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Chowdhury v. Hansmeier

United States District Court, D. Minnesota

April 25, 2019

Sandipan Chowdhury and Booth Sweet, LLP, Appellants,
v.
Paul Hansmeier, Appellee.

          ORDER

          Wilhelmina M. Wright United States District Judge.

         In these related bankruptcy matters, Appellants Sandipan Chowdhury and Booth Sweet, LLP, appeal the December 13, 2018 and January 9, 2019 orders of the United States Bankruptcy Court for the District of Minnesota, which held Appellants in contempt of court and ordered a monetary civil contempt sanction against Appellants for failing to comply with multiple post-judgment orders. Also pending before this Court is the bankruptcy court's January 14, 2019 Report and Recommendation (R&R), which recommends the issuance of arrest warrants for Appellant Sandipan Chowdhury and the partners of Appellant Booth Sweet, LLP-namely, Jason Sweet and Dan Booth-as a civil contempt sanction. For the reasons addressed below, the bankruptcy court's December 13, 2018 and January 9, 2019 orders are affirmed in part and vacated in part; the bankruptcy court's January 14, 2019 R&R is adopted in part; warrants for the arrest of Sandipan Chowdhury, Jason Sweet, and Dan Booth are hereby issued; and this matter is remanded to the bankruptcy court for further proceedings consistent with this Order.

         BACKGROUND

         In the underlying adversary proceeding, the bankruptcy court granted summary judgment to Appellee Paul Hansmeier on March 7, 2018, in the amount of $71, 620.90. This Court subsequently affirmed the bankruptcy court's summary judgment order. Because the R&R provides a detailed factual and procedural background, the Court only briefly summarizes the relevant post-judgment litigation that has occurred to date.

         Hansmeier served Appellants with judgment-enforcement discovery requests, including interrogatories and requests for production, on March 26, 2018. After this Court denied Appellants' motion to stay execution of the judgment, Hansmeier filed a motion to compel Appellants' compliance with judgment-enforcement discovery. The bankruptcy court granted Hansmeier's motion to compel on August 21, 2018, ordering Appellants to produce discovery responses within 14 days or risk the imposition of a daily civil contempt sanction of $250. Hansmeier filed an affidavit of noncompliance on October 10, 2018, and the bankruptcy court issued an order to show cause why civil contempt sanctions against Appellants should not be imposed. At the October 24, 2018 show-cause hearing, the bankruptcy court found that Hansmeier's discovery requests were signed and properly served on Appellants, Hansmeier is entitled to seek the post-judgment discovery at issue, Appellants waived their right to object to Hansmeier's discovery requests, and Appellants did not meaningfully respond to Hansmeier's discovery requests. Consequently, in an October 24, 2018 order, the bankruptcy court held Appellants in contempt and imposed a daily civil contempt sanction of $250 to commence within 48 hours unless Appellants purged their contempt. Appellants did not appeal the October 24, 2018 order.

         Hansmeier filed a motion for contempt on November 21, 2018, asserting that Appellants failed to comply with the October 24, 2018 order. In response, Appellants acknowledged their ongoing noncompliance with the bankruptcy court's orders and sought to relitigate issues previously decided by the bankruptcy court. Following a hearing, the bankruptcy court found that Appellants had failed to comply with the August 21, 2018 and October 24, 2018 orders and had not shown that their compliance with either order was impossible. In a December 13, 2018 order, the bankruptcy court required Appellants to (1) produce to Hansmeier the names of Appellants' financial institutions along with corresponding addresses and account numbers, (2) produce to Hansmeier all remaining discovery responses, with any asserted objections removed, and (3) pay the accrued civil contempt sanctions to the Chapter 7 Trustee. The bankruptcy court also ordered that, if Appellants failed to comply with the foregoing requirements, the daily civil contempt sanction would increase from $250 to $1, 000 beginning on December 18, 2018. Appellants timely appealed the December 13, 2018 order.

         Hansmeier filed a declaration of noncompliance on December 18, 2018, asserting that Appellants had not complied with any aspect of the December 13, 2018 order. The bankruptcy court ordered Appellants to show cause why they should not be subject to increased civil contempt sanctions, including arrest, for their continued failure to comply. At a subsequent hearing on the order to show cause, Appellants again acknowledged their noncompliance with the bankruptcy court's orders and advised the bankruptcy court that they do not intend to comply, arguing that their actions are substantially justified. In its January 9, 2019 order, the bankruptcy court found that Appellants remain in contempt of court and ordered them to purge their contempt no later than January 11, 2019, absent which the bankruptcy court would recommend imprisonment as a coercive civil sanction. Appellants timely appealed the January 9, 2019 order.

         The bankruptcy court issued the pending R&R on January 14, 2019, recommending the issuance of arrest warrants for Sandipan Chowdhury, Jason Sweet, and Dan Booth as a civil contempt sanction, and that these individuals be held in custody until Appellants purge themselves of their contempt. The appeals of the bankruptcy court's December 13, 2018 and January 9, 2019 orders are fully briefed, as are Appellants' objections to the January 14, 2019 R&R. The Court addresses each, in turn, below.

         ANALYSIS

         In bankruptcy proceedings, a district court sits as an appellate court and reviews the bankruptcy court's conclusions of law de novo and its findings of fact for clear error. First State Bank of Roscoe v. Stabler, 914 F.3d 1129, 1136 (8th Cir. 2019); In re Reynolds, 425 F.3d 526, 531 (8th Cir. 2005). A bankruptcy court's discovery and contempt orders are reviewed for an abuse of discretion. See Gagnon v. Sprint Corp., 284 F.3d 839, 855 (8th Cir. 2002); Koehler v. Grant, 213 B.R. 567, 570 (B.A.P. 8th Cir. 1997). A bankruptcy court abuses its discretion if it fails to apply the proper legal standard or relies on clearly erroneous findings of fact. In re Zahn, 526 F.3d 1140, 1142 (8th Cir. 2008).

         Appellants argue that the bankruptcy court erred by ordering sanctions against them in its December 13, 2018 and January 9, 2019 orders. According to Appellants, the bankruptcy court abused its discretion in three ways, by premising its contempt findings on the waiver of discovery objections, ordering monetary sanctions against Appellants, and disregarding Appellants' argument that their contempt was substantially justified. Appellants also contend that the bankruptcy court lacked jurisdiction to issue the January 9, 2019 order while the December 13, 2018 order was pending appeal. Hansmeier counters that the bankruptcy court's December 13, 2018 and January 9, 2019 orders are not erroneous, and this Court lacks jurisdiction to review the rulings that Appellants did not timely appeal.

         I. Scope of Jurisdiction

         The Court begins its analysis by addressing the scope of its jurisdiction over the issues presented in these appeals. A district court has jurisdiction over appeals from final judgments, orders, and decrees of the bankruptcy court within its judicial district. 28 U.S.C. § 158(a). Such an appeal must be filed within 14 days after the entry of the judgment, order, or decree being appealed, “in the same manner as appeals in civil proceedings generally.” Id. § 158(c)(2); see also Fed. R. Bankr. P. 8002(a)(1). A post-judgment contempt order is a final and appealable order. See In re Kujawa, 323 F.3d 628, 630 (8th Cir. 2003) (observing that a bankruptcy court's post-judgment order holding a party in contempt for failing to comply with discovery order is final and appealable); see also ABC, Inc. v. Nameloc, Inc., 403 F.3d 607, 611 (8th Cir. 2005) (holding that appellant waived issues asserted in untimely appeal from contempt order). And a federal court lacks jurisdiction to review a final and appealable bankruptcy court order that is untimely appealed. See In re Delta Eng'g Int'l, Inc., 270 F.3d 584, 586 (8th Cir. 2001) (affirming dismissal of untimely appeal from bankruptcy court order for lack of jurisdiction).

         In their appeals of the bankruptcy court's December 13, 2018 and January 9, 2019 orders, Appellants challenge aspects of the bankruptcy court's October 24, 2018 order and related earlier rulings. Although Appellants contend that they could not appeal the October 24, 2018 order because the bankruptcy court did not impose sanctions at that time, this argument is unsupported the record.[1] The bankruptcy court clearly and unequivocally held Appellants in contempt and ordered sanctions against them at the October 24, 2018 hearing, which included a specific daily sanction amount and an opportunity for Appellants to purge their contempt. As such, the cases on which Appellants rely, which involve the threat of sanctions that had not been imposed, are inapposite. See Olson v. United States, 872 F.2d 820, 821 (8th Cir. 1989); In re Yehud-Monosson USA, Inc., 472 B.R. 868, 881-82 (D. Minn. 2012). Also, Appellants cite no legal authority for the proposition that a post-judgment civil contempt order is not final merely because the bankruptcy court delays the effective date of the sanction by 48 hours to provide the contemnors an opportunity to purge their contempt, as the bankruptcy court did here.

         Appellants also advance equitable arguments pertaining to Hansmeier's alleged procedural errors and misconduct, both in this case and in other matters. But Hansmeier's conduct is not relevant here, because it neither excuses Appellants' conduct nor permits this Court to ignore jurisdictional requirements. See Bowles v. Russell, 551 U.S. 205, 214 (2007) (stating that “the timely filing of a notice of appeal in a civil case is a jurisdictional requirement” and federal courts have “no authority to create equitable exceptions to jurisdictional requirements”). Appellants' equitable arguments, therefore, are unavailing.

         Because Appellants did not appeal the bankruptcy court's October 24, 2018 contempt order, this Court lacks jurisdiction to review that order or any underlying earlier rulings by the bankruptcy court.[2] Accordingly, this Court limits its review to the issues that ...


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