Securities & Exchange Commission, Jose Pablo Urbina Solera v. Pension Fund of America, L.C.

[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________ FILED
U.S. COURT OF APPEALS
No. 10-10464 ELEVENTH CIRCUIT
Non-Argument Calendar SEPTEMBER 15, 2010
________________________ JOHN LEY
CLERK
D.C. Docket No. 1:05-cv-20863-KMM
SECURITIES AND EXCHANGE COMMISSION, et al.,
l
llllllllllllllllllllll Plaintiffs,
JOSE PABLO URBINA SOLERA,
lllllllllllllllllllll Claimant - Appellant,
versus
PENSION FUND OF AMERICA, L.C.,
PFA ASSURANCE GROUP, LTD,
PFA INTERNATIONAL, LTD,
CLAREN TPA, LLC,
LUIS M. CORNIDE, et al.,
lllllllllllllllllllll Defendants - Appellees.
________________________
Appeal from the United States District Court
for the Southern District of Florida
________________________
(September 15, 2010)
Before BLACK, CARNES and PRYOR, Circuit Judges.
PER CURIAM:
Jose Pablo Urbina Solera, proceeding pro se, appeals the district court’s
order holding him in contempt for failing to comply with an anti-suit injunction.
I.
The Securities and Exchange Commission filed an enforcement action
against the Pension Fund of America and related entities (collectively, the
“Pension Fund”), and its two principals, alleging that the Pension Fund defrauded
investors through the sale of “retirement trust plans” in violation of federal law.
The district court appointed Thomas Schultz to serve as receiver over the Pension
Fund and charged him with “marshal[ing] and safeguard[ing] all of the assets of
[the Pension Fund]” for the benefit of defrauded investors and other legitimate
creditors.
The district court approved a claims procedure for distributing the
receivership estate to defrauded investors. Each claimant was to file a proof of
claim form with the Receiver. In 2007 Solera filed a proof of claim form seeking
to recover from the receivership estate $8,030,000 that he claimed to have invested
in the Pension Fund. Solera alleged that he had provided five checks to Carlos
Ruiz, the Pension Fund’s Regional Director for Costa Rica, for investment in the
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Pension Fund. The checks were drawn on the Clearwater, Florida SunTrust Bank
checking account of Harlon Parchment, and were made payable to Solera.
The Receiver opposed Solera’s claim. In support of his position, the
Receiver produced evidence that the SunTrust account on which the checks were
drawn never had a balance even close to the amount Solera claimed to have
invested with the Pension Fund. The Receiver also produced an affidavit from
Harlon Parchment. In the affidavit, Parchment explained that the signature on the
checks was not his, and he expressed his belief that Solera had forged his
signature on the checks.
The district court rejected Solera’s claim. Solera filed a motion for
reconsideration, which the district court denied. Solera appealed from the denial
of his motion for reconsideration. We affirmed. See S.E.C. v. Pension Fund of
America, Inc., No. 09-12125, 2010 WL 1915161 (11th Cir. May 13, 2010).
In January 2009 the Receiver moved the district court to enjoin Solera from
proceeding with the civil components of two criminal lawsuits Solera initiated in
the courts of his native Costa Rica. The Receiver provided an affidavit from a
Costa Rican attorney explaining that a criminal proceeding in Costa Rica has two
components: a criminal component handled by a government prosecutor and a
civil component, known as a “civil action.” The civil action, although filed in a
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criminal court, is a proceeding pursued by a private party, known as the “civil
actor,” who “has an economic claim for alleged damages against the defendant.”
The two components may proceed independently of each other.
The Receiver established that Solera was the civil actor in two criminal
proceedings relating to his alleged investment in the Pension Fund. Solera filed
the first action in 2006. In that civil action, Solera accused Ruiz of fraud,
wrongful retention, and “ideological forgery” in violation of the Costa Rican
criminal code. In the 2006 Civil Action, Solera sought $8,030,000 in damages.
As he did in the claim form he filed with the Receiver, Solera alleged that he had
provided a total of five checks to Ruiz for investment in the Pension Fund. The
first group of three checks totaled $7,900,000, and the other two checks totaled
$130,000. Solera alleged that the Pension Fund delayed cashing the first three
checks, so insufficient funds remained in Parchment’s account when the checks
were presented to the bank for payment. Those checks were returned to Solera by
the Pension Fund. He alleged that the Pension Fund lost the other two checks.
The second action was filed in 2009. Solera, again acting as the civil actor
in a criminal proceeding, sought to recover $130,000 from the Receiver. He
accused the Receiver of committing the felony of wrongful retention. Solera
alleged that the Pension fund lost the two checks totaling $130,000 and that those
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checks were never returned to him. The allegations in the two Costa Rican civil
actions mirrored Solera’s earlier unsuccessful claim against the receivership
estate: He again alleged that he provided five checks, totaling $8,030,000 and
drawn on the account of Harlon Parchment, to Ruiz for investment in the Pension
Fund.
The district court issued the anti-suit injunction. In that injunction, the
district court specifically ordered Solera to “take all steps necessary to withdraw
all pleadings in the civil actions in Costa Rica.” S.E.C. v. Pension Fund of
America, L.C., 613 F. Supp. 2d 1341, 1347 (S.D. Fla. 2009). The district court
explicitly excluded the criminal component of the Costa Rican proceedings from
the coverage of the injunction. Id. Solera withdrew the civil action against the
Receiver but did not withdraw the civil action against Ruiz.
On May 18, 2009, the Receiver filed a motion seeking an order requiring
Solera to show cause why he should not be held in contempt for violating the
anti-suit injunction. On June 16, the district court issued an order to show cause.
In that order, the district court determined that the Receiver had made a prima
facie showing of contempt, and the burden had shifted to Solera to either explain
his noncompliance with the injunction or to comply with it by withdrawing the
civil action against Ruiz. The district court also ordered Solera to attend a show
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cause hearing. Solera did not withdraw the civil action against Ruiz. Instead, he
filed a letter with the district court arguing that the district court had no right to
enjoin the Costa Rican civil action against Ruiz.
On August 20, the district court held the show cause hearing. Solera did not
attend. The district court held Solera in contempt based on his failure to withdraw
the Costa Rican civil action against Ruiz and his failure to attend the show cause
hearing. In its judgment of contempt, the district court ordered Solera to pay to
the Receiver $120,792.67. According to the district court, the sanctions were
designed to compensate the Receiver for fees and costs incurred by the Receiver
related to the Costa Rican lawsuits, the anti-suit injunction, the order to show
cause, and the show cause hearing. Solera appeals.
II.
In reviewing a contempt judgment, we must first determine whether the
nature of the contempt proceeding was civil or criminal. Afro-American
Patrolman’s League v. City of Atlanta, 817 F.2d 719, 723 n. 3 (11th Cir. 1987).
Because the sanctions the district court imposed on Solera for violating the anti-
suit injunction were remedial in nature, that aspect of the contempt sanction is
civil. See Serra Chevrolet v. Gen. Motors, Inc., 446 F.3d 1137, 1147 (2006).
We review the grant of a motion for civil contempt for an abuse of
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discretion, McGregor v. Chierico, 206 F.3d 1378, 1383 (11th Cir. 2000), and “we
review findings of fact arising out of contempt proceedings under the clearly
erroneous standard.” Doe v. Bush, 261 F.3d 1037, 1047 (11th Cir. 2001). A
finding of civil contempt must be supported by clear and convincing evidence.
Riccard v. Prudential Ins. Co., 307 F.3d 1277, 1296 (11th Cir. 2002). The clear
and convincing evidence “must establish that an order was violated.” Jove Eng’g
v. I.R.S., 92 F.3d 1539, 1545 (11th Cir. 1996) (quotation marks and citations
omitted). The clear and convincing evidence must also establish that: (1) the
allegedly violated order was valid and lawful; (2) the order was clear and
unambiguous; and (3) the alleged violator had the ability to comply with the order.
Id.
Because Solera is proceeding pro se, we construe his brief liberally.
Mederos v. United States, 218 F.3d 1252, 1254 (11th Cir. 2000). Solera argues
that the district court’s anti-suit injunction was invalid insofar as it enjoined his
suit against Ruiz. We must determine the validity of the anti-suit injunction
because “[a] judgment of civil contempt, being remedial in nature, stands or falls
with the validity or invalidity of the [underlying] order, and the opposing party
should be compensated only if he was entitled to the order . . . .” Lewis v. S.S.
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Baune, 534 F.2d 1115, 1119 (5th Cir. 1976);1 see also United States v. United
Mine Workers of Am., 330 U.S. 258, 294–95, 67 S. Ct. 677, 696 (1947) (“It does
not follow of course, that simply because a defendant may be punished for
criminal contempt for disobedience of an order later set aside on appeal, that the
plaintiff in the action may profit by way of a fine imposed in a simultaneous
proceeding for civil contempt based upon the same order. The right to remedial
relief falls with an injunction which events prove was erroneously issued.”).
“[F]ederal courts have some power to enjoin foreign suits by persons subject
to federal jurisdiction.” Canon Latin Am., Inc. v. Lantech (CR), S.A., 508 F.3d
597, 601 (11th Cir. 2007). However, a district court may issue an injunction
barring the parties before it from participating in foreign litigation only if: “(1) the
parties are the same in both the foreign and domestic lawsuits, and (2) resolution
of the case before the enjoining court is dispositive of the action to be enjoined.”
Id. (brackets and quotation marks omitted).
The first threshold requirement is not met here—the parties before the
enjoining court are not the same as the parties in the Costa Rican civil action. In
the case before the district court, Solera and the Receiver are the parties. In the
1
In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir.1981) (en banc), this Court
adopted as binding precedent all of the decisions of the former Fifth Circuit handed down prior to
the close of business on September 30, 1981.
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Costa Rican civil action, Solera is the civil actor and Ruiz is the defendant. The
Receiver and Ruiz are obviously not literally the same party.
The Receiver, parroting the district court’s order granting the injunction,
argues that the parties are nevertheless the same in both the domestic and foreign
litigation because “[Solera] has sued [Ruiz] as representative for [the Pension
Fund], one of the Receivership Entities.” See Pension Fund, 613 F. Supp. 2d at
1345. The district court reasoned that, because Solera sued Ruiz as representative
for the Pension Fund “[t]he Receivership Entities are . . . potentially liable for any
damages ultimately awarded in” Solera’s Costa Rican civil action against Ruiz,
and that “the Receiver’s interests are [therefore] aligned with [Ruiz’s], and are
implicated to such an extent that” the Receiver and Ruiz qualify as the same party
for the purpose of issuing an injunction barring foreign litigation.
We disagree. It is true that Solera’s factual allegations in the Costa Rican
civil action against Ruiz mirror the allegations he made in the claims proceeding
before the district court. It is also true that Solera seeks to hold Ruiz liable for
damages he allegedly caused while serving as a Regional Manager for the Pension
Fund. However, our review of the record reveals no evidence that Solera sued
Ruiz “as representative for [the Pension Fund]” or that, under Costa Rican law,
“[t]he Receivership Entities are . . . potentially liable for any damages ultimately
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awarded” to Solera in the Costa Rican civil action against Ruiz. Pension Fund,
613 F. Supp. 2d at 1345. While we note that there is no evidence of those
circumstances in this record, we express no view on whether those circumstances,
if supported by the record, would be enough to make the Receiver and Ruiz
effectively the same party for the purpose of satisfying the first prerequisite to the
issuance of an injunction barring foreign litigation. See Canon, 508 F.3d at 601.
Furthermore, without evidence that Solera is seeking to recover funds only
from the receivership estate in his Costa Rican civil action against Ruiz, the action
before the district court cannot be “dispositive” of the Costa Rican civil action.
See id. at 601 & n.8. The record contains no such evidence. Instead, all that the
record establishes is that, before he ever submitted a claim seeking to recover from
the receivership estate, Solera initiated a civil action in Costa Rica against Ruiz
seeking to hold Ruiz personally responsible for losses that Solera alleges he
sustained because of Ruiz’s actions. The interests of comity demand more than a
showing that the claims before the district court are similar to the claims in the
Costa Rican civil action. Id.
Because neither of the threshold requirements for the issuance of an anti-
suit injunction have been met, id. at 601, the Receiver has failed to establish by
clear and convincing evidence that the anti-suit injunction was “valid and lawful”
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as applied to Solera’s Costa Rican civil action against Ruiz. Jove Eng’g, 92 F.3d
at 1545. To the extent that it rested upon Solera’s violation of the anti-suit
injunction, the district court’s contempt order must be vacated.
However, the district court’s order finding Solera in contempt did not rest
entirely on his violation of the anti-suit injunction; the district court’s finding of
contempt was also based on Solera’s failure to attend the show cause hearing as
required by the show cause order. Solera argues that the district court erred by
holding him in contempt for failing to attend the show cause hearing because he
“justified” his absence from the hearing.
The party seeking an order of contempt bears the initial burden of
demonstrating by clear and convincing evidence that the alleged contemnor has
violated a valid court order. Howard Johnson, Inc. v. Khimani, 892 F.2d 1512,
1516 (11th Cir. 1990). Once the party seeking the contempt order makes out a
prima facie case, “the burden of production shifts to the alleged contemnor to
show a present inability to comply that goes beyond a mere assertion of inability.”
Id. (quotation marks and citation omitted). To satisfy that burden, the party facing
possible contempt sanctions must offer evidence supporting his claim. Citronelle-
Mobile Gathering, Inc. v. Watkins, 943 F.2d 1297, 1301 (11th Cir. 1991)
(quotation marks and citation omitted). A party subject to an order must show that
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he has “made in good faith all reasonable efforts to comply.” Id. (quotation marks
and citation omitted); see also Combs v. Ryan’s Coal Co., 785 F.2d 970, 984 (11th
Cir. 1986) (discussing burden of proof and shifting burden of production in civil
contempt proceedings). We review only for clear error a district court’s factual
finding about whether an alleged contemnor is able to comply with the order.
Citronelle-Mobile, 943 F.2d at 1301.
There is no dispute that Solera failed to attend the hearing as required by the
show cause order. Solera does not contend that the order was unlawful or that it
was ambiguous. Instead, Solera argues that the district court erred when it found
him in contempt because he demonstrated that he could not attend the show cause
hearing. We disagree.
The district court did not err in determining that Solera failed to meet his
burden of producing evidence that he was unable to comply with the district
court’s order. Solera filed two documents stating that he would be unable to
attend the show cause hearing. The first is dated January 2008 and purports to be
a letter from a doctor diagnosing Solera with “symptoms of acute stress disorder.”
Solera makes no effort to explain how a diagnosis of acute stress disorder in
January 2008 foreclosed his attendance at a show cause hearing in August 2009.
Solera filed the second document just one day before the show cause hearing.
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That document is written in Spanish. It states that Solera had a doctor’s
appointment on the date of the show cause hearing. Notably, the “diagnosis”
portion of the form does not state that Solera was suffering from any medical
malady. It instead states only that Solera was a participant in a study. We strictly
interpret the requirement that, in order to satisfy his burden of production, an
alleged contemnor must produce evidence that he made “in good faith all
reasonable efforts to comply” with the district court’s order. Combs, 785 F.2d at
984. Solera’s filings fall far short of satisfying that burden, so on those grounds
he cannot avoid contempt for violating the show cause order.
III.
As we have already explained, the district court erred by finding Solera in
contempt for violating the anti-suit injunction. Thus, the part of the finding of
contempt against Solera that survives rests solely on his failure to attend the show
cause hearing.
The problem is that the district court actually imposed a criminal (instead of
a civil) contempt sanction on Solera when, based on his failure to attend the show
cause hearing, it ordered him to pay the fees and costs incurred by the Receiver
related to that hearing. The sanction imposed was neither coercive nor
compensatory. It was not coercive because when the district court entered the
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contempt order, the show cause hearing had already occurred, so Solera could not
be coerced into attending it. See In re E.I. DuPont De Nemours& Co.–Benlate
Litigation, 99 F.3d 363, 369 (11th Cir. 1996). And the sanction was not
compensatory because there was no harm requiring compensation—the Receiver
would have prepared for and attended the show cause hearing even if Solera had
shown up. In fact, that hearing would have taken longer and would have cost
more if Solera had shown up. Because that part of the sanction award was neither
coercive nor compensatory, it was punitive in nature. See id. (“[T]he sanctions
imposed by the district court were neither compensatory nor coercive in nature,
but instead were designed to punish [the contemnor] for flouting the authority of
the district court.”).
A “district court may not use the civil contempt power to impose what
amounts to a punitive or criminal contempt sanction.” United States v. City of
Miami, 195 F.3d 1292, 1298 (11th Cir. 1999); see also Dupont, 99 F.3d at 369
(holding that the district court committed reversible error by imposing criminal
sanctions in a civil proceeding, which “did not afford [the contemnor] the
procedural protections the Constitution requires for the imposition of criminal
contempt sanctions”). Because the district court imposed what amounted to a
punitive contempt sanction in a civil proceeding, its order must be vacated. See
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DuPont, 99 F.3d at 368 (“‘[A] district court may not, even unwittingly, employ a
civil contempt proceeding to impose what, in law, amounts to a criminal contempt
sanction.’”) (quoting Blalock v. United States, 844 F.2d 1546, 1560 n. 20 (11th
Cir. 1988) (per curiam) (Tjoflat, J., specially concurring)).
The district court is free on remand to decide whether to institute the
necessary procedures to determine whether to impose a criminal contempt sanction
against Solera for failing to attend the show cause hearing on August 20, 2009.
We also pass no judgment on whether the district court could exercise its inherent
powers—separate and apart from contempt proceedings—to sanction Solera for
his failure to comply with the district court’s order to attend the show cause
hearing. See, e.g., In re Sunshine Jr. Stores, Inc., 456 F.3d 1291, 1305 (11th Cir.
2006) (explaining that a district court has the discretion to exercise its inherent
powers, and “[a] primary aspect of that discretion is the ability to fashion an
appropriate sanction for conduct which abuses the judicial process.”).
The district court’s order finding Solera in contempt and awarding sanctions
to the Receiver is VACATED, and the case is remanded for further proceedings
consistent with this opinion.
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