Alper v. Eighth Jud. Dist. Ct. (Nev. Supreme Ct. – June 25, 2015)
A bankruptcy court entered an order lifting an automatic stay to permit the district court to determine whether a judgment debtor’s prior refusals to participate in debtor’s examinations in the district court were subject to criminal contempt. The automatic stay provisions of 11 U.S.C. § 362(b)(1) of the Bankruptcy Code do not stay the commencement or continuation of a criminal action or proceeding against the debtor.
The issue is whether the subsequent district court order finding the judgment debtor in contempt, but allowing him to avoid incarceration by participating in a debtor’s examination, exceeded the scope of the bankruptcy court’s lift stay order.
In August 2010, the district court entered judgment in excess of $16,000,000 against Plise and in favor of Alper. Thereafter, Alper obtained an order for examination of Plise’s assets and liabilities to satisfy the judgment.
Plise did not attend the first scheduled debtor’s examination, and Alper moved for an order to show cause why Elise should not be held in contempt of court. The district court ordered Plise to appear, produce documents, and fully comply with the order or he would be held in contempt of court.
Plise appeared at the next scheduled exam, but asserted a Fifth Amendment privilege in response to every question except his name. Alper filed a status report indicating Plise did not produce the documents the court previously ordered him to produce, nor did he answer questions during the exam. At a subsequent status hearing, the district court ordered Plise to answer Alper’s questions. Alper scheduled a new debtor’s examination, and Plise requested several continuances, but ultimately Plise did not appear. Fifteen days later, Alper sought an order to show cause why Plise should not be held in contempt of court. But, two days before the hearing on that motion, Plise filed a bankruptcy petition.
Alper participated in the bankruptcy proceeding, and as a result, obtained an order from the bankruptcy court granting relief from the automatic stay and allowing the district court to conduct a hearing and enter an order with regard to the alleged criminal contempt of Plise. Alper again moved in district court for an order to show cause as to why Plise should not be held in contempt for his failure to appear at the debtor’s examination. Plise opposed any order for contempt, arguing that, based on its punishment, contempt is a misdemeanor and the statute of limitations had run on any of Plise’s alleged contemptuous conduct.
At the hearing, the district court found Plise guilty of contempt of court and sentenced Plise to 21 days incarceration. However, the district court also provided that Plise could purge his contempt and be released from confinement if he fully participated in a judgment debtor examination. In doing so, he could avoid serving the remainder of his sentence.
Alper filed a writ petition arguing that the district court exceeded the scope of the bankruptcy court’s order granting relief from the automatic stay, thereby violating 11 U.S.C. § 362(a), when it conditionally allowed Plise to avoid criminal contempt punishment, thus transforming the contempt proceeding from criminal to civil. Plise responded by arguing that the statute of limitations had already run on any criminal contemptuous conduct. Plise also argueed that Alper waived his argument by not objecting during the sentencing.
The Nevada Supreme Court explained that generally an automatic stay under § 362 of the United States Bankruptcy Code stays the initiation or continuation of all state actions against the debtor that precede the filing of the bankruptcy petition. However, § 362(b)(1) provides that the filing of a petition in bankruptcy does not operate as a stay of the commencement or continuation of a criminal action or proceeding against the debtor. The Bankruptcy Code does not define “criminal action,” but several bankruptcy courts have held that criminal contempt, but not civil contempt, is included as a criminal action and these proceedings are not subject to the stay.
Here, the bankruptcy court granted relief from the automatic stay, permitting the district court to conduct a hearing and enter an order with regard to Plise’s alleged criminal contempt in the state court action. The district court did so, finding Plise’s conduct contemptuous and subject to criminal punishment in the form of confinement in the detention center for 21 days. That punishment was conditional, however, because the district court also allowed Plise to avoid confinement if he complied with the debtor’s examination at any time during the 21-day sentence. Accordingly, the Court went on to determine whether the district court’s contempt order exceeded its authority because it became civil in nature, not criminal.
The Court has previously explained that whether a contempt proceeding is classified as criminal or civil in nature depends on whether it is directed to punish the contemnor or, instead, coerce his compliance with a court directive. See Rodriguez v. Eighth Judicial Dist. Court, 120 Nev. 798, 102 P.3d 41 (2004). Alper argued that the conditional provision of the contempt order allowing Plise to be released from incarceration directly to a judgment debtor examination transforms the sanction from criminal to civil.
The Court agreed with Alper, explaining that the contempt sanction here was civil in nature because it was intended to compel Plise’s obedience with the district court’s order requiring him to submit to a debtor exam for the benefit of Alper, not as a punishment for Plise’s refusals to obey prior court orders. The district court ordered Plise sentenced to confinement in the Clark County Detention Center for a period of twenty-one days. This language alone was a criminal sanction: it punished Plise for past behavior with a set term of imprisonment. However, the order further stated that Plise may be released directly to an Examination of Judgment Debtor Hearing without serving the remainder of the twenty-one day sentence. When the district court included this opportunity to purge the imprisonment, it put a civil remedy in the place of the punishment—Plise would only remain imprisoned until he submitted to the judgment debtor examination. This opportunity to purge was coercive, as it provided Plise an option to avoid incarceration or obtain early release if he submited to the examination. Thus, the Court found that because the district court’s order was civil in nature, the district court exceeded the scope of its authority granted by the bankruptcy court.