Opinion ID: 786548
Heading Depth: 1
Heading Rank: 2

Heading: classification of contempt proceedings

Text: A. 12 The panel held in Part II of its opinion that this case is one of civil contempt under International Union, United Mine Workers of America v. Bagwell, 512 U.S. 821, 114 S.Ct. 2552, 129 L.Ed.2d 642 (1994). We agree. However, while the panel correctly stated that having decided that the contempt proceeding was civil in nature does not end our inquiry, see Panel Opinion, 312 F.3d at 1337, we do not agree with the panel's conclusions about Bagwell and its application to this case. In contrast to the panel's decision, we hold that in a contempt action for compensatory civil sanctions, a jury trial is not required and damages need only be proven by a preponderance of the evidence. 13 In its opinion, the panel held this case required a departure from the traditional dichotomy between civil contempts and criminal contempts: With a nod to Gertrude Stein, there are civil contempts and there are civil contempts. Id. at 1338. This was based on the panel's conclusion that Bagwell teaches that certain high-end contempt actions require different procedures than those usually followed in civil contempt actions, namely, a jury as neutral factfinder and an enhanced burden of proof. Id. The panel went on to find that the complexity of the injunction and the remedy imposed on the defendants here made it such a high-end case. Id. at 1340-41. The panel then applied a sliding scale of procedural safeguards and found that while the district judge's finding of liability could be affirmed completely, the question of determining the amount of consumer injury had to be answered by a jury utilizing a clear and convincing standard of proof. Id. at 1342. 14 This is where our analysis parts company from the Panel Opinion. We read Bagwell to leave in place just two traditional types of contempt: civil contempt and criminal contempt. The Supreme Court did not create the high-end exception with a sliding scale of procedural requirements that the panel invokes. See 312 F.3d at 1338-39, 1342. Indeed, Bagwell explicitly states that there are only two forms of contempt and their procedural contours ... are well established. 512 U.S. at 827, 114 S.Ct. 2552. 15 The Bagwell Court, in dicta, did acknowledge the difficulties inherent in the use of contempt sanctions for out-of-court disobedience to complex injunctions [which] often require elaborate and reliable factfinding and, therefore, that the considerations justifying expedited procedures do not pertain. Id. at 833-34, 114 S.Ct. 2552; see also id. at 843, 114 S.Ct. 2552 (Scalia, J., concurring) (As the scope of injunctions has expanded, they have lost some of the distinctive features that made enforcement through civil process acceptable.). It may be that the Supreme Court will one day decide that some injunctions do not sufficiently resemble their historical namesakes to warrant the same extraordinary means of enforcement. Id. at 844, 114 S.Ct. 2552 (Scalia, J., concurring). But the Court has thus far declined to find that modern injunctions have reached this point. See id. The Court of Appeals should follow the case which directly controls, leaving to [the Supreme] Court the prerogative of overruling its own decisions. Agostini v. Felton, 521 U.S. 203, 237, 117 S.Ct. 1997, 138 L.Ed.2d 391 (1997) (quoting Rodriguez de Quijas v. Shearson/Am. Express, Inc., 490 U.S. 477, 484, 109 S.Ct. 1917, 104 L.Ed.2d 526 (1989)). 16 Rather than revamping the longstanding criminal/civil distinction, the Court's holding in Bagwell was simply that in a case involving noncompensatory fines amounting to serious criminal sanctions, courts must apply the rules of criminal contempt that afford alleged contemnors such protections as trial by jury. See 512 U.S. at 838-39, 114 S.Ct. 2552. The Court emphasized that its holding did not impose additional burdens in cases involving compensatory, civil contempt remedies. Id. at 838, 114 S.Ct. 2552 (Our holding, however, leaves unaltered the longstanding authority of judges ... to enter broad compensatory awards for all contempts through civil proceedings.). Therefore, the important question in this case, as in Bagwell, is whether the contempt of which the defendants were accused is criminal or civil in nature. B. 17 The Bagwell Court observed that the distinguishing characteristics of civil versus criminal contempts are somewhat less clear than are the procedural contours of each type. 512 U.S. at 827, 114 S.Ct. 2552. One distinguishing characteristic is, however, well established: [A] contempt sanction is considered civil if it `is remedial, and for the benefit of the complainant.' Id. (quoting Gompers v. Buck's Stove & Range Co., 221 U.S. 418, 441, 31 S.Ct. 492, 55 L.Ed. 797 (1911)). As the panel states, Consumer redress is a classic remedial sanction. 312 F.3d at 1337; see also Law v. NCAA, 134 F.3d 1438, 1443 (10th Cir.1998) ([A] critical feature of civil contempt is that the punishment is remedial.) (internal quotation omitted); In re Maurice, 73 F.3d 124, 127-28 (7th Cir.1995) (holding that a contempt sanction is civil in nature, if the payment is designed to compensate for harm done). Therefore, where the sanctions sought in contempt proceedings are solely to be used to compensate injured consumers, the proceedings are civil in nature. 3 18 The defendants here argue that the district court's assessment of sanctions against them does not qualify as compensatory because (1) the FTC may retain funds in excess of what it requires to redress consumer injury and (2), notwithstanding number (1), the remedy is not for the benefit of the FTC, but for third-party consumers. Although as we discuss further in Part V below, we reverse certain provisions of the district court's contempt order because they allow noncompensatory sanctions, the fact that the order included some noncompensatory relief is not determinative of whether the proceedings were civil or criminal. That decision must of course be made at the outset of the proceedings, at the time of the motion to show cause and before the calculation of sanctions. In this case, the FTC's motion sought an award of consumer redress commensurate with the total payments consumers made to defendants since they regained control of the business, less refunds defendants have made to consumers. App. at 42. This is clearly a request for compensatory sanctions. The conduct of the parties and the court throughout the proceedings similarly showed that the focus was on the amount of consumer injury that could be demonstrated, rather than punitive or other noncompensatory sanctions. 19 Nor can the fact that the FTC is not seeking redress for its own losses, but for those of consumers, remove this case from the auspices of civil contempt. We note initially that the defendants apparently did not raise this issue below, which generally precludes our consideration of it on appeal. See Tele-Communications, Inc. v. Comm'r, 104 F.3d 1229, 1233 (10th Cir.1997); In re Walker, 959 F.2d 894, 896 (10th Cir.1992). Furthermore, civil contempt proceedings are considered to be a part of the action from which they stem. D. Patrick, Inc. v. Ford Motor Co., 8 F.3d 455, 459 (7th Cir.1993) (quoting 4 Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure § 1017, at 71 (1987)). This contempt claim stems from an original action brought pursuant to the FTC's powers under the FTC Act. As we discuss more fully below, Congress established the FTC at least in part to protect consumers from economic injuries. See FTC v. Febre, 128 F.3d 530, 536 (7th Cir.1997). Recognizing this, courts have allowed the FTC to sue for the full amount lost by consumers. Id. 20 The defendants correctly point out that the FTC is not entitled to rely on all the provisions of the FTC Act while also taking advantage of the simplified nature of a contempt action. The defendants agreed in the Permanent Injunction, however, that the FTC's role would be to remedy past allegations of consumer fraud and to pursue redress for consumers harmed by the defendants' conduct. App. at 1020, 1036. The defendants, in agreeing to the Permanent Injunction, knew that their ongoing business practices were subject to FTC and judicial oversight and that traditional remedies would be available for breach of their agreement. Not allowing the FTC to pursue contempt sanctions for the benefit of injured consumers in this case would serve neither the intent of Congress in creating the Commission nor the intent of the parties in agreeing to a settlement, civil damages, and ongoing regulation of the defendants' business practices through a permanent injunction. We therefore hold that the actions taken in this case are properly characterized as civil contempt proceedings. C. 21 Though the panel concluded that the proceedings in this case were civil, it went on to find the injunction here so complex that it fell within its  Bagwell exception and required heightened due process protections. In particular, the panel held that due process required the calculation of sanctions in this case to be made by a jury applying the clear and convincing standard of evidence. Panel Opinion, 312 F.3d at 1342. 22 We disagree that a jury is needed to meet due process requirements in a compensatory civil contempt proceeding. It is well-established in our circuit that compensatory contempt actions are appropriately held before a judge, applying a clear and convincing standard for liability and a preponderance of the evidence standard for sanctions. See Reliance Ins. Co. v. Mast Constr. Co., 159 F.3d 1311, 1318 (10th Cir.1998). As explained above, nothing in Bagwell forces a contrary conclusion, and we decline to extend Bagwell in this case. Not only is the language from Bagwell relied on by the panel to establish a high-end exception dicta, but the panel decision would also create an exception the district courts would have difficulty applying on many levels, including during the determination of whether an injunction is complex or simple, when a jury is required, and what the jury's burden of proof should be. 4 We decline to go down this path and thus hold fast to the orthodox model for contempt actions. We therefore reiterate that in compensatory civil contempt proceedings a jury is not required; district court judges should require proof of contempt by clear and convincing evidence and proof of the amount of compensatory damages by a preponderance of the evidence.