Dan Huber, Mary Huber and Lads Network Solutions, Inc. v. Disaster Solutions, LLC and Scott Lewis

DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FOURTH DISTRICT
DAN HUBER, MARY HUBER and LADS NETWORK SOLUTIONS, INC.,
a Missouri Corporation,
Appellants,
v.
DISASTER SOLUTIONS, LLC, and SCOTT LEWIS,
Appellees.
Nos. 4D13-4360 and 4D14-520
[December 9, 2015]
Consolidated appeals from the Circuit Court for the Fifteenth Judicial
Circuit, Palm Beach County; Joseph George Marx, Judge; L.T. Case No.
502012CA002382XX.
Stewart Valencia of Holman, Cohen & Valencia, Hollywood, for
appellants.
Robert J. Hauser of Pankauski Law Firm PLLC, West Palm Beach, for
appellee Disaster Solutions, LLC.
Scott Lewis, West Palm Beach, pro se.
CONNER, J.
The appellants, Dan Huber, Mary Huber, and LADS Network Solutions,
Inc. (“LADS”), appeal two trial court orders finding them in civil contempt
of court for violating court orders and an agreed injunction requiring the
appellants not to disclose confidential information to third parties. The
contempt orders impose two monetary sanctions, one compensatory, the
other coercive, in favor of the appellees, Disaster Solutions, LLC (“DSL”)
and Scott Lewis (“Lewis”). The coercive monetary sanction was suspended
on the condition that the appellants timely comply with court orders in the
future, including a requirement that the compensatory sanction be paid
within ten days.
The appellants raise numerous grounds for reversal. We affirm,
without discussion as to all of the grounds for reversal raised by
appellants, except one. The sole issue we analyze is the propriety of
imposing a deadline for payment of a compensatory contempt sanction to
avoid the imposition of a suspended coercive contempt fine. Finding no
statutory, rule, or case law authority for imposing a deadline for the
payment of a compensatory civil fine or sanction, we reverse as to that
issue alone.
Factual Background and Trial Court Proceedings
LADS is in the business of developing and licensing software programs,
specializing in the use of Global Positioning Satellite (“GPS”) technology.
The principals in LADS are Dan and Mary Huber.
DSL performs services in the disaster relief industry. In 2006, its
principal, Lewis, started working on inventing software programs which
would incorporate Bluetooth functionality into GPS technology to enable
cellular phones to exchange data using Bluetooth capability when the
Internet or cellular phone towers are inoperable.1
In 2010, the two companies entered into a software development
agreement. Because DSL was sharing intellectual property, for which
patent applications were pending, the software development agreement
contained confidentiality provisions. One of the provisions specifically
provided that if LADS was ordered to disclose information deemed
confidential under the agreement to a third party as a result of litigation
by or against LADS, LADS was to promptly notify DSL so that DSL would
have the opportunity to seek protective orders against the disclosure.
In 2011, the deadline for the development of the software was not met.
By 2012, the relationship between the companies had soured to the point
that DSL sued LADS, and LADS countersued.
Early in the litigation, the parties mutually consented to the entry of a
temporary injunction against disclosure of information to third parties, as
provided in the software development agreement. Subsequently, LADS
used the confidentiality provisions of the software development agreement
and the temporary injunction as excuses for noncompliance with discovery
requests propounded by DSL. There were several motions to compel by
DSL, leading to multiple sanctions orders against LADS and the Hubers.
1 “Bluetooth Smart technology is a wireless communications system intended to
replace the cables connecting many types of devices, from mobile phones and
headsets to heart monitors and medical equipment.” Bluetooth,
http://www.bluetooth.com/Pages/what-is-bluetooth-technology.aspx (Oct. 30,
2015).
2
During the litigation in the trial court below, DSL discovered that LADS
and the Hubers were embroiled in litigation in another state with a DSL
competitor. In the course of the foreign litigation, LADS had responded to
discovery requests by the competitor, and in doing so, redacted all
information about LADS that it deemed was confidential, but did nothing
to protect disclosure of information about DSL that was deemed
confidential under the software development agreement. Equally
important, LADS did nothing to give DSL prior warning that the discovery
disclosure was forthcoming in the foreign litigation.2 DSL filed a notice
and motion seeking an order to show cause why LADS and the Hubers
should not be adjudged in civil contempt of court.
After an evidentiary hearing on the civil contempt motion, the trial court
entered a detailed order (“October 2013 order”), with extensive findings of
facts and conclusions of law, adjudging LADS and the Hubers in civil
contempt. As discussed in more detail below, the order imposed two
monetary sanctions, which the case law frequently refers to as contempt
fines. One of the monetary sanctions was compensatory; the other was
coercive.
The coercive sanction was in the amount of $100,000, suspended as
follows:
Further, the Defendants can avoid ever paying this $100,000
by merely complying with this Court’s orders moving forward.
This $100,000 compensatory coercive sanction is suspended
(in accordance with the procedures approved in [International
Union, United Mine Workers v.] Bagwell[, 512 U.S. 821 (1994)]
and Nical [of Palm Beach, Inc.] v. Lewis[, 981 So. 2d 502 (Fla.
4th DCA 2008)]) upon condition that the Defendants strictly
and timely comply with all orders of this Court and satisfy all
future discovery obligations in strict adherence to the Florida
Rules of Civil Procedure. . . . Should another violation be
proven, this $100,000 shall be payable immediately to the
Plaintiffs from the Defendants, who are jointly and severally
liable for this $100,000 sanction payment.
The October 2013 order established the entitlement to a compensatory
monetary sanction, but not the amount. The amount was established by
a subsequent order (“January 2014 order”), after a further evidentiary
2 There was also evidence that prior to suit being filed by DSL, LADS sent a letter
threatening to disclose information to DSL’s competitor in retaliation for
terminating the software development agreement.
3
hearing. Specifically important to the issue decided by this opinion, the
October 2013 order provided:
As Defendants’ timely payments have been one of the
violations sanctioned several times before, in regards to the
determination of the amount of fees and costs of this order,
the Court orders that full payment [of the compensatory
sanction] shall be made within ten calendar days of said
determination. Any delay whatsoever in this reimbursement
shall be considered a violation of this Order, which shall result
in the immediate payment to the Plaintiffs of the $100,000
suspended judgement/fine. [sic]
(emphasis added). The January 2014 order made no reference to the
provision in the October 2013 order that failure to timely pay the
compensatory sanction would result in the imposition of the coercive
sanction.
The appellants gave notice of their appeal regarding the October 2013
order and the January 2014 order.
Legal Analysis
A trial court’s contempt order is reviewed on appeal with a presumption
of correctness and will not be reversed “unless a clear showing is made
that the trial court either abused its discretion ‘or departed so
substantially from the essential requirements of law as to have committed
fundamental error.’” Lewis v. Nical of Palm Beach, Inc., 10 So. 3d 159, 163
(Fla. 4th DCA 2009) (quoting Northstar Invs. & Dev., Inc. v. Pabaco, Inc.,
691 So. 2d 565, 566 (Fla. 5th DCA 1997)) (quotation marks omitted). We
review the legal issues de novo and whether factual findings are supported
by competent substantial evidence. Nical of Palm Beach, Inc. v. Lewis, 981
So. 2d 502, 504 (Fla. 4th DCA 2008).
Monetary Civil Contempt Sanctions
Trial “courts have broad discretion in formulating a valid contempt
sanction” and “the ability . . . to impose creative contempt sanctions.”
Parisi v. Broward Cnty., 769 So. 2d 359, 367 (Fla. 2000). Discretion to
flexibly and creatively formulate an appropriate civil contempt sanction is
needed because “[t]oo restrictive a view of a court’s contempt powers would
render it impotent like a toothless lion, who can only roar in dismay at the
disobedience of his decrees.” Riley v. Riley, 509 So. 2d 1366, 1370 (Fla.
5th DCA 1987). However, the discretion and flexibility granted to the trial
courts sometimes make appellate analysis confusing. It has been said that
4
“[f]ew legal concepts have bedeviled courts, judges, lawyers and legal
commentators more than contempt of court.” Int’l Union, United Mine
Workers of Am. v. Bagwell, 512 U.S. 821, 827 n.3 (1994) (quoting Robert
J. Martineau, Contempt of Court: Eliminating the Confusion between Civil
and Criminal Contempt, 50 U. Cin. L.Rev. 677 (1981)).
Although flexibility and creativity in formulating civil contempt
sanctions is clearly acknowledged in our case law, our supreme court has
also said:
While the inherent contempt power of a single judge is a
bulwark of our legal system, the United States Supreme Court
has also recognized that contempt power “uniquely is ‘liable
to abuse.’” Bagwell, 512 U.S. at 831, 114 S. Ct. 2552. This is
because in the area of civil contempt proceedings, “the
offended judge [is] solely responsible for identifying,
prosecuting, adjudicating, and sanctioning the contumacious
conduct.” Id. Thus, a balance must be struck between the
recognition that courts are vested with contempt powers to
vindicate their authority and the necessity of preventing abuse
of these broad contempt powers. See id. at 831-32, 114 S. Ct.
2552.
Parisi, 769 So. 2d at 363. The court went on to note that “the Supreme
Court recognized in Bagwell, most contempt sanctions ‘to some extent
punish a prior offense as well as coerce an offender’s future obedience.’”
Id. at 364 (quoting Bagwell, 512 U.S. at 828). For that reason, there must
always be concern as to the extent a sanction is punitive. That is because
the procedural safeguards for punitive sanctions are much more stringent
than for remedial sanctions. Id. at 364. (“[T]he nature of the contempt
both determines the procedures for adjudication and sets the parameters
for the sanctions that can be imposed.”).
Monetary contempt sanctions are classified as either “compensatory”
or “coercive” sanctions. Id. at 363. More precisely, “[a] contempt sanction
is considered civil if it either ‘coerce[s] the defendant into compliance with
the court’s order, [or] . . . compensate[s] the complainant for losses
sustained.’” Nical of Palm Beach, Inc. v. Lewis, 815 So. 2d 647, 650 (Fla.
4th DCA 2002) (quoting Bagwell, 512 U.S. at 829). Stated another way,
sanctions, both coercive and compensatory, which are “remedial[] and for
the benefit of the complainant” are considered as civil contempt sanctions.
Parisi, 769 So. 2d at 364. Although there is “a broad arsenal of coercive
5
civil contempt sanctions available to the trial court,”3 id. at 365, most of
the case law addresses the imposition of civil contempt fines as the
sanction.
It may seem anomalous to refer to a “fine” as “compensation,” but the
case law clearly discusses instances in which a contempt fine was used to
compensate for losses sustained by contemptuous violations of a court
orders. Id. at 366 (“[A] monetary fine as a contempt sanction may be legally
imposed as . . . a compensatory contempt sanction.”). More importantly,
and contributing to the difficulty of the analysis, civil contempt fines can
be imposed to both compensate and coerce. Johnson v. Bednar, 573 So.
2d 822, 824 (Fla. 1991) (“Sanctions in civil contempt proceedings may be
employed for either or both of two purposes: to compensate the injured
party for losses sustained, and to coerce the offending party into
compliance with a previously issued court order.”) (emphasis added)
(citation omitted).
Even though monetary sanctions may serve both compensatory and
coercive functions, there are important distinctions, regarding function, as
to the basis for determining the amount of the sanction and how the
sanction is employed or carried out. Regarding contempt fines, our
supreme court has written:
If compensation is intended, the fine must be based on
evidence of the injured party’s actual loss. [citation omitted]
However, if the purpose of imposing a fine is to coerce
compliance[,] the court may exercise its discretion, taking into
consideration the character and magnitude of the harm
threatened by continued contumacy, and the probable
effectiveness of a particular sanction in achieving the result
desired.[]
....
[When the fine is imposed to coerce compliance, the] court’s
task in measuring a coercive fine is not to determine what
would compensate the aggrieved party, but rather the court
must determine what is necessary to force the contemnor into
3 At least one case has identified that the “broad arsenal” includes “incarceration,
garnishment of wages, additional employment, the filing of reports, additional
fines, the delivery of certain assets, the revocation of a driver’s license.” Parisi,
769 So. 2d at 365 (quoting Gregory v. Rice, 727 So. 2d 251, 254 (Fla. 1999)).
Parisi also recognizes that it is permissible for the trial court to use a “hybrid
contempt sanction.” Id. at 367.
6
compliance with the court order. In making this determination
the court must “consider the character and magnitude of the
harm threatened by continued contumacy, and the probable
effectiveness of any suggested sanction in bringing about the
result desired,” as well as “the amount of defendant’s financial
resources and the consequent seriousness of the burden to
that particular defendant.”
Id. at 824-25 (emphasis added).
As can be seen from the principles announced in Johnson, (1) the
amount of a contempt fine for compensatory purposes is limited to the
amount of actual loss incurred by the violation;4 and (2) the amount of a
contempt fine for coercive purposes is determined by the amount necessary
to force the contemnor into compliance with the court order, taking into
consideration the character and magnitude of the harm threatened by
continued contumacy, the probable effectiveness of a particular sanction in
achieving the result desired, and the amount of defendant’s financial
resources. Regarding the amount of a compensatory contempt fine,
another important distinction to be made is that the actual loss must be
directly related to the violation proven. Nical, 815 So. 2d at 651 (reversing
a compensatory contempt fine measured by the amount lost by entering
into a settlement agreement, rather than actual damage caused by not
complying with a court order).
Another distinction between a coercive contempt fine and a
compensatory contempt fine is that a coercive fine must afford the
contemnor the opportunity to purge. Parisi, 769 So. 2d at 365 (“[T]he key
safeguard in civil contempt proceedings is . . . that the contemnor has the
ability to purge the contempt.”). “[A] fixed fine that is ‘imposed and
suspended pending future compliance’ with the court’s prior orders is
considered a purgeable sanction.” Nical, 981 So. 2d at 505 (quoting
Bagwell, 512 U.S. at 829). However, the conduct required of the
contemnor to avoid payment of the suspended fine must be “discrete”
enough, in the sense of clearly stated or specified, for the contemnor to be
aware of what conduct will trigger the imposition of the suspended fine.
4 It is important to note that in Johnson, our supreme court equated the term
“actual loss” with “actual damages.” For example, the court wrote:
In any event, we disagree that all civil contempt fines must be
limited to compensatory fines measured by damages suffered by the
injured party. A contempt fine must be related to actual damages
when the trial court imposes a fine for the purpose of compensating
a party for losses sustained.
Johnson, 573 So. 2d at 825.
7
Lewis v. Nical of Palm Beach, Inc., 959 So. 2d 745, 753 (Fla. 4th DCA 2007)
(on motion for clarification).
Application of the Legal Principles to This Case
Our analysis must begin with determining the specifics of what the trial
court adjudicated in the October 2013 order regarding civil contempt
sanctions. Our review of the October 2013 order leads us to conclude the
trial court imposed two separate monetary contempt sanctions for the
violation of multiple prior court orders. The first monetary sanction was
intended to be compensatory, awarding fees and costs incurred for
enforcing court orders pertaining to confidentiality, with the amount to be
determined at a later hearing. The second monetary sanction was
intended to be coercive and was repeatedly referred to as a coercive fine.
The amount of the second sanction was established as $100,000. As we
have previously stated, we affirm the trial court as to the $100,000 coercive
fine without further discussion.
The amount imposed as the first monetary sanction was ultimately
determined to be $179,270.93, as established in the January 2014 order.
As to the first sanction, our review is problematic because it is unclear if
the award was intended to be solely a compensatory sanction or a “hybrid”
sanction to compensate and impose coercion. What creates the problem
for our analysis is the requirement in the October 2013 order that once
the amount of compensation is determined, the compensatory amount
must be paid within ten days to avoid the imposition of the $100,000
coercive fine.
Appellants contend that a compensatory sanction is limited to actual
loss incurred by their violations, and thus the award is in the nature of
damages. Appellants further argue that the provision of the January 2014
order establishing the amount of compensation, followed by the words “for
which let execution issue,” clearly establishes the sanction is in the nature
of a final judgment for damages, and subject to enforcement by the
provisions of Florida Rule of Civil Procedure 1.570(a).5 6 Appellants further
5 Florida Rule of Civil Procedure 1.570(a), provides:
(a) Money Judgments. Final process to enforce a judgment solely
for the payment of money shall be by execution, writ of
garnishment, or other appropriate process or proceedings.
6 Appellees mention in their answer brief that in entering the January 2014 order,
the trial court made no mention of the ten-day requirement to pay the award
imposed in the October 2013 order. Neither side has raised any contention that
there is an inconsistency between the two orders, so we do not address the issue
either.
8
argue the law is clear that contempt sanctions in the form of coercive fines
cannot be used to enforce the payment of damages. Appellees do not
address those arguments on appeal.
We agree with appellants that the $179,270.93 compensatory sanction
is in essence an award of damages, enforceable by the procedures under
Florida Rule of Civil Procedure 1.570(a). Our research has revealed no
Florida case law support, outside the realm of family law, for the
contention that a coercive contempt fine (in this case $100,000) may be
used to enforce payment of a compensatory contempt fine or sanction.
Moreover, within the realm of family law, the Florida case law does not
support such a contention.
In the context of family law, it is well-settled that it is improper for the
trial court to use the power of civil contempt to enforce marital property
settlement agreements and contractual debts. Weiss v. Weiss, 100 So. 3d
1220, 1224 (Fla. 2d DCA 2012) (“Under Florida law, the remedies available
to enforce the breach by a party of a property settlement provision in a
marital settlement agreement are those available to creditors against
debtors.”) (citation omitted); Pineiro v. Pineiro, 988 So. 2d 686, 687 (Fla.
4th DCA 2008) (explaining that the contempt power of the court cannot be
used to enforce debts); Montanez v. Montanez, 697 So. 2d 184, 185 (Fla.
2d DCA 1997) (explaining that it is well-settled in Florida that debts not
involving support may not be enforced through contempt, even if given
effect in a final judgment of dissolution, because to do so violates
constitutional provision prohibiting imprisonment for debt). Imposing
coercive contempt fines to enforce payment of compensatory awards has
been allowed in the context of family law only when the compensatory
award relates to spousal or child support, enforcement of a child custody
order, or orders awarding attorney’s fees and costs.7 See Fishman v.
Fishman, 656 So. 2d 1250, 1252 (Fla. 1995) (“[T]he use of civil contempt
powers for the enforcement of support payments in domestic relations
cases has been approved.”); Habie v. Habie, 654 So. 2d 1293, 1294-95
(Fla. 4th DCA 1995); Robbie v. Robbie, 683 So. 2d 1131, 1132 (Fla. 4th
DCA 1996). We perceive no valid reason to extend principles applicable to
a very narrow range of family law cases to make an exception to the general
rule that contempt powers may not be used to enforce a compensatory
sanction in this case.
7 The propriety of using coercive sanctions to enforce the payment of attorney’s
fees in family cases has been questioned in this District by concurring opinions
authored by two different judges. See Robbie v. Robbie, 683 So. 2d 1131 1132-
33 (Fla. 4th DCA 1996); Wertkin v. Wertkin, 763 So. 2d 465, 466 (Fla. 4th DCA
2000).
9
In conclusion, we determine that no trial court error has been
demonstrated regarding the imposition of the suspended $100,000
coercive fine established by the October 2013 order or the imposition of a
compensatory fine or sanction for damages in the amount of $179,270.93
for actual loss suffered by the appellees due to the appellants multiple,
willful violations of court orders. However, the trial court erred in ordering
the payment of the compensatory sanction within ten days after the
amount was reduced to a final judgment. As to that error, we reverse and
remand for the trial court to strike that portion of the October 2013 order.
Affirmed in part, reversed in part and remanded.
STEVENSON and DAMOORGIAN, JJ., concur.
* * *
Not final until disposition of timely filed motion for rehearing.
10