United States v. Two General Electric Aircraft Engines

• Court: District Court, District of Columbia
• Decided: November 2, 2016
• Docket: Civil Action No. 2014-2213
• Status: Published

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

UNITED STATES OF AMERICA,

Plaintiff,

v.

TWO GENERAL ELECTRIC AIRCRAFT Civil Action No. 14-2213 {GK) ENGINES, WITH ENGINE SERIAL NUMBERS 695244 AND 705112, AND ALL RECORDS PERTAINING THERETO

Defendant.

Memorandum Opinion and Order

I . Background

This case began on December 30, 2014, when the United States

filed a Verified Complaint for Forfeiture in· Rem against two

General Electric aircraft engines with engine serial numbers

695244 and 705112 (the "Defendant Engines"). See Unopposed Order

to Repatriate the Defendant Properties ("Repatriation Order")

[Dkt. No. 32] (describing the history of this case). At the time

of the Government's Complaint, these engines were located in

Antalya, Turkey. Id.

Subsequently, Evans Meridians, Ltd. ("Evans," "Claimant") ,

filed a verified claim to the Defendant Engines.. Id. After filing

this claim, and unbeknownst to the Court or the Government, Evans

1 transported the Defendant Engines from Turkey to Shanghai, China,

on or about July 27, 2015. Id.

In response, and pursuant to the Government's Motion for Order

to Repatriate, [Dkt. No. 31], on January 27, 2016, the Court

ordered Evans to either repatriate the Defendant Engines to the

United States or post a bond of $6,000,000 by March 31, 2016.

Repatriation Order. To date, Evans has done neither. 1

Accordingly, the Government filed a Motion for Order to Show

Cause why Evans should not be held in contempt for violating the

Repatriation Order. Mot. for Order to Show Cause [Dkt. No. 41].

The Court granted the Government's Motion, scheduled a contempt

hearing, and ordered that Evans' director or another

representative with authority to direct the affairs of the

corporation attend. Order ("Show Cause Order") [Dkt. No. 47].

On October 24, 2016, the contempt hearing was held. Pursuant

to the Court's Show Cause Order, Eugeny Bespalov, an attorney from

Russia with a power of attorney to bind Evans, attended and

testified.

1 Evans' counsel candidly admits that Evans has not complied with the Court's Repatriation Order. Response to Mot. for Order to Show Cause ("Response") at p. 3-4 [Dkt. No. 44]; Unofficial Transcript of Show Cause Hearing ("Unofficial Transcript") at p. 17 ~~ 9-10. An unofficial transcript of the Show Cause Hearing was prepared by the Court Reporter and will be filed on ECF. 2 '>

II. Legal Standard

"The Court has both an inherent and a statutory power to

enforce compliance with its orders and may exercise that authority

through a civil contempt proceeding." SEC v. Bankers Alliance,

Corp., 881 F. Supp. 673, 678 (D.D.C. 1995) (citing inter alia

Shillitani v. United States, 384 U.S. 364, 370 (1966); United

States v. United Mine Workers of America, 330 U.S. 258, 330-32

(1947); 18 u.s.c. § 401). "A party commits contempt when it

violates a definite and specific court order requiring him to

perform or refrain from performing a particular act or acts with

knowledge of that order." Id. (internal citations and quotations

omitted).

"[T]he moving party has the burden of showing by clear and

convincing evidence that (1) a court order was in effect, (2) the

order required certain conduct by the respondent, and ( 3) the

respondent failed to comply with the court's order." Id. The

respondent "may assert a present inability to comply with the order

in question" as an affirmative defense, but in doing so, has the

burden of production. U.S. v. Rylander, 460 U.S. 752, 757 (1983);

Tinsely v. Mitchell, 804 F.2d 1254, 1256 (D.C. Cir. 1986)

("impossibility of performance constitutes a defense to a charge

of contempt"). To meet this burden, the respondent "must

demonstrate his inability to comply categorically and in detail."

3 Bankers Alliance, 881 F. Supp. At 678; SEC v. Showalter, 227 F.

Supp. 2d 110, 120 (D.D.C. 2002) (defendant cannot merely assert

inability, but must "establish that she has made . . . all reasonable

efforts" to comply (emphasis added)).

Even if the respondent cannot demonstrate that she is unable

to comply with the court's order, the court is required to consider

her "good-faith efforts to comply with [the] order in mitigation

of any penalty" the court might impose. Tinsely, 804 F. 2d at 1256.

"To show good faith, the [respondent's] duty includes the

obligation to be reasonably diligent and energetic in attempting

to comply with [the] court's order, and to pay what he can toward

the judgment." Showalter, 227 F. Supp. 2d at 120. A respondent

attempting to demonstrate that she has acted in good faith to

comply must provide "adequate detailed proof." Id.

Civil contempt is a remedial device, utilized to achieve

compliance with a court's order. Id. Therefore, the sanction

imposed is designed to secure compliance, not to punish. Bankers

Alliance, 881 F. Supp. at 678; United Mine Workers of America, 330

U.S. at 304 (the sanction imposed may be employed "to coerce the

defendant into compliance with the court's order").

4 III. Analysis

A. Evans Is in Contempt of the Repatriation Order

Here, there is no question that Evans has failed to comply

with the Court's Repatriation Order, as Evans readily conceded

that it has not. Response at p. 3-4; Unofficial Transcript of

Show Cause Hearing ("Unofficial Transcript") at p. 17 ~~ 9-10.

Instead, Evans raises two arguments as to why the Court should not

hold it in contempt.

First, Evans argues that it is impossible to comply with

either prong of the Court's Order. Response at 5-6. Evans

forthrightly admitted that it has produced no evidence,

whatsoever, demonstrating that it is unable to either repatriate

the engines or post a $6,000,000 bond. Id.; Unofficial Transcript

at p. 18 ~~ 3-10. Consequently, as Evans has not produced even

one shred of evidence in support of its argument that it is unable

to comply with the Court's Repatriation Order, it is obvious that

Evans cannot meet its burden to demonstrate impossibility. 2

Second, Evans argues that it is making good faith efforts to

comply with the Repatriation Order. Response at 7. In support of

2 The only evidence presented at the Show Cause Hearing was the testimony of Mr. Bespalov. When asked what assets Evans has, information that would be necessary for the Court to determine whether Evans has the ability to comply with the Repatriation Order, Mr. Bespalov stated that he did not have any information regarding Evans' assets. Unofficial Transcript at p. 44 ~ 4. 5 this argument, Evans asserts that it has an ownership interest in

an entirely different set of engines that are located in Miami

(the "Miami Engines") and that it is currently attempting use its

stake in those engines to meet the terms of the Repatriation Order.

Id. The Government responds that the Miami Engines have nothing

to do with this case and argues that Evans' conduct regarding

those engines does not constitute a good faith effort to comply

with the Repatriation Order. Reply to Mot. for Order to Show Cause

("Reply") at 3-4.

The Court agrees with the Government. Taken at face value,

Evans' offer is not a concrete step towards compliance with the

Court's Repatriation Order, but a mere proposal with an uncertain

chance of success. Evans asserts that it can sell the Miami

Engines, and use the funds to pay some indeterminate portion of

the $6,000,000 bond, or alternatively, post the Miami Engines

themselves as substitute collateral for the $6,000,000 bond. Yet,

by Evans' owns admission, it lacks physical possession of the Miami

Engines, and the third party that does have possession of them has

some sort of monetary claim against Evans which clouds Evans' title

to them.

Thus, Evans presently lacks the ability to either sell the

Miami Engines or post them as substitute collateral, and it is

wholly uncertain whether Evans will ever have the ability to do

6 so. All Evans has is a questionable plan for future action. That

plan does not constitute an effort at compliance, but is at best,

a proposal to make future efforts that, if successful, might

produce assets that would then enable Evans to make a good faith

effort at compliance.

Indeed, when Evans' conduct is viewed in its entirety, it is ' )

abundantly clear that it has not met its burden to demonstrate

that it made "all reasonable efforts to comply" with the Court's

Repatriation Order. Showalter at 120. A showing of good-faith

efforts by a contemnor requires her to bring forward evidence of

her ability to comply, so that the court may evaluate the efforts

she has actually made against those she had the capability to make.

Here, Evans' refusal to put forward such evidence dooms its

argument that it is making good faith efforts, just as surely as

it doomed its argument of impossibility.

Because Evans has failed to present any evidence of how much

it would cost to repatriate the Defendant Engines or what assets

Evans holds, the Court cannot conclude that Evans made all

reasonable efforts to repatriate the Defendant Engines.

Similarly, the absence of any evidence of Evans' financial state

makes it impossible for the Court to conclude that Evans has done

all it reasonably can to post the $6,000,000 bond. To show good

faith, Evans must demonstrate that it is "paying what [it] can."

7 Showalter at 120. Yet, the Court has no way of knowing what Evans

"can" pay.

The sole piece of evidence before the Court is the testimony

of Mr. Bespalov. However, he failed to identify any steps that

Evans has taken to repatriate the Defendant Engines to the United

States beyond a single inquiry to the Chinese company that !,- allegedly possesses them, asking for their return. Unofficial

Transcript at p. 46 ~~ 17-20. Given the absence of meaningful

evidence, the Court does not consider Evans' single request to

have the Defendant Engines returned a reasonable effort at

compliance.

In sum, Evans has failed to present any evidence showing that

it was "reasonably diligent and energetic in attempting to comply

with this [C]ourt's order." Id. Therefore, the Court holds that

Evans has not made a good faith effort to comply with the

Repatriation Order. As Evans admits that it has failed to comply

with the Repatriation Order and has failed to offer any evidence

suggesting that it is unable to comply or has made a good faith

effort to do so, the Court finds Evans in civil contempt.

B. The Goverrunent's Proposed Sanction is Appropriate

The Court now turns to the question of what sanction would be

sufficient to coerce Evans to comply with the Repatriation Order.

United Mine Workers of America, 330 U.S. at 304. At the Show Cause

8 Hearing, the Government sought a sanction of $15,000 per day until

Evans complies with the Repatriation Order.

In determining what constitutes an effectively coercive

sanction, the court "consider[s] the character and magnitude of

the harm threatened by continued contumacy, and the probable

effectiveness of any suggested sanction in bringing about the

result desired. /1 Id. In doing so, the court "consider [s] the

amount of [the contemnor 1 s] financial resources and the consequent

seriousness of the burden to that particular [contemnor] . /1 Id.

Where, as here, "the contemnor is the only one who possess the

relevant financial information, and chooses not to disclose it, 11

the Court's inability to consider the contemnor 1 s financial

resources is not a bar to imposing sanctions. See Richmark Corp.

v. Timber Falling Consultants, 959 F.2d 1468, 1481-82 (9th Cir.

1992) (internal quotation marks and citations omitted).

In this case, the harm created by Evans 1 continuing failure

to repatriate the Defendant Engines is substantial. The

Government's Complaint alleges that the Defendant Engines were

destined for Iran, and more specifically, the Islamic

Revolutionary Guard Corps-Qods Force, a designated Foreign

Terrorist Organization. See Complaint. If correct, each day that

the Defendant Engines remain outside the United States increases

9 the risk that they will arrive at their intended destination, and

thereby benefit a hostile organization.

In addition, the Government's proposed sanction of $15, 000

per day appears reasonably calculated to coerce compliance with

the Repatriation Order. If Evans were to refuse to comply for one

year, the sanction would total roughly $5.5 million dollars. This

amount is less than the $6,000,000 bond contained in the

Repatriation Order and falls between the disputed estimated values

of the Defendant Engines. See Response at 2, 4 n.3 (noting that

Evans values the engines at roughly $4,000,000, while the

Government likely values them at roughly $6,000,000). Therefore,

to the extent that Evans has any assets, which remains an open

question, the proposed sanction presents Evans with the choice of

repatriating Defendant Engines within a year or risk forfeiting

assets roughly equivalent to the value of Defendant Engines.

Thus, the Government's proposed sanction is reasonably

calculated to coerce Evans' compliance with the Repatriation

Order. 3

3 A sanction of roughly equivalent size was held reasonable under similar circumstances. See Richmark, 959 F. 2d 1468 (upholding sanction of $10, 000 per day against a foreign defendant who refused to provide information about its assets) 10 .:-.

IV. Conclusion

For the foregoing reasons, the Court holds Claimant Evans

Meridian in civil contempt of its Repatriation Order, and imposes

a sanction of $15, 000 per day until Evans complies with the

Repatriation Order. It is hereby

ORDERED, that Evans Meridians, Ltd. , shall be held in contempt

of Court for violating the Repatriation Order; and it is further

ORDERED, that the Court shall sanction Evans Meridians, Ltd.,

by requiring that it pay a fine of $15,000 per day, from the day

this Order issues until it complies with the Repatriation Order,

to the Registry of the Court.

GladySK:Sler November 2, 2016 United States District Judge

Copies via ECF to all counsel of record