Secretary United States Depart v. Altor Inc

• Court: Court of Appeals for the Third Circuit
• Decided: July 25, 2019
• Docket: 13-2621
• Status: Unpublished

Opinion

NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT ___________

No. 13-2621 __________

SECRETARY OF LABOR, United Sates Department of Labor, Petitioner

v.

ALTOR INC., and/or AVCON INC., and/or VASILIOS SAITES, individually, and NICHOLAS SAITES, individually, Respondents ____________________________________

On Application for Judgment of Civil Contempt (Agency No. OSHRC 99-0958) ____________________________________

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT ___________

No. 13-2622 __________

SECRETARY OF LABOR, United States Department of Labor, Petitioner

AVCON INC., VASILIOS SAITES; NICHOLAS SAITES, Respondents ____________________________________

On Application for Judgment of Civil Contempt (Agency Nos. OSHRC 98-0755 and 98-1168) ____________________________________

Argued April 26, 2019

Before: SMITH, Chief Judge, CHAGARES and SCIRICA, Circuit Judges

(Opinion filed: July 25, 2019)

Micole Allekotte Darren Cohen Daniel Hennefeld United States Department of Labor Office of the Solicitor 201 Varick Street Room 983 New York, NY 10014

Ronald J. Gottlieb [ARGUED] Heather R. Phillips John R. Shortall United States Department of Labor Office of the Solicitor S-4004 200 Constitution Avenue, N.W. Washington, DC 20210 Counsel for Petitioner

Kevin J. O’Connor Paul A. Sandars, III [ARGUED] Lum Drasco & Positan 103 Eisenhower Parkway Suite 401 Roseland, NJ 07068 Counsel for Respondent

___________

2 OPINION * ___________ SMITH, Chief Judge

The Secretary of Labor has filed two related petitions for judgments of civil

contempt against Altor, Inc. (“Altor”); Avcon, Inc. (“Avcon”); the companies’ president

and director, Vasilios Saites; and his son, Nicholas Saites (together, the “Respondents”).

We referred the Secretary’s petitions to a special master who has prepared a Report and

Recommendation (“R&R”). For the following reasons, we will: (1) overrule the

Respondents’ objections to the R&R; (2) approve and adopt the R&R; and (3) grant in

part and deny in part the Secretary’s petitions.

I.

This matter arises from penalties imposed against Avcon and Altor for workplace

safety violations under the Occupational Safety and Health Act (the “OSH” Act).

Specifically, in April 2011, following administrative proceedings, the Occupational

Safety and Health Review Commission (the “Commission”) ordered: (1) Avcon to pay

$77,350 in penalties; and (2) Avcon and Altor to pay $412,000 in penalties. 1 It is

undisputed that the corporations did not pay the penalties.

* This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not constitute binding precedent. 1 Avcon and Altor petitioned this Court for review of the Commission’s latter order. We denied the petition. Altor, Inc. v. Sec’y of Labor, 498 F. App’x 145, 149-50 (3d Cir. 2012) (not precedential).

3 Accordingly, the Secretary petitioned this Court to summarily enforce the

Commission’s orders. 2 We granted the Secretary’s petitions, ordering: (1) Avcon, its

officers and directors, successors and assigns, to pay the $77,350 penalty within ten

calendar days, see C.A. No. 11-4078 (order entered Oct. 4, 2012); and (2) Avcon, Altor,

Vasilios Saites, Nicholas Saites, and their successors to pay the $412,000 penalty within

same, see C.A. No. 11-4077 (order entered Nov. 15, 2012).3 It is undisputed that the

Respondents did not comply with these Decrees.

The Secretary then commenced these contempt proceedings. 4 In response to the

Secretary’s petitions, the Respondents asserted that they were unable to comply with our

Decrees because: (1) the corporate entity Avcon had dissolved; and (2) Altor did not have

sufficient assets.

We appointed United States Magistrate Judge Michael A. Hammer to serve as a

special master. Following discovery, Judge Hammer issued an R&R recommending that

2 The OSH Act provides that the Secretary may obtain summary enforcement of any final order issued by the Commission by filing a petition in the appropriate court of appeals. 29 U.S.C. § 660(b). As relevant to this case, the Act further provides that the Secretary may later seek to enforce a court of appeals’ decree in a contempt proceeding. Id. 3 The Respondents petitioned the panel for rehearing of its November 15, 2012 Decree, arguing that the Court had wrongfully interpreted the Commission’s underlying order as imposing “personal and individual” liability on Vasilios and Nicholas Saites. We denied the Respondents’ petition and reissued our November 15, 2012 Decree. See C.A. No. 11- 4077 (order entered January 15, 2013). 4 The Secretary’s contempt petitions relating to our October 4, and November 15, 2012 Decrees were docketed at C.A. Nos. 13-2622 and 13-2621, respectively. 4 we grant the Secretary’s request that this Court hold Altor and Vasilios Saites in

contempt for failing to comply with our November 15, 2012 Decree. He further

recommended that we provide specific directives to these respondents to ensure that they

satisfy their debt to the Commission to the extent that they are financially able. With

respect to Avcon and Nicholas Saites, however, Judge Hammer recommended that the

Court decline to hold them in contempt.

The Respondents submitted objections to the R&R. The Secretary submitted a

response to those objections and the Respondents submitted a reply.

II.

We have jurisdiction over the Secretary’s contempt petitions pursuant to 29 U.S.C.

§ 660(b). Civil contempt “is remedial, and for the benefit of the complainant.” Int’l

Union, United Mineworkers of Am. v. Bagwell, 512 U.S. 821, 827 (1994) (quotation

marks omitted). “Civil contempt sanctions are designed either to compensate the injured

party or to coerce the defendant into complying with the court’s order.” Roe v. Operation

Rescue, 919 F.2d 857, 868 (3d Cir. 1990). In order to establish that a party is liable for

civil contempt, the moving party must prove three “elements: “(1) that a valid order of

the court existed; (2) that the defendants had knowledge of the order; and (3) that the

defendants disobeyed the order.” Marshak v. Treadwell, 595 F.3d 478, 485 (3d Cir.

2009) (quotation marks omitted). These “elements must be proven by clear and

convincing evidence, and ambiguities must be resolved in favor of the party charged with

5 contempt.” John T. v. Del. Cty. Intermediate Unit, 318 F.3d 545, 552 (3d Cir. 2003)

(quotation marks omitted).

An alleged contemnor may defend against a contempt petition by coming forward

with evidence showing that it is unable to comply with the order in question. United

States v. Rylander, 460 U.S. 752, 757 (1983). The alleged contemnor must “introduce

evidence beyond a mere assertion of inability, and [] show that it has made in good faith

all reasonable efforts to comply.” Harris v. City of Philadelphia, 47 F.3d 1311, 1324 (3d

Cir. 1995) (quotation marks omitted).

We may appoint a special master to oversee discovery and “recommend factual

findings and disposition in matters ancillary to proceedings in the court.” See Fed. R.

App. P. 48(a). The parties in this case dispute whether we should review the special

master’s findings of fact de novo or for clear error. We need not resolve this dispute

because, for the reasons discussed below, we would uphold the special master’s factual

findings under either standard of review. 5

III.

Magistrate Judge Hammer concluded that the Secretary has met his burden of

establishing a case for civil contempt—that valid court orders existed, that the

5 In NLRB v. Local 825, we applied the clear error standard of review contained in Federal Rule of Civil Procedure 53 to the special master’s findings of fact. 659 F.2d 379, 383 (3d Cir. 1981). Rule 53 has since been revised and now generally requires de novo review of objections to factual findings. We have not yet had occasion to address whether the amendment to Rule 53 impacts the applicable standard of review under the 6 Respondents had knowledge of the orders, and that the Respondents disobeyed the

orders. 6 See Marshak, 595 F.3d at 485. According to Respondents, however, they

cannot be held in contempt because the corporate entities did not have the “financial

wherewithal to pay the penalties in question.” (Br. of Resp. in Opposition to the

Secretary’s Contempt Petitions at 11 (filed July 24, 2015)).

A. Avcon’s Inability to Comply with the Court’s October 4, and November 15, 2012 Decrees

The Secretary seeks to hold Avcon in contempt for its failure to comply with the

Court’s October 4, and November 15, 2012 Decrees. The Secretary recognizes that

Avcon dissolved in 2010, but argues that it nonetheless must comply with the Decrees

because the company did not take adequate measures to secure its liabilities before its

dissolution. The Secretary also argues that Avcon’s “successor” corporation, Avcrete,

Inc., should be liable for Avcon’s obligations.

Magistrate Judge Hammer rejected both of the Secretary’s arguments and

recommended that we accept Avcon’s inability defense. The Secretary does not object to

Judge Hammer’s recommendation in this regard, and we independently discern no error

circumstances here. 6 The Respondents initially argued that the Secretary had failed to establish a prima facie case of contempt because, in Respondents’ view, their inability to comply with the Decrees meant that they had not “disobeyed” them. In his R&R, however, Magistrate Judge Hammer viewed the Respondents’ inability argument as a defense under Rylander. Respondents do not object. 7 in his analysis. Therefore, we will deny the Secretary’s petitions to the extent they seek

to hold Avcon in contempt of our October 4, and November 15, 2012 Decrees.

B. Altor’s Inability to Comply with the Court’s November 15, 2012 Decree

The Secretary also asks us to hold Altor in contempt for its failure to comply with

the November 15, 2012 Decree. The Secretary contends that, contrary to the

Respondents’ representation, the company has the financial means to satisfy the

judgment.

After reviewing the evidence, Magistrate Judge Hammer concluded that the

Respondents had failed to demonstrate that Altor was unable to pay anything toward the

amount it owed to the Commission. In reaching this conclusion, Judge Hammer relied on

Altor’s bank records from October 2012 through March 2014, which reflect that the

company ended each month with a positive bank balance. Based on these balances,

Judge Hammer found that Altor could have made “at least relatively modest” payments

against the amount owed. (R&R at 27.) Judge Hammer thought it significant that Altor

never “even attempted to negotiate a reduced sum or payment plan with the Secretary.”

(R&R at 22.) For these reasons, he recommended that we hold Altor in contempt.

The Respondents have raised several objections to Magistrate Judge Hammer’s

analysis of Altor’s financial health during the relevant period. They argue that: (1) Judge

Hammer treated the tax returns of Avcon and Altor inconsistently by relying on Avcon’s

negative taxable income to conclude that it could not pay the Decrees, while essentially

8 ignoring the fact that Altor’s tax return for the year ending June 30, 2013, reflects a

negative taxable income in concluding that it could; (2) Judge Hammer placed too much

weight on Altor’s bank account balances without recognizing its monthly operating

expenses; (3) Judge Hammer mischaracterized the extent to which Altor used corporate

funds to pay certain family members’ medical expenses; (4) there is no legal authority

establishing that OSH Act penalties must be accorded priority over legitimate operating

expenses; and (5) Altor was “insolvent” when we issued our November 15, 2012 Decree,

and insolvency provides an absolute defense to the contempt petition.7

These arguments are beside the point. Magistrate Judge Hammer rejected Altor’s

inability defense because its bank account statements showed positive monthly balances

during the relevant period. Based on these balances, Judge Hammer concluded that Altor

had at least some money left at the end of each month to pay toward the Decree. It is

thus irrelevant that Altor reported negative taxable income in June 2013, that it met some

definition of “insolvent” at that time, or that it was paying various monthly expenses

necessary to maintain its business. See SEC v. Musella, 818 F. Supp. 600, 602 (S.D.N.Y.

7 The Respondents also argue that money judgments like the one at issue here are not enforceable by contempt, but are more appropriately enforced via a writ of execution under Rule 69(a) of the Federal Rules of Civil Procedure. (Obj. of Resp. p. 17 (citing Cohen v. Bd. of Trustees of the Univ. of Med. & Dentistry of N.J., 867 F.2d 1455, 1467 (3d Cir. 1989) (distinguishing generally between district court actions in equity, which can be enforceable via contempt, and actions at law for the recovery of money, which should be enforced by writ of execution under Rule 69(a))).) As the Secretary correctly notes, however, the Rules of Civil Procedure are not applicable here, and the OSH Act expressly states that the Secretary may seek contempt when an employer fails to comply 9 1993) (explaining that if an alleged contemnor is not “absolutely unable to comply” with

a court order due to poverty or insolvency, the contemnor “must pay what he or she

can”). Accordingly, we will overrule these objections.

C. Whether To Hold Vasilios and Nicholas Saites in Contempt

The Secretary next argues that in addition to the corporate entities, Vasilios and

Nicholas Saites must be held in contempt because they are responsible for the

corporations’ failure to comply. The Secretary further argues that, in any event, we

explicitly named Vasilios and Nicholas in our November 15, 2012 Decree directing the

Respondents to pay the $412,000 penalty.

Magistrate Judge Hammer agreed with the Secretary that Vasilios, the sole

director and officer of Altor, should be held in contempt for failing to ensure Altor’s

compliance with the Decree. 8 According to Judge Hammer, “[t]hat Altor has failed to

make a single payment against the Decree in more than four years is his responsibility as

much as Altor’s.” (R&R at 36.) With respect to Nicholas Saites, however, Judge

Hammer found that there was no evidence that Nicholas had the position or capacity,

from November 2012 forward, to direct the affairs of Altor. Therefore, Judge Hammer

recommended that we decline to hold Nicholas in contempt.

with a court of appeals’ decree enforcing an OSH Act judgment. See 29 U.S.C. § 660(b). 8 Because Judge Hammer had already recommended that we decline to hold Avcon in contempt, he considered only whether the individual respondents should be responsible for Altor’s failure to comply with our November 15, 2012 Decree. Because we agree with Judge Hammer that Avcon should not be held in contempt, we adopt this approach 10 The Respondents raise several objections to Judge Hammer’s recommendation

that we hold Vasilios in contempt. First, Respondents argue that we cannot hold Vasilios

in contempt because there is no evidence that he intentionally dissipated corporate assets

to avoid payment. We previously have explained, however, that “an alleged contemnor’s

behavior need not be willful in order to contravene the applicable decree.” FTC v. Lane

Labs-USA, Inc., 624 F.3d 575, 582 (3d Cir. 2010); see also Harley–Davidson, Inc. v.

Morris, 19 F.3d 142, 149 (3d Cir. 1994) (stating that good faith is not necessarily a

defense to contempt). Rather, in order to hold Vasilios in contempt, the Secretary need

only show that he was aware of our November 15, 2012 Decree and disobeyed it. See

Marshak, 595 F.3d at 485. Accordingly, we will overrule this objection.

Respondents next argue that Magistrate Judge Hammer’s analysis is inconsistent

with respect to whether Vasilios Saites can be made to pay the penalty imposed against

Altor. According to Respondents, although Judge Hammer ultimately concluded that

Vasilios should be made to pay Altor’s penalty, he stated earlier in his R&R that he had

“construed the Decrees to apply to Vasilios Saites and Nicholas Saites in their capacities

as officers or employees of Avcon and Altor, not to have required them individually to

satisfy the Decrees from personal assets.” (R&R at 6 n.4.)

We do not see any inconsistency in Judge Hammer’s analysis. We, like Judge

Hammer, read our Decree as naming the Saiteses only as officers or employees of Avcon

as well. 11 and Altor. It is well established that when a corporate officer fails to act on behalf of the

corporation to comply with a court order, the officer too may be held in contempt. See,

e.g., Wilson v. United States, 221 U.S. 361, 376 (1911) (“If [corporate officers] fail to

take appropriate action within their power for the performance of the corporate duty,

they, no less than the corporation itself, are guilty of disobedience, and may be punished

for contempt.”); Chi. Truck Drivers v. Bhd. Labor Leasing, 207 F.3d 500, 507 (8th Cir.

2000) (recognizing that corporate officers—even if they were not named in the court’s

original payment order—may be held in contempt for failing to comply with that order);

Max’s Seafood Café ex rel. Lou-Ann, Inc. v. Quinteros, 176 F.3d 669, 675-76 (3d Cir.

1999) (noting that a corporate officer could be held in contempt for failing to take actions

within his power to comply with a court order). Therefore, we will overrule this

objection.

In a related argument, the Respondents object to Magistrate Judge Hammer’s

recommendation that we order Vasilios to be sanctioned in the amount of $412,000; they

contend that Judge Hammer’s “automatic imposition of liability for Altor’s entire penalty

upon [Vasilios] Saites is not supported by the record or any legal analysis.” (Obj. of

Resp. p. 27.) We disagree. Because one of the purposes of civil contempt is to

compensate the petitioner for his loss, we are permitted to fashion a contempt sanction in

an amount equivalent to the amount of the underlying judgment. 9 See Elec. Workers

9 To be clear, the contempt sanction against Vasilios applies only insofar as Altor does 12 Pension Tr. Fund of Local Union # 58, IBEW v. Gary’s Elec. Serv. Co., 340 F.3d 373,

383 n.13 (6th Cir. 2003). To the extent Respondents argue that the recommended

sanction is excessive under the facts of this case, we agree with Judge Hammer that the

sanction fairly holds Vasilios Saites accountable for “[his] failure, for more than four

years, to make even a nominal effort to satisfy the November 15, 2012 Decree.” (R&R at

39.) In any event, as set forth in a separate order that follows, if Vasilios Saites’s current

financial circumstances preclude him from paying the total amount, he will have an

opportunity to demonstrate why he cannot do so.

Lastly, the Secretary does not object to Magistrate Judge Hammer’s

recommendation that we decline to hold Nicholas Saites in contempt. We agree with

Judge Hammer’s recommendation and will deny the Secretary’s petitions to the extent

they seek to hold Nicholas in contempt of our October 4, and November 15, 2012

Decrees.

IV.

For the foregoing reasons, we will: (1) overrule the Respondents’ objections to the

R&R; (2) approve and adopt Magistrate Judge Hammer’s findings of fact and

conclusions of law in the R&R; (3) grant the Secretary’s petition at C.A. No. 13-2621 as

not pay the entirety of the $412,000 penalty. In other words, each dollar that Altor pays towards satisfaction of the underlying Decree subtracts a dollar from the contempt sanction against Vasilios. Likewise, any dollar that Vasilios pays in satisfaction of the contempt sanction against him subtracts a dollar from the amount owed by Altor to satisfy the Decree. 13 to Altor, Inc. and Vasilios Saites and deny it as to Avcon, Inc. and Nicholas Saites; and

(4) deny the Secretary’s petition at C.A. No. 13-2622.