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Opinion 474

Case Name: 

FreeLife International v. Butler (In re Butler)

Judge: 
Judge Boulden
Date: 
Apr-15-2005
Case Number(s): 
04-3012
Status: 

UNPUBLISHED

Body: 

The Plaintiff brought a motion for summary judgment on its third claim for relief seeking to have declared nondischargeable contempt judgments issued by a state trial court totaling more than $900,000. The state court contempt judgments encompassed civil penalties assessed against the Debtors for contempt sanctions and attorney fees. The Plaintiff argued that the monetary sanctions imposed upon the Debtors by the state court are nondischargeable under § 523(a)(7) because they were fines or penalties which, even though not payable to a government entity, were for its benefit and in furtherance of vindicating the dignity and authority of the court. The Debtors claimed the contempt judgments fell outside the exception to discharge because they were not payed directly to a governmental unit as the statute requires. The Court acknowledged that there are good policy arguments favoring an exception to discharge which would uphold a court's authority to impose sanctions and not allow a party to circumvent that authority through a bankruptcy filing. However, the Court ultimately decided that the better-reasoned approach is to rely upon the plain meaning of the statute and declined to follow non-controlling case law from other jurisdictions which expands the exception to civil sanctions. The Court found that § 523(a)(7) does not except from discharge the debts arising from a civil penalty payable directly to a creditor imposed on the Debtors by a state court.

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Opinion 474
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