The June 3 opinion by the U.S. Supreme Court in the case of Taggart v. Lorenzen, Executor of the Estate of Brown, provided much-needed guidance in a previously amorphous and uncertain area of the law: determining when a bankruptcy court may hold a creditor in civil contempt for attempting to collect a on a debt that a discharge order immunized from collection. The court in Taggart held that a bankruptcy court may hold a creditor in civil contempt for violating a discharge order if there is “no fair ground of doubt” as to whether the order barred the creditor’s conduct; relying on traditional principles of common law contempt in asserting that parties cannot be insulated from a finding of civil contempt based on their subjective good faith while further holding that that a bright-line “strict liability”-like approach is too punitive in nature.

The case concerned Radley Weston Taggart, who invested in a company called Sherwood. Taggart’s attempt to sell Sherwood precipitated a dispute between him, other members of the business and the business itself, with the other owners of Sherwood and Sherwood itself arguing that his attempt to sell the business was wrongful. When Taggart filed for bankruptcy, it stayed the litigation for a period. When his bankruptcy case concluded and the litigation resumed, Taggart sought to have the case dismissed on the grounds that he was relieved of his obligations to the creditors (his former fellow owners of the business).

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