Term: 2018
Docket: 18-489
Taggart v. Lorenzen
- Pro
18-489 TAGGART V. LORENZEN DECISION BELOW: 888 F.3d 438 CERT. GRANTED 1/4/2019 QUESTION PRESENTED: This case presents a clear and intractable conflict regarding an important question of federal bankruptcy law. According to the Ninth Circuit, a "creditor's good faith belief that the [Bankruptcy Code's] discharge injunction does not apply * ** precludes a finding of contempt," even if the creditor acted "unreasonbl[y ]" in violating a debtor's rights. That holding directly conflicts with the decisions of three courts of appeals, two bankruptcy appellate panels, and dozens of lower courts. Contrary to the Ninth Circuit, these other courts hold that the Code authorizes relief for discharge violations, irrespective of a creditor's good faith: "'the focus of the court's inquiry in civil contempt proceedings is not on the subjective beliefs or intent of the alleged contemnors in complying with the order, but whether in fact their conduct complied with the order at issue."' This "ineluctabl[e]" conflict was recognized by the panel, and it has since been acknowledged by multiple judges and expert commentators. The question presented was the sole basis for the decision below, and the relevant facts are clean and undisputed. Its correct disposition is vital to the proper administration of the Code, and this case is the ideal vehicle for resolving the entrenched conflict. The question presented is: Whether, under the Bankruptcy Code, a creditor's good-faith belief that the discharge injunction does not apply precludes a finding of civil contempt. LOWER COURT CASE NUMBER: 16-35402, 16-60032, 16-60033, 16-60039, 16-60040, 16- 60042, 16-60043
The U.S. Supreme Court case Taggart v. Lorenzen (2018) revolved around the issue of whether a creditor can be held in contempt for attempting to collect a debt that has been discharged in bankruptcy proceedings if the creditor had a good faith belief that the discharge injunction did not apply. The court ruled unanimously, holding that creditors may indeed face sanctions for such actions even if they believed in good faith that their conduct was lawful. This decision clarified an area of bankruptcy law where lower courts were divided and reinforced protections for individuals who have completed bankruptcy proceedings from continued collection efforts by creditors.
In the dissenting opinion for TAGGART v. LORENZEN, Justice Thomas argued that a creditor should not be held in contempt if they have a "fair ground of doubt" about whether their actions would violate the discharge order. He believed that this standard was more consistent with traditional principles of equity and better aligned with the statutory scheme. In his view, it is unfair to hold creditors in contempt unless they are clearly aware that their conduct is prohibited by the discharge order. He also noted concerns about potential abuse under majority's subjective standard where debtors could potentially manipulate or 'game' bankruptcy proceedings to entrap unwary creditors into violating vague or ambiguous orders.
