U.S. v. Vitek Supply Corp.

• Citation: 151 F.3d 580
• Decision Date: 21 August 1998
• Docket Number: No. 97-4209,97-4209
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. VITEK SUPPLY CORPORATION, Nutritional Products & Services, Inc., and Animix, Inc., Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 580

151 F.3d 580

UNITED STATES of America, Plaintiff-Appellee, v. VITEK SUPPLY CORPORATION, Nutritional Products & Services, Inc., and Animix, Inc., Defendants-Appellants.

No. 97-4209.

United States Court of Appeals, Seventh Circuit.

Argued June 1, 1998.

Decided July 10, 1998.

Rehearing and Suggestion of Rehearing en banc Denied Aug.

21, 1998. ^*

Eric J. Klumb (argued), Thomas P. Schneider, Office of U.S. Atty., Milwaukee, WI, for Plaintiff-Appellee.

James M. Shellow, William H. Theis (argued), Shellow, Shellow & Glynn, Milwaukee, WI, for Defendants-Appellants.

Before CUDAHY, EASTERBROOK, and KANNE, Circuit Judges.

EASTERBROOK, Circuit Judge.

A jury convicted Vitek Supply Corp. and its president, Jannes Doppenberg, of smuggling into the United States animal food containing drugs that had not been submitted to the Food and Drug Administration for approval. Recently we affirmed the convictions and sentences. United States v. Vitek Supply Corp., 144 F.3d 476 (7th Cir.1998). Vitek was fined $350,000 and ordered to pay restitution of approximately $735,000 (most of this representing the value of meat that was destroyed as adulterated when Vitek's customers learned the truth about its products). The judge allowed Vitek to pay the fine at a rate of $6,000 per month and ordered it to pay $130,000 of the restitution within 30 days. Although the judgment was entered in January 1997, Vitek has paid nary a penny. It claims to be defunct and without assets--though after its sentencing it distributed approximately $250,000 to Doppenberg, its corporate affiliates, and its attorneys, draining a treasury that had been depleted during the months before sentencing. Some $115,000 of this $250,000 was both received and disbursed after sentencing. The district court held a hearing on the question whether Vitek had performed its obligations and, if not, whether its four-year term of probation should be revoked. At the end of this hearing the court entered an order that is brief enough to reproduce in full:

Based upon the testimony and other evidence received at the hearing held on October 7 and October 24, 1997, to determine whether Defendant Vitek Supply Corporation had violated the terms of its supervised release [sic: should be probation], the court finds that Vitek did violate the terms of its supervised release by willfully failing to pay either its fine or restitution. Vitek's failure to pay was intentional and without justification. The court finds that Vitek willfully divested itself of assets and passed its cash and other assets to related corporations including Nutritional Products & Services, Inc., Animix, Inc., Pricor, and Wilgenweg Beheer, B.V., which the court finds by clear and convincing evidence to be alter egos of Vitek because the companies share common ownership, control and assets. They operate out of the same facility and market the same or similar products with many of the same employees. Vitek carried out this course of action for the purpose of rendering itself unable to pay its fine or restitution and to deprive its victims of compensation. The Seventh Circuit has stated that "it is well settled that the fiction of a corporate entity must be disregarded whenever it has been adopted or used to circumvent the provisions of a statute." See Casanova Guns, Inc. v. Connally, 454 F.2d 1320, 1322 (7th Cir.1972).

Accordingly, the court ORDERS that, within ninety (90) days of the date of this order, Vitek and its alter egos shall pay the fine and restitution as ordered at sentencing or shall appear and show cause, if any they have, why they should not be held responsible for the continuing violation of Vitek's terms of supervised release. See 18 U.S.C. § 3613A(a)(1).

This order was entered on December 12, 1997. Ten days later Vitek, Nutritional Products, and Animix filed a joint notice of appeal.

Appellate jurisdiction is questionable. The court's order requires Vitek and its corporate affiliates to "pay the fine and restitution as ordered at sentencing or ... appear and show cause, if any they have, why they should not be held responsible" (emphasis added). A prospect of additional proceedings in the district court means that the decision is not final. Moreover, a principal argument advanced on appeal by Nutritional Products and Animix is that they lacked adequate notice of the proceedings and therefore did not have a chance to defend their interests, yet the purpose of a show-cause order is to give notice and offer a hearing. Although this show-cause order is an odd duck--for it purports to "find" (by clear and convincing evidence, no less) that Vitek and its corporate affiliates are alter egos--the fact remains that a hearing was offered to Nutritional Products and Animix. They apparently want two bites at the apple, first on this appeal and then, if we should affirm, in the district court. But the possibility of further proceedings just shows that the order is not final, and hence not appealable.

Or does it? This is not the first time we have encountered an appeal from an order of the form "X happens unless within Y days you do Z." In Otis v. Chicago, 29 F.3d 1159 (7th Cir.1994) (en banc), the judge entered an order stating that he would dismiss the case with prejudice unless within six months the plaintiff answered the defendant's interrogatories. Six months passed, the interrogatories were not answered, the district judge took no action, and the plaintiff appealed. We held that the expiration of the litigant's time to act caused the decision to become final even if the court neglected to enter a proper judgment. What happens, however, if the litigant appeals before the time has expired? That question came up in Albiero v. Kankakee, 122 F.3d 417 (7th Cir.1997), which held that the notice of appeal is subject to Fed.R.App.P. 4(a)(2): "A notice of appeal filed after the court announces a decision or order but before the entry of the judgment or order is treated as filed on the date of and after the entry." According to Otis, the end of the time for action acts as the "entry" of judgment even if the court does nothing; Albiero adds that the notice of appeal remains in limbo until then and springs into effect when the time ends, just as if it had been filed the day after the time ran. A notice of appeal does not waive the litigant's opportunity to avoid an adverse judgment by acting within the allotted time, or make conclusive a decision that as rendered is tentative. See United States v. Milwaukee, 144 F.3d 524 (7th Cir.1998). But if the decision resolves the litigation subject only to a time-limited option, then the expiration of the time coupled with a notice of appeal permits appellate review. Although Albiero was based on a rule that applies only to civil cases, functionally identical language appears in Rule 4(b): "A notice of appeal filed after the announcement of a decision, sentence, or order--but before entry of the judgment or order--is treated as filed on the date of and after the entry." Thus once the 90 days were over and the opportunity to show cause was gone, the notice of appeal took effect and brought the case here.

The district court muddied the waters a little by granting a stay, but without saying just what was being stayed. The order reads: "The government has withdrawn its opposition to Defendant Vitek's request for a stay of the court's order of December 12, 1997, requiring it to pay its fine and restitution within ninety days. Therefore, the court ORDERS that 'Defendant Vitek Supply Corporation's Motion for Stay Pending Appeal' (filed March 12, 1998) is GRANTED." This order grants a motion but does not specify the terms of the stay. Did the court mean to postpone the date allowed to show cause, or only to postpone the obligation to pay up? If the former, then perhaps the time has not expired and the order is therefore not final; if the latter, appealability is unaffected. We think that the latter reading is the right one, and for two reasons. First, although there were two stay motions--one by Vitek, and a second by Nutritional Products and Animix--the order grants only one, Vitek's. And Vitek had been ordered to pay; only Nutritional Products and Animix had been invited to show cause. Second, the stay was entered on April 16, more than a month after the 90 days had expired. By the time the judge acted, the judgment had become final and beyond the district court's power to recall. "The filing of a notice of appeal is an event of jurisdictional significance--it confers jurisdiction on the court of appeals and divests the district court of its control over those aspects of the case involved in the appeal." Griggs v. Provident Consumer Discount Co., 459 U.S. 56, 58, 103 S.Ct. 400, 74 L.Ed.2d 225 (1982). See also, e.g., Berman v. United States, 302 U.S. 211, 214, 58 S.Ct. 164, 82 L.Ed. 204 (1937).

The expiration of the 90 days does more than just create appellate jurisdiction. By allowing the time to pass the appellants abandoned their opportunity to have an evidentiary hearing in the district court. The district judge gave them 90 days to show cause, not 90 days plus whatever time was consumed by an appeal--if only because the decision would not be final, and an appeal therefore would be impossible, while the option of a hearing remained. If appellants wanted a hearing, they had to act during the 90 days. They chose to appeal instead, which was their right, but they must bear the consequences. And the principal consequence for our purposes is that their claim that the district court deprived them of notice and an opportunity to present evidence is so much hot air.

We start with Vitek's arguments on its own behalf. The firm was ordered to pay about $1 million, with $136,000 due the first month. It has paid nothing, despite spending $250,000 on other things since sentence was entered. Vitek has many debts and tells us that these are more pressing than the judgment in the...