Order Granting in Part and Denying in Part Debtors' Motion for Sanctions. The Debtors filed a motion for sanctions against an insurance company seeking compensatory and punitive damages relating to its failure to timely comply with the Bankruptcy Court’s order granting motion to substitute collateral, which required that “the insurance proceeds shall be paid forthwith to the trust account of the Debtors’ attorney.” The testimony of the Debtor and her attorney established that, despite numerous telephone calls and emails, the insurance company did not successfully deliver the proceeds to the intended party until 49 days after the substitution order was entered. The Debtors sought compensation for rental car charges incurred during that period as well as an unspecified amount of attorney’s fees. The Debtors also sought punitive damages of $5,000 to ensure the insurance company’s compliance with similar substitution orders.
     The Court applied the “fair ground of doubt” standard established in Taggart v. Lorenzen, 139 S. Ct. 1795, 1801 (2019) to determine whether the insurance company was in contempt of the substitution order. In applying that standard, the movant must demonstrate the following elements: (1) the party violated a definite and specific order of the court requiring him to perform or refrain from performing a particular act or acts; (2) the party did so with knowledge of the court’s order; and (3) there is no fair ground of doubt as to whether the order barred the party’s conduct — i.e., no objectively reasonable basis for concluding that the party’s conduct might be lawful. In re Carnegie, 621 B.R. 392, 410 (Bankr. M.D.N.C. 2020). The Court found the insurance company had violated a definite and specific order of the Court by not timely complying with the requirement to pay the insurance proceeds “forthwith” to the Debtors’ attorney’s trust account. The company had knowledge of the substitution order, as it was served with a copy by first-class mail as well as by email from the Debtors’ attorney. The Court found there was no fair ground of doubt that the insurance company’s actions were barred by the substitution order.
     Finding the insurance company in contempt, the Court awarded compensatory sanctions to the Debtors in the form of rental car charges and attorney’s fees incurred in ultimately bringing the company into compliance with the substitution order. The Court, however, declined to award the requested $5,000 in punitive damages. The Debtors did not claim that the requested amount was intended to compensate for any harm suffered, nor would such a punitive sanction coerce compliance with the Court’s orders, as the insurance company had already complied with the substitution order. The Debtors also did not come forward with any evidence that the company acted with the requisite degree of bad faith to warrant the imposition of punitive sanctions under the Court’s inherent power.