Opinion ID: 3015065
Heading Depth: 1
Heading Rank: 2

Heading: The Contempt Orders

Text: Respondents challenge the District Court’s March 17 contempt orders by arguing (1) that the Court lacked jurisdiction to enter the orders; (2) that the District Court violated Respondents’ procedural due process rights in the contempt proceedings; (3) that the District Court erred in ignoring Respondents’ defenses to the contempt charges; and (4) that the relief awarded by the District Court, in the form of compensatory costs and coercive fines, was improper. We address each argument in turn.
11 Respondents argue that the appeals that they filed from the District Court’s May 11, August 23 and January 10 Orders divested the District Court of jurisdiction over further contempt proceedings. But the general rule on which Respondents rely, that filing a notice of appeal immediately transfers jurisdiction from a district court to a court of appeals, is subject to a number of exceptions that apply in this case. See generally 20 James Wm. Moore et al., Moore’s Federal Practice § 303.32[1] (3d ed. 1999). For example, the district court retains authority to enforce a judgment that has not been stayed. Id. § 303.32[2][c][vi]. The District Court thus properly denied DOL’s Motion for Adjudication of Civil Contempt on January 10, deferring enforcement of its May 11 and August 23 Orders until Respondents’ Petitions for Rehearing and Rehearing En Banc of its stay application were denied. Chao v. Koresko, No. 04-MC-74 (E.D. Pa. Jan. 10, 2005). Once the stay was finally denied, the District Court retained jurisdiction to enforce its May 11 and August 23 orders. Respondents’ appeal of the District Court’s January 10 Order did not divest the District Court of that jurisdiction. A district court may proceed with a case if an appeal is filed from a non-appealable order. 20 Moore’s Federal Practice § 303.32[2][b][iv][B]. “Civil contempt becomes appealable only when the contemnor has refused to comply with the remedial order and the court has exercised its authority either to punish or to coerce compliance.” U.S. Steel Corp. v. Fraternal Ass’n of Steel Haulers, 601 F.2d 1269, 1273 (3d Cir. 1979). The District Court’s January 10 Order was not appealable–it simply 12 denied DOL’s contempt motion and outlined the penalties for any future failures to comply with the Court’s August 23 Order. As of January 10, then, the Court had not “exercised its authority either to punish or to coerce compliance.” Thus, Respondents’ appeal of the January 10 Order could not disturb the District Court’s jurisdiction to enforce its May 11 and August 23 Orders. The District Court therefore retained jurisdiction to enter the March 17 Orders adjudging Respondents Koresko, Koresko & Associates and Penn-Mont in contempt. B. Respondents’ Procedural Due Process Arguments Respondents contend that the District Court deprived them of their due process rights when it “prospectively” adjudged them in contempt in its January 10 Order and failed to give them adequate opportunity to explain in the hearings that led up to its March 17 Orders. Respondents rely on Newton v. A.C. & S., Inc., 918 F.2d 1121 (3d Cir. 1990), to support their due process theory. In that case, the district court issued an order providing for the imposition of fines if the parties failed to settle by a court-imposed deadline. Id. at 1124. When the parties failed to meet the deadline, the court “summarily” and without a hearing imposed fines on defendants and defendants’ counsel. Id. We reversed and instructed the district court to vacate the fines because the district court had failed to provide the parties with “customary procedural safeguards [to] ensure that the parties or their attorneys have an opportunity to explain the conduct deemed deficient before the fine is imposed and that a record will be available to facilitate 13 appellate review.” Id. at 1127. The comparison of this case to Newton is inept. Whereas the district court in Newton imposed fines before any hearing, the District Court here provided Respondents with two opportunities to explain themselves, at hearings on January 7 and March 16, before it imposed any sanctions. Transcripts were made of those hearings and included in the record for appellate review. The due process standard that we articulated for contempt proceedings in Newton requires no more. C. Respondents’ Contempt Defenses We review a district court’s contempt findings for abuse of discretion. United States v. Sarbello, 985 F.2d 716, 725 (3d Cir. 1993). Abuse of discretion “may be established by showing an error of law or a clearly erroneous judgment or finding of fact.” Id. Respondents have not challenged the merits of the District Court’s contempt findings, so we will not review them here. Instead, Respondents argue that the District Court committed errors of law when it declined to consider Respondents’ “substantial compliance” defense and rejected Respondents’ offer to produce privileged documents with various protections. We disagree. The District Court was under no obligation to consider Respondents’ substantial compliance defense. As Respondents themselves acknowledge, we have never recognized substantial compliance as a defense to civil contempt. See Robin Woods, Inc. v. Woods, 28 F.3d 396, 399 (3d Cir. 1994). Courts that have recognized this defense 14 define it as follows: [S]ubstantial compliance with a court order is a defense to an action for civil contempt. If a violating party has taken “all reasonable steps” to comply with the court order, technical or inadvertent violations of the order will not support a finding of civil contempt. General Signal Corp. v. Donallco, Inc., 787 F.2d 1376, 1379 (9th Cir. 1986) (emphasis added) (citations omitted). We need not consider here whether we should recognize the substantial compliance defense in the future, because even if we were to recognize substantial compliance as a defense to contempt, it would not apply to Respondents. See Robin Woods, 28 F.3d at 399. Respondents’ failure to disclose the documents in this case is neither “technical” nor “inadvertent.” Respondents have acknowledged that they have documents responsive to the subpoena, but have repeatedly declined to produce them. Although they sincerely believe that some of the documents covered by the subpoenas are protected by privilege, that belief does not excuse their failure to comply with the District Court’s order. “[G]ood faith is not a defense to civil contempt.” Id. Nor was the District Court required to accept Respondents’ offer to produce purportedly privileged documents with “protections.” The District Court had already ruled on the merits of Respondents’ privilege claims, and Respondents’ applications to stay the District Court’s order to produce the documents had been denied both by the District Court and by us. The District Court was therefore free to enforce its order. Respondents’ attempts to produce the documents in redacted or “protected” form amounts to nothing more than an attempt to relitigate the privilege issue and was therefore 15 properly disregarded by the District Court. See United States v. Rylander, 460 U.S. 752, 756 (1983) (“‘[A] contempt proceeding does not open to reconsideration the legal or factual basis of the order alleged to have been disobeyed and thus become a retrial of the original controversy.’” (quoting Maggio v. Zeitz, 333 U.S. 56, 69 (1948))). D. The Relief Awarded The District Court ordered Respondents to pay $5,312.50 in compensation for attorneys’ fees (calculated at a rate of $250 per hour) and costs associated with filing DOL’s contempt motion, Chao v. Koresko, No. 04-MC-74 (E.D. Pa. Apr. 25, 2005), and a coercive fine of $250 per day beginning January 26, 2005. Chao v. Koresko, No. 04MC-74 (E.D. Pa. Mar. 17, 2005). Respondents argue that the District Court erred as a matter of law in both awards. First, they assert that the Court erroneously awarded DOL costs for motions that it lost and improperly assessed attorneys’ fees for DOL’s attorneys at a rate comparable to that billed by attorneys in private practice. Second, they argue that the coercive fine is “preempted” by ERISA. We review a district court’s civil contempt sanctions for abuse of the court’s “wide discretion in fashioning a remedy.” Del. Valley Citizens’ Council for Clean Air v. Pennsylvania, 678 F.2d 470, 478 (3d Cir. 1982). The District Court’s award of compensatory costs was proper. The final amount awarded included fees and costs associated with both the January 7 and March 16 hearings. Although it is true that the Court denied DOL’s contempt motion after the January 7 hearing, it did so for a purely technical reason–because we had not yet denied 16 Respondents’ Petitions for Rehearing and Rehearing En Banc of its stay applications. When the District Court ultimately granted DOL’s motion in its March 17 Orders, it relied on evidence adduced at both the January 7 and the March 16 hearings. In addition, the District Court’s April 25 Order indicates that Respondents failed to object to DOL’s submissions supporting its request for attorneys’ fees when they had the opportunity. Koresko, No. 04-MC-74 (E.D. Pa. Apr. 25, 2005). Respondents have thus failed to advance any basis for finding that the District Court abused its discretion in awarding fees and costs associated with both hearings. Nor have they established that the District Court’s award of fees at the rate of $250 per hour was excessive. We have expressly authorized district courts to value government attorneys’ time at market rates for the purpose of awarding sanctions. See Napier v. Thirty or More Unidentified Fed. Agents, Employees, or Officers, 855 F.2d 1080, 1092-93 (3d Cir. 1988). We will accordingly affirm the District Court’s April 25 Order. Respondents’ argument that the District Court erred in ordering them to pay coercive fines is similarly unavailing. According to Respondents, the provision of ERISA that sets statutory penalties for the failure of “plan administrators” to produce information to DOL at $100 per day limited the District Court’s authority to order coercive fines in its contempt proceedings. See 29 U.S.C. § 1132(c)(6). But the provision that Respondents cite speaks only to the authority of the Secretary of DOL to assess civil penalties against ERISA plan administrators; nowhere does it evince an intent to limit a district court’s 17 discretion to fashion appropriate remedies in contempt proceedings. We conclude that the $250 per day fine imposed by the District Court in this case was well within the District Court’s discretion. Because none of the arguments that Respondents raise on appeal demonstrates that the District Court abused its discretion or committed legal error during the enforcement or contempt proceedings, we will affirm the District Court’s May 11 and August 23 Orders enforcing DOL’s subpoenas and the District Court’s March 17 and April 25 Orders adjudging Respondents Koresko, Koresko & Associates and Penn-Mont in contempt and ordering them to pay coercive fines and compensatory costs. 18