A recent decision by the Sixth Circuit United States Court of Appeals based in Cincinnati shows that debtors who refuse to comply with legitimate discovery requests run the risk of significant sanctions.
In the case of In re Lane, No. 20-5399 (December 22, 2020), the Court upheld a finding of contempt issued by a Kentucky bankruptcy court against the debtors who refused to attend a discovery deposition. The debtors made the matter worse by also refusing to provide any dates when they would be able to attend the deposition.
The bankruptcy court sanctioned the debtors and required them to pay $5,000.00 to their adversary. But the court gave the debtors a chance to get out of the sanction by simply “purging” their contempt. All they had to do was comply with the legitimate discovery request by providing a date when they would sit for the deposition and the monetary sanction would have been eliminated.
Instead, they appealed the bankruptcy court’s sanction all the way up to the Sixth Circuit Court of Appeals which upheld it. The Sixth Circuit found that there was clear and convincing evidence of the debtors’ failure to comply with the bankruptcy court’s order requiring the debtors to provide a date when they would be available to have their deposition taken. Since the debtors refused and did not contest the bankruptcy court’s contempt finding—instead, accusing the bankruptcy court of criminal behavior and being generally “uncooperative and argumentative”—the bankruptcy court’s order was allowed to stand. Furthermore, the debtors were unable to show that they were unable comply with the bankruptcy court’s order which would have precluded a finding of contempt. The opinion can be found on the Sixth Circuit Court of Appeals’ website here.