      Case: 14-30961             Document: 00512956505   Page: 1   Date Filed: 03/04/2015




            IN THE UNITED STATES COURT OF APPEALS
                     FOR THE FIFTH CIRCUIT


                                          No. 14-30961                   United States Court of Appeals
                                                                                  Fifth Circuit

                                                                                FILED
In the Matter of: DOROTHY MARIE WHEELER,                                    March 4, 2015
                                                                           Lyle W. Cayce
                 Debtor                                                         Clerk

------------------------------

DOROTHY MARIE WHEELER,

                 Appellee

v.

GLAY H. COLLIER, II; THOMAS C. MCBRIDE; MCBRIDE & COLLIER,

                 Appellants




                      Appeal from the United States District Court
                         for the Western District of Louisiana
                              U.S.D.C. No. 5:11-CV-01670


Before SMITH, PRADO, and OWEN, Circuit Judges.
PER CURIAM:*
        Appellants Glay H. Collier, II, Thomas C. McBride, and McBride &
Collier appeal the district court’s contempt order. The district court ordered


        *Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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                                 No. 14-30961
Appellants 1) to pay $10,000 in sanctions for contempt and 2) to cease and
desist filing and advertising Chapter 7 consumer “No Money Down”
bankruptcies. 1 Because Appellants did not receive notice that the hearing was
being held for the purpose of issuing criminal-contempt sanctions or an
injunction, we vacate the district court’s order insofar as it issues criminal
sanctions and enjoins Appellants.
           I. FACTUAL AND PROCEDURAL BACKGROUND
      Collier and McBride were partners of the law firm McBride & Collier. 2
Collier advertised and performed “No Money Down” bankruptcies, whereby he
would pay the court costs up front. 3 Collier represented Dorothy May Wheeler
in a Chapter 7 bankruptcy proceeding.
      Wheeler then filed an adversarial complaint against Collier, McBride,
and the firm. Wheeler alleged, inter alia, that Collier debited her bank account
after the filing of the bankruptcy petition, in violation of 11 U.S.C. § 362 and
§ 524. 4 Wheeler further alleged Appellants acted as “debt relief agencies,” and
therefore violated 11 U.S.C. §§ 526(c) and 528(a) by failing to provide Wheeler
with clear fee agreement. 5 Appellants filed a motion to dismiss, which the
Bankruptcy court denied. 6 They then filed a request for a jury trial 7 and the
case proceeded in the United States District Court for the Western District of
Louisiana. 8
      On June 12, 2014, the district court held a status conference. The
corresponding minute entry states:



      1 ROA.3195–96.
      2 See ROA.2883–84.
      3 ROA.3266–67
      4 ROA.98; ROA.105–07.
      5 ROA.108–10.
      6 ROA.356–57.
      7 ROA.381.
      8 See ROA.397.

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                                     No. 14-30961
      The court determined that an oral argument and evidence hearing
      will be held in this matter on July 14, 2014, beginning at 9:30 a.m.
      Counsel shall be prepared to present evidence and argue: (1)
      whether Defendants violated 11 USC § 528, and (2) whether the
      Defendants should be held in contempt under § 105 for violating
      the discharge injunction under 11 USC §[ ]524(a)(2).

The court also set a pretrial conference for August 20th and reset the jury trial
for October 21st. 9
      At the July 14th hearing, Collier testified about his bankruptcy practice
and his representation of Wheeler. 10 After the hearing, the district court
entered judgment and closed the case. The district court found Appellants in
violation of 11 U.S.C. §§ 526 and 528 and found them in contempt under
11 U.S.C. § 105 for violating 11 U.S.C. § 524(a)(2). The court awarded to
Wheeler $1,300 in disgorgement, $10,000 in damages “under the equity power
of Section 105,” $30,000 in punitive damages, and attorney’s fees. 11
      The district court also awarded “$10,000 as sanctions for contempt,
payable to the Clerk of the Court.” Finally, “as part of the sanctions imposed,”
the court ordered Appellants 1) “to cease and desist all Chapter 7 consumer
‘No Money Down’ bankruptcies” and 2) to “remove or cancel all advertising in
all media of ‘No Money Down’ Chapter 7 consumer bankruptcies.” The court
stated the advertisements “shall not resume without prior written orders of
this court.” 12 Collier, McBride, and the firm now appeal the $10,000 sanction
and the injunctions.
                                  II. DISCUSSION
      We have jurisdiction over this appeal of a final judgment pursuant to 28
U.S.C. § 1291. “We review a contempt order for abuse of discretion, and we


      9 ROA.2852–53.
      10 ROA.3465–69.
      11 Appellants have since settled with Wheeler. See Blue Br. 19.
      12 ROA.3195–96.

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                                  No. 14-30961
review the district court’s underlying factual findings under the clearly
erroneous standard.” FDIC v. LeGrand, 43 F.3d 163, 166 (5th Cir. 1995). We
also “review the district court’s grant of an injunction for an abuse of discretion,
and underlying questions of law de novo.” Newby v. Enron Corp., 302 F.3d 295,
301 (5th Cir. 2002).
A.    The Monetary Sanction
      The district court ordered Appellants to pay $10,000 in sanctions to the
Clerk of the Court. Appellants argue that this constitutes a criminal-contempt
sanction and that the court failed provide sufficient notice that it was holding
a hearing for criminal contempt.
      1.    Nature of the Sanction
      The sufficiency of notice hinges on whether the district court’s sanction
constituted a criminal- or civil- contempt judgment. A court’s “contempt order
or judgment is characterized as either civil or criminal depending upon its
primary purpose.” In re Bradley, 588 F.3d 254, 263 (5th Cir. 2009) (quoting
Lamar Fin. Corp. v. Adams, 918 F.2d 564, 566 (5th Cir. 1990)). A sanction is
criminal if its purpose “is to punish the contemnor and vindicate the authority
of the court.” Lamar, 918 F.2d at 566. A sanction is civil, on the other hand, if
its purpose is to “coerce the contemnor into compliance with a court order, or
to compensate another party for the contemnor’s violation.” Id.; see also In re
Bradley, 588 F.3d at 263. “A key determinant to this inquiry is whether the
penalty imposed is absolute or conditional on the contemnor’s conduct.” Lamar,
918 F.2d at 566.
      For example, “a lump sum fine that punishes past conduct is criminal,
while a fine that accrues on an ongoing basis in response to noncompliance is
civil.” In re Bradley, 588 F.3d at 263; accord Int’l Union, United Mine Workers
of Am. v. Bagwell, 512 U.S. 821, 829 (1994) (“A flat, unconditional fine . . .
announced after a finding of contempt is criminal if the contemnor has no
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                                 No. 14-30961
subsequent opportunity to reduce or avoid the fine through compliance.”
(internal quotation marks omitted)).
      We hold that the $10,000 in sanctions constitutes a criminal-contempt
sanction. It is not compensatory, as it was payable to the Clerk of the Court.
See In re Bradley, 588 F.3d at 264 (“The present proceeding is a remedial civil
contempt proceeding, because the bankruptcy court held [the contemnor] liable
to the bankruptcy estate rather than imposing a fine payable to the court.”).
Nor is it remedial because it “does not remedy the consequences of defiant
conduct,” id. at 263–64. Moreover, the sanction is unconditional and punitive,
as it was not dependent on Appellants’ future conduct. See Lamar, 918 F.2d at
566 (“The [sanction] had a purely punitive purpose because it was not
conditioned upon the future conduct of the [contemnors].”); United Mine
Workers, 512 U.S. at 829. Because the district court issued a criminal-contempt
sanction, we now address whether Appellants were provided with sufficient
notice prior to the hearing.
      2.       Notice
      In a minute entry, the district court described the July 14th hearing as
follows:
      The court determined that an oral argument and evidence hearing
      will be held in this matter on July 14, 2014, beginning at 9:30 a.m.
      Counsel shall be prepared to present evidence and argue: (1)
      whether Defendants violated 11 USC § 528, and (2) whether the
      Defendants should be held in contempt under § 105 for violating
      the discharge injunction under 11 USC §[ ]524(a)(2). 13

Appellants argue that this was insufficient to provide notice of a criminal-
contempt proceeding. We agree.




      13   ROA.2852.
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                                   No. 14-30961
      Even where the district court has the power to issue a criminal-contempt
sanction,     “procedures   are   mandated    which    protect   the   contemnor’s
constitutional rights.” Lamar, 918 F.2d at 567. Federal Rule of Criminal
Procedure 42(a) requires that the contemnor have notice that the proceeding
is criminal in nature. The absence of the word “criminal” in the contempt notice
is relevant to the notice inquiry, but not fatal. Am. Airlines, Inc. v. Allied Pilots
Ass’n, 968 F.2d 523, 530 (5th Cir. 1992). The omission of the word “criminal”
may be fatal if the notice “fails to describe the conduct which forms the basis
for the contempt charge or if the conduct could be the basis for civil coercive
contempt proceedings.” Id. at 530–31.
      In Lamar, this Court vacated on notice grounds a criminal-contempt
sanction against the defendant for failure to produce documents in pretrial
discovery. 918 F.2d at 565–67. The district court ordered the defendants to
appear “to show cause why they should not be held in contempt for their failure
to comply with the order compelling production.” Id. at 566. Because this order
gave no indication that the contempt proceeding was criminal, we vacated the
criminal portion of the sanctions. Id. at 567. By contrast, in American Airlines,
we upheld criminal sanctions because the contempt notice stated the court
would “take up the matter of possible contempt of court and sanctions, if any,
to be imposed . . . because of [plaintiff and plaintiff’s counsel’s] conduct in
falsely representing” that certain declarations filed with the court had been
properly executed. 968 F.2d at 526. Although the notice did not include the
word criminal, we found sufficient notice because it described past conduct that
was “not subject to coercive civil sanctions.” Id. at 531.
      Here the contempt notice only referenced contempt pursuant to 11
U.S.C. § 105 for violations of the discharge injunction. 14 This provision,


      14   ROA.2852.
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                                       No. 14-30961
however, provides grounds for civil contempt, and therefore does not provide
sufficient notice of a criminal-contempt proceeding. See Terrebonne Fuel &
Lube, Inc. v. Placid Ref. Co., 108 F.3d 609, 613–14 (5th Cir. 1997) (per curiam);
Griffith v. Oles (In re Hipp, Inc.), 895 F.2d 1503, 1515–16 (5th Cir. 1990).
Because Appellants were not on notice that the hearing would implicate
criminal-contempt sanctions, we vacate the portion of the order imposing a
$10,000 sanction payable to the Clerk of the Court.
C.     The Injunctions
       The district court, “as part of the sanctions imposed,” ordered Appellants
“to immediately cease and desist all Chapter 7 consumer ‘No Money Down’
bankruptcies.” The court also ordered Appellants “to remove or cancel all
advertising in all media of ‘No Money Down’ Chapter 7 consumer
bankruptcies,” which was not to be resumed “without prior written orders”
from the court. 15
       Federal Rule of Civil Procedure 65(a) requires “notice to the adverse
party” before an injunction may issue. 16 This rule has “constitutional as well
as procedural dimensions.” Parker v. Ryan, 960 F.2d 543, 544 n.1 (5th Cir.
1992). Thus, Rule 65(a), “with few exceptions, implies ‘a hearing in which the
defendant is given a fair opportunity to oppose the application and to prepare
for such opposition.’” Williams v. McKeithen, 939 F.2d 1100, 1105 (5th Cir.
1991) (quoting Granny Goose Foods, Inc. v. Bhd. of Teamsters & Auto Truck
Drivers Local No. 70 of Alameda, 415 U.S. 423, 432 n.7 (1974)).




       15 ROA.3195–96.
       16 Although this Rule refers to “preliminary injunctions,” we apply it to the district
court’s injunctions because they were issued sua sponte in an order closing the case without
any trial on the merits. See Quershi v. United States, 600 F.3d 523, 526–27 (5th Cir. 2010)
(applying Rule 65(a) notice standards to a pre-filing injunction issued sua sponte by a district
court).
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                                     No. 14-30961
      The court only notified Appellants to “be prepared to present evidence
and argue: (1) whether Defendants violated 11 USC § 528, and (2) whether the
Defendants should be held in contempt under § 105 for violating the discharge
injunction under 11 USC §[ ]524(a)(2).” 17 Nothing in the minute entry suggests
that the court was considering enjoining Appellants’ No Money Down
bankruptcy practice. See Williams, 939 F.2d at 1105 (“There is no evidence that
appellants-sheriffs were on notice that the June 25 hearing was held for any
purpose other than to rule on the motion to vacate the May 25 injunction; they
were therefore unprepared and not on notice to oppose the June 25 preliminary
injunction issued at that hearing.”). Thus, we vacate the district court’s
injunctions. See id. at 1105–06 (vacating the injunction). 18
                                 III. CONCLUSION
      For the foregoing reasons, we VACATE the district court’s order insofar
as it imposes $10,000 in sanctions and enjoins Appellants and REMAND.




      17 ROA.2852.
      18 We do not reach Appellants’ argument that the injunctions are impermissibly broad
under In re Stewart, 647 F.3d 553, 556–58 (5th Cir. 2011). We leave the scope of any
injunctions imposed on remand to the district court’s careful consideration.
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