Summary
holding that, in diversity action, money judgment against city must be executed under state law according to Rule 69
Summary of this case from In re Katrina Canal Breaches Consol. LitigationOpinion
Civil Action No. 02-0130 Section: I/2.
November 4, 2004
ORDER AND REASONS
Before the Court is a motion, filed on behalf of Municipal Administrative Services, Inc. ("MAS"), for contempt sanctions. The City of New Orleans (the "City") opposes the motion. After consideration of the law, the facts, and the legal memoranda submitted by the parties, MAS' motion for contempt sanctions is DENIED.
Rec. Doc. No. 121.
BACKGROUND
This diversity action arises out of a contract dispute between MAS and the City. MAS entered into a contract with the City to audit royalty payments made by BellSouth Telecommunications, Inc. ("BellSouth") to the City. The contract provided that in addition to a fixed fee, the City would pay MAS 20% of the amount it recovered from BellSouth. Based upon MAS' audit, the City filed a lawsuit against BellSouth which was resolved by a final settlement agreement pursuant to which BellSouth agreed to pay the City 5.5 million dollars per year for six years, i.e., from 2001 through 2006. The City refused to pay MAS its 20% contingency fee and it sued in state court seeking a declaration that the City did not owe MAS the contingency fee. MAS removed the action to this Court and filed a counterclaim for breach of contract seeking payment of the fees owed.After a bench trial, this Court found that the City had breached its contract with MAS and, accordingly, entered judgment in favor of MAS on July 15, 2003. The judgment entered was twofold. First, MAS was awarded $1,001,044.00 plus interest thereon. That sum represented MAS' contingency fee for the years 2001, 2002, and 2003 ($323,518.00 × 3), plus $30,490.00, the balance owed MAS for its work on the 1997-98 audit. Second, this Court entered a declaratory judgment directing the City to pay MAS its contingency fee in the amount of $323,518.00 upon the City's receipt of each of BellSouth's 5.5 million dollar payments to the City in 2004, 2005, and 2006.
Rec. Doc. No. 104.
Id.
On July 20, 2004, the Fifth Circuit affirmed this Court's judgment. See City of New Orleans v. Municipal Administrative Servs., Inc., 376 F.3d 501 (5th Cir. 2004). On or about January 23, 2004, BellSouth paid 5.5 million dollars to the City, the settlement funds owed to the City for 2004. Pursuant to this Court's judgment, MAS was entitled to its contingency fee in the amount of $323,518.00 upon the City's receipt of those funds. To date, the City has failed to pay MAS any funds pursuant to this Court's judgment.
See Rec. Doc. No. 131. The City stipulated that it received 5.5 million dollars ($5,500,000.00) from BellSouth by check dated January 23, 2004.
See Rec. Doc. No. 104; see also Rec. Doc. No. 103. MAS' contingency fee with respect to BellSouth's payments due in 2004, 2005, and 2006, is 20% of the difference between $5,500,000.00 and $3,882,410.00. Id. at 54 n. 249.
On May 25, 2004, MAS filed the instant motion requesting that this Court hold the City in civil contempt and seeking an order from this Court granting the following relief in the form of contempt sanctions: (1) immediate payment of MAS' 2004 contingency fee in the amount of $323,518.00; (2) a fine of $2500.00 per day for every day the City's 2004 payment is past due; and (3) an award of reasonable attorneys' fees and costs associated with the prosecution of MAS' motion for contempt.
LAW AND ANALYSIS
Contempt proceedings are classified as either civil or criminal, depending on their primary purpose. Placid Refining Co. v. Terrebonne Fuel and Lube, Inc., 108 F.3d 609, 612 (5th Cir. 1997) (citing Lamar Fin. Corp. v. Adams, 918 F.2d 564, 566 (5th Cir. 1990)). "If the purpose of the order is to punish the party whose conduct is in question or to vindicate the authority of the court, the order is viewed as criminal. If, on the other hand, the purpose of the contempt order is to coerce compliance with a court order or to compensate another party for the contemnor's violation, the order is considered to be civil." Id. (internal citation omitted).
MAS moves the Court to hold the City in civil contempt. MAS' motion is directed at coercing the City to pay MAS its contingency fee for 2004 and to insure that MAS will receive payment upon BellSouth's payments to the City in 2005 and 2006. Accordingly, this Court's analysis is limited to the issue of whether an order holding the City in civil contempt is appropriate in this case.
"Contempt is committed only if a person violates a court order requiring in specific and definite language that a person do or refrain from doing an act." Martin v. Trinity Indus., Inc., 959 F.2d 45, 47 (5th Cir. 1991) (citing Baddock v. Villard (In re Baum), 606 F.2d 592, 593 (5th Cir. 1979)). A movant in a civil contempt proceeding bears the burden of establishing by clear and convincing evidence that (1) a court order was in effect; (2) the order required specified conduct by the respondent; and (3) that the respondent failed to comply with the court's order. United States v. City of Jackson, 359 F.3d 727, 731 (5th Cir. 2004); Trinity Indus., Inc., 959 F.2d at 47.
There is no dispute that this Court's judgment is in effect, that it directed the City to pay MAS its 2004 portion of the 20% contingency fee upon receipt of the BellSouth funds in 2004, and that the City has failed to pay that portion of the judgment. Therefore, MAS contends that it has met its burden of proof and contempt sanctions are appropriate. The City argues that there is no authority for this Court to hold the City in contempt for failing to comply with a "declaratory judgment." Furthermore, the City argues that due to Louisiana's anti-seizure provisions, the City, as a political subdivision, cannot be compelled to satisfy a money judgment in a diversity case. According to the City, MAS' motion for contempt sanctions is simply an attempt to make an end-run around the anti-seizure provisions which preclude MAS from directly seeking a writ of execution from this Court to enforce the judgment. MAS responds by arguing that contempt is appropriate because this Court's "declaratory judgment" does not merely delineate the rights and obligations of the parties but, instead, this Court's judgment is properly characterized as an order directing the City to take specific action, i.e., pay MAS a specific amount of money upon its receipt of BellSouth's payment.
As is clear from the foregoing arguments, the parties vigorously dispute the proper characterization of the form and substance of this Court's judgment. However, whether this Court's judgment is viewed as judgment for damages, a declaratory judgment, or an order directing specific performance of the MAS/City contract, the dispositive issue for purposes of the present motion remains whether, in this diversity action, it is appropriate for this Court to find the City in contempt for failing to pay MAS the amounts declared to be due pursuant to this Court's judgment.
Federal Rule of Civil Procedure 69(a) provides in pertinent part:
Process to enforce a judgment for the payment of money shall be a writ of execution, unless the court directs otherwise. The procedure on execution, in proceedings supplementary to and in aid of a judgment, and in proceedings on and in aid of execution shall be in accordance with the practice and procedure of the state in which the district court is held, existing at the time the remedy is sought, except that any statute of the United States governs to the extent that it is applicable.Id. (emphasis supplied).
Rule 69(a) permits a judgment creditor to use any method of execution consistent with the practice and procedure of the state in which the district court sits. Peacock v. Thomas, 516 U.S. 349, 359 n. 7, 116 S. Ct. 862, 869 n. 7, 133 L. Ed.2d 817 (1996). However, a judgment creditor generally may not avail itself of methods of enforcement that are not available pursuant to state law. See Leroy v. City of Houston, 906 F.2d 1068, 1085-86 (5th Cir. 1990) (holding that the plaintiffs could not enforce a judgment by executing on city property when such execution was impermissible pursuant to state law, but permitting enforcement of a judgment by writ of mandamus when such procedure is provided for pursuant to state law).
Article 12, section 10(A), of the Louisiana Constitution permits a lawsuit against the City for breach of contract. See id. ("Neither the state, a state agency, nor a political subdivision shall be immune from suit and liability in contract or for injury to person or property."). However, section 10(C) provides that "no public property or public funds shall be subject to seizure. . . . No judgment against the state, a state agency, or a political subdivision shall be exigible, payable, or paid except from funds appropriated therefor by the legislature or by the political subdivision against which the judgment is rendered." The Louisiana courts have held that a judgment creditor of a political subdivision of the State has no way to collect on a judgment absent appropriation of funds by the political subdivision for the purpose of paying judgments. See Vogt v. Bd. of Comm'rs of the Orleans Levee Dist., 814 So.2d 648, 654 (La.App. 4th Cir. 2002); See also LSA-R.S. § 13:5109 B(2) ("Any judgment rendered in any suit filed against . . . a political subdivision . . . shall be exigible, payable, and paid only out of funds appropriated for that purpose . . . by the named political subdivision."); Baudoin v. Acadia Parish Police Jury, 702 So.2d 715, 718 (La.App. 3d Cir. 1997); Foreman v. Vermilion Parish Police Jury, 336 So.2d 986, 988 (La.App. 3d Cir. 1976) ("[P]roperty owned by a political subdivision . . . is not subject to seizure and sale under a writ of fieri facias issued to satisfy a money judgment rendered against that political subdivision."). Additionally, pursuant to Louisiana law, mandamus will not lie to compel a political subdivision to pay a judgment or appropriate funds for the payment of judgments Vogt, 814 So.2d at 654. (citations omitted). Additionally, absent some action by the political subdivision, a Louisiana law does not provide a court with the authority to order a political subdivision to pay a judgment in preference to any other indebtedness. See Cooper v. Orleans Parish Sch. Bd., 742 So.2d 55, 64 (La.App. 4th Cir. 1999).
The Fifth Circuit has noted that "federal interests sometimes trump the substance of a state's antiseizure provision by means other than Rule 69(a)." Specialty Healthcare Mgmt. v. St. Mary Parish Hosp., 220 F.3d 650, 653 (5th Cir. 2000). However, the Fifth Circuit also noted that had the state contract dispute at issue in Specialty "been litigated in federal court under diversity jurisdiction, the resulting judgment would have been enforceable according to Rule 69(a), which incorporates state exemptions unless federal law otherwise applied." Id. at 656. The Court concluded that even though federal law was present in that case by virtue of an arbitration agreement governed by the Federal Arbitration Act, "there was nevertheless no conflict between federal and state law justifying a writ of execution or an order commanding hospital officials to pay the judgment." Id.
A Louisiana court has the authority to order a party to immediately deliver property to the sheriff. LSA-R.S. § 13:3862. However, the party must first secure a writ of seizure and a party's disobedience of such an order "shall be punished by contempt of court, unless it is shown that the property is exempt from seizure." Id. (emphasis added). Moreover, due to the Louisiana constitutional constraints on seizure of public funds, a contempt sanction in the form of a fine is generally not an appropriate means of enforcing a judgment for specific performance of a contract if such sanctions would be paid out of public funds. See Heirs of Gremillion v. Rapides Parish Police Jury, 480 So.2d 748, 753 (La.App. 3d Cir. 1986) (reversing trial court's imposition of contempt of court fine for the police jury's refusal to specifically perform the obligations of a contract), rev'd on other grounds, 493 So.2d 584 (La. 1986).
Given the aforementioned jurisprudence, the Court concludes that issuing an order of contempt and imposing sanctions on the City in order to coerce payment of this Court's judgment is inappropriate because such an order would conflict with Louisiana practice and procedure. See Rule 69(a) ("The procedure on execution, in proceedings supplementary to and in aid of a judgment, and in proceedings on and in aid of execution shall be in accordance with the practice and procedure of the state in which the district court is held."). Significantly, in prior briefing to this Court, MAS has acknowledged that this Court may not enforce that portion of this Court's judgment awarding MAS its contingency fee for 2001, 2002, and 2003, because there is no federal interest present in this case. However, MAS contends that the same rule should not apply to this Court's declaratory judgment awarding the contingency fee for 2004, 2005, and 2006. None of the cases cited by MAS address the issue present here, i.e., whether a political subdivision which cannot be compelled to pay a money judgment in a diversity case may nevertheless be held in contempt of court for not doing so.
See Rec. Doc. No. 113, at 2 n. 1.
In the particular context of this diversity action against a Louisiana political subdivision, MAS has not established that it is legally entitled to employ this Court's contempt power as a method of enforcing this Court's judgment for the payment of the 2004 portion of the contingency fee. For purposes of the present motion and the application of Louisiana law pursuant to Fed.R.Civ.P. 69(a), this Court can discern no meaningful distinction between the judgment for past damages and the declaratory relief entered by this Court which is, in essence, a judgment for specific performance of the City's obligation to pay the sums owed in the future. Cf. Hebert v. Exxon Corp., 953 F.2d 936, 938 (5th Cir. 1992) (holding that it is erroneous to distinguish between a "declaratory judgment" which binds a party to pay a specific amount of money and a "money judgment" for purposes of the automatic stay of execution upon posting a bond pursuant to Fed.R.Civ.P. 62(d)). Whether the judgment is viewed as a judgment for money damages, a declaratory judgment, or judgment for specific performance of a contractual obligation, the judgment nevertheless is a judgment for the payment of money.
MAS' motion requests that this Court find the City in contempt in order to compel the City to satisfy the monetary award entered by this Court, a result that conflicts with the State's anti-seizure provision and Louisiana jurisprudence. Under these circumstances, an order of contempt and the imposition of contempt sanctions is inappropriate. By filing its motion for contempt sanctions, MAS simply seeks to accomplish indirectly what it cannot accomplish directly.
As stated by the Vogt court:
This court recognizes and sympathizes with plaintiff['s] plight in getting judgment against the State or political subdivision satisfied. Nonetheless, this court is without constitutional or statutory authority to compel [a political subdivision] to pay the judgment rendered against it.814 So.2d at 656.
Because the City's arguments against issuing an order of contempt are supported by legal justification, MAS is not entitled to attorneys' fees and costs associated with the filing of the instant motion. See Specialty Healthcare, 220 F.3d at 658.
Accordingly, for the above and foregoing reasons,
IT IS ORDERED that the motion for contempt sanctions filed on behalf of Municipal Administrative Services, Inc. is DENIED.