Wright v. Nichols, 95-2430

• Decision Date: 10 April 1996
• Docket Number: No. 95-2430,95-2430
• Citation: 80 F.3d 1248
• Parties: William Randall WRIGHT, Trustee, Appellee, v. Denitia NICHOLS, Appellant, Gary Joe Dean; Lucille M. Dean, Debtors.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1248

80 F.3d 1248

William Randall WRIGHT, Trustee, Appellee, v. Denitia NICHOLS, Appellant Gary Joe Dean; Lucille M. Dean, Debtors.

No. 95-2430.

United States Court of Appeals Eighth Circuit.

Submitted Jan. 9, 1996.

Decided April 10, 1996.

Appeal from the United States District Court for the Western District of Arkansas; Harry F. Barnes, Judge.

Billy J. Hubbell, Crossett, Arkansas (argued), for appellant.

Thomas S. Streetman, Crossett, Arkansas (argued) for appellee.

Before RICHARD S. ARNOLD, Chief Judge, BOWMAN, Circuit Judge, and JONES, ^* District Judge.

BOWMAN, Circuit Judge.

Denitia Nichols appeals from the order of the District Court ¹ finding her in criminal contempt of the Bankruptcy Court. ² We affirm.

We do not have before us a full explanation of the relationship among the players involved in this case, nor do we need one. We do know that the underlying bankruptcy was a Chapter 7 filing by Gary Joe Dean and Lucille M. Dean. Among the persons and entities involved are a company known as Hi-Tech Coatings, Inc., actually found by the Bankruptcy Court to be the property of the debtors, and Nichols, who at times relevant to this appeal was serving as Hi-Tech's president. In an adversary proceeding brought by the Trustee on behalf of the Deans and Hi-Tech, the Bankruptcy Court entered a temporary restraining order (TRO) against Nichols, among others, on February 12, 1993. The court ordered that Nichols and Robert J. Johnson, an attorney (for whom Nichols worked as legal secretary, according to counsel for the Trustee), be "restrained from removing any funds from any accounts held in the name of Hi-Tech Coatings, Inc. or for its benefit and [that Nichols and Johnson] shall immediately cease and desist from any activity that would cause removal of any funds from the accounts of Hi-Tech Coatings, Inc. or disposing of any assets of Hi-Tech Coatings, Inc." Temporary Restraining Order at 1-2. By consent order entered March 23, 1993, the TRO was continued.

On June 24, 1993, William E. Johnson (not to be confused with Robert J. Johnson), the attorney who had represented Nichols and Robert J. Johnson in related proceedings in chancery court and also in the Trustee's adversary proceeding in Bankruptcy Court beginning February 1993 until he withdrew in April or early May 1993, delivered a check for $6733.13 to Billy J. Hubbell, who had replaced Johnson in representing Nichols. The check was made payable to "Hi-Tech Coatings, Inc. & Billy J. Hubbell, their atty." and was for a refund of unearned advanced fees that had been paid to Johnson by Hi-Tech. Nichols endorsed the check as president of Hi-Tech and left it with Hubbell, who deposited it.

When the Trustee discovered what Nichols had done with the Johnson check, and believing that Nichols was violating the TRO in other ways, he asked the Bankruptcy Court to sanction her. On February 10, 1994, a hearing was held on the motion for sanctions, and the Bankruptcy Court indicated its inclination to find Nichols in criminal contempt, expressing some frustration at the course of events: "This is exactly the way she did through all these months and months and months, when she was looting Mr. Dean's corporation, taking the money that he made, he earned, and lavishing herself and Mr. [Robert] Johnson with these proceeds of this fraud." Transcript of Hearing on Motion for Sanctions at 71. On August 18, 1994, the Bankruptcy Court held a show-cause hearing, giving the parties an opportunity to supplement the record, with Nichols fully aware that the court was planning to issue an order of criminal contempt unless she could show cause why it should not do so. No additional testimony was offered and the Bankruptcy Court found Nichols in criminal contempt. On May 8, 1995, the District Court held a hearing on Nichols's objections to the order, taking Hubbell's testimony as a supplement to the record on the motion for sanctions from the Bankruptcy Court. After de novo review, the District Court issued an order of contempt against Nichols and accepted the Bankruptcy Court's recommendation of a sentence of thirty days incarceration. Nichols appeals.

We review the District Court's decision to enter a contempt order for abuse of discretion, giving plenary review to conclusions of law and reviewing factual findings for clear error. See Wycoff v. Hedgepeth, 34 F.3d 614, 616 (8th Cir.1994) (enunciating abuse of discretion standard in review of denial of order of civil contempt); see also, e.g., United States v. Winter, 70 F.3d 655, 659 (1st Cir.1995), cert. denied, --- U.S. ----, 116 S.Ct. 1366, 134 L.Ed.2d 532 (1996); F.D.I.C. v. LeGrand, 43 F.3d 163, 166 (5th Cir.1995). Because this is a case of criminal contempt, we will reverse for abuse of discretion if we do not find that Nichols's behavior constituted contempt beyond a reasonable doubt. International Union, United Mine Workers of Am. v. Bagwell, --- U.S. ----, ----, 114 S.Ct. 2552, 2561, 129 L.Ed.2d 642 (1994).

Nichols argues that her endorsement of the check was not a knowing and willful violation of the TRO, required to sustain the judgment of criminal contempt, because she was relying on the advice of counsel when she signed over the check. We shall assume without deciding that reliance on the advice of counsel is a defense to an act of criminal contempt (although good faith reliance on such advice would be difficult to show where, as here, counsel benefits from the contemptuous act). But see United States v. Di Mauro, 441 F.2d 428, 437 (8th Cir.1971) (holding that reliance on advice of counsel is no defense where contemnors refused to testify in criminal trial despite being given immunity). We need not reach the legal question, for Nichols's claim that she relied on the advice of counsel is, to put it charitably, not supported by the record. Contrary to Nichols's bald assertions in her brief that she relied on the advice of counsel, neither Nichols nor Hubbell testified that they discussed with each other whether or not the endorsement by Nichols would violate the TRO. When asked in the initial hearing before the Bankruptcy Court "what discussions" Nichols had with Hubbell "concerning what you should do with this check," Nichols responded:

He brought the check--we were down--he came down to my office and we talked about it. And because it was the transfer of that unused portion that was ordered paid to Mr. Johnson by [Chancery Court] Judge Vittitow, I signed the check to apply it for his attorney fees, since he was representing me now. Then.

Transcript of Hearing on Motion for Sanctions at 11-12. Nichols never said that she sought or that Hubbell offered advice on whether negotiating the check so that Hubbell might deposit it into his own account would violate the TRO. It would be far too generous an interpretation of the phrase "talked about" to assume Nichols intended to say that Hubbell gave her advice about the check and the TRO, upon which she then acted. In any event, Hubbell's subsequent testimony before the District Court leaves no room for such a liberal reading of "talked about." When asked if he had "any discussions with Denitia Nichols as to whether or not the--her endorsing the check and turning the funds over to you would violate the terms of the TRO," Hubbell said:

I don't think--no, I didn't discuss that with her because I didn't think it did. I mean, my concern was that there might be a turnover order or an order that was a preferential transfer which would have to repaid [sic] but never, it just didn't--I didn't think it violated the Temporary Restraining Order.

Transcript of Hearing on Order of Criminal Contempt at 9 (the same page to which Nichols's brief disingenuously refers in claiming that "[c]ounsel then advised Nichols that she would not be violating the restraining order if she endorsed the check to attorney Hubbell," Brief of Appellant at 6). We do not see how it is possible to prevail in a criminal contempt case with a defense of reliance on the advice of counsel when the party seeking to avoid being held in contempt neither sought nor received the advice of counsel on whether the behavior at issue would violate the court order in question.

More generally, Nichols argues that she did not know, or even consider, that her endorsement of the check could be a violation of the TRO and, therefore, that her violation of the order was not willful. In the context of criminal contempt, willfulness "means a deliberate or intended violation, as distinguished from an accidental, inadvertent, or negligent violation of any order," and the necessary intent "may be inferred from the evidence." Hubbard v. Fleet Mortgage Co., 810 F.2d 778, 781 (8th Cir.1987) (citations to quoted cases omitted). Our review of the record convinces us that Nichols's endorsement of the check was an act of criminal contempt, as it was "a volitional act done by one who knows or should reasonably be aware that [her] conduct is wrongful." In re Holloway, 995 F.2d 1080, 1082 (D.C.Cir.1993) (emphasis omitted and alteration added) (quoting United States v. Greyhound Corp., 508 F.2d 529, 531-32 (7th Cir.1974) (citation to quoted case omitted)), cert. denied, --- U.S. ----, 114 S.Ct. 1537, 128 L.Ed.2d 190 (199...