ILNews

7th Circuit vacates sanction in contempt judgment

Back to TopCommentsE-mailPrintBookmark and Share

The 7th Circuit Court of Appeals found that an order, while unclear, did require a company to become the operator of leases involving oil and gas fields in Texas. But the judges held the District Court judge didn’t fully explain why he was imposing the sanction he did, so the 7th Circuit vacated the sanction.

At issue in Securities and Exchange Commission v. First Choice Management Services Inc. et al.; SonCo Holdings LLC v. Joseph D. Bradley, receiver, and ALCO Oil & Gas Co. LLC, No. 11-1702, is the sanction imposed stemming from a settlement SonCo Holdings entered into with the receiver of First Choice Management Services, which had defrauded victims out of $31 million. Some of First Choice’s assets had been used to acquire “Hull-Silk” oil and gas leases in Texas through a sham corporation. SonCo claimed to have a valid legal interest in the leases obtained through the sham corporation. ALCO Oil & Gas Co. was the operator of the leases.

As part of the settlement, SonCo paid the receiver $600,000 and was ordered to "obtain a bond … that shall replace ALCO’s bond so that ALCO and the receiver may obtain the release of its bond paid for with the defrauded investor funds." ALCO had paid a $250,000 cash bond with the Texas Railroad Commission to assure payment of any costs the commission might impose on ALCO for failing as operator of the wells.  
 
SonCo failed to post the bond that would replace ALCO’s bond and didn’t obtain the commission’s authorization to operate the wells. The District Court held SonCo in contempt, ordered it to return the Hull-Silk leases to the receiver, and allowed the receiver to keep the $600,000 SonCo paid to the receiver. The receiver then assigned them to another company, which in turn assigned them to an unrelated party.

The 7th Circuit found the agreed order was poorly drafted but the language did indicate that SonCo posted a bond so ALCO’s could be released. The order doesn’t say that SonCo must be the operator; it could have engaged with another oil company to become the operator, noted Judge Richard Posner.

Since the District judge in this case used the term “contempt” when sanctioning SonCo, he had to prove the contempt by clear and convincing evidence, which he did not do. The 7th Circuit vacated the sanction and remanded with instructions: the District judge can reimpose the sanction he imposed upon demonstration that it is a compensatory remedy for a civil contempt after all; impose a different or even no sanction, whether for civil contempt or for misconduct not characterized as contempt; or proceed under the rules governing criminal contempts, wrote Posner.

 

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in Indiana Lawyer editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. Indiana's seatbelt law is not punishable as a crime. It is an infraction. Apparently some of our Circuit judges have deemed settled law inapplicable if it fails to fit their litmus test of political correctness. Extrapolating to redefine terms of behavior in a violation of immigration law to the entire body of criminal law leaves a smorgasbord of opportunity for judicial mischief.

  2. I wonder if $10 diversions for failure to wear seat belts are considered moral turpitude in federal immigration law like they are under Indiana law? Anyone know?

  3. What a fine article, thank you! I can testify firsthand and by detailed legal reports (at end of this note) as to the dire consequences of rejecting this truth from the fine article above: "The inclusion and expansion of this right [to jury] in Indiana’s Constitution is a clear reflection of our state’s intention to emphasize the importance of every Hoosier’s right to make their case in front of a jury of their peers." Over $20? Every Hoosier? Well then how about when your very vocation is on the line? How about instead of a jury of peers, one faces a bevy of political appointees, mini-czars, who care less about due process of the law than the real czars did? Instead of trial by jury, trial by ideological ordeal run by Orwellian agents? Well that is built into more than a few administrative law committees of the Ind S.Ct., and it is now being weaponized, as is revealed in articles posted at this ezine, to root out post moderns heresies like refusal to stand and pledge allegiance to all things politically correct. My career was burned at the stake for not so saluting, but I think I was just one of the early logs. Due, at least in part, to the removal of the jury from bar admission and bar discipline cases, many more fires will soon be lit. Perhaps one awaits you, dear heretic? Oh, at that Ind. article 12 plank about a remedy at law for every damage done ... ah, well, the founders evidently meant only for those damages done not by the government itself, rabid statists that they were. (Yes, that was sarcasm.) My written reports available here: Denied petition for cert (this time around): http://tinyurl.com/zdmawmw Denied petition for cert (from the 2009 denial and five year banishment): http://tinyurl.com/zcypybh Related, not written by me: Amicus brief: http://tinyurl.com/hvh7qgp

  4. Justice has finally been served. So glad that Dr. Ley can finally sleep peacefully at night knowing the truth has finally come to the surface.

  5. While this right is guaranteed by our Constitution, it has in recent years been hampered by insurance companies, i.e.; the practice of the plaintiff's own insurance company intervening in an action and filing a lien against any proceeds paid to their insured. In essence, causing an additional financial hurdle for a plaintiff to overcome at trial in terms of overall award. In a very real sense an injured party in exercise of their right to trial by jury may be the only party in a cause that would end up with zero compensation.

ADVERTISEMENT