The Ho norable J oseph S. V an Bo kkelen, U nited St ates  Di s t r i c t J u d g e f o r t h e No r t h e r n Di s t r i c t o f I n d i a n a , s i t t i n g by des i gna t i on. 

## In the 

# U n ited S ta tes Co urt o f Ap p ea ls

F o rth eS e v e n th C ir cu it
N o. 08

- 4013 U NI T ED S TATE S S EC UR I T I ESAN D E XCHANGE C OM MI S S I ON, P la intif f-A pp ellee, v. J AS ON R. H YAT T, et al., D efend a nts. A PP E A L OF : BCI A IR CRAFT L EA S I NG, I NC ., et al.

A pp eal from the United S t ates Di strictC our t forthe North er nDi str ic t of Ill in ois, E a ste rnDi vis ion
. No . 1:08- cv-02224

— George W. Lindberg, Judge .
A RGUED M AY 12, 2009

— D ECI DE D S EP TE MBE R 3, 2010

Befo re P O SNER a nd S YKES, C ircu it Judges, and V AN B OKKELEN, D i s t r i ctJudg e . 2 N o. 08

- 4013 S YKES, Cir cu i tJudg e . Brian H oll na gel and BC IA ircraft Leasi ng appealthe dist ri ct c ourt ’ s o rderhol ding them in co n te m p t a n d aw ar d in g a tt or n ey ’s fe e s f or th eir f ai l ure to adequatel y r espond to two subpoenas duces t e c u m ser ved on them by the Se curi ti es a n d Exchange Com m i ssi on ( “SEC”) i n connect i on with l i ti gat i on between the SEC and anoth er p ar ty. The S EC i ni ti ate d the c on te m pt proc eedi ng vi a a m oti on f ora rul e t o show c au se w hy H ol l nagel and BCI shoul d no t be he ld in conte m pt. The m oti on a ske d the co urt to: (1) o rderthem to full y com plywith the subpoenas ; and ( 2) o rder th em to sh ow ca u se w h y t h ey sh ou ld n ot b e h e l d in co nt empt fo r the i r pa stno nc o m pl i an ce . Acco m pan y i ng thi s m oti on was a noti ce s ett i ng a date a n d ti m e f or a he ar i nga t whi chthe S EC s ai d i t woul d “ pr es en t, a nd s e e ka h e a r i n gd a t e r eg ar di n g ” i t s r e q u e s tf o r a s h o wcause or der. H ol l nageland B CI i nter prete d the not i ce and m oti on t o m ean that the i ni ti alheari ng would be enti re l y m i ni ste ri al

— th a t th e c o u r t wo u l d i s s u e a s h o wcause or der an d se t a no therdate on wh i ch the m er i ts of th e con tem p t issue w ou ld b e heard

. So they d idn ’t s ho w u p. W he n the c a s e wa s ca l l e d a nd Ho l l na g e l a nd BC I didn ’t ap pear, the SEC ski pp ed ove r the pr oce du ra l pr el im inar i es a nd mov ed r i g htt o the mai n e ve nt : The ag en cy ’ s l awy er s as k ed th e co ur t to fi nd Hol l na g ela nd BC Ii n conte m pt. The co urt did so , o rder ed them to ful l y c o m pl y wi ththe s ubpo en as w ithi n t wo da y s, a nd i m posed a $1, 000- a- day fi ne f orany noncom pli ance afte r tha t dat e. The c o ur t later r es ci nde d the fi ne , b utN o. 08

- 4013 3 l eft the co ntem pt or der i n pl ace and or dered H ol l nagel and BC Ito pay the S EC ’ s a tto rney ’ s fees . H ol l nageland BC Iap peal ed, rai si ng sever alpro cedural chal l enges to the dist ri ct c ourt ’ s ord er . Fi rs t, they c o n t e n d th a ta c o n t e m p to r d e r c a n n o ti s s u e f o r n o n c o mpli ance w ith a nonpartysubpoena d u c e s t e c u m unle ss th e rec ip ie n t of th e sub p oen a is fi rst ord ered by the cou rt to com p ly. I n th e alternative th ey claim that the SEC ’s mo t i o n f o r a r ul e to s h o w c a u s e n o t i fi e d th e m only that th e SE C w as seekin g a show -cau se o r d e r s e tting a futu re h e a r i n g d at e o n th e c on te m p t m ot ion , notthat the cou rt w ou ld im m ed iat ely ad j u d ica te w h et h er th ey w er e in conte m pt. A ccel er ati ng the pro cess , theym ai ntai n, depr i v e d the m o fn o t i c e a nd a n o pp o r t un i t y t o b e h e a r d. W e r ej ec t th e fi rst ofthe se a r g um en ts
. Rul e 45 ( e) o fthe Feder alRule s ofCi vi l Pro cedure speci fi cal l y pr ovi des th at a perso n w ho f ai l s “ w i thout adequate e xcuse t o ob ey [a] su b p oe n a” m ay be h eld in c on te m p t. T h e ru le does not r equi re the cour t t o fi rs t o rderco m pli ance bef or e i m posi ng the sa ncti on o fco nt em pt, al though su bsec tion (c) of the rule requ ire s a n i nt erven ing cou rt o r deri f th e r ec i pi en t o fthe s ubpo en a o bj ec ts i n wr i ting to th e pro duct i o n o fdo cument s o r thi ng s. Hol l na g ela nd BC Idi d not s er ve a wr itte n obj ecti on, so the SEC w as en titl ed to seek a cont em p t san ction. W e agre e , how ever, wi ththe a l te r na ti ve a r g um en t th atthe S EC’ s no ti ce a nd m otion f o r a r ul e to s ho w ca us e di d no t pr o vi de su ffi ci en t no ti ce tha t th e di st r i ctc o ur t woul d de ci de th e con tem pt i ss ue a t th e i ni ti alhe ar i ng . The no ti ce s o ug ht onl y the i ss ua nc e o fa s ho w-c au se o r dera nd a sk ed th e4 N o. 08

- 4013

co ur t to s eta he ar i nga t whi chthe mer i ts o fthe c o ntem pt i ssue w oul d l ate r be a dj ud i cate d. A ccor dingly, w e vaca te th e con tem p t orde r.

I . B a c kg r o und I n dis tr i c t-c ou rtl i ti gat i on be tw een the S EC and H yat t J o h n s o n C a p i t a l, l a wy e r s f o r th e S E C i ss ue d t wo subpoenas d u c e s t e c u m to no npa r ti es Br ian H ol l na g ela nd BC IA i rcr aft Leas i ng ( col l ecti vel y “ BC I ”)
. T h e subpoenas we r e i s s ue d i n J un e a nd Augus t2 0 0 8 a nd r e qu e s t e d a l ar g e numbero fdo cument s r el at ed to the unde r l y i ng l i ti g at i o n. BCIr ec ei ve d a t wo-w ee ke xt en si o n fr o m the SEC fo r the J une subpoena and r es p ond ed i n J ulyby pr o du c i ngn ume r o us d ocume nt s o n a CD
. T he S EC though t th e pr oducti on was defi ci ent b ecause so m e o f the e -m ails di d not co ntai n thei r or i gi nal at tachm ents or h ad at ta c h m en ts th at w er e no t pr od u c ed in t h eir na ti ve f o r m at
. Twi ce the S EC req ue st ed th atBCIc ur e th e d efi cienc ie s ; each tim e B C Iattem p ted to do so, the SE C ’s l aw yer s f ound p ro bl em s with the producti on. A fter r ec ei vi ngthe Aug us t su bpo en a, BCIa g ain a sk ed th e SEC fo r tw o extr a weeks to respond. The S EC r ej ecte d th i s r equest on Au gust 20, 20 08

— th e d u e d a t e s e ti n t he su bpo en a

—ba se d o n the c o nt i nui ngdi spu te o ve r the adequacy o fBC I ’ s co m pli ance w i th the J une subpoena. On the after noo n o fA ugust 2 8, 20 08

— the Thursday bef or e Labo r Day

— th e S EC fi l ed a m oti o n i n the dist ri ct c ourtse eki ng the i ssuanc e ofa rul e t o show cause wh y B C I s h o u l d n o t b e h e l d i n c o n t e mp t f o r n o n c o mpl i an ce wi ththe s ubpo en as . The no ti ce a ccom pan y i ngN o. 08

- 4013 5 th e m o ti o n t o l d BCIthat t he S EC woul d a ppea r i n the di st r i ctc o ur t at9 : 30 a . m . o n S ept embe r 3 , 2 008 ( th e W edn es daya fte r Labo r Da y ) , a nd wou l d “ th ena nd ther e pr ese nt, and see k a hear in g date r ega rdi ng” i ts m otio n f orthe i ssuance ofa rul e t o show cause. The m ot i o n a s k e d t h e c o u r tt o : ( 1 ) o r d e r B C It o “ fu l l y a n d c o mple tel y r espond to the SEC’s subpoenas” ; and ( 2) o rder “BC I and Hol l nagel to show ca use w hy they sh ou ld not be he l d i n conte m p t ofco urt. ” In a m em or andu m fi l ed i n s u p p o r to fth e mo t i o n, th e S E C r e q u e s t e d th e s a me r e l i e f

. I n th e l a s tp a r a g r a p h o fth e me mor an dum , h o wev er, the S EC a lso as k ed th e co ur t to “ fi nd BCIa nd H ol l nageli n conte m pt” and award att or ney’ s fees . BC Idi d not a pp ear a t the S eptem ber3 hear i ng. W hen the c a s e wa s c a l l e d a nd BCI ’ s no na pp e a r a nc e w as no t e d, the SE C ’s l aw yer s t ol d the j ud ge: “[ W ] e’ re her e t oday on o ur c o nt empt mot i o n a g ains t BCI Ai r cr aft Lea singa nd H oll nagelf ornotco m ply i ng with thre e [ si c] subpoenas i s s u e d t o th e m. ” T h e y a s k e d th e c o u r tt o o r d e r th a t“ B CI and H ol l nagelm ake a com ple te and properp ro du cti on” by no o n o n S ept embe r 5. T he y a l so a sk ed th e co ur t to “ fi nd BCI a nd Hol l na g eli n c o nt em pt f o r f ai l i ngt o r es po nd to these subpoenas co m ple tel y” and propose d a fi n e o f $1, 000 per day i fcom ple te producti on was notm ade by th e Sep tem ber 5 d ead li ne . Fi na ll y, th ey a s k e d the cou rt f oran a w ar d ofat torney’ s fees . The co urt or al l y e nter ed th es e o r der s as r eque sted. A t th e S EC’ s su g g es ti o n, the j ud ge or dered the m at te r “co nti nued ” t o Se ptem ber10 to “re p or t b ac k on w h er e w e a re .” Lat e r th a ts a me d a y , th e c o u r ti s s u e d t wo c o n fl i ct i ng w ri tte n or ders pu rp or ti ng to r eco rd wh at tr anspi re d6 N o. 08

- 4013 d uring the m orning hearing

. Th e fi rst, a su m m ary m i nute o rder, st ate d: “H ear i ng hel d and conti nue d to 9/ 10/2008 at9: 00 a. m . Res ponse due 9/5/2008 by noo n to pla i nti ff’ s m oti on f oro rderto sho w cause ag ai nst BC I
. . . . ” BC I say s that i t und er sto od thi s as a n ord er di r ec tingi t to s ubmi t a “s ho w ca use” r es po ns e o n the co nt empt i ss ue by th e S ept embe r 5 dea dl i ne and s et ting a he ar i ngon th e m at te r a t 9 a. m . o n S ept embe r 1 0. The se co nd o r der, pr epa r ed bythe SEC a nd i ss ue d a fte r the mi nu t e o r de r, wa s qui t e di ff e r e nt
. I tma de fi nd i ng s a dj udi ca tingBCIi n c o nt empt and o r der ed “ful l, pr o per, a nd com ple te” co m pli ance with the subpoenas by noon o n Se ptem ber5. T h e o rderal so i m posed a fi ne o f$1 , 000 f o r e ve r y da y o fno nc o m pl i an ce the r ea fte r, “ i nc l udi ng w eek ends and hol i days. ” F i nal l y, thi s s eco nd o rder aw ar ded the SE C its “co sts and re aso nabl e a tto rney f ees ” a nd di re cted the ag en c y to fi l e a n appropri ate fee pet i ti o n. Th e n e xtda y , S e pt e mbe r4 , the di s t ri ctc o ur te nt e r e d a d ocket entry striking th e fi rst o f t h e w ritten ord ers enter ed on S eptem ber3. BC Ii m m ed i ate l y m ove d to v a c a t e the S e pt e mbe r 3 o r de r fi nd i ng i t i n c o nt e mp t. BCI ar gu ed fi rs t that the co ntem pt m oti on was notpro pe rly bef or e the co urt on S ep tem ber3. Based o n the conte nts o fthe no ti ce a cc o m pan y i ngthe S EC’ s Au gu st 28 m o ti o n, BCI ar g ue d tha t th e S ept embe r 3 he ar i ngwas e ss en ti al l y o nl y a sche du l i ng hea ri ng. BC Ial so att em pted to e xp l a i n why i t wa s no t i n c o nt e mpt
. On S e pt e m ber 5, i n acco rdance w i th the te rm s o fthe by- now st ri cken m i nute o rder, B CI fi l ed a res ponse to the SEC ’ s m oti on f or a r ule to sho w cause . The co urt str uck thi s re sp on se asN o. 08

- 4013 7

m oo t. A l so on S eptem ber5, B C Ise nt ano therpro du cti on o fs ubpo en ae d do cument s to the SEC. The S EC co nsi der ed th i s l at es t at te m pt a t co m pl i an ce de fi ci en t. Dur i ng the c ours e o fthe next week, BC Ise nt two addit ional pr o duct i o ns at te m pting to addr es s th e as se r te d defi ci en ci es. On Septem ber9, the dist ri ct c ourtdenied BC I ’ s m oti on to v ac at e th e co nt empt o r der

. The S ept embe r 1 0 he ar i ng was c o nt i nue d t o S ept embe r 1 7, a nd on th at dat e th e j udg e addr es se d whethe r BCIha d c o m pl i ed wi ththe su bpo en as as or der ed. Co nc l udi ngtha t BCI was making a r ea so nabl e eff o r t to c o m pl y , the j ud ge con tinue d the hear i ng to Octobe r 1. BC Im ade y et anothe r producti on of docu m en ts seve ral d ays later. Fi na ll y , at the Oc tober 1 h ea rin g, th e jud ge fou n d th at B C I ha d su b st an t i a lly com pli ed w i th the S eptem ber3 or der t o com pel p ro du cti o n a nd the r efo r e r es ci nde d the $ 1, 00 0- per - dayfine. T he cou rt l eft th e rest of th e con tem p t ord er in p lace, how ever, an d r equi r ed BCI t o pa y t he S EC’ s at to r ne y ’ s f ee s. The SEC subm i tte d a bi l l f orm or e th an $3 3, 000 i n fees , w hi ch the d ist ri ct c ourtr educed to j ust under $6, 000. BCIa pp e a l e d.

I I . Discussi on Civi l co ntem pt i s “ a uni que c ivil sancti on be cause i ts ai m i s bo th co er ci ve and com pensato ry . ” Pri m a Te k II , LL C v. Kl e rk’s Pl as t i cIn du s . , B. V. , 525 F .3 d 5 33, 542 ( 7th Cir. 20 08 )
. The c o er ci ve a spe ct of the r emedy i s no t ati ss ue here

. To pr evai l o n a r equest f ora conte m pt fi nd i ng,8 N o. 08

- 4013 th e m o vi ngpa r tymuste st ab l ish byc l ea r a nd c o nv i nc i ng ev i den ce tha t ( 1) a co ur t o r derse ts f o r tha n un ambi g uo us c o mma n d ; ( 2 ) th e al l e g e d c o n t e mn o r v i o l a t e d th a tc o mm an d; ( 3) th e vi o l at i o n was si g ni fi ca nt, m ea ni ng the al l ege d contem nor di d not s ubstanti al l y c om plywith the o rder ; and ( 4) the al l ege d contem nor f ai l ed to m ake a re as on ab le a n d d ilige n t e ffor t t o c om p ly. Id. BC I ar gues th at a subpoena d u c e s t e c u m i ssued by an at to rn ey i s no t a co urt or der a nd ther ef or e the di str i ct co ur t co ul d no t ho l d BCIi n c o nt em p t si m pl y f o r f ai l i ng to com plywith the S EC ’ s s ubpoenas. T h e fi rs t e l em ent o f conte m pt r equi re s the m ovi ng partyto “ ‘ poi nt to a decree f ro m the cour t which s et[ s] f or th i n speci fi c detai l an un e q u i v o c a l c o mma n d w h i c h th e p a r t y i n c o n t e mpt vi ol ate d.’ ” Stotl er& C o . v. Able, 87 0 F
. 2d 1158 , 11 63 ( 7th Ci r . 1 9 8 9 ) ( qu o ti ng F errell v. Pier ce, 78 5 F
. 2d 1372 , 13 78 ( 7th Ci r. 19 86) )
. BC Ico ntends thatthi s pre re quis i te was no t m ethe r e be ca us e th e su bpo en as i ss ue d b y the SEC’s att or neys w er e no t co urt or ders. BC Icl ai m s that bef or e a dj ud i cati ng the co ntem pt m oti on, t h e d i str i ct cour t fi rs t had to i ssue an o rd erco m pel l i ng co m pli ance w i th the S EC ’ s s ubpoenas. T h is a r g u m en t ru n s in to d ifficu lty u n d er ce rt ain p ro visions in th e proc ed ura l rules ap p li cab le to d iscovery subpoenas. Rule 45 ( a) o fthe Feder alRule s o fC i vi l Pro

cedure expla in s that a ci vi l subpoena m ay i ssue i n one of two way s. The c l er ko fthe c o ur t m ayi ssue a su bpo en a “si gned but othe rwis e i n bl ank, ” which i s then com ple ted b y t h e re q u es tin g p ar ty . F ED . R. C IV . P. 45(a)(3)
. A l ter nati ve l y , a n a tt o r ne y may al so “ i ss ue a nd s i g n a s ubpo en aN o. 08

- 4013 9

as an offi cer of

. . . a cour t i n w hi ch the att or ne y is a u thori zed to p ra c tic e; or. . . a cour t f ora dist ri ct where a depo si ti o n i s to b e taken or pr o duct i o n t o b e m ade , i fthe attorn ey is au th orized to p ractice in t he cou rt w he re the a cti on i s pending

. ” Id. Rule 45( e) s p ea ks dir ectl y t o the power ofthe dist ri ct cour t to hol d the re ci pie nt of a subpoena in contem pt: “The i ssui ng co urt m ay h old in co ntem pt a per son w ho, havi ng be en se rv ed, f ai l s without a dequ ate excuse to obe y the subpoena. ” F ED . R. C IV . P. 4 5 ( e )
. T he c o nt e mpt provi si on i n subsec ti on ( e) does n ot dist i ngui sh be tw een subpo en as i ss ue d wi ths o m e co ur t i nv o l ve m en t

— thos e i ss ue d i n b l an kb y the c o ur t cl er k a nd c o m pl et ed bythe p ar ty w h o req u es ts it

— an d tho se i ss ue d wi th o uta ny cour t i nvol vem ent a t a l l by an a tto rneyas an offi cero f th e cou rt. I ns tead , sub sect ion (e) of R ule 45 broad ly refers to the c o nt e mptp o we r o fthe “ i s s ui ngc o ur t, ” wh i ch i m pli es that al l di sco very s ubpoenas a re co ntem ptsan cti o nabl e o r der s o fthe c o ur t whethe r i ss ue d i n b l an k by the c l er k o r by an at torney a s a n offi cero fthe cour t. T h e A dvis ory Com m i tte e Notes confi rm thi s r eadi ng o f th e r ul e. The c o m m en ta r y e xplains tha t “[ a] l th o ug h the subpoena i s i n a s en se t h e co m m and ofthe att or ney w ho com p letes the form , d efi an ce of a su bp oen a is ne verthel ess an a ct in defi ance o fa cour t or d er and exposes the defi ant witness to conte m pt sanct i ons. ” F ED . R. C IV . P. 45 ( a) ( 2) adv i so r y co m m i tt ee ’ s no te ( 19 91 a m en d. )
. Nothi ng i n Rule 45 o r th e a ccom panyi ng co m m entar y purpor ts to l i m i t the conte m pt pow er to subpoenas i ssue d w i th m ore direct d istri ct cou rt i nv olvem en t or to requ ire10 N o. 08

- 4013 an i nter veni ng co urt or de r w h en the subpoena i s i ssued by an at torney. There i s l i m i ted appel l ate casel aw on thi s is sue, bu t that w h ich ex ist s s u p p or ts th is u n d er st an d in g. SeePennw alt C orp. v. D urand-Wayland, Inc. , 70 8 F
. 2d 492, 49 4 n. 5 ( 9th C ir. 1983) (“a sub p oen a d uc es tec u m is itsel f a cou rt or der, and noncom pli ance m ay w ar ra nt c onte m pt sancti ons, ” but noti ng that w hen the pers on subpoenae d obj ects i n w ri ti ng, “the party see ki ng disc ove rym u st o bt ain a c o ur t o r derdi r ec tingc o m pl i an ce ” be f o r e co ntem p t w illbe available) ; Fis he rv. M ar ub e niCot t on Corp
. , 52 6 F
. 2d 13 38 , 1 34 1- 42 ( 8th Ci r . 1 97 5) ( exp la i ni ngthe d isti nc tio n b e t w een Ru le 37 sanc tions for f ail ure of a partyto co m plywith a di sco ver y r equest an d R ule 45 sa nc ti o ns f o r fail ure o fa no npa r tyt o c o m pl y wi tha di sc o ve r y s ubpo en a)
. Acco r di ng l y , we r ej ec t BCI ’ s ar g um ent that a subpoena i ss u ed u nd erRule 45 ( a) ( 3) by an attorn ey as a n o fficer ofthe cou rt i s not itself a cou rt o r de r s ubj e c tt o c o nt e mpts a nc t i o ns i fdi s o b e y e d. I t doe s no t f ol l ow, how eve r, that a c onte m pt m oti on f ordi sob edi ence ofa nonp ar ty subpoena s houl d be tr eat ed i n exact l y the sa m e way as a conte m pt m oti on f o r v i o l a t i o n o fa n o th e r ki n d o fc o u r to r d e r . A s th e c o mm entar y t o Rule 45( e) expl ai ns: I n at l ea sts o m e ci r cumst an ce s, a no n- par tymight be gui l tyofco nt empt f o r re fus i ngto ob eya s ubpo en a eve n though the s u b p oena m ani f est l y o ver re aches the a pp ro pri ate l i m i ts ofthe subpoen a p ower. But, b ec au se th e c o m m an d of th e s u b p oe n a is n ot inN o. 08

- 4013 11 f a c to ne u t t e r e d b y a j ud i c i a l o ffi c e r, c o nt e mpt shoul d be ve ryspar i ngl y a pp l i ed w hen the non- party w i tness has been ove rbo rne by a par ty orat torney. F ED . R. C IV . P. 45( e) advi sor y c om m i tte e’ s no te ( 1991 amend. ) ( ci ta ti on om i tt ed)

. Rul e 45 a l so c o nt ains i m port ant pr ovi si ons to prot ect the r eci pie nt o fa subp oen a from un d ue bu rd en or e xp en se, invas ion of a p riv ileg e, or d isc l os u re of p ro te c te d m at er ial. See F ED . R. C IV . P. 45(c). F o r ex ampl e, unde r Rul e 45 ( c) , i nt erve ni ng co urt i nv o l ve m en t i s r equi r ed pr i o r t o i ni ti at i o n o fc o nte m pt pr o ce eding s i fthe reci pi en t o fthe s ubpo en a ser ves a wri tte n ob j ec tio n on the par ty orat torney des i gn at ed in t h e s u b p oe n a. F ED . R. C IV . P. 4 5 ( c ) ( 2 ) ( B)
. On re cei pt ofsuch a n obj ecti on, t h e p arty ser vi ng the subp oe n a “ m ay m ov e t h e is su in g c ou rtfor a n ord er co m p ell i ng producti on or i nspecti on, ” and the producti on o r inspe ct i o n “ m ayb e r equi r ed o nl y a s di r ec te d i n the or der. ” F ED . R. C IV . P. 45( c) ( 2) ( B)( i ) ( i i )
. A l so, R u le 45( c) ( 3) describes the c i rcum sta nc es und erwh i ch the cour t m ust or m ay qu as h or m od ify a su b p oe n a. See F ED . R. C IV . P. 45( c) ( 3)
. These provi si ons sugge st at a m i ni m um that con tem p t m otions for nonc om p li an ce w ith a d iscovery su b p oe na sho uld be ente rt ai ned w i th speci alat tenti on to the pr oce du ra l and subst anti ve rights o fthe nonparty w i tness
. H er e, BC I did not ser ve a w ri tte n obj ecti on or m ove to qu ash or m od ify the su bp oen as. Th e SE C therefore w as not required to fi r st o bt ain a co ur t o rd er com pel l i ng co mpl i a n c e wi th i t s s u b p o e n a s b e f o r e i n i t i a t i n gc o nte m pt pr o ce eding s. As a ge ner almatt er, ho wev er, the12 N o. 08

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m or e pr ud ent pr acti ce forthe c ou rt is to i ssue such an o rd er be for e e n te rt ain in g a m ot ion for c on te m p t. See 9 A C HA RLES A L A N W RIG HT & A RTHU R R. M IL LER, F E DE RAL P RACT I CE AN D P RO CE D URE § 2465 ( 3d ed. 20 08) ( “ Th e di s t ri ct j ud g e n o r mal l y wi l l p r e f a c e a c o nt e mpt ci tat i on with an o rderdi re c ting ei therco m pli ance wi ththe s ubpo en a o r a s ho wi ngo fa n exc us e f o r the no nc o m pl i an ce . ”)
. The pr o bl em he r e i s no t th atthe SE C cou ld not m ove for con tem p t w ithou t a n int erveni ng co urt or der com pel l i ng co m pli ance; the probl em i s that the not i ce a n d m oti on di d not pro vi de adequa te no ti ce tha t th e S EC woul d a sk for a fi ndi ng of contem p t at the i nitial he aring on th e m otion for a rul e t o show cause. Du e p r o c e s s r e qu i r e s tha ta p e r s o n f aci ngc o nt e mpt sancti ons be g i ven a dequ ate not i ce an d f ai r opportunity to b e he ar d in c ivil c on te m p t p ro c ee d in gs . Se e, e . g. , A utote ch Tec hs
. LP v. Int egral Res e ar ch & D e v. Corp. , 49 9 F
. 3d 737, 74 6- 47 ( 7th Ci r. 20 07)
. Thi s m in i m al l y incl ud es a r equi re m en t tha t “no tice be given of the tim e and p lac e of he arin g” on th e p ro p rie ty of a c o n t e m p t o rd er . A m . Fletch er M o rtg. C o . v. B a ss , 6 88 F. 2d 513, 51 9 ( 7th Ci r. 19 82) ; 9A C HA RLES A LA N W RI GHT & A RTHU R R. M I L L ER, F ED ERAL P RACT I CE AN D P RO CE D URE § 2 46 5 ( 3d ed. 2 00 8) ( “[ D] ue proce ss does re quir e that any ci vi l conte m nor be given cer tai n basi c pro cedura l p ro tect i ons bef or e be i ng subj ect to any s ancti on: adequate noti ce a nd an o pp or tuni ty to b e he ar d a t a m ea ni ng ful t i m e an d i n a mean i ng ful m an n er .”). In t h i s c on te x t, “t h e fo c u s m u st be on n ot ify i ngthe a l l eg ed co nt emno r, r athe r tha n o n theN o. 08

- 4013 13 f or m al i ti es ofnot i fi cati on pro cedures. ” A uto t e ch Tech s. , 499 F. 3d at 748. I ti s u nd i s pu t e d tha t BCIwa s o n no t i c e tha tthe S EC w as charg i ng i t with co ntum aci ous no ncom pli ance wi ththe s ubpo en as ; tha t m uchwas clear f r o m the SE C ’s m ot ion . B C I arg u es m o r e p ar tic u lar ly th at it d id n ot ha ve su ffici en t notice th at th e d istri ct cou rt w oul d be as ke d to deci de w hethera conte m pt or der s ho ul d b e i s s ue d att heSept e m b e r3 he ar i ng . Base d o n the speci fi c co ntents of the not i ce a nd m oti on, we agr ee. N o do ub ti twa s u nwi s e f o r BC It o c o ns i de r i t s p r e s e nce at th e Sep tem ber 3 he aring to be op tional. Bu t the SEC ’s use o fthe proce du ra l devi ce o fa “m ot ion fora rul e t o show ca u se ” gave BCI noti ce only th at th e c ou rtw ou ld b e a s k ed to iss u e a sh ow -c au se ord er on th at d at e, n ot th ati t woul d im m edi at el y t ak e up the mer i ts o fthe c o ntem pt i ssue. T h e m ot ion f ora rul e t o show cause was an un ne cess ary ext ra l aye r o f p rocess , bu t its use he re eff ecti vel y pos tpon ed the adj ud i cati on o fthe al l ege d c o n t e mptu n t i l a ft e r th e c o u r ti s s u e d th e r e q u e s t e d s h o wcau se ord er. Show-ca use m oti ons hi sto ri cal l y s er ved two purposes : F i r st, the mot i o n was a way t o b r i ngmatt er s to the dist ri ct c ourtm or e s pee d ily than o therm etho ds ofpre sentm ent pri or to the Feder al Rules of Civil P ro cedure. See 5 C HA RLES A LA N W RI GHT & A RTHU R R. M IL LER, F ED ERAL P RACT I CE AN D P RO CE D URE § 1195 (3d ed

. 2004). Se cond, the gr anti ng o fa sh ow-cause m oti on pro vi ded noti ce t o the no nm ovi ng p ar ty o fwh at he m ust do to avo i d som e o therco u rt act i on, such a s the i ssuance ofan14 N o. 08

- 4013 inj u n c tio n or w rit
. Id. A sh ow - c a u se m ot ion es se n tia lly as k s a d i s t r i c t c o u r t t o i s s u e a n o r d e r r e q u i r i ng t he non m ovan t to s ho w the c o ur t bya c er ta i n da te why the c o ur ts ho ul d n o tt a k e s o me o the r a c t i on

— he r e, the i m posi ti on o fa conte m pt sanct i on. I n other w ord s, the s how

- cause or der s ati sfi es the due- proce ss noti ce r equir em ent b y g i vi ng the nonm ovingparty no ti ce o f hi s o pp ortuni ty to re spond bef or e the subst anti ve re q u es t fo r re lief is e n te rt ain ed

. See M er ce r v . M it chel l , 908 F.2d 763, 766-68 (11th Cir. 1990). The F ede r alRul es of Ci vi l Pr o ce dur e dec l i ne d t o i ncorp orate th is burd en som e proc ed ure i nt o the m od ern pr o ce dur alc o de. I ns te ad, a Rul e 6( c) no ti ce o fhe ar i ng an d a Rul e 7 ( b) mot i o n s ta tingthe g r o unds f o r the re l i efand speci fyi ng t h e a ctualr el i efso ught suffi ce t o provi de due-pro cess not i ce t o the no nm ovi ng par ty p riorto entry of a court ord er. F ED . R. C IV . P. 7(b). U nd erRule 6( c) ( 1) ( C), the dist ri ct c ourtm ay, ex par te and fo r cause, sho rt en the n orm alnot i ce per i od. J ud ge C lark

— one ofthe prin c ip aldrafter s o fthe Feder alRule s of C iv il P roced ure

— l ong ago expl ained the pro cedural shi ft a w ay f ro m sho w - cause or ders: A n unn eces sar y a pp ear ance o fi rr egul ar i ty w as gi ven the pro ceedi ngs b el ow by the f act that f or m al or ders to show cause, si gned by a j ud ge, were proc u re d , w h er ea s s im p l e n ot ice s o f m ot ion s w ou ld h av e b ee n p re fer ab le. T h e n ew Fe d er al R u les of C ivil Pr o ce dur e at te m pt t o l i m i t to a min i m um the se unnecess ar y f or m al i ti es w hi ch tak e up t h e t i m e o f j ud ges and add nothi ng o fval ue to the proce edi ngs.N o. 08

- 4013 15 H er e the o rderto sho w cause o n the m oti on to quash w as si m ply a so m ew hat per em ptor y no ti ce o f m oti on , a s the j ud ge bel ow p oi nted out. S i nce s uch or ders to show cause s er ve onl y t o c on fuse, j ud ges m igh t w ell d e c l i n e t o s ign th em ex c ep t w h en rea lly re qu ire d by orj usti fi ed und erbi nd i ng r ule s o fpro cedure. A pplicati on of Tracy, 106 F.2d 96 , 98 (2 d C ir. 19 39 ) (C lar k, J., c on c u rrin g). A c c or d in gly , th e F ed er al R u les of C ivil Proc ed ure h av e s im p lified m ot ion p ra c tic e a n d larg ely elim in at ed th e n e e d to se ek sh ow -c au se ord er s. C ivil co nt empt pr o ce edings m ayb e i ni ti at ed byno ti ce a nd m o ti o n. Despit e i ts obs ol esce nce, l i ti gants re gul ar l y a sk cour ts to i ssue show-cause o rder s i n ci vi l c on tem pt proceed in g s , p erha p s beca us e the fed eral r ules for cr i m i nal co nt empt pr o vi de th ata c o ur t m us t g iv e no ti ce o fc o nte m p t p ro c ee d in gs “in op en co u rt, i n a n o r d e r t o s how c a use, o r i n an ar re st or der. ” See F ED . R. C RIM . P. 42 ( a) ( 1) ( em phasi s a dd ed). Rega rdl ess o fthe m oti vati on, wh en a par ty i ni ti at es a ci vi l co ntem pt proc eedi ng vi a a m o ti o n f o r a r ul e to s ho w ca us e, we see no r ea so n why i t sh o ul d no t be g i ve n i ts hi storicala nd l i te r almean i ng f o r no ti ce pur po se s: tha t th e m o vi ng pa r tyi s as k i ng only f ora prel i m i naryo rderdi re cti ng t he al l ege d conte m nor to sho w cause w hy the co urt shoul d not fi nd h i m i n c o nt e mpt
. Di s t r i c tc o urts i n thi s c i r c ui ta ppar e nt l y r e g ul a r l y t r e a ts ho w- c a us e mo t i o ns a s di s ti nct fro m ot h er m ot ion s u n d er th e F ed er al R u les of C ivil P ro c ed u re . Se e, e . g. , Som m er fi el d v. Ci ty of

Chi cago , 2 5 2 F
. R. D.16 N o. 08

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S ee al so C om m odity F u tures Trading C om m ’ n v. Velazqu ez , N o. 04 1 C 58 53 , 20 07W L 16 73 21 8, at* 2 ( N
. D. I l l . Jun e 6, 20 07 ) ( “[ T] he M oti on to I ss ue a Ru le to Show Cau se w hy M r. V el azquez s ho ul d not b e h e l d i n c i vi l c on t e m pt
. . . do e s n ota ppe a r t o be a d ispo sitive m otio n. Th e id ea o f a sho w cau se m otio n is to ho l d a h ea ri ng, atwhi c h the f ac t fi nder wil l ul t i m at ely eva l uat e whethe r a fi ndi ng o f co nte m pt
. . . i s appr opr i at e on th e e v id en ce an d fac ts p re se n te d .”); B ds. of Trs. o f the B ri cklayers L ocal 74 v. Vo rkapic , N o . 01 C 10 4 8 , 20 0 1 W L 64 9 5 0 1 , at *1 n .1 (N .D
. Ill. J u ne 8, 2001 ) (“W e im p lied ly g r a n t e d th e p lain tiffs’ [ show

- cause ] m oti on prior t o condu ct ing the evidenti ary he ar i ng, whic h al l par t i es under s t ood t o be a he arin g on w hether o r not the def endan ts w ere in viol ati on of the prelim in a ry inju n ct io n .”); C ent
. St at es , Se. & Sw
. A re as H ea l t h & Wel f are & P ension Fu n ds v. Tran scon Lines , N o. 9 0 C 1 8 5 3 , 1993 U .S. D ist . L E X IS 12 4 2 7(N .D . Ill. S ep t. 7, 19 9 3 ). 407, 41 3 ( N
. D. I l l

. 20 08) ( “The purpose of[a show-cause ] m oti on i s t o persuade the co urt that ther e s hou ld b e a hear i ng atwh ich the f actfi nd erwil l ul ti m ate l y e val uate whether a fi ndi ngo fc o nt empt i s appr o pr i at e o n the evid en ce p resen ted

. ”). 1 I n cer tai n l i m i ted cir cum sta nces, a dist ri ct c ourtm ay tr eata s ho w- c a us e mo t i o n a s a mo t i o n f o r a n o r de r o n the m er its ofthe al l ege d contem pt w here doi ng so w oul d not ca u se prej ud i ce

— that i s, wh en i t would not vi ol ate the al l ege d contem nor ’ s r i ght t o noti ce and an op p or tu n ity to b e h ea rd

. See 5 W RI GHT & M IL LER, F ED ERAL P RACT I CE AN D P RO CE D URE § 1195 ( 3d ed. 20 04) ( “ [ A] requ est for a sh ow cau se ord er usu a ll y w il l be en terta in ed an d tr ea te d as a m ot ion , if doing so will not prej udiceN o. 08

- 4013 17

S ee also A m . F am ily M u t. Ins. v . R oth , N o . 05 C 3 8 3 9 , 2 0 0 7WL 2 23 77 33 5, at *14 (N .D
. Ill. A u g . 16 , 20 07 ) (treating sho w -cau se m ot i on as a m ot i on on t he m er i t s ofc ont em ptbe c aus e “de f en dant s ha ve had a m pl e not i c e ofthe c l ai m s ag ai ns tthe m an d have fully re s ponde d t o [ m ovan t ] ’ s the or i es , ar gum en t s , an d s uppor t i ng e vi denc e. Henc e, the re i s no ne c es s i t y for di re c t i ng [a sh o w -ca u se o rd er ] .
. . .”); Vo rk a p ic, 2 0 0 1 W L 6 4 9 5 0 1 , a t *1 n .1 ( “ Al t ho ug h t he pa r t i e s ’ s ub s e q ue ntbr i e f s c on t i nu e t o be s t yl ed a s b riefs i n s uppor tor oppos i t i on t o the M ot i on f or I s s uan c e ofanOrder f or Rul e t o S how C aus e, the y both a rg ue the ulti m a te q u es ti on before the court

— t hati s , whethe r t he defe nd ants are indeed in cont em p t, not w hether thi s court sh o u ld issu e a n o rd er for r u le to sh o w ca u se .”); O rion In d u s., Inc. v. A nte nna C o. , N o. 87 C 678 8, 199 1 W L 708 62 , at *4 (N .D
. Ill. A pr. 27, 1991) ( “[ E]ven a curso ry revie w ofthe brie f s fil ed and the c our tt ra ns c ri pt s i n thi s c as e, r eve al s thatfro m the m om ent the m oti on f or a r ule t o show caus e was fir stpres en t ed t o Ma g i s t r a t e J u dg e L e fk o w, th e p a r t i e s a r g u e d t he m otio n o n th e m erits, an d treate d the m otio n lik e it w as a m ot i on for an or der fi ndi ng the defen dant s i n c ont em ptof co u rt .”). the o pp o sing pa rties .” (em p h as is a d d ed )); Som m er fi el d, 252 F. R. D. at 414 ( “[ T]he m oti on m ay pro perl y b e view ed as a m otion for c ont em p t since it asked f or a fi nd i ng o fco ntem pt and a m i scel lan y of si gni fi cant s ancti on s, the Ci ty has r esponded, and the m att erhas been fu lly br iefe d by bo th sid es . Th u s, it is a s t h ou gh th e ru le to show cau se ha d been grante d

. ”). 2 The SEC argu es t hat BCI shoul d have be en aware that the S eptem ber3 h ea ringo n the show-cause m oti on was BC I’s only opportunity t o ar gue the m er i ts ofthe al l ege d18 N o. 08

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c o nt e mpt
. T he S EC no t e s th a ti th a d p r e v i o us l y fi l e d a s i mi l a r mo t i o n i n a d i ff e r e n tc a s e b e f o r e a d i f f er en t j udg e i n whi chBCIwas the n a na m ed d ef en dan t, a nd BCI r es po nde d t o thi s m o ti o n b y s p eci fi ca l l y a ddr es sing the p r o pr i e t y o fa c o nt e mpto r de r . We a r e n o tper s ua de d. BC I ’s pri orco nd uct i n a diff erent case befor e a di f f e r e nt j ud ge in a case in w hich i t w as a p a r t y doe s not d eterm i ne the a dequa cy of the no ti ce pr o vi ded i n thi s case . The noti ce at i ssue here tol d BCI that the re lief soughtatthe Se ptem ber 3 hear i ng would be l i m i ted to th e i ss ua nc e o ft wo o r der s: ( 1) a n o r derc o m p ell in g BC I ’ s co m pli ance wit h the subpoenas; and ( 2) an or d er req u irin g B C I to sh ow w h y it s h o u l d n o t be h eld i n conte m pt. The SEC al so rel i es on a para gr aph at the end ofi ts m em or andu m i n su p p ort o fi ts m oti on f ora rul e t o sh ow ca u se in w h ich it a sk ed th e c ou rtto find B C I i n conte m pt and aw ar d atto rney ’ s fees . These re quests f or su bs ta nt i ve r el i ef, ho wev er, wer e co nt ai ne d o nl y i n the s u p p o r t i n gme mo r a n d um

— not i n the noti ce a nd m oti on

— an d a ppea r ed o nl y o nc e an d the n onl y in the fi na l se nt en ce s o f th e m emor an dum

. The bul k of th e m em or andu m di scusse d th e g ro und s f orthe SEC’s re quest f oran o rderco m p el l i ng co m pli ance with the subpo en as an d i ts r eque st f o r an o r der to sh o w cau se. The m em or and u m w as not enough t o counter act the e ff ect ofthe SEC’s noti ce a nd m oti on, wh i ch put BC Io n noti ce that the S EC would se ek onl y pr oce du ra l r elie fat the S eptem ber3 hear i ng. Fin ally , th e SE C co n te n d s t h at an y fa ilu re of n ot ice d id not prej ud i ce BCI bec ause BC Ihas neversa id how actualN o. 08

- 4013 19 noti ce woul d have hel pe d it avo i d a co ntem pt fi nd i ng. Th e r e c o r d d o e s n o ts up po r tthi s a r g ume nt
. BC Ifi l e d a m o ti o n t o v acate the c o nt empt o r dero n S ept embe r 4 a nd a r g ue d tha t i t ha d b e e n mak i ng r e a s o nab l e e ff or ts to c om p ly w ith th e s u b p oe n as an d th er efo re w as n o t in conte m pt. But the dist ri ct j ud ge d eni ed the m oti on a s m oot beca us e he th ou gh t B C I h a d w aived i ts op p ortuni ty to conte st the c onte m pt fi nd i ng byfa iling to sh o w up a t the S ept embe r 3 he ar i ng . As we ha ve e xpla i ned, al though it w as i m prudent not to att end that hear i ng, the SEC’s noti ce a nd m oti on f ailed t o gi ve BCI no ti ce tha t the a gen cywoul d s ee ka c o nt empt r ul i ng at that ti m e. A s su c h , there was no wai vero n the m er i ts o fthe c o nt empt i ss ue . The di st r i ctc ou r t ne ve r c o ns i de r e d B C I ’ s c l a i m th a t i t h a d b e e n ma k i n g a g o o df ai the ff o r t to c o m pl y wi ththe s ubpo en as . Had i t do ne so , i t m igh t n ot h av e fo u n d B C I i n co n te m p t. See F ED . R. C IV . P. 4 5 ( e ) ( “ Th e i s s ui ngc o ur tma y h o l d in c o nt e mpt a per son w ho, havi ng be en se rv ed, f ai l s w ith o ut a dequa te excu se to o be y the s ubpo en a. ” ( emphas i s adde d))

. T re at in g t h e S E C ’ s p r o c e d u r a l m o t i o n fo r r u le t o s ho w c a us e a s a s ub s t a nt i v e mo t i o n f o r c o nt e mpt p rej u d ice d B C I. C ONTEMPT O RD ER V ACATED

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