United States Court of Appeals 

for the Fifth Circuit ____________ 

No. 22-11036 

____________ 

In the Matter of Highland Capital Management, L.P., 

Debtor, 

The Charitable DAF Fund, L.P.; CLO Holdco, Limited; 

Mark Patrick; Sbaiti & Company, P.L.L.C.; Mazin A. 

Sbaiti; Jonathan Bridges, 

Appellants, 

versus

Highland Capital Management, L.P., 

Appellee, 

______________________________ 

In the Matter of Highland Capital Management, L.P., 

Debtor, 

James Dondero, 

Appellant, 

versus

Highland Capital Management, L.P., 

Appellee. 

______________________________ 

United States Court of Appeals 

Fifth Circuit 

FILED 

April 4, 2024 

Lyle W. Cayce 

Clerk 

Case: 22-11036 Document: 131-1 Page: 1 Date Filed: 04/04/2024
2 

Appeal from the United States District Court 

for the Northern District of Texas 

USDC Nos. 3:21-CV-1974, 3:21-CV-1979 

______________________________ 

Before Dennis, Engelhardt, and Oldham, Circuit Judges.

Andrew S. Oldham, Circuit Judge: 

 A bankruptcy court held Appellants in civil contempt and ordered 

them to pay $239,655 in compensatory damages. The bankruptcy court 

abused its discretion. We vacate and remand. 

I. 

In 2019, litigation claims plunged Highland Capital Management, L.P. 

into bankruptcy. James Dondero co-founded Highland and controlled it 

when the firm filed its voluntary Chapter 11 petition. The bankruptcy 

“provoked a nasty breakup between Highland Capital and . . . Dondero.” 

Matter of Highland Cap. Mgmt., L.P., 48 F.4th 419, 424 (5th Cir. 2022). 

Eventually, Highland, Dondero, and an unsecured creditors’ committee 

entered into a settlement agreement. Id. at 425. Pursuant to that settlement, 

Dondero relinquished control of Highland to three independent directors: 

James P. Seery, Jr., John S. Dubel, and Russell Nelms. The bankruptcy court 

approved the agreement. 

The directors then moved the bankruptcy court to appoint Seery as 

Highland’s Chief Executive Officer, Chief Restructuring Officer, and 

Foreign Representative. The bankruptcy court granted the motion. To 

protect Seery from vexatious litigation—and this case has been full of it, see 

Highland Capital, 48 F.4th at 426—the bankruptcy court adopted this 

gatekeeping order: 

No entity may commence or pursue a claim or cause of action 

of any kind against Mr. Seery relating in any way to his role as 

the chief executive officer and chief restructuring officer of the 

Case: 22-11036 Document: 131-1 Page: 2 Date Filed: 04/04/2024
No. 22-11036 

3 

Debtor without the Bankruptcy Court (i) first determining 

after notice that such claim or cause of action represents a 

colorable claim of willful misconduct or gross negligence 

against Mr. Seery, and (ii) specifically authorizing such entity 

to bring such claim. The Bankruptcy Court shall have sole 

jurisdiction to adjudicate any such claim for which approval of 

the Court to commence or pursue has been granted. 

ROA.1172 (“the Seery Order”). No interested party objected, so the Seery 

Order became final. 

With Seery at the helm, Highland began untangling its estate. In late 

2020, it entered into an agreement with one of its largest creditors, 

HarbourVest, to settle a $300 million unsecured claim. Dondero objected, 

but to no avail; the bankruptcy court blessed the settlement.1

Not content to stand down, Dondero turned to two entities he 

founded—the Charitable DAF Foundation and its affiliate CLO Holdco 

(collectively “DAF”)—and DAF CEO Mark Patrick. Patrick then retained 

the law firm Sbaiti & Company PLLC to investigate Highland. DAF 

eventually filed suit against Highland in district court and alleged that 

Highland, through Seery, withheld material information and engaged in selfdealing related to the HarbourVest settlement. 

 A week after filing the initial suit, DAF moved the district court for 

leave to amend its complaint to add Seery as a defendant (“the Motion”). It 

did not have the bankruptcy court’s approval to sue Seery. But DAF 

reasoned that permission from the district court sitting over the bankruptcy 

court would obviate this defect. The district court dismissed the Motion for 

_____________________ 

1

 CLO Holdco, a DAF-controlled entity and an Appellant in this case, also lodged 

an objection but withdrew it before the Bankruptcy Court ruled on the settlement. 

Case: 22-11036 Document: 131-1 Page: 3 Date Filed: 04/04/2024
No. 22-11036 

4 

procedural reasons the day after it was filed. Therefore, DAF never sued 

Seery. 

After the district court’s swift dismissal of the Motion, Highland 

moved for an order requiring DAF, the persons who authorized the Motion, 

and the Sbaiti Firm to show cause why they should not be held in civil 

contempt for violating the Seery Order. The bankruptcy court granted the 

motion and also required Dondero to show cause why he should not be 

sanctioned. It then permitted extensive discovery, see ROA.9761–11237, and 

held a lengthy evidentiary hearing, ROA.605. The bankruptcy court did so 

not because there was any dispute that DAF filed the Motion, but rather to 

consider the “explanations/rationales given by those involved . . . .” 

ROA.44. The bankruptcy judge was especially curious about Dondero’s role. 

After the hearing, the bankruptcy court determined that the Motion 

constituted “pursu[it] of a claim” against Seery in violation of the Seery 

Order. ROA.53. Accordingly, it held all parties involved in filing the 

Motion—DAF, Patrick, Sbaiti, Sbaiti attorneys Mazin Sbaiti and Jonathan 

Bridges, and James Dondero (collectively “Appellants”)—in contempt and 

ordered them to pay Highland $239,655. In making this estimate, the 

bankruptcy court started by considering the expenses Highland actually 

incurred—namely the fees Highland paid its lawyers to litigate the contempt 

proceedings. But the bankruptcy court assumed Highland’s submissions 

were “conservative,” so it added over $50,000 based on mere guesswork. 

ROA.604–05. It declined Highland’s invitation to award treble damages but 

imposed, sua sponte, a $100,000 sanction for failed appeals, apparently to 

deter Appellants from seeking review of its contempt order. 

The district court vacated the bankruptcy court’s $100,000-perappeal sanction (without prejudice) because even Highland conceded that it 

was excessive. But it affirmed the remainder of the award over Appellants’ 

Case: 22-11036 Document: 131-1 Page: 4 Date Filed: 04/04/2024
No. 22-11036 

5 

several objections. Most relevantly, Appellants argued that the sanction was 

punitive and thus exceeded the scope of the bankruptcy court’s civil 

contempt powers. The district court concluded that because the bankruptcy 

court “expressly designed its award to compensate” Highland for the costs 

it incurred in litigating the contempt proceedings, the award was 

compensatory and therefore civil. ROA.12269 (quotation omitted). 

Appellants timely appealed to this court. We have jurisdiction under 

28 U.S.C. § 158(d)(1). Our review is for abuse of discretion. See In re Bradley, 

588 F.3d 254, 261 (5th Cir. 2009). But because a court “abuses its discretion 

when it bases its decision on an erroneous legal conclusion,” Jeter v. Astrue, 

622 F.3d 371, 376 (5th Cir. 2010) (citation omitted), we review the 

bankruptcy court’s conclusions of law de novo. 

II. 

A. 

“Bankruptcy courts are not Article III courts.” Bradley, 588 F.3d at 

266. Therefore, “they do not necessarily possess the inherent powers of such 

courts.” Ibid. So while Article III courts have the inherent power to punish 

violations of their orders through criminal contempt,2 see United States v. 

United Mine Workers of Am., 330 U.S. 258, 294 (1947), bankruptcy courts 

have only civil contempt powers because that is all Congress has given them. 

See Bradley, 588 F.3d at 266; see also ibid. (noting that the source of 

bankruptcy court’s contempt powers is statutory) (citing Placid Ref. Co. v. 

Terrebonne Fuel & Lube, Inc., 108 F.3d 609, 612–13 (5th Cir. 1997)); see also 11 

U.S.C. § 105(a) (“The [bankruptcy] court may issue any order, process, or 

_____________________ 

2

 As long as they comply with the procedural safeguards that accompany criminal 

contempt proceedings. See, e.g., United States v. Puente, 558 F. App’x 339 (5th Cir. 2013) 

(per curiam). 

Case: 22-11036 Document: 131-1 Page: 5 Date Filed: 04/04/2024
No. 22-11036 

6 

judgment that is necessary or appropriate to carry out the provisions of this 

title.”). Accordingly, bankruptcy courts may issue contempt orders, but any 

contempt sanction imposed by a bankruptcy court must be civil. See Bradley, 

588 F.3d at 266. 

The civil contempt power is limited. That is because it “uniquely is 

liable to abuse. Unlike most areas of law, where a legislature defines both the 

sanctionable conduct and the penalty to be imposed, civil contempt 

proceedings leave the offended judge solely responsible for identifying, 

prosecuting, adjudicating, and sanctioning the contumacious conduct.” Int’l 

Union, United Mine Workers of Am. v. Bagwell, 512 U.S. 821, 831 (1994) 

(quotation and citations omitted). Thus, civil contempt sanctions may not 

have the “primary purpose” of “punish[ing] the contemnor [or] 

vindicat[ing] the authority of the court.” Lamar Fin. Corp. v. Adams, 918 F.2d 

564, 566 (5th Cir. 1990). Rather, they must be “remedial, and for the benefit 

of the complainant.” Bagwell, 512 U.S. at 827 (quotation and citation 

omitted). 

That means civil contempt sanctions must be calculated either to 

(1) coerce the contemnor into compliance with a court order or 

(2) compensate another party for the contemnor’s violations. See Lamar, 918 

F.2d at 566. Contempt sanctions imposed to coerce the contemnor into 

compliance with a court order are civil only if they are “conditional on the 

contemnor’s conduct.” Ibid.; see also Bagwell, 512 U.S. at 829 (“Where a fine 

is not compensatory, it is civil only if the contemnor is afforded an 

opportunity to purge.”). Contempt sanctions imposed for compensatory 

purposes are civil only if they are “based upon evidence of complainant’s 

actual loss.” United Mine Workers of Am., 330 U.S. at 304. 

A fee-shifting sanction—the kind we are tasked with reviewing here—

is supposed to be compensatory. See Goodyear Tire & Rubber Co. v. Haeger, 

Case: 22-11036 Document: 131-1 Page: 6 Date Filed: 04/04/2024
No. 22-11036 

7 

581 U.S. 101 (2017). In Goodyear Tire, the Court reversed the sanction in 

question because the district court failed to “establish a causal link[] between 

the litigant’s misbehavior and legal fees paid by the opposing party.” Id. at 

108. The required causal link means that a bankruptcy court may shift “only 

those attorney’s fees incurred because of the misconduct at issue.” Id. at 109; 

see ibid. (fee shifting awards “may go no further than to redress the wronged 

party for losses sustained” (quotation and citation omitted)); ibid. (courts 

must “calibrate[]” fee shifting awards “to the damages caused by the badfaith acts on which [they are] based” (quotation and citation omitted)). 

Absent that because-of link, the sanction is punitive rather than 

compensatory and hence falls outside the bankruptcy court’s statutorily 

limited powers. Thus, if a contempt movant “would have incurred an 

expense” even absent the non-movant’s contumacious conduct, “he has 

suffered no incremental harm . . . and so the court lacks a basis for shifting 

the expense.” Ibid. 

B. 

We start with common ground. DAF obviously could have filed the 

Motion in the bankruptcy court. The Seery Order specifically states that an 

entity may bring a covered claim with the bankruptcy court’s approval. See

ROA.1172. Thus, DAF (or any of the other Appellants for that matter) could 

have filed the Motion in the bankruptcy court, sought the approval of the 

bankruptcy judge, and committed no contempt. 

It is also common ground that DAF’s only contumacious conduct was 

filing the Motion in the district court as opposed to the bankruptcy court. See 

Oral Arg. at 17:05–21. We take the parties’ agreement on that as dispositive 

of the scope and extent of Appellants’ misconduct. 

So the question presented is whether the bankruptcy court’s sanctions 

award comports with Goodyear Tire. Both the bankruptcy judge and the 

Case: 22-11036 Document: 131-1 Page: 7 Date Filed: 04/04/2024
No. 22-11036 

8 

district court reasoned that the award was compensatory because it shifted 

expenses Highland reasonably and necessarily incurred in responding to the 

Motion.3

 Both courts were wrong. 

Highland incurred virtually all its contempt-related expenses because 

the bankruptcy court permitted extensive discovery and conducted a 

marathon evidentiary hearing to unearth Dondero’s role in filing the Motion. 

But Dondero’s intentions were relevant only to criminal contempt—a 

sanction the bankruptcy court was powerless to impose. See, e.g., Puente, 558 

F. App’x at 341 (noting that, in criminal contempt proceedings, “the district

court must also find . . . that the defendant exhibited willful, contumacious 

intent, or a reckless state of mind, at the time the prohibited conduct 

occurred” (emphasis added) (quotation omitted)). Dondero’s intentions—

and virtually all of the discovery and the bankruptcy court’s mini-trial—were 

irrelevant to civil contempt. The only question in civil contempt is whether 

and to what extent Highland was damaged by DAF’s choice to file the 

_____________________ 

3

 Neither court contended the sanctions award was designed to coerce Appellants 

into obeying the Seery Order. See Lamar Fin. Corp., 918 F.2d at 566 (noting coercion is an 

alternative basis for sanctions awards in bankruptcy courts). And no party before us 

disputes this approach. That is for good reason: coercive sanctions must give the 

contemnor an opportunity to purge the contempt. Ibid.; see also Bagwell, 512 U.S. at 829. 

And the sanctions award in this case did not do so. 

Nor could the sanction be justified on the ground that the fees shifted were 

incurred in proceedings necessary to fashion a sanction calculated to coerce prospective 

compliance with the Seery Order. DAF disclosed the existence of the Seery Order in its 

motion to amend before the district court, and it specifically asked the district court for 

permission to commence a claim against Seery. Since bankruptcy courts exercise 

jurisdiction at the sufferance of supervising district courts, see 28 U.S.C. § 151, Appellants 

could have reasonably concluded that district court permission to commence a claim 

against Seery would obviate the need for bankruptcy court approval. And in any event, we 

can find no precedent for using sanctions to coerce a party into complying with an order 

the party acknowledged and sought permission to obey (even if it sought permission in the 

wrong forum). 

Case: 22-11036 Document: 131-1 Page: 8 Date Filed: 04/04/2024
No. 22-11036 

9 

Motion in the wrong forum. Neither Highland nor the bankruptcy court was 

permitted to seize on DAF’s error and leverage it into a punitive proceeding. 

See id. at 342 (holding a punishment labeled “civil” was in fact criminal 

“because the sanction imposed was apparently intended to punish past 

conduct . . . rather than to secure future compliance or remedy some harm 

resulting from noncompliance” (quotation omitted)). 

C. 

Highland offers two principal responses. The first came from oral 

argument. The second came from Highland’s brief. Neither is persuasive. 

Oral argument first. When pressed for any remedial purpose behind 

the sanctions award, Highland could only muster that a bankruptcy judge 

“has every right and reason to vindicate its own authority by finding out who 

is responsible for violating its orders.” Oral Arg. at 19:48-55 (emphasis 

added). That is outcome-determinative here: We have explained that if “the 

purpose of the sanction is to . . . vindicate the authority of the court, the order 

is viewed as criminal.” Lamar Fin. Corp., 918 F.2d at 566. And because 

“bankruptcy courts lack criminal contempt power,” Bradley, 588 F.3d at 

266, they do not have inherent powers to impose sanctions for the purpose of 

vindicating their own authority. 

Second, Highland points to unpublished opinions that have suggested 

bankruptcy judges have wide discretion to shift expenses incurred during 

civil-contempt proceedings. See, e.g., In re Skyport Glob. Commc’ns, 661 F. 

App’x 835, 841 (5th Cir. 2016) (“Almost without exception it is within the 

discretion of the trial court to include, as an element of damages assessed 

against the defendant found guilty of civil contempt, the attorneys’ fees 

incurred in the investigation and prosecution of the contempt proceedings.” 

(citation omitted)). Of course, “[w]e are not bound by our unpublished 

opinions.” United States v. Escalante, 933 F.3d 395, 402 n. 9 (5th Cir. 2019) 

Case: 22-11036 Document: 131-1 Page: 9 Date Filed: 04/04/2024
No. 22-11036 

10 

(citing 5th Cir. R. 47.5.4). And in any event, these unpublished decisions 

predate Goodyear Tire, so we would be obliged to reevaluate them even if they 

were published. See, e.g., In re Bonvillian Marine Serv., Inc., 19 F.4th 787, 792–

93 (5th Cir. 2021). 

But more fundamentally, our unpublished decisions did not say 

bankruptcy courts may shift fees to punish a party’s misconduct. Skyport, for 

example, only established that civil contempt includes the power to “order 

the award of attorneys’ fees for compensatory purposes where a party 

necessarily expended fees in bringing an action to enforce the injunction.” 661 

F. App’x at 841 (alteration adopted) (emphasis added) (quotation omitted) 

(quoting Cook v. Ochsner Found. Hosp., 559 F.2d 270, 272 (5th Cir. 1977)). 

The fees awarded to Highland bore no connection to redressing DAF’s 

decision to file the Motion in the wrong court—much less were Highland’s 

fees “necessarily expended.” Ibid. It is not as if the bankruptcy court awarded 

fees to Highland that it incurred only because it responded to the Motion in 

district court as opposed to bankruptcy court. Nor did Highland necessarily 

expend fees to enforce an injunction requiring DAF to file the Motion in the 

appropriate court, as in Skyport. So our unpublished decisions would not 

control in any event. 

The judgment of the district court is VACATED, and the case is 

REMANDED. On remand, the bankruptcy court is instructed to limit any 

sanction award to the damages Highland suffered because DAF filed the 

Motion in the wrong court—i.e., the expenses Highland reasonably incurred 

in opposing the Motion in district court, less those it would have spent 

opposing the Motion had it been filed in bankruptcy court.

Case: 22-11036 Document: 131-1 Page: 10 Date Filed: 04/04/2024
No. 22-11036 

11 

James L. Dennis, Circuit Judge, dissenting: 

For the reasons assigned by the district court, I would affirm the 

bankruptcy court’s $239,655 civil compensatory sanction award in full. 

Charitable DAF Fund LP v. Highland Cap. Mgmt. LP, No. 21-1974, 2022 WL 

4538466 (N.D. Tex. Sept. 28, 2022). “The bankruptcy court properly 

constrained its compensatory award to fees incurred during the contempt 

hearing, which would not have occurred in the absence of the sanctioned 

conduct.” Id. at *7 n.82 (discussing Goodyear Tire & Rubber Co. v. Haeger, 

581 U.S. 101 (2017)). 

 To reach a contrary conclusion, the panel majority disregards the 

three applicable standards of review. First, “[l]ike the district court,” we are 

supposed to “review[] [the] bankruptcy court’s findings of fact for clear 

error, and its legal conclusions de novo.” In re Bradley, 588 F.3d 254, 261 (5th 

Cir. 2009) (citing Placid Ref. Co. v. Terrebonne Fuel & Lube, Inc., 108 F.3d 609, 

613 (5th Cir. 1997)). Second, “[w]here the district court has affirmed the 

bankruptcy court’s factual findings,” as is the case here, “we [should] only 

reverse if left with a firm conviction that error has been committed.” Id. 

(quotation omitted). And third, “[a] bankruptcy court’s assessment of 

monetary sanctions for contempt [should be] reviewed for abuse of 

discretion.” Id. (citation omitted). 

 Instead, however, the majority selectively picks mere seconds of 

Appellee counsel’s oral argument as constituting an agreement that 

Appellants’ “only contumacious conduct” was filing their motion in the 

wrong court, suggesting that the misfiling was a mere inadvertence. Ante, at 

7 (majority opinion) (emphasis in original). The majority then asserts that 

this “agreement” is “dispositive of the scope and extent of Appellants’ 

misconduct,” ignoring altogether Appellee counsel’s argument that “this 

motion was filed in the wrong court in a very cynical and manipulative forum 

Case: 22-11036 Document: 131-1 Page: 11 Date Filed: 04/04/2024
No. 22-11036 

12 

shopping move.” See Oral Argument Recording at 21:13-21:19, Charitable 

DAF Fund v. Highland Capt’l Mgmt, 22-11036 (5th Cir. Sep. 5, 2023). 

I sincerely disagree with the majority. The record contains no facts or 

evidence indicating that Appellee’s counsel agreed to such an incorrect and 

rhetorically disadvantageous position. Nor is there any basis for the 

majority’s unfair implication that the bankruptcy court seized on Appellants’ 

“error” and leveraged it into a punitive proceeding. Ante, at 9. 

After reviewing the record and applying the standards of review 

required by our circuit precedents, I conclude that the bankruptcy court and 

the district court committed no error of law, no clear error of fact, and no 

abuse of discretion. For these reasons, I respectfully dissent from the 

majority’s reversal of the bankruptcy and district courts’ judgments. 

Case: 22-11036 Document: 131-1 Page: 12 Date Filed: 04/04/2024