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In re Husain

United States District Court, N.D. Illinois, Eastern Division

July 13, 2018

IN RE AL-HAROON B. HUSAIN, Respondent-Appellant,
v.
PATRICK S. LAYNG, U.S. Trustee, Appellee.

          MEMORANDUM OPINION AND ORDER

          Honorable Edmond E. Chang United States District Judge.

         Al-Haroon Husain was disbarred and held in contempt by the bankruptcy court. The Seventh Circuit affirmed the disbarment. In the Matter of: Al-Haroon B. Husain, 866 F.3d 832, 834 (7th Cir. 2017). This is Husain's separate appeal challenging the finding of contempt.[1] He contends that the bankruptcy court's findings were clearly erroneous and that the contempt should be vacated. R. 15, Appellant Br. at 10.[2] For the reasons discussed in this Opinion, the contempt order is affirmed.

         I. Background

         Before his disbarment, Al-Haroon Husain was an attorney representing Chapter 7 debtors in the Bankruptcy Court of the Northern District of Illinois. Disciplinary Order, Trustee Appx. at 22.[3] After the United States Trustee uncovered several instances of alleged misconduct in Husain's bankruptcy cases, the bankruptcy court instituted disciplinary proceedings against him. See Bankr. Discipline Record at 1135; Bankr. Docket, Trustee Appx. at 2.[4] After an evidentiary hearing on the alleged misconduct, the bankruptcy court found that Husain engaged in misconduct by, among other things, signing clients' names to under-perjury declarations (without saying that he was doing so); copying and reusing clients' signatures so that it looked like they had signed documents that they had not read; and submitting documents that omitted important assets of clients. Disciplinary Order, Trustee Appx. at 18; In the Matter of: Husain, 866 F.3d 832, 834-35 (7th Cir. 2017). As a result, the bankruptcy court “permanently suspended” (that is, disbarred) Husain from practicing before the Bankruptcy Court for the Northern District of Illinois. Id.; In re Husain, 533 B.R. 658, 698 (Bankr. N.D.Ill. 2015). In later orders, the bankruptcy court ordered Husain to pay restitution to an array of former clients and to pay costs to the United States Trustee for the costs of prosecuting the disciplinary proceeding. Restitution Order, Husain Appx. at 1304; Costs Order, Trustee Appx. at 73. In total, Husain was ordered to pay $28, 100 in restitution to 18 clients and $16, 809.21 in prosecution costs. Disciplinary Order, Trustee Appx. at 60; Costs Order, Trustee Appx. at 73; Motion to Show Cause, Trustee Appx. at 70.

         The restitution-payment deadline was set for August 28, 2015, and the Trustee costs were due by September 24, 2015. See Motion to Combine, Trustee Appx. at 63. On August 31, 2015 (three days after the restitution payment was due), Husain filed a motion in the bankruptcy court, arguing—for the first time—that he was unable to afford the restitution payment. Motion to Combine, Trustee Appx. at 63. Accompanying the motion was an affidavit executed by Husain, and in turn, the affidavit attached a document that bore a title of “Personal Financial Statement.” Trustee Appx. at 65-67. The financial statement asserted that Husain had only $2775 in assets and an underwater net worth of negative $37, 225. Id. at 66.[5] The Trustee fired back with a motion seeking the issuance of a show-cause order against Husain as to why he should not be held in contempt. Motion to Show Cause, Trustee Appx. at 70.

         In an order signed on September 1, 2015, the bankruptcy court memorialized Husain's obligation to pay $16, 809.21 to the Trustee for the costs of prosecution. Costs Order, Trustee Appx. at 73. In early October 2015, the bankruptcy court ordered Husain to show cause why he should not be held in contempt of court for “failing to comply with the July 29, 2015, Restitution Order and the September 1, 2015, Order Awarding Costs.” Show Cause Order, Trustee Appx. at 75. That hearing was set for December 1, 2015. Id.

         On the day of the hearing, Husain and his counsel moved to strike the contempt hearing, because they had brought the full payment. Husain Appx., Hrg. Tr. 2:12-16. But there were two problems. First, Husain had brought a single check for the full amount, even though there were separate sets of payees (the individual clients and the United States Trustee). Id. 5:1-4. Second, the Trustee also wanted to elicit testimony on where the funds came from to ensure that Husain properly obtained the money comprising the payments (instead of, for example, by misappropriating client funds). Id. 8:14-19; 14:19-23. The bankruptcy court recessed so that Husain could correctly split the checks for the restitution payments, and then the proceeding resumed later that day. Id. 10:4-13. At that hearing, attorneys for the Trustee questioned Husain, who testified that he obtained the funds through his wife and father-in-law and denied that the money came from any client trust accounts. Id. 18:19-23; id. 21:2-12. After the examination, the Trustee asked the bankruptcy court to hold Husain in contempt for failing to make the payments on time, but at the same time the Trustee took the position that the contempt could be purged with the payment made that day. Id. 25:3-15. The Trustee also asked that the bankruptcy court order Husain to pay the Trustee's out-of-pockets costs for pursuing the contempt proceeding, which totaled $6, 178.68. Id. 25:16-23. Husain (through his attorney) argued that he could not be held in contempt, because he could not afford to pay the restitution and costs when they had come due. See e.g., id. 41:4-10. But the bankruptcy court found Husain's defense to be not credible and held him in contempt for missing the deadlines—though it did not order any further punishment, because he had brought the payment to the hearing. Id. 45:7-11; 46:6-8. Later, the bankruptcy court entered an order memorializing those findings, that is, holding Husain in contempt, declining further punishment, and awarding the United States Trustee its attorney's fees and costs in prosecuting the contempt. Contempt Order, Husain Appx. at 1302.

         The week after the bankruptcy court's rulings, Husain appealed both his disbarment and the contempt holding to the District Court for the Northern District of Illinois. See Bankr. Docket, Trustee Appx at 16-17; Executive Committee Order, Trustee Appx. at 76. The District Court assigned both appeals to the Executive Committee for the Northern District of Illinois, the five-judge panel which handles the District Court's disciplinary proceedings. 7th Circuit Opinion, Trustee Appx. at 79. The Executive Committee issued an order dismissing the contempt appeal due to a lack of jurisdiction. Executive Committee Order, Trustee Appx. at 76. From there, Husain appealed again. Bankr. Docket, Trustee Appx. at 16-17. The Seventh Circuit affirmed Husain's disbarment, but noted that the Executive Committee should have transferred the contempt appeal to a single district judge for review. 7th Circuit Opinion, Trustee Appx. at 79-81. So the Seventh Circuit remanded the contempt appeal for assignment and decision by a district judge. Id.; see also 28 U.S.C. § 158(a). The contempt appeal is now before this Court for decision.

         II. Standard of Review

         District courts have jurisdiction to hear appeals from the final judgments and orders of the bankruptcy courts. 28 U.S.C. § 158(a).[6] When deciding an appeal from the bankruptcy court, the district court sits as an appellate court. See id.; Matter of Neis, 723 F.2d 584, 588 (7th Cir. 1983). On appeal, civil contempt findings are reviewed only for an abuse of discretion. In re Taylor, 793 F.3d 814, 818 (7th Cir. 2015). So the Court will only reverse a finding of civil contempt if it “depends on faulty legal premises [or] clearly erroneous factual findings.” Id. (quoting Harrell ex rel. N.L.R.B. v. Am. Red Cross, Heart of Am. Blood Servs. Region, 714 F.3d 553, 556 (7th Cir. 2013)). The district court reviews the bankruptcy court's legal findings de novo and its factual findings for clear error. In re Miss. Valley Livestock, Inc., 745 F.3d 299, 302 (7th Cir. 2014). The clear-error standard of review means that the district court will not reverse a factual finding simply because it would have decided the issue differently; instead, a reviewing court must ask whether, considering all of the evidence, “it is left with the definite and firm conviction that a mistake has been committed.” Easley v. Cromartie, 532 U.S. 234, 242 (2001) (cleaned up).[7]

         III. Analysis

         A. Mootness

         Civil contempt acts as a vehicle to compel a party “to do what a court had previously ordered him to do.” Turner v. Rogers, 564 U.S. 431, 441 (2011) (cleaned up). So before digging into the facts leading to Husain's civil contempt, the Court must address whether the case is moot, because Husain eventually did make the underlying payments. “Ordinarily[, ] compliance with an order of civil contempt makes the order moot.” Szabo v. U.S. Marine Corp., 819 F.2d 714, 716 (7th Cir. 1987) (citing Marshall v. Whittaker Corp., 610 F.2d 1141, 1145 (3d Cir. 1979)). That makes sense, because the purpose of civil contempt is to coerce compliance with an order, and once that is done—that is, once the contempt is purged—then there is no purpose to an appellate challenge against the contempt finding because “reversing the order would not benefit the party held in contempt.” Id.

         But when an order that is associated with the finding of contempt imposed some other obligation, then that separate order can be challenged on appeal, even when the contemnor has complied with the primary obligation of the order. Szabo, 819 F.2d at 716. In Szabo, a company was held in contempt, and as a result was ordered to, among other things, bargain with a particular union and to pay the National Labor Relations Board its attorney's fees and expenses incurred in prosecuting the contempt. Id. The company then complied with the order. The Seventh Circuit acknowledged the general rule that a contemnor who has complied with the underlying order no longer has anything at stake. Id. But Szabo held that, among other things, the order to pay attorney's fees and expenses remained a live dispute. See Id. The same is true here. Although Husain has substantially complied with the underlying order that resulted in the contempt finding, he may ...


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