F I L E D United States Court of Appeals Tenth Circuit UNITED STATES COURT OF APPEALS AUG 25 2000 TENTH CIRCUIT PATRICK FISHER Clerk
TIMOTHY MELLON,
Plaintiff-Appellee, v. Nos. 99-3292 and 00-3023 CESSNA AIRCRAFT COMPANY, (D.C. No. 96-CV-1454-JTM) (D. Kan.) Defendant-Appellant.
ORDER AND JUDGMENT *
Before HENRY, BRISCOE , Circuit Judges, and ALLEY , District Judge. **
Defendant Cessna Aircraft Corporation (Cessna) has filed two appeals
which this court has consolidated on its own motion. In the first appeal, Cessna
challenges the district court’s grant of summary judgment in favor of plaintiff
Timothy Mellon on Mellon’s breach of contract/promissory estoppel claim arising
out of Cessna’s refusal to perform service on Mellon’s aircraft. In the second
* This order and judgment is not binding precedent, except under the doctrines of law of the case, res judicata, and collateral estoppel. The court generally disfavors the citation of orders and judgments; nevertheless, an order and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3. ** The Honorable Wayne E. Alley, United States District Judge for the Western District of Oklahoma, sitting by designation. appeal, Cessna challenges a post-judgment contempt order issued by the district
court. We exercise jurisdiction pursuant to 28 U.S.C. § 1291. With respect to
Cessna’s first appeal, we reverse the district court’s entry of summary judgment
in favor of Mellon and remand with directions to enter summary judgment in
favor of Cessna. With respect to Cessna’s second appeal, we affirm in part and
reverse in part the district court’s post-judgment contempt order.
I.
Cessna is a Kansas corporation with its principal place of business in
Wichita, Kansas. Cessna is the world’s largest manufacturer of light and mid-size
general purpose jet aircraft. In addition to its manufacturing operations, Cessna
owns and operates a network of service centers throughout the United States that
provide maintenance service to owners and operators of Cessna jets. Cessna has
also licensed several independently-owned service centers in North America to
perform maintenance service on Cessna jets. In addition to the Cessna-owned and
Cessna-licensed service centers, there are approximately 70 fixed based operators
in the United States that are certified by the Federal Aviation Administration
(FAA) to service Cessna jets.
Mellon, a resident of Connecticut, currently owns a Citation I jet, serial
number 501-0116, manufactured by Cessna. The jet was manufactured and
delivered to its initial owner in 1979. Mellon purchased the jet in May 1989, and
2 became the tenth owner of record. Shortly thereafter, Mellon purchased and had
installed on the jet an FAA-approved modification. 1 The modification added new
fuel tanks to the jet to extend its flying range. According to Mellon, he contacted
Cessna prior to purchasing the modification and was assured that installation of
the modification would not prevent him from having his jet maintained and
serviced at Cessna-owned service centers.
In early 1992, Mellon began investigating additional FAA-approved
modifications that would extend his aircraft’s flying range. In particular, Mellon
focused on the Eagle 400 modification sold by Sierra Industries. The Eagle 400
modification, which essentially required an aircraft to be remanufactured,
included the installation of new engines (different from the original engines
certified and installed by Cessna), changes to the plane’s wing structure, and
changes to hundreds of other items. The modification resulted in different
calibrations and specifications for the systems that measured airspeed, fuel
quantity, and total gross weight. Prior to making a final decision, Mellon
telephoned Charles Knapp, the acting general manager of a Cessna-owned service
1 When an aircraft is approved by the FAA, a type certificate is issued under Part 23 of the FAA’s regulations. Modifications to a particular aircraft, whether designed by the manufacturer or a third party, must also be FAA- approved. When the FAA approves a modification, it issues what is referred to as a supplemental-type certificate (STC). Modifications are apparently often referred to simply as “STCs.”
3 center in Newburgh, New York, where Mellon regularly took his jet for service
and maintenance. Mellon’s purpose in contacting Knapp was to determine if
installation of the Eagle 400 modification would affect his ability to have his jet
serviced at Cessna-owned service centers. Mellon alleges he discussed with
Knapp in general terms the extent of the Eagle modifications he contemplated
making. Mellon further alleges he informed Knapp that the modification included
the installation of new engines. Mellon believes he also may have told Knapp the
modification included changing the jet’s battery, and he may have shown Knapp a
brochure regarding the proposed modification. Finally, Mellon alleges he
informed Knapp that he was interested in continuing to have as much service
work performed at Cessna-owned service centers as possible.
Although Knapp acknowledges that Mellon contacted him, his recollection
of the conversation is slightly different. Knapp alleges Mellon informed him that
the proposed modification included only the installation of new engines. 2 Further,
Knapp denies that he made any promises regarding service to Mellon’s jet at
Cessna-owned service centers. It is uncontroverted that Knapp stated he would
need to consult with Cessna management and get back in touch with Mellon. It is
unclear from the record whether Knapp contacted Cessna management officials in
2 According to Knapp, he was under the impression that Mellon’s jet had already received an Eagle modification to its wings, and Mellon was simply contemplating upgrading the engines as well.
4 Wichita regarding Mellon’s inquiry, or whether he simply contacted Cessna
personnel in other Cessna-owned service centers.
Knapp subsequently telephoned Mellon and informed him that Cessna
would continue to provide service for his aircraft if he purchased the proposed
modification. According to Mellon, Knapp informed him Cessna would continue
to perform routine maintenance, as well as phase inspections, on the aircraft. 3
The only exception, Mellon alleges, was for “parts that were added” during the
modification. App. at 244. Mellon admits he was informed by Knapp he would
have to seek service for such parts from Sierra. Knapp denies that he specified
the type of service work Cessna would perform on Mellon’s jet after the
modification, or which Cessna-owned service centers (aside from the Newburgh
service center) would provide service. Knapp further denies making any promises
to Mellon regarding the length of time the Newburgh service center would
continue to provide service on Mellon’s jet.
After the second conversation with Knapp, Mellon purchased the Eagle 400
modification for a price of approximately $1.2 million. Between the completion
of the modification in early 1993 and September 1995, the Cessna-owned service
center at Newburgh, New York, continued to provide service for Mellon’s jet.
3 An aircraft apparently is required by the FAA to undergo a phase inspection on a routine basis in order to determine whether it is airworthy.
5 This service included the performance of a phase inspection. Mellon also
received service from non-Cessna-owned service centers, including Sierra, during
this same period of time.
On September 22, 1995, Cessna issued Service Letter SL500-03-01 (the
Service Letter) to all owners of Citation jets equipped with modifications similar
to Mellon’s. The Service Letter stated that “STCs . . . developed without Cessna
involvement and engineering approval w[ould] not be supported by Cessna.” App.
at 318. The Service Letter further stated that “Citation aircraft that have installed
STCs that permit performance and/or alter limitations outside the Cessna FAA
Approved Flight Manual may be refused service at Cessna service centers,” and
that “Cessna-owned service centers w[ould] not provide support in the way of
installation, spare parts, repair, inspection or warranty for STCs not approved by
Cessna.” Id.
Cessna’s issuance of the Service Letter was apparently prompted by
problems encountered in providing service to Mellon’s aircraft and another
similarly-modified aircraft. Cessna-owned service centers were unable to obtain
information from Sierra that would have allowed them to perform corrective action
on defects found in areas affected by the Eagle 400 modification. Cessna officials
ultimately decided that, due to the complexity of the modification and Cessna’s
lack of knowledge, it would be unable to service those areas on an aircraft that had
6 been modified by the Eagle 400, or to provide phase inspections for aircraft with
the Eagle 400 modification. According to Cessna, if it performed service on
Mellon’s aircraft that FAA inspectors determined was beyond the authority of its
repair station certificates, Cessna could be subjected to enforcement actions by the
FAA that included both civil and criminal penalties.
As a result of the Service Letter, Mellon must seek service, including phase
inspections, from Cessna-authorized service centers (who are independently-owned
and thus not bound by the Service Letter) or other third-party servicers. It is
undisputed that Sierra provides service, including phase inspections, for aircraft
with the Eagle 400 modification. The cost of this service is less than the cost of
service at a Cessna-owned service center.
II.
Mellon filed this diversity action against Cessna in the United States District
Court for the District of Columbia on June 10, 1996. The complaint alleged
violations of Sections I and II of the Sherman Act (tying and monopolization) and
breach of contract. Pursuant to a motion filed by Cessna, the case was
subsequently transferred to the United States District Court for the District of
Kansas. The parties filed cross-motions for summary judgment with respect to the
breach of contract claim. On December 2, 1998, the district court denied Cessna’s
motion for summary judgment and granted Mellon’s cross-motion for summary
7 judgment on the breach of contract claim. In pertinent part, the district court
concluded that the uncontroverted facts demonstrated Mellon was entitled to
prevail under a theory of promissory estoppel:
Mellon spent $1.2 million on a modification to his airplane in reliance on Cessna’s promise of continued service. Cessna upheld its promise for over two years. In light of Cessna’s prior history in servicing Mellon’s modified aircraft, it would be unconscionable for Cessna to suddenly refuse service to Mellon, especially since Mellon would not have purchased the expensive modification had Cessna not promised continued service.
App. at 82. The district court further concluded that Mellon was entitled to
specific performance of the oral agreement with Cessna:
The injury he has sustained is the lack of security he feels from obtaining major repairs and phase inspections from Cessna, an injury that cannot be addressed through the payment of money damages. This should not impose an unreasonable burden upon Cessna in light of its prior compliance with its agreement to provide maintenance and phase inspections on Mellon’s modified aircraft. Any hardship Cessna may suffer in performing its agreement is not disproportionate to the value of the service Mellon seeks.
Id. at 83-84. As part of its order, the district court also granted Mellon’s motion to
dismiss his Sherman Act claims without prejudice. Cessna subsequently filed a
motion to alter or amend the judgment, which the district court denied. In doing
so, the district court also rejected Cessna’s request for “clarification of its
obligations under the contract”:
The court is not willing to rewrite the contract under the guise of ordering specific performance. The parties themselves know the scope of the contract, i.e., Cessna shall continue to service Mellon’s
8 airplane in the same manner it did before it issued the service letter. In other words, whatever service and maintenance Cessna was providing at the time it issued the letter, that is what it is obligated to do. The court does note that this contract is personal to Mellon. Upon Mellon’s sale, transfer or assignment of the aircraft to any other person or entity, the contract terminates.
Id. at 95-96.
Cessna appealed the district court’s order and filed a motion to stay the
district court’s order of specific performance pending appeal. This court denied
that motion on November 29, 1999. On November 30, 1999, Mellon filed an
emergency motion for contempt with the district court. In this motion, Mellon
alleged that despite the district court’s order, Cessna had continued to refuse to
service his aircraft. Mellon further alleged his aircraft needed a Phase 4
inspection by the end of November 1999, and a Phase 5 inspection by the end of
December 1999. When Cessna refused to service his aircraft, Mellon flew his
aircraft to Texas to obtain the needed service from Sierra. After conducting a
telephone hearing, the district court found that Cessna had acted in contempt of
the prior orders. Accordingly, the district court ordered Cessna
to pay plaintiff’s expenses in taking the aircraft to Texas, and for its phase inspections in Texas by Sierra. Second, following the completion of the Texas inspections, plaintiff [will be] permitted to present the aircraft for a second series of Phase IV and V inspections by Cessna. Cessna [is] ordered to complete these inspections as soon as it is reasonably possible. Third, Cessna [is] ordered to pay any reasonable attorney fees of plaintiff in bringing the . . . motion.
9 Supp. App. at 34.
III.
Case No. 99-3292 (Summary judgment rulings)
We review the district court’s grant of summary judgment de novo, applying
the same legal standard used by the district court. Simms v. Oklahoma ex rel.
Dep’t of Mental Health & Substance Abuse Servs., 165 F.3d 1321, 1326 (10th
Cir.), cert. denied, 120 S. Ct. 53 (1999). Summary judgment is appropriate “if the
pleadings, depositions, answers to interrogatories, and admissions on file, together
with the affidavits, if any, show that there is no genuine issue as to any material
fact and that the moving party is entitled to a judgment as a matter of law.” Fed.
R. Civ. P. 56(c). In applying this standard, we examine the factual record and
draw reasonable inferences therefrom in the light most favorable to the
non-moving party. Penry v. Federal Home Loan Bank, 155 F.3d 1257, 1261 (10th
Cir. 1998), cert. denied, 526 U.S. 1039 (1999).
Cessna contends the district court erred in granting summary judgment in
favor of Mellon on his breach of contract claim. 4 In support of this contention,
4 The parties agree, and we concur, that New York substantive law governs this dispute. See Boyd Rosene and Assocs. v. Kansas Mun. Gas Agency , 174 F.3d 1115, 1118 (10th Cir. 1999) (holding that federal court sitting in diversity “looks to the substantive law of the forum state, including its choice of law principles, to determine the applicable substantive law”); American States Ins. Co. v. McCann , 845 P.2d 74, 77 (Kan. App. 1993) (holding that, in Kansas, the (continued...)
10 Cessna argues the alleged contract violates New York’s Statute of Frauds and, in
any event, is too vague to be enforced. 5 Alternatively, Cessna argues that genuine
issues of material fact exist regarding (1) the nature and extent of Knapp’s promise
to Mellon (e.g., the extent and nature of service to be provided to Mellon, the
duration of the promise), (2) whether Mellon’s alleged reliance on Knapp’s
promise was reasonable and foreseeable to Cessna, and (3) the nature of Mellon’s
alleged injuries.
New York’s Statute of Frauds, codified in General Obligations Law 5-
701(a)(1), “requires an agreement to be in writing if it cannot be performed within
one year from the date of its making.” Kestenbaum v. Suroff, 704 N.Y.S.2d 260,
261 (N.Y. App. Div. 2000). If an oral agreement “may be ‘fairly and reasonably
interpreted such that it may be performed within a year, the Statute of Frauds will
not act as a bar however unexpected, unlikely, or even improbable that such
performance will occur during that time frame.’” Radnay v. Charge & Ride, Inc.,
697 N.Y.S.2d 664, 665 (N.Y. App. Div. 1999) (quoting Cron v. Hargro Fabrics,
694 N.E.2d 56, 58 (N.Y. 1998)). The determination of whether an agreement
4 (...continued) applicable law in cases involving contract construction depends on where the contract was made). 5 Although not asserted by Cessna and therefore not addressed here, it is not apparent from the record presented what, if any, consideration Cessna received for its alleged agreement to continue servicing Mellon’s aircraft.
11 satisfies the Statute of Frauds is a legal question under state law, see Joseph E.
Seagram & Sons, Inc. v. Shaffer, 310 F.2d 668, 675 (10th Cir. 1962), and is thus
subject to de novo review. See Salve Regina College v. Russell, 499 U.S. 225,
231 (1991) (holding that district court rulings on state-law issues are reviewed de
novo).
Cessna contends that Knapp’s alleged promise to provide continuing service
to Mellon violates the Statute of Frauds because it cannot possibly be performed
within one year. Mellon argues the promise could have been performed within one
year if his aircraft had been “taken out of service,” or if the aircraft had been
destroyed by “fire, storm, or other natural disaster.” Appellee’s Brief at 23.
Mellon also argues that even if the promise could not have been performed within
one year, application of the Statute of Frauds should be estopped because it would
be unconscionable to not enforce the relied-upon promise.
Assuming, arguendo, that Knapp made a promise of continuing service on
behalf of Cessna, we conclude that promise could not possibly have been
performed within one year. The alleged promise did not impose upon Cessna an
obligation to perform a single task that might or might not have been performed
with one year, but instead required Cessna to maintain Mellon’s aircraft for an
indefinite period of time. See, e.g., George Burke Co. v. Intermetro Indus. Corp.,
702 N.Y.S.2d 37, 38 (N.Y. App. Div. 2000) (concluding that alleged oral
12 agreement for plaintiff to become and indefinitely remain defendant’s exclusive
distributor of certain product could not be performed within one year and was thus
void under Statute of Frauds). Mellon suggests performance of the promise could
have been completed within one year if his aircraft had been destroyed or
otherwise taken out of service. We are not convinced, however, that this is
sufficient under New York law to avoid the Statute of Frauds. In applying the
Statute of Frauds, the New York courts have long distinguished “between
‘performance’ which fulfils [a] contract, and circumstances which defeat its
purpose.” Cohen v. Bartgis Bros. Co., 35 N.Y.S.2d 206, 208 (N.Y. App. Div.
1942). Here, the destruction of Mellon’s aircraft within one year of Knapp’s
alleged promise would have defeated the purpose of the promise, but would not
have fulfilled it. Thus, the hypothetical circumstances suggested by Mellon are
insufficient to defeat Cessna’s Statute of Frauds defense.
Even Mellon’s ability to sell his aircraft at any time and thereby terminate
the alleged agreement with Cessna is insufficient to satisfy the Statute of Frauds.
Under New York law, “a contract with a termination provision can be performed
within one year [and thereby satisfy the statute of frauds] if there is a possibility,
however slight, that the termination can be unilaterally effected within one year.”
William J. Conlon & Sons, Inc. v. Wanamaker, 583 F. Supp. 212, 216 (E.D.N.Y.
1984). There are two important limitations to this rule, however. First, “the
13 termination provision must be express” rather than implied. Id. The fact that an
agreement contains an implied termination provision “is insufficient to remove [it]
from the requirements of the Statute of Frauds.” Id. Second, the termination
provision must afford the party to be charged with the contract (i.e., the defendant)
the right to terminate. See, e.g., Special Event Entertainment v. Rockefeller
Center, Inc., 458 F. Supp. 72, 76 (S.D.N.Y. 1978) (“Were plaintiff to have a right,
based only upon an oral representation, to unilaterally extend the contract for more
than one year, the defendant would be at the mercy of such representation without
any protection from possible fraud.”); North Shore Bottling Co. v. C. Schmidt and
Sons, Inc., 239 N.E.2d 189, 191 n.3 (N.Y. 1968) (noting Statute of Frauds bars
oral agreements affording only the plaintiff an option to terminate); Belfert v.
Peoples Planning Corp. of America, 199 N.Y.S.2d 839, 842 (N.Y. Sup. Ct. 1959)
(noting where the right to terminate is limited unilaterally to the plaintiff, “it is
illusory, from the point of view of the defendant, to consider the contract
terminable or performable within one year”); Supplee v. Hallanan, 179 N.Y.S.2d
725, 726-27 (N.Y. Sup. Ct. 1958) (rejecting argument that oral contract providing
plaintiff a unilateral option to cancel within a year satisfied the Statute of Frauds).
The alleged agreement at issue in this case fails to meet either of these
requirements. The district court concluded the alleged agreement was “personal to
Mellon,” and “[u]pon Mellon’s sale, transfer or assignment of the aircraft to any
14 other person or entity, the contract terminates.” Addendum to Appt.’s Opening
Brief at 19. In other words, the district court concluded the alleged agreement
between Mellon and Cessna contained an implied provision affording Mellon the
unilateral right to terminate the agreement by selling, transferring, or assigning his
aircraft to another person or entity (the right to terminate was clearly not express,
in that there is no evidence it was ever discussed by Mellon and Knapp).
Obviously, the agreement afforded Cessna no such right. Instead, it was allegedly
bound to service Mellon’s aircraft for as long as Mellon owned it. Thus, even
assuming Mellon had an implied right to terminate the agreement and could have
done so within one year, that is not sufficient under New York law to satisfy the
Statute of Frauds.
We now turn to Mellon’s estoppel argument. New York law permits parties
in limited circumstances to rely on the doctrine of promissory estoppel as a means
of overcoming a Statute of Frauds defense to a breach of contract claim. See
Cyberchron Corp. v. Calldata Sys. Dev., Inc., 47 F.3d 39, 44 (2d Cir. 1995)
(outlining New York cases on the issue). A court may, at its discretion, “disregard
a mandate of the Statute of Frauds” if the plaintiff has suffered an “extraordinary
and unconscionable injury . . . beyond that which flows naturally from the non-
performance of the unenforceable agreement.” M.K.D. Capital Corp. v. Miller,
652 N.Y.S. 2d 919, 921-22 (N.Y. Sup. Ct. 1996). However, as the Second Circuit
15 has noted, the limitations on the availability of this theory of promissory estoppel
must be enforced because “[t]he strongly held public policy reflected in New
York’s Statute of Frauds would be severely undermined if a party could be
estopped from asserting it every time a court found that some unfairness would
otherwise result.” Philo Smith & Co. v. USLIFE Corp., 554 F.2d 34, 36 (2d Cir.
1977). The district court in this case rejected Cessna’s Statute of Frauds argument
on the grounds that Mellon had suffered unconscionable injury in reliance on
Knapp’s promise of continued service, and that uncontested evidence otherwise
supported Mellon’s promissory estoppel claim. Because Cessna’s Statute of
Frauds defense ultimately hinges upon these conclusions, we proceed to review
them in detail.
To reiterate, a plaintiff seeking to avoid New York’s Statute of Frauds and
recover under a theory of promissory estoppel must demonstrate an unconscionable
injury arising out of his reliance on the defendant’s promise. Readco, Inc. v.
Marine Midland Bank, 81 F.3d 295, 301 (2d Cir. 1996). Although the New York
courts have not specifically defined the phrase “unconscionable injury,” they have
indicated it encompasses only injuries “beyond that which flow[] naturally . . .
from the non-performance of the unenforceable agreement.” Merex A.G. v.
Fairchild Weston Sys., Inc., 29 F.3d 821, 826 (2d Cir. 1994); see also Philo Smith,
554 F.2d at 36 (suggesting unconscionable injury normally involves an
16 “irremediable change in position” on the part of the party seeking to avoid the
Statute of Frauds).
The district court concluded Mellon established this element by
uncontroverted evidence:
Mellon has suffered injury as a result of his reliance on Cessna’s promise to continue servicing his aircraft after he installed the Eagle 400 modification. Mellon can no longer obtain the service he so highly values at Cessna-owned service centers. The confidence he once had in the airworthiness and safety of his Citation no longer exists.
App. at 81. The district court also noted: “In light of Cessna’s prior history in
servicing Mellon’s modified aircraft, it would be unconscionable for Cessna to
suddenly refuse service to Mellon, especially since Mellon would not have
purchased the expensive modification had Cessna not promised continued service.”
Id. at 82.
After carefully examining the record, we reject the district court’s
conclusions. Although Mellon alleges he purchased the Eagle 400 modification in
reliance on Knapp’s alleged promises, “[t]his hardly seems the sort of irremediable
change in position normally associated with the doctrine of promissory estoppel.”
Philo Smith, 554 F.2d at 36. There is no dispute that Mellon has reaped, and
continues to reap, benefits from the Eagle 400 modification in terms of the
extended flying range it affords him. Although Mellon alleges his confidence in
the airworthiness and safety of his aircraft has diminished as a result of Cessna’s
17 refusal to service his aircraft, there is no evidence that the failure to enforce
Knapp’s alleged promises would effectively deprive Mellon of the use of his
aircraft or substantially diminish his ability to dispose of it. Mellon’s injury did
not result in an “irremediable change in position.” Id. Mellon’s diminished
confidence in the airworthiness of his aircraft could be remedied by replacement of
his aircraft. At best, Mellon has established that the market value of his aircraft
has been reduced by approximately $50,000 because he cannot have it serviced at
Cessna-owned service centers. 6 In our view, none of this evidence is sufficient to
establish an “unconscionable injury” under New York law.
Because Mellon has failed to present evidence sufficient to establish the
existence of an unconscionable injury, we conclude the district court erred in
granting summary judgment in favor of Mellon on his breach of
contract/promissory estoppel claim. 7 For this same reason, we conclude the
district court erred in denying Cessna’s motion for summary judgment based upon
its Statute of Frauds defense.
6 On this point, we note that the aircraft did not receive exclusive service from Cessna prior to Mellon’s ownership. Thus, it appears debatable whether Cessna’s alleged breach of promise had any effect on the market value of the aircraft. 7 In light of our conclusions regarding the unconscionable injury element, we find it unnecessary to address the remaining elements of Mellon’s promissory estoppel claim. Likewise, we find it unnecessary to address Cessna’s challenge to the district court’s award of specific performance in favor of Mellon.
18 Case No. 00-3023 (Contempt order)
Cessna challenges the district court’s December 28, 1999, contempt order.
Cessna asserts (1) its failure to conduct a Phase 5 inspection on Mellon’s aircraft
did not violate the district court’s specific performance order; (2) even if Cessna
did violate the district court’s specific performance order, it did so as a result of
the ambiguity of that order; and (3) “because the contempt sanctions are, in part,
criminal, reversal is required because the district court ignored virtually all of
Cessna’s due process rights.” Cessna’s Opening Brief at 14.
A district court’s resolution of a civil contempt motion is reviewed for abuse
of discretion. See Reliance Ins. Co. v. Mast Constr. Co., 159 F.3d 1311, 1315
(10th Cir. 1998). “‘Abuse of discretion is established if the district court’s
adjudication of the contempt proceedings is based upon an error of law or a clearly
erroneous finding of fact.’” Id. (quoting Reliance Ins. Co. v. Mast Constr. Co., 84
F.3d 372, 375-76 (10th Cir. 1996)). To prevail in a civil contempt proceeding, the
plaintiff must prove by clear and convincing evidence that (1) a valid court order
existed, (2) the defendant had knowledge of the order, and (3) the defendant
disobeyed the order. Id.
Cessna contends it did not disobey the district court’s specific performance
order because that order did not require it to conduct a Phase 5 inspection on
Mellon’s aircraft. According to Cessna, the district court’s specific performance
19 order “established . . . a safe harbor for Cessna to limit its servicing of Mellon’s
airplane – it did not have to service Sierra’s modifications (principally, the
reconfigured wings and the new engines).” Cessna’s Opening Brief at 14. Cessna
argues that “[t]he contempt sanction, in contrast, requires Cessna to perform a
Phase 5 inspection, which means servicing all of Mellon’s airplane, including
portions modified by Sierra.” Id. (emphasis in original).
We agree that the district court’s initial order granting summary judgment
and awarding specific performance in favor of Mellon was less than clear. In the
“Background” section of the order, the district court concluded that “Knapp told
Mellon that Cessna would continue to service his aircraft once he installed the
Eagle 400 modification, excluding, however, any maintenance on parts that were
added in the modification. As to those parts, Knapp advised Mellon that he would
have to return the airplane to Sierra for service.” App. at 77. In the section of the
order addressing the award of specific performance, the district court referred to
Cessna’s “agreement to provide maintenance and phase inspections on Mellon’s
modified aircraft.” Id. at 84. Nowhere did the district court specifically outline
Cessna’s continuing responsibilities to Mellon.
The district court clarified the specific performance order when it denied
Cessna’s motion to alter or amend judgment. Cessna’s motion to alter or amend
judgment asked the district court to “identify explicitly the services and
20 inspections [Cessna was] not obligated to perform under the agreement.” Id. at 91.
In response, the district court stated:
The facts are quite simple. Mellon bargained specifically for Cessna service before he purchased the modifications to his Citation. Cessna indicated it would continue to service the modified aircraft, with the exception of the modifications themselves. Based on Cessna’s promise to continue its service and maintenance, Mellon purchased the modifications and had them installed. Cessna did not state for how long it would continue to service and maintain Mellon’s modified airplane. Therefore, Mellon reasonably believed Cessna would continue to service and maintain his airplane for as long as he owned it. Cessna upheld its promise to service and maintain Mellon’s airplane until it issued the service letter in September 1995. *** Cessna has requested a clarification of its obligations under the contract. The court is not willing to rewrite the contract under the guise of ordering specific performance. The parties themselves know the scope of the contract, i.e., Cessna shall continue to service Mellon’s airplane in the same manner it did before it issued the service letter. In other words, whatever service and maintenance Cessna was providing at the time it issued the letter, that is what it is obligated to do. The court does note that this contract is personal to Mellon. Upon Mellon’s sale, transfer or assignment of the aircraft to any other person or entity, the contract terminates.
Id. at 94-96.
We conclude that Cessna, in refusing to perform a Phase 5 inspection on
Mellon’s aircraft, violated the district court’s orders. It is true, as pointed out by
Cessna, that the district court’s orders were inconsistent to some degree. On the
one hand, the court’s orders acknowledged Knapp did not promise that Cessna
would service or maintain parts added to Mellon’s airplane by the modification
21 process. On the other hand, the court’s orders required Cessna to maintain the pre-
Service Letter level of service; a level which effectively required Cessna to service
parts added to Mellon’s airplane during the modification process. Although the
district court never specifically directed Cessna to perform a Phase 5 inspection on
Mellon’s airplane, the gist of the above-outlined orders was that Cessna was to
continue providing the same level of service to Mellon that it had provided prior to
the 1995 Service Letter. It was uncontroverted that, after Mellon purchased the
Eagle 400 modification and before the 1995 Service Letter was issued, Cessna
performed a Phase 5 inspection on Mellon’s airplane. Thus, Cessna knew or
reasonably should have known that the district court intended that Cessna conduct
phase inspections on Mellon’s airplane. 8 We therefore conclude the district court
acted within its discretion in concluding that Cessna violated the specific
performance decree.
Cessna contends the district court “crossed the line between civil and
criminal contempt” when it “ordered Cessna to reimburse Mellon for Sierra’s
Phase 5 inspection without any opportunity for Cessna to purge its purported
8 Cessna appears to be correct in asserting that the district court effectively extended the promise allegedly made by Knapp to Mellon. That is, instead of acknowledging the exception expressly outlined by Knapp, the district court’s orders require Cessna to inspect parts added to Mellon’s airplane by Sierra. Nevertheless, the proper course of action was for Cessna to comply with the district court’s orders.
22 contempt.” Cessna’s Opening Brief at 24. Cessna further contends that “[b]y
imposing criminal fines and charging Cessna with criminal contempt before
evidence could be received or briefing completed, the district court violated
Cessna’s right to due process.” Id.
“[A] contempt order . . . is characterized as either civil or criminal
depending upon its primary purpose.” Law v. National Collegiate Athletic
Assoc., 134 F.3d 1025, 1030 (10th Cir.), cert. denied, 525 U.S. 822 (1998).
“Essentially, contempt is considered civil if the sanction imposed is designed
primarily to coerce the contemnor into complying with the court’s demands and
criminal if its purpose is to punish the contemnor, vindicate the court’s authority,
or deter future misconduct.” United States v. Lippitt, 180 F.3d 873, 876 (7th Cir.),
cert. denied, 120 S. Ct. 389 (1999); see United Mine Workers v. Bagwell, 512 U.S.
821, 827 (1994) (noting that civil contempt sanctions are “designed to compel
future compliance with a court order,” and “are considered to be coercive and
avoidable through obedience”); Gompers v. Buck’s Stove & Range Co., 221 U.S.
418, 441 (1911) (noting a sanction is civil if it is “remedial, and for the benefit of
the complainant,” and criminal if it is “is punitive, to vindicate the authority of the
court”). “A contempt fine . . . is considered civil and remedial if it either
‘coerce[s] the defendant into compliance with the court’s order, [or] . . .
compensate[s] the complainant for losses sustained.” Bagwell, 512 U.S. at 829
23 (quoting United States v. United Mine Workers, 330 U.S. 258, 303-04 (1947)).
“Where a fine is not compensatory, it is civil only if the contemnor is afforded an
opportunity to purge.” Id. at 829. “Thus, a ‘flat, unconditional fine’ totaling even
as little as $50 announced after a finding of contempt is criminal if the contemnor
has no subsequent opportunity to reduce or avoid the fine through compliance.”
Id. (quoting Penfield Co. v. SEC, 330 U.S. 585 , 590 (1947)).
Here, we conclude the monetary penalty imposed on Cessna (i.e., having to
reimburse Mellon for the cost of the Phase 5 inspection performed by Sierra) was
criminal, rather than civil. Although the penalty at first blush appears
compensatory, it was imposed before Mellon had sustained any losses, aside from
his travel expenses to Texas which were incurred prior to the hearing where the
sanctions were imposed against Cessna. As previously indicated, Mellon filed his
motion for contempt on November 30, 1999, approximately one day after this court
denied Cessna’s motion to stay judgment pending appeal. At that time, Mellon
was seeking to have a Phase 5 inspection performed on his aircraft, but had not yet
scheduled an inspection to be performed by either Sierra or Cessna. During the
hearing on Mellon’s motion, the district court permitted Cessna’s counsel to speak
with Cessna service representatives to determine if and when they could perform a
Phase 5 inspection on Mellon’s aircraft. The following day, December 1, 1999,
Cessna’s counsel informed the district court and Mellon’s counsel that Cessna’s
24 service center in Newburgh could perform a Phase 5 inspection on Mellon’s
aircraft on December 13, 1999. Rather than simply directing Cessna to conduct
the Phase 5 inspection on that date at Mellon’s expense, the district court allowed
Mellon to choose what he wanted to do. Mellon instead chose to have a Phase 5
inspection performed at Sierra (at Cessna’s expense) during the first week of
December, and then to have a second Phase 5 inspection performed by Cessna at a
subsequent date (at his own expense). The result of allowing Mellon to make this
choice deprived Cessna of the opportunity to purge its contempt and forced Cessna
to pay for the cost of the Phase 5 inspection to be performed by Sierra. In short,
the penalty imposed on Cessna was neither compensatory nor coercive, but rather
punitive. 9
Because the district court did not afford Cessna the requisite procedural
protections before imposing the monetary penalty, the sanction must be reversed.
“‘Criminal contempt is a crime in the ordinary sense, and criminal penalties may
not be imposed on someone who has not been afforded the protections that the
Constitution requires of such criminal proceedings.’” Law, 134 F.3d at 1030
(quoting Bagwell, 512 U.S. at 826-27). “The degree of procedural safeguards
9 The district court also directed Cessna to reimburse Mellon for the costs incurred in flying his aircraft to Texas and for his attorney fees in filing the contempt motion. Because these sanctions were clearly compensatory, we will allow them to stand.
25 required for criminal contempt proceedings varies based on the seriousness of the
penalty, but notice is a basic requirement for any criminal contempt proceeding.”
Id. (internal citation omitted). Here, the district court failed to give Cessna notice
that either the November 30, 1999, or the December 1, 1999, telephonic hearings
“would be of a criminal nature, as required by Fed. R. Crim. P. 42(b) which
provides that ‘[a] criminal contempt . . . shall be prosecuted on notice . . . [which]
shall state the essential facts constituting the criminal contempt charged and
describe it as such.’” Id. “Because the procedures required of criminal contempt
proceedings were not followed here,” we reverse the contempt sanction. Id.
Finally, Cessna contends that if this court “reverses the contempt order and
remands Mellon’s motion to the district court for a hearing, it also should require
appointment of a different district judge to conduct the hearing.” Cessna’s
Opening Brief at 31. We need not address Cessna’s contention at length because
there will be no remand for further contempt proceedings. Instead, the criminal
contempt sanctions are reversed. See Law, 134 F.3d at 1030-31 (reversing
criminal sanctions imposed by district court without remanding case for further
proceedings). This is consistent with the notion that “[a] criminal contempt
proceeding is an independent criminal action.” United States v. Peterson, 456 F.2d
1135, 1139 (10th Cir. 1972).
IV.
26 The court is in receipt of appellant’s counsel’s letter of supplemental
authority dated May 16, 2000, and appellee’s counsel’s letter of May 17, 2000, in
response. We remind both counsel that it is not the court’s responsibility to obtain
materials from the district court record. See 10th Cir. R. 10.3(B). Instead, it is
counsel’s responsibility to file the materials necessary for the court to properly
review the issues raised on appeal. See 10th Cir. R. 10.3(C)-(E), 30.1(A)(1).
V.
With respect to Case No. 99-3292, we REVERSE the judgment of the
district court and REMAND with directions to enter summary judgment in favor of
Cessna on Mellon’s breach of contract claim. With respect to Case No. 00-3023,
we AFFIRM the district court’s contempt order to the extent it requires Cessna to
pay for Mellon’s travel expenses to Texas and attorney fees for filing the contempt
motion, but REVERSE the contempt sanctions requiring Cessna to pay for the
Phase 5 inspection performed by Sierra.
Entered for the Court
Mary Beck Briscoe Circuit Judge