In Re: Larisa Ivanovna Markus, 78 F.4th 554

Larisa Markus, a Russian national and former bank president, was subject to a Chapter 15 foreign insolvency recognition in the SDNY; her foreign liquidator (Rozhkov) sought discovery of alleged U.S. assets.
Rozhkov served a broad Rule 45 subpoena on “Larisa Markus, c/o Victor A. Worms” (Markus's U.S. counsel). Worms moved to quash and then produced no responsive documents.
The bankruptcy court denied the motion to quash, ordered Worms to contact Markus and her agents and produce non-privileged responsive documents (with extensions), and warned that sanctions could follow.
After continued noncompliance, the FR moved for sanctions; the bankruptcy court found Worms acted willfully/in bad faith, imposed civil contempt per diem sanctions ($1,000/day for 55 days = $55,000) and awarded $36,600 in attorneys’ fees under the court’s inherent authority.
The district court affirmed in part, vacated certain retroactive and appellate-fee awards and remanded for clarification; on further review the Second Circuit considered two main issues: (1) whether a bankruptcy court has inherent authority to impose civil contempt sanctions, and (2) whether Worms received adequate notice/due process.
The Second Circuit affirmed: bankruptcy courts possess inherent civil-contempt authority (subject to limits), the court properly found bad faith and satisfied the King factors, and Worms received sufficient notice and opportunity to be heard.

Issue	Plaintiff's Argument (Worms)	Defendant's Argument (Rozhkov/FR)	Held
Whether a bankruptcy court has inherent authority to impose civil contempt sanctions	Bankruptcy courts lack inherent authority to impose civil contempt; contempt power derives only from §105(a) or other statutory authority	Bankruptcy courts, like Article III courts, possess inherent sanctioning powers (Chambers, Sanchez); inherent power can support civil contempt where express authority is inadequate	Bankruptcy courts do have inherent authority to impose civil contempt sanctions, subject to statutory limits and due-process safeguards
Whether Worms received sufficient notice and opportunity to defend against sanctions (source & basis)	FR’s motion mainly cited Rules 37/45; brief citation to inherent power was insufficient notice of the source of sanctions	Extensive warnings, hearings, briefing, and appeals gave Worms clear notice of the conduct and the court’s reliance on inherent authority	Due process satisfied: Worms had ample notice of both the alleged conduct and the court’s invocation of inherent authority and had opportunities to be heard
Requirements for imposing inherent civil contempt on an attorney (bad faith and King factors)	Argued required findings not met	Bankruptcy court made explicit findings of willfulness/bad faith and the King factors were satisfied	Court affirmed that when sanctioning an attorney acting as advocate, bad faith (or willfulness) and King factors are required and were met here

Chambers v. NASCO, Inc., 501 U.S. 32 (1991) (federal courts possess inherent power to manage proceedings and sanction for contempt)
Shillitani v. United States, 384 U.S. 364 (1966) (courts have inherent power to enforce orders through civil contempt)
Rosellini v. U.S. Bankr. Ct. (In re Sanchez), 941 F.3d 625 (2d Cir. 2019) (bankruptcy courts possess inherent sanctioning powers like Article III courts)
Solow v. Kalikow (In re Kalikow), 602 F.3d 82 (2d Cir. 2010) (statutory contempt powers complement inherent powers; court must identify authority invoked)
King v. Allied Vision, Ltd., 65 F.3d 1051 (2d Cir. 1995) (elements required to establish civil contempt)
Gucci Am., Inc. v. Weixing Li, 768 F.3d 122 (2d Cir. 2014) (civil contempt must be coercive or compensatory, not punitive)
United States v. Seltzer, 227 F.3d 36 (2d Cir. 2000) (bad faith required when sanctioning attorney for conduct in role as advocate; different standard when misconduct not for client benefit)
Taggart v. Lorenzen, 139 S. Ct. 1795 (2019) (civil contempt requires no fair ground of doubt that order barred conduct)
Law v. Siegel, 571 U.S. 415 (2014) (bankruptcy courts remain constrained by the Bankruptcy Code)