M & C Corporation v. Erwin Behr GMBH & Co., KG

NOT RECOMMENDED FOR PUBLICATION
File Name: 12a1292n.06
No. 11-2167 FILED
Dec 17, 2012
UNITED STATES COURT OF APPEALS DEBORAH S. HUNT, Clerk
FOR THE SIXTH CIRCUIT
M&C Corporation, )
)
Plaintiff-Appellant, )
)
v. ) ON APPEAL FROM THE UNITED
) STATES DISTRICT COURT FOR THE
Erwin Behr GmbH & Co., KG, et al., ) EASTERN DISTRICT OF MICHIGAN
)
Defendants-Appellees. )
Before: MERRITT, MOORE, AND McKEAGUE, Circuit Judges.
MERRITT, Circuit Judge. After two decades of litigation and many futile attempts to
enforce judgments against the named defendant, plaintiff M&C Corporation now seeks to reach
nonparty respondents Deutsche Bank AG (“Deutsche”), Jens Schmelt, and Jan Hoetzel. Deutsche
is a German corporation, Schmelt is a German resident, and Hoetzel is a resident of Michigan.
Specifically, M&C attempts to hold the respondents in contempt for their alleged role in selling the
assets of defendant Erwin Behr GmbH & Company, KG (“Behr”), a German corporation, assets that
included Behr Industries Corporation (“Behr Industries”), a former Behr subsidiary based in
Michigan. The district court dismissed the contempt proceedings against Deutsche and Schmelt on
the primary rationale that it lacked personal jurisdiction. For the reasons explained below, we hold
that the district court had personal jurisdiction. However, because M&C has failed to prove
contempt on the merits, we affirm the district court’s dismissal of Deutsche, Schmelt, and Hoetzel.
No. 11-2167
M&C Corp. v. Erwin Behr GmbH & Co., KG, et al.
I. Background
This litigation has a history of Dickensian proportions. It has engendered five previous
appeals to this court, none of which is immediately relevant to the questions we must answer in this
case. Facts important to the current appeal are summarized below. For a more complete description
of the central dispute between M&C and Behr, see our opinion in the fifth appeal. M&C Corp. v.
Erwin Behr GmbH and Co., KG, 289 F. App’x 927, 929–31 (6th Cir. 2008) (“Behr V”).
In 1991, M&C sued Behr in the District Court for the Eastern District of Michigan. It
claimed that Behr breached a 1985 contract under which M&C was to be Behr’s exclusive agent for
the sale of wood paneling for luxury cars. The proceeding shifted to an international arbitrator, who
in 1994 ordered Behr to pay future commissions to M&C. The district court upheld the arbitrator’s
decision, and we affirmed. 87 F.3d 844 (6th Cir. 1996). Behr did not comply, and in 1996 the
district court held Behr in contempt and appointed a receiver over its holdings. The court also
enjoined Behr and “its officers, agents, servants, employees, attorneys and those individuals or
entities acting in concert or participation with them” from disposing of any of Behr’s assets. App.
of Non-ECF Docs. at 115.
In 2005, Behr sold to a private equity firm some of its assets, including Behr Industries, a
subsidiary based in Grand Rapids, Michigan. Behr provided no notice to M&C, the receiver, the
arbitrator, or the district court. Behr itself declared bankruptcy and changed its name to “Alpha-200
GmbH & Company, KG.”
The district court held Behr in contempt for selling its assets in contravention of the 1996
injunction, a decision we affirmed. Behr V, 289 F. App’x at 935–36. Several months after the
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district court issued its contempt order, M&C sought a separate show-cause order against nonparties
it alleged to have violated the injunction through the sale of Behr’s assets, including Deutsche and
Schmelt. The magistrate judge denied the motion because “[t]he question whether the Court could
obtain personal jurisdiction over these non-parties and enforce any subsequent orders upon them is
a fundamental concern that Plaintiff has not adequately addressed.” R. 626, Report and
Recommendation at 9. In December 2007, the district court adopted the magistrate’s report in a
modified form. It permitted M&C to file an updated list of nonparty respondents against which
contempt should issue, and stated that the list “shall give clear and convincing evidence of the
violations of the Court’s orders for each nonparty that support[s] the issuance of orders to show
cause for contempt.” R. 652, Order at 6–7.
In May 2010, M&C filed a motion once again naming Deutsche and Schmelt, among others,
as nonparties in contempt of court. The motion named Hoetzel as a contemnor for the first time.
M&C alleged that Deutsche, as Behr’s creditor, compelled Behr to transfer its assets to Schmelt, who
in turn acted as trustee and sold the assets. It also alleged that Hoetzel was among several Behr
officers who arranged the sale. M&C did not attach exhibits in support of these allegations. In July
2010, the district court ordered the nonparty respondents to appear in court to show cause why they
should not be held in contempt. M&C subsequently filed a motion to quash all discovery, arguing
that contempt motions “are summary in nature, and not some form of ‘trial’ with the panoply of
pretrial proceedings.” R. 751, Mot. to Quash and/or Suspend Disc. at 2. Five weeks before the
hearing, the district court issued an order stating that no live testimony would be permitted at the
hearing and that “the parties may attach, as appendices to their briefs, any affidavits or other
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documentary evidence needed to support the legal argument.” R. 764, Order Denying Mot. at 2.
M&C did not submit documentary evidence in response to the district court’s order. Instead, it
appeared at the hearing with several binders of evidence that it claimed would support its case. See
R. 786, Tr. of Mot. Hr’g at 52–53, 60–61.
After the hearing, the district court declined to impose sanctions against Deutsche, Schmelt,
or Hoetzel. It based its ruling as to Deutsche and Schmelt entirely on a lack of personal jurisdiction.
It found no general jurisdiction because Schmelt only rarely visited the United States and because
Deutsche had no Michigan offices. Relying on Reebok International Limited v. McLaughlin, 49 F.3d
1387 (9th Cir. 1995), and an expert witness’s evaluation of German law, the district court found no
specific jurisdiction, primarily because German law would refuse to enforce the district court’s 1996
injunction. As for Hoetzel, the district court found he was unable to pay and that entering sanctions
against him would not aid in enforcement of the 1996 injunction.1
M&C moved for reconsideration. The district court declined to reverse its previous ruling
on personal jurisdiction. The court also ruled, for the first time, that M&C had failed to bring clear
and convincing evidence of the respondents’ contempt.
M&C now appeals the district court’s denial of its motion to reconsider. This order is final
within the meaning of 28 U.S.C. § 1291. See Sanders v. Monsanto Co., 574 F.2d 198, 199 (5th Cir.
1978) (“[I]f a motion for civil contempt is denied after the entry of the judgment which was the
1
The court denied sanctions against two additional nonparty respondents for failure of service. It granted
sanctions against other nonparties that failed to respond, as well as against Behr itself. These rulings are not before us
in this appeal.
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subject of the contempt, the denial is final and reviewable because no further district court action is
necessary to give life to the denial.”).
II. Personal Jurisdiction
Supreme Court precedent commands that we first address whether the district court had
personal jurisdiction over Deutsche and Schmelt. Steel Co. v. Citizens for a Better Env’t, 523 U.S.
83, 94–95 (1998). Personal jurisdiction over Hoetzel is not at issue because he is a Michigan
resident. We review de novo a court’s dismissal for lack of personal jurisdiction. See Conn v.
Zakharov, 667 F.3d 705, 711 (6th Cir. 2012). Each side spends much of its briefing on this issue,
particularly in examining whether Reebok International Limited v. McLaughlin, 49 F.3d 1387 (9th
Cir. 1995), requires a federal court to find jurisdiction lacking when a contempt order would be
unenforceable in the nonparty’s country of residence. This briefing, while helpful in framing the
issue, is ultimately superfluous in light of Gerber v. Riordan, 649 F.3d 514 (6th Cir. 2011), a case
requiring courts in the Sixth Circuit to exercise personal jurisdiction whenever a defendant’s attorney
enters a general appearance.
In Gerber, the defendants submitted a pro se motion to dismiss for lack of personal
jurisdiction. The district court compelled the defendants to retain an attorney, who entered a general
appearance. After an interim of two and a half years, during which the parties filed numerous
pretrial motions, the defendants filed another motion to dismiss for lack of personal jurisdiction,
which the district court granted. We reversed. Rather than finding that the defendants waived
personal jurisdiction by participating in the litigation for two and a half years without raising it, we
instead held that they waived it by virtue of the general appearance. Gerber, 649 F.3d at 520
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(“Defendants’ filing of a general appearance with the district court constituted a voluntary
acceptance of the district court’s jurisdiction, and therefore, a waiver of Defendants’ personal
jurisdiction defense.”).
The same result is required here. Deutsche’s first filing in response to the district court’s
show-cause order was a general appearance entered by its counsel on September 21, 2010.2
Schmelt’s first filings were general appearances by his two attorneys on November 12, 2010.3 These
filings are nearly identical to the document held to waive personal jurisdiction in Gerber.4 This case
does admit of some distinctions from Gerber. Most notably, the respondents are foreign nonparties
rather than defendants to the suit, and the district court compelled the respondents to appear in order
to show cause why it should not hold them in contempt. However, these distinctions are ultimately
an insufficient basis to depart from Gerber’s rule. Indeed, in Gerber the district court’s order
compelling the attorney’s participation did not deter us from finding that the attorney’s general
appearance waived personal jurisdiction. Because Gerber is directly on point and because a “panel
of this Court cannot overrule the decision of another panel,” Deutsche and Schmelt waived personal
jurisdiction when their attorneys entered general appearances. Salmi v. Sec’y of Health and Human
Servs., 774 F.2d 685, 689 (6th Cir. 1985).
2
This document reads, “Please take notice that Morley W itus of BARRIS, SOTT, DENN & DRIKER, PLLC,
hereby enters his Appearance as co-counsel on behalf of Deutsche Bank AG in the above-captioned matter.” R. 745.
3
The first attorney’s filing reads, “Please enter the appearance of the undersigned as attorneys for JENS
SCHMELT in the within cause.” R. 756. The second attorney’s filing reads verbatim. R. 757.
4
The document held to waive personal jurisdiction in Gerber read only this: “Now comes Richard M. Kerger
and enters his appearances as counsel for defendants, James C. Riordan and Seven Locks Press Corp. in this matter.”
See Gerber, 649 F.3d at 524 (Moore, J., concurring).
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III. Merits of M&C’s Contempt Claim
We next address M&C’s argument that Deutsche, Schmelt, and Hoetzel should be held in
contempt for their role in liquidating Behr. When a district court orders or denies a contempt citation
based on a violation of the court’s injunction, we review its decision for abuse of discretion. See
NLRB v. Cincinnati Bronze, Inc., 829 F.2d 585, 590 (6th Cir. 1987).
An analysis of whether a district court has authority to hold nonparties in contempt for
violating its injunction must begin with Federal Rule of Civil Procedure 65(d)(2). The Rule provides
three categories of persons that an injunction may bind. The first, of course, is the parties
themselves. Fed. R. Civ. P. 65(d)(2)(A). The second is the parties’ officers, agents, servants,
employees, and attorneys. Fed R. Civ. P. 65(d)(2)(B). The third is “persons who are in active
concert or participation” with a party or its officers, agents, servants, employees, or attorneys. Fed.
R. Civ. P. 65(d)(2)(C). The party seeking contempt sanctions bears the threshold burden of placing
its target within one of these categories. Moreover, where a party seeks to hold nonparties in civil
contempt, it must also show that the nonparties are “aware of the injunction and know that their acts
violate the injunction.” Additive Controls & Measurement Sys., Inc. v. Flowdata, Inc., 154 F.3d
1345, 1353 (Fed. Cir. 1998) (citing Waffenschmidt v. MacKay, 763 F.2d 711 (5th Cir. 1985)).
Taking these rules together, a party seeking contempt sanctions against a nonparty must prove that
the nonparty knew of the injunction and knowingly aided and abetted an enjoined party or its agents
to violate the injunction. This showing must be made by clear and convincing evidence. Elec.
Workers Pension Trust Fund of Local Union #58, IBEW v. Gary’s Elec. Serv. Co., 340 F.3d 373, 379
(6th Cir. 2003).
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It is readily apparent that M&C has failed to meet these standards. The district court
structured the presentation of proof in a very definite fashion. After M&C first asked for sanctions,
the district court’s December 2007 order required M&C to submit clear and convincing evidence
alongside any subsequent prayer for contempt. When M&C returned to ask for contempt sanctions
in 2010, information in its motion tending to satisfy the nonparty contempt standards was limited
to bare allegations that were similar to those found in the earlier, deficient motion. Apparently the
district court excused M&C from failing to satisfy its 2007 order and required the respondents to
show cause. In its prehearing order, the district court announced that no live testimony would be
heard, but that the parties could submit, as appendices to their briefs, documentary evidence in
support of their arguments. M&C submitted no documentary evidence, but instead appeared at the
hearing with a number of binders that it claimed to prove the respondents’ contempt. It was well
within the district court’s discretion to reject a presentation of evidence that disobeyed its previous
order. And having no evidentiary basis for a contempt finding, the district court was correct to
dismiss M&C’s claim on the merits.
M&C attempts to compensate for its failing by attacking the district court’s procedures as
“at complete odds with law.” Reply Br. at 7. M&C argues that it was legally entitled to a contempt
hearing at which it was permitted to take live testimony, present evidence, and conduct prehearing
discovery. For this argument it cites the Benchbook for U.S. District Court Judges and Sanders v.
Monsanto Company, 574 F.2d 198 (5th Cir. 1978).
The Benchbook is not binding authority and does not convince us that the district court’s
procedures were an abuse of discretion. M&C’s citation to Sanders is somewhat more persuasive.
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That case held that a civil contempt proceeding is of the nature of a trial rather than a motion hearing,
and that a full evidentiary hearing is required. Sanders, 574 F.2d at 199–200. At least one other
circuit agrees with this approach. See Pennwalt Corp. v. Durand-Wayland, Inc., 708 F.2d 492, 495
(9th Cir. 1983). The Sixth Circuit does not appear to have definitively addressed the question. See
Kendrick v. Bland, 845 F.2d 326 (6th Cir. 1988) (unpublished) (summarily holding that Fed. R. Civ.
P. 43 did not require the district court to hold a hearing on a motion for civil contempt).
Even were we to accept, as a general proposition of law, that a claim of civil contempt
requires a full-blown trial, we would not require that the district court hold one here. Not only did
M&C fail to object to the district court’s procedures until appeal; it sought to deny discovery to the
respondents because it considered a contempt hearing to be “summary in nature, and not some form
of ‘trial’ with the panoply of pretrial proceedings.” R. 751, Mot. to Quash and/or Suspend Disc. at
2. Fundamental fairness prevents us from giving to M&C what it sought to deny its opponents.
The district court did not abuse its discretion by dismissing the respondents for lack of
evidence showing them in contempt. The district court’s order also applied to another respondent,
Dietmar Klaube. Klaube did not respond to M&C’s appellate brief. Because our conclusion applies
equally to him, he will also be dismissed from the proceedings.
Though the district court had personal jurisdiction over Deutsche and Schmelt by virtue of
their attorneys’ general appearances, M&C did not make a proper showing that the respondents were
in contempt of the district court’s 1996 injunction. As far as Deutsche, Schmelt, and Hoetzel are
concerned, this case has come to an end. Accordingly, the judgment of the district court dismissing
the contempt proceeding is affirmed.
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KAREN NELSON MOORE, Circuit Judge, concurring in the judgment. The majority
opinion applies a principle it derives from Gerber v. Riordan, 649 F.3d 514 (6th Cir. 2011), to
conclude that the filing of notices of appearance by the attorneys for Schmelt and Deutsche Bank
resulted in a waiver of Schmelt’s and Deutsche Bank’s personal-jurisdiction defenses. To the extent
that Gerber supports this conclusion, I continue to believe that the case was wrongly decided for the
reasons stated in my concurrence in Gerber. 649 F.3d at 520–25 (Moore, J., concurring). A one-
sentence filing that “does nothing more than give notice of the identity of the [nonparty respondents’]
counsel of record,” id. at 524, was not sufficient to give M&C a reasonable expectation that Schmelt
and Deutsche Bank would defend the case on the merits. See id. at 519; Swanson v. City of
Hammond, 411 F. App’x 913, 915 (7th Cir. 2011); United States v. 51 Pieces of Real Prop., Roswell,
N.M., 17 F.3d 1306, 1314 (10th Cir. 1994) (holding that making an initial appearance was not
sufficient to waive a personal-jurisdiction defense).
I also do not agree that this panel is bound to follow such a rule, because published decisions
of this Court before Gerber have held that the filing of a notice of appearance is insufficient to waive
a personal-jurisdiction defense. See King v. Taylor, 694 F.3d 650, 661 n.7 (6th Cir. 2012) (“The
written appearance filed by Taylor’s counsel . . . does not constitute forfeiture. See Friedman v.
Estate of Presser, 929 F.2d 1151, 1157 n.7 (6th Cir. 1991). . . . Insofar as some of our more recent
cases might suggest otherwise, see, e.g., Gerber, 649 F.3d at 520, they must yield to Friedman.”).
We should follow the pre-Gerber authority, because the earlier of two conflicting published panel
decisions is controlling. See Darrah v. City of Oak Park, 255 F.3d 301, 309 (6th Cir. 2001).
Further, to the extent that the Gerber principle cited by the majority relies on a distinction between
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special and general appearances, this distinction was abolished by Federal Rule of Civil Procedure
12. See Cnty. Sec. Agency v. Ohio Dep’t of Commerce, 296 F.3d 477, 483 (6th Cir. 2002) (“In order
to object to a court’s exercise of personal jurisdiction, it is no longer necessary to enter a ‘special
appearance.’”); Haile v. Henderson Nat’l Bank, 657 F.2d 816, 820 n.4 (6th Cir. 1981) (“We note that
a ‘special appearance’ to challenge jurisdiction is no longer necessary under the Federal Rules. A
defendant must attack the validity of service of process pursuant to Rule 12(b).”); Orange Theatre
Corp. v. Rayherstz Amusement Corp., 139 F.2d 871, 874 (3d Cir. 1944) (“Rule 12 has abolished for
the federal courts the age-old distinction between general and special appearances.”). Thus, I do not
agree that the filing of notices of appearance by counsel for Deutsche Bank and Schmelt is
dispositive regarding the question of waiver of the personal-jurisdiction defenses.
I would nonetheless hold that Deutsche Bank waived its personal-jurisdiction defense, using
a different rationale than the majority. Namely, Deutsche Bank waived its personal-jurisdiction
defense by not raising the defense in its first responsive pleading, when it failed to mention personal
jurisdiction in its response to the show-cause order. See R. 770 (Deutsche Bank Resp. to Mot. for
Judgment of Civil Contempt) (Page ID #5630). This filing presents legal arguments relating only
to the merits of whether Deutsche Bank should be held in contempt for violating the 1996 injunction.
Because Deutsche Bank failed to raise its personal-jurisdiction defense in its “‘first defensive
move,’” it waived the defense. Rauch v. Day & Night Mfg. Corp., 576 F.2d 697, 701 (6th Cir. 1978)
(quoting 5 WRIGHT & MILLER, FEDERAL PRACTICE & PROCEDURE : CIVIL § 1391 at 855 (1969)); see
Taubman Co. v. Webfeats, 319 F.3d 770, 773 (6th Cir. 2003) (“[A] challenge to personal jurisdiction
must be raised in the first responsive pleading or be waived.”).
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Schmelt, in contrast, raised a personal-jurisdiction defense in his response to the show-cause
order. See R. 768 (Schmelt Resp. to Order to Show Cause at 8) (Page ID #5576). In assessing
whether Schmelt subsequently waived this personal-jurisdiction defense through his conduct in the
litigation, I would ask whether Schmelt gave M&C “‘a reasonable expectation that [he] w[ould]
defend the suit on the merits.’” Gerber, 649 F.3d at 519 (quoting Mobile Anesthesiologists Chicago,
LLC v. Anesthesia Assocs. of Houston Metroplex, P.A., 623 F.3d 440, 443 (7th Cir. 2010)); see also
King, 694 F.3d at 659 (applying the same test). Although Schmelt pursued some discovery prior to
the hearing on the show-cause order, making various discovery requests and serving subpoenas,
when Schmelt filed a Motion to Compel Discovery, he continued to assert that the district court
lacked jurisdiction over him. See R. 773 (Schmelt Mot. to Compel at 4) (Page ID #5720). Although
in some circumstances a party may waive a personal-jurisdiction defense through conduct even after
timely asserting the defense, I would find that Schmelt’s conduct did not rise to the level of waiver
in this case. See Lechoslaw v. Bank of Am., N.A., 618 F.3d 49, 55–56 (1st Cir. 2010) (holding that
the district court did not abuse its discretion in finding no waiver of a personal-jurisdiction defense,
even when the defendant made and responded to discovery requests and participated in some motion
practice); 5C WRIGHT & MILLER, FEDERAL PRACTICE & PROCEDURE : CIVIL § 1391 (3d ed. 2012)
(“Courts have continued to maintain that if the defendant has properly raised a defense by motion
or in the answer, even though the defendant participates in the litigation on the merits, the defense
still can be preserved and reasserted later in the action.”).
The cases in which waiver through conduct has been found often involved prolonged and
intentional delay in seeking a resolution of the personal-jurisdiction defense and sustained
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participation in the merits without continual reassertion of the defense. See, e.g., King, 694 F.3d at
660 (holding that defendant waived his personal-jurisdiction defense where he “participated
extensively in the litigation for over a year,” including “[v]oluntarily participating in full discovery
on the merits”); Rauch, 576 F.2d at 702 (holding that the district court erred in dismissing the action
for lack of personal jurisdiction when the defendants participated in extended discovery and filed
a motion to dismiss based on the statute of limitations, among other conduct); Cont’l Bank, N.A. v.
Meyer, 10 F.3d 1293, 1297 (7th Cir. 1993) (finding waiver after “defendants fully participated in
litigation of the merits for over two-and-a-half years without actively contesting personal
jurisdiction”).
Unlike in the cases where waiver was found, Schmelt’s filings with the district court
consistently reasserted the personal-jurisdiction objection. R. 773 (Schmelt Mot. to Compel at 4)
(Page ID #5720); R. 787 (Schmelt Resp. to Mot. to Refer Proceedings to Mediation) (Page ID
#5952) (adopting rationale of Dietmar Klaube’s response that the matter should not be referred to
mediation because the district court did not have jurisdiction to compel mediation); see Yeldell v.
Tutt, 913 F.2d 533, 539 (8th Cir. 1990) (explaining that a defense of lack of personal jurisdiction is
waived where a defendant’s “conduct did not reflect a continuing objection to the power of the court
to act over the defendant’s person” (emphasis added) (internal quotation marks omitted)). Schmelt
also did not delay seeking a ruling on the personal-jurisdiction defense. Schmelt’s Motion to
Compel Discovery did not give M&C a reasonable expectation that Schmelt would defend the suit
on the merits, see Gerber, 649 F.3d at 519, but rather expressly stated that Schmelt was requesting
that the district court grant him relief regarding his discovery requests and subpoena only “if the
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Court does not order an outright dismissal of Plaintiff’s contempt claim against Schmelt” on
jurisdictional grounds. See R. 773 (Schmelt Mot. to Compel at 4–5) (Page ID #5720–21). I would
hold that Schmelt’s conduct in the litigation, including his continual assertions that the district court
lacked personal jurisdiction, did not constitute waiver. See, e.g., Mobile, 623 F.3d at 443 (holding
that the defendant did not waive a personal-jurisdiction defense even though it had filed a motion
with the district court asking for expedited discovery, and stating that, “[f]aced with an impending
preliminary injunction hearing . . . Mobile/Houston had the right to ask for more time to learn who
was suing it and why without losing its right to object to personal jurisdiction”). Thus, I would reach
the merits of whether the district court had personal jurisdiction over Schmelt.
My disagreement with the majority’s personal-jurisdiction-waiver analysis notwithstanding,
I agree that M&C failed to meet its burden to show that the nonparty respondents should be held in
contempt for violating the 1996 injunction. Accordingly, I concur in the judgment.
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