Reich v. ABC/York-Estes Corp.

• Decision Date: 28 August 1995
• Docket Number: YORK-ESTES,94-3657,Nos. 94-3571,s. 94-3571
• Citation: 64 F.3d 316
• Parties: 2 Wage & Hour Cas.2d (BNA) 1514 Robert REICH, Secretary of Labor, United States Department of Labor, Plaintiff-Appellee, v. ABC/CORPORATION, doing business as Heavenly Bodies, Michael G. Welleck, individually, and Loumar Corporation, Defendants-Appellants, and Rita Erwin and Tammy Senter, Proposed Intervenors-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 316

64 F.3d 316

2 Wage & Hour Cas.2d (BNA) 1514

Robert REICH, Secretary of Labor, United States Department of Labor, Plaintiff-Appellee, v. ABC/YORK-ESTES CORPORATION, doing business as Heavenly Bodies, Michael G. Welleck, individually, and Loumar Corporation, Defendants-Appellants and Rita Erwin and Tammy Senter, Proposed Intervenors-Appellants.

Nos. 94-3571, 94-3657.

United States Court of Appeals Seventh Circuit.

Argued April 21, 1995.

Decided Aug. 28, 1995.

Janet M. Graney, Denise C. Hockley-Cann, Christine E. Zuehlke, Dept. of Labor, Chicago, IL, William J. Stone (argued), Anne Payne Fugett, Dept. of Labor, Office of Sol., Washington, DC, for Robert Reich in No. 94-3571.

Michael J. Rovell, Lisa I. Fair, Chicago, IL, Robert E. Bull, Altheimer & Gray, Chicago, IL, Shannon M. Heilman, Adamski & Conti, Chicago, IL, for ABC/York-Estes Corp., and Michael G. Welleck in No. 94-3571.

Harvey M. Silets, James M. Witz, Katten, Muchin & Zavis, Chicago, IL, for Loumar Corp., in No. 94-3571.

J. Stephen Walker (argued), Chicago, IL, for Rita Erwin and Tammy Senter in No. 94-3571.

Janet M. Graney, Denise C. Hockley-Cann, Christine E. Zuehlke, Dept. of Labor, Chicago, IL, William J. Stone (argued), Anne Payne Fugett, Dept. of Labor, Office of Sol., Washington, DC, for Robert Reich in No. 94-3657.

Michael J. Rovell (argued), Lisa I. Fair, Chicago, IL, Shannon M. Heilman, Adamski & Conti, Chicago, IL, for ABC/York-Estes Corp., and Michael G. Welleck in No. 94-3657.

Before BAUER, CUDAHY, and MANION, Circuit Judges.

BAUER, Circuit Judge.

ABC/York-Estes Corporation operates the Old Higgins Inn, an entertainment establishment featuring female exotic dancers, located in Elk Grove, Illinois. Pursuant to an investigation of ABC's pay practices at the Inn, the Secretary of Labor brought this suit against ABC for violations of the Fair Labor Standards Act. The complaint alleged that since August 1989, ABC has continuously violated the minimum wage, overtime, and recordkeeping provisions of the Act. See 29 U.S.C. Secs. 206, 207, 211, 215.

After ABC failed to respond to the Secretary's summons and complaint, the district judge granted the Secretary's motion for a default judgment. ABC then filed an appearance and requested that the district judge vacate the default judgment. Based upon ABC's express assurances that it would comply with all outstanding obligations and discovery requests, the district court vacated the default judgment. Those assurances were worthless; ABC committed a litany of discovery violations over the ensuing two years of this litigation. The Secretary again moved for sanctions and requested that yet another default judgment be entered. Pursuant to that motion, the magistrate judge issued a report recommending that the Secretary's motion be granted and a default judgment be entered. ABC offered no objection to that recommendation, and the district judge adopted the magistrate judge's report and recommendation and entered a default judgment.

The issues in this consolidated appeal do not require us to undertake anything as interesting as exposing the ins and outs of operating an exotic dancing establishment. Rather, the first issue requires us to examine a more pedestrian matter involving procedure. After the second default judgment was entered, the parties were preparing a status report for the district judge in anticipation of a hearing to determine liquidated damages. On the twenty-eighth day after the default judgment was entered, the Secretary's counsel revealed to ABC's lawyers that he was proceeding under the assumption that an injunction had been entered by the district judge enjoining ABC from future violations of the Act. ABC's counsel responded that it did not read the order that way and filed a notice of appeal.

This led to the unlikely, but not unprecedented, episode in which the counsel for ABC, an appellant, began his argument by urging this court to dismiss his client's appeal because it lacks jurisdiction. ABC's counsel submits that this argument is not as incongruous as it first may seem. ABC claims that there is no injunction and that it was put in this awkward position by the timing of the appellate process. ABC believed that it could not gain confirmation from the district judge in time and was forced into this appeal. ABC, therefore, looks to us, rather than the district judge, to decide whether it was actually enjoined by the district judge. The Secretary of course argues that the district judge indeed issued an enforceable injunction, that we have jurisdiction to hear ABC's appeal, and that, while we are at it, we should uphold the injunction. We find that there is no enforceable injunction, which compels us to dismiss this appeal for lack of jurisdiction.

That portion of the district judge's memorandum opinion and order on which the Secretary relies is as follows:

Plaintiff's Motion for Sanctions is granted against defendants ABC/York-Estes Corporation doing business as Heavenly Bodies and Michael G. Wellek, individually and doing business as Heavenly Bodies, for the reasons stated in the Report and Recommendation. The Answer filed May 3, 1993 by these defendants is stricken. The allegations of plaintiff's Amended Complaint are deemed admitted by these defendants. A default judgment on liability and findings as to all facts relating thereto are entered on the merits in favor of the plaintiff and against these defendants as prayed for in the Amended Complaint, which states: "[P]laintiff prays for judgment, pursuant to section 17 of the Act, permanently enjoining and restraining defendants, their officers, agents, servants, employees, and those persons in active concert or participation with them who receive actual notice of any such judgment, from violating the provisions of sections 6, 7, 11, 15(a)(2) and 15(a)(5) of the Act, and for such other and further relief as may be necessary or appropriate, including the restraint of any withholding of payment of unpaid minimum wage and overtime compensation, with interest as applicable, found by the court to be due under the Act to defendants' employees. Said interest is, where applicable, to run from the date such back wages become due until the date back wages are paid." (Amended Complaint Ad damnum, pp. 5-6.)

The Secretary argues that the district judge's intention to issue an injunction was effectuated by the incorporation of the amended complaint into the order. If that is so, there is no valid injunction for two distinct, yet related, reasons: the alleged injunction fails to satisfy the requirements of both Federal Rules of Civil Procedure 58 and 65(d).

The violations of Rules 58 and 65(d) in this case are, for the most part, straightforward and obvious. Here, the district judge issued no separate document setting forth the judgment enjoining ABC from future violations. Rule 58, however, requires one. It states: "Every judgment shall be set forth on a separate document. A judgment is effective only when so set forth and when entered as provided in Rule 79(a)." Without such a separate document, Rule 58 is violated and there is no enforceable judgment.

A violation of Rule 58 is not necessarily jurisdictional. The United States Supreme Court, in Bankers Trust Co. v. Mallis, 435 U.S. 381, 384, 98 S.Ct. 1117, 1119-20, 55 L.Ed.2d 357 (1978), held that compliance with Rule 58 is jurisdictional in the sense that it determines when the time for appeal begins to run, but it is not to be so rigidly enforced that parties may not waive it. Id. In that case, the parties agreed that the district court's failure to enter a judgment was simply an oversight. Id. at 387-88, 98 S.Ct. at 1121-22. The Court held that both parties could waive the "separate document" requirement of Rule 58 if the violation did not mislead or prejudice either party and therefore affirmed the Court of Appeals' exercise of jurisdiction. Id. at 387, 98 S.Ct. at 1121.

A more severe implication of a Rule 58 violation presented itself to this court in Bates v. Johnson, 901 F.2d 1424 (7th Cir.1990). In that case, the defendant, the State of Illinois, admitted that it had failed to comply even slightly with a consent decree entered in the district court regarding visitation rights of parents from whom custody of their children had been taken. Id. at 1426-27. Illinois then attempted to exercise an option under the consent decree to change its rules; this change would have effectively unshackled the state from the strictures of the decree. Id. To exercise this option, the consent decree required Illinois to gain the district judge's approval; it was not forthcoming. The district judge denied the state the change and awarded sanctions against it. Id. The district judge went one step further and orally "enjoined" Illinois from exercising its "escape hatch." Id. at 1427. The judge, however, refused to enter a judgment to that effect or even issue a written order. Id.

We held that this was an obvious violation of Rule 58 which rendered the "injunction" a nullity. Id. at 1428. Without a valid injunction from which to appeal, we dismissed the appeal "on the ground that the appellant does not seek relief from any provisions of the orders from which the appeals have been taken." Id. at 1429. In short, this violation of Rule 58 meant there was no judgment, final or otherwise, necessary to our appellate jurisdiction pursuant to 28 U.S.C. Sec. 1291. Our holding in Bates recognized, particularly in light of Mallis, that a party can elect to stand on the rules and deny this court jurisdiction if it so chooses.

Our decision in Bates is enough to compel the dismissal of ABC's appeal in this case. There is no separate document to satisfy Rule 58, and ABC does not wish to waive its right to strict enforcement of this rule. That resolves the issue.

But the violation of Rule 58 takes on greater severity when viewed alongside the violation of Rule 65(d). This rule, entitled Form...