Servaas Inc. v. Mills

14-385-cv(L)
SerVaas v. Mills, et al.
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED
BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1.
WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY
MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE
NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY
OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held at the
Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the
30th day of August, two thousand and sixteen.
Present:
PETER W. HALL,
GERARD E. LYNCH,
DENNY CHIN,
Circuit Judges.
____________________________________________________
SERVAAS INC.,
Plaintiff–Appellee,
v. Nos. 14-385-cv(L)
14-438-cv(Con)
TIMOTHY B. MILLS, ESQ., JAMES MAGGS, ESQ., TENNANT D
MAGEE, ESQ., MAGGS & MCDERMOTT, LLC, STEPHEN
ALBRIGHT,
Appellants,
REPUBLIC OF IRAQ, MINISTRY OF INDUSTRY OF THE REPUBLIC OF IRAQ,
Defendants-Appellants.
_____________________________________________________
1
For Plaintiff-Appellee: John Piskora, Loeb & Loeb LLP, New York,
NY; Martin D. McGill and Scott P. Martin,
Gibson Dunn & Crutcher LLP, Washington,
D.C.
For Appellants: Arthur Glenn Jakoby and Ross L. Hirsch,
Herrick, Feinstein LLP, New York, NY.
____________________________________________________
Appeal from a judgment of the United States District Court for the Southern District of
New York (Berman, J.).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND
DECREED that the order of the district court is VACATED and the case is REMANDED.
Timothy B. Mills, James Maggs, Tennant D. Magee, Maggs & McDermott LLC, and
Stephen Albright (collectively, “attorney-appellants”) appeal from a January 24, 2014 contempt
order and a February 7, 2014 sanctions order entered in the United States District Court for the
Southern District of New York. SerVaas Inc. commenced this action against the Republic of
Iraq and the Ministry of Industry of the Republic of Iraq (collectively, “Iraqi defendants”) under
the New York Uniform Money-Judgments Recognition Act, New York C.P.L.R. § 5301 et seq.,
in order to enforce a 1991 default judgment entered in SerVaas’s favor by the Paris Commercial
Court. The district court granted summary judgment in favor of SerVaas and, after a flurry of
post judgment motions, granted SerVaas’s motion to compel the Iraqi defendants to produce
discovery responses. After the Iraqi defendants failed to comply with the discovery order,
SerVaas moved for an order to show cause why the Iraqi defendants should not be held in
contempt. Following a hearing, the district court held the Iraqi defendants and their lawyers—
the attorney-appellants—in contempt and imposed on the Iraqi defendants monetary sanctions in
the form of per diem fees and on the attorney-appellants an order to pay certain attorneys’ fees to
the plaintiffs. The Iraqi defendants and the attorney-appellants both appealed.
2
After filing briefs with this court, SerVaas and the Iraqi Defendants settled their dispute
and the Iraqi Defendants withdrew their appeal with prejudice; as part of the settlement, SerVaas
waived any interest in the monetary sanctions imposed on the attorney-appellants. The attorney-
appellants argue both that their appeal was not mooted by the settlement and that the district
court abused its discretion when it held them in contempt. We assume the parties’ familiarity
with the underlying facts, the procedural history of the case, and the issues on appeal. For the
reasons set forth below we vacate both orders and remand the case to the district court.
Before turning to the merits of the appeal, we must first ensure that there is a live
controversy over which we have jurisdiction. Agee v. Paramount Commc’ns, Inc., 114 F.3d 395,
398 (2d Cir. 1997) (“Article III of the Constitution limits this Court to consideration of appeals
involving a live case or controversy.”). The attorney-appellants, as nonparties in this case, may
appeal the district court’s contempt order. Keach v. Cty. of Schenectady, 593 F.3d 218, 223 (2d
Cir. 2010) (“While, typically, nonparties may not appeal from the judgments of a district court,
there is an exception to this general rule where a nonparty, such as an attorney, has been held in
contempt or sanctioned by the court.” (citation omitted)). The parties’ subsequent settlement,
however, creates an unusual situation where all of the substantive issues in the underlying
lawsuit are rendered moot by the settlement agreement. See Agee, 114 F.3d at 399 (recognizing
that a parties’ appeal is rendered moot by a settlement agreement that disposes of the underlying
issues in the appeal).
The attorney-appellants contend that even though the settlement agreement resolves the
monetary component of the district court’s sanction, they have standing to challenge continuing
reputational harm to them arising from the existence of the contempt order. We agree and
recognize that the harm to the attorney-appellants’ reputation is a cognizable injury such that the
3
attorney-appellants’ appeal is not moot. See Keach, 593 F.3d at 225 (“[A] finding that an
attorney is guilty of specific misconduct is an adverse decision that can be appealed.”); Agee,
114 F.3d at 399.
Turning to the merits of the contempt sanction, we review the district court’s decision to
hold the attorney-appellants in contempt under an abuse of discretion standard that is more
rigorous than usual. CBS Broad. Inc. v. FilmOn.com, Inc., 814 F.3d 91, 98 (2d Cir. 2016). This
includes conducting “a de novo review of any rulings of law made by the district court.” S. New
Eng. Tel. Co. v. Global NAPs Inc., 624 F.3d 123, 145 (2d Cir. 2010). Individuals charged with
civil contempt are “entitled to notice of the allegations, the right to counsel, and a hearing at
which the plaintiff bears the burden of proof and the defendant has an opportunity to present a
defense.” Schoenberg v. Shapolsky Publishers, Inc., 971 F.2d 926, 934–935 (2d Cir. 1992),
abrogated on other grounds by Bassett v. Mashantucket Pequot Tribe, 204 F.3d 343 (2d Cir.
2000).
The attorney-appellants argue that the district court erred by not affording them adequate
notice of the contempt charges against them before finding them in contempt. While we express
no view as to the substance of the contempt finding, we agree that the notice to the attorney-
appellants was insufficient. SerVaas moved for contempt and civil sanctions solely against the
Iraqi Defendants. Neither prior to nor during the contempt hearing were the attorney-appellants
notified that the district court was contemplating holding them in contempt, particularly so given
that the district court reaffirmed that the focus of the proceedings was to determine whether the
Iraqi Defendants failed to comply with the discovery order. Only after the attorney-appellants
were held in contempt did they realize that they, too, were being charged with contempt. Because
this is insufficient notice, the district court exceeded the bounds of its discretion when, under the
4
circumstances, it proceeded to find the attorney-appellants in contempt and to impose contempt
sanctions.
On remand, the district court may, if it wishes, reinstitute contempt proceeding against
the attorney-appellants. After providing the attorney-appellants adequate notice, and thus an
opportunity to present a defense, the court may make such findings and order such relief
(including contempt sanctions) as it deems appropriate based on the full record then before it.
The attorney-appellants will be able to appeal any adverse decision.
Accordingly, we vacate the January 24, 2014 order holding the attorney-appellants in
contempt. In addition, because the attorneys’ fees sanctions were premised on the original
finding of contempt, we vacate the February 7, 2014 order imposing sanctions on the attorney-
appellants. We remand the case to the district court.
FOR THE COURT:
Catherine O’Hagan Wolfe, Clerk
5