Government Guarantee Fund of the Republic of Finland v. Hyatt Corp.

39 V.I. 328, 182 F.R.D. 182, 1998 WL 494681, 1998 U.S. Dist. LEXIS 12903
CourtDistrict Court, Virgin Islands
DecidedAugust 6, 1998
DocketCivil No. 1995-49(M)
StatusPublished
Cited by8 cases

This text of 39 V.I. 328 (Government Guarantee Fund of the Republic of Finland v. Hyatt Corp.) is published on Counsel Stack Legal Research, covering District Court, Virgin Islands primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Government Guarantee Fund of the Republic of Finland v. Hyatt Corp., 39 V.I. 328, 182 F.R.D. 182, 1998 WL 494681, 1998 U.S. Dist. LEXIS 12903 (vid 1998).

Opinion

MOORE, Chief Judge

MEMORANDUM

INTRODUCTION

This matter is before the Court based on a motion of defendant Hyatt Corporation ["Hyatt"] for an order vacating and withdrawing from publication the portion of the Court's May 4, 1998, Memorandum decision finding Hyatt in contempt ["Motion re: Contempt"]. Also pending before the Court is Hyatt's motion for an order vacating in part, or modifying the Court's Order of November 21, 1997 and December 19, 1997, and for a determination that no further sanctions should issue ["Motion re: Sanctions"]. Plaintiffs have not opposed the motions, based on a provision of the settlement agreement between the parties.1

The underlying facts of this case have been previously well documented. See Government Guarantee Fund ["GGF"] v. Hyatt Corp., 5 F. Supp. 2d 324, 1998 U.S. Dist. LEXIS 6839, 1998 WL 240391, at *1. On May 4, 1998, the Court, after delineating a series of acts undertaken by Hyatt, made the following conclusion:

[A]t least as late as January 1998, Hyatt persisted in its obdurate and contumacious refusal to follow the lawful orders of this Court. As of the hearing on January 15, 1998, [the "January 15th Hearing"] Hyatt still had not complied with the Court's Order, issued one year earlier [330]*330on January 28, 1997, to account for all the funds which passed through its hands during the period it continued illegally to remain in possession and continued to act as manager of the hotel in breach of its fiduciary duties to the hotel's owner. Hyatt's performance at the January 15, 1998, hearing evidenced a carefully planned and orchestrated effort to appear to comply with the Order without disclosing what Hyatt apparently considers highly damaging information about its related entities. This deliberate noncompliance and withholding of properly producible information constitutes contempt of this Court.
Hyatt was not content with mere contempt, however. It affirmatively misrepresented what it had produced to this Court. . . . The Court . . . finds that this contumacious performance further constitutes a deliberate attempt to mislead and perpetrate a fraud upon this Court.
. . . Hyatt's earlier and totally inadequate effort at compliance was sanctionable, if not contumacious. Hyatt's effrontery in presenting more of the same in a "new" submission with still no itemization of the benefits Hyatt-related entities received during the illegal holdover, and then misleading its testifying expert and, therefore, the Court about the purpose of the submission, is truly mind-boggling. Whether this effrontery stems from desperation to cover up evidence which might support plaintiffs' claims of improper kickbacks to Hyatt-related entities, which evidence it appears has only recently been pried from Hyatt's iron grasp, remains to be developed at trial. It suffices here to observe that this audacious performance falls squarely within the overall pattern of delay and obstruction the Court has already found to have been demonstrated by Hyatt's conduct in this case.

GGF v. Hyatt Corp., 5 F. Supp. 2d at 330, 1998 WL 240391, at *5-6 (emphasis in original) [the "May 4th Order"]. After the January 15th hearing, but before the Court's May 4th Order was entered, Hyatt submitted a final version of the Accounting Document which greatly advanced its efforts to comply with this Court's Order.

[331]*331ANALYSIS

Motion to Vacate finding of Contempt

Hyatt bases its motion to vacate the finding of contempt generally on two arguments.

First, Hyatt alleges impossibility of the task, the "Herculean" effort required to meet the demands of the Court, and the relatively minor benefit to the Court and plaintiffs in expending this effort. The impossibility argument is premised on the fact that the financial system for the St. John hotel was not integrated with those of the Hyatt corporate offices. Therefore, Hyatt argues, it was impossible for them to comply with this Court's Order of January 28,1997 ["January 28th Order"], because the documents necessary were in possession of the plaintiffs in storage on St. Croix. As previously pointed out, Hyatt designed this financial system. It therefore may not rely on its deficiencies in defense. Further, the Accounting Document was finally produced. Asking plaintiffs for and obtaining access to the documents removed a major self-imposed obstacle.

Compliance with the Court's January 28th Order was no doubt herculean, and the Court accepts that Hyatt spent approximately $351,000 to produce the Accounting Document. According to Hyatt, the final document revealed only $90,000 of previously undisclosed benefit to Hyatt-related entities, out of accounts payable of approximately $10.6 million. What Hyatt fails to grasp is that the considerations for complying with a court order differ from those for satisfying a materiality test under generally accepted accounting principles.

Second, Hyatt argues that it was subject to an "ever expanding" definition of related entities. Hyatt states that, in agreeing to the definition of related entities as "going up to H Group, Inc. or HV, Inc., two corporate-level parents* and . . . every affiliate of those companies," (Jan. 15, 1998 Tr. pp. 185-86-), "this was the first time since the Court's January 28, 1997 Order that the plaintiffs' counsel acceded to any limitations" on the definition. (Mot. re: Contempt at 15.) Be that as it may, Hyatt must have known the meaning of the words "related entities" when it negotiated the use of the term in the Management Agreement with the owners in March of 1990. It [332]*332was more than a little disingenuous for Hyatt suddenly to suffer a lapse of memory when the Court adopted the use of the same term in its January 28th Order. The Court's Order, while broad, was not ambiguous, and for all these reasons, the Order manifested the requisite amount of specificity.

The Court finds that the plaintiffs did establish the necessary elements of contempt by clear and convincing evidence. Hyatt violated the Court's January 28th Order. The May 4, 1998, Memorandum and Order, therefore, will not be vacated, nor will it be withdrawn from publication.

Nevertheless, the Court does find that Hyatt and it's present counsel have purged themselves of the contempt and that the imposition of contempt sanctions is not necessary. Hyatt states the matter succinctly:

Civil contempt is a remedial device imposed to coerce compliance with a court order or to compensate a complainant for losses sustained. United Mine Workers of Am. v. Bagwell, 512 U.S. 821, 129 L. Ed. 2d 642, 114 S. Ct. 2552 (1994). By complying with a court order, a party may purge itself of contempt. Hicks v. Feiock, 485 U.S. 624, 99 L. Ed. 2d 721, 108 S. Ct. 1423 (1988); United States v. Pozsgai, 999 F.2d 719 (3d Cir. 1993). Indeed, the court must afford a contemnor an opportunity to do so. Otherwise, a civil contempt sanction becomes a criminal one.

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39 V.I. 328, 182 F.R.D. 182, 1998 WL 494681, 1998 U.S. Dist. LEXIS 12903, Counsel Stack Legal Research, https://law.counselstack.com/opinion/government-guarantee-fund-of-the-republic-of-finland-v-hyatt-corp-vid-1998.