Court Opinion

ID: 4283324
Source: CourtListenerOpinion
Date Created: 2018-06-11 17:00:51.996351+00
Date Added: 2024-06-11T14:08:04.454805
License: Public Domain

UNITED STATES DISTRICT COURT
                             FOR THE DISTRICT OF COLUMBIA

 UNITED STATES OF AMERICA,

                        Plaintiff,

                        v.
                                                       Case No. 1:14-cv-02213-TNM
 TWO GENERAL ELECTRIC AIRCRAFT
 ENGINES,

                        Defendant.

                                     MEMORANDUM OPINION

       This in rem proceeding against two General Electric aircraft engines started in 2014,

when the United States filed a complaint seeking forfeiture of the engines and alleging that

Evans Meridians Ltd. intended to transfer the engines to an Iranian entity with terrorist ties.

Evans Meridians filed a counter-claim asserting lawful ownership of the property. In 2016, it

failed to comply with a court order directing it to repatriate the engines or post a $6 million bond,

and the Court entered a coercive contempt order directing the company to pay the Court a fine of

$15,000 for each day that it continued in noncompliance. In 2018, Evans Meridians gave up its

claim to the property, saying the engines had been dismantled for parts, and the United States

moved for a compensatory contempt order directing the company to pay the United States

Marshals Service a $4 million fine. Because Evans Meridians has relinquished its claim and

there are no other counter-claimants, I will enter default judgment in favor of the United States.

At a hearing on February 14, 2018, I requested further briefing regarding the United States’

motion for compensatory sanctions. Because Evans Meridians’s contempt led to the destruction

of the engines, I will grant the United States’ motion for a compensatory contempt order. In the
interest of justice, I will reduce the outstanding fine under the Court’s prior contempt order to $2

million.

I.     The United States Is Entitled to Default Judgment in Its Forfeiture Case Against the
                                             Engines
       A court must enter default judgment when the “party against whom a judgment . . . is

sought has failed to plead or otherwise defend, and that failure is shown by affidavit or

otherwise.” Fed. R. Civ. Pro. 55(a). A party who has voluntarily relinquished its claim to

property subject to a forfeiture proceeding has relinquished its right to an adversarial hearing or

notice of default judgment. United States v. 8 Gilcrease Lane, 638 F.3d 297, 300 (D.C. Cir.

2011). Default judgment in an in rem forfeiture proceeding is appropriate when no further

defenses against forfeiture remain. See, e.g., United States v. 2 North Adams Street, 2010 WL

6714756 at *2 (D.D.C. 2010).

       On January 24, 2018, Evans Meridians voluntarily withdrew its claim to the engines.

Notice of Vol. Dismissal 1. That withdrawal left no further claimants adverse to the United

States’ forfeiture claim. I construe the United States’ April 2018 supplemental memorandum,

asserting that “the government is now entitled to default judgment and an order of forfeiture in

the government’s favor” as a motion for default judgment. Pl.’s Suppl. Mem. 7; cf. Estate of

Botvin ex rel. Ellis v. Islamic Republic of Iran, 772 F. Supp. 2d 218, 221 n.1 (D.D.C. 2011)

(construing motion for default judgment in part as motion for reconsideration because it argued

that a prior ruling was erroneous and because reconsideration was necessary to grant the

requested relief). Because Evans Meridians “voluntarily relinquished its claim” to the engines, it

also relinquished its right to challenge default judgment in the underlying forfeiture case. See 8

Gilcrease Lane, 638 F.3d at 300-02. As no further claimants to the engines remain to present

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defenses against forfeiture, default judgment is proper. See 2 North Adams Street, 2010 WL

6714756 at *2. An order of forfeiture will be entered in favor of the United States.

       Title to the engines vests retroactively in the United States from the “commission of the

act giving rise to forfeiture.” 18 U.S.C. § 981(f) (2012). The Complaint here alleges several acts

potentially giving rise to forfeiture, none of which are disputed. For example, the Complaint

alleges that the engines are subject to forfeiture because an attempt was made to transfer them to

Iran in violation of the International Emergency Economic Powers Act in late 2013 or early

2014. Compl. ¶¶ 21-23. The Complaint also alleges that the engines are subject to forfeiture as

property involved in money laundering transactions or attempted money laundering transactions,

the first of which took place on October 25, 2013. Id. ¶¶ 2, 27. The acts giving rise to forfeiture

took place before the Complaint was filed and before the engines were dismantled. Because title

vests retroactively, the United States has held title to the engines throughout the pendency of this

lawsuit.

 II.       A $4 Million Sanction Will Be Awarded to the United States to Compensate It for
                                           Its Actual Loss
       A federal court has inherent and statutory power to impose civil sanctions upon a

contemptuous party. See 18 U.S.C. § 401 (2012); Shillitani v. United States, 384 U.S. 364, 370

(1966). Courts may impose civil sanctions either to coerce the contemnor into compliance with

the court’s order or “to compensate the complainant for losses sustained” from the contempt.

United States v. United Mine Workers of Am., 330 U.S. 258, 303-04 (1947). Compensatory

sanctions are paid to the complainant, “based upon evidence of complainant’s actual loss.” Id. at

304.

       An adversarial hearing is required for a civil contempt sanction only if there is a genuine

issue of material fact in dispute about the contempt. See Food Lion, Inc. v. United Food &

                                                 3
Commercial Workers Int’l Union, 103 F.3d 1007, 1019-20 (D.C. Cir. 1997). “In a contempt

proceeding, the moving party has the burden of showing by clear and convincing evidence that

(1) a court order was in effect, (2) the order required certain conduct by the respondent, and (3)

the respondent failed to comply with the court’s order.” SEC v. Bankers All. Corp., 881 F. Supp.

673, 678 (D.D.C. 1995).

        The material facts relevant to Evans Meridians’s contempt were established in the

October 2016 adversarial hearing. Mem. Op. 2. The Court determined then that (1) a

repatriation order was in effect, (2) the order required Evans Meridians to repatriate the engines

or post $6 million bond, and (3) Evans Meridians had failed to do so. Id. at 5. No genuine issue

of material fact remains unresolved after that hearing on Evans Meridians’s continued failure to

repatriate the engines. Evans Meridians readily admits that it “was ordered to repatriate the two

engines . . . but it did not do so.” Evans’s Suppl. Mem. 7-8. According to a letter forwarded to

the government by Evans Meridians the engines were destroyed while they remained overseas in

China. Mot. for Comp. Fine, Ex. A; see also Resp. to Mot. For Comp. Fine 4. Evans

Meridians’s contempt in failing to repatriate the engines caused the destruction of the engines.

And the destruction of the engines deprived the United States of its property interest in the

engines and in the litigation of its claim.

        Evans Meridians insists that it did not “willfully” violate the repatriation order. Evans’s

Suppl. Mem. 6. Willfulness, however, is not an element of civil contempt. See Bankers All., 881

F. Supp. 678. Evans Meridians also claims that “[t]here has not been any showing that Evans

Meridians had the ability to repatriate the engines after the Contempt Order was entered.”

Evans’s Suppl. Mem. 6. But in pleading an impossibility defense to civil contempt, “the

defendant has the burden of production.” United States v. Rylander, 460 U.S. 752, 757 (1983).

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The relevant fact is that there has been no showing that Evans Meridians could not repatriate the

engines. Mem. Op. 5. The burden of that showing rests on Evans Meridians, and Evans

Meridians has not met its burden.

       The relief granted to the United States today remediates the property loss suffered as a

result of the destruction of the engines. Because a forfeiture award vests title retroactively, the

United States has held title to the engines throughout the lawsuit. See 18 U.S.C. § 981(f).

During the time in which the engines remained overseas as a direct result of Evans Meridians’s

contempt of the repatriation order, a Chinese warehouse destroyed the engines; this destruction

deprived the United States of its property. See Evans’s Suppl. Mem. 2; see also Order to

Repatriate. It is an appropriate civil sanction to order Evans Meridians to “compensate the

[United States] for losses caused by the violation of the [repatriation] order.” Landmark Legal

Found. v. EPA, 272 F. Supp. 2d 70, 75 (D.D.C. 2003).

       The United States is entitled to $4 million as compensation for the actual loss of the

engines. This is a reasonable valuation of the engines as it reflects the price of Evans

Meridians’s most recent contract to sell the engines. See Pl.’s Suppl. Mem. 9. Evans Meridians

claims that the engines “no longer exist,” so an approximation of their current market value

would be futile. Evans’s Resp. to Mot. for Compensatory Fine 4. The proper measure of the

United States’ loss is the value of the engines at the time Evans Meridians’s contempt interfered

with the United States’ property rights in the engines. The $4 million figure provided by Evans

Meridians’s own sales negotiations is a fair estimate of that value. See United Mine Workers of

Am., 330 U.S. 304 (noting that compensatory contempt fines should be based on evidence of the

complainant’s actual loss); see also Mem. Op. at 10 (noting that Evans Meridians itself valued

the engines at roughly $4 million at the time it was held in contempt). Payment to the United

                                                  5
States Marshals Service is an appropriate means of directly compensating the United States as

the party harmed by Evans Meridians’s contempt.

        Evans argues that the fine requested by the United States is criminal rather than civil.

Evans’s Supp. Mem. 3-6. A party facing criminal sanctions is entitled to the Constitutional

protections proper to criminal proceedings, including a jury trial, if the sanctions are serious.

Int’l Union, United Mine Workers of Am. v. Bagwell, 512 U.S. 821, 826 (1994). The distinction

between civil and criminal contempt turns on the “character and purpose” of the sanction. Id. at

828. The character of the relief is based on “an examination of the relief itself” rather than the

subjective motivations of the court. Id. If the sanction is punitive and vindicates the authority of

the court, it is criminal, but if it is remedial and for the benefit of the complainant, it is civil. Id.

at 827-28.

        When a sanction is a fine, “it is remedial when it is paid to the complainant, and punitive

when it is paid to the court, though a fine that would be payable to the court is also remedial

when the defendant can avoid paying the fine simply by performing the affirmative act required

by the court’s order.” Hicks on Behalf of Feiock v. Feiock, 485 U.S. 624, 632 (1988). The

sanction imposed by the Court today is payable to the United States as the complainant, and it is

thus civil and compensatory, rather than criminal.

        Evans Meridians argues that a $4 million sanction is large enough to push this sanction

from the realm of civil contempt to that of criminal contempt. Evans’s Suppl. Mem. 5. To

support this view, Evans Meridians cites to footnote 5 of Bagwell. Id. But that footnote uses the

size of a sanction to distinguish between petty and serious criminal sanctions, not to distinguish

between civil and criminal sanctions. Bagwell, 512 U.S. 821, 837, n.5. Evans Meridians

                                                    6
misinterprets Bagwell and thus is incorrect in asserting that the size of the sanction factors into

the civil-criminal distinction.

         Evans Meridians is similarly incorrect in arguing that, because forfeiture is punitive and

criminal, a sanction relating to forfeiture must be punitive and criminal. Evans’s Suppl. Mem. 7-

8. Forfeiture is not always punitive and criminal; forfeiture can be civil. See 18 U.S.C. §§ 981-

82. In fact the authorities cited by Evans Meridians highlight the distinction between civil and

criminal forfeiture. Austin v. United States, 509 U.S. 602, 618 (1993) (finding that, although

civil sanctions are distinct from criminal sanctions, the Eighth Amendment applies); see also

Austin, 509 U.S. at 624 (Scalia, J. concurring) (distinguishing criminal in personam from civil in

rem forfeiture); United States v. Bajakajian, 524 U.S. 321, 331-32 (1998) (distinguishing

punitive in personam forfeiture from remedial in rem forfeiture). Evans Meridians did not join

the action as a claimant until three months after the United States filed its claim against the

engines. Claim for Property 1. The act giving rise to forfeiture may have occurred as early as

October 2013, a month before Evans Meridians was invoiced for the engines, to be delivered in

the British Virgin Islands. Complaint 8-9. The underlying action here is for civil forfeiture,

proceeding in rem against the engines; it is not for criminal forfeiture, proceeding in personam

against Evans Meridians. Complaint 1; see 18 U.S.C. §§ 981-82.

  III.     In the Interests of Justice, the Outstanding Coercive Contempt Sanction Will Be
                                          Reduced to $2 Million
         A district court has “wide discretion” and “broad equitable powers to craft remedial

sanctions for civil contempt.” United States v. Latney’s Funeral Home, Inc., 41 F. Supp. 3d 24,

36 (D.D.C. 2014). In addition to its discretion in fashioning equitable sanctions, “a district court

ordinarily has the power to modify or rescind its orders at any point prior to final judgment in a

civil case.” Dietz v. Bouldin, 136 S. Ct. 1885, 1892 (2016). The original repatriation order

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