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Law Office Management

Nov. 2, 2006

Litigation: Held in Contempt, No Appeal

One lawyer's experience with debtor's prison. By Robert Selna

By Robert Selna
      Who says debtor's prison is a thing of the past? Just ask lawyer and Bay Area real estate developer John Kontrabecki. He spent 13 months at the federal correctional institution in Dublin after San Francisco federal bankruptcy Judge Dennis Montali found him in contempt for allegedly misleading the court about his ability to satisfy a $20 million debt to an investment bank.
      To get out of jail last year, Kontrabecki, 55, had to sell his $5 million home in San Francisco's Pacific Heights and many of his real estate holdings. So far, he's forked over $6 million in attorneys fees to lawyers representing the lender, Lehman Brothers; another $3.4 million in legal fees is pending.
      Kontrabecki has learned the hard way that there is no recognized right for parties to appeal a civil contempt sanction order. And a federal district court judge and a panel of three appellate court judges have all agreed that they have no power to second-guess Montali's contempt finding until Kontrabecki's case is concluded. "I think I've fallen in a black hole in the law," Kontrabecki observes. "It puts the judge in the position where he is the wronged party, the finder of fact, and the executioner."
      Kontrabecki's situation is rare, but not unique. For example, a global investment manager in New York who was sued by the Securities and Exchange Commission has been behind bars since 2000 for contempt after failing to hand over $14.9 million in assets. And in Pennsylvania, a millionaire has been languishing in jail for more than a decade on a contempt charge issued during a divorce proceeding.
      In San Francisco, Kontrabecki's case won't be resolved until the amount of any economic harm he's done to Lehman Brothers is determined. However, if Judge Montali decides he owes additional attorneys fees and doesn't pay them, Kontrabecki runs the risk of being thrown into jail once again.

Megan Kinneyn

Daily Journal Staff Writer

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