Post by Jim on Aug 11, 2010 8:10:21 GMT -5
Impossibility of Performance: A Complete Defense
In any contempt proceeding for failure to obey a court order, the inability to obey the particular order is a complete defense.6 This is known as the "impossibility of performance" defense.
This defense will be available so long as the inability to comply or the impossibility to perform was not created by the individual to whom the order is directed at the time of, or close in time to, the court's order being issued.
The court will examine the nexus in time between the date the impossibility was created and the date the court's order issued. If a nexus is found between these two dates such that it can be shown by the requisite burden of proof that the defendant knew or reasonably should have known at the time the impossibility was created that a court order would enter (or a subpoena would issue), the court will likely find the impossibility was
created in bad faith and the impossibility of performance defense will likely be lost.
The impossibility of performance defense is outlined by the Second Circuit Court of Appeals in the case of Badgley v. Santacroce, 800 F.2d 33 (2nd Cir. 1986).
The purpose of civil contempt, broadly stated, is to compel a reluctant party to do what a court requires of him. Because compliance with a court's directive is the goal, an order of civil contempt is appropriate "only when it appears that obedience is within the power of the party being coerced by the order." Maggio v. Zeitz, 333 U.S. 56, 69, 92 L.Ed. 476, 68
S.Ct. 401 (1948). A court's power to impose coercive civil contempt is limited by an individual's ability to comply with the court's coercive order. Shillitani v. United States, 384 U.S. 364, 371, 16 L.Ed. 2d 622, 86 S.Ct. 1531 (1966); Maggio v. Zeitz, supra, 333 U.S. at 72-73. A party may defend against contempt by showing that his compliance is "factually impossible." United States v. Rylander, 460 U.S. 752, 757, 75 L.Ed. 2d 521, 103 S.Ct. 1548 (1983).
When determining whether an alleged contemnor has the ability to comply with a court's order, the court is generally limited to examining the facts and circumstances that exist at the time the order is issued that create the impossibility on the part of the contemnor.
Thus, in the Rylander case, 8 the court ordered Rylander to produce certain corporate documents. At the time the order entered, Rylander did not have possession of the documents and was no longer a corporate officer. Because insufficient proof was offered to show Rylander had actual possession of the documents and that he did not have access
to the documents without committing some extreme act, the United States Supreme Court permitted his defense of impossibility and ruled Rylander could not be held in contempt of the court's order.
Self-Created Impossibility and Good Faith
Inability to comply with a court's order will not be recognized as a valid defense in those situations where the impossibility to perform was self-created for the specific purpose of avoiding a court's order or subpoena that has been or is about to be issued.9 In other words, the mere fact that the defendant created the impossibility is not of particular relevance. It is when the defendant creates the impossibility that is important.
In situations where courts have examined the issue of self-created impossibility, the courts have consistently ruled that contempt will not apply unless the alleged contemnor acted in bad faith. Bad faith will not be found unless there exists some nexus in time between the creation of the impossibility and the issuance of the court's order or subpoena. In the Blaine case, Federal Trade Commission v. Blaine, 308 F. Supp. 932 (N.D. Ga. 1970); see also Ex parte Fuller, 50 S.W. 2d 654 (Mo. 1932).
Blaine claimed he was unable to comply with a court's order to produce corporate documents, for which he served as president, on the basis he
had transferred all of the documents to his attorney five months prior to being served with the subpoena. When the order to produce the documents was issued, Blaine's attorney returned the documents to him, but several files were missing. When the attorney and Blaine testified they did not know the whereabouts of the missing files, the court found no basis for a finding of bad faith and thus no contempt. Specifically, the court ruled, "it
must appear by the legal preponderance of the evidence that . . . at the time of the service of the subpoena [the defendant] had possession or control of the documents."Id. at 932-33.
Contrast the result in Blaine with the result in Goldstein. In the latter case, the Second Circuit Court of Appeals found the defendant's inability to comply with a subpoena for the production of documents to have been created in bad faith. United States v. Goldstein, 105 F.2d 150 (2nd Cir. 1939).
The defendantdisposed of documents subject to the subpoena eleven days prior to the issuance of the subpoena and had reason to know the subpoena would be issued at or about the time he undertook to dispose of the documents. As such, the court found the defense of impossibility of performance to be ineffective.
Proving Good Faith
As part of the showing of good faith, the defendant needs to be prepared to prove there was no ability to perform. Specifically, the defendant must show he took steps within his power to comply with the court order and must offer proof to this extent.
Stotler and Co. v. Able, 870 F.2d 1158 (7th Cir. 1989); Foust v. Denato, 175 N.W.2d 403 (Iowa 1970).
Furthermore, the inability must be shown to have existed for a period of time sufficient to avoid a nexus in time being established between the time the inability to perform arose and the time the order or subpoena issued.
For asset protection planning purposes, the earlier steps are taken to move the assets offshore and into the complete control of the foreign trustee, the more likely the impossibility defense will prevail. Thus, the more tenuous the nexus in time, the more difficult it will be for the court to find bad faith on the part of the alleged contemnor. In addition, the defendant must make all reasonable attempts to comply with the court's order and adequately document all such efforts.
In any contempt proceeding for failure to obey a court order, the inability to obey the particular order is a complete defense.6 This is known as the "impossibility of performance" defense.
This defense will be available so long as the inability to comply or the impossibility to perform was not created by the individual to whom the order is directed at the time of, or close in time to, the court's order being issued.
The court will examine the nexus in time between the date the impossibility was created and the date the court's order issued. If a nexus is found between these two dates such that it can be shown by the requisite burden of proof that the defendant knew or reasonably should have known at the time the impossibility was created that a court order would enter (or a subpoena would issue), the court will likely find the impossibility was
created in bad faith and the impossibility of performance defense will likely be lost.
The impossibility of performance defense is outlined by the Second Circuit Court of Appeals in the case of Badgley v. Santacroce, 800 F.2d 33 (2nd Cir. 1986).
The purpose of civil contempt, broadly stated, is to compel a reluctant party to do what a court requires of him. Because compliance with a court's directive is the goal, an order of civil contempt is appropriate "only when it appears that obedience is within the power of the party being coerced by the order." Maggio v. Zeitz, 333 U.S. 56, 69, 92 L.Ed. 476, 68
S.Ct. 401 (1948). A court's power to impose coercive civil contempt is limited by an individual's ability to comply with the court's coercive order. Shillitani v. United States, 384 U.S. 364, 371, 16 L.Ed. 2d 622, 86 S.Ct. 1531 (1966); Maggio v. Zeitz, supra, 333 U.S. at 72-73. A party may defend against contempt by showing that his compliance is "factually impossible." United States v. Rylander, 460 U.S. 752, 757, 75 L.Ed. 2d 521, 103 S.Ct. 1548 (1983).
When determining whether an alleged contemnor has the ability to comply with a court's order, the court is generally limited to examining the facts and circumstances that exist at the time the order is issued that create the impossibility on the part of the contemnor.
Thus, in the Rylander case, 8 the court ordered Rylander to produce certain corporate documents. At the time the order entered, Rylander did not have possession of the documents and was no longer a corporate officer. Because insufficient proof was offered to show Rylander had actual possession of the documents and that he did not have access
to the documents without committing some extreme act, the United States Supreme Court permitted his defense of impossibility and ruled Rylander could not be held in contempt of the court's order.
Self-Created Impossibility and Good Faith
Inability to comply with a court's order will not be recognized as a valid defense in those situations where the impossibility to perform was self-created for the specific purpose of avoiding a court's order or subpoena that has been or is about to be issued.9 In other words, the mere fact that the defendant created the impossibility is not of particular relevance. It is when the defendant creates the impossibility that is important.
In situations where courts have examined the issue of self-created impossibility, the courts have consistently ruled that contempt will not apply unless the alleged contemnor acted in bad faith. Bad faith will not be found unless there exists some nexus in time between the creation of the impossibility and the issuance of the court's order or subpoena. In the Blaine case, Federal Trade Commission v. Blaine, 308 F. Supp. 932 (N.D. Ga. 1970); see also Ex parte Fuller, 50 S.W. 2d 654 (Mo. 1932).
Blaine claimed he was unable to comply with a court's order to produce corporate documents, for which he served as president, on the basis he
had transferred all of the documents to his attorney five months prior to being served with the subpoena. When the order to produce the documents was issued, Blaine's attorney returned the documents to him, but several files were missing. When the attorney and Blaine testified they did not know the whereabouts of the missing files, the court found no basis for a finding of bad faith and thus no contempt. Specifically, the court ruled, "it
must appear by the legal preponderance of the evidence that . . . at the time of the service of the subpoena [the defendant] had possession or control of the documents."Id. at 932-33.
Contrast the result in Blaine with the result in Goldstein. In the latter case, the Second Circuit Court of Appeals found the defendant's inability to comply with a subpoena for the production of documents to have been created in bad faith. United States v. Goldstein, 105 F.2d 150 (2nd Cir. 1939).
The defendantdisposed of documents subject to the subpoena eleven days prior to the issuance of the subpoena and had reason to know the subpoena would be issued at or about the time he undertook to dispose of the documents. As such, the court found the defense of impossibility of performance to be ineffective.
Proving Good Faith
As part of the showing of good faith, the defendant needs to be prepared to prove there was no ability to perform. Specifically, the defendant must show he took steps within his power to comply with the court order and must offer proof to this extent.
Stotler and Co. v. Able, 870 F.2d 1158 (7th Cir. 1989); Foust v. Denato, 175 N.W.2d 403 (Iowa 1970).
Furthermore, the inability must be shown to have existed for a period of time sufficient to avoid a nexus in time being established between the time the inability to perform arose and the time the order or subpoena issued.
For asset protection planning purposes, the earlier steps are taken to move the assets offshore and into the complete control of the foreign trustee, the more likely the impossibility defense will prevail. Thus, the more tenuous the nexus in time, the more difficult it will be for the court to find bad faith on the part of the alleged contemnor. In addition, the defendant must make all reasonable attempts to comply with the court's order and adequately document all such efforts.
