Court Opinion

ID: 3037516
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:56:36.604007+00
Date Added: 2024-06-11T11:48:46.401486
License: Public Domain

United States Court of Appeals
                        FOR THE EIGHTH CIRCUIT
                                ___________

                                No. 02-3622
                                ___________

Chicago Truck Drivers, Helpers &      *
Warehouse Workers Union Pension       *
Fund; Fred Boudreau, trustee of       *
Chicago Truck Drivers, Helpers and    *
Warehouse Workers Union Pension       *
Fund; Jack Stewart; William H.        *
Carpenter, the present trustees;      *
John Broderick,                       *
                                      *
              Plaintiffs - Appellees, *
                                      *
       v.                             *   Appeal from the United States
                                      *   District Court for the
Brotherhood Labor Leasing, a Missouri *   Eastern District of Missouri.
corporation; MFI Leasing Company,     *
a Missouri corporation; Falls City    *
Industries, Inc., a Kentucky          *
corporation; Middlewest Freightways, *
Inc., a Missouri corporation,         *
                                      *
              Defendants,             *
                                      *
       v.                             *
                                      *
Steven M. Gula; William H. Behrens; *
Ann Gula,                             *
                                      *
              Contemnors,             *
                                      *
Dysart, Taylor, Lay, Cotter &         *
McMonigle, P.C.,                      *
                                      *
             Contemnor - Appellant,   *
                                      *
Peter Gabriel Bender; Michael, Best & *
Friedrich, LLC; Lashly Baer,          *
                                      *
             Contemnors.              *
                                 ___________

                              Submitted: September 12, 2003
                                 Filed: May 4, 2005
                                  ___________

Before MORRIS SHEPPARD ARNOLD, BOWMAN, and MELLOY, Circuit Judges.
                          ___________

BOWMAN, Circuit Judge.

      The law firm of Dysart, Taylor, Lay, Cotter and McMonigle, P.C., appeals from
the order of the District Court1 finding the firm in civil contempt of court and
imposing sanctions. We affirm.

       In the underlying action that gave rise to the finding of contempt, Chicago
Truck Drivers, Helpers and Warehouse Workers Union Pension Fund and its trustees
(collectively, the Fund) sued several corporations owned by Steven Gula to collect
withdrawal liability payments under ERISA.2 At one time during the relevant period,

      1
       The Honorable David D. Noce, United States Magistrate Judge for the Eastern
District of Missouri, sitting with the consent of the parties under 28 U.S.C. § 636(c).
      2
       Employee Retirement Income Security Act of 1974 (as amended by the
Multiemployer Pension Plan Amendments Act of 1980), 29 U.S.C. §§ 1001–1461.
Under ERISA, an employer that withdraws from a multiemployer pension plan will
be liable to the plan for "the allocable amount of unfunded vested benefits." 29
U.S.C. § 1381(b)(1).

                                         -2-
the corporations were represented by Dysart Taylor. On December 4, 1996, the
District Court entered summary judgment for the Fund, holding that the corporations
would "be required, within 60 days of the date of the judgment order issued herewith,
to pay to plaintiffs the interim payments demanded by the plaintiffs in the amended
demand." Chicago Truck Drivers Union Pension Fund v. Bhd. Labor Leasing, 950
F. Supp. 1454, 1471 (E.D. Mo. 1996). In accordance with the provisions of ERISA,
the court ordered that any further disputes between the parties would be "submitted
to an arbitrator." Id. On June 13, 1997, Dysart Taylor was granted leave to withdraw
from the case. On June 25, 1997, the District Court entered an amended judgment
against the corporations, which included awards to the Fund for delinquent and future
withdrawal liability, with dollar amounts noted and due dates specified, and awards
for attorney fees, costs, interest, and liquidated damages. Chicago Truck Drivers
Union Pension Fund v. Bhd. Labor Leasing, 974 F. Supp. 751, 756-57 (E.D. Mo.
1997).

       In November 1998, the Fund sought to have the corporations and their officers
held in contempt for failure to pay any of the court-ordered judgments. The District
Court denied the Fund's petition. The Fund appealed and we remanded. Chicago
Truck Drivers Union Pension Fund v. Bhd. Labor Leasing, 207 F.3d 500 (8th Cir.
2000). We concluded that the District Court had made some errors in ruling on the
Fund's petition and so it was an abuse of the court's discretion to deny the contempt
petition. In remanding, we also said this in a footnote: "The suggestion that the
Appellees' attorneys advised them to pay their legal fees in lieu of making court-
ordered payments, if true, is troubling. But we have no occasion to consider the
question [of whether prior counsel might be held in contempt] on this record because
the Fund only sought a contempt sanction against the Appellees and Gula, not their
lawyers." Id. at 507 n.7.

       On remand, the Fund amended the petition to name the corporations' and
officers' attorneys as additional alleged contemnors. The District Court held a

                                        -3-
hearing on the petition and determined that Steven Gula and Dysart Taylor acted in
contempt of the court's orders.3 Chicago Truck Drivers Union Pension Fund v. Bhd.
Labor Leasing, 230 F. Supp. 2d 963, 970 (E.D. Mo. 2002). According to the court,
the law firm aided and abetted Gula's failure to pay the Fund. The court agreed with
the Fund's assertion that attorneys at Dysart Taylor were aware that the corporations'
assets were not sufficient to pay both the Fund and other creditors, including Dysart
Taylor, and nevertheless advised Gula to pay the others first. As a sanction, the
District Court ordered Dysart Taylor to pay the Fund the amount that it had received
in payment from the corporations, $12,855.55. Dysart Taylor appeals. "We review
the district court's decision to enter a civil contempt order for abuse of discretion,
reviewing its factual findings for clear error." Jake's, Ltd. v. City of Coates, 356 F.3d
896, 899 (8th Cir. 2004).

        Dysart Taylor first asserts that the firm cannot be held in contempt of the
December 1996 order because it was neither a final order nor an injunction and it
could not be construed as an injunction. We disagree. In our most recent prior
opinion in this litigation, when speaking of the amended order of June 1997, we noted
that although it "was not labeled an injunction, it looked like one: it compelled the
[corporations'] affirmative, prospective obedience with it." Chicago Truck Drivers,
207 F.3d at 507. The December order was no different. Dysart Taylor's argument
that the order lacked the necessary specificity is unavailing. The order is not
"unintelligible," nor does its "command . . . def[y] comprehension." Int'l
Longshoremen's Ass'n, Local 1291 v. Philadelphia Marine Trade Ass'n, 389 U.S. 64,
76 (1967). While the December 1996 order could have been written with more detail
(as it ultimately was in June 1997), it nevertheless put the corporations on notice of
what they should do and when they should do it: "to pay to plaintiffs the interim
payments demanded by the plaintiffs in the amended demand" and to do so "within
60 days of the date of the judgment order issued herewith." Chicago Truck Drivers,

      3
       Steven Gula has not appealed.

                                          -4-
950 F. Supp. at 1471. In any event, the attorneys knew that Gula's corporations were
on shaky ground financially and were responsible for substantial interim withdrawal
payments. And they should have known, if they did not, that advising Gula to pay
other bills (including Dysart Taylor's own bills) before paying the Fund was the same
as advising Gula to disregard the order. We conclude that Dysart Taylor was
complicit in "a violation of a court order by one who fully understands its meaning
but chooses to ignore its mandate." Int'l Longshoremen's Ass'n, 389 U.S. at 76.

        As for finality, the fact that the Fund sought to amend the order to increase the
amount owed by adding on interest, attorney fees, and other costs did not relieve the
corporations of responsibility to make the interim payments while they waited for the
district court to rule on the motion. An injunction need not be a final and appealable
order to be enforceable. And even if this were not an injunction, "[w]ithdrawal
liability shall be payable in accordance with the schedule set forth by the plan
sponsor . . . beginning no later than 60 days after the date of the demand
notwithstanding any request for review or appeal of determinations of the amount of
such liability or of the schedule." 29 U.S.C. § 1399(c)(2) (emphasis added). The
corporations thus have arguably had an obligation to pay withdrawal liability from
sixty days following the time of the Fund's first demand, and that obligation was not
changed but only reiterated when the District Court entered its order in December
1996. See, e.g., Trs. of Plumbers & Pipefitters Nat'l Pension Fund v. MAR-LEN,
Inc., 30 F.3d 621, 626 (5th Cir. 1994) ("[A] reviewing court merely determines
whether the pension plan's claim is nonfrivolous and colorable. If the claim for
withdrawal liability is colorable, the employer must make interim payments while it
contests the underlying liability." (footnote omitted)); Bd. of Trs. of Trucking
Employees Welfare Fund, Inc. v. Centra, 983 F.2d 495, 507–08 (3d Cir. 1992) ("The
pay now, dispute later principle . . . is well established . . . . [P]ayments must be made
whether the underlying dispute is resolved through arbitration or by a federal court.").
The corporations' failure to make interim payments was a violation of federal law
beginning as early as sixty days after the Fund first made its demand, and ultimately

                                           -5-
came to be a violation of a federal court order as well. In these circumstances, we do
not think it was error for the District Court to entertain a motion for civil contempt
based on violation of the court's December 1996 order implementing the Fund's
demand.

       Dysart Taylor also challenges the District Court's fact-finding on the value of
the corporate assets that were available in December 1996 and June 1997 (when the
court issued the interim payment orders) and what the law firm knew about that
situation; the sufficiency of the evidence supporting the court's findings concerning
Dysart Taylor's advice about which entities the corporations should pay first; and the
court's failure to find that Dysart Taylor acted in bad faith before the court imposed
sanctions for contempt. We conclude that the District Court cited sufficient
documentary and testamonial evidence to support the facts as the court found them.
See Chicago Truck Drivers, 230 F. Supp. 2d at 967–68 (E.D. Mo. 2002). Moreover,
the court had the advantage of being in a position to evaluate the credibility of
witnesses and their live testimony. Having conducted our own careful review of the
record, we cannot say that the court clearly erred in finding the facts as it did and
concluding that the evidence was sufficient to find Dysart Taylor in contempt.
Further, we agree that the law firm's bad faith vel non is immaterial to the court's
finding of contempt in this case.

        Finally, Dysart Taylor challenges the court's determination that it was in
contempt of the June 25, 1997, order when the firm had been granted leave to
withdraw as counsel twelve days before that. Again, we see no error. The District
Court did not fashion the contempt order or the sanction with reference to the two
orders, that is, specifying one amount for violating the 1996 order and another for
violating the 1997 order. Instead, the court found Dysart Taylor in contempt for
failing to advise Gula to use the corporations' remaining assets to pay its withdrawal
liability, which liability was set out in the order filed in December 1996 when the firm
was actively representing the corporations. The results of Dysart Taylor's contempt

                                          -6-
was ongoing—the corporations paid the law firm and others, to the exclusion of the
Fund, until their assets were exhausted and they were unable to comply with the
court's orders.

      Because we cannot say that the District Court abused its discretion in finding
Dysart Taylor in civil contempt of court and in ordering sanctions, we affirm.

MELLOY, Circuit Judge, dissenting.

       I respectfully dissent from the majority opinion. I believe that the lawyers in
this case are being penalized for doing what lawyers do. That is, they give advice to
clients, sometimes clients who are in financial distress, and get paid for that advice.
The district court, and now the majority, have held that doing so may subject the
lawyer to civil contempt and the payment of substantial damages. I believe that such
a holding puts at peril any attorney who represents financially distressed clients.

       In order to fully address my concerns, I think it is important to set forth a
chronology of significant events in this case. The Chicago Truck Drivers, Helpers
and Warehouse Workers Union (Independent) Pension Fund (the “Fund”) and its
trustees brought suit against four trucking companies owned by Steven Gula to
collect interim payments for withdrawal liability under ERISA. Appellant Dysart
Taylor represented the trucking companies during part of that underlying action that
gave rise to the finding of contempt.

      On December 4, 1996 the district court granted the Fund’s motion for summary
judgment. In granting the motion, the court found the defendants liable for the
withdrawal of interim payments under ERISA. The district court ordered the trucking
companies to begin making interim payments within sixty days. As the majority
notes, the Fund, not the defendant, then filed a motion to alter or amend the
judgement pursuant to Fed.R.Civ. Proc. 59(e).

                                         -7-
       The court granted Dysart Taylor leave to withdraw from the case on June 13,
1997. On June 25, 1997 the district court entered an amended judgment against the
trucking companies. This amended order clarified the amount owed and the schedule
of payments. It required the trucking companies to pay past-due interim payments,
liquidated damages, attorneys’ fees and costs, interest, and to make quarterly
installments beginning August 1, 1997.

       The Fund did not receive any payments by November 1998. Accordingly, the
Fund moved to hold the corporate defendants and Steven Gula, the corporate
defendants’ sole officer and shareholder, in contempt. The district court denied the
motion and the Fund appealed. On March 24, 2000 we remanded the case after
concluding that the district court improperly placed the burden on the Fund to show
that the alleged contemnors’ inability to pay. Chicago Truck Drivers v. Brotherhood
Labor Leasing, 207 F.3d 500, 505 (8th Cir. 2000) Further, we stated that the Fund
was entitled to develop its case against Gula in spite of the fact that he was not named
in the prior payment orders.

       On remand the Fund filed an amended petition for contempt. The amended
petition joined all of the attorneys who had represented the corporate defendants as
alleged contemnors, including Dysart Taylor, and the corporate defendants.
Following a hearing the district court held that Steven Gula and Dysart Taylor acted
in contempt of the court’s directives. The district court found that Dysart Taylor was
aware that the corporations’ assets were insufficient to pay both the Fund and the
other creditors, including Dysart Taylor. It also found that the law firm provided
legal advice regarding whom to pay. In particular, the district court concluded that
Dysart Taylor aided and abetted Gula’s failure to pay the Fund. The district court
ordered Dysart Taylor to pay the Fund the amount it had received in payment from
the corporations.

                                          -8-
       The Fund “bears the burden of proving facts warranting a civil contempt order
by clear and convincing evidence.” Indep. Fed’n of Flight Attendants v. Cooper, 134
F.3d 917, 920 (8th Cir. 1998). “The contempt power is a most potent weapon, and
therefore it must be carefully and precisely employed.” Mahers v. Hedgepeth, 32
F.3d 1273, 1275 (8th Cir. 1994). I do not believe the evidence in this case meets this
stringent standard.

        When Dysart Taylor received the December 1996 order it was not clear that the
order constituted an appealable final injunction. The law firm was faced with
advising its client as to what to do. What was the effect of the Rule 59(e) motion?
Was the order final, given the filing of the motion to alter or amend? Was the order
appealable? Can other operating expenses be paid before payment of the withdrawal
liability? Should the company begin paying the judgment (assuming it was a final
judgment), appeal, attempt to settle, or file bankruptcy? Dysart Taylor ultimately
advised its client that it could pay other creditors and then pay the Fund with any
money remaining. Dysart Taylor’s receipt of payment for this representation is what
gives rise to this contempt proceeding.

       Even if one assumes that Dysart Taylor should have realized the December
1996 order should have been construed as an injunction and gave poor advice, I do
not believe its actions rise to the level of aiding and abetting contempt. I part
company with the majority when it states that the law firm’s bad faith is immaterial
to the court’s finding of contempt. A law firm that gives legal advice in good faith
is not subject to contempt as an aider and abettor of its client. See In re Watts 190
U.S. 1, 29 (1903) (“In the ordinary case of advice to clients, if an attorney acts in
good faith and in the honest belief that his advice is well founded and in the just
interests of his client, he cannot be held liable for error in judgment.”); Maness v.
Meyers, 419 U.S. 449, 467 (1975) (holding that an attorney is not subject to contempt
for good faith legal advice regarding the Fifth Amendment).

                                         -9-
       In late 1996 and early 1997 the issue of whether the interim order was, in fact,
an injunction was not at all clear. At the time the order was entered, even the
Magistrate Judge did not believe the order was an injunction as evidenced by his
failure to treat it as such in 1996. Although this court stated that the district court’s
June 25, 1997 order looked like an injunction even if it was not labeled one, it never
addressed whether the December 4, 1996 judgment could be construed as an
injunction. Chicago Truck Drivers, 207 F.3d at 507. Further, merely “looking” like
an injunction does not satisfy the clear and convincing evidence standard required to
make a finding of contempt.

        Moreover, at the time of the entry of the December 1996 order, the case law
tended to suggest that the order was not an injunction. The only circuit authority on
the issue had found that such an interim order for payment of ERISA withdrawal
liability was not an injunction. The Seventh Circuit held in a case similar to the case
at bar, Trustees of the Chicago Truck Drivers, Helpers and Warehouse Workers
Union Pension Fund v. Central Transport, Inc., 935 F.2d 114, 117 (7th Cir. 1991),
that an interim order under ERISA requiring payments pending arbitration is not an
injunction.4 Accordingly, it was not obvious that the order in this case was an
injunction. This uncertainty was exacerbated by the legitimate questions the
attorneys had regarding whether the order was a final order since the plaintiff filed
a timely motion to alter and amend the judgment pursuant to Fed. R. Civ. P. 59(e).
To that end, neither party appealed the judgment, likely due to doubt regarding
whether it was ripe for appeal. The Fund never tried to enforce the order. It only
started execution proceedings in November 1998, after the entry of the final order in

      4
        The Seventh Circuit later found that failure to obey a court order to pay
ERISA withdrawal liability may be enforced by a contempt proceeding. Central
States, Southeast and Southwest Areas Pension Fund v. Wintz Properties, Inc., 155
F.3d 868, 873 (7th Cir. 1998). Our court also so held in the appeal of an earlier order
in this case. Chicago Truck Drivers, 207 F.3d at 505. However, both of those
decisions came well after the events that give rise to this contempt action.

                                          -10-
June 1997. Accordingly, I firmly believe the movant fell far short of proving by clear
and convincing evidence that the defendant law firm aided and abetted a violation of
an injunction when the firm did not even realize that an injunction existed.

       Even if there was an injunction in place, it is not impermissible to advise a
client regarding how to deal with an injunction order and to get paid for those
services. In this case, the attorneys had to review the terms of the injunction, confer
with their client, respond to the motion to alter and amend the judgment, and review
the available options given the fact that there was insufficient money to pay the
judgment. In light of the attorneys reasonable belief that the judgment was not an
injunction, much less a final injunction, the attorneys’ advice regarding how to deal
with the order was not sufficiently improper as to rise to the level of contempt.

        Finally, I am troubled by the majority’s statements that the contempt finding
was predicated in part on the fact that, even if there was no injunction, the withdrawal
liability was a legal obligation of the company. Slip Opinion at 5. Again, attorneys
deal with legal obligations all the time, such as individuals who are delinquent in
paying their federal or states taxes, in default on their mortgage, or behind on their
credit card payments. Practically every person in a bankruptcy proceeding is
delinquent on paying a number of legal obligations. Under the majority’s ruling, a
lawyer advising a financially distressed client as to how to deal with competing legal
obligations is at risk of a contempt citation for providing such advice and receiving
payment for those services. As the petitioner correctly suggests, to expose attorneys
to a possible contempt in this situation will temper attorney advocacy and impede
clients’ ability to obtain advice when it is most needed. As the Supreme Court has
said in a criminal context:

      If performance of a lawyer’s duty to advise a client that a privilege is
      available exposes a lawyer to the threat of contempt for giving honest

                                         -11-
      advice it is hardly debatable that some advocates may lose their zeal for
      forthrightness and independence.

Maness, 419 U.S. at 466 (1975).

      Accordingly, I respectfully dissent.
                      ______________________________

                                        -12-