In re: Demetrius Bertrand Dickerson Sr

[2] UNITED STATES DISTRICT COURT [3] WESTERN DISTRICT OF WASHINGTON AT SEATTLE [5] In re: [6] DEMETRIUS BERTRAND DICKERSON, SR., [7] Debtor. [8] ___________________________________ 9 C19-143 TSZ DEMETRIUS BERTRAND DICKERSON, 10 SR., ORDER 11 Appellant, 12 v. 13 MERCHANTS CREDIT CORPORATION, 14 Appellee. 15 THIS MATTER comes before the Court on an appeal from the United States 16 Bankruptcy Court for the Western District of Washington (the “Bankruptcy Court”). For 17 the reasons stated in this order, the Court AFFIRMS in part and REVERSES in part the 18 Bankruptcy Court’s ruling. 19 Background 20 This case arises out of a motion for sanctions filed by Demetrius Bertrand 21 Dickerson, Sr. (the “Debtor”) against Merchants Credit Corporation (“Merchants”) for a 22 discharge violation. The Debtor asserts Merchants violated the discharge injunction 1 issued under 11 U.S.C. § 524 (a)(3) by garnishing the wages of his non-debtor spouse. 2 After a hearing, the Bankruptcy Court entered detailed Findings of Fact and Conclusions 3 of Law (ER 0286-0298) and concluded that civil contempt sanctions were not appropriate 4 under either 11 U.S.C. § 105 or the Court’s inherent power. The Debtor does not 5 challenge the Bankruptcy Court’s Findings of Fact. Rather, the Debtor challenges the 6 legal conclusions reached by the Bankruptcy Court based on the Findings of Fact. 7 Discussion 8 A. Section 105 Standard under Taggart 9 The Bankruptcy Court concluded that “to prove a sanctionable violation of the 10 discharge injunction, the Debtor must show by clear and convincing evidence that 11 Merchants lacked a good faith belief that the discharge injunction applied to its claim, 12 even if such belief was unreasonable.” ER 0295. The Bankruptcy Court’s conclusion 13 was based on then existing Ninth Circuit precedent in Lorenzen v. Taggart (In re 14 Taggart), 888 F.3d 438 (9th Cir. 2018), which held that “good faith,” even if 15 unreasonable, would insulate a creditor from a finding of contempt. Subsequent to the 16 Bankruptcy Court’s ruling, the United States Supreme Court reversed the Ninth Circuit, 17 overturned the “good faith” standard, and clarified that “a court may hold a creditor in 18 civil contempt for violating a discharge order if there is no fair ground of doubt as to 19 whether the order barred the creditor’s conduct.” Taggart v. Lorenzen, 139 S. Ct. 1795 , 20 1799 (2019) (emphasis in original). In other words, civil contempt may be appropriate 21 “if there is no objectively reasonable basis for concluding that the creditor’s conduct 22 might be lawful.” Id. 1 The Court concludes that in light of the new standard for judging violations of [2] 11 U.S.C. § 524 , the Bankruptcy Court’s Conclusions of Law based on the good faith 3 standard was error. The Court reverses that ruling and the case is remanded to the 4 Bankruptcy Court to apply the correct legal standard to the facts of this case. In the event 5 the Bankruptcy Court concludes sanctions are appropriate, it should determine the 6 amount of sanctions appropriate under the circumstances. 7 B. Inherent Authority Sanctions 8 Inherent authority sanctions are only appropriate upon specific findings of bad 9 faith or willful misconduct. Knupfer v. Lindblade (In re Dyer), 322 F.3d 1178, 1196 (9th 10 Cir. 2003). The Bankruptcy Court indicated that it was “not able to make a specific 11 finding of bad faith or willful misconduct.” ER 0297. The Bankruptcy Court applied the 12 correct standard of bad faith or willful misconduct, and its findings are entitled to “great 13 deference.” See Evon v. Law Offices of Sidney Mickell, 688 F.3d 1015, 1035 (9th Cir. 14 2012). Based on the findings of fact of the Bankruptcy Court and its application of the 15 proper standard, the Court AFFIRMS the Bankruptcy Court’s legal conclusion that 16 sanctions were not appropriate under its inherent authority. 17 Conclusion 18 For the foregoing reasons, the Court enters this ORDER: 19 (1) The decision of the Bankruptcy Court is REVERSED in part and this 20 matter is REMANDED to the Bankruptcy Court to determine whether sanctions are 21 appropriate under the “no fair ground of doubt” standard announced in the Taggart [22] 1 decision and, if so, what amount of sanctions, if any, should be assessed under all the 2 circumstances. 3 (2) The Bankruptcy Court’s decision is AFFIRMED in part with respect to its 4 refusal to award sanctions under its inherent authority. 5 (3) The Clerk is directed to enter judgment consistent with this Order and to 6 send a copy of this Order and the Judgment to all counsel of record and to the 7 Honorable Marc Barreca. 8 IT IS SO ORDERED. 9 Dated this 11th day of October, 2019. [10] A [11] 12 Thomas S. Zilly United States District Judge