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

facebook - twitter on Facebook & Twitter

Indiana State Bar Association

Indianapolis Bar Association

Evansville Bar Association

Allen County Bar Association

Indiana Lawyer on Facebook

facebook
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. Put aside all the marijuana concerns, we are talking about food and fiber uses here. The federal impediments to hemp cultivation are totally ridiculous. Preposterous. Biggest hemp cultivators are China and Europe. We get most of ours from Canada. Hemp is as versatile as any crop ever including corn and soy. It's good the governor laid the way for this, regrettable the buffoons in DC stand in the way. A statutory relic of the failed "war on drugs"

  2. Cannabis is GOOD for our PEOPLE and GOOD for our STATE... 78% would like to see legal access to the product line for better Hoosier Heath. There is a 25% drop in PAIN KILLER Overdoses in states where CANNABIS is legal.

  3. This article is excellent and should be required reading for all attorneys and would-be attorneys, regardless of age or experience. I've caught myself committing several of the errors mentioned.

  4. Bill Satterlee is, indeed, a true jazz aficionado. Part of my legal career was spent as an associate attorney with Hoeppner, Wagner & Evans in Valparaiso. Bill was instrumental (no pun intended) in introducing me to jazz music, thereby fostering my love for this genre. We would, occasionally, travel to Chicago on weekends and sit in on some outstanding jazz sessions at Andy's on Hubbard Street. Had it not been for Bill's love of jazz music, I never would have had the good fortune of hearing it played live at Andy's. And, most likely, I might never have begun listening to it as much as I do. Thanks, Bill.

  5. The child support award is many times what the custodial parent earns, and exceeds the actual costs of providing for the children's needs. My fiance and I have agreed that if we divorce, that the children will be provided for using a shared checking account like this one(http://www.mediate.com/articles/if_they_can_do_parenting_plans.cfm) to avoid the hidden alimony in Indiana's child support guidelines.

ADVERTISEMENT