RECOMMENDED FOR FULL-TEXT PUBLICATION Pursuant to Sixth Circuit Rule 206 2 Elec. Workers Local 58 Pension Trust No. 01-1864 ELECTRONIC CITATION: 2003 FED App. 0295P (6th Cir.) Fund et al. v. Gary’s Elec. Serv. Co. File Name: 03a0295p.06 GIARMARCO, Troy, Michigan, for Appellee. ON BRIEF: Sheldon M. Meizlish, Detroit, Michigan, Rolland R. O’Hare, UNITED STATES COURT OF APPEALS SACHS, NUNN, KATES, KADUSHIN, O’HARE, FOR THE SIXTH CIRCUIT HELVESTON & WALDMAN, Detroit, Michigan, for _________________ Appellant. William L. Hooth, Ryan Lee Perry, COX, HODGMAN & GIARMARCO, Troy, Michigan, for Appellee. ELECTRICAL WORKERS X PENSION TRUST FUND OF - _________________ LOCAL UNION #58, IBEW, et - - No. 01-1864 OPINION al., - _________________ Plaintiffs-Appellants, > , KAREN NELSON MOORE, Circuit Judge. This dispute - v. originated when Defendant-Appellee Gary’s Electric Service - Company (“Gary’s Electric”) violated a collective bargaining - agreement’s (“CBA”) fringe benefit provisions and then GARY ’S ELECTRIC SERVICE - failed to honor a request for information from Plaintiffs- COMPANY , - Appellants Electrical Worker’s Pension Trust Fund of Local Defendant-Appellee. - Union #58, International Brotherhood of Electrical Workers, N et al. (“the Funds”) regarding the performance of Gary’s Electric’s representational duties. The Funds first filed a Appeal from the United States District Court grievance with the Labor-Management Committee (“LMC”) for the Eastern District of Michigan at Detroit. based on Gary’s Electric’s failure to pay fringe benefits, No. 98-74631—Anna Diggs Taylor, District Judge. requesting that the LMC enter an arbitration award ordering Gary’s Electric to file past-due reports, pay past-due Argued: January 30, 2003 contributions, and thereafter file and pay contributions as they became due. After the LMC entered the award, the Funds Decided and Filed: August 18, 2003 filed an action in district court to secure Gary’s Electric’s compliance with the terms of the award. Upon the Funds’ Before: BATCHELDER, MOORE, and CLAY, Circuit motion, the district court granted summary judgment in favor Judges. of the Funds. When Gary’s Electric appealed, the appeal was _________________ consolidated with a National Labor Relations Board (“NLRB”) petition seeking enforcement of an NLRB order COUNSEL finding that Gary’s Electric engaged in unfair labor practices. A panel of this court affirmed the district court’s decision and ARGUED: Mark Granzotto, Royal Oak, Michigan, for enforced the NLRB order. See Elec. Workers Local 58 Appellant. William L. Hooth, COX, HODGMAN &
1 No. 01-1864 Elec. Workers Local 58 Pension Trust 3 4 Elec. Workers Local 58 Pension Trust No. 01-1864 Fund et al. v. Gary’s Elec. Serv. Co. Fund et al. v. Gary’s Elec. Serv. Co.
Pension Trust Fund v. Gary’s Elec. Serv. Co., 227 F.3d 646 fringe benefits — pension, vacation, unemployment, annuity, (6th Cir. 2000). and medical — into the Funds. Thereafter, the Funds brought contempt proceedings in the On August 4, 1998, in accordance with the terms of the district court against Gary’s Electric and its owner, Russell CBA, the Funds made a demand to the LMC for arbitration of Gary Pipia (“Pipia”), alleging that they continually violated their grievance, charging that Gary’s Electric failed to make the terms of the arbitration award. The district court held a its contractual payments into the Funds and failed to submit hearing and granted the contempt petition as to Gary’s the required fringe benefit reports. A hearing before the LMC Electric but denied it as to Pipia. The district court explained was set for August 20, 1998, and Gary’s Electric was given that, among other reasons, Pipia could not be held in notice. On August 25, 1998, the LMC found Gary’s Electric contempt because he was not an actual defendant in the guilty of the charges in the grievance and ordered Gary’s action. The Funds then brought this appeal from the portion Electric to pay the past-due fringe benefit payments, produce of the court’s order denying the contempt petition as to Pipia. the reports, and make future payments when due.2 An We VACATE the decision of the district court and additional award from the LMC, also dated August 25, 1998, REMAND for additional proceedings consistent with this found Gary’s Electric guilty of failing to secure a surety bond opinion. as required by the CBA. I. BACKGROUND Almost two months later, after Gary’s Electric failed to comply with the LMC awards, the Funds filed a complaint in Gary’s Electric, a Michigan corporation wholly owned by district court requesting that the court enter a judgment Pipia, was a small electrical service company with primarily enforcing the LMC’s awards. On May 18, 1999, the district residential and small-business customers. In 1976, and again court granted the Funds’ motion for summary judgment, and in 1988, Gary’s Electric signed a letter of assent authorizing Gary’s Electric immediately filed an appeal.3 A three-judge the Southeastern Michigan Chapter of the National Electrical Contractors Association (“NECA”) to be its representative for all business matters between NECA and the International 2 The arbitration award specifically ordered Gary’s Electric to remedy Brotherhood of Electrical Workers’ Local Union #58 (“the its violation by: Union”).1 Through its representative, NECA, Gary’s Electric A. Submitting the fringe benefit reports due to the date of this entered into a binding CBA with the Union. This CBA decision as required by Article VIII of that Agreem ent, and required participating employers to pay their employees’ B. Immediately paying the amounts shown on those reports as due, including the liquidated dam ages d ue thereon, and ... D. Hereafter, filing all reports and paying all fringe bene fit contributions on a timely basis as required by Article VIII. 1 Joint Appendix (“J.A.”) at 16 (Compl., Ex. C, Award of the LMC ). The second letter of assent, signed by P ipia as G ary’s Electric’s presid ent, took effect on July 29 , 198 8 and stated that it would remain 3 effective until terminated by Gary’s Electric supplying NEC A and the During the pending appeal, Gary’s Electric neither filed a Union with written notice at least 150 days p rior to the agreement’s supersedeas bond nor stayed the judgment pending appeal. Thus, the anniversary date. See Elec. Work ers Local 58 Pension Trust Fund, 227 district court “retain[ed] jurisdiction to enforce [its] judgment.” NLRB v. F.3d at 650. Cincinnati Bronze, Inc., 829 F.2d 58 5, 588 (6th Cir. 1987). No. 01-1864 Elec. Workers Local 58 Pension Trust 5 6 Elec. Workers Local 58 Pension Trust No. 01-1864 Fund et al. v. Gary’s Elec. Serv. Co. Fund et al. v. Gary’s Elec. Serv. Co.
panel of this court heard the consolidated appeal4 on its rulings on the other issues contained in the Funds’ petition August 4, 2000, and issued an opinion on September 25, for contempt. 2000, enforcing the NLRB order and affirming the district court’s grant of summary judgment for the Funds. See Elec. The instant appeal began when the Funds reinitiated the Workers Local 58 Pension Trust Fund, 227 F.3d at 649. deferred portions of their contempt petition against both Gary’s Electric and Pipia.7 In their motion for rehearing filed While Gary’s Electric’s appeal was pending,5 the Funds on December 7, 2000, the Funds alleged that Gary’s Electric, initiated contempt proceedings in district court against Gary’s with total disregard for this court’s decision, chose not to Electric and Pipia for failing to adhere to the district court’s comply with the district court’s judgment — it did not make orders to pay past-due contributions, disclose fringe benefit delinquent payments, produce all the necessary fringe benefit reports, adhere to the rules in the CBA for future reports,8 make prospective payments as they became due, or contributions and reports, secure a surety bond, and pay the comply with the bond award. According to the affidavit of a Funds their costs and attorney fees.6 A November 23, 1999 Funds employee responsible for monitoring participating order of the district court temporarily disposed of the Funds’ employers’ payments to the Funds, from the district court’s petition for contempt by ordering: (1) Gary’s Electric to judgment enforcing the LMC awards in May 1999 until produce, within one month, the fringe benefit reports from October 30, 1999, fringe benefit contributions owed by June 1998 through the present date; and (2) Pipia to submit to Gary’s Electric amounted to $75, 345.04.9 In the motion, the a deposition within two months. The district court postponed Funds also allege that Pipia began to waste the corporate asserts in an effort to avoid making the court-required payments. According to the Funds, Pipia starting “stripping
4 The NLRB ’s general counsel brought charges against Gary’s 7 Electric for failure to provide information relevant to the performance of In previous briefs to this court, Gary’s Electric relied on a its repre sentational duties pursuant to Sections 8(a)(5) and (1) of the September 29, 2000 district court order deciding that the motion for National Labor Relations Act (“NLRA”). The ad ministrative law judge contempt is moot because the court issued an order dismissing the case on (“ALJ”) found Gary’s Electric guilty as charged, and then the NLRB November 23, 1999. On October 19, 2000, the district court issued affirmed the ALJ’s decision. The NLR B eventually sought enforcement another order vacating the September 29, 2000 ord er which denied the of its order, and that action was conso lidated with Gary’s Electric’s appeal motion for contemp t as moot, and stated that the September order was from summary judgment in the Funds’ case. “erroneously issued.” J.A. at 5 (Docket #42).
5 8 Gary’s Electric ceased functioning as an electrical services company Gary’s Electric eventually produced the reports for May 8, 1998 by No vember 1 999 , although Pipia and his secretary continued to work through October 30 , 1999. Nevertheless, they failed to produce any up until January 20 00 in order to wind up the business’s affairs. repo rts for Novemb er and December 1999, even though, as the Funds According to the Funds, Gary’s Electric went out of business on allege, Gary’s Electric still employed electrical workers during those November 13, 1999. months.
6 9 The Funds admit that once these contempt proceedings began, The Funds assert that if the time period runs from the date of Gary’s Electric submitted the fringe benefit reports that earlier they were judgment up until November 13, 1999 when Gary’s Electric went out of ordered to produce. These reports showed that between May 8, 19 98 and business, then the amount owed by Gary’s Electric in fringe benefits is October 30 , 1999 , Gary’s Electric ow ed $2 47,80 3.82 to the Funds. “some a hundred seven thousand dollars.” J.A. at 136 (T r. of Mot. Hr’g). No. 01-1864 Elec. Workers Local 58 Pension Trust 7 8 Elec. Workers Local 58 Pension Trust No. 01-1864 Fund et al. v. Gary’s Elec. Serv. Co. Fund et al. v. Gary’s Elec. Serv. Co.
the corporation of its assets” after the NLRB and the Funds II. ANALYSIS initiated proceedings against it in late 1998 and early 1999. Appellants’ Br. at 8. The evidence supporting the Funds’ A. Jurisdiction position that Pipia flagrantly and deliberately disregarded the court’s judgment includes: Pipia more than tripling his The district court had jurisdiction pursuant to §301 of the Gary’s Electric salary within two years, Pipia’s receipt of Labor Management Relations Act, as amended, 29 U.S.C. large bonuses and loans from Gary’s Electric, Pipia’s use of § 185, and §§ 502(g)(2) and 515 of the Employee Retirement funds from a corporate account to purchase a fur coat for his Income Security Act of 1974 (“ERISA”). We have wife which he later claimed as a bonus, and Pipia’s directives jurisdiction over this timely appeal pursuant to 28 U.S.C. to pay in full every creditor except for the debt owed the § 1291. Funds. B. Standard of Review At the motion hearing, the Funds requested that Pipia “be ordered to purge himself of contempt by requiring him to pay A decision on a contempt petition is within the sound [to the Funds] the sum of . . . a hundred thousand twelve discretion of the trial court and thus is reviewed only for an dollars [and] thirty-eight cents, that being the amount of abuse of discretion. Peppers v. Barry, 873 F.2d 967, 968 (6th indebtedness that accrued after [Pipia] was ordered to comply Cir. 1989). “Abuse of discretion is defined as a definite and with the fringe benefit provisions of the Collective Bargaining firm conviction that the trial court committed a clear error of Agreement.” J.A. at 141 (Tr. of Mot. Hr’g). Ultimately, the judgment.” Bowling v. Pfizer, Inc., 102 F.3d 777, 780 (6th district court granted the contempt petition with respect to Cir. 1996) (quotation omitted), cert. denied, 522 U.S. 906 Gary’s Electric, but denied it without prejudice with respect (1997). Under this standard, a district court’s decision is to to Pipia. The district court stated: be afforded “great deference;” it “will be disturbed only if the district court relied upon clearly erroneous findings of fact, I will at this time enter an order finding the corporation improperly applied the governing law, or used an erroneous in contempt of the order, the injunctive order of this court legal standard.” Blue Cross & Blue Shield Mut. of Ohio v. because it failed to do what it was ordered to do. I am Blue Cross & Blue Shield Ass’n, 110 F.3d 318, 322 (6th Cir. unable to do that with Mr. Pipia because although you 1997). have told me many very reprehensible things that he has done, there are no proofs of that on this record and he C. Contempt was not a defendant in this case and he was not ordered specifically to do anything other than give a deposition 1. Corporate Officers Can Be Held in Contempt which he did do. When a court seeks to enforce its order or supervise its J.A. at 153 (Tr. of Mot. Hr’g). The Funds now appeal from judgment, one weapon in its arsenal is contempt of court. See the portion of the district court’s order denying the petition to NLRB v. Cincinnati Bronze, Inc., 829 F.2d 585, 588 (6th Cir. hold Pipia in contempt. 1987). Recognizing that the power “to punish for contempts” should not be used lightly, the Supreme Court has stated that this power “is a necessary and integral part of the No. 01-1864 Elec. Workers Local 58 Pension Trust 9 10 Elec. Workers Local 58 Pension Trust No. 01-1864 Fund et al. v. Gary’s Elec. Serv. Co. Fund et al. v. Gary’s Elec. Serv. Co.
independence of the judiciary, and is absolutely essential to comply with a court order, we also consider whether the the performance of the duties imposed on them by law. defendant “took all reasonable steps within [his] power to Without it they are mere boards of arbitration, whose comply with the court’s order.” Peppers, 873 F.2d at 969. judgments and decrees would be only advisory.” Gompers v. Buck’s Stove & Range Co., 221 U.S. 418, 450 (1911). In the present case, the Funds petitioned for a contempt Contempt proceedings enforce the message that court orders order against both Gary’s Electric and its principal officer and and judgments are to be complied with in a prompt manner. owner, Pipia. The district court granted the motion for Gary’s Cincinnati Bronze, 829 F.2d at 590. With respect to civil Electric but denied the motion for Pipia. The district court contempt proceedings, “[j]udicial sanctions . . . may, in a identified three reasons for dismissing the contempt motion proper case, be employed for either or both of two purposes; with respect to Pipia. First, the district court noted that Pipia to coerce the defendant into compliance with the court’s could not be held in contempt because he was not a defendant order, and to compensate the complainant for losses in the lawsuit. Second, the court focused on the terms of the sustained.” United States v. United Mine Workers of Am., original order and stated that the only act Pipia was 330 U.S. 258, 303-04 (1947). specifically and individually ordered to do was to submit to a deposition and that he complied in full. Third, the district In order to hold a litigant in contempt, the movant must court reasoned that although the Funds identified Pipia’s produce clear and convincing evidence that shows that “he many “reprehensible” acts, “there [were] no proofs of that on violated a definite and specific order of the court requiring [the] record.” J.A. at 153 (Tr. of Mot. Hr’g). In order to him to perform or refrain from performing a particular act or reverse the district court, we must find that the district court acts with knowledge of the court’s order.” Cincinnati Bronze, abused its discretion in that it either made clearly erroneous 829 F.2d at 591 (quotation and brackets omitted). Clear and findings of fact, improperly applied the controlling law, or convincing evidence is a not a light burden and should not be used the incorrect legal standard in dismissing the petition as confused with the less stringent, proof by a preponderance of to Pipia. Blue Cross & Blue Shield Mut. of Ohio, 110 F.3d at the evidence. See Consol. Coal Co. v. Local Union No. 1784, 322. United Mine Workers of Am., 514 F.2d 763, 766 (6th Cir. 1975). Once the movant establishes his prima facie case, the The Funds carry the initial burden to show contempt. That burden shifts to the contemnor who may defend by coming is, the Funds must come forward with clear and convincing forward with evidence showing that he is presently unable to evidence showing that Pipia “violate[d] a definite and specific comply with the court’s order. United States v. Rylander, 460 order of the court requiring him to perform or refrain from U.S. 752, 757 (1983) (“[w]here compliance is impossible, performing a particular act or acts with knowledge of the neither the moving party nor the court has any reason to court’s order.” Cincinnati Bronze, 829 F.2d at 591 (quotation proceed with the civil contempt action. It is settled, however, omitted). Thus, an initial issue we must resolve is whether an that in raising this defense, the defendant has a burden of unnamed party can be subject to a court order, i.e., whether a production.”). To meet this production burden in this circuit court’s order directed to a corporation ever could reach out to “a defendant must show categorically and in detail why he or bind a non-litigant, such as a corporate officer. The answer she is unable to comply with the court’s order.” Rolex Watch is clearly established in both this circuit and the Supreme U.S.A., Inc. v. Crowley, 74 F.3d 716, 720 (6th Cir. 1996) Court. (quotation omitted). When evaluating a defendant’s failure to No. 01-1864 Elec. Workers Local 58 Pension Trust 11 12 Elec. Workers Local 58 Pension Trust No. 01-1864 Fund et al. v. Gary’s Elec. Serv. Co. Fund et al. v. Gary’s Elec. Serv. Co.
Many decades ago, in a case where a corporate officer who entities are subject to in personam jurisdiction for purposes of failed to comply with a subpoena duces tecum was held in contempt if they have notice of the injunction and its contempt, the Supreme Court stated: contents”); see also Cent. States, Southeast and Southwest Areas Pension Fund v. Wintz Props., Inc., 155 F.3d 868, 876 A command to the corporation is in effect a command to (7th Cir. 1998) (deciding that the company’s president and those who are officially responsible for the conduct of its owner, a non-party to the lawsuit, also was subject to the affairs. If they, apprised of the writ directed to the injunction when the court’s order was directed at the company corporation, prevent compliance or fail to take and its officers); NLRB v. Sequoia Dist. Council of appropriate action within their power for the performance Carpenters, AFL-CIO, 568 F.2d 628, 633 (9th Cir. 1977) (“It of the corporate duty, they, no less than the corporation can hardly be argued that the principal officers of a labor itself, are guilty of disobedience, and may be punished union are not legally identified with it, and thus liable in for contempt. contempt for disobeying an order directed to the union.”). Heralding the majority view as the law of this circuit, we Wilson v. United States, 221 U.S. 361, 376 (1911) (noting that referenced a Second Circuit case quoting Judge Learned the corporation can be proceeded against in its corporate Hand: “‘a person who knowingly assists a defendant in capacity at the same time that “[officers] are punished in their violating an injunction subjects himself to civil as well as natural capacities for failure to do what the law requires of criminal proceedings for contempt. This is well settled law.’” them as the representatives of the corporation.” (quotation Hochschild, 977 F.2d at 212 (quoting Backo v. Local 281, omitted)). More recently, we have commented on the issue United Bhd. of Carpenters & Joiners, 438 F.2d 176, 180 (2d of holding a corporate president in contempt when an Cir. 1970), cert. denied, 404 U.S. 858 (1971) (quoting injunction is directed solely to the corporation or company. Alemite Mfg. Corp. v. Staff, 42 F.2d 832 (2d Cir. 1930))). See United States v. Hochschild, 977 F.2d 208 (6th Cir. Ultimately, we determined that the defendant officer was 1992), cert. denied, 506 U.S. 1067 (1993). In Hochschild, the “bound by the injunction . . . because of his relationship to the defendant corporate officer argued that he was not bound by corporation.” Id.10 the terms of the injunction directed to his corporation. In support of his argument, the defendant relied on language in Other circuits have reasoned similarly. The Eighth Circuit the district court’s order that implied that the district court in Chicago Truck Drivers v. Bhd. Labor Leasing, 207 F.3d may have lacked jurisdiction over him because he was not a 500 (8th Cir. 2000), was faced with a case strikingly similar named party in the action. Id. at 212. On appeal, we to the one presented on this appeal. In Chicago Truck determined that the injunction applied to the nonparty officer Drivers, a union pension fund and its trustees sued in his corporate capacity. We arrived at this conclusion after corporations for interim payments of withdrawal liability we juxtaposed the two contrasting viewpoints— the minority under ERISA. Id. at 503. The district court granted summary view suggesting that personal jurisdiction over a non-party for contempt only can be achieved through service of process and the majority view allowing personal jurisdiction for contempt 10 over officers or corporate employees if they have notice of the W e noted that according to Federal Rule of Civil Procedure 65(d), injunctions are binding on defendant corporations’ officers in their injunction and its contents. Id. (noting that “more [cases] corp orate capacities, so long as they have no tice. Ho chschild, 977 F.2d have held that officers or employees of corporate and business at 211. No. 01-1864 Elec. Workers Local 58 Pension Trust 13 14 Elec. Workers Local 58 Pension Trust No. 01-1864 Fund et al. v. Gary’s Elec. Serv. Co. Fund et al. v. Gary’s Elec. Serv. Co.
judgment in the union pension fund’s favor and ordered the The Eighth Circuit noted that although the Supreme Court commencement of payments. See id. Amended judgments in Rylander stated that a “present inability to comply” is a followed, ordering further payments but “[b]oth the initial and defense to civil contempt, some circuits have refined that amended judgments contained no reference to either [the statement requiring that an alleged contemnor, asserting corporations’ sole officer and shareholder] specifically or the inability to pay, establish “(1) that they were unable to [corporations’] officers or other agents generically.” Id. comply, explaining why categorically and in detail; (2) that When the union pension fund never received any of the court- their inability to comply was not self-induced; and (3) that ordered payments, the fund filed a motion for contempt they made in good faith all reasonable efforts to comply.” against both the corporations and their sole owner and Chicago Truck Drivers, 207 F.3d at 506 (quotations omitted). shareholder in his personal capacity. Id. The union pension Regarding the assertion that the defendant officer could be fund rested its case after it presented evidence that no held in contempt individually, the Eighth Circuit compared payments had been made although the payments were due and the case before it to injunctions under Federal Rule of Civil that at the time the payments became due, the corporate Procedure 65(d).11 Because the Supreme Court liberally entities had the resources to pay. See id. at 504. The district applied Rule 65(d) to any “‘equitable decree compelling court denied the motion for contempt stating that the union obedience under the threat of contempt’” including “not only pension fund failed “to produce evidence sufficient for a injunctions . . . but also ‘enforcement orders and affirmative finding that the defendants have assets for making the decrees,’” the Eighth Circuit determined that a corporate judgment debt payments but did not do so.” Id. officer can be bound by a court’s payment orders even when the “orders [make] no specific reference to him.” Chicago On appeal, the Eighth Circuit remanded the case to the Truck Drivers, 207 F.3d at 507 (quoting Int’l Longshoremen’s district court, stating that the district court abused its Ass’n v. Philadelphia Marine Trade Ass’n, 389 U.S. 64, 75- discretion by shifting the burden to the union pension fund to 76 (1967)). Thus, while a district court’s order setting a pay show that the corporation had the present ability to pay and schedule may or may not be classified as an injunction, it by failing to make any specific findings as to whether the nevertheless can be treated as one when “it compel[s] . . . defendant officer committed acts that might support a affirmative, prospective obedience with it.” Id. contempt finding against him personally. Id. at 508. In addition, the court of appeals instructed the district court on In the case before us, the district court’s order only referred remand to make specific findings with respect to whether the to Gary’s Electric and did not mention its agents, officers, or parties satisfied their burdens. Id. at 505. The court further owners at all. But, as is evident from the Supreme Court in noted that although “a contempt finding against the Wilson and our opinion in Hochschild, whether or not Pipia [corporations likely] would [not] serve any useful purpose, was a named defendant in the order, or even mentioned at all, since it appears they no longer have any assets,” the union pension fund “is entitled to further development of the record concerning the dissipation of the [corporations’] assets, and 11 an express finding from the court that the [corporations] have Rule 65(d) provides that an injunction or a restraining order bind s: satisfied their burden on an inability-to-comply defense.” Id. “the parties to the action, their officers, agents, servants, employees, and attorneys, and . . . those persons in active concert or participation with at 505-06. them who receive actual notice of the order by personal service or otherwise.” Fed. R. Civ. P. 65(d). No. 01-1864 Elec. Workers Local 58 Pension Trust 15 16 Elec. Workers Local 58 Pension Trust No. 01-1864 Fund et al. v. Gary’s Elec. Serv. Co. Fund et al. v. Gary’s Elec. Serv. Co.
is not controlling. See Wilson, 221 U.S. at 376; Hochschild, no payments had been made although the payments were due, 977 F.2d at 212. Pipia, as an officer of the corporation and the district court improperly dismissed the petition to hold the one responsible for the corporation’s affairs, was subject Pipia in contempt. to the court’s order just as the corporation itself was. See Chicago Truck Drivers, 207 F.3d at 508. Because Pipia Once the Funds establish their prima facie case, the burden either “prevent[ed] compliance or fail[ed] to take appropriate of production shifts to Pipia, who may defend against an action within [his] power for the performance of the corporate order of contempt by producing evidence to show that he is duty,” the district court had the authority to hold Pipia in presently unable to comply with the court’s order. See contempt. Wilson, 221 U.S. at 376. The Funds only needed Rylander, 460 U.S. at 757. However, as we stated previously, to show that Gary’s Electric did not comply with the district some courts have narrowed Rylander by requiring either that court’s judgment in order to meet their burden. That said, the the contemnor prove in great detail his inability to pay, show Funds met their initial burden for a contempt finding against that he did not cause the inability, or prove that he Pipia when they presented to the district court the previous unsuccessfully attempted compliance in good faith. See order of the court affirming the LMC awards and Pipia’s own Chicago Truck Drivers, 207 F.3d at 506. We previously have deposition testimony admitting that he knew of the court’s required a contemnor to show “categorically and in detail why order yet failed to observe it.12 See, e.g., Chicago Truck he or she is unable to comply with the court’s order.” Rolex Drivers, 207 F.3d at 505 (“Here, it is undisputed that [the Watch U.S.A., Inc., 74 F.3d at 720. We also have evaluated corporations] have not made any payments pursuant to the whether the defendant “took all reasonable steps within [his] court’s order. At that point, the burden should have shifted to power to comply with the court’s order.” Peppers, 873 F.2d [the corporations] to show an inability to comply.”). The at 969. Until now, however, we have never decided whether Funds presented clear and convincing evidence — we embrace the refinement on Rylander that requires the undisputed, even — that Pipia, the sole owner and officer of contemnor to show that his present inability to comply is not Gary’s Electric, “with knowledge of the court’s order,” chose his own fault or the result of self-induced inability. Nor have to violate the court’s order by not making the required we decided previously whether we would sanction the contributions to the Funds. Cincinnati Bronze, 829 F.2d at wrongdoer. Today we choose to follow the lead of the Eighth 591 (quotation omitted). Moreover, the district court’s order Circuit and hold that the Rylander “present inability to was in effect because Gary’s Electric did not file a comply” defense to civil contempt requires that the supersedeas bond and because Gary’s Electric did not obtain contemnor show that he is not responsible for the present a stay of the district court’s judgment pending appeal. Thus, inability to pay.13 If the contemnor cannot make this because Pipia is bound by the district court’s order directed at Gary’s Electric and because the Funds presented evidence that 13 To the extent that Chica go Tru ck Drivers suggests that the defendant officer could not be held liable for an amount equivalent to the 12 underlying delinq uent payments bec ause he was never sued in his In his testimony, Pipia uses ignorance as an excu se for his failure individual capa city, we disagree. B ecause one of the p urpo ses of civil to pay the contributio ns. He states: “I just wasn’t aware that I had to pay contempt is to compensate a complainant for its losses, we note that Pipia it. I thought we we re in co urt. We were fighting this out, and I didn’t — can be fined in an am ount equivalent to the original judgment. The I was not going to join the union, and rather than pay that kind of mo ney, district court should consider to what extent P ipia deliberately caused the I would just close the business down.” J.A. at 202 (Pipia Dep.). underlying judgment to remain unpaid and should sanction accordingly. No. 01-1864 Elec. Workers Local 58 Pension Trust 17 18 Elec. Workers Local 58 Pension Trust No. 01-1864 Fund et al. v. Gary’s Elec. Serv. Co. Fund et al. v. Gary’s Elec. Serv. Co.
showing, then the Rylander defense is unavailable. Thus, comply with the court’s order.14 Rolex Watch U.S.A., Inc., 74 taking our cues from the Supreme Court in Rylander and F.3d at 720. Wilson, we determine that if a corporate officer avoids a court’s order to the corporation by failing to take action or Because we have decided that a showing of clean hands is attempt compliance, “they, no less than the corporation itself, essential to the Rylander defense, we are impressed even are guilty of disobedience, and may be punished for more by Pipia’s attempts to drain the corporate resources to contempt.” Wilson, 221 U.S. at 376. Moreover, we hold that avoid satisfying the court’s order. The first example cited by because a civil contempt ruling either attempts to coerce the Funds is the doubling of Gary’s Electric’s rent15 that compliance or compensate the complainant for losses, it is occurred after the Funds moved for summary judgment. The fully appropriate to impose judicial sanctions on the nonparty office space that Gary’s Electric leased was owned by one of corporate officer. See United Mine Workers, 330 U.S. at 303- Pipia’s other companies, KRP, and thus the increased rent 04. directly benefitted KRP at the expense of Gary’s Electric and its creditors. Another example of Pipia’s diversion of Gary’s Turning then to the instant case, Pipia clearly did not meet Electric’s assets was Pipia’s salary increase from $70,000, as his burden of production. As the Funds point out, Pipia indicated in his 1997 income tax return, to $220,500 in testified in his deposition that he did not abide by the 1999.16 Additionally, Pipia received a $54,000 bonus in judgment because he did not think Gary’s Electric was October 1999;17 Gary’s Electric had an outstanding $5,100 contractually obligated to do so. Interestingly and without a loan to Pipia in June 2000; and Pipia purchased a fur coat court order, however, Pipia paid off nearly all Gary’s using funds from Gary’s Electric’s trade-exchange accounts- Electric’s other creditors approximately $541,100 between receivable account which he later documented as a bonus. May 17, 1999 and December 31, 1999. J.A. at 139-40 (Tr. of Mot. Hr’g). Moreover, according to the Funds, Gary’s 14 Electric had gross receipts of $1,800,000 in 1999, the year the In his deposition testimony, Pipia indicates that business operations company closed its doors. Even assuming that all of Pipia’s ceased on January 2000 and he then liquidated Gary’s Electric’s assets. actions were taken in good faith and not to avoid paying the Although his testimony indicates that Gary’s Electric still owes some money to the bank, owes taxes to the state, and no longer has any Funds, Pipia’s decision to pay all other creditors and refusal acco unts receivables, it is not at all clear in a categorical and detailed way to pay the Funds anything at all is ample evidence from which that Gary’s Electric was unable to comply with the court’s order when the the district court could conclude that Pipia did not take “all order was issued. reasonable steps” to ensure Gary’s Electric’s compliance with 15 the court order. See Peppers, 873 F.2d at 969. In addition, The rent went from $1,500 a m onth to $3,000 a mo nth. Pipia’s testimony that the company’s affairs had wound up 16 shortly after the contempt hearing — presumably attempting At the mo tion hearing, Gary’s Electric’s counsel suggested that to imply a lack of expendable funds — is hardly sufficient to Pipia’s pay raise occurred because business sales went up from show “categorically and in detail” why Pipia is unable to $1,200,00 0 to $1,900,00 0 that year.
17 According to a letter from Pipia’s accountant, the October 1999 payroll did indicate a $54,000 bonus for Pipia; howe ver, $18,0 00 o f this money was withheld taxes, and the remaining $36,000 was a charge to his loan account. Thus, Pipia received no net cash from this transaction. No. 01-1864 Elec. Workers Local 58 Pension Trust 19 20 Elec. Workers Local 58 Pension Trust No. 01-1864 Fund et al. v. Gary’s Elec. Serv. Co. Fund et al. v. Gary’s Elec. Serv. Co.
Considering these events in their entirety, we believe that the to be in contempt, it is up to the district court to “fashion an Funds are “entitled to further development of the record appropriate sanction.” Chicago Truck Drivers, 207 F.3d at regarding a possible contempt finding against [Pipia] 508. Appropriate sanctions would aim to compensate the personally.” Chicago Truck Drivers, 207 F.3d at 506. Funds for losses resulting from Pipia’s purposeful decisions to avoid paying the judgment and to eliminate Gary’s In sum, the district court abused its discretion on numerous Electric’s resources. fronts when it denied the contempt petition for Pipia. First, the court’s determination that Pipia could not be held in 2. Contempt Is an Acceptable Form of Relief contempt because he was not a defendant was an improper application of controlling law. See generally Hochschild, 977 Gary’s Electric argues that contempt is not the proper relief F.2d at 212 (holding that a corporate officer was bound by an for failure to pay a monetary judgment, and that only injunction directed at the corporation). Second, because garnishment, attachment, and execution are available as Pipia, the company’s sole owner and officer, was responsible collection remedies. We disagree with Gary’s Electric’s for the corporation’s compliance, he implicitly was ordered to classification of this action as a collection action. In our do more than merely submit to a deposition as the district opinion, the sanction of civil contempt is more properly court opinion suggests. See Wilson, 221 U.S. at 376. Third, considered a compensatory remedy and an encouragement to the district court clearly did not consider properly the burdens comply with court orders. As we stated above, the objective in this case. See Chicago Truck Drivers, 207 F.3d at 505. In of any contempt determination is to enforce the message that order to proceed on its motion for contempt, all the Funds court orders and judgments are to be taken seriously. See needed to show was that Gary’s Electric did not pay the Cincinnati Bronze, 829 F.2d at 590. Moreover, judicial ordered amounts. Thus, once Gary’s Electric admitted that it sanctions can be used not only to coerce compliance, but also did not obey the court’s order to make payments to the Funds, to compensate the complainant. See United Mine Workers, the district court abused its discretion when it failed to shift 330 U.S. at 303-04; see also 11A Charles Alan Wright, the burden to Pipia to show “categorically and in detail” why Arthur R. Miller, & Mary Kay Kane, Federal Practice and Gary’s Electric could not pay. Rolex Watch U.S.A., Inc., 74 Procedure § 2960, at 372-73 (2d ed. 1995) (“A federal court’s F.3d at 720. Moreover, based on today’s holding, Pipia also discretion includes the power to frame a sanction to fit the will need to show that he was not the cause of Gary’s violation.”). Thus, the sanction of civil contempt may include Electric’s inability to pay. Finally, the district court made a fine designed to compensate the Funds not only for the erroneous findings of fact when it dismissed the contempt money that Pipia squandered but also for the money Pipia petition with respect to Pipia stating that there were no proofs diverted from the Funds and paid to other creditors. See on the record of Pipia’s “reprehensible” acts. Pipia’s generally United Mine Workers, 330 U.S. at 303-04 (noting deposition testimony provided sufficient evidence from which that judicial sanctions may be used to compensate a the district court could have concluded that additional complainant for losses and that they “must of course be based development of the record was necessary. upon evidence of [the] complainant’s actual loss”); Wright, Miller, & Kane, supra § 2960, at 369-70 (“[Relief in a civil Therefore, we instruct the district court to use the proper contempt proceeding] often takes the form of a fine in the legal tests and make specific findings with respect to whether amount of the damage sustained by plaintiff.”). Thus, the parties satisfied their respective burdens. If Pipia is found because this contempt proceeding is brought to compensate No. 01-1864 Elec. Workers Local 58 Pension Trust 21 22 Elec. Workers Local 58 Pension Trust No. 01-1864 Fund et al. v. Gary’s Elec. Serv. Co. Fund et al. v. Gary’s Elec. Serv. Co.
the Funds for losses based on Pipia’s failure to comply with pleadings and proof of an alter-ego relationship, Michigan the court’s order and not as a medium for collecting the law does not permit the court to pierce the corporate veil and underlying judgment, it is not a collection action but a hold a corporate officer liable for a corporation’s debt. In compensatory tool which expressly permits the use of support of Gary’s Electric’s contention, Chicago Truck monetary sanctions in this manner.18 Drivers also suggests that the defendant corporate officer could not be liable for the underlying delinquent payments 3. A Corporate Officer Can Be Held in Contempt because he was never sued in his individual capacity. 207 Without Piercing the Corporate Veil F.3d at 507-08. According to Gary’s Electric, because the Funds did not Once again, Gary’s Electric fails to recognize that the attempt to pierce the corporate veil and did not sue Pipia in Funds are not requesting that Pipia be liable for Gary’s his individual capacity, Pipia could never personally be held Electric’s delinquent fringe-benefit contributions, but rather responsible for Gary’s Electric’s failure to make the fringe- the Funds request that Pipia be held in contempt. Chicago benefit contributions as ordered by the court. Gary’s Electric Truck Drivers expressly provides that the district court could also argues that because the Funds failed to submit specific “fashion an appropriate sanction” if the defendant officer was ultimately found in contempt of court. 207 F.3d at 507-08. Thus, on remand, the district court could determine that a 18 Gary’s Electric’s position also is refuted by an analysis of the proper sanction would be to fine Pipia in an amount Supreme Court’s decisio n in NLRB v. Deena A rtware, Inc., 361 U.S. 398 equivalent to those funds that Pipia reasonably diverted. See (1960). Although this Supreme Co urt case did not specifically address the Chicago Truck Drivers, 207 F.3d at 505 (noting that “[w]here question raised by Gary’s Electric, whe ther contempt proceedings are proper to enforce a money judgment, the concurrence in the Supreme compensation is intended, a fine is imposed, payable to Court opinion reveals that contempt proceedings are used to enforce complainant”) (quoting United Mine Workers, 330 U.S. at orders for back pa y. See Deena Artware, Inc., 361 U.S. at 412-14 304). Fittingly, the Funds never asked that Pipia be held (Frankfurter, J., concurring) (“It is equally appropriate for the Court of personally responsible for the amount Gary’s Electric was App eals, by decree enforcing the Board’s order, to place [an employer] ordered to pay, but rather the Funds requested that Pipia be at the hazard tha t if an am ount is found to be owing, [conduct designed to defeat the back-pay order] subsequent to the decree may be found to be held accountable for his own deliberate disobedience of the contuma cious. . . . Accordingly, the petition for contempt should have court’s order. Piercing the corporate veil is unnecessary been sustained.”); see also NLRB v. Deena A rtware, Inc., 251 F.2d 183, because the Funds are not attempting to hold Pipia liable for 186 (6th Cir. 1958) (“In the absence of contempt proceedings, we do not Gary’s Electric’s corporate debts. find that jurisdiction is conferred upon us to order and supervise discovery proceedings in the appellate court for the purpo se of enforcing a monetary III. CONCLUSION awa rd running in favor of a private individual, even though the award has received its vitality from a previous decree of this Co urt.” (em phasis added)). Because there is no material distinction between finding Because the district court abused its discretion when it contempt for failure to com ply with an order to provide employees back denied the Funds’ petition to hold Pipia in contempt, we pay and for failure to comply with an order to make past-due fringe VACATE the district court’s decision and REMAND for benefit contributions, we see no justification for treating these two additional proceedings consistent with this opinion. monetary award s differently under the law. Thus, we conclude that Deena Artware provides additional support for a determination that contempt is an appro priate form of relief in these circumstances.