## Facts

- In an SEC civil enforcement action alleging securities fraud, a federal district court entered (1) an asset-freeze temporary restraining order and (2) a receivership order appointing William D. Brown as receiver over defendants’ and relief defendants’ assets.
- Both orders bound not only the defendants and relief defendants but also their attorneys and other persons “in active concert or participation” who had actual notice.
- The orders prohibited transferring or selling property owned by, or in the actual or constructive possession of, the defendants or relief defendants and required prompt delivery of receivership assets to the receiver.
- A Picasso painting claimed to be owned by Lois Whitcraft (the defendant’s mother) hung in Jeffrey Bruteyn’s bedroom and was under his control.
- After entry of the orders, Bruteyn met with his attorney, Phillip W. Offill, Jr., to discuss obtaining money for Bruteyn’s living expenses and legal fees despite the asset freeze.
- Bruteyn proposed selling the painting; Offill questioned whether the orders permitted the sale but ultimately advised it would be permissible because Whitcraft owned the painting.
- The painting was sold the same day; the proceeds were deposited into Whitcraft’s account and made available (or intended to be available) for Bruteyn’s benefit.
- Neither the painting nor the sale proceeds were delivered to the receiver.
- The SEC and the receiver moved for civil contempt against Bruteyn, Offill, and Whitcraft; the district court held all three in civil contempt.
- Offill and Whitcraft appealed the contempt orders.

## Issues

1. Whether the district court abused its discretion in holding attorney Phillip W. Offill, Jr. in civil contempt for knowingly aiding a violation of the asset-freeze and receivership orders.
2. Whether the district court abused its discretion in holding Lois Whitcraft in civil contempt where she claimed ownership of the painting and the record did not show she knowingly violated the orders.

## Decision

- The court of appeals affirmed the civil contempt order against Offill.
- The court of appeals vacated the civil contempt order against Whitcraft.
- The disposition was affirmed in part and vacated in part.

## Legal Principles

- Civil contempt requires clear and convincing evidence that (1) a court order was in effect, (2) the order required certain conduct, and (3) the respondent failed to comply.
- Injunctions and related orders may bind nonparties who have actual notice and act “in active concert or participation” with parties subject to the order, consistent with Rule 65(d).
- An attorney is not insulated from contempt liability by the attorney-client relationship; a lawyer with actual notice may be held in contempt for knowingly aiding a client’s violation of a court order.
- For a nonparty to be held in contempt, the evidence must show actual notice and a knowing violation; a generalized awareness of litigation or asset restrictions is insufficient without proof of understanding that the order covered the specific conduct or asset.

## Conclusion

The Fifth Circuit upheld contempt for a lawyer who, with actual notice, actively facilitated the sale of property in a defendant’s possession and the diversion of proceeds away from the receiver, but vacated contempt against the defendant’s mother because the record did not clearly and convincingly show she knowingly understood the orders barred selling property she believed she owned.


Whitcraft v. Brown, 570 F.3d 268 (5th Cir. 2009)