Court Opinion

ID: 2970902
Source: CourtListenerOpinion
Date Created: 2015-09-22 16:24:30.958883+00
Date Added: 2024-06-11T11:43:32.576371
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RECOMMENDED FOR FULL-TEXT PUBLICATION
            Pursuant to Sixth Circuit Rule 206            2    Elec. Workers Local 58 Pension Trust         No. 01-1864
    ELECTRONIC CITATION: 2003 FED App. 0295P (6th Cir.)        Fund et al. v. Gary’s Elec. Serv. Co.
                File Name: 03a0295p.06
                                                          GIARMARCO, Troy, Michigan, for Appellee. ON BRIEF:
                                                          Sheldon M. Meizlish, Detroit, Michigan, Rolland R. O’Hare,
UNITED STATES COURT OF APPEALS                            SACHS, NUNN, KATES, KADUSHIN, O’HARE,
              FOR THE SIXTH CIRCUIT                       HELVESTON & WALDMAN, Detroit, Michigan, for
                _________________                         Appellant. William L. Hooth, Ryan Lee Perry, COX,
                                                          HODGMAN & GIARMARCO, Troy, Michigan, for
                                                          Appellee.
ELECTRICAL WORKERS              X
PENSION TRUST FUND OF            -                                            _________________
LOCAL UNION #58, IBEW, et        -
                                 -     No. 01-1864                                OPINION
al.,                             -                                            _________________
         Plaintiffs-Appellants, >
                                 ,
                                                             KAREN NELSON MOORE, Circuit Judge. This dispute
                                 -
           v.                                             originated when Defendant-Appellee Gary’s Electric Service
                                 -
                                                          Company (“Gary’s Electric”) violated a collective bargaining
                                 -
                                                          agreement’s (“CBA”) fringe benefit provisions and then
GARY ’S ELECTRIC SERVICE         -
                                                          failed to honor a request for information from Plaintiffs-
COMPANY ,                        -
                                                          Appellants Electrical Worker’s Pension Trust Fund of Local
          Defendant-Appellee. -                           Union #58, International Brotherhood of Electrical Workers,
                                N
                                                          et al. (“the Funds”) regarding the performance of Gary’s
                                                          Electric’s representational duties. The Funds first filed a
      Appeal from the United States District Court        grievance with the Labor-Management Committee (“LMC”)
     for the Eastern District of Michigan at Detroit.     based on Gary’s Electric’s failure to pay fringe benefits,
   No. 98-74631—Anna Diggs Taylor, District Judge.        requesting that the LMC enter an arbitration award ordering
                                                          Gary’s Electric to file past-due reports, pay past-due
               Argued: January 30, 2003                   contributions, and thereafter file and pay contributions as they
                                                          became due. After the LMC entered the award, the Funds
         Decided and Filed: August 18, 2003               filed an action in district court to secure Gary’s Electric’s
                                                          compliance with the terms of the award. Upon the Funds’
 Before: BATCHELDER, MOORE, and CLAY, Circuit             motion, the district court granted summary judgment in favor
                  Judges.                                 of the Funds. When Gary’s Electric appealed, the appeal was
                  _________________                       consolidated with a National Labor Relations Board
                                                          (“NLRB”) petition seeking enforcement of an NLRB order
                       COUNSEL                            finding that Gary’s Electric engaged in unfair labor practices.
                                                          A panel of this court affirmed the district court’s decision and
ARGUED: Mark Granzotto, Royal Oak, Michigan, for          enforced the NLRB order. See Elec. Workers Local 58
Appellant. William L. Hooth, COX, HODGMAN &

                            1
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                     Fund et al. v. Gary’s Elec. Serv. Co.                           Fund et al. v. Gary’s Elec. Serv. Co.

Pension Trust Fund v. Gary’s Elec. Serv. Co., 227 F.3d 646                   fringe benefits — pension, vacation, unemployment, annuity,
(6th Cir. 2000).                                                             and medical — into the Funds.
  Thereafter, the Funds brought contempt proceedings in the                     On August 4, 1998, in accordance with the terms of the
district court against Gary’s Electric and its owner, Russell                CBA, the Funds made a demand to the LMC for arbitration of
Gary Pipia (“Pipia”), alleging that they continually violated                their grievance, charging that Gary’s Electric failed to make
the terms of the arbitration award. The district court held a                its contractual payments into the Funds and failed to submit
hearing and granted the contempt petition as to Gary’s                       the required fringe benefit reports. A hearing before the LMC
Electric but denied it as to Pipia. The district court explained             was set for August 20, 1998, and Gary’s Electric was given
that, among other reasons, Pipia could not be held in                        notice. On August 25, 1998, the LMC found Gary’s Electric
contempt because he was not an actual defendant in the                       guilty of the charges in the grievance and ordered Gary’s
action. The Funds then brought this appeal from the portion                  Electric to pay the past-due fringe benefit payments, produce
of the court’s order denying the contempt petition as to Pipia.              the reports, and make future payments when due.2 An
We VACATE the decision of the district court and                             additional award from the LMC, also dated August 25, 1998,
REMAND for additional proceedings consistent with this                       found Gary’s Electric guilty of failing to secure a surety bond
opinion.                                                                     as required by the CBA.
                        I. BACKGROUND                                          Almost two months later, after Gary’s Electric failed to
                                                                             comply with the LMC awards, the Funds filed a complaint in
   Gary’s Electric, a Michigan corporation wholly owned by                   district court requesting that the court enter a judgment
Pipia, was a small electrical service company with primarily                 enforcing the LMC’s awards. On May 18, 1999, the district
residential and small-business customers. In 1976, and again                 court granted the Funds’ motion for summary judgment, and
in 1988, Gary’s Electric signed a letter of assent authorizing               Gary’s Electric immediately filed an appeal.3 A three-judge
the Southeastern Michigan Chapter of the National Electrical
Contractors Association (“NECA”) to be its representative for
all business matters between NECA and the International                          2
                                                                                    The arbitration award specifically ordered Gary’s Electric to remedy
Brotherhood of Electrical Workers’ Local Union #58 (“the                     its violation by:
Union”).1 Through its representative, NECA, Gary’s Electric                       A. Submitting the fringe benefit reports due to the date of this
entered into a binding CBA with the Union. This CBA                                     decision as required by Article VIII of that Agreem ent, and
required participating employers to pay their employees’                          B. Immediately paying the amounts shown on those reports as
                                                                                        due, including the liquidated dam ages d ue thereon, and
                                                                                                                  ...
                                                                                  D. Hereafter, filing all reports and paying all fringe bene fit
                                                                                        contributions on a timely basis as required by Article VIII.
    1                                                                        Joint Appendix (“J.A.”) at 16 (Compl., Ex. C, Award of the LMC ).
      The second letter of assent, signed by P ipia as G ary’s Electric’s
presid ent, took effect on July 29 , 198 8 and stated that it would remain       3
effective until terminated by Gary’s Electric supplying NEC A and the              During the pending appeal, Gary’s Electric neither filed a
Union with written notice at least 150 days p rior to the agreement’s        supersedeas bond nor stayed the judgment pending appeal. Thus, the
anniversary date. See Elec. Work ers Local 58 Pension Trust Fund, 227        district court “retain[ed] jurisdiction to enforce [its] judgment.” NLRB v.
F.3d at 650.                                                                 Cincinnati Bronze, Inc., 829 F.2d 58 5, 588 (6th Cir. 1987).
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                     Fund et al. v. Gary’s Elec. Serv. Co.                              Fund et al. v. Gary’s Elec. Serv. Co.

panel of this court heard the consolidated appeal4 on                           its rulings on the other issues contained in the Funds’ petition
August 4, 2000, and issued an opinion on September 25,                          for contempt.
2000, enforcing the NLRB order and affirming the district
court’s grant of summary judgment for the Funds. See Elec.                        The instant appeal began when the Funds reinitiated the
Workers Local 58 Pension Trust Fund, 227 F.3d at 649.                           deferred portions of their contempt petition against both
                                                                                Gary’s Electric and Pipia.7 In their motion for rehearing filed
   While Gary’s Electric’s appeal was pending,5 the Funds                       on December 7, 2000, the Funds alleged that Gary’s Electric,
initiated contempt proceedings in district court against Gary’s                 with total disregard for this court’s decision, chose not to
Electric and Pipia for failing to adhere to the district court’s                comply with the district court’s judgment — it did not make
orders to pay past-due contributions, disclose fringe benefit                   delinquent payments, produce all the necessary fringe benefit
reports, adhere to the rules in the CBA for future                              reports,8 make prospective payments as they became due, or
contributions and reports, secure a surety bond, and pay the                    comply with the bond award. According to the affidavit of a
Funds their costs and attorney fees.6 A November 23, 1999                       Funds employee responsible for monitoring participating
order of the district court temporarily disposed of the Funds’                  employers’ payments to the Funds, from the district court’s
petition for contempt by ordering: (1) Gary’s Electric to                       judgment enforcing the LMC awards in May 1999 until
produce, within one month, the fringe benefit reports from                      October 30, 1999, fringe benefit contributions owed by
June 1998 through the present date; and (2) Pipia to submit to                  Gary’s Electric amounted to $75, 345.04.9 In the motion, the
a deposition within two months. The district court postponed                    Funds also allege that Pipia began to waste the corporate
                                                                                asserts in an effort to avoid making the court-required
                                                                                payments. According to the Funds, Pipia starting “stripping

    4
       The NLRB ’s general counsel brought charges against Gary’s                   7
Electric for failure to provide information relevant to the performance of           In previous briefs to this court, Gary’s Electric relied on a
its repre sentational duties pursuant to Sections 8(a)(5) and (1) of the        September 29, 2000 district court order deciding that the motion for
National Labor Relations Act (“NLRA”). The ad ministrative law judge            contempt is moot because the court issued an order dismissing the case on
(“ALJ”) found Gary’s Electric guilty as charged, and then the NLRB              November 23, 1999. On October 19, 2000, the district court issued
affirmed the ALJ’s decision. The NLR B eventually sought enforcement            another order vacating the September 29, 2000 ord er which denied the
of its order, and that action was conso lidated with Gary’s Electric’s appeal   motion for contemp t as moot, and stated that the September order was
from summary judgment in the Funds’ case.                                       “erroneously issued.” J.A. at 5 (Docket #42).

    5                                                                               8
     Gary’s Electric ceased functioning as an electrical services company              Gary’s Electric eventually produced the reports for May 8, 1998
by No vember 1 999 , although Pipia and his secretary continued to work         through October 30 , 1999. Nevertheless, they failed to produce any
up until January 20 00 in order to wind up the business’s affairs.              repo rts for Novemb er and December 1999, even though, as the Funds
According to the Funds, Gary’s Electric went out of business on                 allege, Gary’s Electric still employed electrical workers during those
November 13, 1999.                                                              months.

    6                                                                               9
     The Funds admit that once these contempt proceedings began,                     The Funds assert that if the time period runs from the date of
Gary’s Electric submitted the fringe benefit reports that earlier they were     judgment up until November 13, 1999 when Gary’s Electric went out of
ordered to produce. These reports showed that between May 8, 19 98 and          business, then the amount owed by Gary’s Electric in fringe benefits is
October 30 , 1999 , Gary’s Electric ow ed $2 47,80 3.82 to the Funds.           “some a hundred seven thousand dollars.” J.A. at 136 (T r. of Mot. Hr’g).
No. 01-1864      Elec. Workers Local 58 Pension Trust            7   8     Elec. Workers Local 58 Pension Trust        No. 01-1864
                  Fund et al. v. Gary’s Elec. Serv. Co.                    Fund et al. v. Gary’s Elec. Serv. Co.

the corporation of its assets” after the NLRB and the Funds                                 II. ANALYSIS
initiated proceedings against it in late 1998 and early 1999.
Appellants’ Br. at 8. The evidence supporting the Funds’             A. Jurisdiction
position that Pipia flagrantly and deliberately disregarded the
court’s judgment includes: Pipia more than tripling his                The district court had jurisdiction pursuant to §301 of the
Gary’s Electric salary within two years, Pipia’s receipt of          Labor Management Relations Act, as amended, 29 U.S.C.
large bonuses and loans from Gary’s Electric, Pipia’s use of         § 185, and §§ 502(g)(2) and 515 of the Employee Retirement
funds from a corporate account to purchase a fur coat for his        Income Security Act of 1974 (“ERISA”). We have
wife which he later claimed as a bonus, and Pipia’s directives       jurisdiction over this timely appeal pursuant to 28 U.S.C.
to pay in full every creditor except for the debt owed the           § 1291.
Funds.
                                                                     B. Standard of Review
   At the motion hearing, the Funds requested that Pipia “be
ordered to purge himself of contempt by requiring him to pay            A decision on a contempt petition is within the sound
[to the Funds] the sum of . . . a hundred thousand twelve            discretion of the trial court and thus is reviewed only for an
dollars [and] thirty-eight cents, that being the amount of           abuse of discretion. Peppers v. Barry, 873 F.2d 967, 968 (6th
indebtedness that accrued after [Pipia] was ordered to comply        Cir. 1989). “Abuse of discretion is defined as a definite and
with the fringe benefit provisions of the Collective Bargaining      firm conviction that the trial court committed a clear error of
Agreement.” J.A. at 141 (Tr. of Mot. Hr’g). Ultimately, the          judgment.” Bowling v. Pfizer, Inc., 102 F.3d 777, 780 (6th
district court granted the contempt petition with respect to         Cir. 1996) (quotation omitted), cert. denied, 522 U.S. 906
Gary’s Electric, but denied it without prejudice with respect        (1997). Under this standard, a district court’s decision is to
to Pipia. The district court stated:                                 be afforded “great deference;” it “will be disturbed only if the
                                                                     district court relied upon clearly erroneous findings of fact,
  I will at this time enter an order finding the corporation         improperly applied the governing law, or used an erroneous
  in contempt of the order, the injunctive order of this court       legal standard.” Blue Cross & Blue Shield Mut. of Ohio v.
  because it failed to do what it was ordered to do. I am            Blue Cross & Blue Shield Ass’n, 110 F.3d 318, 322 (6th Cir.
  unable to do that with Mr. Pipia because although you              1997).
  have told me many very reprehensible things that he has
  done, there are no proofs of that on this record and he            C. Contempt
  was not a defendant in this case and he was not ordered
  specifically to do anything other than give a deposition               1. Corporate Officers Can Be Held in Contempt
  which he did do.                                                     When a court seeks to enforce its order or supervise its
J.A. at 153 (Tr. of Mot. Hr’g). The Funds now appeal from            judgment, one weapon in its arsenal is contempt of court. See
the portion of the district court’s order denying the petition to    NLRB v. Cincinnati Bronze, Inc., 829 F.2d 585, 588 (6th Cir.
hold Pipia in contempt.                                              1987). Recognizing that the power “to punish for contempts”
                                                                     should not be used lightly, the Supreme Court has stated that
                                                                     this power “is a necessary and integral part of the
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                  Fund et al. v. Gary’s Elec. Serv. Co.                 Fund et al. v. Gary’s Elec. Serv. Co.

independence of the judiciary, and is absolutely essential to     comply with a court order, we also consider whether the
the performance of the duties imposed on them by law.             defendant “took all reasonable steps within [his] power to
Without it they are mere boards of arbitration, whose             comply with the court’s order.” Peppers, 873 F.2d at 969.
judgments and decrees would be only advisory.” Gompers v.
Buck’s Stove & Range Co., 221 U.S. 418, 450 (1911).                  In the present case, the Funds petitioned for a contempt
Contempt proceedings enforce the message that court orders        order against both Gary’s Electric and its principal officer and
and judgments are to be complied with in a prompt manner.         owner, Pipia. The district court granted the motion for Gary’s
Cincinnati Bronze, 829 F.2d at 590. With respect to civil         Electric but denied the motion for Pipia. The district court
contempt proceedings, “[j]udicial sanctions . . . may, in a       identified three reasons for dismissing the contempt motion
proper case, be employed for either or both of two purposes;      with respect to Pipia. First, the district court noted that Pipia
to coerce the defendant into compliance with the court’s          could not be held in contempt because he was not a defendant
order, and to compensate the complainant for losses               in the lawsuit. Second, the court focused on the terms of the
sustained.” United States v. United Mine Workers of Am.,          original order and stated that the only act Pipia was
330 U.S. 258, 303-04 (1947).                                      specifically and individually ordered to do was to submit to
                                                                  a deposition and that he complied in full. Third, the district
  In order to hold a litigant in contempt, the movant must        court reasoned that although the Funds identified Pipia’s
produce clear and convincing evidence that shows that “he         many “reprehensible” acts, “there [were] no proofs of that on
violated a definite and specific order of the court requiring     [the] record.” J.A. at 153 (Tr. of Mot. Hr’g). In order to
him to perform or refrain from performing a particular act or     reverse the district court, we must find that the district court
acts with knowledge of the court’s order.” Cincinnati Bronze,     abused its discretion in that it either made clearly erroneous
829 F.2d at 591 (quotation and brackets omitted). Clear and       findings of fact, improperly applied the controlling law, or
convincing evidence is a not a light burden and should not be     used the incorrect legal standard in dismissing the petition as
confused with the less stringent, proof by a preponderance of     to Pipia. Blue Cross & Blue Shield Mut. of Ohio, 110 F.3d at
the evidence. See Consol. Coal Co. v. Local Union No. 1784,       322.
United Mine Workers of Am., 514 F.2d 763, 766 (6th Cir.
1975). Once the movant establishes his prima facie case, the         The Funds carry the initial burden to show contempt. That
burden shifts to the contemnor who may defend by coming           is, the Funds must come forward with clear and convincing
forward with evidence showing that he is presently unable to      evidence showing that Pipia “violate[d] a definite and specific
comply with the court’s order. United States v. Rylander, 460     order of the court requiring him to perform or refrain from
U.S. 752, 757 (1983) (“[w]here compliance is impossible,          performing a particular act or acts with knowledge of the
neither the moving party nor the court has any reason to          court’s order.” Cincinnati Bronze, 829 F.2d at 591 (quotation
proceed with the civil contempt action. It is settled, however,   omitted). Thus, an initial issue we must resolve is whether an
that in raising this defense, the defendant has a burden of       unnamed party can be subject to a court order, i.e., whether a
production.”). To meet this production burden in this circuit     court’s order directed to a corporation ever could reach out to
“a defendant must show categorically and in detail why he or      bind a non-litigant, such as a corporate officer. The answer
she is unable to comply with the court’s order.” Rolex Watch      is clearly established in both this circuit and the Supreme
U.S.A., Inc. v. Crowley, 74 F.3d 716, 720 (6th Cir. 1996)         Court.
(quotation omitted). When evaluating a defendant’s failure to
No. 01-1864      Elec. Workers Local 58 Pension Trust        11    12    Elec. Workers Local 58 Pension Trust                No. 01-1864
                  Fund et al. v. Gary’s Elec. Serv. Co.                  Fund et al. v. Gary’s Elec. Serv. Co.

  Many decades ago, in a case where a corporate officer who        entities are subject to in personam jurisdiction for purposes of
failed to comply with a subpoena duces tecum was held in           contempt if they have notice of the injunction and its
contempt, the Supreme Court stated:                                contents”); see also Cent. States, Southeast and Southwest
                                                                   Areas Pension Fund v. Wintz Props., Inc., 155 F.3d 868, 876
  A command to the corporation is in effect a command to           (7th Cir. 1998) (deciding that the company’s president and
  those who are officially responsible for the conduct of its      owner, a non-party to the lawsuit, also was subject to the
  affairs. If they, apprised of the writ directed to the           injunction when the court’s order was directed at the company
  corporation, prevent compliance or fail to take                  and its officers); NLRB v. Sequoia Dist. Council of
  appropriate action within their power for the performance        Carpenters, AFL-CIO, 568 F.2d 628, 633 (9th Cir. 1977) (“It
  of the corporate duty, they, no less than the corporation        can hardly be argued that the principal officers of a labor
  itself, are guilty of disobedience, and may be punished          union are not legally identified with it, and thus liable in
  for contempt.                                                    contempt for disobeying an order directed to the union.”).
                                                                   Heralding the majority view as the law of this circuit, we
Wilson v. United States, 221 U.S. 361, 376 (1911) (noting that     referenced a Second Circuit case quoting Judge Learned
the corporation can be proceeded against in its corporate          Hand: “‘a person who knowingly assists a defendant in
capacity at the same time that “[officers] are punished in their   violating an injunction subjects himself to civil as well as
natural capacities for failure to do what the law requires of      criminal proceedings for contempt. This is well settled law.’”
them as the representatives of the corporation.” (quotation        Hochschild, 977 F.2d at 212 (quoting Backo v. Local 281,
omitted)). More recently, we have commented on the issue           United Bhd. of Carpenters & Joiners, 438 F.2d 176, 180 (2d
of holding a corporate president in contempt when an               Cir. 1970), cert. denied, 404 U.S. 858 (1971) (quoting
injunction is directed solely to the corporation or company.       Alemite Mfg. Corp. v. Staff, 42 F.2d 832 (2d Cir. 1930))).
See United States v. Hochschild, 977 F.2d 208 (6th Cir.            Ultimately, we determined that the defendant officer was
1992), cert. denied, 506 U.S. 1067 (1993). In Hochschild, the      “bound by the injunction . . . because of his relationship to the
defendant corporate officer argued that he was not bound by        corporation.” Id.10
the terms of the injunction directed to his corporation. In
support of his argument, the defendant relied on language in         Other circuits have reasoned similarly. The Eighth Circuit
the district court’s order that implied that the district court    in Chicago Truck Drivers v. Bhd. Labor Leasing, 207 F.3d
may have lacked jurisdiction over him because he was not a         500 (8th Cir. 2000), was faced with a case strikingly similar
named party in the action. Id. at 212. On appeal, we               to the one presented on this appeal. In Chicago Truck
determined that the injunction applied to the nonparty officer     Drivers, a union pension fund and its trustees sued
in his corporate capacity. We arrived at this conclusion after     corporations for interim payments of withdrawal liability
we juxtaposed the two contrasting viewpoints— the minority         under ERISA. Id. at 503. The district court granted summary
view suggesting that personal jurisdiction over a non-party for
contempt only can be achieved through service of process and
the majority view allowing personal jurisdiction for contempt           10
over officers or corporate employees if they have notice of the           W e noted that according to Federal Rule of Civil Procedure 65(d),
                                                                   injunctions are binding on defendant corporations’ officers in their
injunction and its contents. Id. (noting that “more [cases]        corp orate capacities, so long as they have no tice. Ho chschild, 977 F.2d
have held that officers or employees of corporate and business     at 211.
No. 01-1864      Elec. Workers Local 58 Pension Trust       13    14     Elec. Workers Local 58 Pension Trust                 No. 01-1864
                  Fund et al. v. Gary’s Elec. Serv. Co.                  Fund et al. v. Gary’s Elec. Serv. Co.

judgment in the union pension fund’s favor and ordered the           The Eighth Circuit noted that although the Supreme Court
commencement of payments. See id. Amended judgments               in Rylander stated that a “present inability to comply” is a
followed, ordering further payments but “[b]oth the initial and   defense to civil contempt, some circuits have refined that
amended judgments contained no reference to either [the           statement requiring that an alleged contemnor, asserting
corporations’ sole officer and shareholder] specifically or the   inability to pay, establish “(1) that they were unable to
[corporations’] officers or other agents generically.” Id.        comply, explaining why categorically and in detail; (2) that
When the union pension fund never received any of the court-      their inability to comply was not self-induced; and (3) that
ordered payments, the fund filed a motion for contempt            they made in good faith all reasonable efforts to comply.”
against both the corporations and their sole owner and            Chicago Truck Drivers, 207 F.3d at 506 (quotations omitted).
shareholder in his personal capacity. Id. The union pension       Regarding the assertion that the defendant officer could be
fund rested its case after it presented evidence that no          held in contempt individually, the Eighth Circuit compared
payments had been made although the payments were due and         the case before it to injunctions under Federal Rule of Civil
that at the time the payments became due, the corporate           Procedure 65(d).11 Because the Supreme Court liberally
entities had the resources to pay. See id. at 504. The district   applied Rule 65(d) to any “‘equitable decree compelling
court denied the motion for contempt stating that the union       obedience under the threat of contempt’” including “not only
pension fund failed “to produce evidence sufficient for a         injunctions . . . but also ‘enforcement orders and affirmative
finding that the defendants have assets for making the            decrees,’” the Eighth Circuit determined that a corporate
judgment debt payments but did not do so.” Id.                    officer can be bound by a court’s payment orders even when
                                                                  the “orders [make] no specific reference to him.” Chicago
   On appeal, the Eighth Circuit remanded the case to the         Truck Drivers, 207 F.3d at 507 (quoting Int’l Longshoremen’s
district court, stating that the district court abused its        Ass’n v. Philadelphia Marine Trade Ass’n, 389 U.S. 64, 75-
discretion by shifting the burden to the union pension fund to    76 (1967)). Thus, while a district court’s order setting a pay
show that the corporation had the present ability to pay and      schedule may or may not be classified as an injunction, it
by failing to make any specific findings as to whether the        nevertheless can be treated as one when “it compel[s] . . .
defendant officer committed acts that might support a             affirmative, prospective obedience with it.” Id.
contempt finding against him personally. Id. at 508. In
addition, the court of appeals instructed the district court on      In the case before us, the district court’s order only referred
remand to make specific findings with respect to whether the      to Gary’s Electric and did not mention its agents, officers, or
parties satisfied their burdens. Id. at 505. The court further    owners at all. But, as is evident from the Supreme Court in
noted that although “a contempt finding against the               Wilson and our opinion in Hochschild, whether or not Pipia
[corporations likely] would [not] serve any useful purpose,       was a named defendant in the order, or even mentioned at all,
since it appears they no longer have any assets,” the union
pension fund “is entitled to further development of the record
concerning the dissipation of the [corporations’] assets, and          11
an express finding from the court that the [corporations] have           Rule 65(d) provides that an injunction or a restraining order bind s:
satisfied their burden on an inability-to-comply defense.” Id.    “the parties to the action, their officers, agents, servants, employees, and
                                                                  attorneys, and . . . those persons in active concert or participation with
at 505-06.                                                        them who receive actual notice of the order by personal service or
                                                                  otherwise.” Fed. R. Civ. P. 65(d).
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                     Fund et al. v. Gary’s Elec. Serv. Co.                            Fund et al. v. Gary’s Elec. Serv. Co.

is not controlling. See Wilson, 221 U.S. at 376; Hochschild,                   no payments had been made although the payments were due,
977 F.2d at 212. Pipia, as an officer of the corporation and                   the district court improperly dismissed the petition to hold
the one responsible for the corporation’s affairs, was subject                 Pipia in contempt.
to the court’s order just as the corporation itself was. See
Chicago Truck Drivers, 207 F.3d at 508. Because Pipia                             Once the Funds establish their prima facie case, the burden
either “prevent[ed] compliance or fail[ed] to take appropriate                 of production shifts to Pipia, who may defend against an
action within [his] power for the performance of the corporate                 order of contempt by producing evidence to show that he is
duty,” the district court had the authority to hold Pipia in                   presently unable to comply with the court’s order. See
contempt. Wilson, 221 U.S. at 376. The Funds only needed                       Rylander, 460 U.S. at 757. However, as we stated previously,
to show that Gary’s Electric did not comply with the district                  some courts have narrowed Rylander by requiring either that
court’s judgment in order to meet their burden. That said, the                 the contemnor prove in great detail his inability to pay, show
Funds met their initial burden for a contempt finding against                  that he did not cause the inability, or prove that he
Pipia when they presented to the district court the previous                   unsuccessfully attempted compliance in good faith. See
order of the court affirming the LMC awards and Pipia’s own                    Chicago Truck Drivers, 207 F.3d at 506. We previously have
deposition testimony admitting that he knew of the court’s                     required a contemnor to show “categorically and in detail why
order yet failed to observe it.12 See, e.g., Chicago Truck                     he or she is unable to comply with the court’s order.” Rolex
Drivers, 207 F.3d at 505 (“Here, it is undisputed that [the                    Watch U.S.A., Inc., 74 F.3d at 720. We also have evaluated
corporations] have not made any payments pursuant to the                       whether the defendant “took all reasonable steps within [his]
court’s order. At that point, the burden should have shifted to                power to comply with the court’s order.” Peppers, 873 F.2d
[the corporations] to show an inability to comply.”). The                      at 969. Until now, however, we have never decided whether
Funds presented clear and convincing evidence —                                we embrace the refinement on Rylander that requires the
undisputed, even — that Pipia, the sole owner and officer of                   contemnor to show that his present inability to comply is not
Gary’s Electric, “with knowledge of the court’s order,” chose                  his own fault or the result of self-induced inability. Nor have
to violate the court’s order by not making the required                        we decided previously whether we would sanction the
contributions to the Funds. Cincinnati Bronze, 829 F.2d at                     wrongdoer. Today we choose to follow the lead of the Eighth
591 (quotation omitted). Moreover, the district court’s order                  Circuit and hold that the Rylander “present inability to
was in effect because Gary’s Electric did not file a                           comply” defense to civil contempt requires that the
supersedeas bond and because Gary’s Electric did not obtain                    contemnor show that he is not responsible for the present
a stay of the district court’s judgment pending appeal. Thus,                  inability to pay.13 If the contemnor cannot make this
because Pipia is bound by the district court’s order directed at
Gary’s Electric and because the Funds presented evidence that
                                                                                    13
                                                                                       To the extent that Chica go Tru ck Drivers suggests that the
                                                                               defendant officer could not be held liable for an amount equivalent to the
    12
                                                                               underlying delinq uent payments bec ause he was never sued in his
        In his testimony, Pipia uses ignorance as an excu se for his failure   individual capa city, we disagree. B ecause one of the p urpo ses of civil
to pay the contributio ns. He states: “I just wasn’t aware that I had to pay   contempt is to compensate a complainant for its losses, we note that Pipia
it. I thought we we re in co urt. We were fighting this out, and I didn’t —    can be fined in an am ount equivalent to the original judgment. The
I was not going to join the union, and rather than pay that kind of mo ney,    district court should consider to what extent P ipia deliberately caused the
I would just close the business down.” J.A. at 202 (Pipia Dep.).               underlying judgment to remain unpaid and should sanction accordingly.
No. 01-1864      Elec. Workers Local 58 Pension Trust       17    18     Elec. Workers Local 58 Pension Trust                   No. 01-1864
                  Fund et al. v. Gary’s Elec. Serv. Co.                  Fund et al. v. Gary’s Elec. Serv. Co.

showing, then the Rylander defense is unavailable. Thus,          comply with the court’s order.14 Rolex Watch U.S.A., Inc., 74
taking our cues from the Supreme Court in Rylander and            F.3d at 720.
Wilson, we determine that if a corporate officer avoids a
court’s order to the corporation by failing to take action or        Because we have decided that a showing of clean hands is
attempt compliance, “they, no less than the corporation itself,   essential to the Rylander defense, we are impressed even
are guilty of disobedience, and may be punished for               more by Pipia’s attempts to drain the corporate resources to
contempt.” Wilson, 221 U.S. at 376. Moreover, we hold that        avoid satisfying the court’s order. The first example cited by
because a civil contempt ruling either attempts to coerce         the Funds is the doubling of Gary’s Electric’s rent15 that
compliance or compensate the complainant for losses, it is        occurred after the Funds moved for summary judgment. The
fully appropriate to impose judicial sanctions on the nonparty    office space that Gary’s Electric leased was owned by one of
corporate officer. See United Mine Workers, 330 U.S. at 303-      Pipia’s other companies, KRP, and thus the increased rent
04.                                                               directly benefitted KRP at the expense of Gary’s Electric and
                                                                  its creditors. Another example of Pipia’s diversion of Gary’s
   Turning then to the instant case, Pipia clearly did not meet   Electric’s assets was Pipia’s salary increase from $70,000, as
his burden of production. As the Funds point out, Pipia           indicated in his 1997 income tax return, to $220,500 in
testified in his deposition that he did not abide by the          1999.16 Additionally, Pipia received a $54,000 bonus in
judgment because he did not think Gary’s Electric was             October 1999;17 Gary’s Electric had an outstanding $5,100
contractually obligated to do so. Interestingly and without a     loan to Pipia in June 2000; and Pipia purchased a fur coat
court order, however, Pipia paid off nearly all Gary’s            using funds from Gary’s Electric’s trade-exchange accounts-
Electric’s other creditors approximately $541,100 between         receivable account which he later documented as a bonus.
May 17, 1999 and December 31, 1999. J.A. at 139-40 (Tr. of
Mot. Hr’g). Moreover, according to the Funds, Gary’s
                                                                       14
Electric had gross receipts of $1,800,000 in 1999, the year the          In his deposition testimony, Pipia indicates that business operations
company closed its doors. Even assuming that all of Pipia’s       ceased on January 2000 and he then liquidated Gary’s Electric’s assets.
actions were taken in good faith and not to avoid paying the      Although his testimony indicates that Gary’s Electric still owes some
                                                                  money to the bank, owes taxes to the state, and no longer has any
Funds, Pipia’s decision to pay all other creditors and refusal    acco unts receivables, it is not at all clear in a categorical and detailed way
to pay the Funds anything at all is ample evidence from which     that Gary’s Electric was unable to comply with the court’s order when the
the district court could conclude that Pipia did not take “all    order was issued.
reasonable steps” to ensure Gary’s Electric’s compliance with
                                                                       15
the court order. See Peppers, 873 F.2d at 969. In addition,                 The rent went from $1,500 a m onth to $3,000 a mo nth.
Pipia’s testimony that the company’s affairs had wound up
                                                                       16
shortly after the contempt hearing — presumably attempting               At the mo tion hearing, Gary’s Electric’s counsel suggested that
to imply a lack of expendable funds — is hardly sufficient to     Pipia’s pay raise occurred because business sales went up from
show “categorically and in detail” why Pipia is unable to         $1,200,00 0 to $1,900,00 0 that year.

                                                                       17
                                                                         According to a letter from Pipia’s accountant, the October 1999
                                                                  payroll did indicate a $54,000 bonus for Pipia; howe ver, $18,0 00 o f this
                                                                  money was withheld taxes, and the remaining $36,000 was a charge to his
                                                                  loan account. Thus, Pipia received no net cash from this transaction.
No. 01-1864      Elec. Workers Local 58 Pension Trust         19    20   Elec. Workers Local 58 Pension Trust         No. 01-1864
                  Fund et al. v. Gary’s Elec. Serv. Co.                  Fund et al. v. Gary’s Elec. Serv. Co.

Considering these events in their entirety, we believe that the     to be in contempt, it is up to the district court to “fashion an
Funds are “entitled to further development of the record            appropriate sanction.” Chicago Truck Drivers, 207 F.3d at
regarding a possible contempt finding against [Pipia]               508. Appropriate sanctions would aim to compensate the
personally.” Chicago Truck Drivers, 207 F.3d at 506.                Funds for losses resulting from Pipia’s purposeful decisions
                                                                    to avoid paying the judgment and to eliminate Gary’s
   In sum, the district court abused its discretion on numerous     Electric’s resources.
fronts when it denied the contempt petition for Pipia. First,
the court’s determination that Pipia could not be held in             2. Contempt Is an Acceptable Form of Relief
contempt because he was not a defendant was an improper
application of controlling law. See generally Hochschild, 977         Gary’s Electric argues that contempt is not the proper relief
F.2d at 212 (holding that a corporate officer was bound by an       for failure to pay a monetary judgment, and that only
injunction directed at the corporation). Second, because            garnishment, attachment, and execution are available as
Pipia, the company’s sole owner and officer, was responsible        collection remedies. We disagree with Gary’s Electric’s
for the corporation’s compliance, he implicitly was ordered to      classification of this action as a collection action. In our
do more than merely submit to a deposition as the district          opinion, the sanction of civil contempt is more properly
court opinion suggests. See Wilson, 221 U.S. at 376. Third,         considered a compensatory remedy and an encouragement to
the district court clearly did not consider properly the burdens    comply with court orders. As we stated above, the objective
in this case. See Chicago Truck Drivers, 207 F.3d at 505. In        of any contempt determination is to enforce the message that
order to proceed on its motion for contempt, all the Funds          court orders and judgments are to be taken seriously. See
needed to show was that Gary’s Electric did not pay the             Cincinnati Bronze, 829 F.2d at 590. Moreover, judicial
ordered amounts. Thus, once Gary’s Electric admitted that it        sanctions can be used not only to coerce compliance, but also
did not obey the court’s order to make payments to the Funds,       to compensate the complainant. See United Mine Workers,
the district court abused its discretion when it failed to shift    330 U.S. at 303-04; see also 11A Charles Alan Wright,
the burden to Pipia to show “categorically and in detail” why       Arthur R. Miller, & Mary Kay Kane, Federal Practice and
Gary’s Electric could not pay. Rolex Watch U.S.A., Inc., 74         Procedure § 2960, at 372-73 (2d ed. 1995) (“A federal court’s
F.3d at 720. Moreover, based on today’s holding, Pipia also         discretion includes the power to frame a sanction to fit the
will need to show that he was not the cause of Gary’s               violation.”). Thus, the sanction of civil contempt may include
Electric’s inability to pay. Finally, the district court made       a fine designed to compensate the Funds not only for the
erroneous findings of fact when it dismissed the contempt           money that Pipia squandered but also for the money Pipia
petition with respect to Pipia stating that there were no proofs    diverted from the Funds and paid to other creditors. See
on the record of Pipia’s “reprehensible” acts. Pipia’s              generally United Mine Workers, 330 U.S. at 303-04 (noting
deposition testimony provided sufficient evidence from which        that judicial sanctions may be used to compensate a
the district court could have concluded that additional             complainant for losses and that they “must of course be based
development of the record was necessary.                            upon evidence of [the] complainant’s actual loss”); Wright,
                                                                    Miller, & Kane, supra § 2960, at 369-70 (“[Relief in a civil
  Therefore, we instruct the district court to use the proper       contempt proceeding] often takes the form of a fine in the
legal tests and make specific findings with respect to whether      amount of the damage sustained by plaintiff.”). Thus,
the parties satisfied their respective burdens. If Pipia is found   because this contempt proceeding is brought to compensate
No. 01-1864         Elec. Workers Local 58 Pension Trust                21     22   Elec. Workers Local 58 Pension Trust       No. 01-1864
                     Fund et al. v. Gary’s Elec. Serv. Co.                          Fund et al. v. Gary’s Elec. Serv. Co.

the Funds for losses based on Pipia’s failure to comply with                   pleadings and proof of an alter-ego relationship, Michigan
the court’s order and not as a medium for collecting the                       law does not permit the court to pierce the corporate veil and
underlying judgment, it is not a collection action but a                       hold a corporate officer liable for a corporation’s debt. In
compensatory tool which expressly permits the use of                           support of Gary’s Electric’s contention, Chicago Truck
monetary sanctions in this manner.18                                           Drivers also suggests that the defendant corporate officer
                                                                               could not be liable for the underlying delinquent payments
  3.     A Corporate Officer Can Be Held in Contempt                           because he was never sued in his individual capacity. 207
         Without Piercing the Corporate Veil                                   F.3d at 507-08.
   According to Gary’s Electric, because the Funds did not                       Once again, Gary’s Electric fails to recognize that the
attempt to pierce the corporate veil and did not sue Pipia in                  Funds are not requesting that Pipia be liable for Gary’s
his individual capacity, Pipia could never personally be held                  Electric’s delinquent fringe-benefit contributions, but rather
responsible for Gary’s Electric’s failure to make the fringe-                  the Funds request that Pipia be held in contempt. Chicago
benefit contributions as ordered by the court. Gary’s Electric                 Truck Drivers expressly provides that the district court could
also argues that because the Funds failed to submit specific                   “fashion an appropriate sanction” if the defendant officer was
                                                                               ultimately found in contempt of court. 207 F.3d at 507-08.
                                                                               Thus, on remand, the district court could determine that a
    18
        Gary’s Electric’s position also is refuted by an analysis of the       proper sanction would be to fine Pipia in an amount
Supreme Court’s decisio n in NLRB v. Deena A rtware, Inc., 361 U.S. 398        equivalent to those funds that Pipia reasonably diverted. See
(1960). Although this Supreme Co urt case did not specifically address the     Chicago Truck Drivers, 207 F.3d at 505 (noting that “[w]here
question raised by Gary’s Electric, whe ther contempt proceedings are
proper to enforce a money judgment, the concurrence in the Supreme
                                                                               compensation is intended, a fine is imposed, payable to
Court opinion reveals that contempt proceedings are used to enforce            complainant”) (quoting United Mine Workers, 330 U.S. at
orders for back pa y. See Deena Artware, Inc., 361 U.S. at 412-14              304). Fittingly, the Funds never asked that Pipia be held
(Frankfurter, J., concurring) (“It is equally appropriate for the Court of     personally responsible for the amount Gary’s Electric was
App eals, by decree enforcing the Board’s order, to place [an employer]        ordered to pay, but rather the Funds requested that Pipia be
at the hazard tha t if an am ount is found to be owing, [conduct designed to
defeat the back-pay order] subsequent to the decree may be found to be
                                                                               held accountable for his own deliberate disobedience of the
contuma cious. . . . Accordingly, the petition for contempt should have        court’s order. Piercing the corporate veil is unnecessary
been sustained.”); see also NLRB v. Deena A rtware, Inc., 251 F.2d 183,        because the Funds are not attempting to hold Pipia liable for
186 (6th Cir. 1958) (“In the absence of contempt proceedings, we do not        Gary’s Electric’s corporate debts.
find that jurisdiction is conferred upon us to order and supervise discovery
proceedings in the appellate court for the purpo se of enforcing a monetary                       III. CONCLUSION
awa rd running in favor of a private individual, even though the award has
received its vitality from a previous decree of this Co urt.” (em phasis
added)). Because there is no material distinction between finding                Because the district court abused its discretion when it
contempt for failure to com ply with an order to provide employees back        denied the Funds’ petition to hold Pipia in contempt, we
pay and for failure to comply with an order to make past-due fringe            VACATE the district court’s decision and REMAND for
benefit contributions, we see no justification for treating these two          additional proceedings consistent with this opinion.
monetary award s differently under the law. Thus, we conclude that
Deena Artware provides additional support for a determination that
contempt is an appro priate form of relief in these circumstances.