In re Krueger

• Decision Date: 16 May 2013
• Docket Number: NO. 03-12-00838-CV,03-12-00838-CV
• Parties: In re Jeffrey (Tre) Krueger
• Court: Texas Court of Appeals

In re Jeffrey (Tre) Krueger

NO. 03-12-00838-CV

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

Filed: May 16, 2013

ORIGINAL PROCEEDING FROM TRAVIS COUNTYMEMORANDUM OPINION

Relator Jeffrey (Tre) Krueger was found in contempt of court for violating a temporary injunction and was committed to jail for 125 days. During his confinement, Krueger filed a petition for writ of habeas corpus and an emergency motion to set bond pending this Court's determination of the merits of the petition. We granted the emergency motion, ordered Krueger released upon the posting of bond, and requested a response from the real parties in interest, Michael Torres and Cru Energy, Inc. (Cru Energy). A response was subsequently filed. Having considered the petition and response, we conclude that Krueger is entitled to relief. Accordingly, we will grant the petition for writ of habeas corpus.

BACKGROUND

Krueger and Torres are opposing parties in ongoing litigation involving Cru Energy, a company that they co-founded. In the underlying suit, Krueger sued Torres for breach of fiduciary duty, fraud, conversion, and other theories of recovery. Torres filed an answer and counterclaim in which he made similar allegations against Krueger. During the course of the litigation, Torressought and obtained a temporary restraining order and two temporary injunctions against Krueger. The temporary restraining order, which was entered on June 14, 2011, and extended by agreement on July 27, 2011, prohibited Krueger from, among other things, "making or initiating any withdrawals or transfers from the Wells Fargo Account (as defined in Plaintiffs' Original Petition), excluding transfers to be made in the ordinary course of business of Cru Energy."¹ The first temporary injunction, which was entered on July 5, 2011, and replaced the temporary restraining order, prohibited Krueger from:

(1) scheduling or providing notice of or conducting a shareholder's meeting;(2) making or initiating any withdrawals or transfers from any of Cru Energy, Inc. bank accounts, including, but not limited to, the Wells Fargo Account as defined in Plaintiffs' Original Petition;

(3) disposing of, selling or encumbering the shares or any assets of Cru Energy, Inc. to which Jeffrey Krueger claims ownership;

(4) removing, destroying, or otherwise making unavailable any written information or documents related to the activities of any of Cru Energy, Inc.'s employees, agents, contractors, prospective or actual investors, customers or governmental agencies and its employees, or any other person who may be directly or indirectly involved with the affairs or business of Cru Energy, Inc.;

(5) contacting any of Cru Energy Inc.'s investors or potential investors, or any other persons doing business with or potentially a participant in the business of Cru Energy, Inc., except as specifically authorized by Michael Torres.

The second temporary injunction, which was entered on July 15, 2011 and purports to supplement the first temporary injunction, further ordered Krueger to "[r]eturn $80,000 to the Cru Energy bank account number 7038038340 to said account no later than July 18, 2011," to "[r]efrain and desist from denying or restricting Michael Torres' access to all money in Cru Energy, Inc.'s bank account number 7038038340 or any other account in the name of Cru Energy, Inc. at Wells Fargo Bank for usual and customary purposes of Cru Energy, Inc.," and to "[r]efrain and desist from denying or restricting Michael Torrres' access to or control over the Cru Energy, Inc. Website registered in the company's name . . . ."

On January 18, 2012, Krueger filed for Chapter 7 Bankruptcy in the United States Bankruptcy Court for the Northern District of Texas. Subsequently, Cru Energy filed a motion for relief from the automatic stay, and the bankruptcy court modified the stay to allow Cru Energy to pursue criminal contempt charges against Krueger relating to his obligations under the temporaryorders. On September 6, 2012, following a hearing, Krueger was held in contempt for violating the temporary restraining order by making three cash withdrawals on June 17, 2011, totaling $3,091.21, from the Wells Fargo Account referenced in the order. Krueger was subsequently committed to the Travis County Jail for three consecutive days.

In November 2012, Cru Energy pursued additional contempt charges against Krueger relating to alleged violations of the first temporary injunction. Cru Energy alleged that Krueger had violated the injunction by failing to cease and desist from either directly or indirectly "making or initiating any withdrawals or transfers from any of Cru Energy, Inc. bank accounts, including, but not limited to, the Wells Fargo Account as defined in Plaintiffs' Original Petition." Specifically, according to Cru Energy, Krueger admitted that he had "held $80,000 in trust for Cru Energy, Inc." and that he had "withdrew and transferred all of that money in separate violations of the Temporary Injunction."

Cru Energy also alleged that Krueger had further violated the injunction by failing to cease and desist from either directly or indirectly "contacting any of Cru Energy Inc.'s investors or potential investors, or any other persons doing business with or potentially a participant in the business of Cru Energy, Inc., except as specifically authorized by Michael Torres." According to Cru Energy, Krueger had contacted "multiple investors, vendors, and potential contractors and employees of Cru Energy." These alleged contacts "includ[ed] but [were] not limited to": (1) sending an email to several investors and potential contractors and employees of Cru Energy; (2) contacting and ultimately contracting with DSL, a vendor of Cru Energy; (3) contacting on multiple occasions Pablo Cortez and Robert Cook, both of whom were employees of Cru Energy;(4) contacting an employee of Seva Energie, a vendor of Cru Energy; and (5) sending an email to Dr. Patrick Hayes, "an investor and potential vendor or customer" of Cru Energy.

A hearing was held on the allegations. At the hearing, the district court admitted into evidence the transcript of the September contempt hearing (but not the documentary evidence from that hearing) and took "judicial notice of its court file."² The district court proceeded to consider additional evidence regarding the allegations, including the testimony of Krueger and former Cru Energy employees Cook and Cortez. Documentary evidence was also admitted relating to Krueger's allegedly improper contacts, including copies of email messages and phone logs.

At the conclusion of the hearing, the district court found that Krueger had violated the temporary injunction as alleged. Specifically, the district court found that Krueger had made 23 separate withdrawals and transfers from a Cru Energy bank account (the account was not specifically identified in the contempt order, other than as "the bank account holding Cru Energy, Inc. funds"), in the aggregate amount of approximately $80,000. The district court further found that Krueger had also violated the injunction by sending an email to several investors and employees of Cru Energy, sending an email to a vendor of Cru Energy, and sending emails to Pablo Cortez, an employee of Cru Energy. For each violation, the district court committed Krueger to jail for five consecutive days, for a total term of confinement of 125 days. Krueger was immediately taken into custody and confined to the Travis County jail.³ This habeas-corpus proceeding followed.

STANDARD AND SCOPE OF REVIEW

Contempt is "broadly defined" as "disobedience to or disrespect of a court by acting in opposition to its authority." In re Reece, 341 S.W.3d 360, 364 (Tex. 2011) (orig. proceeding) (citing Ex parte Chambers, 898 S.W.2d 257, 259 (Tex. 1995) (orig. proceeding)). "[C]ontempt is a broad and inherent power of a court." Id. (citing Ex parte Browne, 543 S.W.2d 82, 86 (Tex. 1976) (orig. proceeding)). However,

[D]espite the breadth of a court's contempt power, we have warned it is a tool that should be exercised with caution. As the Court of Criminal Appeals has explained, "[c]ontempt is strong medicine"—the alleged contemnor's very liberty is often at stake—and so it should be used "only as a last resort."

Id. (internal citations omitted).

An order finding a party in contempt is not an appealable order. See Norman v. Norman, 692 S.W.2d 655, 655 (Tex. 1985). Therefore, the only remedies available to the contemnor are obtaining a writ of mandamus if the contemnor is not confined, or a writ of habeas corpus if, as here, the contemnor is subject to confinement. See In re Long, 984 S.W.2d 623, 625 (Tex. 1999); Ex parte Cardwell, 416 S.W.2d 382, 384 (Tex. 1967). "The remedy [of habeas corpus] is in the nature of a collateral attack and its purpose is not to determine the ultimate guilt or innocence of the relator, but only to ascertain whether the relator has been unlawfully imprisoned." Ex parte Gordon, 584 S.W.2d 686, 688 (Tex. 1979). In a habeas-corpus proceeding, the order or judgment challenged is presumed to be valid until the relator has discharged his burden of showing otherwise. Ex parte Occhipenti, 796 S.W.2d 805, 809 (Tex. App.—Houston [1st Dist.] 1990, orig. proceeding) (citing Johnson v. Zerbst, 304 U.S. 458, 468-69 (1938)). For the relator tobe entitled to release from custody, "the trial court's order of commitment must be void, either because it was beyond the power of the court or because it deprived the relator of his liberty without due process of law." Ex parte Barnett, 600 S.W.2d 252, 254 (Tex. 1980).

The amount of due process afforded to the contemnor depends on the type of contempt being charged. "Contempt may occur in the presence of a court (direct contempt), or outside the court's presence (constructive contempt)." Reece, 341 S.W.3d at 365 (citing Gordon, 584 S.W.2d at 688). Because constructive contempt occurs outside the court's presence, more procedural safeguards are...