Waffenschmidt v. MacKay
| Citation | 763 F.2d 711 |
| Decision Date | 21 June 1985 |
| Docket Number | No. 84-4012,84-4012 |
| Parties | Friedrich Wilhelm WAFFENSCHMIDT, et al., Plaintiffs-Appellees-Appellants Cross-Appellees, v. Jack W. MACKAY, Jr., et al., Defendants, Palmore Currey, II, et al., Appellants Cross-Appellees, First National Bank of Mount Vernon, Texas, Appellee Cross-Appellant Cross-Appellee. |
| Court | United States Courts of Appeals. United States Court of Appeals (5th Circuit) |
J. Robertshaw, Robertshaw & Meredith, Greenville, Miss., for Currey.
Phillip N. Cockrell, Texarkana, Tex., for First Nat. Bk. of Mt. Vernon.
Schwartz, Klink & Schreiber, James Schreiber, Stephen C. Edds, New York City, for Waffenschmidt.
W. Wayne Drinkwater, Lake, Tindall, Hunger & Thackston, Greenville, Miss., for First Nat. Bank.
Appeals from the United States District Court for the Northern District of Mississippi
Before CLARK, Chief Judge, GARWOOD, and HILL, Circuit Judges.
I
Nonparties who reside outside the territorial jurisdiction of a district court may be subject to that court's jurisdiction if, with actual notice of the court's order, they actively aid and abet a party in violating that order. This is so despite the absence of other contacts with the forum. We, therefore, affirm the judgment of the district court, holding that three of the respondents, D & K Motor Sports, Inc. ("D & K"), its owner, Johnson (collectively referred to as "Johnson"), and Currey were in contempt of court. We affirm the holding that a fourth respondent, the First National Bank of Mount Vernon, Texas ("the Bank"), did not aid or abet the defendant. We also affirm the court's rulings concerning attorney's fees and pretermit any ruling on the order permitting substitution of collateral for Johnson's supersedeas bond.
II
This appeal is the culmination of a series of proceedings directed toward halting the dissipation and secretion of assets that are the subject of the underlying suit. For the purposes of this appeal, to the extent that these facts relate to the events between MacKay and the Waffenschmidts, which are the subject of ongoing proceedings in the district court, we will assume as true the facts as stated in the Waffenschmidts' complaint. To the extent these facts relate to the district court's findings concerning the appellants, Currey, Johnson, and the Bank, we construe the evidence in a light most favorable to upholding the court's verdict. See Glasser v. United States, 315 U.S. 60, 80, 62 S.Ct. 457, 469, 86 L.Ed. 680 (1942).
The Waffenschmidts paid MacKay $4.5 million for stock in a Mississippi corporation and subsequently sued him for securities fraud. The court issued a temporary restraining order (TRO) on March 16, 1983, which enjoined MacKay and "all persons acting in concert" with him from:
[t]ransferring, concealing, or disposing of any funds received by them from [the Waffenschmidts], or any property acquired with such proceeds ... [or] permitting the concealment, transfer, disposal, secreting, dissipation, or encumbering of such assets; provided, however, that this order shall not preclude [those subject to this order] ... from carrying on or engaging in the usual and ordinary conduct of business....
The court extended the TRO through May 24, 1983. On May 27, after a three day hearing, the court granted a preliminary injunction which continued the interdictions of the TRO and also required MacKay to pay $430,000 of the proceeds from the stock sale into the court.
MacKay was unable to deposit these funds with the court because he had transferred them in the form of United States Treasury Notes with attached interest coupons to Currey ($103,500), Johnson ($100,000), and the Bank ($230,000) during the spring of 1983. These respondents independently received the proceeds in Texas sometime between March and June.
The court commenced a hearing on July 23, requiring MacKay to show cause why he should not be held in contempt. During the course of this hearing, plaintiffs deposed Currey, Johnson, and the Bank's president, Greer. The court found MacKay guilty of civil contempt and ordered him jailed on August 22 until he complied with the court's order. MacKay remained in jail until November 10, at which time the court released him on the ground that further incarceration would be punitive.
Meanwhile, the Waffenschmidts had attempted to retrieve these funds from Currey, Johnson, and the Bank. On March 21, 1983, plaintiffs served the Bank with a copy of the TRO, and on March 25 with notice of its extension. The Bank received a copy of the preliminary injunction on July 25. Currey and Johnson received copies of the TRO and preliminary injunction shortly after their depositions in July. The Waffenschmidts sent each respondent a copy of the Order of Contempt against MacKay by September 2.
Following the release of MacKay, the court issued an order on November 14 to Currey, Johnson, and the Bank to show cause why they were not in contempt. The court also ordered them to turn over the proceeds they had received from MacKay. These respondents moved to quash the order, alleging lack of jurisdiction among their defenses.
The court held a hearing on December 2, and Currey, Johnson, and the Bank entered special appearances to contest the court's jurisdiction. MacKay, Currey, Johnson, and Greer testified and had full opportunity to present evidence to support their positions. The court found that none of these respondents had contacts within Mississippi to subject them to traditional in personam jurisdiction. It found, however, that Currey and Johnson had notice of the court's orders, acted as agents, servants, and/or employees of MacKay, and acted in active concert and participation with him in dissipating the stock proceeds.
The court thus held that they were subject to the court's jurisdiction as persons enjoined by the court's order. Upon evaluating all the evidence presented at the hearing, the court found Currey and Johnson in contempt and imposed compensatory fines on Currey for $110,340.09 and on Johnson for $106,840.09. These amounts included a $6,840.09 award of attorney's fees against each.
In contrast, the court found that while the Bank had received notice of the TRO and acted negligently in its transactions with MacKay, it had not acted as MacKay's agent in active concert or participation with him. Therefore, the court held it lacked jurisdiction over the Bank, and could not hold it in contempt. The court declined to award either the Bank or the Waffenschmidts attorney's fees against the other party.
Currey and Johnson filed timely notice of appeal. The Waffenschmidts cross-appealed, seeking a civil contempt order and attorney's fees against the Bank. The Bank also cross appealed, petitioning for attorney's fees against the Waffenschmidts. Finally, upon application of Johnson, the court allowed him to pledge approximately $31,000 worth of boats, motors, and trailers to serve as security pending this appeal, in place of the traditional supersedeas bond for the full $106,840.09. The Waffenschmidts also appeal this substitution.
III
Currey, Johnson, and the Bank assert that the District Court for the Northern District of Mississippi lacks jurisdiction to hold these Texas residents in contempt of court. The court held that the respondents lacked sufficient contacts to exercise traditional in personam jurisdiction over them. None were named as parties in the underlying suit or had any contacts with Mississippi, and all lived beyond the territorial limits for service of process as prescribed in Fed.R.Civ.P. 4(f).
Currey and Johnson contend that the court's action in holding them in contempt violates International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945), requiring that before a court may assert jurisdiction over a person, the person must have sufficient minimum contacts with the forum such that "maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.' " Id. at 316, 66 S.Ct. at 158, quoting, Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 343, 85 L.Ed. 278 (1940).
The district court evaluated jurisdiction of Currey, Johnson, and the Bank pursuant to Fed.R.Civ.P. 65(d), which states in pertinent part:
Every order granting an injunction and every restraining order ... is binding only upon the parties to the action, their officers, agents, servants, employees, and attorneys, and upon those persons in active concert or participation with them who receive actual notice of the order by personal service or otherwise.
We must determine whether knowing violation of a court's injunction order by the agent of a party who aids and abets that party's violation of the order permits jurisdiction when no other contacts exist with the forum. We conclude that such jurisdiction is necessary to the proper enforcement and supervision of a court's injunctive authority and offends no precept of due process.
At the outset of our analysis, we note that the court exercised two types of jurisdiction. Only the second type is contested in this appeal.
Initially, the court asserted jurisdiction to determine whether it had personal jurisdiction of the parties. The power of a court to exercise this preliminary jurisdiction is well settled, and respondents do not dispute that the court had such authority. See United States v. United Mine Workers, 330 U.S. 258, 293, 67 S.Ct. 667, 695-96, 91 L.Ed. 884 (1947); Familia de Boom v. Arosa Mercantil, S.A., 629 F.2d 1134, 1137 (5th Cir.1980); Atlantic Las Olas, Inc. v. Joyner, 466 F.2d 496, 498 (5th Cir.1972); 13 Wright, Miller & Cooper, Federal Practice and Procedure, Jurisdiction 2d, Sec. 3536 (1984). Instead, they attack the court's determination that it had personal jurisdiction of respondents so as to properly hold Currey and Johnson in contempt. This latter finding is the subject of our further analysis.
Courts possess the inherent authority to enforce their own injunctive decrees. United...
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