Filed 05/07/20 by Clerk of Supreme Court

IN THE SUPREME COURT

STATE OF NORTH DAKOTA

2020 ND 104

Douglas Arnold and Thomas Arnold, Plaintiffs and Appellees

v.

Trident Resources, LLC, American 

Power Company, Inc. and American Power 

Group Corporation, Defendants 

and

Thomas Lockhart, individually and 

as an officer and director of Trident 

Resources, LLC, Defendant and Appellant

No. 20190322

Appeal from the District Court of Mountrail County, North Central Judicial 

District, the Honorable Richard L. Hagar, Judge.

REVERSED AND REMANDED.

Opinion of the Court by Jensen, Chief Justice.

Thomas E. Kalil, Williston, ND, for plaintiffs and appeleees.

William C. Black, Bismarck, ND, for defendant and appellant.
1

Arnold v. Trident Resources

No. 20190322

Jensen, Chief Justice.

[¶1] Thomas Lockhart appeals from an order finding him in contempt, 

imposing a sanction requiring the forfeiture of $300,000 to Douglas Arnold and 

Thomas Arnold, and divesting him of any management rights in Trident 

Resources, LLC. Lockhart argues the district court’s order improperly imposes 

a punitive sanction for his contempt. We reverse and remand this case to the 

district court for further findings in support of the sanction imposed for 

Lockhart’s contempt.

I

[¶2] In 2013, Lockhart and the Arnolds entered into business capturing 

and compressing natural gas. The parties formed Trident Resources, with 

Lockhart owning a 70% interest and each of the Arnolds owning a 15% interest. 

Trident Resources owned two well processing units (WPUs), each purchased 

for $300,000.

[¶3] In 2015, the Arnolds initiated this action seeking reformation of the 

Trident Resources’ member control and operating agreement to clarify the 

parties’ respective ownership interests. Following a bench trial, the court 

ordered the entry of a judgment confirming Lockhart’s ownership of a 70% 

interest and each of the Arnold’s 15% ownership interest in Trident Resources.

[¶4] Before the entry of the judgment, Lockhart informed the Arnolds he had 

received an offer from Black Butte Resources to purchase one of the WPUs for 

$300,000. The Arnolds consented to the sale of the WPU, provided the proceeds 

were deposited into their attorney’s trust account. Lockhart agreed to deposit 

the funds into the trust account as requested by the Arnolds.

[¶5] When it appeared Lockhart had failed to deposit the funds into the trust 

account, the Arnolds filed a motion seeking to discover the location of the WPU 

and the sale proceeds. Before the hearing on the Arnolds’ motion, Lockhart 

deposited $100,000 into the trust account. At the hearing, the court ordered 
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Lockhart to provide the Arnolds and the court with information regarding the 

WPU that had been sold and the date the remaining $200,000 would be 

deposited into the trust account. The court further ordered that if Lockhart 

failed to provide the information within 15 days of the hearing a sanction of 

$5,000 would be imposed with an additional $1,000 sanction for every 

subsequent week the information was not provided. Additionally, the court 

provided that if the information was not given within 30 days, the Arnolds 

could request a hearing for the court to consider additional sanctions. Lockhart 

eventually deposited $200,000 into the trust account and filed an affidavit 

stating Black Butte had purchased the WPU and the WPU had been 

transferred to Black Butte.

[¶6] Subsequent to Lockhart filing his affidavit, the Arnolds learned the WPU 

had not been sold to Black Butte for $300,000, but had instead been sold to 

another party for $500,000. The Arnolds filed a motion requesting the court to 

find Lockhart in contempt and for the imposition of appropriate sanctions. At 

the hearing on the motion, Lockhart conceded his affidavit was false and 

stipulated to the entry of a finding of contempt.

[¶7] The court found Lockhart in contempt “by virtue of having knowingly 

made and filed a false affidavit” and imposed the following sanction:

a. Defendants Thomas Lockhart and Trident Resources, LLC have 

no right, claim or interest in the $300,000.00 placed into 

escrow with the Plaintiffs’ attorney. The Plaintiff’s attorney may 

immediately disperse this money to the Plaintiffs. Any remaining 

debts owed by Trident Resources, LLC, with the exception of any 

unpaid storage fees from May 1, 2019 forward, shall be paid using 

the $200,000.00 received by Thomas Lockhart and which he failed 

to disclose to the Court.

b. With regard to any remaining property of Trident Resources, 

LLC, Thomas Lockhart shall have no right whatsoever to dispose 

of, assign, or sell said property. The sale of any remaining property 

shall be negotiated solely by the Plaintiffs, but all contracts shall 

be signed by Thomas Lockhart and the Plaintiffs, with each person 

signing in their capacity as members and with Lockhart 

additionally signing as an officer/director of the LLC.
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The court denied the Arnolds’ request for an award of attorney fees, noting it 

had provided the $300,000 sanction.

[¶8] Lockhart does not contest the finding of contempt and challenges only 

the forfeiture of the $300,000. He argues the forfeiture is either an improperly 

imposed punitive sanction or a remedial sanction which exceeds the available 

remedial remedies.

II

[¶9] District courts have broad discretion in making contempt findings and 

those findings will be disturbed on appeal only if the district court has abused 

its discretion. Upton v. Nolan, 2018 ND 243, ¶ 18, 919 N.W.2d 181 (quoting 

Booen v. Appel, 2017 ND 189, ¶ 24, 899 N.W.2d 648). “A district court abuses 

its discretion when it acts in an arbitrary, unreasonable, or unconscionable 

manner; its decision is not the product of a rational mental process leading to 

a reasoned determination; or it misinterprets or misapplies the law.” Id.

[¶10] This Court exercises a very limited review of a district court’s 

determination regarding contempt. Upton v. Nolan, 2018 ND 243, at ¶ 18. Our 

limited review of a finding of contempt requires the district court to provide an 

adequate explanation of the basis for its finding. Johnson v. Gehringer, 2006 

ND 157, ¶ 11, 717 N.W.2d 920 (quoting In re Spicer, 2006 ND 79, ¶ 8, 712 

N.W.2d 640). If valid reasons for the district court’s finding are fairly 

discernable, either by deduction or inference, the finding will not be 

reversed. Id.

[¶11] Courts have the authority to impose remedial or punitive sanctions for 

contempt of court. N.D.C.C. § 27-10-01.2(1). When considering an alleged 

contempt, the district court must first decide whether a remedial or punitive 

sanction is applicable, and then apply the appropriate procedures for imposing 

the sanction. Holkesvig v. Welte, 2012 ND 14, ¶ 9, 809 N.W.2d 323. When a 

district court has failed to follow the appropriate procedure in contempt 

proceedings, this Court generally remands the case to the district court for a 

determination of whether the appropriate contempt proceedings should be 

initiated. See Holkesvig v. Welte, 2012 ND 14, ¶ 14, 809 N.W.2d 323; Millang 
4

v. Hahn, 1998 ND 152, ¶ 19, 582 N.W.2d 665; Endersbe v. Endersbe, 555 

N.W.2d 580, 583 (N.D. 1996).

III

[¶12] Lockhart argues the sanction imposed by the court was improper 

because it was either a procedurally deficient punitive sanction or a remedial 

sanction exceeding the available remedial sanction statutory remedies. 

Punitive sanctions and remedial sanctions are statutorily defined within 

N.D.C.C. § 27-10-01.1 as follows:

. . . .

3. “Punitive sanction” includes a sanction of imprisonment 

if the sentence is for a definite period of time. A sanction 

requiring payment of a sum of money is punitive if 

the sanction is not conditioned upon performance or 

nonperformance of an act, and if the sanction’s purpose is to 

uphold the authority of the court.

4. “Remedial sanction” includes a sanction that is conditioned 

upon performance or nonperformance of an act required by 

court order. A sanction requiring payment of a sum of money 

is remedial if the sanction is imposed to compensate a party 

or complainant, other than the court, for loss or injury 

suffered as a result of the contempt.

[¶13] The imposition of punitive sanctions for contempt is limited to two 

sets of circumstances. First, “[t]he state’s attorney of a county, the attorney 

general, or a special prosecutor appointed by the court may seek the imposition 

of a punitive sanction by issuing a complaint charging a person with 

contempt of court and reciting the sanction sought to be imposed.” N.D.C.C. 

§ 27-10-1.3(1)(b). “The state’s attorney, attorney general, or special prosecutor 

may initiate issuance of the complaint or may issue the complaint on the 

request of a party to an action or proceeding in a court or of the judge presiding 

in an action or proceeding.” N.D.C.C. § 27-10-1.3(1)(b). While the issuance of 

a complaint as described in this paragraph may be appropriate and may occur 

in the future, no complaint has been issued in this case.
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[¶14] The second set of circumstances allowing for the imposition of punitive 

sanctions arise when “[t]he judge presiding in an action or proceeding may 

impose a punitive sanction upon a person who commits contempt of court in 

the actual presence of the court.” N.D.C.C. § 27-10-1.3(2). “The judge shall 

impose the punitive sanction immediately after the contempt of court and only 

for the purpose of preserving order in the court and protecting the authority 

and dignity of the court.” N.D.C.C. § 27-10-1.3(2). The sanction imposed in 

this case was not initiated as the result of actions occurring in the presence of 

the court and were not imposed to preserve “order in the court and protecting 

the authority and dignity of the court.”

[¶15] Neither of the two sets of circumstances allowing for the imposition of a 

punitive sanction were satisfied prior to the court imposing the sanctions in 

this case. We agree with Lockhart, to the extent the sanction was punitive, it 

was improperly imposed.

IV

[¶16] Lockhart also asserts the sanction exceeds the statutorily defined 

remedial sanctions. A court may impose one or more of the following remedial 

sanctions:

a. Payment of a sum of money sufficient to compensate a party or 

complainant, other than the court, for a loss or injury suffered as 

a result of the contempt, including an amount to reimburse the 

party for costs and expenses incurred as a result of the contempt; 

b. Imprisonment if the contempt of court is of a type included in 

subdivision b, c, d, e, or f of subsection 1 of section 27-10-01.1. The 

imprisonment may extend for as long as the contemnor continues 

the contempt or six months, whichever is shorter;

c. A forfeiture not to exceed two thousand dollars for each day the 

contempt continues;

d. An order designed to ensure compliance with a previous order of 

the court; or
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e. A sanction other than the sanctions specified in subdivisions a 

through d if the court expressly finds that those sanctions would 

be ineffectual to terminate a continuing contempt.

N.D.C.C. § 27-10-01.4.

[¶17] The sanction imposed by the court does not include imprisonment as 

allowed under subsection (b). The sanction does not impose a forfeiture not to 

exceed two thousand dollars per day for a continuing contempt as allowed 

under subsection (c).

[¶18] The Arnolds contend the sanction can be affirmed as a sanction under 

subsection (a) as a payment of a sum of money sufficient to compensate the 

Arnolds for a loss or injury suffered as a result of the contempt. The Arnolds 

cite to this Court’s prior decision in Johnson v. Gehringer, 2006 ND 157, 717 

N.W.2d 920, as support for their argument. In Johnson, a sanction was 

imposed for violation of a judgment precluding one of the parties from engaging 

in the installation and repair of residential and commercial heating and air 

conditioning systems. Id. at ¶ 10. The Court determined the amount of the 

sanction after finding the installation of heating and air conditioning units was 

five percent of the cost the aggrieved party had paid for the total business it 

was allocated in the judgment. Id. at ¶ 15. The sanction was equal to five 

percent of the total cost. Id. We concluded as follows:

Although other measures of compensation for the contempt may 

also have been appropriate, the amount of the compensation 

imposed by the district court relates to Gehringer’s injury which 

was caused by Johnson’s contempt. The district court did not 

abuse its discretion in its damage award.

Id.

[¶19] In Johnson, the district court provided an adequate explanation of the 

basis for its finding and a valid reason for the court’s finding was fairly 

discernable, either by deduction or inference, from the record. In the present 

case, the sanction equaled twice the amount the Arnolds were owed, plus the 

expenses that were allocated to Lockhart. The court did not provide any link 
7

between its imposition of the sanction and a loss or injury suffered by the 

Arnolds as a result of Lockhart’s contempt. We are left with an insufficient 

record to determine whether a remedial sanction under subsection (a) in the 

amount ordered was appropriate.

[¶20] The Arnolds contend the sanction can be affirmed as an order designed 

to ensure compliance with a previous order of the court under subsection (d).

The Arnolds provide no explanation how the imposition of the sanction ensures 

compliance with a prior order of the court and to the contrary, argue the court’s 

order “ends the continuing contempt of Thomas Lockhart.” The definition of a 

remedial sanction includes a sanction that is conditioned upon performance or 

nonperformance of an act required by court order, or the payment of a sum of 

money to compensate a party for loss or injury suffered as a result of the 

contempt. N.D.C.C. § 27-10-01.1(4). The sanction was not conditioned upon 

the performance or nonperformance of an act. The court had previously 

imposed a conditional sanction when it initially ordered that if Lockhart failed 

to provide certain information within 15 days of the hearing, a sanction of 

$5,000 would be imposed with an additional $1,000 sanction for every 

subsequent week the information was not provided, but the sanction was not 

tied to that conditional order. Additionally, as discussed above, the court did 

not provide an explanation of how the sanction related to any loss or injury 

resulting from the contempt. We disagree with the Arnolds that the sanction 

can be affirmed under subsection (d) as a remedial sanction designed to ensure 

compliance with a previous court order.

[¶21] The Arnolds further contend the sanction can be affirmed under 

subsection (e) as a “sanction other than the sanctions specified in subdivisions 

a through d if the court expressly finds that those sanctions would be 

ineffectual to terminate a continuing contempt.” After reviewing the record,

we conclude the court did not provide an adequate explanation of the basis for

finding a sanction would be appropriate under subsection (e) and we are unable 

to discern from the current record, either by deduction or inference, a valid 

reason for the amount of the sanction.
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V

[¶22] The circumstances necessary for the imposition of a punitive sanction 

were not present prior to the imposition of a sanction in this case. We are also 

left with an insufficient record to review the appropriateness of the imposition 

of a remedial sanction in the amount ordered by the court. We reverse and 

remand this case for further findings to explain the district court’s rationale

for imposing the monetary sanction for Lockhart’s contempt. On remand, the 

district court may consider any of the remedial provisions provided in section 

27-10-01.4, N.D.C.C., as it may deem appropriate.

[¶23] Jon J. Jensen, C.J.

Gerald W. VandeWalle

Daniel J. Crothers 

Jerod E. Tufte

Lisa Fair McEvers