## Facts

- Bradley Weston Taggart, a former co-owner of an Oregon business, was sued in Oregon state court by the business and co-owners for breach of the operating agreement.
- While the state-court case was pending, Taggart filed for Chapter 7 bankruptcy.
- The bankruptcy court entered a discharge order releasing Taggart from liability for most pre-bankruptcy debts and enjoining collection of discharged debts.
- After the discharge, the state court entered judgment against Taggart and awarded attorney’s fees to the opposing parties.
- Taggart returned to bankruptcy court and sought civil contempt sanctions, alleging the attempt to collect attorney’s fees violated the discharge injunction under 11 U.S.C. § 524(a)(2).
- On remand after earlier appellate proceedings, the bankruptcy court held the creditors in civil contempt under a standard it described as akin to strict liability because the creditors knew of the discharge and intended the acts that violated it.
- The Bankruptcy Appellate Panel vacated the sanctions, and the Ninth Circuit affirmed, holding contempt is unavailable if the creditor had a subjective good-faith belief the discharge did not apply, even if that belief was unreasonable.
- The Supreme Court granted review to determine the correct contempt standard for discharge violations.

## Issues

1. What standard governs civil contempt for conduct alleged to violate a bankruptcy discharge order: a strict-liability-type rule, a subjective good-faith rule, or an objective standard tied to the reasonableness of the creditor’s view of the discharge’s scope?

## Decision

- The Supreme Court unanimously vacated and remanded.
- A court may hold a creditor in civil contempt for violating a discharge order only if there is no fair ground of doubt that the order barred the creditor’s conduct.
- The Court rejected the bankruptcy court’s near–strict-liability approach.
- The Court rejected the Ninth Circuit’s purely subjective good-faith approach that would bar contempt even when the creditor’s belief is unreasonable.
- The Court left application of the standard to the lower courts in the first instance.

## Legal Principles

- A discharge order “operates as an injunction” against attempts to collect discharged debts. 11 U.S.C. § 524(a)(2).
- Bankruptcy courts may enforce the discharge injunction through orders and sanctions authorized by 11 U.S.C. § 105(a), informed by traditional injunction and contempt doctrine.
- Civil contempt is appropriate only when there is no fair ground of doubt as to whether the discharge order prohibited the challenged conduct; equivalently, when there is no objectively reasonable basis to conclude the conduct might be lawful.
- A creditor’s subjective good faith does not control the contempt determination; however, subjective intent may bear on the selection or amount of sanctions once contempt is established.

## Conclusion

The Court held that contempt for violating a bankruptcy discharge requires an objective showing that the creditor lacked any fair ground of doubt that the discharge barred the conduct, vacating the judgment applying a subjective good-faith standard and remanding for use of the objective test.


Taggart v. Lorenzen, 139 S. Ct. 1795 (2019)