S & D Land Clearing Ex Rel. Mitchell v. D'Elegance Management Ltd. ( 2002 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
S & D LAND CLEARING, United 
States of America, for the use and
benefit of; MIKE MITCHELL, d/b/a
Malaco,
Plaintiffs-Appellees,
v.
D’ELEGANCE MANAGEMENT LIMITED,
INCORPORATED,  No. 01-1553
Defendant-Appellant,
and
ENVIRONMENTAL CORRECTIONS
CORPORATION, a/k/a Waste Control
Services; UNIVERSAL SURETY OF
AMERICA,
Defendants.

D’ELEGANCE MANAGEMENT LIMITED, 
INCORPORATED, United States of
America for the use and benefit of,
Plaintiff-Appellant,
v.
UNIVERSAL SURETY OF AMERICA,
Defendant-Appellee,  No. 01-1509
and
ENVIRONMENTAL CORRECTIONS
CORPORATION, a/k/a Waste Control
Services,
Defendant.

2 S & D LAND CLEARING v. D’ELEGANCE MANAGEMENT LIMITED
MIKE MITCHELL, d/b/a Malaco, 
Plaintiff-Appellee,
and
S & D LAND CLEARING, United
States of America, for the use and
benefit of,
Plaintiff,
v.
VEZINA, LAWRENCE & PISCITELLI,  No. 01-1576
P.A.,
Intervenor-Appellant.
and
D’ELEGANCE MANAGEMENT LIMITED,
INCORPORATED; ENVIRONMENTAL
CORRECTIONS CORPORATION, a/k/a
Waste Control Services; UNIVERSAL
SURETY OF AMERICA,
Defendants.

S & D LAND CLEARING v. D’ELEGANCE MANAGEMENT LIMITED 3
S & D LAND CLEARING, United 
States of America, for the use and
benefit of; MIKE MITCHELL, d/b/a
Malaco,
Plaintiff-Appellee,
and
UNIVERSAL SURETY OF AMERICA,
Defendant-Appellee,
v.
 No. 01-2043
VEZINA, LAWRENCE & PISCITELLI,
P.A.,
Intervenor-Appellant,
and
D’ELEGANCE MANAGEMENT LIMITED,
INCORPORATED; ENVIRONMENTAL
CORRECTIONS CORPORATION, a/k/a
Waste Control Services,
Defendants.

Appeals from the United States District Court
for the Eastern District of North Carolina, at Wilmington.
James C. Fox, Senior District Judge.
(CA-97-49-7-F, CA-97-212-F)
Argued: February 26, 2002
Decided: April 25, 2002
Before WILKINSON, Chief Judge, and WILKINS and
WILLIAMS, Circuit Judges.
Nos. 01-1553, 01-1509, and 01-1576 affirmed in part and dismissed
in part, and No. 01-2043 dismissed by unpublished per curiam opin-
ion.
4 S & D LAND CLEARING v. D’ELEGANCE MANAGEMENT LIMITED
COUNSEL
ARGUED: Stephen Bruce Rakusin, Ft. Lauderdale, Florida; Michael
A. Piscitelli, VEZINA, LAWRENCE & PISCITELLI, P.A., Ft. Lau-
derdale, Florida, for Appellants. Augustus Graham Shirley, II,
LEWIS & ROBERTS, Raleigh, North Carolina, for Appellees. ON
BRIEF: Charles D. Meier, MARSHALL, WILLIAMS & GORHAM,
L.L.P., Wilmington, North Carolina; Robert Gibbs Watt, WATT,
TIEDER & HOFFAR, McLean, Virginia, for Appellants. C. Hamilton
Jarrett, III, CONNER, GWYN, SCHENCK, P.L.L.C., Raleigh, North
Carolina, for Appellees.
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
OPINION
PER CURIAM:
D’Elegance Management Limited, Incorporated (D’Elegance) and
its counsel, the law firm of Vezina, Lawrence and Piscitelli (VLP)
(collectively Appellants), appeal from three orders of the district court
in two related cases that arise out of the removal of debris in North
Carolina following Hurricane Fran. The two cases, one brought by
D’Elegance seeking payment from two bonds issued by Universal
Surety of America (Universal) to cover clean-up work performed by
D’Elegance (the Bond Case) and the other brought against
D’Elegance by Mike Mitchell d/b/a Malaco and S&D Land Clearing
(collectively Malaco) seeking damages with regard to work it did to
assist in the clean-up1 (the Debris Case), reach this court for the sec-
1
Both cases originally included claims under the Miller Act, 40
U.S.C.A. §§ 270a-270d (West 1986). Persons asserting claims under this
Act must bring their claims "in the name of the United States for the use
of the person suing." 40 U.S.C.A § 270b(b). For the ease of reference,
however, we will refer to the cases as having been brought by
D’Elegance and Malaco.
S & D LAND CLEARING v. D’ELEGANCE MANAGEMENT LIMITED 5
ond time. See United States for Use and Benefit of S & D Land Clear-
ing v. D’Elegance Ltd., Inc., No. 9802758, 2000 WL 966034 (4th Cir.
July 13, 2000) (D’Elegance I) (affirming the district court’s judgment
in the Debris Case except for its decision to set aside Malaco’s com-
pensatory damage award); United States for Use and Benefit of
D’Elegance, Ltd., Inc. v. Universal Surety of Am., No. 99-2195, 2000
WL 1224164 (4th Cir. Aug. 29, 2000) (D’Elegance II) (reversing the
district court’s grant of summary judgment in the Bond Case against
D’Elegance as to first bond and affirming its grant of summary judg-
ment against D’Elegance as to second). Although these current
appeals have not been formally consolidated, they are factually inter-
related to such a degree that we conclude it is appropriate to resolve
them in a single opinion.
Appellants challenge three orders issued by the district court. First,
on March 16, 2001, in the Bond Case, the district court ordered Uni-
versal to pay the judgment against it in the amount of $250,000, plus
costs in the amount of $5,231.87 and post-judgment interest, into the
Office of the Clerk of the Court. Second, on March 21, 2001, in the
Debris Case, the district court, on Malaco’s motion, commenced sup-
plemental proceedings to enforce the judgment against D’Elegance
and ordered Appellants not to transfer any property of D’Elegance
that was not exempt from execution. Third, on July 3, 2001, the dis-
trict court denied VLP’s motion for leave to file a Notice of Charging
Lien in the Bond Case. Because the district court has not ruled on the
ultimate fate of the funds paid by Universal to the Office of the Clerk
of the Court, the challenges to the March 16 and July 3 orders are
unreviewable as interlocutory. With regard to the appeal from the
March 21 order, the district court did not err in allowing supplemental
proceedings and the order not to transfer D’Elegance’s property was
appropriate under such proceedings.
I.
On September 6, 1996, Hurricane Fran, a category 3 hurricane on
the Saffir/Simpson Hurricane Scale, made landfall on the North Caro-
lina coast near Cape Fear. Hurricane Fran, one of the costliest in
United States history, killed 34 people and caused over $3.2 billion
in property damage.
6 S & D LAND CLEARING v. D’ELEGANCE MANAGEMENT LIMITED
On September 18, 1996, the U.S. Army Corps of Engineers (the
Corps) awarded a contract to Waste Control Services for the removal
of debris in eight counties in North Carolina. Waste Control then sub-
contracted with D’Elegance for the removal of construction and
demolition debris (C & D debris) in both Pender and New Hanover
Counties. D’Elegance agreed to remove at least 5,000 cubic yards of
such debris a day. Waste Control, as required by its contract with the
Corps, executed and delivered two payment bonds that would provide
coverage for the protection of its subcontractors, with Waste Control
as principal and Universal as surety.
D’Elegance in turn subcontracted with Malaco to perform all of
D’Elegance’s debris-removal work, misrepresenting to Malaco that
the work would involve not only C & D debris but also vegetative
debris.2 Malaco subcontracted with a trucking company for enough
trucks to meet D’Elegance’s quota of 5,000 cubic yards per day. Once
removal began, however, D’Elegance used other haulers, leaving
most of Malaco’s debris removal capacity unutilized. The small
amount of C & D debris Malaco was allowed to remove was the least
profitable.3 Malaco encountered other difficulties, including
D’Elegance’s efforts to hire away Malaco’s truck drivers with prom-
ises of higher pay and warnings that Malaco did not have a contract
and was not going to get paid. Malaco continued to haul C & D debris
until October 29, 1996, at which time Waste Control instructed
Malaco to cease work on the project because Malaco was not going
to be paid by D’Elegance. Although D’Elegance did pay $55,344 to
Malaco and $80,629.33 directly to Malaco’s subcontractors, at the
time of the work stoppage, D’Elegance owed Malaco a balance of
$62,232.54 for the debris Malaco had removed. On November 4,
1996, D’Elegance offered to pay Malaco if the latter would sign a
backdated contract with terms materially different from the original
contract, but Malaco declined. This situation left Malaco deeply
indebted to its subcontractors. At the same time, Waste Control did
2
Removing vegetative debris is quicker than removing C & D debris
and therefore is more profitable. D’Elegance, however, had only con-
tracted with Waste Control to remove C & D debris.
3
For example, Malaco was not allowed to remove C & D debris that
already had been stockpiled.
S & D LAND CLEARING v. D’ELEGANCE MANAGEMENT LIMITED 7
not pay the full amount of D’Elegance’s $2,752,684 invoice, leaving
a balance of at least $369,623.23.
On March 5, 1997, Malaco initiated the Debris Case by filing a
complaint against Waste Control, D’Elegance, and Universal. Malaco
claimed, among other things, that D’Elegance had breached its con-
tract with Malaco and had violated North Carolina’s unfair and decep-
tive trade practices statute. See N.C. Gen. Stat. § 75-1.1 (1999)
(Chapter 75). D’Elegance counter-claimed against Malaco for breach
of contract, asserting that Malaco had failed to meet the 5,000 cubic
yards per-day quota and had failed to pay its subcontractors in a
timely fashion. D’Elegance initiated the Bond Case on December 3,
1997, by filing suit against Waste Control and Universal to recover
the unpaid balance from its invoice. On February 25, 1998, the district
court consolidated the Bond Case and the Debris Case.
The case was tried before a jury in August 1998, and the jury
found, with regard to the claims in the Debris Case, in favor of
Malaco and against D’Elegance.4 With regard to the claims in the
Bond Case, the district court declared a mistrial, and consequently,
the cases were severed on January 27, 1999.
On appeal of the Debris Case, this court affirmed the denial of
D’Elegance’s motion for judgment as a matter of law, the denial of
treble damages, and the registration of the judgment.5 See
D’Elegance I, at *9. We reversed, however, the district court’s ruling
to set aside the jury’s fraud verdict and ordered that the jury’s fraud
award should be reinstated and trebled pursuant to Chapter 75. Id.(affirming in part and reversing in part, but not remanding). As a
result, D’Elegance became indebted to Malaco for a total of
$841,828.00, plus interest: $400,000 in compensatory damages for
4
On November 10, 1998, D’Elegance transferred substantial assets to
its principals, Donnie and Metra Hughes, and to Artem, Inc.
5
The district court certified the judgment for registration in another
district on March 17, 1999. On October 12, 1999, a Writ of Execution
was issued in the Southern District of Florida, where D’Elegance, which
is incorporated in the state of Florida, had a bank account. The writ was
submitted to the United States Marshals Service but was returned unsat-
isfied on November 10, 1999.
8 S & D LAND CLEARING v. D’ELEGANCE MANAGEMENT LIMITED
breach of contract; $300,000.00 in trebled compensatory damages for
fraud; and $141,828.00 for attorney’s fees, costs, and expenses.
In the Bond Case, the district court granted Universal’s motion for
summary judgment as to both payment bonds on August 5, 1999.
D’Elegance appealed and on August 29, 2000, we determined that the
district court erred in failing to grant D’Elegance’s motion for partial
summary judgment as to the value of the first payment bond.6 See
D’Elegance II, at * 4. With regard to the second bond, we affirmed
the grant of summary judgment against D’Elegance and remanded for
further proceedings. Id.Following our decisions in the two cases, the district court entered
the three orders that are now the subject of this appeal. Specifically,
D’Elegance brings appeals No. 01-1509 and 01-1553 challenging the
district court’s March 16, 2001 and March 21, 2001 orders, respec-
tively, and VLP brings appeals No. 01-1576 and 01-2043 challenging
the district court’s March 21, 2001 and July 3, 2001 orders, respec-
tively.
II.
We initially must consider the existence of appellate jurisdiction
sua sponte. Braswell Shipyards, Inc. v. Beazer East, Inc., 2 F.3d 1331,
1336 (4th Cir. 1993). Generally, our jurisdiction extends to "final
decisions" of the district courts, as well as certain types of interlocu-
tory decisions that are rendered immediately appealable by the district
court’s certification order, by a specific form of statutory authoriza-
tion, or under the "collateral order" doctrine. See 28 U.S.C.A.
§§ 1291, 1292 (West 2000); Fed. R. Civ. P. 23(f); Cohen v. Beneficial
Industr. Loan Corp., 337 U.S. 541, 546 (1949) (explaining the "col-
lateral order" doctrine); Technosteel, LLC v. Beers Constr. Co., 271
F.3d 151, 154 (4th Cir. 2001) (cataloging the bases of appellate juris-
diction).
6
Shortly following this decision, on September 22, 2000, D’Elegance
allegedly assigned its rights against Universal to VLP.
S & D LAND CLEARING v. D’ELEGANCE MANAGEMENT LIMITED 9
A. THE MARCH 16, 2001 ORDER
D’Elegance, in appeal No. 01-1509, seeks to appeal the district
court’s March 16, 2001 order that the funds due in the Bond Case be
paid into the Office of the Clerk of the Court pending final resolution
of Malaco’s claims. Universal, the party actually ordered to pay the
funds and the only other party in appeal No. 01-1509, takes no posi-
tion regarding the propriety of the requirement that it pay the funds
into the Clerk’s Office and does not cross-appeal the district court’s
entry of partial summary judgment in D’Elegance’s favor in the Bond
Case. Universal’s only contention on appeal is that, regardless of who
is entitled to the funds that Universal has paid into the Clerk’s Office
at the district court’s direction, Universal has fully discharged its obli-
gations under the district court’s judgment in the Bond Case.
D’Elegance does not contend otherwise. As between D’Elegance and
Universal, the only parties to the Bond Case, there is presently no dis-
pute for this court to adjudicate. Insofar as D’Elegance seeks to chal-
lenge the requirement that Universal pay funds into the Clerk’s
Office, that challenge is, in substance, addressed to a controversy
between D’Elegance and Malaco regarding the payment of
D’Elegance’s judgment debt in the Debris Case.
As between D’Elegance and Malaco, the district court’s March 16
order requiring that the Bond Case proceeds be paid into the Clerk’s
Office does not finally resolve the question of what party or parties
are entitled to the funds. Instead, the district court seeks to hold the
funds pending a resolution of the question of entitlement to them. In
other words, the March 16 order, while nominally entered in the Bond
Case, is in fact a temporary and intermediate measure directed
towards the resolution of issues that have not been finally adjudicated
in the supplemental proceedings stemming from the judgment in the
Debris Case. The district court’s preliminary decision thus constitutes
a classic interlocutory order incident to sound case management that
is not "final" under 28 U.S.C.A. § 1291 and that we are without juris-
diction to disturb.7 Technosteel, 271 F.3d at 154 (explaining that,
7
Even if the district court’s order requiring that funds be paid into the
Clerk’s Office were "final," it is far from clear that D’Elegance is a
proper party to challenge it, as Appellants both contend that D’Elegance
has assigned its entire interest in Universal’s payment in the Bond Case
to VLP.
10 S & D LAND CLEARING v. D’ELEGANCE MANAGEMENT LIMITED
subject to certain exceptions not relevant here, appellate jurisdiction
is limited to final orders).
B. THE MARCH 21, 2001 ORDER
Appellants next contend that the district court erred in entering, on
March 21, 2001, an order barring Appellants from disposing of or
interfering with any "property of D’Elegance not exempt from execu-
tion in this case pending final ruling on [Malaco’s] Motion for Sup-
plemental Proceedings." (No. 01-1509 J.A. at 291.) We have
jurisdiction to review the district court’s interlocutory order granting
the injunction. See 28 U.S.C.A. § 1292(a)(1). Appellants argue (1)
that no injunction was warranted because Malaco is not entitled to
supplemental proceedings;8 (2) that the injunction is void because the
district court failed to comply with the requirements of Federal Rule
of Civil Procedure 65; and (3) that the injunction is overbroad. We
review the district court’s entry of an injunction for abuse of discre-
tion, but to the extent that pure questions of law determine the propri-
ety of an injunction, our review is de novo. Commodity Futures
Trading Comm’n v. Kimberlynn Creek Ranch, Inc., 276 F.3d 187, 191
(4th Cir. 2002).
1. The Propriety of Supplemental Proceedings
Appellants argue that Malaco did not meet the prerequisites under
North Carolina law for the initiation of supplemental proceedings.
Federal Rule of Civil Procedure 69 provides that:
Process to enforce a judgment for the payment of money
8
We have jurisdiction to review this question because, at the threshold,
if Malaco was not entitled to initiate supplemental proceedings, the dis-
trict court’s injunction, entered pursuant to those proceedings, cannot
stand. Thus, the question of whether Malaco met the basic prerequisites
for the initiation of supplemental proceedings is "intimately bound up
with" the grant of the injunction. Nationsbank Corp. v. Herman, 174
F.3d 424, 427 (4th Cir. 1999) (holding that jurisdiction over denial of
summary judgment was appropriate where issue of exhaustion of admin-
istrative remedies was "intimately bound up with" propriety of a prelimi-
nary injunction).
S & D LAND CLEARING v. D’ELEGANCE MANAGEMENT LIMITED 11
shall be a writ of execution, unless the court directs other-
wise. The procedure on execution, in proceedings supple-
mentary to and in aid of a judgment, and in proceedings on
and in aid of execution shall be in accordance with the prac-
tice and procedure of the state in which the district court is
held, existing at the time the remedy is sought, except that
any statute of the United States governs to the extent that it
is applicable.
Thus, North Carolina law generally governs the procedure for supple-
mentary proceedings in this case. The initiation of supplemental pro-
ceedings in North Carolina is governed by N.C. Gen. Stat. § 1-352,
which provides:
When an execution against property of a judgment debtor
. . . issued to the sheriff of the county where he resides or
has a place of business, or if he does not reside in the State,
to the sheriff of the county where a judgment roll or a tran-
script of a judgment is filed, is returned wholly or partially
unsatisfied, the judgment creditor at any time after the return
. . . is entitled to an order from the court . . . requiring such
debtor to appear and answer concerning his property . . . .
Appellants first contend that Malaco lacks a judgment in its favor
and thus, that D’Elegance is not a "judgment debtor" against whom
supplemental proceedings are permitted. This argument fails because
in the Debris Case, the district court entered judgment against
D’Elegance, and this Court affirmed that judgment in part and
reversed in part, but we did not remand. D’Elegance I, at *9. Indeed,
in D’Elegance’s appeal of the district court’s judgment in the Debris
Case, we specifically affirmed the registration of the judgment in
Florida. Thus this court consistently has recognized the finality of the
judgment against Appellants.
Appellants next argue that supplemental proceedings are unavail-
able to Malaco because Malaco has not adequately attempted to avail
itself of execution procedures. Supplemental proceedings are not
available under North Carolina law until an execution is attempted
and is unsuccessful in whole or in part. FDIC v. British-American
Corp., 726 F. Supp. 622, 631 (E.D.N.C. 1989). Appellants contend
12 S & D LAND CLEARING v. D’ELEGANCE MANAGEMENT LIMITED
that Malaco’s unsuccessful attempt to execute the judgment in the
Southern District of Florida was an insufficient predicate for supple-
mental proceedings in North Carolina, because only the court that
ordered execution of the judgment may initiate supplemental proceed-
ings under North Carolina law. North Carolina Nat’l Bank v. C.P.
Robinson Co., 352 S.E.2d 684, 687 (N.C. 1987). We are mindful,
however, that under Rule 69, "any aspects of the assimilated practices
and procedures that are uniquely designed to enforce state judgments
are not assimilated, nor is any aspect that may be inconsistent with the
federal policy of affording judgment creditors the right to a writ of
execution to enforce money judgments in federal courts." United
States for the use and benefit of Global Bldg. Supply v. Harkins Build-
ers, Inc., 45 F.3d 830, 833 (4th Cir. 1995). Because "state procedure
was designed for state courts, not federal," it may be necessary to
employ hybrid procedures in Rule 69 cases. Travelers Indemn. Co. v.
Hash Mgmt., Inc., 173 F.R.D. 150, 153-54 (M.D.N.C. 1997). North
Carolina state venue rules cannot govern the enforcement in federal
court of federal judgments where a debtor’s property is located in a
state other than the one in which the judgment was rendered. Conse-
quently, Appellants are incorrect; North Carolina law, as assimilated
by Rule 69, does not require that supplemental proceedings in this
case be conducted by a federal court in Florida. When Malaco’s writ
of execution was returned unsatisfied from the Southern District of
Florida, Malaco had a "writ of execution . . . returned wholly or par-
tially unsatisfied," as is required by N.C. Gen. Stat. § 1-352.9D’Elegance next argues that Malaco must docket its federal judg-
ment in the North Carolina state courts in order to obtain supplemen-
tal proceedings in the district court. The basis for this argument is
N.C. Gen. Stat. § 1-237, which accords to properly docketed federal
judgments the force and effect of a lien under state law. D’Elegance
then argues that under N.C. Gen. Stat. § 1-313(1), Malaco may not
execute against property until the appropriate North Carolina sheriff
has levied upon that property. D’Elegance’s argument, however,
9
Because the writ of execution was served in Florida, and Malaco reg-
istered its judgment in the Southern District of Florida, D’Elegance’s
argument that the docketing of a federal judgment in North Carolina state
court is a prerequisite to execution in North Carolina does not impair the
validity of Malaco’s attempt to execute in Florida.
S & D LAND CLEARING v. D’ELEGANCE MANAGEMENT LIMITED 13
would produce results that are, to say the least, idiosyncratic. In this
case, the only property in North Carolina which is subject to the judg-
ment appears to be Universal’s surety payment, which has been
placed in the custody of the Clerk’s Office of the district court.
D’Elegance would have Malaco docket a federal judgment in state
court for the purpose of causing a state sheriff to levy upon funds held
by the clerk of the federal court that rendered the judgment, as a pre-
requisite to allowing the federal court to determine the entitlement to
those funds. The circularity of this procedure is evident, and it is clear
that § 1-237 and related provisions apply when enforcement of a fed-
eral judgment is sought in state court. Similarly, § 1-352’s require-
ment that a writ of execution against a non-resident be issued to the
"sheriff of the county where a judgment roll or transcript of a judg-
ment is filed," is logically inapplicable here, because a federal judg-
ment need not be filed in state court to confer on the federal court
jurisdiction to determine the entitlement to funds paid into the clerk’s
office of the district court pursuant to the federal judgment.
Malaco has established the prerequisites to initiate supplemental
proceedings under Federal Rule of Civil Procedure; it has complied
with the applicable requirements of North Carolina law by showing
that it registered its judgment in the Southern District of Florida, that
it attempted to execute the judgment in that district, and that the writ
of execution was returned unsatisfied. Consequently, the basic predi-
cate for the district court’s injunction — the propriety of supplemental
proceedings — has been established.10
10
Appellants contend, further, that supplemental proceedings are
improper because VLP has a valid priority lien on Universal’s payment
in the Bond Case. This contention goes to the ultimate disposition of
property in the supplemental proceedings; yet to date, the district court
has taken no reviewable, final action other than the entry of the injunc-
tion against asset transfers. Because the district court has not finally
determined anyone’s entitlement to any property, we restrict our consid-
eration to the propriety of initiating supplemental proceedings — a nec-
essary predicate to the reviewable injunction — and will not address the
course of the proceedings except insofar as the injunction is implicated.
Similarly, VLP cannot obtain review of the district court’s refusal, in its
July 3 order, to allow it to file a lien against the Universal payment,
because the basic issue is whether Malaco is entitled to the funds, or
14 S & D LAND CLEARING v. D’ELEGANCE MANAGEMENT LIMITED
2. The Propriety of Injunctive Relief
Appellants next argue that the district court’s injunction against
asset transfers, in its March 21 order, is invalid because it fails to
comply with the requirements for the entry of a preliminary injunc-
tion. In general, a district court is required to balance the likelihood
and degree of irreparable injury to each party and determine the likeli-
hood of success on the merits before granting a preliminary injunc-
tion. Blackwelder Furniture Co. v. Seilig Mfg. Co., 550 F.2d 189, 195
(4th Cir. 1977). Further, legal remedies must ordinarily be inadequate
to permit the award of equitable relief, and Federal Rule of Civil Pro-
cedure 65(c) requires a party seeking a preliminary injunction to post
a bond "in such sum as the court deems proper." Appellants argue that
the district court was required to find that the balance of irreparable
injury favored Malaco before granting an injunction barring Appel-
lants from engaging in transfers of non-exempt assets. Appellants
argue that the district court’s injunction harms D’Elegance’s ability
to operate as a viable, ongoing business concern, as well as
D’Elegance’s ability to pay its attorneys, and thus, that the balance of
hardships favors Appellants. Appellants further argue that Malaco has
not shown that legal remedies are inadequate and has not posted a
bond as is required by Rule 65. We review the district court’s grant
of injunctive relief for abuse of discretion. Kimberlynn Creek, 276
F.3d at 191. North Carolina law, rendered applicable here by Rule 69,
provides that "[t]he court or judge may, by order, forbid a transfer or
other disposition of, or any interference with, the property of a judg-
ment debtor not exempt from execution." N.C. Gen. Stat. § 1-358(1999).
whether, instead, VLP, on either a lien theory or an assignment theory,
is entitled to the funds. There is no reason why the denial of VLP’s
attempt to file a Notice of Charging Lien cannot effectively be reviewed
on appeal from a determination of which party is entitled to the Universal
funds, and accordingly we find no reason to review the validity of VLP’s
asserted charging lien at this stage. Cf. United States v. Lawrence, 201
F.3d 536, 537 (4th Cir. 2000) (holding that the collateral order doctrine
allows appellate jurisdiction for an interlocutory appeal of an order made
during the course of litigation that is "related to matters outside the
stream of the main action and would not be subject to effective review
as part of the final judgment in the action." (citation omitted)).
S & D LAND CLEARING v. D’ELEGANCE MANAGEMENT LIMITED 15
At the outset, we must address the interaction of Rule 69, which
authorizes supplemental proceedings in accordance with the practice
of the relevant state, and Rule 65 and related requirements for the
entry of injunctive relief by the district courts. Appellants argue that
Rule 65 requires Malaco to post a bond in order to obtain injunctive
relief in a supplemental proceeding. We reject this contention because
it is undercut by Federal Rule of Civil Procedure 62, which provides
that a stay of execution pending appeal requires the appellant to post
a bond. It would be a strange outcome if, before it lost the prior
appeal, D’Elegance was required to post a bond to avoid execution of
the judgment, but after the judgment against D’Elegance on the merits
survived all available appeals and D’Elegance failed to pay it, Malaco
became obligated to post a bond in order to pursue supplemental pro-
ceedings. A party seeking a preliminary injunction prior to the final
adjudication of liability must post a bond in order to ensure a source
of recovery in the event that the injunction is erroneous. Once there
is a judgment (in this case, a judgment that has survived all available
appeals), however, the party seeking enforcement of the judgment
need not post security to obtain satisfaction of its rights under the
court’s judgment.
Similarly, findings regarding the balance of irreparable harm and
the likelihood of success on the merits are not required here. Under
Rule 69, only if North Carolina courts required findings regarding the
likelihood of success on the merits and the balance or irreparable
injury would such findings be a prerequisite to the entry of the order
in this case. United Int’l Holdings, Inc. v. Wharf Holdings Ltd., 210
F.3d 1207, 1356 (10th Cir. 2000) ("Wharf argues the turnover order
was in effect a mandatory injunction entered by the court without
making the factual findings that are a prerequisite to a grant of injunc-
tive relief. Under the plain language of [Rule 69], such factual find-
ings are necessary only if compelled by . . . a federal statute or the
applicable state rules for execution of judgments."). North Carolina’s
articulation of the substantive standards for an order freezing assets
in supplemental proceedings is not an aspect of North Carolina law
that is unique to proceedings in state court. Thus, under Rule 69,
North Carolina law governs the question of whether the district court
must make findings regarding the balance of irreparable harm and the
likelihood of success on the merits. Id.; cf. Global Bldg. Supply, 45
F.3d at 833 (aspects of state procedures that are uniquely designed to
16 S & D LAND CLEARING v. D’ELEGANCE MANAGEMENT LIMITED
enforce state judgments are not assimilated under Rule 69). Appel-
lants cite no authority indicating that North Carolina requires such
findings, and no federal statute operates to require them in this con-
text. Here, Malaco has a final judgment; it is thus conclusively estab-
lished that D’Elegance is liable to Malaco, and it is uncontested that
this judgment is as yet unsatisfied. If the "merits" are framed as Mala-
co’s entitlement to satisfaction of its judgment from D’Elegance’s
non-exempt assets, such entitlement is a necessary implication of
D’Elegance having a fully adjudicated and unsatisfied judgment debt
to Malaco, and any irreparable injury stems from D’Elegance’s adju-
dicated liability and nonpayment of that liability.11 It would be inap-
posite to require a judgment creditor to make some special showing
of hardship to achieve collection of a valid judgment.
3. The Breadth of the Injunction
D’Elegance next argues that the "trial court erred in extending a
blanket injunction as to restraint of future transfers and dispositions
in a supplemental proceeding." (No. 01-1553, Appellant’s Br. at 47.)
As noted above, under § 1-358 a court may forbid transfers of a judg-
ment debtor’s property. D’Elegance argues that the injunction is over-
broad because it applies to future assets. (No. 01-1553, Appellant’s
Br. at 46.) The district court’s order, however, only applies to prop-
erty that is not exempt from execution under North Carolina law
(non-exempt property). Under North Carolina law, future earnings are
exempt from execution. See Jacobi-Lewis Co. v. Charco Enterprises,
466 S.E.2d 338, 339 (N.C. App. 1996) (citing Harris v. Hinson, 360
S.E.2d 118,120 (N.C. App. 1987)). In other words, "future earnings,
wages or salaries to become due, or which become due after service
of the order for examination," Motor Finance v. Putnam, 50 S.E.2d
670, 671 (N.C. 1948) (citation omitted), are exempt from execution
and therefore not affected by the district court’s injunction. The North
11
If D’Elegance’s non-exempt assets are insufficient to pay its judg-
ment debt, it cannot suffer irreparable injury by virtue of having assets
temporarily frozen which represent less than the amount of assets that it
is obligated to pay outright to Malaco. If, on the other hand,
D’Elegance’s non-exempt assets exceed its debt to Malaco, it has a rem-
edy readily at hand for any harm caused by impairment of its right to
transfer non-exempt assets: it can pay its judgment debt.
S & D LAND CLEARING v. D’ELEGANCE MANAGEMENT LIMITED 17
Carolina Court of Appeals, however, has suggested that while future
earnings are exempt from supplemental proceedings, other subse-
quently acquired property may be non-exempt. See Harris, 360
S.E.2d at 121.
III.
In conclusion, we find that we have jurisdiction to review the dis-
trict court’s March 21, 2001 order prohibiting transfers of non-exempt
assets and that we have jurisdiction to review the question of Mala-
co’s threshold entitlement to supplemental proceedings, as the propri-
ety of the March 21 order is intimately bound up with the question
of whether supplemental proceedings are warranted. We hold that
Malaco is entitled to supplemental proceedings, that the injunction
meets the requirements of Rule 69, and that the injunction is not over-
broad. We find that we lack jurisdiction to review the district court’s
March 16, 2001 order requiring Universal to make its payment in the
Bond Case into the Clerk’s Office or the district court’s July 3, 2001
order denying VLP’s motion to file a Notice of Charging Lien, as nei-
ther order is final or reviewable. Accordingly, we affirm the district
court’s entry of injunctive relief in appeals No. 01-1553 and 01-1576,
dismiss appeal No. 01-2043 for lack of jurisdiction, affirm the district
court’s judgment in appeal No. 01-1509 as between Universal and
D’Elegance, and dismiss for lack of jurisdiction D’Elegance’s chal-
lenge to the district court’s order that funds be paid into the Clerk’s
Office rather than directly to D’Elegance in appeal No. 01-1509.
No. 01-1553 - AFFIRMED IN PART AND
DISMISSED IN PART
No. 01-1509 - AFFIRMED IN PART AND
DISMISSED IN PART
No. 01-1576 - AFFIRMED IN PART AND
DISMISSED IN PART
No. 01-2043 - DISMISSED