1. Constructive trusts & tracing through exchanges  Direct Exchange - P can trace through direct exchanges (Problem 8-1)  Exchanges & Commingling If D commingles P’s stolen cash with his own, P must use the tracing fictions/presumptions: 1. D spends his own $ first 2. New $ lawfully acquired is Ds unless D manifests intent to replenish P’s $ 3. D invests P’s $ first 1 & 3 can be used at P’s election to maximize P’s recovery although can only use in “real time.” 2 must be used as it is stated. Use of these presumptions with the ledger system will illustrate the lowest intermediate balance rule (without consciously applying it) LIB rule – If total balance of account falls below the value of the stolen item deposited in the account, the lowest balance prior to the next deposit of P’s $ (or an adjudication) limits what P can get for that particular property

2. Tracing into swelled assets  If D is bankrupt & P can trace into assets that are now worth more that what P lost, court will limit P to amount that she actually lost  Equitable lien – device that secures a monetary judgment in the amount of loss by creating a security interest in specific property. Gives holder of the lien the right to force a sale and have the proceeds of the sale applied to pay off the security interest.  P can force D to sell the property and give her the amount of her losses. The remainder goes back into the bankruptcy estate for unsecured creditors.  Can be especially useful even absent bankruptcy if there is one property (real estate) and multiple victims (Paolini)  If D is NOT bankrupt P can trace into swelled assets with constructive trust and keep the entire amount.

3. Facts common to all Tracing problems  Scum manages a trust fund for his mother which contains the following: 100 shares Microsoft at $30/share 100 shares of Exxon at $50/share 100 shares of Walmart at $60/share  Scum embezzles from Mom in each problem so we know that there are GROUNDS for a constructive trust. The key is to find out whether there is an identifiable asset.  Scum maintains his own checking account which, at the beginning of each problem, has $10,000 in it.  Due to financial difficulties, after the actions identified in each problem, Scum eventually goes bankrupt making a damage judgment essentially not worth it.  Each transaction in each problem occurs in chronological order on a different day with the balance immediately being recorded.

4. What is contempt?  Contempt is the court’s power to protect itself and its orders  It generally is used in two situations  A party or witness (contemnor) acts disrespectfully toward a judicial body (i.e., disruption in the courtroom, etc.)  A party violates a court order that applies to that party (e.g., an injunction)

5. Kinds of contempt – civil compensatory contempt  Compensates non-contemnor for its losses/contemnor’s gains due to contemnor’s violation of court order  Responsibility for proof of harm lies w/ non-contemnor  Can be imposed whether violation is willful or merely inadvertent  Initiated by motion of aggrieved party – civil procedures apply  Movant must show violation of order by clear and convincing evidence

6. Kinds of contempt – coercive civil contempt  Order designed to coerce contemnor to comply with court order in the future.  Typical methods of coercion - Court jails contemnor until compliance OR fines for every day of non-compliance (fine is usually payable to the gov’t)  Coercive civil contempt is viewed as remedial rather than as punishment  Contemnor “holds the keys to the jailhouse door”  Civil procedures typically apply ( But see Bagwell )  Aggrieved party typically initiates by motion UNLESS it is a summary contempt (e.g., in-court refusal to testify) where court is vindicating own rights

7. Kinds of contempt – criminal contempt  Designed to punish past conduct – vindicate court’s authority  Characterized by the imposition of a determinate fine or jail sentence as a result of past behavior – all fines payable to the state  “Intent” requirement – contempt imposed only for willful violations  Willful = purpose or knowledge  Most (but not all) of the procedural protections applicable in criminal proceedings apply  PBRD, jury trial for certain $ amounts or sentences, double jeopardy...

8. UMW v. Bagwell – facts o Longstanding labor disputes between mining companies and union. o Trial court entered injunction prohibiting various activities by union – obstruction of ingress/egress to company facilities, jackrocking, large pickets at certain sites o http://en.wikipedia.org/wiki/File:Caltrop.jpg http://en.wikipedia.org/wiki/File:Caltrop.jpg o 1 st contempt hearing – court found 72 separate violations and issued $642,000 fine. o Court also announced a prospective fine schedule - $100K for future violent breaches of injunction & $20K for future nonviolent breaches. o At subsequent hearings (7 of them) – court found 400 separate violations of the injunction; imposed $64,000,000 in fines - $52,000,000 payable to the government, the rest payable to the companies. Civil procedures were used, except for PBRD requirement.

9. UMW v. Bagwell – criminal or coercive contempt How do we characterize the contempt fines imposed by the trial court judge – criminal or civil in nature? o 1 st set of fines -- $642,000 o Look criminal – determinate fines for past actions & payable to gov’t o 2 nd set of fines -- $52 million o Va courts – fines are coercive – civil procedures are okay o SCT – fines are criminal – criminal procedures should have been used before imposition

10. SCT reasoning re Bagwell fines: Classic Coercive Contempt: 1) Court issues order: “Disclose your source.” 2) Reporter who is subject to the order violates it; is found in contempt; jailed/fined daily until complies with order. Report can avoid each new fine/imprisonment by complying. Bagwell conditional fines: 1) Court issues injunction prohibiting certain destructive behavior by union. 2) Court threatens penalties for future violations. 3) Union violates order; is found in contempt; previously threatened fines are imposed. These latter fines look like determinate criminal fines once imposed even if they look coercive when threatened. Union doesn’t have opportunity to avoid fines once imposed

11. When are criminal procedures required with what sometimes looks like coercive contempt: 1. Can the fine be purged after a contempt finding?  Bagwell – no  Reporter/source -yes 2. Is the contempt direct (i.e., in the courtroom)?  Bagwell – no  Reporter/source - yes 3. Is the court’s order that was violated simple or complex?  Bagwell – complex  Reporter/source - simple

12. Run-of-the mill coercive contempt – the big question Can the contempt operate perpetually if the contemnor refuses to comply? General rule re release of contemnor: Court should release contemnor from coercive contempt when (1) compliance is no longer needed OR (2) the contempt no longer has a coercive effect. Anyanwu standard: Is there a substantial likelihood that continued commitment will accomplish the purpose of the court order? If yes – court can maintain confinement If no – court should release contemnor It is contemnor’s burden to show that the contempt has lost its coercive impact.

13. How does a judge determine that the coercive order has lost it’s impact?  Is it enough that the contemnor avows to “never give in”?  Probably not – refusal to comply is alone insufficient  So what more is needed?  How do factors such as “age, state of health, & length of confinement” relate to contemnor’s credibility?  “Each case must be decided on an independent evaluation of all of the particular facts. Age, state of health and length of confinement are all factors to be weighed, but the critical question is whether or not further confinement will serve any coercive purpose.” Catena v. Seidl (quoted in Anyanwu ) These are very fact-bound & context-specific inquiries

14. How does a judge determine contemnor’s stubbornness has become irrevocable – cont’d How relevant is the form of testimony re contemnor’s stubbornness? Live testimony vs. affidavits Personal testimony vs. third-party testimony Psychiatric testimony? Did the form of Anyanwu’s evidence (along with his actions) help or hurt his claim regarding the coercive effect of the contempt? 2 letters from Vice-Consul US Embassy & Civil Rights Ctr. (both suggesting court case has made situation worse) Never testifies on own behalf Never did what court asked him to do (despite court making it easier for him to comply)

15. Impossibility as a defense Impossibility of compliance with a court order is a defense to contempt (both criminal and civil coercive). It is the contemnor’s burden to prove impossibility How do we determine when it is impossible for the contemnor to comply? Often it’s just a matter of credibility – does the contemnor’s story hold up to scrutiny? What if the contemnor is partly responsible for why she can’t comply? Courts are unlikely to allow the defense. Court will probably hold a criminal contempt hearing instead since no amount of coercion is likely to work.