Case Name: Dick GREGORY, Appellant, v. Larry D. DEPTE, Sandra L. Henderson and Correction Connection, Inc.
Court: United States Court of Appeals for the Third Circuit
Jurisdiction: United States
Decision Date: 1990-02-14
Citations: 896 F.2d 31
Docket Number: Nos. 89-1260, 89-1688
Parties: Dick GREGORY, Appellant, v. Larry D. DEPTE, Sandra L. Henderson and Correction Connection, Inc.
Judges: Before BECKER, COWEN and SEITZ, Circuit Judges.
Reporter: Federal Reporter 2d Series
Volume: 896
Pages: 31–42

Head Matter:
Dick GREGORY, Appellant, v. Larry D. DEPTE, Sandra L. Henderson and Correction Connection, Inc.
Nos. 89-1260, 89-1688.
United States Court of Appeals, Third Circuit.
Argued Oct. 17, 1989.
Decided Feb. 14, 1990.
James B. Crummett, James B. Crummett & Associates, Philadelphia, Pa., Dennis J. Clark, Maura D. Corrigan (argued), Plunk-ett & Cooney, P.C., Detroit, Mich., for appellant.
Luther E. Weaver, III (argued), Michael J. Churchill, Stella M. Tsai, Baskin, Flaherty, Elliott & Mannino, Philadelphia, Pa., Gregory B. Montgomery, Camden, N.J., for appellees.
Before BECKER, COWEN and SEITZ, Circuit Judges.

Opinion:
OPINION OF THE COURT
SEITZ, Circuit Judge.
Plaintiff in the district court, Dick Gregory, appeals two sanctions imposed by the district court in its February 27, 1989, order finding him in contempt of its November 29, 1988, consent preliminary injunction. The preliminary injunction applied to both plaintiff and defendants and required them to maintain the "status quo" that existed before this lawsuit with respect to a licensing agreement between the parties. The injunction did not further define the "status quo."
The background of this tortuous litigation is important. On January 7, 1987, plaintiff entered into a licensing agreement (the Agreement) with Correction Connection, Inc. (CCI) which granted CCI "an exclusive license throughout the United States . to market, distribute and sell" many of plaintiff's copyrighted products, including the diet mix involved in this case. CCI was authorized to sell the diet products through retail and/or multilevel marketing channels. In exchange, plaintiff re ceived royalties from such sales. Under the terms of the Agreement, plaintiff reserved "all rights to distribute, sell and exploit the [diet product] through mail orders."
There was no definition of "mail orders" in the Agreement. Evidence in the record indicates that until the contempt hearing, plaintiffs mail order operation consisted almost exclusively of very small monthly sales directly to consumers. The only exception to this consumer-oriented mail order operation occurred sometime in the fall of 1988. During that fall, plaintiffs company began negotiations with one Sergio concerning a large mail order purchase program to be conducted through cable television stations. Plaintiff testified that the terms of this contract are that he is to supply Sergio with 700,000 cans of the diet product every six months, and Sergio is responsible for mailing the product monthly to consumer subscribers. Although plaintiffs testimony on this issue is somewhat vague, he implied that the Sergio contract has not yet been implemented.
On October 18, 1988, plaintiff filed a complaint in the district court seeking damages, injunctive relief and termination of the Agreement. The complaint alleged that CCI and several of its officers conspired to defraud plaintiff of his ownership interest in CCI, injured his business reputation and breached the Agreement by failing to pay him his contractual royalties. CCI and the individual defendants filed an Answer and Counterclaims, alleging that Gregory had, inter alia, failed to perform his own obligations under the Agreement.
After protracted legal skirmishing, but no recorded court action, the court approved a Stipulation and Proposed Order on November 29, 1988, presumably pending final decision. The Order, inter alia, required the parties "to maintain the status quo that existed before this lawsuit," enjoined them "from contacting any suppliers, distributors, agents, etc.," of the opposing side, and recited that the Agreement was to remain "in full force and effect."
On February 1, 1989, defendant CCI moved for contempt sanctions against plaintiff. It contended that Gregory had drop shipped large amounts of diet product to current and former CCI distributors in violation of the November 29 injunction. In addition, CCI alleged two other violations. First, CCI argued that plaintiff had violated the order by telling distributors that the CCI Agreement had been nullified and that they could now get their diet product directly from him. And, second, CCI contended that plaintiff had violated the Agreement by selling the diet product at retail through his Florida hotel.
The district court held contempt hearings and after taking evidence the court issued a contempt order and made certain factual findings. The order found Gregory in contempt for violating the November 29 injunction, as well as for violating what it found to be previous, non-record, judicial orders issued at an earlier status conference. We will treat the previous orders as irrelevant to the disposition of this appeal.
The district court found, in effect, that the status quo provision of the November 29, 1988, injunction barred plaintiff from making large shipments to consumers. It then found that plaintiff had violated this provision. It also found that plaintiff had contacted suppliers, etc., and had engaged in sales through retail channels in violation of the injunction.
As a sanction for the contempt, the court ordered that plaintiffs future sales be limited to "quantities no greater than two cans per customer per month to individual end-consumers for the purpose of personal consumption." It also imposed as a sanction a requirement that, for the period between November 2, 1988, and February 27, 1989, plaintiff pay defendant $10 for each can sold over and above two cans per customer per month sold through regular mail order channels to individual end-consumers for the purpose of personal consumption. Finally, the court enjoined plaintiff and those acting in concert with him from engaging in any commercial con tacts with former or present employees of CCI.
The plaintiff appealed the contempt order under both 28 U.S.C. § 1291 and 1292(a)(1) (No. 89-1260). He also appealed the order denying his motion for reconsideration (No. 89-1688).
We are met at the outset with the need to consider the nature of the contempt sanctions — civil or criminal — because of our resolution of this appeal.
We assume the correctness of the contempt finding, but not the sanctions, solely for the purpose of addressing the appeala-bility issues presented.
TWO-CAN SANCTION
We consider first whether the two-can sanction is appealable. Plaintiff contends that the sanction is a modification of the consent preliminary injunction of November 29, 1988, and thus is appealable under the "modifying" language of 28 U.S.C. § 1292(a)(1). The short answer is that no motion to modify was made under Fed.R.Civ.P. 65 (governing the practice for seeking a preliminary injunction). On the contrary, the sole matter tried by the district court was the alleged contempt of the November 29, 1988, consent injunction. Thus, the appeal of the two-can sanction is not appealable as a modification of the prior injunction. Indeed, if it is treated as a modification it would impugn the provision in the $10.00 per can sanction to the extent that the sanction gives a two-can credit per month in calculating the amount owed by plaintiff.
On the other hand, we conclude that the two-can limitation was a permissive sanction based on the civil contempt finding because its purpose was to compel compliance with the court's earlier order. So viewed, it is essentially coercive rather than punitive. While the usual rule is that an interlocutory civil contempt is not ap-pealable, United States Steel Corp. v. Fraternal Ass'n of Steel Haulers, 601 F.2d 1269, 1273 (3d Cir.1979), the sanction in the form of the two-can limitation, in our view, amounts to an independent preliminary injunction and thus is appealable at this stage, 28 U.S.C. § 1292(a)(1). We next determine whether the district court abused its discretion in imposing that injunction as a sanction.
Obviously our review is severely constrained lest, in reviewing the sanction, we violate the rule against appellate review of the civil contempt determination at this stage. Given the basis for the civil contempt finding and its objective, we cannot say that the imposition of the injunctive sanction constituted an abuse of discretion. We will therefore affirm the district court's order to that extent.
$10.00 PER CAN SANCTION
We next consider plaintiff's attempt to appeal the $10.00 per can sanction. A question immediately arises as to whether this sanction is presently appealable.
We first consider whether this contempt sanction may be justified as civil. Such a sanction must coerce or compensate. Since it is tied to past conduct it cannot be coercive. If the $10.00 per can sanction is compensatory, it must not exceed the actual damages caused the offended party, Quinter v. Volkswagen of America, 676 F.2d 969 (3d Cir.1982), and must be based on evidence of a complainant's actual loss. National Drying Machinery Co. v. Ackoff 245 F.2d 192 (3d Cir.), cert. denied, 355 U.S. 832, 78 S.Ct. 47, 2 L.Ed.2d 44 (1957).
However, the record here contains absolutely no evidentiary basis for the $10.00 figure. Nor do the district court's findings of fact shed any light on that subject. Finally, the order of the district court contains no explanation for the use of the $10.00 amount. Thus, despite the fact that defendant requested that plaintiff be held in civil contempt, the record lacks an important evidentiary basis to support a compensatory fine as a permissible sanetion for civil contempt.
If, on the other hand, the $10.00 provision is viewed as a criminal sanction, the proceedings can be said to suffer from a failure to comply with some of the procedural requirements found in Fed.R.Crim.P. 42(b). Additionally, the order provides that the payment is to be made to defendant rather than to the government. This suggests a civil contempt sanction.
As our court said in National Drying Machinery Co. v. Ackoff, 245 F.2d 192, 195 (3d Cir.), cert. denied, 355 U.S. 832, 78 S.Ct. 47, 2 L.Ed.2d 44 (1957):
But there can be no "equity" in a compensatory award except as it provides a fair equivalent for some loss. If, on the other hand, the reference to changed "equities" means that the defendant deserved punishment for a willful wrong, the procedure must be that of criminal contempt rather than the employment of civil contempt as a punitive device.
We, of course, have jurisdiction, to consider our jurisdiction. However, in view of the ambiguous character of the $10.00 sanction, whether criminal or civil, we are not in a position to decide whether we should dismiss this portion of the appeal as one taken from an unappealable order holding plaintiff in civil contempt, United States Steel Corp. v. Fraternal Ass'n of Steel Haulers, 601 F.2d 1269, 1273 (3d Cir.1979), or remand it as a premature appeal from a criminal sanction that has never been entered in the criminal docket of the district court as required by Fed.R.App.P. 4(b). See also Fed.R.Crim.P. 32(b)(1). Compare United States v. Thoreen, 653 F.2d 1332, 1338 (9th Cir.), cert. denied, 455 U.S. 938, 102 S.Ct. 1428, 71 L.Ed.2d 648 (1982).
Faced with our inability to decide on which basis to dispose of this appeal, we conclude that the preferable course is to vacate the $10.00 per can sanction and remand this case to the district court to permit the court to take all appropriate steps, including a reopening of the proceedings, to clarify the nature of this sanction. See Clark v. Boynton, 362 F.2d 992, 996-998 (5th Cir.1966); Skinner v. White, 505 F.2d 685, 688, 689 (5th Cir.1974). In the event of another appeal, this court will then be able to reach a definitive determination as to the nature of the $10.00 per can contempt sanction.
CONCLUSION
The two-can limit as a sanction for the contempt finding will be affirmed. The provision in the contempt order leveling a $10.00 per can fine for a stipulated period will be vacated and that matter will be remanded for further consideration consistent with this opinion.
The order of the district court denying reconsideration will be affirmed because the motion was not served in timely fashion. See Sonnenblick-Goldman Corp. v. Nowalk, 420 F.2d 858, 861 (3d Cir.1970).
The parties shall bear their own costs in No. 89-1260. Plaintiff shall pay the costs in No. 89-1688.
. Although plaintiff's attorney was also found in contempt, we will limit our discussion to appellant, Dick Gregory.
. Both parties appear to agree that this date should have been November 29, 1988.
. Plaintiff does not attack on appeal so much of the contempt order as enjoined plaintiff from engaging in commercial contacts with former and present employees of CCI.
. The statement of counsel for defendant in making his argument to the court that "it's costing us in the neighborhood of ten dollars a can in terms of lost profits," is, mildly put, not evidence.
. Because of the doubtful nature of the sanction, we need not address the possible applicability of Kershner v. Mazurkiewicz, 670 F.2d 440 (3d Cir.1982); Latrobe Steel Co. v. United Steelworkers, 545 F.2d 1336 (3d Cir.1976); United States v. Spectro Foods Corp., 544 F.2d 1175 (3d Cir.1976).
. In a criminal case the notice of appeal by a defendant shall be filed in the district court within 10 days after the entry of (i) the judgment or order appealed . A judgment or order is entered within the meaning of this subdivision when it is entered in the criminal docket.