In Re: Mosdos Chofetz Chaim Inc.

Background

The appeal concerned a March 23, 2022 order by Bankruptcy Judge Robert D. Drain. That order found Rabbi Mayer Zaks in contempt and imposed compensatory sanctions in an adversary proceeding involving a dispute between two rabbis concerning the transfer of real property. The contempt finding arose from Zaks’s conduct during a March 4, 2022 hearing on a motion to enforce an injunction barring him and others from entering or remaining on the property.

During the hearing, Zaks repeatedly interrupted Judge Drain while testifying, tried to add to declarations that had been submitted as his direct testimony, and argued with opposing counsel. Judge Drain had warned him to stop interrupting. The bankruptcy court found that Zaks’s conduct was unruly, disorderly, argumentative, and improper; intended to interfere with and disrupt the proceedings; and caused unnecessary delay and preparation. It ordered him to pay the moving party’s reasonable fees and expenses for preparing for the adjourned hearing.

Arguments on Appeal

Zaks argued that the bankruptcy court abused its discretion. He contended that the court needed to identify a clear and definite order that he violated, provide notice and a hearing, identify specific authority for the sanctions, and find that he acted in bad faith. He also argued that any bad-faith finding would be erroneous and motivated by personal animus. The opinion states that Zaks separately raised an impossibility defense, but the district court did not address it because the sanctions were based on his in-court conduct rather than his or his lawyer’s observance of the Sabbath or request to end the hearing early.

Court’s Analysis

The district court explained the difference between direct contempt and indirect contempt. Direct contempt involves disruptive conduct in the judge’s presence and may be addressed summarily when immediate action is needed to restore order. Indirect contempt generally involves disobedience to a court order outside the courtroom and ordinarily requires greater procedural protections.

The court held that the contempt here was direct contempt. Zaks’s repeated interruptions, outbursts, apparent efforts to delay the proceeding, attempts to add to his direct testimony contrary to the bankruptcy court’s procedures, and arguments with opposing counsel occurred in Judge Drain’s presence. Because the contempt was direct, the bankruptcy court did not need to identify a separate violated order, provide advance notice and a hearing, or specify statutory authority before imposing the sanctions.

The district court also rejected Zaks’s argument that the bankruptcy court could not impose compensatory sanctions without a bad-faith finding. It distinguished authority concerning out-of-court conduct and noted that Judge Drain had found that Zaks’s conduct was willful and intended to delay the proceeding, which the district court said would be enough to show bad faith even if such a finding were required.

Disposition

Applying abuse-of-discretion review, Judge Seibel held that the bankruptcy court did not abuse its discretion in finding Zaks in civil contempt or imposing compensatory sanctions. The court affirmed the Contempt Order and directed the clerk to close the case.