Secretary United States Depart v. Altor Inc

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________
No. 13-2621
__________
SECRETARY OF LABOR, United Sates Department of Labor,
Petitioner
v.
ALTOR INC., and/or AVCON INC., and/or VASILIOS SAITES,
individually, and NICHOLAS SAITES, individually,
Respondents
____________________________________
On Application for Judgment of Civil Contempt
(Agency No. OSHRC 99-0958)
____________________________________
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________
No. 13-2622
__________
SECRETARY OF LABOR, United States Department of Labor,
Petitioner
v.
AVCON INC., VASILIOS SAITES; NICHOLAS SAITES,
Respondents
____________________________________
On Application for Judgment of Civil Contempt
(Agency Nos. OSHRC 98-0755 and 98-1168)
____________________________________
Argued April 26, 2019
Before: SMITH, Chief Judge, CHAGARES and SCIRICA, Circuit Judges
(Opinion filed: July 25, 2019)
Micole Allekotte
Darren Cohen
Daniel Hennefeld
United States Department of Labor
Office of the Solicitor
201 Varick Street
Room 983
New York, NY 10014
Ronald J. Gottlieb [ARGUED]
Heather R. Phillips
John R. Shortall
United States Department of Labor
Office of the Solicitor
S-4004
200 Constitution Avenue, N.W.
Washington, DC 20210
Counsel for Petitioner
Kevin J. O’Connor
Paul A. Sandars, III [ARGUED]
Lum Drasco & Positan
103 Eisenhower Parkway
Suite 401
Roseland, NJ 07068
Counsel for Respondent
___________
2
OPINION *
___________
SMITH, Chief Judge
The Secretary of Labor has filed two related petitions for judgments of civil
contempt against Altor, Inc. (“Altor”); Avcon, Inc. (“Avcon”); the companies’ president
and director, Vasilios Saites; and his son, Nicholas Saites (together, the “Respondents”).
We referred the Secretary’s petitions to a special master who has prepared a Report and
Recommendation (“R&R”). For the following reasons, we will: (1) overrule the
Respondents’ objections to the R&R; (2) approve and adopt the R&R; and (3) grant in
part and deny in part the Secretary’s petitions.
I.
This matter arises from penalties imposed against Avcon and Altor for workplace
safety violations under the Occupational Safety and Health Act (the “OSH” Act).
Specifically, in April 2011, following administrative proceedings, the Occupational
Safety and Health Review Commission (the “Commission”) ordered: (1) Avcon to pay
$77,350 in penalties; and (2) Avcon and Altor to pay $412,000 in penalties. 1 It is
undisputed that the corporations did not pay the penalties.
*
This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not
constitute binding precedent.
1
Avcon and Altor petitioned this Court for review of the Commission’s latter order. We
denied the petition. Altor, Inc. v. Sec’y of Labor, 498 F. App’x 145, 149-50 (3d Cir.
2012) (not precedential).
3
Accordingly, the Secretary petitioned this Court to summarily enforce the
Commission’s orders. 2 We granted the Secretary’s petitions, ordering: (1) Avcon, its
officers and directors, successors and assigns, to pay the $77,350 penalty within ten
calendar days, see C.A. No. 11-4078 (order entered Oct. 4, 2012); and (2) Avcon, Altor,
Vasilios Saites, Nicholas Saites, and their successors to pay the $412,000 penalty within
same, see C.A. No. 11-4077 (order entered Nov. 15, 2012).3 It is undisputed that the
Respondents did not comply with these Decrees.
The Secretary then commenced these contempt proceedings. 4 In response to the
Secretary’s petitions, the Respondents asserted that they were unable to comply with our
Decrees because: (1) the corporate entity Avcon had dissolved; and (2) Altor did not have
sufficient assets.
We appointed United States Magistrate Judge Michael A. Hammer to serve as a
special master. Following discovery, Judge Hammer issued an R&R recommending that
2
The OSH Act provides that the Secretary may obtain summary enforcement of any final
order issued by the Commission by filing a petition in the appropriate court of appeals.
29 U.S.C. § 660(b). As relevant to this case, the Act further provides that the Secretary
may later seek to enforce a court of appeals’ decree in a contempt proceeding. Id.
3
The Respondents petitioned the panel for rehearing of its November 15, 2012 Decree,
arguing that the Court had wrongfully interpreted the Commission’s underlying order as
imposing “personal and individual” liability on Vasilios and Nicholas Saites. We denied
the Respondents’ petition and reissued our November 15, 2012 Decree. See C.A. No. 11-
4077 (order entered January 15, 2013).
4
The Secretary’s contempt petitions relating to our October 4, and November 15, 2012
Decrees were docketed at C.A. Nos. 13-2622 and 13-2621, respectively.
4
we grant the Secretary’s request that this Court hold Altor and Vasilios Saites in
contempt for failing to comply with our November 15, 2012 Decree. He further
recommended that we provide specific directives to these respondents to ensure that they
satisfy their debt to the Commission to the extent that they are financially able. With
respect to Avcon and Nicholas Saites, however, Judge Hammer recommended that the
Court decline to hold them in contempt.
The Respondents submitted objections to the R&R. The Secretary submitted a
response to those objections and the Respondents submitted a reply.
II.
We have jurisdiction over the Secretary’s contempt petitions pursuant to 29 U.S.C.
§ 660(b). Civil contempt “is remedial, and for the benefit of the complainant.” Int’l
Union, United Mineworkers of Am. v. Bagwell, 512 U.S. 821, 827 (1994) (quotation
marks omitted). “Civil contempt sanctions are designed either to compensate the injured
party or to coerce the defendant into complying with the court’s order.” Roe v. Operation
Rescue, 919 F.2d 857, 868 (3d Cir. 1990). In order to establish that a party is liable for
civil contempt, the moving party must prove three “elements: “(1) that a valid order of
the court existed; (2) that the defendants had knowledge of the order; and (3) that the
defendants disobeyed the order.” Marshak v. Treadwell, 595 F.3d 478, 485 (3d Cir.
2009) (quotation marks omitted). These “elements must be proven by clear and
convincing evidence, and ambiguities must be resolved in favor of the party charged with
5
contempt.” John T. v. Del. Cty. Intermediate Unit, 318 F.3d 545, 552 (3d Cir. 2003)
(quotation marks omitted).
An alleged contemnor may defend against a contempt petition by coming forward
with evidence showing that it is unable to comply with the order in question. United
States v. Rylander, 460 U.S. 752, 757 (1983). The alleged contemnor must “introduce
evidence beyond a mere assertion of inability, and [] show that it has made in good faith
all reasonable efforts to comply.” Harris v. City of Philadelphia, 47 F.3d 1311, 1324 (3d
Cir. 1995) (quotation marks omitted).
We may appoint a special master to oversee discovery and “recommend factual
findings and disposition in matters ancillary to proceedings in the court.” See Fed. R.
App. P. 48(a). The parties in this case dispute whether we should review the special
master’s findings of fact de novo or for clear error. We need not resolve this dispute
because, for the reasons discussed below, we would uphold the special master’s factual
findings under either standard of review. 5
III.
Magistrate Judge Hammer concluded that the Secretary has met his burden of
establishing a case for civil contempt—that valid court orders existed, that the
5
In NLRB v. Local 825, we applied the clear error standard of review contained in
Federal Rule of Civil Procedure 53 to the special master’s findings of fact. 659 F.2d 379,
383 (3d Cir. 1981). Rule 53 has since been revised and now generally requires de novo
review of objections to factual findings. We have not yet had occasion to address
whether the amendment to Rule 53 impacts the applicable standard of review under the
6
Respondents had knowledge of the orders, and that the Respondents disobeyed the
orders. 6 See Marshak, 595 F.3d at 485. According to Respondents, however, they
cannot be held in contempt because the corporate entities did not have the “financial
wherewithal to pay the penalties in question.” (Br. of Resp. in Opposition to the
Secretary’s Contempt Petitions at 11 (filed July 24, 2015)).
A. Avcon’s Inability to Comply with the Court’s October 4, and November 15,
2012 Decrees
The Secretary seeks to hold Avcon in contempt for its failure to comply with the
Court’s October 4, and November 15, 2012 Decrees. The Secretary recognizes that
Avcon dissolved in 2010, but argues that it nonetheless must comply with the Decrees
because the company did not take adequate measures to secure its liabilities before its
dissolution. The Secretary also argues that Avcon’s “successor” corporation, Avcrete,
Inc., should be liable for Avcon’s obligations.
Magistrate Judge Hammer rejected both of the Secretary’s arguments and
recommended that we accept Avcon’s inability defense. The Secretary does not object to
Judge Hammer’s recommendation in this regard, and we independently discern no error
circumstances here.
6
The Respondents initially argued that the Secretary had failed to establish a prima facie
case of contempt because, in Respondents’ view, their inability to comply with the
Decrees meant that they had not “disobeyed” them. In his R&R, however, Magistrate
Judge Hammer viewed the Respondents’ inability argument as a defense under Rylander.
Respondents do not object.
7
in his analysis. Therefore, we will deny the Secretary’s petitions to the extent they seek
to hold Avcon in contempt of our October 4, and November 15, 2012 Decrees.
B. Altor’s Inability to Comply with the Court’s November 15, 2012 Decree
The Secretary also asks us to hold Altor in contempt for its failure to comply with
the November 15, 2012 Decree. The Secretary contends that, contrary to the
Respondents’ representation, the company has the financial means to satisfy the
judgment.
After reviewing the evidence, Magistrate Judge Hammer concluded that the
Respondents had failed to demonstrate that Altor was unable to pay anything toward the
amount it owed to the Commission. In reaching this conclusion, Judge Hammer relied on
Altor’s bank records from October 2012 through March 2014, which reflect that the
company ended each month with a positive bank balance. Based on these balances,
Judge Hammer found that Altor could have made “at least relatively modest” payments
against the amount owed. (R&R at 27.) Judge Hammer thought it significant that Altor
never “even attempted to negotiate a reduced sum or payment plan with the Secretary.”
(R&R at 22.) For these reasons, he recommended that we hold Altor in contempt.
The Respondents have raised several objections to Magistrate Judge Hammer’s
analysis of Altor’s financial health during the relevant period. They argue that: (1) Judge
Hammer treated the tax returns of Avcon and Altor inconsistently by relying on Avcon’s
negative taxable income to conclude that it could not pay the Decrees, while essentially
8
ignoring the fact that Altor’s tax return for the year ending June 30, 2013, reflects a
negative taxable income in concluding that it could; (2) Judge Hammer placed too much
weight on Altor’s bank account balances without recognizing its monthly operating
expenses; (3) Judge Hammer mischaracterized the extent to which Altor used corporate
funds to pay certain family members’ medical expenses; (4) there is no legal authority
establishing that OSH Act penalties must be accorded priority over legitimate operating
expenses; and (5) Altor was “insolvent” when we issued our November 15, 2012 Decree,
and insolvency provides an absolute defense to the contempt petition.7
These arguments are beside the point. Magistrate Judge Hammer rejected Altor’s
inability defense because its bank account statements showed positive monthly balances
during the relevant period. Based on these balances, Judge Hammer concluded that Altor
had at least some money left at the end of each month to pay toward the Decree. It is
thus irrelevant that Altor reported negative taxable income in June 2013, that it met some
definition of “insolvent” at that time, or that it was paying various monthly expenses
necessary to maintain its business. See SEC v. Musella, 818 F. Supp. 600, 602 (S.D.N.Y.
7
The Respondents also argue that money judgments like the one at issue here are not
enforceable by contempt, but are more appropriately enforced via a writ of execution
under Rule 69(a) of the Federal Rules of Civil Procedure. (Obj. of Resp. p. 17 (citing
Cohen v. Bd. of Trustees of the Univ. of Med. & Dentistry of N.J., 867 F.2d 1455, 1467
(3d Cir. 1989) (distinguishing generally between district court actions in equity, which
can be enforceable via contempt, and actions at law for the recovery of money, which
should be enforced by writ of execution under Rule 69(a))).) As the Secretary correctly
notes, however, the Rules of Civil Procedure are not applicable here, and the OSH Act
expressly states that the Secretary may seek contempt when an employer fails to comply
9
1993) (explaining that if an alleged contemnor is not “absolutely unable to comply” with
a court order due to poverty or insolvency, the contemnor “must pay what he or she
can”). Accordingly, we will overrule these objections.
C. Whether To Hold Vasilios and Nicholas Saites in Contempt
The Secretary next argues that in addition to the corporate entities, Vasilios and
Nicholas Saites must be held in contempt because they are responsible for the
corporations’ failure to comply. The Secretary further argues that, in any event, we
explicitly named Vasilios and Nicholas in our November 15, 2012 Decree directing the
Respondents to pay the $412,000 penalty.
Magistrate Judge Hammer agreed with the Secretary that Vasilios, the sole
director and officer of Altor, should be held in contempt for failing to ensure Altor’s
compliance with the Decree. 8 According to Judge Hammer, “[t]hat Altor has failed to
make a single payment against the Decree in more than four years is his responsibility as
much as Altor’s.” (R&R at 36.) With respect to Nicholas Saites, however, Judge
Hammer found that there was no evidence that Nicholas had the position or capacity,
from November 2012 forward, to direct the affairs of Altor. Therefore, Judge Hammer
recommended that we decline to hold Nicholas in contempt.
with a court of appeals’ decree enforcing an OSH Act judgment. See 29 U.S.C. § 660(b).
8
Because Judge Hammer had already recommended that we decline to hold Avcon in
contempt, he considered only whether the individual respondents should be responsible
for Altor’s failure to comply with our November 15, 2012 Decree. Because we agree
with Judge Hammer that Avcon should not be held in contempt, we adopt this approach
10
The Respondents raise several objections to Judge Hammer’s recommendation
that we hold Vasilios in contempt. First, Respondents argue that we cannot hold Vasilios
in contempt because there is no evidence that he intentionally dissipated corporate assets
to avoid payment. We previously have explained, however, that “an alleged contemnor’s
behavior need not be willful in order to contravene the applicable decree.” FTC v. Lane
Labs-USA, Inc., 624 F.3d 575, 582 (3d Cir. 2010); see also Harley–Davidson, Inc. v.
Morris, 19 F.3d 142, 149 (3d Cir. 1994) (stating that good faith is not necessarily a
defense to contempt). Rather, in order to hold Vasilios in contempt, the Secretary need
only show that he was aware of our November 15, 2012 Decree and disobeyed it. See
Marshak, 595 F.3d at 485. Accordingly, we will overrule this objection.
Respondents next argue that Magistrate Judge Hammer’s analysis is inconsistent
with respect to whether Vasilios Saites can be made to pay the penalty imposed against
Altor. According to Respondents, although Judge Hammer ultimately concluded that
Vasilios should be made to pay Altor’s penalty, he stated earlier in his R&R that he had
“construed the Decrees to apply to Vasilios Saites and Nicholas Saites in their capacities
as officers or employees of Avcon and Altor, not to have required them individually to
satisfy the Decrees from personal assets.” (R&R at 6 n.4.)
We do not see any inconsistency in Judge Hammer’s analysis. We, like Judge
Hammer, read our Decree as naming the Saiteses only as officers or employees of Avcon
as well.
11
and Altor. It is well established that when a corporate officer fails to act on behalf of the
corporation to comply with a court order, the officer too may be held in contempt. See,
e.g., Wilson v. United States, 221 U.S. 361, 376 (1911) (“If [corporate officers] fail to
take appropriate action within their power for the performance of the corporate duty,
they, no less than the corporation itself, are guilty of disobedience, and may be punished
for contempt.”); Chi. Truck Drivers v. Bhd. Labor Leasing, 207 F.3d 500, 507 (8th Cir.
2000) (recognizing that corporate officers—even if they were not named in the court’s
original payment order—may be held in contempt for failing to comply with that order);
Max’s Seafood Café ex rel. Lou-Ann, Inc. v. Quinteros, 176 F.3d 669, 675-76 (3d Cir.
1999) (noting that a corporate officer could be held in contempt for failing to take actions
within his power to comply with a court order). Therefore, we will overrule this
objection.
In a related argument, the Respondents object to Magistrate Judge Hammer’s
recommendation that we order Vasilios to be sanctioned in the amount of $412,000; they
contend that Judge Hammer’s “automatic imposition of liability for Altor’s entire penalty
upon [Vasilios] Saites is not supported by the record or any legal analysis.” (Obj. of
Resp. p. 27.) We disagree. Because one of the purposes of civil contempt is to
compensate the petitioner for his loss, we are permitted to fashion a contempt sanction in
an amount equivalent to the amount of the underlying judgment. 9 See Elec. Workers
9
To be clear, the contempt sanction against Vasilios applies only insofar as Altor does
12
Pension Tr. Fund of Local Union # 58, IBEW v. Gary’s Elec. Serv. Co., 340 F.3d 373,
383 n.13 (6th Cir. 2003). To the extent Respondents argue that the recommended
sanction is excessive under the facts of this case, we agree with Judge Hammer that the
sanction fairly holds Vasilios Saites accountable for “[his] failure, for more than four
years, to make even a nominal effort to satisfy the November 15, 2012 Decree.” (R&R at
39.) In any event, as set forth in a separate order that follows, if Vasilios Saites’s current
financial circumstances preclude him from paying the total amount, he will have an
opportunity to demonstrate why he cannot do so.
Lastly, the Secretary does not object to Magistrate Judge Hammer’s
recommendation that we decline to hold Nicholas Saites in contempt. We agree with
Judge Hammer’s recommendation and will deny the Secretary’s petitions to the extent
they seek to hold Nicholas in contempt of our October 4, and November 15, 2012
Decrees.
IV.
For the foregoing reasons, we will: (1) overrule the Respondents’ objections to the
R&R; (2) approve and adopt Magistrate Judge Hammer’s findings of fact and
conclusions of law in the R&R; (3) grant the Secretary’s petition at C.A. No. 13-2621 as
not pay the entirety of the $412,000 penalty. In other words, each dollar that Altor pays
towards satisfaction of the underlying Decree subtracts a dollar from the contempt
sanction against Vasilios. Likewise, any dollar that Vasilios pays in satisfaction of the
contempt sanction against him subtracts a dollar from the amount owed by Altor to
satisfy the Decree.
13
to Altor, Inc. and Vasilios Saites and deny it as to Avcon, Inc. and Nicholas Saites; and
(4) deny the Secretary’s petition at C.A. No. 13-2622.
14