Court Opinion

ID: 29944
Source: CourtListenerOpinion
Date Created: 2010-04-25 09:47:49+00
Date Added: 2024-06-11T12:43:13.199695
License: Public Domain

IN THE UNITED STATES COURT OF APPEALS
                       FOR THE FIFTH CIRCUIT

                           No. 00-21159
                         Summary Calendar

                SECURITIES AND EXCHANGE COMMISSION,

                                                 Plaintiff-Appellee,

                               versus

                    KARL L. DAHLSTROM; ET AL.,

                                                         Defendants,

                        KARL L. DAHLSTROM,

                                              Defendant-Appellant.

                       --------------------
          Appeal from the United States District Court
               for the Southern District of Texas
                      USDC No. H-92-CV-2992
                       --------------------
                          January 6, 2003

Before JONES, DUHÉ, and CLEMENT, Circuit Judges.

PER CURIAM:1

     Karl L. Dahlstrom, federal prisoner #12894-054, appeals from

the district court’s order finding him in contempt for failing to

comply with a disgorgement order because he failed to execute the

conveyances necessary to effect the sale of two properties on which

judicial liens were created.   The liens were created in 1995 when

a 1993 consent judgment was abstracted and after the district court

     1
        Pursuant to 5TH CIR. R. 47.5, the court has determined
that this opinion should not be published and is not precedent
except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
ordered Dahlstrom to disgorge the amount agreed upon in the consent

judgment.

     Dahlstrom contends that his contempt was criminal, not civil,

in nature.    The contempt sanction in Dahlstrom’s case was designed

to force compliance with the disgorgement order for the benefit of

the SEC.    The sanction therefore was civil in nature.   Int’l Union,

United Mine Workers of America v. Bagwell, 512 U.S. 821, 827-28

(1994).

     Dahlstrom raises several arguments seeking to challenge the

consent judgment and the disgorgement order.         Both are final

orders.     Dillon v. State of Mississippi Military Dep’t, 23 F.3d

915, 917 (5th Cir. 1994); In re TransAmerican Natural Gas Corp., 978

F.2d 1409, 1414-15 (5th Cir. 1992).       Dahlstrom may not litigate

issues challenging the validity of those final orders pursuant to

the doctrine of res judicata.          St. Paul Mercury Ins. Co. v.

Williamson, 224 F.3d 425, 436 (5th Cir. 2000).      We may raise res

judicata sua sponte to affirm the district court.          Russell v.

Sunamerica Securities, Inc., 962 F.2d 1169, 1172 (5th Cir. 1992).

     Dahlstrom contends that the district court erred by finding

that the two subject properties were part of his individual estate.

According to Dahlstrom, the properties belonged to business trusts,

not to him.

                                   2
       The United States Tax Court determined that both business

trusts    (and    many    others      created    by    Dahlstrom)         “were    without

economic    substance      and     were      merely    a    scheme    to     evade      tax.”

Dahlstrom    v.   Commissioner,         61    T.C.M.       (CCH)   2876    (1991).         We

affirmed the Tax Court’s decision. Dahlstrom v. Commissioner, Nos.

91-5101 & 91-5105 (5th Cir. Jul. 29, 1993) (unpublished).                          Because

the trusts were illegitimate, the district court did not err by

disregarding them.

       Dahlstrom contends that the properties were shielded from

disgorgement because they were homestead properties under Texas

law.     Dahlstrom has not shown that the district court abused its

discretion by rejecting his homestead-exemption contention. SEC v.

Huffman, 996 F.2d 800, 803 (5th Cir. 1993).

       Dahlstrom contends that the SEC’s contempt motion was time-

barred under 28 U.S.C. § 2415(a), because the motion was filed more

than six years after the entry of the consent judgment, which he

argues created a debt for purposes of the Debt Collection Act.

Dahlstrom’s contention is without merit. A disgorgement obligation

created by a consent judgment is not a debt for purposes of the

Debt   Collection        Act.    Huffman,        996   F.2d    at     803.        The    Debt

Collection Act therefore does not apply.

       Dahlstrom finally contends that the district court deprived

him of due process by failing to allow him to be present at any

contempt    hearing      held    by    the    district       court.        Dahlstrom       is

                                             3
technically correct to argue that the district court erred by not

holding a hearing, as is required by FED. R. CIV. P. 43(a).   Sanders

v. Monsanto Co., 574 F.2d 198, 199-100 (5th Cir. 1978).

     However, the relevant fact of Dahlstrom’s noncompliance with

the disgorgement order was never at issue in the district court.

Dahlstrom was able to present his arguments effectively in his

pleading opposing the SEC’s show-cause motion.    Moreover, he does

not argue that the district court might have resolved any issues

differently, or that any evidence would have been presented, had a

hearing been held.   Finally, Dahlstrom already was in prison when

the district court found him in contempt.        The contempt order

therefore did not actually deprive him of his liberty.           The

district court’s error was harmless.   See King v. Gulf Oil Co., 581

F.2d 1184, 1187 (5th Cir. 1978).

     AFFIRMED.

                                   4