Court Opinion

ID: 2964770
Source: CourtListenerOpinion
Date Created: 2015-09-21 21:30:47.50126+00
Date Added: 2024-06-11T11:43:01.155958
License: Public Domain

USCA1 Opinion

	

                            United States Court of Appeals
                                For the First Circuit
                                 ____________________

        No. 95-1270
                             AETNA CASUALTY & SURETY CO.

                                 Plaintiff, Appellee,
                                          v.

                                   JACK MARKARIAN,

                                Defendant, Appellant.

                                 ____________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT
                          FOR THE DISTRICT OF MASSACHUSETTS

                     [Hon. William G. Young, U.S. District Judge]
                                             ___________________
                                 ____________________

                                        Before

                           Stahl and Lynch, Circuit Judges,
                                            ______________
                            and O'Toole, District Judge.*
                                         ______________
                                 ____________________

            Kenneth  R. Berman, with whom Rhonda B. Parker and Sherin & Lodgen
            __________________            ________________     _______________
        LLP were on brief, for appellant.
        ___

            David S.  Douglas, with  whom Howard  S. Veisz,  Gregg Kanter  and
            _________________             ________________   ____________
        Kornstein, Veisz &  Wexler LLP,  and Glenda Ganem  and McGovern,  Hug,
        ______________________________       ____________      _______________
        Welch & Ganem LLP were on brief, for appellee.
        _________________

                                 ____________________

                                     June 4, 1997
                                 ____________________

                            
        ____________________

        *Of the District of Massachusetts, sitting by designation.

                      LYNCH, Circuit Judge.  Jack Markarian, against whom
                      LYNCH, Circuit Judge.
                             _____________

            appellee  Aetna  Casualty  and  Surety Company  has  a  civil

            judgment,  appeals from  the  entry of  a  writ of  ne  exeat
                                                                _________

            against  him.   The  writ, which  is  essentially a  form  of

            equitable  bail,  was issued  ex  parte  in the  District  of

            Massachusetts in  February 1995.  It  prohibits Markarian, an

            American citizen who is employed and lives with his family in

            Massachusetts, from leaving the state or removing  any of his

            assets from  the state without  the court's permission.   The

            writ required Markarian to surrender his passport to a United

            States Marshal, and  violation of its terms is  punishable by

            detention in a federal facility.

                      Markarian    raises     federal    statutory    and

            constitutional objections  to the issuance  of the writ.   We

            vacate the writ  without reaching the constitutional  issues,

            although  they  are not  frivolous.   The  writ of  ne exeat,
                                                                ________

            governed by Fed. R. Civ.  P. 69 and Mass. R. Civ.  P. 4.3(c),

            is  not available as a  tool in an  ordinary civil collection

            action like this.   It  may only issue  in furtherance of  "a

            judgment  or order requiring  the performance of  an act, the

            neglect or  refusal to perform  which would be  punishable by

            the court as a contempt."  Mass. R. Civ. P. 4.3(c).   The All

            Writs  Act, 28  U.S.C.    1651, does  not  negate this  state

            requirement for issuance of the writ.

                                          I.

                      The facts of the underlying civil action brought by

            Aetna  against  Markarian are  of  little  importance to  the

            present appeal.  Suffice it to  say that Aetna was the victim

            of  a fraudulent  autobody insurance  claim scheme,  and that

            Markarian along  with some  relatives and the  companies they

            controlled were the perpetrators of the scheme.  A e t n a

            brought  suit in  federal  district  court in  Massachusetts,

            asserting claims under civil RICO,  Massachusetts common law,

            and the  Massachusetts deceptive trade practices  statute.  A

            jury  found in  Aetna's favor  on most of  the claims  in the

            complaint, and  in November  1993 the district  court entered

            judgment holding Markarian and  his 22 co-defendants  jointly

            and severally liable for over $6 million.  Markarian and some

            of  the defendants  were also  found individually  liable for

            over $1.5 million under Mass. Gen. Laws Ch. 93A.   This court

            affirmed  the judgment in December  1994.  Aetna  Cas. & Sur.
                                                       __________________

            Co. v. P & B Autobody, 43 F.3d 1546 (1st Cir. 1994).
            ___    ______________

                      Judgment  in  hand, Aetna  sought  to identify  and

            seize  assets.     It   commenced  a  supplementary   process

            proceeding  in federal  court under  Fed. R.  Civ. P.  69 and

            Mass. Gen. Laws Ch.  224,   14 seeking an  order transferring

            ownership of Markarian's non-exempt assets.  Aetna also filed

            an  ex parte  application  for  the  writ  of  ne  exeat  and
                                                           _________

            supported it  with an   affidavit stating that  Markarian and

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            his co-defendants were secreting assets to render them immune

            to supplementary process.

                      The district court  issued the writ of  ne exeat in
                                                              ________

            February 1995, finding  that Markarian and  his co-defendants

            had been moving  assets out of the jurisdiction as part of an

            effort to prevent enforcement of the judgment and  that there

            was  a strong likelihood that  they would continue  to do so.

            The  district court also  found that  there was  an immediate

            likelihood   that   the   co-defendants  would   depart   the

            jurisdiction or the United States.

                      In March 1995, Markarian appealed from the writ and

            filed  a suggestion  of  bankruptcy.   The bankruptcy  filing

            resulted in  an automatic  stay of the  supplementary process

            proceedings,  see 11  U.S.C.    362(a), and  later in  March,
                          ___

            Markarian moved this court to stay the appeal from the writ.1

            This court issued an order holding the appeal in abeyance and

            directing counsel to report back after the  decision from the

            bankruptcy court.   Markarian then  moved to vacate  the writ

            before the bankruptcy court,  which denied the motion without

            prejudice in November 1995 and referred Markarian back to the

            district  court.   See  In re  Jack  Markarian, No.  95-40961
                               ___  ______________________

            (Bankr. D. Mass. Nov. 20, 1995).

                                
            ____________________

            1.  The writ does not appear to fall within  the terms of the
            Automatic  Stay  provision of  the  Bankruptcy  Code, see  11
                                                                  ___
            U.S.C.    362, and thus the writ and the appeal from the writ
            were not stayed automatically by the bankruptcy filing.

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                                          4

                      The district court in March 1996 denied Markarian's

            motion   to  vacate   the  writ,   stating  that   it  lacked

            jurisdiction   over  the   matter.     Markarian   moved  for

            clarification of this ruling.  While that motion was pending,

            in  July 1996,  the bankruptcy  court ruled  that Markarian's

            debts to Aetna were not dischargeable because they  arose out

            of fraud.  See In re Jack Markarian, No. 95-40961 (Bankr.  D.
                       ___ ____________________

            Mass. Jul. 31, 1996).   However, the bankruptcy court  deemed

            the   issue  close   enough  to   stay  the  order   of  non-

            dischargeability and  certify the  case to the  First Circuit

            Bankruptcy  Appellate Panel,  where it  is  now pending.   In

            October  1996, the  district  court,  ruling  on  Markarian's

            motion for clarification of the refusal to vacate the writ of

            ne exeat, denied  the motion "on the  merits" without opinion
            ________

            or findings.  This appeal followed.

                                         II.

                      Aetna   argues   that   there   is   no   appellate

            jurisdiction,   saying  the   writ   is  no   more  than   an

            interlocutory  order to  preserve assets  until  its separate

            supplementary  process  proceedings  against   Markarian  are

            completed.2   We disagree.   At issue is  not a supplementary

            process order but a writ of  ne exeat:  Aetna's motion papers
                                         ________

            and  the  order  issuing  the   writ  make  no  reference  to

                                
            ____________________

            2.  The supplementary process proceedings cannot resume until
            the conclusion of the  bankruptcy proceedings unless the stay
            is lifted.

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                                          5

            supplementary process, and the  writ, by its terms,  does not

            expire with  the  termination of  the  supplementary  process

            proceedings.   The  writ  is effectively  an injunction  over

            which  this  court has  jurisdiction  pursuant  to 28  U.S.C.

              1292(a).  See  United States v. Shaheen, 445 F.2d 6, 7 (7th
                        ___  _____________    _______

            Cir. 1971).  We also note Markarian's argument  that issuance

            of the  writ was an error of law,  and thus the writ may well

            be an appealable collateral order.  See id. at 7 n.2.
                                                ___ ___

                                         III.

                      Where a money judgment  has been entered in federal

            court, enforcement  of the  judgment is governed  by Fed.  R.

            Civ. P. 69, which provides that the procedures to be used are

            those of the state  in which the district court  sits, unless

            there is an applicable federal statute.  Aetna availed itself

            of state process, seeking a writ of ne exeat.
                                                ________

                      Massachusetts  procedure  permits  issuance of  the

            writ only in support of an order punishable by the court as a

            contempt.  See Mass. R. Civ.  P. 4.3(c).  A money judgment is
                       ___

            not  such an order.3  "[T]he writ  of ne exeat has never been
                                                  ________

            issued  in aid  of  legal, as  distinguished from  equitable,

            process,  or for  the purpose  of obtaining  security from  a

                                
            ____________________

            3.  The Massachusetts supplementary process statute, however,
            provides that violation of  a supplementary process order may
            be punishable as a contempt.  See Mass. Gen. Laws  Ch. 224,  
                                          ___
            16.   We do not reach the question of whether the writ may be
            used  after a supplementary process order has been issued and
            there has been a violation.  That is not the case here.

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                                          6

            defendant in  at action of  law."   Moore v.  Valda, 23  N.E.
                                                _____     _____

            1102,  1103 (Mass. 1890) (per curiam).  "[W]hen a party fails

            to  satisfy a  court-imposed  money judgment  the appropriate

            remedy  is a writ of  execution, not a  finding of contempt."

            Combs v. Ryan's Coal Co., 785 F.2d 970, 980 (11th Cir. 1996);
            _____    _______________

            see also  Shuffler v. Heritage  Bank, 720 F.2d  1141, 1147-48
            ________  ________    ______________

            (9th Cir. 1983).   It follows that  the issuance of the  writ

            was error.  See  Gabovitch v. Lundy, 584  F.2d 559, 560  (1st
                        ___  _________    _____

            Cir.  1978)   (failure   to  comply   with  state   procedure

            invalidated writ of execution).

                      These  are not  mere formalisms.    The writ  of ne
                                                                       __

            exeat is an ancient writ.   It hearkens back to the days when
            _____

            debtors  were imprisoned for failure to pay their debts.  The

            writ is itself a form  of civil arrest.  Caselaw on  the writ

            has narrowed  its use to situations  resulting from equitable

            debt rather than  debts recoverable at law.  See 65 C.J.S. Ne
                                                         ___           __

            Exeat    4,  at  396  (1966).    The  Massachusetts  rule  is
            _____

            similarly circumscribed.

                      Indeed, the Reporter's  Notes to the  Massachusetts

            rule providing for the writ of ne exeat express concern about
                                           ________

            the constitutionality  of the writ, even  circumscribed as it

            is.   The  Massachusetts  courts, recognizing  that the  writ

            operates in  restraint of personal liberties,  have held that

            the writ  "is to  be  granted with  caution"  and "is  to  be

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            continued  in force with caution."  Cohen v. Cohen, 64 N.E.2d
                                                _____    _____

            689, 693 (Mass. 1946).

                      Aetna's  motion for  a writ  of ne  exeat finds  no
                                                      _________

            ground on  which to  rest.   Rule  69 does  not provide  that

            ground independently, because it  directs that "[p]rocess  to

            enforce a judgment for  the payment of money shall be  a writ

            of  execution,  unless  the  court directs  otherwise.    The

            procedure on execution .  . . shall be in accordance with the

            practice  and procedure  of the  state in which  the district

            court is  held . . .  ."  The "otherwise"  clause is narrowly

            construed.    See Combs,  785  F.2d  at  980.   It  does  not
                          ___ _____

            authorize enforcement  of a  civil money judgment  by methods

            other  than   a  writ   of  execution,  except   where  "well

            established principles  [so] warrant."  13 J.  Moore, Moore's

            Federal  Practice   69.02, at 69-5  to -7 (3d  ed. 1997); see
                                                                      ___

            also Hilao v.  Estate of Marcos, 95  F.3d 848, 854  (9th Cir.
            ____ _____     ________________

            1996).4

                                
            ____________________

            4.   One such  situation is where an  action for contempt has
            been instituted for  failure to pay an  obligation imposed by
            statute in order to  enforce the public policies  embodied in
            the  statutory scheme.    See, e.g.,  McComb v.  Jacksonville
                                      _________   ______     ____________
            Paper Co., 336  U.S. 187,  193-95 (1949).   Another is  where
            _________
            there has  been a congressional determination  to provide the
            government with  the ability to  seek a writ  of ne  exeat in
                                                             _________
            furtherance  of enforcing  tax  obligations.   See, e.g.,  26
                                                           _________
            U.S.C.   7402(a).  A third is where the judgment is against a
            state which  refuses to appropriate funds  through the normal
            process  provided  by  state  law.     See,  e.g.,  Spain  v.
                                                   __________   _____
            Mountanos, 690 F.2d 742,  744-45 (9th Cir. 1982); Gary  W. v.
            _________                                         ________
            Louisiana, 622 F.2d 804,  806 (5th Cir. 1980).   In contrast,
            _________
            the size of the  award and the difficulties in  enforcing the
            judgment   due  to  the  location   of  the  assets  and  the

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                      This court has  held that "the legislative  history

            and  judicial application of  Rule 69(a) make  clear that the

            first  sentence of  the Rule  expresses a  limitation on  the

            means of enforcement of money judgments and does not create a

            general power to issue writs of execution in disregard of the

            state  law incorporated by the rest of the Rule."  Gabovitch,
                                                               _________

            584 F.2d at 560-61.  The state remedy is the exclusive  route

            here.  See id. at 561.
                   ___ ___

                      Aetna also points to the All Writs Act, 28 U.S.C.  

            1651,  but does not develop  its argument.   The point is not

            well taken.  The  All Writs Act "does not  authorize [federal

            courts]  to  issue  ad  hoc writs  whenever  compliance  with

            statutory   procedures   appears    inconvenient   or    less

            appropriate."   Pennsylvania Bureau  of Correction  v. United
                            __________________________________     ______

            States Marshals Serv.,  474 U.S.  34, 43 (1985).   Where,  as
            _____________________

            here, there  is  a statutory  procedure  which  "specifically

            addresses the particular issue at hand, it is that authority,

            and  not  the  All Writs  Act,  that  is  controlling."   Id.
                                                                      ___

            Indeed, there is every  reason not to reach  to find the  All

            Writs Act applicable where "the courts have consistently read

            Rule 69(a) as limiting all federal process on money judgments

                                
            ____________________

            uncooperativeness of the judgment debtor are not the types of
            extraordinary  circumstances which warrant departure from the
            general rule  that money judgments  are enforced by  means of
            writs  of execution  rather than  by  resort to  the contempt
            power of the courts.  See Hilao, 95 F.3d at 855.
                                  ___ _____

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            to  the   type  of   process  available  under   state  law."

            Gabovitch, 584 F.2d at 561.
            _________

                      This opinion  does not condone  Markarian's failure

            to  pay his  judgment debt,  nor does  it fail  to appreciate

            Aetna's  frustration.    It   simply  holds  that  the  legal

            predicate for issuance of the extraordinary writ of  ne exeat
                                                                 ________

            is lacking and so issuance of the writ was error.

                      The  order granting  the writ  is reversed  and the
                                                        ________

            writ is vacated.  No costs.
                    _______

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