Aetna Casualty v. Rodco Autobody

• Court: Court of Appeals for the First Circuit
• Decided: June 10, 1997
• Docket: 95-1270
• Status: Published

Opinion

USCA1 Opinion

United States Court of Appeals

                                For the First Circuit

                                 ____________________



        No. 95-1270

                             AETNA CASUALTY & SURETY CO.



                                 Plaintiff, Appellee,

                                          v.



                                   JACK MARKARIAN,



                                Defendant, Appellant.



                                 ____________________



                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                          FOR THE DISTRICT OF MASSACHUSETTS



                     [Hon. William G. Young, U.S. District Judge]
                                             ___________________

                                 ____________________



                                        Before



                           Stahl and Lynch, Circuit Judges,
                                            ______________

                            and O'Toole, District Judge.*
                                         ______________

                                 ____________________



            Kenneth  R. Berman, with whom Rhonda B. Parker and Sherin & Lodgen
            __________________            ________________     _______________

        LLP were on brief, for appellant.
        ___



            David S.  Douglas, with  whom Howard  S. Veisz,  Gregg Kanter  and
            _________________             ________________   ____________

        Kornstein, Veisz &  Wexler LLP,  and Glenda Ganem  and McGovern,  Hug,
        ______________________________       ____________      _______________

        Welch & Ganem LLP were on brief, for appellee.
        _________________


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                                     June 4, 1997

                                 ____________________


____________________



        *Of the District of Massachusetts, sitting by designation.



LYNCH, Circuit Judge.  Jack Markarian, against whom
                      LYNCH, Circuit Judge.
                             _____________



            appellee  Aetna  Casualty  and  Surety Company  has  a  civil



            judgment,  appeals from  the  entry of  a  writ of  ne  exeat
                                                                _________



            against  him.   The  writ, which  is  essentially a  form  of



            equitable  bail,  was issued  ex  parte  in the  District  of



            Massachusetts in  February 1995.  It  prohibits Markarian, an



            American citizen who is employed and lives with his family in



            Massachusetts, from leaving the state or removing  any of his



            assets from  the state without  the court's permission.   The



            writ required Markarian to surrender his passport to a United



            States Marshal, and  violation of its terms is  punishable by



            detention in a federal facility.



                      Markarian    raises     federal    statutory    and



            constitutional objections  to the issuance  of the writ.   We



            vacate the writ  without reaching the constitutional  issues,



            although  they  are not  frivolous.   The  writ of  ne exeat,
                                                                ________



            governed by Fed. R. Civ.  P. 69 and Mass. R. Civ.  P. 4.3(c),



            is  not available as a  tool in an  ordinary civil collection



            action like this.   It  may only issue  in furtherance of  "a



            judgment  or order requiring  the performance of  an act, the



            neglect or  refusal to perform  which would be  punishable by



            the court as a contempt."  Mass. R. Civ. P. 4.3(c).   The All



            Writs  Act, 28  U.S.C.    1651, does  not  negate this  state



            requirement for issuance of the writ.



                                          I.



The facts of the underlying civil action brought by



            Aetna  against  Markarian are  of  little  importance to  the



            present appeal.  Suffice it to  say that Aetna was the victim



            of  a fraudulent  autobody insurance  claim scheme,  and that



            Markarian along  with some  relatives and the  companies they



            controlled were the perpetrators of the scheme.  A e t n a



            brought  suit in  federal  district  court in  Massachusetts,



            asserting claims under civil RICO,  Massachusetts common law,



            and the  Massachusetts deceptive trade practices  statute.  A



            jury  found in  Aetna's favor  on most of  the claims  in the



            complaint, and  in November  1993 the district  court entered



            judgment holding Markarian and  his 22 co-defendants  jointly



            and severally liable for over $6 million.  Markarian and some



            of  the defendants  were also  found individually  liable for



            over $1.5 million under Mass. Gen. Laws Ch. 93A.   This court



            affirmed  the judgment in December  1994.  Aetna  Cas. & Sur.
                                                       __________________



            Co. v. P & B Autobody, 43 F.3d 1546 (1st Cir. 1994).
            ___    ______________



                      Judgment  in  hand, Aetna  sought  to identify  and



            seize  assets.     It   commenced  a  supplementary   process



            proceeding  in federal  court under  Fed. R.  Civ. P.  69 and



            Mass. Gen. Laws Ch.  224,   14 seeking an  order transferring



            ownership of Markarian's non-exempt assets.  Aetna also filed



            an  ex parte  application  for  the  writ  of  ne  exeat  and
                                                           _________



            supported it  with an   affidavit stating that  Markarian and


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his co-defendants were secreting assets to render them immune



            to supplementary process.



                      The district court  issued the writ of  ne exeat in
                                                              ________



            February 1995, finding  that Markarian and  his co-defendants



            had been moving  assets out of the jurisdiction as part of an



            effort to prevent enforcement of the judgment and  that there



            was  a strong likelihood that  they would continue  to do so.



            The  district court also  found that  there was  an immediate



            likelihood   that   the   co-defendants  would   depart   the



            jurisdiction or the United States.



                      In March 1995, Markarian appealed from the writ and



            filed  a suggestion  of  bankruptcy.   The bankruptcy  filing



            resulted in  an automatic  stay of the  supplementary process



            proceedings,  see 11  U.S.C.    362(a), and  later in  March,
                          ___



            Markarian moved this court to stay the appeal from the writ.1



            This court issued an order holding the appeal in abeyance and



            directing counsel to report back after the  decision from the



            bankruptcy court.   Markarian then  moved to vacate  the writ



            before the bankruptcy court,  which denied the motion without



            prejudice in November 1995 and referred Markarian back to the



            district  court.   See  In re  Jack  Markarian, No.  95-40961
                               ___  ______________________



            (Bankr. D. Mass. Nov. 20, 1995).


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            1.  The writ does not appear to fall within  the terms of the

            Automatic  Stay  provision of  the  Bankruptcy  Code, see  11
                                                                  ___

            U.S.C.    362, and thus the writ and the appeal from the writ

            were not stayed automatically by the bankruptcy filing.



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The district court in March 1996 denied Markarian's



            motion   to  vacate   the  writ,   stating  that   it  lacked



            jurisdiction   over  the   matter.     Markarian   moved  for



            clarification of this ruling.  While that motion was pending,



            in  July 1996,  the bankruptcy  court ruled  that Markarian's



            debts to Aetna were not dischargeable because they  arose out



            of fraud.  See In re Jack Markarian, No. 95-40961 (Bankr.  D.
                       ___ ____________________



            Mass. Jul. 31, 1996).   However, the bankruptcy court  deemed



            the   issue  close   enough  to   stay  the  order   of  non-



            dischargeability and  certify the  case to the  First Circuit



            Bankruptcy  Appellate Panel,  where it  is  now pending.   In



            October  1996, the  district  court,  ruling  on  Markarian's



            motion for clarification of the refusal to vacate the writ of



            ne exeat, denied  the motion "on the  merits" without opinion
            ________



            or findings.  This appeal followed.



                                         II.



                      Aetna   argues   that   there   is   no   appellate



            jurisdiction,   saying  the   writ   is  no   more  than   an



            interlocutory  order to  preserve assets  until  its separate



            supplementary  process  proceedings  against   Markarian  are



            completed.2   We disagree.   At issue is  not a supplementary



            process order but a writ of  ne exeat:  Aetna's motion papers
                                         ________



            and  the  order  issuing  the   writ  make  no  reference  to



                                
            ____________________



            2.  The supplementary process proceedings cannot resume until

            the conclusion of the  bankruptcy proceedings unless the stay

            is lifted.



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supplementary process, and the  writ, by its terms,  does not



            expire with  the  termination of  the  supplementary  process



            proceedings.   The  writ  is effectively  an injunction  over



            which  this  court has  jurisdiction  pursuant  to 28  U.S.C.



              1292(a).  See  United States v. Shaheen, 445 F.2d 6, 7 (7th
                        ___  _____________    _______



            Cir. 1971).  We also note Markarian's argument  that issuance



            of the  writ was an error of law,  and thus the writ may well



            be an appealable collateral order.  See id. at 7 n.2.
                                                ___ ___



                                         III.



                      Where a money judgment  has been entered in federal



            court, enforcement  of the  judgment is governed  by Fed.  R.



            Civ. P. 69, which provides that the procedures to be used are



            those of the state  in which the district court  sits, unless



            there is an applicable federal statute.  Aetna availed itself



            of state process, seeking a writ of ne exeat.
                                                ________



                      Massachusetts  procedure  permits  issuance of  the



            writ only in support of an order punishable by the court as a



            contempt.  See Mass. R. Civ.  P. 4.3(c).  A money judgment is
                       ___



            not  such an order.3  "[T]he writ  of ne exeat has never been
                                                  ________



            issued  in aid  of  legal, as  distinguished from  equitable,



            process,  or for  the purpose  of obtaining  security from  a


____________________



            3.  The Massachusetts supplementary process statute, however,

            provides that violation of  a supplementary process order may

            be punishable as a contempt.  See Mass. Gen. Laws  Ch. 224,  
                                          ___

            16.   We do not reach the question of whether the writ may be

            used  after a supplementary process order has been issued and

            there has been a violation.  That is not the case here.



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defendant in  at action of  law."   Moore v.  Valda, 23  N.E.
                                                _____     _____



            1102,  1103 (Mass. 1890) (per curiam).  "[W]hen a party fails



            to  satisfy a  court-imposed  money judgment  the appropriate



            remedy  is a writ of  execution, not a  finding of contempt."



            Combs v. Ryan's Coal Co., 785 F.2d 970, 980 (11th Cir. 1996);
            _____    _______________



            see also  Shuffler v. Heritage  Bank, 720 F.2d  1141, 1147-48
            ________  ________    ______________



            (9th Cir. 1983).   It follows that  the issuance of the  writ



            was error.  See  Gabovitch v. Lundy, 584  F.2d 559, 560  (1st
                        ___  _________    _____



            Cir.  1978)   (failure   to  comply   with  state   procedure



            invalidated writ of execution).



                      These  are not  mere formalisms.    The writ  of ne
                                                                       __



            exeat is an ancient writ.   It hearkens back to the days when
            _____



            debtors  were imprisoned for failure to pay their debts.  The



            writ is itself a form  of civil arrest.  Caselaw on  the writ



            has narrowed  its use to situations  resulting from equitable



            debt rather than  debts recoverable at law.  See 65 C.J.S. Ne
                                                         ___           __



            Exeat    4,  at  396  (1966).    The  Massachusetts  rule  is
            _____



            similarly circumscribed.



                      Indeed, the Reporter's  Notes to the  Massachusetts



            rule providing for the writ of ne exeat express concern about
                                           ________



            the constitutionality  of the writ, even  circumscribed as it



            is.   The  Massachusetts  courts, recognizing  that the  writ



            operates in  restraint of personal liberties,  have held that



            the writ  "is to  be  granted with  caution"  and "is  to  be


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continued  in force with caution."  Cohen v. Cohen, 64 N.E.2d
                                                _____    _____



            689, 693 (Mass. 1946).



                      Aetna's  motion for  a writ  of ne  exeat finds  no
                                                      _________



            ground on  which to  rest.   Rule  69 does  not provide  that



            ground independently, because it  directs that "[p]rocess  to



            enforce a judgment for  the payment of money shall be  a writ



            of  execution,  unless  the  court directs  otherwise.    The



            procedure on execution .  . . shall be in accordance with the



            practice  and procedure  of the  state in which  the district



            court is  held . . .  ."  The "otherwise"  clause is narrowly



            construed.    See Combs,  785  F.2d  at  980.   It  does  not
                          ___ _____



            authorize enforcement  of a  civil money judgment  by methods



            other  than   a  writ   of  execution,  except   where  "well



            established principles  [so] warrant."  13 J.  Moore, Moore's



            Federal  Practice   69.02, at 69-5  to -7 (3d  ed. 1997); see
                                                                      ___



            also Hilao v.  Estate of Marcos, 95  F.3d 848, 854  (9th Cir.
            ____ _____     ________________



            1996).4



                                
            ____________________



            4.   One such  situation is where an  action for contempt has

            been instituted for  failure to pay an  obligation imposed by

            statute in order to  enforce the public policies  embodied in

            the  statutory scheme.    See, e.g.,  McComb v.  Jacksonville
                                      _________   ______     ____________

            Paper Co., 336  U.S. 187,  193-95 (1949).   Another is  where
            _________

            there has  been a congressional determination  to provide the

            government with  the ability to  seek a writ  of ne  exeat in
                                                             _________

            furtherance  of enforcing  tax  obligations.   See, e.g.,  26
                                                           _________

            U.S.C.   7402(a).  A third is where the judgment is against a

            state which  refuses to appropriate funds  through the normal

            process  provided  by  state  law.     See,  e.g.,  Spain  v.
                                                   __________   _____

            Mountanos, 690 F.2d 742,  744-45 (9th Cir. 1982); Gary  W. v.
            _________                                         ________

            Louisiana, 622 F.2d 804,  806 (5th Cir. 1980).   In contrast,
            _________

            the size of the  award and the difficulties in  enforcing the

            judgment   due  to  the  location   of  the  assets  and  the



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This court has  held that "the legislative  history



            and  judicial application of  Rule 69(a) make  clear that the



            first  sentence of  the Rule  expresses a  limitation on  the



            means of enforcement of money judgments and does not create a



            general power to issue writs of execution in disregard of the



            state  law incorporated by the rest of the Rule."  Gabovitch,
                                                               _________



            584 F.2d at 560-61.  The state remedy is the exclusive  route



            here.  See id. at 561.
                   ___ ___



                      Aetna also points to the All Writs Act, 28 U.S.C.  



            1651,  but does not develop  its argument.   The point is not



            well taken.  The  All Writs Act "does not  authorize [federal



            courts]  to  issue  ad  hoc writs  whenever  compliance  with



            statutory   procedures   appears    inconvenient   or    less



            appropriate."   Pennsylvania Bureau  of Correction  v. United
                            __________________________________     ______



            States Marshals Serv.,  474 U.S.  34, 43 (1985).   Where,  as
            _____________________



            here, there  is  a statutory  procedure  which  "specifically



            addresses the particular issue at hand, it is that authority,



            and  not  the  All Writs  Act,  that  is  controlling."   Id.
                                                                      ___



            Indeed, there is every  reason not to reach  to find the  All



            Writs Act applicable where "the courts have consistently read



            Rule 69(a) as limiting all federal process on money judgments


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            uncooperativeness of the judgment debtor are not the types of

            extraordinary  circumstances which warrant departure from the

            general rule  that money judgments  are enforced by  means of

            writs  of execution  rather than  by  resort to  the contempt

            power of the courts.  See Hilao, 95 F.3d at 855.
                                  ___ _____



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to  the   type  of   process  available  under   state  law."



            Gabovitch, 584 F.2d at 561.
            _________



                      This opinion  does not condone  Markarian's failure



            to  pay his  judgment debt,  nor does  it fail  to appreciate



            Aetna's  frustration.    It   simply  holds  that  the  legal



            predicate for issuance of the extraordinary writ of  ne exeat
                                                                 ________



            is lacking and so issuance of the writ was error.



                      The  order granting  the writ  is reversed  and the
                                                        ________



            writ is vacated.  No costs.
                    _______


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