Taggart v. Lorenzen: the standard for discharge contempt

The dispute over collection after discharge

Taggart concerned attorney’s fees arising from litigation involving a debtor who had received a bankruptcy discharge. The debtor sought civil contempt sanctions against creditors for attempting to collect those fees. The lower courts applied different approaches to the significance of the creditors’ understanding of the discharge.

The Supreme Court addressed the standard for civil contempt. It did not treat the dispute as an opportunity to make every postdischarge collection question turn solely on whether the creditor said it acted in good faith.

The Court adopted an objective doubt standard

The Court held that civil contempt may be appropriate when there is no fair ground of doubt whether the discharge order barred the creditor’s conduct. It drew on traditional principles governing injunctions and civil contempt in interpreting sections 524 and 105.

An objectively unreasonable understanding does not become protected simply because the creditor sincerely believed it. At the same time, the Court rejected the debtor’s proposed approach resembling strict liability. Subjective good or bad faith can still have a role in the broader contempt analysis and selection of sanctions.

How to read the decision in a collection file

Separate three questions: what the discharge covered, what the creditor did, and whether the legal uncertainty satisfies the contempt standard. A collection notice, payment demand, or litigation filing needs to be evaluated against the actual order and governing law. Documenting the basis for a decision can help explain conduct, but a private memo does not create an automatic defense.

The Court distinguished the statutory setting of discharge from the automatic stay. Readers should not transfer this holding wholesale to every stay-damages dispute without examining the relevant provision.

Scope of this case note

This note summarizes the June 3, 2019 opinion and its stated limits. The judgment was vacated and the case remanded. It does not report subsequent proceedings or replace research into later controlling applications of the contempt standard.