United States v. Two General Electric Aircraft Engines ( 2018 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA,
Plaintiff,
v.
Case No. 1:14-cv-02213-TNM
TWO GENERAL ELECTRIC AIRCRAFT
ENGINES,
Defendant.
MEMORANDUM OPINION
This in rem proceeding against two General Electric aircraft engines started in 2014,
when the United States filed a complaint seeking forfeiture of the engines and alleging that
Evans Meridians Ltd. intended to transfer the engines to an Iranian entity with terrorist ties.
Evans Meridians filed a counter-claim asserting lawful ownership of the property. In 2016, it
failed to comply with a court order directing it to repatriate the engines or post a $6 million bond,
and the Court entered a coercive contempt order directing the company to pay the Court a fine of
$15,000 for each day that it continued in noncompliance. In 2018, Evans Meridians gave up its
claim to the property, saying the engines had been dismantled for parts, and the United States
moved for a compensatory contempt order directing the company to pay the United States
Marshals Service a $4 million fine. Because Evans Meridians has relinquished its claim and
there are no other counter-claimants, I will enter default judgment in favor of the United States.
At a hearing on February 14, 2018, I requested further briefing regarding the United States’
motion for compensatory sanctions. Because Evans Meridians’s contempt led to the destruction
of the engines, I will grant the United States’ motion for a compensatory contempt order. In the
interest of justice, I will reduce the outstanding fine under the Court’s prior contempt order to $2
million.
I. The United States Is Entitled to Default Judgment in Its Forfeiture Case Against the
Engines
A court must enter default judgment when the “party against whom a judgment . . . is
sought has failed to plead or otherwise defend, and that failure is shown by affidavit or
otherwise.” Fed. R. Civ. Pro. 55(a). A party who has voluntarily relinquished its claim to
property subject to a forfeiture proceeding has relinquished its right to an adversarial hearing or
notice of default judgment. United States v. 8 Gilcrease Lane, 638 F.3d 297, 300 (D.C. Cir.
2011). Default judgment in an in rem forfeiture proceeding is appropriate when no further
defenses against forfeiture remain. See, e.g., United States v. 2 North Adams Street, 2010 WL
6714756 at *2 (D.D.C. 2010).
On January 24, 2018, Evans Meridians voluntarily withdrew its claim to the engines.
Notice of Vol. Dismissal 1. That withdrawal left no further claimants adverse to the United
States’ forfeiture claim. I construe the United States’ April 2018 supplemental memorandum,
asserting that “the government is now entitled to default judgment and an order of forfeiture in
the government’s favor” as a motion for default judgment. Pl.’s Suppl. Mem. 7; cf. Estate of
Botvin ex rel. Ellis v. Islamic Republic of Iran, 772 F. Supp. 2d 218, 221 n.1 (D.D.C. 2011)
(construing motion for default judgment in part as motion for reconsideration because it argued
that a prior ruling was erroneous and because reconsideration was necessary to grant the
requested relief). Because Evans Meridians “voluntarily relinquished its claim” to the engines, it
also relinquished its right to challenge default judgment in the underlying forfeiture case. See 8
Gilcrease Lane, 638 F.3d at 300-02. As no further claimants to the engines remain to present
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defenses against forfeiture, default judgment is proper. See 2 North Adams Street, 2010 WL
6714756 at *2. An order of forfeiture will be entered in favor of the United States.
Title to the engines vests retroactively in the United States from the “commission of the
act giving rise to forfeiture.” 18 U.S.C. § 981(f) (2012). The Complaint here alleges several acts
potentially giving rise to forfeiture, none of which are disputed. For example, the Complaint
alleges that the engines are subject to forfeiture because an attempt was made to transfer them to
Iran in violation of the International Emergency Economic Powers Act in late 2013 or early
2014. Compl. ¶¶ 21-23. The Complaint also alleges that the engines are subject to forfeiture as
property involved in money laundering transactions or attempted money laundering transactions,
the first of which took place on October 25, 2013. Id. ¶¶ 2, 27. The acts giving rise to forfeiture
took place before the Complaint was filed and before the engines were dismantled. Because title
vests retroactively, the United States has held title to the engines throughout the pendency of this
lawsuit.
II. A $4 Million Sanction Will Be Awarded to the United States to Compensate It for
Its Actual Loss
A federal court has inherent and statutory power to impose civil sanctions upon a
contemptuous party. See 18 U.S.C. § 401 (2012); Shillitani v. United States, 384 U.S. 364, 370
(1966). Courts may impose civil sanctions either to coerce the contemnor into compliance with
the court’s order or “to compensate the complainant for losses sustained” from the contempt.
United States v. United Mine Workers of Am., 330 U.S. 258, 303-04 (1947). Compensatory
sanctions are paid to the complainant, “based upon evidence of complainant’s actual loss.” Id. at
304.
An adversarial hearing is required for a civil contempt sanction only if there is a genuine
issue of material fact in dispute about the contempt. See Food Lion, Inc. v. United Food &
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Commercial Workers Int’l Union, 103 F.3d 1007, 1019-20 (D.C. Cir. 1997). “In a contempt
proceeding, the moving party has the burden of showing by clear and convincing evidence that
(1) a court order was in effect, (2) the order required certain conduct by the respondent, and (3)
the respondent failed to comply with the court’s order.” SEC v. Bankers All. Corp., 881 F. Supp.
673, 678 (D.D.C. 1995).
The material facts relevant to Evans Meridians’s contempt were established in the
October 2016 adversarial hearing. Mem. Op. 2. The Court determined then that (1) a
repatriation order was in effect, (2) the order required Evans Meridians to repatriate the engines
or post $6 million bond, and (3) Evans Meridians had failed to do so. Id. at 5. No genuine issue
of material fact remains unresolved after that hearing on Evans Meridians’s continued failure to
repatriate the engines. Evans Meridians readily admits that it “was ordered to repatriate the two
engines . . . but it did not do so.” Evans’s Suppl. Mem. 7-8. According to a letter forwarded to
the government by Evans Meridians the engines were destroyed while they remained overseas in
China. Mot. for Comp. Fine, Ex. A; see also Resp. to Mot. For Comp. Fine 4. Evans
Meridians’s contempt in failing to repatriate the engines caused the destruction of the engines.
And the destruction of the engines deprived the United States of its property interest in the
engines and in the litigation of its claim.
Evans Meridians insists that it did not “willfully” violate the repatriation order. Evans’s
Suppl. Mem. 6. Willfulness, however, is not an element of civil contempt. See Bankers All., 881
F. Supp. 678. Evans Meridians also claims that “[t]here has not been any showing that Evans
Meridians had the ability to repatriate the engines after the Contempt Order was entered.”
Evans’s Suppl. Mem. 6. But in pleading an impossibility defense to civil contempt, “the
defendant has the burden of production.” United States v. Rylander, 460 U.S. 752, 757 (1983).
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The relevant fact is that there has been no showing that Evans Meridians could not repatriate the
engines. Mem. Op. 5. The burden of that showing rests on Evans Meridians, and Evans
Meridians has not met its burden.
The relief granted to the United States today remediates the property loss suffered as a
result of the destruction of the engines. Because a forfeiture award vests title retroactively, the
United States has held title to the engines throughout the lawsuit. See 18 U.S.C. § 981(f).
During the time in which the engines remained overseas as a direct result of Evans Meridians’s
contempt of the repatriation order, a Chinese warehouse destroyed the engines; this destruction
deprived the United States of its property. See Evans’s Suppl. Mem. 2; see also Order to
Repatriate. It is an appropriate civil sanction to order Evans Meridians to “compensate the
[United States] for losses caused by the violation of the [repatriation] order.” Landmark Legal
Found. v. EPA, 272 F. Supp. 2d 70, 75 (D.D.C. 2003).
The United States is entitled to $4 million as compensation for the actual loss of the
engines. This is a reasonable valuation of the engines as it reflects the price of Evans
Meridians’s most recent contract to sell the engines. See Pl.’s Suppl. Mem. 9. Evans Meridians
claims that the engines “no longer exist,” so an approximation of their current market value
would be futile. Evans’s Resp. to Mot. for Compensatory Fine 4. The proper measure of the
United States’ loss is the value of the engines at the time Evans Meridians’s contempt interfered
with the United States’ property rights in the engines. The $4 million figure provided by Evans
Meridians’s own sales negotiations is a fair estimate of that value. See United Mine Workers of
Am., 330 U.S. 304 (noting that compensatory contempt fines should be based on evidence of the
complainant’s actual loss); see also Mem. Op. at 10 (noting that Evans Meridians itself valued
the engines at roughly $4 million at the time it was held in contempt). Payment to the United
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States Marshals Service is an appropriate means of directly compensating the United States as
the party harmed by Evans Meridians’s contempt.
Evans argues that the fine requested by the United States is criminal rather than civil.
Evans’s Supp. Mem. 3-6. A party facing criminal sanctions is entitled to the Constitutional
protections proper to criminal proceedings, including a jury trial, if the sanctions are serious.
Int’l Union, United Mine Workers of Am. v. Bagwell, 512 U.S. 821, 826 (1994). The distinction
between civil and criminal contempt turns on the “character and purpose” of the sanction. Id. at
828. The character of the relief is based on “an examination of the relief itself” rather than the
subjective motivations of the court. Id. If the sanction is punitive and vindicates the authority of
the court, it is criminal, but if it is remedial and for the benefit of the complainant, it is civil. Id.
at 827-28.
When a sanction is a fine, “it is remedial when it is paid to the complainant, and punitive
when it is paid to the court, though a fine that would be payable to the court is also remedial
when the defendant can avoid paying the fine simply by performing the affirmative act required
by the court’s order.” Hicks on Behalf of Feiock v. Feiock, 485 U.S. 624, 632 (1988). The
sanction imposed by the Court today is payable to the United States as the complainant, and it is
thus civil and compensatory, rather than criminal.
Evans Meridians argues that a $4 million sanction is large enough to push this sanction
from the realm of civil contempt to that of criminal contempt. Evans’s Suppl. Mem. 5. To
support this view, Evans Meridians cites to footnote 5 of Bagwell. Id. But that footnote uses the
size of a sanction to distinguish between petty and serious criminal sanctions, not to distinguish
between civil and criminal sanctions. Bagwell, 512 U.S. 821, 837, n.5. Evans Meridians
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misinterprets Bagwell and thus is incorrect in asserting that the size of the sanction factors into
the civil-criminal distinction.
Evans Meridians is similarly incorrect in arguing that, because forfeiture is punitive and
criminal, a sanction relating to forfeiture must be punitive and criminal. Evans’s Suppl. Mem. 7-
8. Forfeiture is not always punitive and criminal; forfeiture can be civil. See 18 U.S.C. §§ 981-
82. In fact the authorities cited by Evans Meridians highlight the distinction between civil and
criminal forfeiture. Austin v. United States, 509 U.S. 602, 618 (1993) (finding that, although
civil sanctions are distinct from criminal sanctions, the Eighth Amendment applies); see also
Austin, 509 U.S. at 624 (Scalia, J. concurring) (distinguishing criminal in personam from civil in
rem forfeiture); United States v. Bajakajian, 524 U.S. 321, 331-32 (1998) (distinguishing
punitive in personam forfeiture from remedial in rem forfeiture). Evans Meridians did not join
the action as a claimant until three months after the United States filed its claim against the
engines. Claim for Property 1. The act giving rise to forfeiture may have occurred as early as
October 2013, a month before Evans Meridians was invoiced for the engines, to be delivered in
the British Virgin Islands. Complaint 8-9. The underlying action here is for civil forfeiture,
proceeding in rem against the engines; it is not for criminal forfeiture, proceeding in personam
against Evans Meridians. Complaint 1; see 18 U.S.C. §§ 981-82.
III. In the Interests of Justice, the Outstanding Coercive Contempt Sanction Will Be
Reduced to $2 Million
A district court has “wide discretion” and “broad equitable powers to craft remedial
sanctions for civil contempt.” United States v. Latney’s Funeral Home, Inc., 41 F. Supp. 3d 24,
36 (D.D.C. 2014). In addition to its discretion in fashioning equitable sanctions, “a district court
ordinarily has the power to modify or rescind its orders at any point prior to final judgment in a
civil case.” Dietz v. Bouldin, 136 S. Ct. 1885, 1892 (2016). The original repatriation order
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