Civil Procedure — contempt

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United States Court of Appeals For the Seventh Circuit

Civil

Civil Procedure — contempt

Sanctions for contempt must be vacated where the court did not state the reasons for them.

“A judge has to justify the sanctions he imposes. FTC v. Trudeau, supra, 579 F.3d at 770-71; Autotech Technologies LP v. Integral Research & Development Corp., 499 F.3d 737, 752 (7th Cir. 2007); Mid-American Waste Systems, Inc. v. City of Gary, 49 F.3d 286, 293 (7th Cir. 1995); FTC v. Kuykendall, 371 F.3d 745, 763 (10th Cir. 2004) (en banc). Since the judge in this case intended the sanction (perhaps better termed ‘remedy’) to be compensatory, he had to explain what it was compensating for; and he did not do that. For what costs had the receiver and ALCO incurred as a consequence of SonCo’s violation of the agreed order, besides the $22,000 in attorneys’ fees that the judge directed SonCo to pay? He didn’t say. It might seem obvious that ALCO lost the $250,000 in bond money that it would have recovered had SonCo become the operator of the Hull-Silk leases or hired a substitute to operate them. But no; the judge ordered the new lessee, Wilson Operating Company (this was before Wilson assigned the leases), to pay $250,000 to the receiver, to be divided with ALCO. The unstated but inescapable premise was that Wilson’s assignee was going either to operate the leases or hire an operator, and in either event would replace ALCO’s bond. Without replacement the Texas Railroad Commission would not return ALCO’s bond money, which was the guaranty of ALCO’s ability to cover at least some of the conservation and environmental costs to which its operation of the wells might give rise.”

Affirmed in part, and Reversed in part.

11-1702 SEC v. First Choice Management Services, Inc.

Appeal from the United States District Court for the Northern District of Indiana, Miller, J., Posner, J.