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United States Court of Appeals

Fifth Circuit

FILED

May 19, 2005

Charles R. Fulbruge III

Clerk

REVISED JULY 15, 2005

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

 

No. 03-51461 

 

FEDERAL TRADE COMMISSION

Plaintiff - Appellee

v.

ASSAIL, INC; ET AL

Defendants

ROBERT M DRASKOVICH

Appellant

v.

ROBB EVANS & ASSOCIATES, LLC

Appellee

 

No. 03-51462 

 

FEDERAL TRADE COMMISSION

Plaintiff - Appellee

v.

ASSAIL, INC; ET AL

Defendants

DEAN Y KAJIOKA

Appellant

v.

ROBB EVANS & ASSOCIATES, LLC
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Appellee
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Appeals from the United States District Court

for the Western District of Texas, Waco

Before KING, Chief Judge, and GARZA and BENAVIDES, Circuit

Judges.

KING, Chief Judge:

This consolidated appeal concerns the district court’s

refusal to award attorney’s fees to two attorneys whose clients

had their assets frozen as part of a civil case brought by the

Federal Trade Commission. After the district court entered an

asset freeze order, the two clients paid substantial retainers to

their attorneys. In separate orders, the district court ordered

the attorneys to turn all or substantially all the funds over to

the court-appointed receiver. The attorneys now appeal those

orders. We AFFIRM.

I. BACKGROUND

A. Common Factual Background

The events leading to these two appeals can be traced to

January 9, 2003, when Plaintiff-Appellee Federal Trade Commission

(“FTC”) filed a complaint in the United States District Court for

the Western District of Texas. The complaint alleged that a

variety of corporations and individuals, led by Kyle Kimoto and

his primary operating company, Assail Inc. (“Assail”)

(collectively the “defendants”), engaged in a telemarketing

scheme in violation of § 5(a) of the Federal Trade Commission Act
1 The defendants told consumers that in exchange for an

advance fee, they would receive a pre-approved MasterCard credit

card. As part of the verification process, the defendants also

offered consumers “free trials” of various services without

indicating that acceptance of the trials would result in

recurring monthly charges to the consumers’ bank accounts. Using

information obtained through these misrepresentations, the

defendants debited each consumer’s account $175 or more. 

The consumers never received the benefits they were

promised. Rather than receiving a credit card, consumers

generally received either an application for a cash-secured debit

card or an unusable plastic card with an unauthorized

reproduction of the MasterCard logo and meaningless numbers

embossed on the card. The defendants also made it extremely

difficult for consumers to cancel recurring charges and obtain

refunds.

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(“FTCA”), 15 U.S.C. § 45(a), and the FTC’s Telemarketing Sales

Rule, 16 C.F.R. § 310.1-.9.1

At the FTC’s insistence, on the day the complaint was filed,

the court issued an ex parte temporary restraining order barring

the defendants from continuing their scheme and freezing their 

assets. The order named certain specific defendants, but it also

made clear that the “provisions of this Order shall be binding

upon the defendants and upon their . . . attorneys . . . and all

other persons or entities in active concert or participation with

[the defendants] who receive actual notice of this Order . . . .” 

The court also appointed Appellee Robb Evans & Associates, LLC

(“REA”) as receiver. On February 4, 2003, the district court

issued a preliminary injunction that essentially restated the

terms of the temporary restraining order.

B. Factual and Procedural Background for Robert M. Draskovich

On January 15, 2003, REA took control of Assail’s principal
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place of business in St. George, Utah. The next day, Kimoto

retained Appellant Robert M. Draskovich to defend him in the

FTC’s matter and in any potential criminal matters. The day

after that, January 17, Draskovich received a $200,000 retainer. 

The funds were wired directly to him by Alliance Solutions, Inc.

(“Alliance”). On January 21, 2003, Draskovich received an

additional $10,000, which was transferred to him from Valdine

Management Co. (“Valdine”). Kimoto assured Draskovich that the

Alliance funds were not “tainted,” i.e., the funds had nothing to

do with the government’s allegations of telemarketing fraud. 

On September 22, 2003, Kimoto, Assail, and the FTC entered

into a stipulated judgment which brought the proceedings against

Kimoto and Assail to a close. The court issued a judgment

against Kimoto for $106 million. The judgment was suspended to

the extent that it exceeded the sum generated from the

liquidation of the assets in which Kimoto had an interest. All

funds generated from the liquidation were ordered to be paid as

consumer redress. The stipulated judgment contained a provision

that allowed the defendants’ attorneys to apply for fees from the

receivership estate. On October 2, 2003, Draskovich applied to

the district court to allow him to retain the funds he received

from Alliance and Valdine. This was in spite of the fact that in

April 2003, the FTC had already requested that Draskovich return

the $210,000, arguing that the funds were transferred to him in

violation of the court’s asset freeze order. On October 22,
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2003, the FTC and REA filed motions opposing the fee application

and requesting that the district court require Draskovich to turn

over the $210,000 to REA. On November 13, 2003, the court denied

Draskovich’s application and granted the FTC and REA’s countermotions requesting repayment of the entire retainer. Draskovich

now appeals from the court’s November 13 order. On appeal, he

argues that: (1) the district court erred in finding that the

fees he received were subject to the initial asset freeze; (2)

the district court’s order violated his client’s Sixth Amendment

right to counsel; and (3) the procedures the district court used

in making its decision violated due process.

C. Factual and Procedural Background for Dean Y. Kajioka

When REA staff took control of Assail on January 15, 2003,

an Assail employee mentioned that Assail was in the process of

installing certain joint equipment with Valdine. Valdine was

located in the same office complex as Assail. This led REA staff

to suspect that even though Valdine was not named in the FTC’s

complaint, it was part of Kimoto’s scheme. REA’s suspicions were

confirmed when it visited Valdine’s offices that same day. REA

found Woody Davidson, Assail’s head of technology, in the process

of installing $100,000 worth of equipment to create a

telemarketing call center, as well as linking Valdine and

Assail’s computer and telephone systems so that they would be

fully integrated. Davidson and other Assail employees indicated

that Valdine’s offices were to become the control center for
2 Draskovich’s second payment of $10,000 came from this

disbursal.

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Assail’s telemarketing operations. 

Steven Henriksen, Valdine’s president, secretary, treasurer,

sole shareholder, sole employee, and sole bank account signatory,

was quickly informed of REA’s actions by his brother, who was the

Chief Financial Officer of Assail and a defendant in the

underlying action. In the two weeks following REA’s raid,

Henriksen, at the direction of Kimoto, paid out approximately

$500,000 from Valdine’s accounts to secure legal representation

for the various defendants.2 During this general time period,

Henriksen also paid himself approximately $130,000 in bonuses.

On January 20, 2003, Henriksen retained Appellant Dean Y.

Kajioka to represent him and Valdine for an initial retainer of

$60,000. The next day, Henriksen withdrew $10,000 from Valdine’s

account to pay part of Kajioka’s retainer. The day after that,

January 22, Henriksen withdrew another $50,000 to pay the

remainder of the retainer.

On January 23, 2003, Kajioka called REA and objected to

REA’s taking possession and control of Valdine, taking particular

note of the fact that Valdine was not named in any court papers. 

REA informed Kajioka that it believed Valdine was an affiliated

entity of Assail, and thus REA would not release Valdine’s

assets. Kajioka’s claim that Valdine was not named in any court

papers was mooted as a result of the court’s preliminary
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injunction on February 4. Unlike the initial temporary

restraining order, Valdine was expressly included within the

scope of the temporary injunction.

On June 2, 2003, REA’s counsel sent a letter to Kajioka

demanding that he return the full retainer to REA because the

funds had been transferred in violation of the court’s asset

freeze order. Kajioka refused REA’s request. This refusal

prompted the FTC and REA to file separate motions on August 21,

2003, requesting the court to issue an order forcing Kajioka and

Henriksen to show cause why they should not be held in contempt. 

On September 5, 2003, the court issued such an order.

On October 2, 2003, the district court held a hearing for

Henriksen and Kajioka to show cause why they should not be held

in contempt. Henriksen asserted his Fifth Amendment right as to

all substantive questions. Kajioka refused to testify under

oath, but he did make an unsworn statement in open court. He

acknowledged that he had been retained to represent Henriksen on

January 20, 2003 and had received the $60,000 retainer. He also

stated that he was retained to represent Henriksen in any

potential criminal actions but had also provided representation

in the civil case.

On October 9, 2003, the court issued an order holding

Henriksen in contempt for dissipating Valdine’s assets in

violation of the temporary restraining order and the preliminary

injunction. The court declined to hold Kajioka in contempt. The
3 The court, however, slightly modified the earlier

order. At some point, Kajioka took $10,000 from the initial

retainer and paid it to Marjorie Guymon, another attorney who did

some work on Henriksen’s case. Since Guymon had already turned

over her $10,000 to REA, the court determined that Kajioka needed

to repay only $40,000. 

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court found that because no criminal prosecution commenced,

Kajioka could not have earned the entire $60,000 for services

rendered in connection with Henriksen’s potential criminal

liability. The court did allow Kajioka to retain $10,000 for

services rendered and ordered him to return the rest of the funds

to REA or show cause why he should not be held in contempt. 

Kajioka filed several memoranda, as well as documentary evidence,

with the court in support of his contention that he should be

allowed to keep the full amount of the retainer. On November 26,

2003, the court issued its final order on the matter. The court

reiterated its earlier determination that Kajioka was allowed to

keep $10,000.3 Kajioka now appeals from the court’s final order,

raising on appeal the identical issues as Draskovich.

II. STANDARD OF REVIEW

This appeal essentially covers two issues: (1) the district

court’s orders concerning assets found to be part of the

receivership estate; and (2) the district court’s award of

attorney’s fees. Both issues are reviewed on an overall abuse of

discretion standard, under which we review underlying factual

findings for clear error and issues of law de novo. See United

States v. Melrose E. Subdivision, 357 F.3d 493, 498 (5th Cir.
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2004) (reviewing under an abuse of discretion standard a request

to amend an asset freeze order in order to pay attorney’s fees).

III. ANALYSIS

A. Appellate Jurisdiction

On April 15, 2004, we sent a briefing notice to the parties

directing them to address the following issue: “Whether the

order(s) from which appeal is taken in this civil case is

appealable based on the termination of the litigation, pursuant

to R. 54(b), Fed. R. App., or the collateral order doctrine, or

whether there exists [sic] some other bases of appellate

jurisdiction. See generally 28 U.S.C. §§ 1291, 1292(a), (b).”

Upon reviewing both the parties’ arguments and the record,

we conclude that we do have jurisdiction to hear these appeals. 

The final section of the stipulated order entered into on

September 22, 2003, states: “The parties hereby consent to entry

of the foregoing Order which shall constitute a final judgment

and order in this matter. The parties further stipulate and

agree that the entry of the foregoing order shall constitute a

full, complete, and final settlement of this action.” This order

was entered on September 22, 2003. The order relating to Robert

M. Draskovich was entered on November 13, 2003. The order

relating to Dean Y. Kajioka was entered on November 26, 2003. 

Thus, both orders were entered after the underlying litigation

against Kimoto was settled. 

With respect to Draskovich, this chronology makes it clear
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that the underlying litigation is final. The same holds true for

Kajioka. Kajioka’s client, Steven Henriksen, never was a

defendant in the underlying action. However, the true ownership

of the funds in his possession, including those he used to pay

Kajioka, was a question to be determined in the underlying

litigation. That question was answered by the stipulated order. 

Thus, in both cases the district court entered a final judgment

before Draskovich and Kajioka initiated their respective appeals. 

Essentially, the stipulated order terminated the liability phase

of the case. The instant appeals concern REA’s efforts to reduce

Kimoto’s assets to liquid form and distribute those liquid assets

to victims of his fraudulent scheme. Accordingly, this court has

appellate jurisdiction to hear these appeals.

B. The District Court did not Err in Finding that Draskovich

and Kajioka Improperly Accepted and Maintained Possession of

the Retainers

Draskovich and Kajioka argue that their acceptance of the

retainers was permissible because the funds they accepted were

not subject to the initial asset freeze order. Kajioka claims

that at the time he was paid his retainer, Valdine and Henriksen

had not been mentioned in any court papers. Valdine and

Henriksen were not specifically mentioned until the February 4

preliminary injunction was issued. Until that time, Kajioka

claims there was no way he could have known that Henriksen and

Valdine were subject to the asset freeze order. Kajioka further
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asserts that in his January 23 call to REA, he was led to believe

that the seizure may have been a mistake. Similarly, Draskovich

claims that when he received the funds from Alliance and Valdine,

they had not been named in any court papers. Thus, in the

appellants’ view, to say that the transfers violated a court

order would be to say that the order was violated before it ever

existed. 

The appellants alternatively argue that there was no way for

them to know that the transfers violated the court order. The

appellants argue that their ignorance is a valid excuse because

they had no duty to independently investigate whether the parties

paying their fees were acting in concert with the named parties. 

To the extent there was such a duty to inquire, Draskovich argues

that he fulfilled this duty by securing Kimoto’s promise that the

funds with which he was being paid were not tainted.

1. The Appellants’ Fees Were Subject to the Asset Freeze

Order

The appellants’ arguments fail to persuade us that the

district court erred. As mentioned above, the initial ex parte

temporary restraining order stated that the terms of the order

covered the named parties as well as “all other persons or

entities in active concert or participation with” the defendants. 

The district court’s determination that Alliance, Valdine, and

Henriksen were acting in concert with the named defendants, and

thus were subject to the asset freeze, is a finding of fact that
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is reviewed for clear error. Cf. Portland Feminist Women’s

Health Ctr. v. Advocates for Life, Inc., 877 F.2d 787, 789-90

(9th Cir. 1989) (holding that the court of appeals could not

review whether the district court’s determination that a

contemptor was acting in concert with a party named in an

injunction was clearly erroneous because the appellant-contemptor

failed to provide the necessary hearing transcripts in the

record). 

The record provides substantial evidence supporting the

district court’s determination. REA’s investigation established

that nearly all of the money flowing into and out of Alliance and

Valdine’s bank accounts came from, and was sent to, other Kimotocontrolled entities. REA found no business justification for any

of these transfers. The incipient joint operation center is also

highly relevant because it shows that Valdine and Assail were

essentially operating as one company. Thus, we affirm the

district court’s finding that the appellants’ fees were paid with

funds subject to the asset freeze order.

2. The Appellants Had a Duty to Inquire As to the Source 

of Their Fees

The next question, then, is whether an attorney has a duty

to inquire as to the source of his fee when he is put on notice

that his fee may derive from a pool of frozen assets. Although

this court has yet to confront this issue directly, we hold that

for several reasons an attorney does hold such a duty. First, we
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think that accepting a fee from a pool of assets frozen by a

court order is sufficiently akin to accepting a fee from the

proceeds of criminal activity to make the principle applicable to

the latter situation instructive here. As a general matter of

professional ethics, an attorney “may not accept the fruits of

the crime as a fee, for knowingly accepting the fruits of crime

in return for valuable services is simply a form of aiding and

abetting crime . . . .” 1 GEOFFREY C. HAZARD, JR. & W. WILLIAM HODES,

THE LAW OF LAWYERING § 9.32, at 9-136 (3d ed. Supp. 2005). For this

reason, an attorney must “‘audit’ a client sufficiently so as to

avoid becoming part of a criminal scheme that includes disposing

of ill-gotten gains.” Id. The instant case did not involve

criminal charges, although it bears mentioning that both lawyers

were retained for potential criminal representation. Even though

criminal charges apparently did not materialize, it is clear that

Kimoto committed multiple, egregious violations of the FTCA. 

Further, the fees in question were derived from Kimoto’s

fraudulent scheme. Thus, it seems entirely appropriate to apply

to the instant case this general ethical obligation to “audit” a

client before accepting potentially tainted fees.

Additionally, “[t]his court adheres to the well established

doctrine that [a]n attorney, after being admitted to practice,

becomes an officer of the court, exercising a privilege or

franchise. As officers of the court, attorneys owe a duty to the

court that far exceeds that of lay citizens.” Carroll v. Jaques
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Admiralty Law Firm, P.C., 110 F.3d 290, 294 (5th Cir. 1997)

(internal citations and quotation marks omitted) (second

alteration in original). For us to hold that an attorney has no

duty to investigate the source of his fees in the instant

circumstances would essentially be a statement that an officer of

the court has no duty to investigate whether he himself is

violating a valid court order. We are not willing so to hold.

In rather similar circumstances to the instant case, the

Ninth Circuit followed this officer-of-the-court rationale in

holding that an attorney did have a duty of inquiry. CFTC v. Co

Petro Marketing Group, Inc., 700 F.2d 1279 (9th Cir. 1983). In

Co Petro, the district court appointed a receiver over a firm and

permanently enjoined it from transferring or diverting any of its

resources. The next day, the firm sent a $60,000 check to its

law firm to cover its existing legal bill and to establish a

trust account for future services. The law firm cashed the check

before it received a copy of the district court’s order. The

receiver later petitioned the district court to force the law

firm to return the funds. The district court granted the

petition. On appeal, the Ninth Circuit affirmed the district

court’s order, noting that: 

[a]s an officer of the court, appellant was under a

duty to inquire as to the exact terms of the

district court’s decision [to freeze his client’s

assets] before depositing the check. Consequently,

we agree with the district court that [the

appellant] violated the permanent injunction

against transfer of [the frozen] assets when it
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deposited the check.

Co Petro, 700 F.2d at 1285. 

The Sixth Circuit’s decision in McGraw v. Connelly (In re

Bell & Beckwith), 838 F.2d 844 (6th Cir. 1988), provides yet

another rationale for imposing a duty of inquiry on attorneys. 

In McGraw, a bankruptcy trustee sought to recover $150,000 of a

bankrupt firm’s assets that were paid to an attorney to represent

the firm’s managing director in a criminal case. At the time the

fee was paid, the firm had been placed into receivership and all

of its assets had been frozen. The attorney acknowledged that

the funds were fraudulently conveyed and that he held them

pursuant to a constructive trust. However, he argued that he

received the funds as a bona fide purchaser for value, and thus

his rights to the funds were superior to the trustee’s. The

Sixth Circuit disagreed with this claim, finding that a party

cannot be a bona fide purchaser where the circumstances

surrounding the conveyance would lead a reasonable person to

doubt the validity of the transfer. Id. at 849. Where such

reasonable doubt exists, the court found that a party has a duty

to make further inquiry. The court summarized its conclusion by

stating that the attorney “was under a duty of inquiry as to the

source of his fee, and this [sic] his inquiry would have clearly

revealed that his fee was derived from fraudulently obtained

assets.” Id.

Finally, the asset forfeiture provisions in the Racketeer
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Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. 

§ 1963 (2000), and the Continuing Criminal Enterprise Statute

(“CCE”), 21 U.S.C. § 853 (2000), while not applicable here, are

nonetheless instructive. Under both statutes, property

(including money) derived from criminal activity is subject to

forfeiture irrespective of whether the criminal defendant still

possesses the property. 18 U.S.C. § 1963(c) (2000); 21 U.S.C. 

§ 853(c) (2000). However, the statutes also provide that a

third-party transferee may defeat forfeiture if “the petitioner

is a bona fide purchaser for value of the right, title, or

interest in the property and was at the time of purchase

reasonably without cause to believe that the property was subject

to forfeiture under this section . . . .” 18 U.S.C.

§ 1963(l)(6)(B) (2000); 21 U.S.C. § 853(n)(6)(B) (2000). Based

on this statutory language, it stands to reason that if an

attorney has been paid with funds tainted under either RICO or

the CCE and wishes to retain them, he must demonstrate that he

conducted an inquiry sufficient to allow him to be “reasonably

without cause to believe that the property was subject to

forfeiture.” In In re Moffitt, Zwerling & Kemler, P.C., 846 F.

Supp. 463 (E.D. Va. 1994), the court took exactly this approach. 

In Moffitt, a law firm was retained by a client who was indicted

under the CCE for the sale of narcotics. The client paid the

firm’s $103,800 retainer in cash using primarily $100 bills he

kept stored in a cracker box. Aside from admonishing the client
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that the law firm could not accept “funny money,” the firm made

no efforts to ascertain the source of the funds. When the

government sought forfeiture of the funds, the firm claimed that

it was protected under § 853(n)(6)(B). The court rejected this

claim, stating:

when confronted with circumstances essentially

similar to those at bar attorneys should inform

prospective clients that they cannot pay fees

with drug proceeds and that such proceeds are

subject to forfeiture, even in the attorney’s

hands. If the prospective client answers that

the money comes from legitimate sources,

attorneys should take whatever further steps or

ask whatever further questions may be suggested

by the circumstances to satisfy themselves that

it is objectively reasonable to believe the

answer. 

Id. at 474. The Fourth Circuit affirmed this approach, stating:

“We can find no fault with the district court’s conclusion.” 

United States v. Moffitt, Zwerling & Kemler, P.C., 83 F.3d 660,

665 (4th Cir. 1996). 

Based on the above cases and commentary, there is a clear

principle that an attorney is not permitted to be willfully

ignorant of how his representation is funded. While each case is

distinguishable from the instant case in some way, when taken

together, they teach that when an attorney is objectively on

notice that his fees may derive from a pool of frozen assets, he

has a duty to make a good faith inquiry into the source of those

fees. Failure to make such an inquiry in the face of this duty

will result in disgorgement of the funds.
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3. The Appellants Did Not Discharge their Duty of Inquiry

The final query is whether the appellants received

sufficient notice to trigger this duty of inquiry and whether

they discharged the duty. The circumstances of Draskovich’s fee

payment should have alerted him that something was awry. He knew

that his client was accused of perpetrating massive telemarketing

fraud, that all of his assets were frozen, and that supposedly

unrelated third parties were paying his fees. These facts should

have raised Draskovich’s suspicions. Indeed, in the context of

RICO and the CCE, the Supreme Court has stated that the mere fact

that an attorney has read the indictment against his client is

enough to put him on notice that his fees are potentially tainted

and to destroy his status as a bona fide purchaser for value. 

Caplin & Drysdale v. United States, 491 U.S. 617, 633 n.10 (1989)

(“given the requirement that any assets which the Government

wishes to have forfeited must be specified in the indictment, the

only way a lawyer could be a beneficiary of § 853(n)(6)(B) would

be to fail to read the indictment of his client”) (internal

citations omitted); United States v. Monsanto, 491 U.S. 600, 604

n.3 (1989) (“An attorney seeking a payment of fees from forfeited

assets under § 853(n)(6) would presumably rest his petition on

subsection (B) quoted above, though (for reasons we explain in

Caplin & Drysdale . . .) it is highly doubtful that one who

defends a client in a criminal case that results in forfeiture

could prove that he was without cause to believe that the
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property was subject to forfeiture.”) (internal citations and

quotation marks omitted). Once on notice, Draskovich needed to

do far more than simply take his client at his word that the fees

were not tainted in order to make a reasonable claim for fees. 

Trusting Kimoto’s truthfulness unconditionally was especially

unreasonable considering that he was accused of fraud, an

allegation going directly to his honesty.

Kajioka may not be quite as culpable as Draskovich, which

may account for the district court’s decision to allow Kajioka to

keep some of the fees paid to him. According to Kajioka, his

client initially assured him that REA had made some mistake in

seizing his office. The record suggests that REA apparently did

make a few such mistakes when it initially raided Assail’s

offices, so Kajioka may not have been patently unreasonable in

initially taking his client at his word. However, during

Kajioka’s January 23, 2003 call with REA, he was given

information that put him on notice that REA probably did not

simply knock on the wrong door. This notice triggered a duty of

inquiry, which Kajioka did not discharge. Any claim he may have

for work completed before the January 23 call with REA is

accounted for by the $10,000 the district court awarded him. 

Kajioka does not argue that this fee award was inappropriate for

the several day’s worth of services he then provided.

Thus, the district court properly concluded both that

Draskovich and Kajioka improperly accepted their retainers and
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that they should turn over all (or substantially all, in the case

of Kajioka) the retainers to REA for distribution to the victims

of Kimoto’s fraudulent scheme.

C. The District Court’s Orders did not Violate the Sixth

Amendment

Draskovich and Kajioka argue that the district court’s

orders violate their respective clients’ Sixth Amendment rights

because the orders deny the clients representation by counsel of

their choice. In the appellants’ view, this Sixth Amendment

interest must trump the FTC’s interest in obtaining restitution.

The appellants’ Sixth Amendment argument is totally without

merit. The most important reason the argument fails is that this

is a civil case. The Sixth Amendment right to counsel is

inapplicable in civil cases. See Goonsuwan v. Ashcroft, 252 F.3d

383, 385 n.2 (5th Cir. 2001) (“It is well settled that, because

deportation hearings are considered civil in nature, there is no

Sixth Amendment right to counsel.”); Sanchez v. United States

Postal Serv., 785 F.2d 1236, 1237 (5th Cir. 1986) (per curiam)

(“[T]he sixth amendment right to effective assistance of counsel

does not apply to civil proceedings.”). 

D. The District Court Afforded Draskovich and Kajioka Due

Process

Draskovich and Kajioka claim that their due process rights

were violated because in rendering its decisions, the district

court relied solely on affidavits and self-serving reports from

REA. They claim that where a contemptor asserts genuine issues
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of material fact, it is inappropriate for a court to issue

contempt sanctions without a full, impartial hearing. The

appellants assert that there were several disputed issues of fact

at the relevant district court hearings. They claim that in the

face of these disputed issues, they were provided with only a

summary proceeding in which they did not have the opportunity to

face their accusers, hear the basis of their accusers’

conclusions, cross-examine them, or call witnesses.

As with the appellants’ Sixth Amendment argument, this due

process argument is without merit. The appellants’ attempt to

characterize themselves as contemptors must fail for the simple

reason that they were never held in contempt. This is an appeal

regarding disputes between a receiver and two nonparties to the

underlying case. The court resolved the dispute and backed up

its resolution with the threat of contempt. Every court order is

backed with the implicit threat of contempt if the order is

violated. See United States v. Fidanian, 465 F.2d 755, 757 (5th

Cir. 1972) (“It is settled law that the power to punish for

contempt is an inherent power of the federal courts and that it

includes the power to punish violations of their own orders.”).

In this case, the threat was merely made explicit. Thus, the

contempt issue is simply a red herring. 

Although this court has not confronted directly the issue of

what process is due where a receiver and a nonparty both claim

the same property, the Ninth Circuit has stated clearly that in
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such circumstances “summary proceedings satisfy due process so

long as there is adequate notice and opportunity to be heard.” 

Commodities Futures Trading Comm’n v. Topworth Int’l, Ltd., 205

F.3d 1107, 1113 (9th Cir. 2000). It is wrong for the appellants

to claim that they did not have an opportunity to respond to the

claim that they did not rightfully possess the funds in question. 

In Kajioka’s case, on October 2, 2003, the court held a hearing

on the issue of whether the funds were transferred in violation

of the asset freeze order. Kajioka was present at the hearing

and refused the offer to cross-examine the witnesses. The fact

that this hearing occurred negates Kajioka’s contention that the

district court relied exclusively on documentary evidence in

reaching its determination. After this hearing, the court also

permitted Kajioka to submit two legal memoranda briefing the

relevant legal issues as well as documentary evidence. 

Draskovich also had an opportunity to respond. On October 2 and

30, 2003, Draskovich submitted to the court memoranda and

supporting documentary evidence arguing for his position. 

Because the appellants actually did make the effort to respond to

the charges against them, they clearly had notice of the claims. 

In Draskovich’s case, the notion that he did not have notice is

particularly fantastic because he took part in negotiating the

stipulated judgment that set out the procedures by which he

petitioned the court to keep his retainer.

IV. CONCLUSION
- 24 -

For the foregoing reasons, the orders appealed from are

AFFIRMED.