Scalia v. Par 2 Contractors

FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT December 6, 2019
_________________________________
Elisabeth A. Shumaker
Clerk of Court
EUGENE SCALIA, Secretary of Labor,*
Plaintiff - Appellee,
v.
Nos. 18-4147 & 18-4148
PARAGON CONTRACTORS (D.C. No. 2:06-CV-00700-TC)
CORPORATION; BRIAN JESSOP, (D. Utah)
individually,
Defendants - Appellants,
PAR 2 CONTRACTORS, LLC,
Intervenor Defendant - Appellant,
and
JAMES JESSOP, individually,
Defendant,**
_________________________________
*
Pursuant to Fed. R. App. P. 43(c)(2), Eugene Scalia is automatically
substituted for Thomas E. Perez as Plaintiff-Appellee.
**
In a Memorandum Decision Including Findings of Fact and Conclusions of
Law and Contempt Order issued September 10, 2018, the district court concluded
that Paragon Contractors Corporation; Brian Jessop; Par 2 Contractors, LLC; Don
Jessop, as Par 2’s agent; and Jacob Barlow, as Par 2’s agent, were in civil contempt
of the district court’s 2007 injunction. However, Don Jessop and Jacob Barlow were
not parties to the underlying district court proceedings; they were found to be in
contempt only in their capacities as agents of Par 2, which was a defendant below.
Accordingly, Don Jessop and Jacob Barlow are not proper parties to these appeals,
and the Clerk is directed to remove them from the caption in 18-4147.
ORDER AND JUDGMENT***
_________________________________
Before LUCERO, HARTZ, and MATHESON, Circuit Judges.
_________________________________
Paragon Contractors Corporation (“Paragon”), Brian Jessop, and Par 2
Contractors, LLC (“Par 2”) appeal a contempt order issued by the district court.
Exercising jurisdiction under 28 U.S.C. § 1291, see O’Connor v. Midwest Pipe
Fabrications, Inc., 972 F.2d 1204, 1208 (10th Cir. 1992), we affirm.
I
In 2007, the district court entered a permanent injunction against Paragon,
Brian Jessop, James Jessop, and “their officers, agents, servants, employees, and
those persons in active concert or participation with them who receive actual notice”
of the injunction, enjoining them from employing minors “under conditions
constituting oppressive child labor,” as defined in the Fair Labor Standards Act
(“FLSA”). Several years later, the Department of Labor (“DOL”) began
investigating additional child labor violations by Paragon and Brian Jessop.
Although Paragon was primarily a construction company, DOL suspected it was
using children to harvest pecans. In 2016, the district court found Paragon and Brian
Jessop in contempt of the 2007 injunction. The court set up a claims process through
which children employed by Paragon between 2008 and 2013 could seek back wages
***
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. It may be cited,
however, for its persuasive value consistent with Fed. R. App. P. 32.1 and
10th Cir. R. 32.1.
2
related to the pecan harvest. It also appointed a special master to ensure Paragon’s
compliance with the injunction. On appeal, we affirmed the contempt finding and
back-wages sanction but reversed the appointment of a special master. Acosta v.
Paragon Contractors Corp., 884 F.3d 1225, 1229 (10th Cir. 2018).
Separate from the pecan-harvesting investigation, DOL began to suspect that
Par 2 was taking over Paragon’s operations in an effort to evade the 2007 injunction.
In September 2017, DOL filed a Motion for Order to Show Cause, alleging that
Paragon had simply changed its name to Par 2 and violated the injunction by
employing minors in hazardous construction work in 2016. DOL sought joinder of
Par 2, a finding of contempt, and various sanctions. Par 2 filed a motion to intervene,
which the district court granted. The court ordered the parties to provide their direct
examination testimony by declaration, with declarants to appear for cross-
examination at an evidentiary hearing. After the evidentiary hearing, the district
court found the following facts.
Brian Jessop is the owner and president of Paragon, a construction company
that engaged in rough carpentry and framing jobs. He was Paragon’s estimator for
projects and the primary point of contact with other contractors. Don Jessop is Brian
Jessop’s brother and worked as a Paragon foreman. Jacob Barlow is Brian Jessop’s
nephew. He did timekeeping, payroll, and accounting for Paragon, using the title
“Office Manager.” Paragon had $5 to $7 million in annual revenues from 2010 to
2012. But by 2016, the company had only a “job or two,” and by 2017 had ceased
operations and had no employees.
3
In December 2013, in the midst of a subpoena dispute related to the pecan
harvest, Don Jessop filed articles of incorporation for Par 2. The company began
construction framing work similar to that done by Paragon in 2014. Par 2 had just
over $1 million in revenues in 2014, which increased to $8 million by 2016.
Initially, Par 2 used Paragon’s phone number and email address to communicate with
contractors. The entities operated out of the same building through 2017. Many of
Par 2’s employees—at least nineteen of them—had previously worked at Paragon.
Paragon’s management team took on analogous roles at Par 2. Don Jessop,
who was a Paragon foreman, was listed as the sole owner and member of Par 2 on
paperwork filed with the Utah Department of Commerce. He continued to act as
foreman for the new company. Jacob Barlow, Paragon’s officer manager, is also the
office manager for Par 2. Similarly, Brian Jessop continued to work as an estimator
and primary contact person for contractors at Par 2. However, Brian Jessop and Don
Jessop attempted to conceal Brian Jessop’s involvement in Par 2 from DOL, both
claiming he was not substantially involved in the company. Brian Jessop stated that
he was merely helping with Par 2 for a few hours each evening. But emails show he
engaged in day-to-day management activities during business hours and signed
official safety records as a supervisor of Par 2. Moreover, Par 2 produced documents
to DOL from which Brian Jessop’s name had been removed. DOL obtained Par 2 bid
documents from a contractor that included a salutation from Brian Jessop and
revisions that were noted as “per phone call with Brian Jessop.” When the same
documents were produced by Par 2, Brian Jessop’s name had been deleted.
4
Paragon and Par 2 representatives and employees gave inconsistent responses
about which of the two companies they worked for. When questioned on a job site,
Par 2 employees identified themselves as working for Paragon. In response to a
request for safety records, Par 2 sent Occupational Safety and Health Administration
forms 300A and 300 with “Paragon Contractors Corp” or “Paragon Contractors
Corporation” as the establishment name. At one point, a contractor sent an email to
Par 2 noting that “you[r] company name changed” from Paragon and requesting an
updated W-9 form. Jacob Barlow sent an updated W-9 for Par 2.
In November 2016, the Arizona Department of Occupational Safety and Health
and DOL’s Wage and Hour Division inspected a Par 2 job site in Arizona. DOL
determined two minors were engaged in work on the roof using nail guns. It assessed
a civil monetary penalty, which Par 2 paid without contest.
The district court issued an order finding Paragon, Brian Jessop, Par 2, and
Don Jessop and Jacob Barlow (as Par 2’s agents) in contempt of the 2007 injunction.
It found defendants’ testimony not credible, citing numerous inconsistencies and
evasions. The court ordered defendants to provide a copy of the 2007 injunction to
all employees, contractors, and other entities with whom they contracted in the last
ten years; to place $50,000 into a fund to provide FLSA training; and to pay
attorneys’ fees and costs. Paragon and Brian Jessop filed a timely notice of appeal,
as did Par 2. We consolidated the appeals.
After briefing in this appeal was complete, a ruling was issued on the issue of
back wages for the pecan-harvesting violations. The district court determined
5
Paragon and Brian Jessop owe $1,012,960.90 to the minors they employed and
ordered them to pay $812,960.90 into the fund for compensating the children for
unpaid wages. That order is the subject of a separate appeal. In addition, DOL is
currently seeking civil penalties against Paragon and Brian Jessop in an
administrative action, DOL case 2015-CLA-00008, related to the pecan-harvesting
violations.
II
We review a district court’s civil contempt ruling for abuse of discretion.
Reliance Ins. v. Mast Constr. Co., 84 F.3d 372, 375 (10th Cir. 1996). “A district
court has broad discretion in using its contempt power to require adherence to court
orders. In determining whether the court committed legal error by violating limits on
such power, our review is de novo.” O’Connor, 972 F.2d at 1209 (quotation
omitted). We review findings of fact for clear error. See Reliance, 84 F.3d at 375.
A
Par 2 contends that the district court violated its due process rights by finding
it to be a successor to Paragon in a contempt proceeding. Specifically, Par 2 argues it
cannot be subjected to liability for back wages from the pecan-harvest order and civil
penalties from the administrative action absent a complaint, discovery, and a jury
trial. Whether adequate due process protections have been afforded is generally “a
question of law subject to de novo review.” Pub. Serv. Co. of Okla. v. N.L.R.B., 318
F.3d 1173, 1182 (10th Cir. 2003). However, we do not reach the merits of Par 2’s
due process argument because we conclude the argument is premature.
6
“A claim is not ripe for adjudication if it rests upon contingent future events
that may not occur as anticipated or indeed may not occur at all.” Texas v. United
States, 523 U.S. 296, 300 (1998) (quotation omitted). As Par 2 itself frames its
argument, its being deemed a successor to Paragon in a contempt proceeding was
improper because Par 2 “may be held liable for millions of dollars in penalties and
claims being pursued against Paragon.” (emphasis added).1 It is uncertain whether
Par 2 will in fact be held liable in the manner it predicts. Par 2’s due process
argument as to the back pay award would become ripe only if the following events
occur: the award is affirmed by this court, DOL seeks to hold Par 2 responsible for
the award, the district court holds Par 2 liable, and the court does so based on the
findings in this case without affording Par 2 additional process. Par 2’s potential of
being held liable for civil penalties is even more attenuated. It appears that civil
penalties have not yet been assessed at the administrative level, and, if they are, the
same chain of events would need to occur.
1
Par 2’s argument appears to rest on the mistaken assumption that, because the
district court characterized Par 2 as a successor to Paragon for purposes of binding it
to the 2007 injunction, Par 2 is a successor to Paragon in every context. Not so. As
the Supreme Court has recognized, asking whether a company “is a ‘successor’ is
simply not meaningful in the abstract” because “[a] new employer . . . may be a
successor for some purposes and not for others.” Howard Johnson Co. v. Detroit
Local Joint Exec. Bd., Hotel & Rest. Emp. & Bartenders Int’l Union, AFL-CIO, 417
U.S. 249, 262 n.9 (1974). Whether a successor is liable for a specific sum depends
on “the facts of each case and the particular legal obligation which is at issue.” Id.7
If Par 2 is in fact held liable for back pay and civil penalties, it will have the
opportunity to challenge the process provided to it during those proceedings.2 But
Par 2 may not be held liable at all. Even if it is, we do not yet know what process
will be afforded to Par 2 in those proceedings. Accordingly, we conclude Par 2’s due
process claim is premature. And because Par 2 does not advance any particular
argument in its Opening Brief indicating the process provided to it was insufficient
with respect to the sanctions actually imposed by the district court, any such
argument is waived. See Coleman v. B-G Maint. Mgmt. of Colo., Inc., 108 F.3d
1199, 1205 (10th Cir. 1997). Further, defendants failed to raise any due process
argument before the district court, providing an independent basis to decline
consideration of this issue. See Rosewood Servs., Inc. v. Sunflower Diversified
Servs., Inc., 413 F.3d 1163, 1167 (10th Cir. 2005) (arguments not raised in district
court are waived on appeal).
B
Defendants also challenge the district court’s application of the contempt order
to Par 2, Don Jessop, and Jacob Barlow. In general, a party may be held in civil
contempt for violating an injunction if the plaintiff proves “by clear and convincing
2
We note that the primary case upon which Par 2 relies in its Opening Brief, a
decision of the Utah Supreme Court, considered the due process claims at issue only
after post-judgment collection procedures were complete. See Brigham Young Univ.
v. Tremco Consultants, Inc., 156 P.3d 782, 785 (Utah 2007). Federal courts have
similarly considered whether post-judgment efforts to collect from a party not bound
by an original judgment followed appropriate procedures. See, e.g., Thomas, Head &
Greisen Emps. Tr. v. Buster, 95 F.3d 1449, 1452-53 (9th Cir. 1996).
8
evidence, that a valid court order existed, that the defendant had knowledge of the
order, and that the defendant disobeyed the order.” Reliance, 159 F.3d at 1315. On
appeal, defendants do not contest that the injunction prohibited Brian Jessop,
Paragon, their agents, and those in “active concert or participation” with them, from
violating the provisions of FLSA addressing oppressive child labor. Nor do they
challenge the district court’s findings that Par 2 in fact violated those provisions.
The only question before us is whether Par 2 and its agents were appropriately bound
by the injunction.
An injunction binds the parties, “the parties’ officers, agents, servants,
employees, and attorneys,” and “other persons who are in active concert or
participation with” them. Fed. R. Civ. P. 65(d)(2). However, such individuals must
“receive actual notice” of the injunction to be bound by it. Id. As the Supreme Court
long ago recognized, such a rule is necessary so “that defendants may not nullify a
decree by carrying out prohibited acts through aiders and abettors, although they
were not parties to the original proceeding.” Regal Knitwear Co. v. N.L.R.B., 324
U.S. 9, 14 (1945). If entities or individuals are the “instrumentalities through which
[a] defendant seeks to evade an order or . . . come within the description of persons in
active concert or participation with [a defendant] in the violation of an injunction,”
then “they are brought within scope of contempt proceedings.” Id. Accordingly,
contempt orders are binding on entities that “operate as merely a disguised
continuance of the old employer.” Id. (quotations omitted). This analysis “depends
on an appraisal of [the entity’s] relations and behavior.” Id. at 15.
9
Defendants argue Par 2, Don Jessop, and Jacob Barlow were not within the
scope of the 2007 injunction. Don Jessop and Jacob Barlow were employees of
Paragon and thus included under Rule 65(d)(2)(B). As to Par 2, the district court
concluded that it was the instrumentality through which Paragon, Brian Jessop, and
James Jessop sought to evade the 2007 injunction and that it acted in active concert
or participation with them. We do not discern any error in the district court’s
conclusions. To the contrary, we agree that the record clearly and convincingly
establishes Par 2 operated as a disguised continuance of Paragon. As the facts
described above demonstrate, Par 2 simply picked up Paragon’s operations.
Particularly noteworthy is evidence showing that a contractor believed Paragon had
simply changed its name to Par 2. It is also clear that the purpose of this transition
was to evade compliance with the 2007 injunction. Don Jessop incorporated Par 2
while Paragon was involved in a subpoena dispute with DOL related to the 2007
injunction. Brian Jessop and Don Jessop attempted to conceal Brian Jessop’s
involvement with Par 2. And Par 2 altered documents submitted to DOL to remove
Brian Jessop’s name.3
3
Defendants object to the district court’s application of the “MacMillan
factors,” a set of criteria we have used in determining whether a Title VII order binds
a successor, see Trujillo v. Longhorn Mfg. Co., 694 F.2d 221, 225 (10th Cir. 1982).
Because we conclude Par 2 falls within the scope of the 2007 injunction under Rule
65(d), we do not need to address its application of those factors. See Regal Knitwear,
324 U.S. at 14 (holding “successors and assigns” are liable for contempt if they are
properly within the scope of the injunction under Rule 65(d)). Although the test
under Rule 65(d) overlaps to some degree with the MacMillan analysis, we do not
decide whether Par 2 is a successor to Paragon under the MacMillan factors.
10
Turning to whether the parties had notice of the injunction, we agree with the
district court that Par 2 had actual notice. Par 2, like any corporate entity, “acquire[s]
knowledge only through its officers and agents.” Bergeson v. Life Ins. Corp. of Am.,
265 F.2d 227, 232 (10th Cir. 1959). Brian Jessop, an agent of Par 2, was a party
bound by the injunction and had actual knowledge of it. With respect to Don Jessop
and Jacob Barlow, we cannot say the district court clearly erred in finding they had
actual notice of the 2007 injunction. As the district court noted, Don Jessop was a
director at Paragon when the injunction was entered and facilitated the transfer of
operations from Paragon to Par 2. Jacob Barlow served as Paragon’s office manager
and assisted in gathering documents for the DOL’s subpoena in 2013, which was
related to the injunction. The court permissibly found incredible the men’s denials of
knowledge of the injunction.
III
AFFIRMED.
Entered for the Court
Carlos F. Lucero
Circuit Judge