Court Opinion

ID: 43355
Source: CourtListenerOpinion
Date Created: 2010-04-25 21:55:05+00
Date Added: 2024-06-11T17:17:00.975700
License: Public Domain

[DO NOT PUBLISH]

              IN THE UNITED STATES COURT OF APPEALS
                                                          FILED
                      FOR THE ELEVENTH CIRCUIT
                                               U.S. COURT OF APPEALS
                       ________________________ ELEVENTH CIRCUIT
                                                        July 21, 2005
                              No. 04-15621           THOMAS K. KAHN
                          Non-Argument Calendar           CLERK
                        ________________________

                   D. C. Docket No. 94-02081-CV-GET-1

NATIONAL UNION FIRE INSURANCE COMPANY
OF PITTSBURGH, PENNSYLVANIA,

                                            Plaintiff-Counter-Defendant-
                                            Appellee,

                                   versus

OLYMPIA HOLDING CORPORATION
a.k.a. P-I-E Nationwide, Inc., et al.,

                                            Defendants-Counter-Claimant-
                                            Cross-Claimant,

LEONARD A. PELULLO,

                                            Defendant-Cross-Defendant-
                                            Counter-Claimant-Appellant,

JOSEPH M. FIORAVANTI,

                                            Defendant-Appellant,

NCNB NATIONAL BANK, et al.,
                                                    Defendants-Counter-Claimants,

NATIONSBANK OF FLORIDA, N.A., et al.,

                                              Defendants.
                          ________________________

                   Appeal from the United States District Court
                      for the Northern District of Georgia
                        _________________________

                                  (July 21, 2005)

Before BLACK, CARNES and MARCUS, Circuit Judges.

PER CURIAM:

      The district court imposed civil contempt sanctions of $283,172.80 on

Leonard Pelullo and Joseph Fioravanti, Appellants, for violation of its March 31,

1997 permanent injunction. Appellants contend the district court abused its

discretion by (1) finding them in contempt, (2) awarding an excessive amount of

sanctions, and (3) not holding an evidentiary hearing. We affirm.

                               I. BACKGROUND

      In 1994, National Union Fire Insurance Company of Pittsburgh,

Pennsylvania (National Union) filed an interpleader action to resolve competing

claims under a directors and officers insurance policy (D & O policy) it issued to

P-I-E Nationwide, Inc. Pelullo, an officer and director of P-I-E, was indicted in

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Jacksonville, Florida (Jacksonville action), as well as in Philadelphia,

Pennsylvania (Philadelphia action) and Newark, New Jersey (Newark action).

Pelullo made claims for coverage and defense costs under the D & O policy,

eventually gaining coverage for the Jacksonville action but not the Philadelphia or

Newark actions.

      On March 31, 1997, the district court granted National Union a permanent

injunction “enjoining defendants from commencing or prosecuting any action

affecting the proceeds of the policy.” National Union and Pelullo also entered into

a Defense Costs Funding Agreement (“DCFA”), which followed the district

court’s order and provided for defense costs to be provided from the D & O

policy.

      On November 7, 2000, Pelullo and other plaintiffs, with assistance from

counsel, Fioravanti, filed a civil RICO action in Philadelphia against National

Union, law firms insured by National Union, and law firms retained by National

Union to represent entities controlled by Pelullo. The first amended complaint,

filed in February 2001, alleged that National Union and other defendants sought to

limit National Union’s exposure by engaging in a RICO conspiracy, and made

specific reference to the D & O policy and the March 31, 1997 district court order.

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      National Union filed a motion for order to show cause why Pelullo and

Fioravanti should not be held in civil contempt for violating the March 31, 1997

permanent injunction, which the district court granted on October 2, 2001. Pelullo

then filed a second amended complaint on November 21, 2001, which reasserted

the earlier claims and added two new claims against National Union, including an

allegation that National Union breached the DCFA and acted in bad faith.

      On January 9, 2002, the district court issued an order finding Pelullo and

Fioravanti in contempt and imposing sanctions. The monetary sanctions consisted

of the “reasonable attorney’s fees, costs and expenses” National Union incurred as

a result of defending the RICO complaint, as well as the “reasonable attorney’s

fees, costs and expenses” incurred in prosecuting the motion for contempt. The

district court also directed Pelullo and Fioravanti to dismiss the RICO action.

      More than two years of wrangling ensued regarding the appropriate amount

of sanctions. On December 3, 2003, the district court issued an order finding that

National Union was entitled to recover fees incurred for defending Pelullo’s RICO

complaint through January 15, 2002, when those claims were dismissed, as well as

fees incurred in prosecuting the motion for contempt.

      The district court’s final order was filed August 4, 2004, directing Pelullo

and Fioravanti to pay $283,172.80 in sanctions, consisting of $219,128.97 for

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National Union’s RICO defense and $64,043.83 for National Union’s prosecution

of the motion for contempt. Pelullo and Fioravanti appeal.

                                 II. DISCUSSION

      We review a grant or denial of civil contempt for an abuse of discretion.

Jove Eng’g, Inc. v. IRS, 92 F.3d 1539, 1545 (11th Cir. 1996). District courts “have

inherent power to enforce compliance with their lawful orders through civil

contempt.” Citronelle-Mobile Gathering, Inc. v. Watkins, 943 F.2d 1297, 1301

(11th Cir. 1991) (citing Shillitani v. United States, 384 U.S. 364, 370, 86 S. Ct.
1531, 1535 (1966)). To achieve compliance, courts can impose both coercive and

compensatory sanctions. Id. at 1304.

A.    Finding of contempt

      The district court’s January 9, 2002 order found Pelullo and Fioravanti in

contempt of its March 31, 1997 permanent injunction. The 1997 order enjoined

Pelullo “from commencing or prosecuting any action affecting the proceeds of the

policy,” which encompasses not only actions seeking the proceeds themselves but

also any action concerning the proceeds or undermining the final judgment of the

district court. The district court’s January 2002 order found

      the only reasonable interpretation of the claims asserted by Pelullo is
      that the recovery sought would “affect [] the proceeds of the [D & O]
      policy” in violation of this court’s permanent injunction. For

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      example, Pelullo alleges a breach of the Defense Funding Agreement
      which specifically provided for payment out of policy proceeds.
      Furthermore, the damages sought by Pelullo include legal fees for the
      Philadelphia, Newark and Jacksonville Criminal Actions which were
      the subject of the instant interpleader action. Such relief would
      directly affect the proceeds of the D & O policy.

We agree with the district court.

      Civil contempt orders should be upheld if the defendant’s contempt is clear

and convincing, and demonstrates “(1) the allegedly violated order was valid and

lawful; (2) the order was clear, definite and unambiguous; and (3) the alleged

violator had the ability to comply with the order.” McGregor v. Chierico, 206
F.3d 1378, 1383 (11th Cir. 2000) (quotation omitted).

      Pelullo and Fioravanti do not argue the district court’s injunction was

invalid or unlawful, or unclear and ambiguous. Nor do they argue they were

unable to comply with the permanent injunction. Instead, they contend they did

not willfully violate the district court’s injunction, and therefore they should not

be held in contempt. But their subjective intent is not relevant: “[T]he focus of

the court’s inquiry in civil contempt proceedings is not on the subjective beliefs or

intent of the alleged contemnors in complying with the order, but whether in fact

their conduct complied with the order at issue.” Howard Johnson Co., Inc. v.

Khimani, 892 F.2d 1512, 1516 (11th Cir. 1990).

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      By itself, Count X of the RICO complaint violated the permanent injunction

because, if successful, it would affect the proceeds of the D & O policy. Count X

alleged National Union breached the DCFA, which concerned the payment of

legal fees by National Union to Pelullo under the D & O policy. Under Count X,

paragraph 208(a) sought “the damages alleged in paragraph 182.” Paragraph 182

outlined damages suffered by Pelullo, including millions of dollars in legal fees

for the Philadelphia and Newark actions. In other words, Pelullo’s RICO

complaint sought payment of legal fees, fines, forfeitures, and restitution for the

Philadelphia and Newark actions. But the district court’s June 4, 1996 judgment

(amended by the March 31, 1997 judgment) denied coverage and legal fees for

Pelullo’s defense in the Philadelphia and Newark actions. Thus, the RICO

complaint by Pelullo and Fioravanti would affect the proceeds of the D & O

policy, which the district court’s permanent injunction expressly prohibited.

      Similarly, Count II alleged National Union organized and supervised a

conspiracy to “ensure that M. Pelullo would remain incarcerated and be convicted

in the Jacksonville Criminal Action, which conviction would then require

Mr. Pelullo to reimburse National Union for Mr. Pelullo’s legal fees and costs paid

by National Union under the D & O policy.” According to Count II, among the

method and means employed by National Union included “National Union’s

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breach of its obligations under the D & O Policy and the Funding Agreement.” If

Pelullo succeeded on Count II, the proceeds of the D & O policy might be

affected.

      The district court correctly determined Pelullo’s RICO complaint, if

successful, would affect the D & O policy, and therefore violated its permanent

injunction. We find no abuse of discretion.

B.    Amount of sanctions

      Once a district court finds a party in contempt, it has “broad discretion in

fashioning a contempt sanction.” Sizzler Family Steak Houses v. W. Sizzlin Steak

House, Inc., 793 F.2d 1529, 1536 n.8 (11th Cir. 1986). As noted above, sanctions

can be imposed for both coercive and compensatory reasons. Citronelle-Mobile,
943 F.2d at 1304.

      As part of its sanctions, the district court sought to compensate National

Union for the costs it incurred in defending the RICO complaint and in

prosecuting the civil contempt order. In its December 3, 2003 order, the district

court reviewed the attorneys’ fees paid by National Union, and found “the rates

and hours billed are consistent with those charged by lawyers of similar

experience in an action such as this.” The August 4, 2004 final order reaffirmed

this finding: “[B]ased on the court’s review of the unredacted billing records filed

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under seal by the plaintiff, the court adheres to its original finding that the fees

requested by plaintiff are reasonable.” Thus, on two separate occasions, the

district court reviewed the attorneys’ fees, costs, and expenses paid by National

Union, and found them reasonable.

       We find no abuse of discretion in the district court’s calculation of sanctions

for Pelullo’s and Fioravanti’s civil contempt.1

C.     Evidentiary hearing

       Appellants contend the district court abused its discretion by failing to

conduct an evidentiary hearing before holding them in contempt, claiming material

facts were in dispute.

       “[W]hen there are no disputed factual matters that require an evidentiary

hearing, the court might properly dispense with the hearing prior to finding the

defendant in contempt and sanctioning him.” Mercer v. Mitchell, 908 F.2d 763,

769 n.11 (11th Cir. 1990). Here, there were no material issues of fact requiring an

evidentiary hearing. The validity of the permanent injunction was never

       1
           Relying principally on Norman v. Hous. Auth. of City of Montgomery, 836 F.2d 1292
(11th Cir. 1988), Appellants seek to import the lodestar method of calculating attorneys’ fees into
a district court’s calculation of sanctions, but we see no reason to do so. Sanctions for civil
contempt are not equivalent with typical payment of attorneys’ fees, and civil contempt sanctions
do not require the use of the lodestar method. We yield to the broad discretion enjoyed by
district courts in fashioning sanctions for civil contempt, and do not find the amount of sanctions
unreasonable.

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questioned, and neither party disputes that Pelullo and Fioravanti filed the RICO

complaint. Neither party disputes the contents of that complaint, nor do they

dispute the existence and validity of the DCFA. As to the amount of sanctions,

National Union provided uncontradicted evidence of the attorneys’ fees, costs, and

expenses it paid.

      Appellants challenge the interpretation of the facts, but not the existence of

the facts themselves. Although they object to the fees paid by National Union,

deeming them excessive, their concern goes to necessity and propriety, not the fact

of whether the fees were paid.

      With no disputed material facts in issue, the district court did not abuse its

discretion by not holding an evidentiary hearing before finding Pelullo and

Fioravanti in contempt.

                                 III. CONCLUSION

      The district court did not abuse its discretion in finding Appellants in

contempt. Nor did the district court abuse its discretion in determining the amount

of sanctions, and by not holding an evidentiary hearing.

      AFFIRMED.

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