FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

IN RE BRADLEY WESTON TAGGART,

Debtor,

SHELLEY A. LORENZEN, Executor of 

Estate of Stuart Brown; TERRY W.

EMMERT; KEITH JEHNKE; SHERWOOD 

PARK BUSINESS CENTER, LLC,

Appellants,

v.

BRADLEY WESTON TAGGART,

Appellee.

No. 16-35402

D.C. No.

3:12-cv-00236-

MO

Appeal from the United States District Court

for the District of Oregon

Michael W. Mosman, Chief District Judge, Presiding
2 IN RE TAGGART

IN RE BRADLEY WESTON TAGGART,

Debtor,

BRADLEY WESTON TAGGART,

Appellant,

v.

SHELLEY A. LORENZEN, Executor of 

Estate of Stuart Brown; TERRY W.

EMMERT; KEITH JEHNKE; SHERWOOD 

PARK BUSINESS CENTER, LLC,

Appellees.

No. 16-60032

BAP No.

15-1158

IN RE BRADLEY WESTON TAGGART,

Debtor,

BRADLEY WESTON TAGGART,

Appellant,

v.

TERRY W. EMMERT; KEITH JEHNKE;

SHERWOOD PARK BUSINESS CENTER,

LLC; SHELLEY A. LORENZEN, 

Executor of Estate of Stuart Brown,

Appellees.

No. 16-60033

BAP No.

15-1119
IN RE TAGGART 3

IN RE BRADLEY WESTON TAGGART,

Debtor,

SHELLEY A. LORENZEN, Executor of 

the Estate of Stuart Brown,

Appellant,

v.

BRADLEY WESTON TAGGART,

Appellee.

No. 16-60039

BAP No.

15-1119

IN RE BRADLEY WESTON TAGGART,

Debtor,

TERRY W. EMMERT; KEITH JEHNKE;

SHERWOOD PARK BUSINESS CENTER,

LLC,

Appellants,

v.

BRADLEY WESTON TAGGART,

Appellee.

No. 16-60040

BAP No.

15-1119
4 IN RE TAGGART

IN RE BRADLEY WESTON TAGGART,

Debtor,

SHELLEY A. LORENZEN, Executor of 

Estate of Stuart Brown,

Appellant,

v.

BRADLEY WESTON TAGGART,

Appellee.

No. 16-60042

BAP No.

15-1158

IN RE BRADLEY WESTON TAGGART,

Debtor,

TERRY W. EMMERT; KEITH JEHNKE;

SHERWOOD PARK BUSINESS CENTER, 

LLC,

Appellants,

v.

BRADLEY WESTON TAGGART,

Appellee.

No. 16-60043

BAP No.

15-1158

OPINION

Appeal from the Ninth Circuit

Bankruptcy Appellate Panel

Kirscher, Jury, and Faris, Bankruptcy Judges, Presiding
IN RE TAGGART 5

Argued and Submitted October 3, 2017

Portland, Oregon

Filed April 23, 2018

Before: Edward Leavy, Richard A. Paez,

and Carlos T. Bea, Circuit Judges.

Opinion by Judge Bea

SUMMARY*

Bankruptcy

The panel affirmed the Bankruptcy Appellate Panel’s 

opinion reversing the bankruptcy court’s order entering 

contempt sanctions against creditors for knowingly violating 

the discharge injunction in a Chapter 7 case.

The panel held that the creditors did not knowingly 

violate the discharge injunction because they had a 

subjective good faith belief that the discharge injunction did 

not apply to their state-court claim for post-petition 

attorneys’ fees. The creditors’ subjective good faith belief, 

even if unreasonable, insulated them from a finding of 

contempt. The panel concluded that it therefore need not 

reach the creditors’ cross-appeal from the district court’s 

holding that they violated the discharge injunction.

 * This summary constitutes no part of the opinion of the court. It 

has been prepared by court staff for the convenience of the reader.
6 IN RE TAGGART

COUNSEL

John Martin Berman (argued) and Damon J. Petticord, 

Tigard, Oregon, for Bradley Weston Taggart.

Janet M. Schroer (argued), Hart Wagner LLP, Portland, 

Oregon; James Ray Streinz, Streinz Law Office, Portland, 

Oregon, for Shelley Lorenzen.

Hollis Keith McMilan (argued), Hollis K. McMilan P.C.,

Portland, Oregon, for Terry W. Emmert, Keith Jehnke, and 

Sherwood Park Business Center LLC.

OPINION

BEA, Circuit Judge:

This case arises out of a complex set of bankruptcy 

proceedings. Appellant Bradley Taggart was a real estate 

developer who owned a 25% interest in Sherwood Park 

Business Center, LLC (“SPBC”). Appellees and CrossAppellants Terry Emmert and Keith Jehnke also each owned 

a 25% interest in SPBC. In 2007, Taggart allegedly 

transferred his share of SBPC to his attorney in this action, 

John Berman.

When Emmert and Jehnke learned that Taggart had 

transferred his interest in SPBC to Berman, they sued 

Taggart and Berman in Oregon state court, asserting that the 

transfer breached SPBC’s operating agreement because 

Taggart did not provide the notice required to allow Emmert 

and Jehnke to exercise their right of first refusal to buy 

Taggart’s interest at the agreed upon price. The state court 

action also sought attorneys’ fees pursuant to the operating 
IN RE TAGGART 7

agreement. Taggart filed an answer to the state court action, 

sought to dismiss the action, and filed a counterclaim for 

attorneys’ fees pursuant to the operating agreement.

On November 4, 2009, shortly before trial in the state 

court action, Taggart filed a voluntary Chapter 7 Bankruptcy 

petition (the “Petition”). The state court action was stayed 

pending the resolution of Taggart’s bankruptcy Petition. On 

February 23, 2010, Taggart received his discharge in the 

bankruptcy proceedings.

After the discharge, Emmert and Jehnke, represented by 

attorney Stuart Brown, continued the state court action 

against Berman and Taggart. As part of the litigation, Brown 

served Taggart with a subpoena for a deposition. Taggart, 

represented by Berman, moved for a protective order that 

would allow him not to appear at the deposition, but the state 

trial court never ruled on the motion. Nonetheless, Taggart 

appeared for his deposition.

Prior to trial, Berman moved on Taggart’s behalf to 

dismiss the claims against Taggart in light of the bankruptcy 

discharge. The state court denied the motion, finding that 

Taggart was a necessary party to Emmert and Jehnke’s 

claims seeking to expel Taggart from SPBC, but the parties 

agreed that no monetary judgment would be awarded against 

Taggart. Taggart did not appear at or participate in the trial, 

but Berman orally renewed his motion to dismiss on 

Taggart’s behalf at the close of evidence. The state court

once again denied the motion.

After trial, the state court issued findings of fact and 

conclusions of law that unwound the transfer of Taggart’s 

interest in SPBC to Berman and expelled Taggart from 

SPBC. Brown submitted a proposed judgment, to which 
8 IN RE TAGGART

Berman objected. Taggart appeared at the hearing for entry 

of the judgment and provided testimony and argument.

Following the hearing, the state court entered a judgment 

that allowed any party to petition for attorneys’ fees. The 

litigation regarding attorneys’ fees spawned a complex, 

interrelated web of litigation in both state and federal court.

First, Brown filed a petition for attorneys’ fees in state 

court on behalf of SPBC, Emmert, and Jehnke. Brown’s fee 

petition sought to recover fees against both Berman and 

Taggart, but limited the request for fees against Taggart to 

those fees that had been incurred after the date of Taggart’s 

bankruptcy discharge. In the fee petition, Brown alerted the 

state court to the existence of Taggart’s bankruptcy 

discharge and argued that Taggart could still be held liable 

for attorneys’ fees incurred after Taggart’s discharge 

because Taggart had “returned to the fray.” That is, SPBC, 

Emmert, and Jehnke claimed Taggart had willingly engaged 

in opposing them in the state court action after Taggart 

obtained his bankruptcy discharge. Taggart opposed 

Brown’s petition for attorneys’ fees, arguing his bankruptcy 

discharge barred any claim for attorneys’ fees, whether they 

were incurred before or after his discharge in bankruptcy.

While the attorneys’ fee petition was pending in state 

court, Taggart moved the bankruptcy court to reopen his 

bankruptcy proceeding. The day the bankruptcy court 

reopened Taggart’s bankruptcy proceeding, Taggart filed a 

motion seeking to hold Brown, Jehnke, Emmert, and SPBC 

(collectively, the “Creditors”) in contempt for violating the 

discharge by seeking an award of attorneys’ fees against him 

in the state court action.

Meanwhile, the state trial court issued a ruling awarding 

attorneys’ fees to SPBC, but not Jehnke and Emmert. The 
IN RE TAGGART 9

state court ruled that Taggart could be held liable for 

attorneys’ fees that were incurred after his bankruptcy 

discharge because he had “returned to the fray.”1 Taggart 

appealed the state court’s determination to the Oregon Court 

of Appeals. See Sherwood Park Bus. Ctr., LLC v. Taggart, 

341 P.3d 96 (Or. Ct. App. 2014).

Subsequently, the bankruptcy court denied Taggart’s 

motion for contempt, finding that the state court had 

correctly decided the issue: whether Taggart had indeed 

“returned to the fray.” Taggart appealed the bankruptcy 

court’s ruling to the district court. The district court 

reversed, finding that Taggart’s actions were insufficient to 

constitute a “return to the fray” and, as a result, the discharge 

injunction barred the attorneys’ fee claim. The district court 

remanded to the bankruptcy court for a determination of 

whether the Creditors “knowingly violated the discharge 

injunction in seeking attorney fees.”2

On remand, the bankruptcy court found the Creditors had 

knowingly violated the discharge injunction by seeking 

attorneys’ fees in the state action and entered an order 

holding them in contempt. Following further proceedings, 

the bankruptcy court awarded sanctions against SPBC, 

 1 Whether Taggart had “returned to the fray” was significant because 

if a debtor “returns to the fray” by engaging in post-bankruptcy petition 

litigation, a creditor may seek an attorneys’ fee award if the new 

litigation was not within the “fair contemplation of the parties” prior to 

the bankruptcy petition. See In re Castellino Villas, A. K. F. LLC, 

836 F.3d 1028, 1034–37 (9th Cir. 2016).

2 Emmert, Brown, Jehnke, and SPBC filed a notice of appeal of the 

district court’s decision. This court dismissed the appeal because the 

district court’s ruling was not a final order.
10 IN RE TAGGART

Emmert, Jehnke, and Brown’s estate,3 pursuant to the 

court’s contempt ruling.

The Creditors appealed the bankruptcy court’s contempt 

ruling to the Bankruptcy Appellate Panel (“BAP”). On 

appeal, the BAP reversed the bankruptcy court’s finding of 

contempt. The BAP reasoned that the Creditors could not be 

held in contempt unless they “knowingly” violated the 

discharge injunction. Because the BAP found that the 

Creditors had a good faith belief that the discharge 

injunction did not apply to their attorneys’ fee claim, it 

concluded that they had not “knowingly” violated the 

discharge injunction.

In the meantime, the Oregon Court of Appeals reversed 

the state trial court’s ruling regarding attorneys’ fees. See 

Taggart, 341 P.3d at 102–04. In line with the district court, 

the Oregon Court of Appeals held that Taggart’s actions 

were not sufficiently affirmative or voluntary to constitute a 

“return to the fray.” Id. As a result, the court concluded that 

the discharge injunction barred the recovery of attorneys’ 

fees. Id.

Ultimately, the Creditors were barred from pursuing 

attorneys’ fees against Taggart by the rulings of both the 

district court and the Oregon Court of Appeals. 

Additionally, due to the BAP’s ruling, the Creditors were not 

liable for sanctions for knowingly violating the discharge 

injunction by seeking attorneys’ fees against Taggart in the 

state court litigation.

 3 Brown passed away in 2013. Shelley Lorenzen represents Brown 

in this litigation as the executor of his estate.
IN RE TAGGART 11

Taggart filed a notice of appeal challenging the BAP’s 

decision to reverse the bankruptcy court’s contempt findings 

against the Creditors. The Creditors filed a notice of crossappeal challenging the district court’s ruling that Taggart had 

not returned to the fray in the state court litigation.

I

We begin with Taggart’s appeal, in which he argues that 

the BAP committed reversible error when it held that the 

Creditors could not be held in contempt because they did not 

knowingly violate the discharge injunction. A discharge 

under Chapter 7 of the bankruptcy code “discharges the 

debtor from all debts that arose before the date of the” 

bankruptcy petition. 11 U.S.C. § 727(b). Once issued, the 

discharge “operates as an injunction against the 

commencement or continuation of an action . . . to collect, 

recover or offset any such debt as a personal liability of the 

debtor.” 11 U.S.C. § 524(a)(2). A bankruptcy court may 

enforce the discharge injunction by holding a party in 

contempt for knowingly violating the discharge. In re Zilog, 

Inc., 450 F.3d 996, 1007 (9th Cir. 2006).

In this case, after the district court concluded that 

Taggart had not “returned to the fray,” it remanded the case 

to the bankruptcy court for a determination of whether the 

Creditors should be held in contempt. The bankruptcy court 

determined that the Creditors were aware of the discharge 

order, but proceeded with their efforts to recover attorneys’ 

fees from Taggart. The bankruptcy court concluded that it 

was irrelevant whether the Creditors held a subjective good 

faith belief that the discharge injunction did not apply to their 

claim. As a result, the bankruptcy court held that the 

Creditors had committed a knowing violation of the 

discharge injunction and it held them in contempt.
12 IN RE TAGGART

On appeal, the BAP reversed. The BAP concluded that 

the Creditors had a subjective good faith belief that their 

claim was exempt from the discharge injunction. In light of 

this good faith belief, the BAP held that the Creditors did not 

“knowingly” violate the discharge injunction, even though 

an actual violation had occurred.

We review the BAP’s decisions de novo. In re 

Filtercorp, Inc., 163 F.3d 570, 576 (9th Cir. 1998). The 

bankruptcy court’s decision to impose contempt sanctions is 

reviewed for an abuse of discretion. In re Dyer, 322 F.3d 

1178, 1191 (9th Cir. 2003). A bankruptcy court abuses its 

discretion if its decision is based on an incorrect legal rule, 

or if its “application of the correct legal standard was 

(1) ‘illogical,’ (2) ‘implausible,’ or (3) without ‘support in 

inferences that may be drawn from the facts in the record.’” 

United States v. Hinkson, 585 F.3d 1247, 1262 (9th Cir. 

2009) (quoting Anderson v. City of Bessemer, 470 U.S. 564, 

577 (1985)).

“The standard for finding a party in civil contempt is well 

settled: The moving party has the burden of showing by clear 

and convincing evidence that the contemnors violated a 

specific and definite order of the court. The burden then 

shifts to the contemnors to demonstrate why they were 

unable to comply.” In re Bennett, 298 F.3d 1059, 1069 (9th 

Cir. 2002) (quoting F.T.C. v. Affordable Media, 179 F.3d 

1228, 1239 (9th Cir.1999)). As noted above, a bankruptcy 

court may hold a party in contempt for knowingly violating 

the discharge injunction. Zilog, 450 F.3d at 1007. We have 

adopted a two-part test for determining the propriety of a 

contempt sanction in the context of a discharge injunction: 

“[T]o justify sanctions, the movant must prove that the 

creditor (1) knew the discharge injunction was applicable 
IN RE TAGGART 13

and (2) intended the actions which violated the injunction.” 

Bennett, 298 F.3d at 1069.

Only the first prong of the test is at issue here. To satisfy 

the first prong, knowledge of the applicability of the 

injunction must be proved as a matter of fact and may not be 

inferred simply because the creditor knew of the bankruptcy 

proceeding. Zilog, 450 F.3d at 1007–08; see also Dyer, 

322 F.3d at 1191–92 (rejecting an attempt to infer 

knowledge of the automatic stay based on knowledge of the 

bankruptcy proceedings in the context of a contempt 

ruling).4 Additionally, the creditor’s good faith belief that 

the discharge injunction does not apply to the creditor’s 

claim precludes a finding of contempt, even if the creditor’s 

belief is unreasonable. Zilog, 450 F.3d at 1009 n.14 (“To the 

extent that the deficient notices [from the bankruptcy court 

and opposing counsel] led the [creditors] to believe, even 

unreasonably, that the discharge injunction did not apply to 

their claims because they were not affected by the 

bankruptcy, this would preclude a finding of willfulness.”).

In this case, the bankruptcy court abused its discretion by 

concluding that the Creditors knowingly violated the 

discharge injunction. Specifically, the bankruptcy court 

abused its discretion by applying an incorrect rule of law. 

See Hinkson, 585 F.3d at 1262. The bankruptcy court held 

that a good faith belief that the discharge injunction was 

 4 Although Dyer dealt with a violation of the automatic stay, rather 

than a violation of the discharge injunction, the sanctions at issue were 

not imposed under the bankruptcy code provision that specifically allows 

sanctions for a violation of the automatic stay, 11 U.S.C. § 362(h). Dyer,

322 F.3d at 1189. Rather, sanctions were imposed under the bankruptcy 

court’s 11 U.S.C. § 105(a) contempt authority, thereby invoking the 

standard that applies when there is a violation of the discharge 

injunction. Id.
14 IN RE TAGGART

inapplicable to the Creditors’ claims was irrelevant for 

purposes of determining whether there was a “knowing” 

violation of the discharge injunction. This holding conflicts 

with Zilog, where we stated that even an unreasonable belief 

that the discharge injunction did not apply to a creditor’s 

claims would preclude a finding of contempt. 450 F.3d at 

1009 n.14.

It is true, as Taggart points out, that language from our 

prior opinions in Bennett and Dyer appears to be somewhat 

in tension with Zilog.

5 However, neither Bennett nor Dyer

held that a creditor’s subjective good faith belief that the 

discharge injunction is inapplicable is irrelevant to the 

contempt analysis. In fact, Bennett expressly states that the 

creditor must know that the discharge injunction is 

“applicable” to the creditor’s claims, and Dyer cited that 

holding with approval. Bennett, 298 F.3d at 1069; Dyer, 

322 F.3d at 1192. Regardless, Zilog’s statement of the law 

is clear, directly addresses the question at issue in here, and 

is binding on this court.

In this case, as the BAP found, the Creditors possessed a 

good faith belief that the discharge injunction did not apply 

to their claims based on their contention that Taggart had 

“returned to the fray,” and Taggart does not contend 

otherwise. Much like the creditors in Zilog relied on 

statements by the debtor’s counsel and the bankruptcy court 

in concluding that their claims were not impacted by the 

discharge injunction, the Creditors relied on the state court’s 

 5 Taggart specifically highlights language from Dyer, which states: 

“In determining whether the contemnor violated the stay, the focus ‘is 

not on the subjective beliefs or intent of the contemnors in complying 

with the order, but whether in fact their conduct complied with the order 

at issue.’” 322 F.3d at 1191 (quoting In re Hardy, 97 F.3d 1384, 1390 

(11th Cir. 1996)).
IN RE TAGGART 15

judgment that the discharge injunction did not apply to their 

claim for post-petition attorneys’ fees. Although the 

Creditors—like the creditors in Zilog—were ultimately 

incorrect, their good faith belief, even if unreasonable, 

insulated them from a finding of contempt. Zilog, 450 F.3d 

at 1009 n.14. As a result, the BAP did not err when it 

reversed the contempt sanctions entered by the bankruptcy 

court against the Creditors.

II

Because we have determined that the Creditors cannot 

be held in contempt for any alleged violation of the discharge 

injunction, we need not reach the arguments raised in the 

Creditors’ cross-appeal regarding the district court’s holding 

that the Creditors violated the discharge injunction by 

seeking an attorneys’ fee award in the state court litigation.6 

Even if the Creditors did violate the discharge injunction—

and we express no opinion as to whether they did or did 

not—they cannot be held in contempt for that alleged 

violation. As discussed above, they acted pursuant to their 

good faith belief that, due to Taggart’s “return to the fray,” 

the discharge injunction did not apply to their claims. As a 

 6 After the district court’s decision in this case, but before the parties 

completed their briefing in our court, another Ninth Circuit panel issued 

an opinion in In re Castellino Villas, A. K. F. LLC, 836 F.3d 1028, 1034 

(9th Cir. 2016). Lorenzen’s briefing to this court recognized the 

Castellino Villas opinion and noted that, in Lorenzen’s view, Castellino 

Villas commands resolution of whether Creditors violated the discharge 

against the Creditors. At the time of briefing in this case, Castellino 

Villas had been decided, but could have been reheard by an en banc panel 

of this court or overturned or modified by the Supreme Court. Lorenzen 

requested that we deem her cross-appeal withdrawn if Castellino Villas

was not overturned or modified. Because Castellino Villas has neither 

been overturned nor modified, we grant Lorenzen’s request to withdraw 

her cross-appeal. Therefore, we do not address it.
16 IN RE TAGGART

result, we decline to reach the issues raised by the Creditors’ 

Cross-Appeal.

III

In light of the above, we AFFIRM the BAP’s opinion 

reversing the bankruptcy court’s order entering contempt 

sanctions against the Creditors.