S. Suburban housing Ctr. v. Berry, 98-1764

• Decision Date: 02 August 1999
• Docket Number: No. 98-1764,98-1764
• Citation: 186 F.3d 851
• Parties: (7th Cir. 1999) SOUTH SUBURBAN HOUSING CENTER, an Illinois Not-For-Profit Corporation, Plaintiff-Appellant, v. ANNE BERRY, Defendant-Appellee
• Court: U.S. Court of Appeals — Seventh Circuit

Page 851

186 F.3d 851 (7th Cir. 1999)

SOUTH SUBURBAN HOUSING CENTER, an Illinois Not-For-Profit Corporation, Plaintiff-Appellant, v. ANNE BERRY, Defendant-Appellee.

No. 98-1764

United States Court of Appeals, Seventh Circuit

Argued December 11, 1998

Decided August 2, 1999

Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 93 C 6505--Milton I. Shadur, Judge.

Before BAUER, MANION and ROVNER, Circuit Judges.

ILANA DIAMOND ROVNER, Circuit Judge.

South Suburban Housing Center alleged that Anne Berry, a real estate agent, engaged in racial steering. The parties settled the case with a consent decree, which Berry promptly violated. The district court declined to enforce the decree in the manner requested by the Housing Center, and the Housing Center appealed. We affirm in part, vacate in part, and remand with directions.

I.

South Suburban Housing Center sued Anne Berry, a realtor, alleging that she steered Caucasian customers away from University Park, and steered African-American customers towards University Park and away from communities that were primarily Caucasian. Berry agreed to settle the case, and on August 11, 1994, she signed a consent decree, which was subsequently entered by the district court on August 23, 1994. Berry did not admit liability in the consent decree, but agreed to refrain from racial steering, and to document her contacts with prospective home buyers. She also agreed to pay the Housing Center damages in the amount of 10% of her commissions in excess of $25,000 per year for five years, and to deliver an accounting of her earnings to the Housing Center on a quarterly basis during that time. The decree specified possible penalties for its violation:

In the event that Berry is convicted of violating any of the terms of this Decree or is found guilty of violating any federal, state or local Fair Housing Ordinance, (other than any violation of a purely technical or minor nature) including any nonsolicitation ordinances, then Berry shall voluntarily surrender her real estate sales license and will refrain from engaging in real estate sales for a period of five years thereafter.

See Consent Decree, Appendix of Plaintiff- Appellant South Suburban Housing Center, at para. 19. Despite signing the consent decree, Berry failed to comply with any of her reporting or payment obligations. For more than a year, the Housing Center attempted to obtain voluntary compliance with the decree. After incurring considerable expense in these efforts, the Housing Center filed a civil contempt proceeding to enforce the decree and to obtain damages for the violations. In particular, the Housing Center sought monetary damages, attorneys' fees and the surrender of Berry's real estate license.

The district court found by clear and convincing evidence that Berry had wilfully violated the consent decree, and ordered that she immediately comply with each and every provision. The court entered judgment in the amount of $4,280.40, plus prejudgment interest. That amount was determined by calculating 10% of Berry's commissions above $25,000 for the years that she had failed to pay pursuant to the terms of the consent decree. Because the Housing Center was also seeking reimbursement for its staff time expended in seeking voluntary compliance as well as attorneys' fees for the contempt proceeding, the district court allowed Berry an opportunity to submit evidence in mitigation to possible additional sanctions. Berry paid the $4280.40 judgment, albeit late, but pleaded poverty in response to the Housing Center's request that she be assessed damages for staff time and attorneys' fees. She also objected to the voluntary surrender of her real estate license, arguing that the loss of her livelihood was an unenforceable penalty. Finally, she argued that surrender of the license was an inappropriate penalty for a technical violation of the decree, and that she had not violated the substance of the decree that she not engage in racial steering.

The district court agreed, characterizing surrender of the real estate license as "draconian." See Transcript of Proceedings Before the Honorable Milton I. Shadur, December 5, 1997, at 6. The court stated that if the Housing Center had evidence of violations of the "purpose of the Decree," the court would hold a hearing to consider license revocation. The court indicated that surrender of the license was appropriate only if Berry was continuing to engage in racial steering, and not if she committed a mere technical violation of the Decree such as failure to make payments or failure to meet the reporting requirement. See December 5, 1997 Tr. at 8-9.

In response to the Housing Center's request for compensatory damages for the amount of staff time expended seeking voluntary compliance, as well as attorneys' fees, the court directed Berry to submit a financial statement and tax returns. The court stated that, in part, the Housing Center's ability to obtain these damages was dependent on Berry's financial condition. See December 5, 1997 Tr. at 12. The court characterized the Decree as equitable, and declined to "impoverish" Berry even if the Decree required that damages be awarded. Id., at 13. A few months later, the parties were back before the district court because Berry had failed to provide the financial statement, and had provided only partial tax returns. The Housing Center once again sought surrender of Berry's real estate license, and requested a signed financial statement. The district court characterized the Housing Center's request for license surrender as "vengeance" and "vindictiveness." Transcript of Proceedings Before the Honorable Milton I. Shadur, February 27, 1998, at 6-7.

The court acknowledged that Berry had not provided an adequate financial statement showing her inability to pay additional damages, but declined to impose damages. Instead, the court found that the Consent Decree was a contract, and that the contract did not specifically provide for attorneys' fees, and did not provide for license surrender for any violation other than continued racial steering. Moreover, the district court noted, to the extent that the Consent Decree did require forfeiture of the license for a failure to pay or a failure to comply with reporting requirements, that provision would be an unenforceable penalty. Id., at 11-13. The court therefore denied the request for license forfeiture and also denied the request for attorneys' fees, but made its fee ruling contingent on Berry providing a personally verified financial statement immediately. The court clarified that "if the financial circumstances of the defendant here were other than what has been disclosed, I would very cheerfully, I can assure you, compel not only the payment of the amounts that she's obligated to pay and the carrying out of her reporting obligations that she is obligated to carry out, but also to create a situation in which it has not cost the South Suburban Housing Center something in order to do that." Id., at 16. No one disputes that to this day, Berry has not provided a personally verified financial statement as required by the district court. The Housing Center appeals.

II.

On appeal, the Housing Center asks us to find that the district court erred as a matter of law in denying compensatory damages for staff time solely on the basis of Berry's claimed inability to pay. The Housing Center contends that the district court abused its discretion in denying attorneys' fees to a prevailing party in these circumstances, again based totally on the defendant's claimed, but unsupported, inability to pay. Finally, the Housing Center urges us to find that the district court erred as a matter of law in holding that the license forfeiture provision of the consent decree was an unenforceable penalty.

A.

The parties agree that a court may impose sanctions for civil contempt in order to coerce compliance or to compensate the complainant for losses sustained as a result of the contumacious conduct. See United States v. United Mine Workers of America, 330 U.S. 258, 303-04 (1947); Connolly v. J.T Ventures, 851 F.2d 930, 932 (7th Cir. 1988). They also agree that a district court has broad discretion to fashion such an award, and may compensate the winning party for actual expenditures of staff time incurred in the successful prosecution of a contempt action. See Connolly, 851 F.2d at 933; Commodity Futures Trading Commission v. Premex, Inc., 655 F.2d 779, 785 (7th Cir. 1981). They part company, however, on the appropriate weight to be given the defendant's inability to pay. The Housing Center contends that, although financial hardship is an appropriate factor to consider when assessing a coercive civil fine, it can never be an absolute bar to compensatory damages resulting from the defendant's contumacious conduct. Berry maintains that the district court appropriately exercised its discretion by considering both the nature of the harm to the plaintiff and the probable effect of the sanctions on the defendant.

We cannot say that the district court erred as a matter of law because it considered the defendant's financial circumstances. See United Mine Workers, 303 U.S. at 303-04. When the purpose of sanctions in a civil contempt proceeding is compensatory, a fine, payable to the complainant, must be based on evidence of actual loss. Id. When the purpose is to make the defendant comply, the court must consider 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." Id., 303 U.S. at 304. "It is a corollary of the above principles that a court which has returned a conviction for contempt must, in fixing the amount of a fine to be imposed as a punishment or as a means of securing future compliance, consider the amount of defendant's financial resources and the...