Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-95-01058/USCOURTS-ca10-95-01058-0/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 

---

PUBLISH 

UNITED STATES COURT OF APPEALS 

TENTH CIRCUIT 

CONSUMERS GAS & OIL, INC., ) 

) 

Plaintiff-Appellee, ) 

) 

~ ) No. 95-1058 

) 

FARMLAND INDUSTRIES, INC., ) 

) 

Defendant-Appellant, ) 

) 

JAMES L. RAINEY; G. C. MATTHIESEN; ) 

HARRY D. CLEBERG; J.D. ATWOOD; ) 

TIM R. DAUGHERTY; STEPHEN P. DEES; ) 

G.E. EVANS; R W. HONSE; EARL L. ) 

KNAUSS; H. WAYNE RICE; B.L. ) 

SANDERS; and John Doe Directors 1-25, ) 

) 

Defendants-Appellees. ) 

Appeal from the United States District Court 

for the District of Colorado 

(No. 92-K-1394) 

~.,I LED 

United States Court o1 Appeals 

Teatb Circuit 

MAY 1 7 1996 

PATRICK FISHER 

Clerk 

Terry W. Schackmann, of Spencer Fane Britt & Browne, of Kansas City, Missouri, 

(Barry L. Pickens and Jennifer A. Downs, of Spencer Fane Britt & Browne, of Kansas 

City, Missouri, and Daniel F. Wake, of Daniel F. Wake, P.C., of Denver, Colorado, with 

him on the brief), for the appellant. 

Richard G. Sander, of Popham, Haik, Schnobrich & Kaufman, Ltd., of Denver, Colorado, 

(DavidS. Fein, of Popham, Haik, Schnobrich & Kaufman, Ltd., of Denver, Colorado, and 

Frank A. Taylor and Patrick A. Reinken, of Popham, Haik, Schnobrich & Kaufman, Ltd., 

of Minneapolis, Minnesota, with him on the brief) for the plaintiff-appellee. 

Before TACHA, HOLLOWAY, and BRISCOE, Circuit Judges. 

Appellate Case: 95-1058 Document: 01019277472 Date Filed: 05/17/1996 Page: 1 
BRISCOE, Circuit Judge. 

Farmland Industries, Inc., (Farmland) appeals a contempt order issued by the 

district court upon its finding that Farmland breached an order approving the parties' 

settlement agreement. Because the order approving the agreement did not contain the 

provision allegedly violated by Farmland, we reverse. 

I. 

Farmland is a Kansas corporation, organized and conducting business as a regional 

agricultural cooperative. Consumers Oil & Gas, Inc., (Consumers) is a former Colorado 

farm cooperative and a former member of Farmland. Consumers brought claims under 

various federal and state theories to recover equity that Farmland allegedly wrongfully 

refused to redeem. Shortly before trial, the parties entered into a Stipulation of 

Settlement, in which the parties agreed "[t]here shall be no press release and no 

communication with the media concerning the settlement of this Action, or concerning 

the Action itself, except a joint release to be approved by both Class Counsel and 

Defendant Farmland on or before July 7, 1993." Appellant's br. append. Cat 14. The 

district court approved the stipulation and its order discussed in detail the manner in 

which Farmland was to satisfy Consumers' claims. The order did not specifically discuss 

or explicitly refer to the prohibition of press releases and communications to the media. 

The order generally provided: "This Order shall be considered an implementation of the 

Stipulation of Settlement. The Stipulation of Settlement shall not be considered merged 

into this Order or superseded by it." Appellant's Append. I at 161. It further provided: 

Without affecting the finality of this Judgment in any way, the Court 

reserves continuing jurisdiction over the implementation and 

enforcement of the terms of the Stipulation of Settlement and any 

2 

Appellate Case: 95-1058 Document: 01019277472 Date Filed: 05/17/1996 Page: 2 
ld. at 162. 

issues relating to Subclass membership, notice to Class Members, 

distributions to Class Members, allocation of expenses among the 

class, disposition of unclaimed payment amounts, and all other 

aspects of this action, until all acts agreed to be performed under the 

Stipulation of Settlement shall have been performed and the final 

order of dismissal referenced above has become effective or until 

October 1, 1996, whichever occurs latest. 

After the court entered its order, Consumers' counsel filed another action against 

Farmland, on behalf of a separate class, in the United States District Court for the 

Southern District of Iowa (the Great Rivers litigation). Farmland subsequently published 

an article in its corporate newsletter under the heading of "Opinion" entitled "Lawsuit 

challenges cooperative governance." Appellant's br. append. D. The article discussed the 

Great Rivers litigation as well as the instant case. The newsletter also contained a "Q & 

A" section that discussed the instant case and some of the terms of the settlement 

agreement. Farmland sent the newsletter to approximately 150,000 customers, a few 

members of Congress, "some Kansas City area libraries," and "various national and state 

cooperative associations." Appellant's append. I at 221. 

Consumers moved for civil contempt, arguing the article violated the court's order. 

The district court issued a contempt citation in which it ordered Farmland to show cause 

why the court should not find it in contempt. Following a hearing, presided over by a 

different district judge than the one who authored the order, the court concluded the 

section of the stipulation prohibiting communications to the media was part of the district 

court's order, and Farmland breached it by discussing the case in its corporate newsletter. 

The court found Farmland in contempt and imposed sanctions. Farmland was ordered to 

pay Consumers' fees and costs related to the contempt proceeding, and to publish in its 

3 

Appellate Case: 95-1058 Document: 01019277472 Date Filed: 05/17/1996 Page: 3 
newsletter (1) a notice that it had been held in contempt of court and ordered to pay 

Consumers' fees and costs, (2) a notice that the court directed it to state that its comments 

were misleading, (3) a retraction of certain comments, and ( 4) an apology to the court and 

all concerned. 1 

II. 

Farmland argues the court erred (1) by predicating contempt on an alleged 

violation of a provision of the settlement agreement not explicitly set forth in the court's 

order, (2) by finding that Farmland violated the settlement agreement, (3) by ordering 

"criminal" sanctions that neither compensated Consumers' injuries nor coerced Farmland 

to end a continuing violation, and ( 4) by punishing speech deemed critical of a prior court 

decision. We first address whether we have jurisdiction to consider this appeal. 

A. 

Consumers argues we lack jurisdiction over Farmland's appeal. The parties 

dispute whether the contempt is civil or criminal; Consumers argues it is civil, but 

Farmland argues it is criminal. Generally, "a party to a pending proceeding may not 

appeal from an order of civil contempt except as part of an appeal from a final judgment, 

whereas an adjudication of criminal contempt is a final order appealable prior to final 

judgment." Pro-Choice Network of Western New York v. Walker, 994 F.2d 989,994 (2d 

Cir. 1993). See also Fox v. Capital Co., 299 U.S. 105, 107 (1936) (stating party to 

pending proceeding may not appeal from order of civil contempt except as part of appeal 

from final judgment); In re Christensen Engineering Co., 194 U.S. 458 (1904) (explaining 

1 This court granted Farmland's motion to stay enforcement of the contempt order 

pending resolution of this appeal. 

4 

Appellate Case: 95-1058 Document: 01019277472 Date Filed: 05/17/1996 Page: 4 
adjudications of criminal contempt appealable prior to final judgment). However, in 

O'Connor v. Midwest Pipe Fabrications, 972 F.2d 1204, 1208 (lOth Cir. 1992), we 

explained: 

On the question of finality, we are mindful of the general rule 

that "a finding of civil contempt is not reviewable on interlocutory 

appeal." Combs v. Ryan's Coal Co., 785 F.2d 970, 976 (11th Cir.), 

cert. denied sub nom, Simmons v. Combs, 479 U.S. 853, 107 S.Ct. 

187, 93 L.Ed.2d 120 (1986). Despite this rule, however, in the 

postjudgment stage of a case, " [ o ]nee the finding of contempt has 

been made and a sanction imposed, the order has acquired all the 

'elements of operativeness and consequence necessary to be 

possessed by any judicial order to enable it to have the status of a 

final decision"' under 28 U.S. C. § 1291 (1976). Shuffler v. Heritaae 

Bank, 720 F.2d 1141, 1145 (9th Cir. 1983) (quoting SEC y. Naftalin, 

460 F.2d 471, 475 (8th Cir. 1972)). 

In the instant case, the district court made a finding of contempt in the "postjudgment 

stage" and imposed specific, unavoidable sanctions. Consumers' arguments to the 

contrary are unpersuasive. Thus, the contempt order is appealable regardless of whether 

it is more properly characterized as criminal or civil. We turn to the merits ofFannland's 

appeal. 

B. 

"A district court has broad discretion in using its contempt power to require 

adherence to court orders." United States v. Riewe, 676 F.2d 418, 421 (lOth Cir. 1982). 

However, in determining whether a court committed legal error by violating limits on its 

contempt power, our review is de novo. O'Connor, 972 F.2d at 1209. 

Farmland contends contempt was improper because the district court's order did 

not incorporate the provision of the stipulation prohibiting press releases or 

communications to the media. Farmland argues for strict construction of Federal R. Civ. 

P. 65(d). In response, Consumers argues Kokkonen v. Guardian Life Ins. Co. of 

5 

Appellate Case: 95-1058 Document: 01019277472 Date Filed: 05/17/1996 Page: 5 
America, 114 S.Ct. 1673 (1994), overrules the authorities on which Farmland relies. 

Consumers misreads Kokkonen. Kokkonen addresses a jurisdictional question: whether a 

federal district court has "inherent power" or "ancillary jurisdiction" to enforce a 

dismissal-producing settlement agreement. Kokkonen holds that a court lacks subject 

matter jurisdiction to enforce. a settlement absent an independent jurisdictional basis or a 

reservation of jurisdiction in the order dismissing the action. Kokkonen neither prohibits 

nor discourages strict construction of Rule 65( d). 

Farmland allegedly violated a term of a settlement agreement approved by a 

judicial order. "Standing alone, a settlement agreement is nothing more than a contract; 

the imprimatur of an injunction is required to render it a consent decree enforceable 

through contempt." D. Patrick v. Ford Motor Co., 8 F.3d 455, 460 (7th Cir. 1993). Rule 

65( d) governs the form and scope of injunctive orders. "[T]he term 'injunction' in Rule 

65(d) is not to be read narrowly but includes all equitable decrees compelling obedience 

under the threat of contempt." 11A Wright, Miller & Kane, Federal Practice and 

Procedure§ 2955, at 309 (1995). 

Rule 65( d) provides in part: "Every order granting an injunction and every 

restraining order shall set forth the reasons for its issuance; shall be specific in terms; 

[and] shall describe in reasonable detail, and not by reference to the complaint or other 

document, the act or acts sought to be restrained. (Emphasis added) The rule is phrased 

in mandatory language. "[It] expressly proscribes the issuance of an injunction which 

describes the enjoined conduct by referring to another document." Thomas y. Brock, 810 

F.2d 448, 450 (4th Cir. 1985). The proscription protects those who are enjoined by 

informing them of the specific conduct regulated by the injunction and subject to 

6 

Appellate Case: 95-1058 Document: 01019277472 Date Filed: 05/17/1996 Page: 6 
contempt. ~ 11A Federal Practice and Procedure§ 2955, at 310. 

The Seventh Circuit has held that a provision of a settlement agreement not 

explicitly set forth in a judicial order is not enforceable by contempt. H.K. Porter Co. y. 

National Friction Products, 568 F.2d 24 (7th Cir. 1977). Similarly, it has held that 

merely retaining jurisdiction to enforce the agreement is not enough to transform it into 

an order enforceable by contempt. D. Patrick, 8 F.3d at 461. Both holdings faithfully 

apply the plain language of Rule 65(d) by prohibiting incorporation by reference. In H.K. 

Porter, the Seventh Circuit explained generally as follows: 

Because of the risks of contempt proceedings, civil or criminal, 

paramount interests of liberty and due process make it indispensable 

for the chancellor or his surrogate to speak clearly, explicitly, and 

specifically if violation of his direction is to subject a litigant ... to 

coercive or penal measures, as well as to payment of damages. 

568 F.2d at 27. 

The Seventh Circuit strictly construes Rule 65( d). ~ alsQ Seattle-First-Nat. Bank 

v. Manges, 900 F.2d 795, 799 (5th Cir. 1990) (strictly construing "no-reference" 

requirement of Rule 65(d)); Thomas, 810 F.2d at 450 (same). cr. Hartford-Empire Co. y. 

United States, 323 U.S. 386, 410 (1945) (eliminating part of injunction enjoining 

appellants "from violations 'as charged in the complaint"'). Not all circuits strictly 

construe Rule 65(d). ~'~'Williams v. City of Dothan, 818 F.2d 755, 761 (11th Cir.) 

(explaining "Rule 65( d) should not be applied strictly; rather the inquiry should be 

whether the parties subject to the injunctive order understood their obligations under the 

order"), modified, 828 F.2d 13 (lith Cir. 1987). This court has not clearly indicated 

whether Rule 65( d) should be construed strictly. Cf. Citizen Band Potawatomi Indian 

Tribe of Oklahoma v. Oklahoma Tax Com'n, 969 F.2d 943, 946 n.3 (lOth Cir. 1992) 

7 

Appellate Case: 95-1058 Document: 01019277472 Date Filed: 05/17/1996 Page: 7 
(noting order failed to comply with Rule 65(d), but avoiding issue because parties did not 

argue violation of Rule 65( d), because all concerned knew scope of injunction, and 

because order described in "reasonable detail" the conduct enjoined); Commercial Sec. 

Bank v. Walker Bank & Trust Co., 456 F.2d 1352, 1356 (lOth Cir. 1972) (stating 

generally that "Rule 65 must be strictly complied with"); Munitions Carriers Conference 

v. American Farm Lines, 440 F.2d 944, 947-48 (lOth Cir. 1971) (discussing injunction 

that referred to enjoinee's duties under various statutes). 

Rule 65( d) is clear. "Every order granting an injunction ... shall describe in 

reasonable detail, and not by reference to the complaint or other document, the act or acts 

sought to be restrained." (Emphasis added.) After reviewing the authorities presented by 

the parties and conducting our own research, we are persuaded the better view is to 

construe Rule 65(d) strictly and thereby give effect to its plain, mandatory language. By 

reaching this result, we refrain from substituting ad hoc uncertainty for the rule's 

uniformity and clarity, and we advance two important functions performed by the rule: 

(1) to prevent confusion on the part of those faced with injunctive orders and (2) to aid 

the appellate court in defining the bounds of the injunctive relief, cf. Schmidt v. Lessard, 

414 U.S. 473, 476-77 (1974) (per curiam) (discussing functions Rule 65(d) designed to 

perform). 

m. 

Although the district court specified in its order that it retained jurisdiction, and 

although it set forth some provisions of the parties' settlement agreement, it did not 

expressly set forth the provision prohibiting communications to the media. Since the 

district court did not expressly set forth the prohibition, it may not be enforced by 

8 

Appellate Case: 95-1058 Document: 01019277472 Date Filed: 05/17/1996 Page: 8 
contempt. Farmland's first argument is dispositive; therefore, we do not reach its 

alternative arguments. 

The district court's contempt order is REVERSED. 

9 

Appellate Case: 95-1058 Document: 01019277472 Date Filed: 05/17/1996 Page: 9