Constructive Trusts - tracing t hrough e xchanges

1. Constructive Trusts - tracing through exchanges • Direct Exchange - P can trace through direct exchanges as in Problem 8-1 – direct exchange of stock-cash-stock. • Exchanges & Commingling • If D commingles P’s stolen cash with his own, P must use the tracing fictions/presumptions: • D spends his own $ first • New $ lawfully acquired is Ds unless D manifests an intent to replenish P’s $ • 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. Can also use these elections together on the same purchase to maximize P’s recovery

2. 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)

3. 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

4. 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

5. 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, double jeopardy . . .

6. UMW v. Bagwell – facts • Longstanding labor disputes between mining companies and union. • Trial court entered injunction prohibiting various activities by union – obstruction of ingress/egress to company facilities, jackrocking, large pickets at certain sites • http://en.wikipedia.org/wiki/File:Caltrop.jpg • 1st contempt hearing – court found 72 separate violations and issued $642,000 fine. • Court also announced a prospective fine schedule - $100K for future violent breaches of injunction & $20K for future nonviolent breaches. • 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.

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

8. SCT reasoning re Bagwell fines: Classic Coercive Contempt: • Court issues order: “Disclose your source.” • Reporter subject to the order violates it; is found in contempt; jailed/ fined daily until complies with order. Bagwell conditional fines: • Court issues injunction prohibiting certain destructive behavior by union. • Court threatens penalties for future violations. • Union violates order; is found in contempt; previously threatened fines are imposed.

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