Appellate Courts Skeptical About Bankruptcy Court Sanctions

The Fifth Circuit, for example, takes a balanced approach. "[B]ankruptcy courts have only civil contempt powers because that is all Congress has given them …. Accordingly, bankruptcy courts may issue contempt orders, but any contempt sanction imposed by a bankruptcy court must be civil" — compensatory, not punitive. In re Highland Capital Management, 2024 WL 1450065, *2 (5^th Cir. Apr. 4, 2024) (2-1). Accord, In re Markus, 78 F.4^th 554, 563 n.5 (2d Cir. 2023). A split Fourth Circuit, as noted, went further: a bankruptcy court's "civil contempt and sanctions orders … for violating a discovery order are interlocutory and cannot be immediately appealed as of right." In re Bestwall, LLC, 2024 WL 1841960, (4^th Cir. Apr. 29, 2024) (2-1). The Second Circuit takes a more nuanced approach. PHH Mortg. Corp. v Senesenich (In re Gravel), 6 F. 4^th 503, 511, 513 (2d Cir. 2021). ("A bankruptcy court's award of sanctions, including findings of contempt, are reviewed [on appeal] for abuse of discretion;" reviewed under 28 U.S.C. §158(d)(2)(A) (after certification); "this court has a duty to conduct its own 'exacting' review of contempt orders;" bankruptcy court cannot "hold a party in contempt for violating an order that is subject to varying interpretations".).