Chicago Truck Drivers v. Brotherhood Labor Leas'g

• Decision Date: 10 January 2000
• Docket Number: No. 99-1913,DEFENDANTS-APPELLEES,PLAINTIFFS-APPELLANTS,99-1913
• Citation: 207 F.3d 500
• Parties: (8th Cir. 2000) CHICAGO TRUCK DRIVERS, HELPERS AND WAREHOUSE WORKERS UNION PENSION FUND, A PENSION TRUST; GEORGE OSSEY, TONY CULLOTTA, JOHN BRODERICK, AND WILLIAM H. CARPENTER, THE PRESENT TRUSTEES,, v. BROTHERHOOD LABOR LEASING, A MISSOURI CORPORATION; MFI LEASING COMPANY, A MISSOURI CORPORATION; FALLS CITY INDUSTRIES, INC., A KENTUCKY CORPORATION; AND MIDDLEWEST FREIGHTWAYS, INC., A MISSOURI CORPORATION, Submitted:
• Court: U.S. Court of Appeals — Eighth Circuit

Page 500

207 F.3d 500 (8th Cir. 2000)

CHICAGO TRUCK DRIVERS, HELPERS AND WAREHOUSE WORKERS UNION PENSION FUND, A PENSION TRUST; GEORGE OSSEY, TONY CULLOTTA, JOHN BRODERICK, AND WILLIAM H. CARPENTER, THE PRESENT TRUSTEES, PLAINTIFFS-APPELLANTS, v. BROTHERHOOD LABOR LEASING, A MISSOURI CORPORATION; MFI LEASING COMPANY, A MISSOURI CORPORATION; FALLS CITY INDUSTRIES, INC., A KENTUCKY CORPORATION; AND MIDDLEWEST FREIGHTWAYS, INC., A MISSOURI CORPORATION, DEFENDANTS-APPELLEES.

No. 99-1913

UNITED STATES COURT OF APPEALS FOR THE EIGHTH CIRCUIT

Submitted: January 10, 2000

Decided: March 24, 2000

Appeal from the United States District Court for the Eastern District of Missouri. [Copyrighted Material Omitted] Before Bowman and Loken, Circuit Judges, and Alsop, District Judge.¹

Alsop, District Judge.

Appellants, Chicago Truck Drivers, Helpers and Warehouse Workers Union Pension Fund and its present trustees (the "Fund"), moved before a magistrate judge for certification of facts supporting a finding of contempt against the Appellees and their sole officer and shareholder, Steven Gula. The magistrate judge denied the motion, finding that the Fund was "unable to produce evidence sufficient for a finding that the defendants have assets for making the judgment debt payments." We remand.

I.

The Fund sued Gula's corporations, but not Gula personally, for interim payments of withdrawal liability under the Employee Retirement Income Security Act of 1974 (ERISA), as amended by the Multiemployer Pension Plan Amendments Act of 1980, 29 U.S.C. §§ 1381-1405. The parties consented to have a magistrate judge² hear and decide the case. On December 4, 1996, the district court granted the Fund's motion for summary judgment and ordered the Appellees to commence making interim payments within sixty days.

When the Appellees failed to pay as ordered, the Fund sought to amend the judgment to require that the Appellees make all past-due interim payments plus interest. The Fund's motion also sought attorneys' fees and prospective relief, in the form of an order directing that the Appellees make future interim payments in accordance with a schedule determined by the court. On June 25, 1997, the district court granted the Fund's motion and issued an amended judgment that required Appellees to pay all past-due amounts, attorneys' fees and expenses, and future quarterly interim payments on a prescribed schedule commencing on August 1, 1997 and continuing through February 1, 2003. Both the initial and amended judgments contained no reference to either Gula specifically or the Appellees' officers or other agents generically.

On March 18, 1998, this Court affirmed without comment the judgments of the district court. Chicago Truck Drivers Pension Fund v. Brotherhood Labor Leasing, 141 F.3d 1167 (8th Cir. 1998) (table decision).³ The Supreme Court subsequently returned Appellees' petition for certiorari as untimely filed.

In November 1998, having received none of the court-ordered payments, the Fund filed a motion for contempt and sanctions against the corporate Appellees and Gula personally. The district court issued an order to show cause why they should not be held in contempt. At the hearing on the show cause order, the court took no testimony but instead ordered that Gula submit to a judgment debtor examination by way of deposition. See FED. R. CIV. P. 69(a). In ordering the deposition, the court observed that the Fund was "entitled to a fair opportunity to locate the assets of the judgment debtors, and to levy execution of them to the extent the law allows."

The Fund took Gula's deposition on February 9, 1999. He acknowledged that the Appellees' corporate books and accounts had been his responsibility since 1992. He confirmed that he prepared and signed the 1997 consolidated federal tax return for Appellee MFI Leasing Company ("MFI") and its subsidiaries.⁴ That tax return's balance sheet showed a $182,000 cash and cash equivalents balance as of December 31, 1997. Gula testified that he calculated this amount from MFI's bank statement. When asked to produce the statement, Gula replied that he had a practice of destroying all bank statements and canceled checks after filing the tax returns, "because of space."

The same tax return showed an $89,000 cash value life insurance balance as of December 31, 1997. Gula testified that he cashed out the policies sometime in April or May of 1998--after losing the appeal in this case--and endorsed the checks over to the Appellees' lawyers.

Gula also testified that one of the corporate Appellees received "somewhere around" $26,000 from a mortgage debtor "to generate cash to pay legal fees . . . somewhere in like April to August of '97." When asked what he did with this money, Gula replied that he wrote checks, from that and other of the Appellees' accounts, for "over the last few years, hundreds of thousands of dollars for attorneys fees." He estimated that the total amount of legal fees he paid was "a little bit more than three hundred thousand dollars."

Following Gula's deposition, the district court resumed its earlier hearing on the motion for contempt. Appellees' counsel essentially conceded that the Fund had established the following: (1) Appellees had made none of the ordered payments, and (2) at the time the payments were due, the Appellees had the financial resources to make at least some of those payments. Counsel explained that the Appellees, relying on the advice of their then-lawyers, used those resources to pay their legal fees instead.

The Fund presented this evidence concerning the Appellees' assets, and the dissipation of those assets. The Fund then rested, saying it had "no further evidence at this time." The court asked defense counsel if it had any evidence "in response to the pending motion." Defense counsel replied, "I don't either."

On February 17, 1999, the district court issued a two-page order denying the contempt motion. In that order, the court wrote:

During the pendency of the motion, the Court allowed the plaintiffs to conduct discovery of available information about the defendants' assets. Following this discovery, plaintiffs have been unable to produce evidence sufficient for a finding that the defendants have assets for making the judgment debt payments but did not do so.

The Fund appeals from this order.

II.

We review the denial of a contempt order for abuse of discretion. Independent Fed'n of Flight Attendants v. Cooper, 134 F.3d 917 (8th Cir. 1998). The party moving for contempt sanctions bears the burden of proving facts warranting a civil contempt order by clear and convincing evidence. Id.

The Fund argues that the district court abused its discretion by improperly placing the burden on the Fund to prove that the Appellees had a present ability to pay the amounts ordered. It argues that established contempt law only requires the movant to show that the alleged contemnors violated a court order, and the alleged contemnors bear the burden of showing their inability to comply.

The Appellees respond that the district court, in a proper exercise of its discretion, chose to enforce its payment orders through judgment debtor discovery and execution. They contend that the district court properly concluded that use of its contempt power would be "premature." They also argue that they sufficiently established a present inability to comply with the payment orders. Finally, they argue that they reasonably relied on their prior counsel's advice to pay counsel instead of the Fund.

III.

One of the overarching goals of a court's contempt power is to ensure that litigants do not anoint themselves with the power to adjudge the validity of orders to which they are subject. United States v. United Mine Workers, 330 U.S. 258, 290 n. 56 (1947). The Supreme Court has observed that, without the contempt power, "what the Constitution now fittingly calls the 'judicial power of the United States' would be a mere mockery." Id.

In a proceeding before a magistrate judge, disobedience of a lawful order "shall constitute a contempt of the district court for the district wherein the magistrate is sitting." 28 U.S.C. § 636(e). Although magistrate judges do not themselves have contempt power, they may certify any contemptuous acts or conduct to a district judge, who may then adjudge that person or party in contempt "by reason of the facts so certified." Id.

Civil contempt may be employed either to coerce the defendant into compliance with a court order or to compensate the complainant for losses sustained, or both. United Mine Workers, 330 U.S. at 303-04. Either incarceration or a fine may accomplish the purpose of coercion, while, "[w]here compensation is intended, a fine is imposed, payable to complainant." Id. at 304; see also United States v. Onan, 190 F.2d 1 (8th Cir.) (holding that a court has the power to impose a fine for civil contempt), cert. denied, 342 U.S. 869 (1951). In the ERISA context, civil contempt may also be employed to sanction those who disobey an interim withdrawal payment order. Central States Pension Fund v. Wintz Properties, Inc., 155 F.3d 868, 876 (7th Cir. 1998).⁵ It is with these purposes in mind that we turn to address what transpired in this case.

IV.

A party seeking civil contempt bears the initial burden of proving, by clear and convincing evidence, that the alleged contemnors violated a court order. Independent Fed'n of Flight Attendants v. Cooper, 134 F.3d 917, 920 (8th Cir. 1998). Here, it is undisputed that Appellees have not made any payments pursuant to the court's order. At that point, the burden should have shifted to the Appellees to show an inability to comply. United States v. Rylander, 460 U.S. 752, 757 (1983).

It is unclear whether the district court properly considered these burdens in this case. Nowhere in the order denying the contempt motion are the burdens articulated. Two of the court's statements suggest to us that it...