Seven Arts Pictures, Inc. v. Jonesfilm

• Decision Date: 18 February 2013
• Docket Number: No. 11-31124,11-31124
• Parties: SEVEN ARTS PICTURES, INCORPORATED, a Nevada Corporation, Plaintiff-Appellant, v. JONESFILM, a Pennsylvania Joint Venture, Defendant-Appellee, v. LEEWAY PROPERTIES, INCORPORATED, Garnishee-Appellant. JONESFILM, Creditor, v. PETER M. HOFFMAN, Interested Party-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

SEVEN ARTS PICTURES, INCORPORATED, a Nevada Corporation, Plaintiff-Appellant, v. JONESFILM, a Pennsylvania Joint Venture, Defendant-Appellee, v. LEEWAY PROPERTIES, INCORPORATED, Garnishee-Appellant.

JONESFILM, Creditor, v. PETER M. HOFFMAN, Interested Party-Appellant.

No. 11-31124

UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

FILED: February 18, 2013

Appeals from the United States District Court

for the Eastern District of Louisiana

USDC No. 2:09-MC-4814

Before HIGGINBOTHAM, SMITH, and ELROD, Circuit Judges.

JERRY E. SMITH, Circuit Judge:^*

It is a truth "universally acknowledged," that courts of justice have inherent power to require "submission to their lawful mandates." Anderson v. Dunn, 19 U.S. (6 Wheat.) 204, 227 (1821). The question is whether the district court abused its discretion by requiring Peter Hoffman to submit to its lawful mandates. Hoffman ignored the court's orders for months based on what he thought were "substantial justifications," which he neglected to share with the court. Because the court did not abuse its discretion in that or any other of its rulings, we affirm.

I.

Jonesfilm holds judgments of almost $1 million from state and federal courts in California against Hoffman and several companies controlled by or affiliated with him (the "judgment debtors"), including Seven Arts Pictures, Inc. ("SAP"). Upon learning that Hoffman and the other judgment debtors owned or controlled several Louisiana limited liability companies, Jonesfilm registered the judgments in federal court, seeking to enforce and collect on them. In October 2010, the court ordered Hoffman and the judgment debtors to produceSchedule K-1s, financial statements, and tax returns (the "charging orders"). Instead of objecting to the charging orders or asking the court to modify or vacate them, Hoffman just ignored them.

In January 2011, the district court garnished funds held on behalf of the judgment debtors by the Louisiana companies ("garnishees"), including Leeway Properties, Inc. ("Leeway"), and ordered the garnishees to answer garnishment interrogatories. The garnishees, including Leeway, were served with the garnishment order on January 27, 2011.

Leeway initially asserted that it held no garnished funds as of January 27.¹ Months later, however, Leeway admitted that it had actually held $174,769.56—received from a judgment debtor, and subsequently transferred to Hoffman, two other judgment debtors, and the judgment debtors' certified public accountants ("CPAs")—on that date. Leeway professed to know nothing about who owned the funds. The funds had been transferred without authorization, Leeway averred, by an employee seeking to cover up her embezzlement scheme.

In March, Jonesfilm asked the court to hold Hoffman and the judgment debtors in contempt for failing to comply with the charging orders, to compel the garnishees to completely and accurately answer the garnishment interrogatories, and for attorney's fees. In August, it asked the court to order Leeway and Hoffman to deliver the garnished funds immediately. The court referred both motions to a magistrate judge ("MJ").

The MJ issued his report and recommendations in October 2011, finding that the judgment debtors, including Hoffman, had disobeyed the charging orders by failing to deliver financial documents; that Leeway held $174,769.56of garnished funds when served with the garnishment order; that in violation of the garnishment order, $74,769.56 had been transferred to judgment debtors, including Hoffman, and $100,000 had been transferred to pay the judgment debtors' CPAs; that the garnishees' interrogatory answers were and continued to be inaccurate and incomplete; and that Jonesfilm had incurred necessary and reasonable fees of $21,357.50 to pursue its contempt and compulsion motions.

The MJ recommended that the district court hold Hoffman and the other judgment debtors in contempt for disobeying the charging orders; that it order Hoffman and Leeway to deliver $174,769.56 of garnished funds to Jonesfilm; that it compel Leeway to provide complete and accurate supplemental interrogatory answers; and that it award Jonesfilm $21,357.50 in attorney's fees. After considering objections, the court approved and adopted the MJ's report and ordered the recommended relief. SAP, Hoffman, and Leeway appeal.

II.

"We review contempt orders and sanctions imposed thereunder for an abuse of discretion." Whitcraft v. Brown, 570 F.3d 268, 271 (5th Cir. 2009). We review the district court's factual findings for clear error and its conclusions of law de novo. Id. The court's discretion to impose sanctions includes the authority to award damages² and attorney's fees.³ Reviewing the imposition of such sanctions, "we will not substitute our judgment for that of the district court." City of Jackson, 359 F.3d at 731. We also review discovery rulings, including rulings on motions to compel, for abuse of discretion. Wiwa v. Royal Dutch Petroleum Co., 392 F.3d 812, 817 (5th Cir. 2004).

III.

A.

"A movant in a civil contempt proceeding bears the burden of establishing by clear and convincing evidence (1) that a court order was in effect, (2) that the order required certain conduct by the respondent, and (3) that the respondent failed to comply with the court's order." Martin v. Trinity Indus., Inc., 959 F.2d 45, 47 (5th Cir. 1992). Hoffman and SAP acknowledge that the charging orders required them to disclose various financial documents to Jonesfilm and that they failed to do so. Nonetheless, they assert that the district court abused its discretion by holding them in contempt without considering the "substantial justification" for their conduct.⁴

The court did not abuse its discretion. A litigant may not "make himself a judge of the validity of orders which have been issued, and by his own act of disobedience set them aside, . . . [otherwise,] the 'judicial power of the United States' would be a mere mockery." Gompers v. Buck's Stove & Range Co., 221 U.S. 418, 450 (1911). When a party violates a court order without objecting to it, asking the court to modify or vacate it, or even informing the court why it cannot or will not obey it, the court may hold the party in contempt without first deciding whether the disobedience was justified.

None of the cases cited by Hoffman and SAP holds otherwise. In A&H Sportswear Co. v. Victoria's Secret Stores, Inc., 134 F. Supp. 2d 668, 670 (E.D. Pa. 2001), for example, the court noted that a party should not be held in contempt "where there is ground to doubt the wrongfulness of the [party's] conduct." The issue was whether there was an order binding on the party, not whether the party had some justification for defying the court. Id. The decision in In re C.B.S., Inc., 570 F. Supp. 578 (E.D. La. 1983),⁵ is similarly inapposite. There, the district court exercised its discretion not to hold CBS in criminal contempt for refusing to hand over a transcript of an upcoming 60 Minutes episode to a judge who needed to decide whether to enjoin the broadcast. Id. at 584—85. Among the reasons for the decision were that the judge's contemplated prior restraint would have been unconstitutional, that CBS had "continually objected" to the order, and that CBS had "little or no time to seek writs to appeal." Id. Even if Hoffman and SAP's proffered justifications were legitimate, they failed to object to the charging orders in any way in advance of the contempt proceedings.

Supposing Hoffman and SAP had objected to the charging orders, their proffered justifications are insubstantial. They claimed that (1) the district court lacked personal jurisdiction over Hoffman⁶ and that (2) they should not have been required to release tax returns, which, in SAP's case, were not available at the time.

1.

Hoffman maintains that the district court lacked jurisdiction over him because he resides in California and has not had continuous and systematiccontacts with Louisiana. Jonesfilm responds that Hoffman waived his objection to jurisdiction and is subject to general jurisdiction in Louisiana in any event.

Whether the court properly exercised jurisdiction over a defendant is a question of law that we review de novo. Bullion v. Gillespie, 895 F.2d 213, 216 (5th Cir. 1990). Where the alleged facts are disputed, "the party who seeks to invoke the jurisdiction of the district court bears the burden of establishing contacts by the nonresident defendant sufficient to invoke the jurisdiction of the court." Id. at 216—17 (quoting WNS, Inc. v. Farrow, 884 F.2d 200, 203 (5th Cir. 1989)). Where a court considers whether to dismiss for lack of personal jurisdiction without holding an evidentiary hearing, the party seeking to invoke jurisdiction must make only a prima facie showing, and the court must accept as true that party's allegations and resolve all factual disputes in its favor. Guidry v. U.S. Tobacco Co., 188 F.3d 619, 625 (5th Cir. 1999).⁷

"A federal court sitting in diversity must satisfy two requirements to exercise personal jurisdiction over a nonresident defendant." Pervasive Software, Inc. v. Lexware GmbH & Co. KG, 688 F.3d 214, 220 (5th Cir. 2012). "First, the forum state's long-arm statute must confer personal jurisdiction. Second, the exercise of jurisdiction must not exceed the boundaries of the Due Process Clause of the Fourteenth Amendment." Id. Because Louisiana's long-arm statute extends personal jurisdiction to the limits of due process, we need only con-sider the limitations of the Fourteenth Amendment. See Dickson Marine Inc. v. Panalpina, Inc., 179 F.3d 331, 336 (5th Cir. 1999).

No one contends that this suit arises out of Hoffman's contacts with Louisiana. Therefore, personal jurisdiction is proper only if his contacts with the state were "continuous and systematic," giving the state general jurisdiction over any action brought against him,⁸ and if it would be fair to subject him to suit there. See Wilson v. Belin, 20 F.3d 644, 647 (5th Cir. 1994). In evaluating...