Combs v. Ryan's Coal Co., Inc.

• Decision Date: 02 April 1986
• Docket Number: 85-7751,Nos. 85-7743,s. 85-7743
• Citation: 785 F.2d 970
• Parties: 7 Employee Benefits Ca 1548 Harrison COMBS, John J. O'Connell and Paul R. Dean, as Trustees of the United Mine Workers of America Health and Retirement Funds, Plaintiffs-Appellees, v. RYAN'S COAL COMPANY, INC., a corporation; George M. Simmons; and Alan's Coal Sales, Defendants-Appellants.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 970

785 F.2d 970

7 Employee Benefits Ca 1548

Harrison COMBS, John J. O'Connell and Paul R. Dean, as Trustees of the United Mine Workers of America Health and Retirement Funds, Plaintiffs-Appellees, v. RYAN'S COAL COMPANY, INC., a corporation; George M Simmons; and Alan's Coal Sales, Defendants-Appellants.

Nos. 85-7743, 85-7751.

United States Court of Appeals Eleventh Circuit.

April 2, 1986.

William H. Mills, Redden, Mills & Clark, Gerald L. Miller, Birmingham, Ala., for defendants-appellants.

Robert Stropp, Jr., Patrick K. Nakamura, Birmingham, Ala., for plaintiffs-appellees.

Appeals from the United States District Court for the Northern District of Alabama.

Before JOHNSON and HATCHETT, Circuit Judges, and ALAIMO ^*, Chief District Judge.

JOHNSON, Circuit Judge:

This case requires that we determine the precise scope of a trial court's power to find parties in contempt and to order sanctions in order to secure compliance with that court's orders. It also requires that we determine what constitutes a final, appealable order in the context of contempt citations. For the reasons explained herein, we find that the appeal of the trial court's first order is improperly brought because that order is not final and hence may not be heard on interlocutory appeal. Accordingly, the action docketed as No. 85-7743 is DISMISSED. As to the trial court's two orders of November 25, docketed as No. 85-7751, we AFFIRM in all respects that portion entering a final civil judgment. As to that portion directing that appellant George Simmons be incarcerated, we VACATE AND REMAND for clarification or modification.

I.

Appellees, Trustees of the United Mine Workers Health and Retirement Funds ["the Trustees" or "the appellees"], filed an action under the Employee Retirement Income Security Act, 29 U.S.C.A. Sec. 1132(g)(2)(E) (1985) ["ERISA"], in 1983 against appellant Ryan's Coal Inc. ["Ryan's"] seeking both legal and equitable relief under a collective bargaining agreement due to Ryan's failure to make scheduled pension fund payments for its employees as required by 29 U.S.C.A. Sec. 1145.

Ultimately appellees and appellant George Simmons ["Simmons"], president and chief executive officer of Ryan's, agreed on a consent decree and order, which was entered on January 14, 1985, awarding the Trustees the desired remedies, including $492,754.91 to be paid in installments with interest, and injunctive relief preventing asset transfers except for valid and fair consideration. The trial court retained jurisdiction so as to monitor compliance. Ryan's made its January payment and submitted its financial statement as the agreement stipulated. It has made no payments since January and filed no reports since March.

On October 4, 1985, due to Ryan's failure to meet the terms of the consent decree, appellees filed a petition for contempt and a motion for a show cause order. Also named in the petition were appellants Alan's Coal Sales ["Alan's"], Simmons, and Simmons Machinery (another of George Simmons' endeavors). Simmons Machinery is not currently before us. The trial court issued the show cause order on October 10 and set the hearing date for November 8, 1985. Alan's, Simmons Machinery, and Simmons moved to quash or strike all orders. Answers were timely filed. This is the consolidated appeal from two hearings held to enforce the earlier consent decree. To the extent possible, the facts for each are put forth separately.

November 8 Hearing:

The key actor in this case is George Simmons. He is president, chief executive officer, and 80% stockholder of Ryan's, a contractor that mines coal from land leased to Alan's, a partnership that retails coal to the public. Ryan's is under contract to sell all of the coal it mines to Alan's. Simmons is a general partner, manager, and majority shareholder in Alan's. He is also president and sole stockholder in Simmons Machinery, and is involved in a number of other ventures.

From their creation until the trouble that led to the consent decree, Alan's and Ryan's were operated as separate businesses, with individual books and accounts, though they were both run out of the same building, where Simmons had his office and headquartered all of his various businesses. Due to audits pursuant to the collective bargaining agreement, this arrangement was generally known to appellees.

In March Ryan's ceased production and began winding down its business. It did not make the payment scheduled in the consent decree. It no longer had a bookkeeper, so the responsibility for bookkeeping and the writing of checks was assumed by Alan's. Separate books were maintained, but all of the money was run through Alan's accounts and checks for Ryan's debts were drawn from these accounts. When Ryan's closed in June, the cash balance of over $10,000 was transferred from Ryan's to Alan's account. All of Ryan's receivables were deposited into Alan's accounts. Total cash disbursements by Alan's for Ryan's obligations was $137,000, including employees' paychecks.

At closing, Ryan's had 1985 gross sales of $650,000, negative equity of almost $100,000, and assets of $1,620,000, 90% of which were receivables owed by Alan's. Earlier Alan's had been permitted to execute in favor of Ryan's a seven year promissory note for $1.5 million, interest free, owing to Ryan's for unpaid-for coal sales. At some point within three months prior to closing, Ryan's paid Simmons over $10,000 and paid $50,000 to Simmons Equipment Co., a corporation entirely owned and operated by Simmons.

The hearing on November 8 was to consider the failure to comply with the consent decree entered in January. Simmons Machinery was dismissed as a party. The court further considered whether Alan's or Simmons should be considered the successor and/or alter ego of Ryan's for purposes of enforcing the obligations under the January decree.

Simmons testified at the hearing that neither Ryan's nor Alan's had the money to make the required pension fund payments. He further testified that he personally could not pay the required amount. However, he did not provide access to any of the financial records for himself or for Ryan's for 1985. He argued that neither he nor Alan's should be held responsible for Ryan's debts because appellees knew of the close relationship and made no effort to include Simmons or Alan's in the January consent decree.

On November 13, the district court entered an order and findings of fact that Alan's was the successor and that Simmons was the alter ego of Ryan's. Alan's and Simmons were held in civil contempt along with Ryan's for failure to abide by the January consent decree. The remedy ordered was compensatory and gave the contemnors the opportunity to purge themselves of contempt prior to a second hearing, ordered for November 22, at which the court would determine compliance with the November 13 order and the amount of costs and fees to be assessed. The three appellants were ordered to pay appellees $226,411.73, to post a surety bond of $500,000 by November 22, and, at the request of the Trustees, to suffer an audit for unpaid pension contributions due for the period since March. Appellees were awarded attorney's and accountant's fees and costs.

November 22 Hearing:

Prior to this hearing both sides were to secure several items for the court's consideration. Appellees were directed to prepare and did submit affidavits enumerating costs and fees incurred. Appellants had been ordered to secure the $500,000 surety bond. All three appellants claim that they sought a bond and that all three were unable to secure one, due to their financial circumstances. Appellees maintain that only Ryan's sought the bond.

Despite the court's order, Simmons did not have an audit prepared of himself or of either company. Instead he had his accountant prepare an unverified personal financial statement. The accountant refused to certify the accuracy of that statement because it was inconsistent with Generally Accepted Accounting Principles: the figures were based solely on Simmons' representations, rather than on a standard audit; the accountant had no access to Simmons' current bank records; and the asset valuations were based on liquidation price rather than fair market value. Appellees contend, and the court below found, that this had the effect of significantly undervaluing Simmons' net worth. Appellees also claim that Ryan's sold coal to Alan's at prices significantly below fair market value.

The record below shows, inter alia, that Simmons has 100% ownership of Simmons Equipment Co. (which he claims is not producing a profit), significant holdings or interests in several other enterprises, including Calvert & Marsh Co. and Berry Mountain Mining Co. (the former he claims is insolvent and not operating; the latter he claims to be heavily in debt and about to go under), 2000 acres of land, a cattle farming operation, $800,000 worth of heavy equipment, and a $250,000 home. He also created an irrevocable trust for his children's benefit and loaned it $1 million. He claims that all of these assets are encumbered by various mortgages and collateral arrangements, or are owned jointly with his wife. He offered no independent accounting of his worth, no independent appraisals of the value of his tangible holdings, no recent bank records, no tax return for 1984, incomplete balance statements for some of his businesses, and he failed to reveal a $400,000 note owed him by Berry Mountain Mining.

In light of the failure to provide the information ordered at the November 8 hearing, the trial court on November 25 entered two orders. First, it found bad faith failure to comply with its earlier order. The court entered findings that the November 13 order was not a final order, that Simmons had failed to submit an audited and verified financial statement and had significantly understated his worth, that he had failed to provide financial records for Simmons Equipment...