Opinion
Case No. 2:05-CV-1097
02-26-2013
OHIO MIDLAND, INC., et al. Plaintiffs, v. GORDON PROCTOR, et al. Defendants.
JUDGE ALGENON L. MARBLEY
Magistrate Judge Mark R. Abel
OPINION & ORDER
I. INTRODUCTION
In this Court's Order dated February 11, 2013, (Doc. 202), this Court ordered Plaintiff KDC Investments, LLC ("KDC" or "Plaintiff") to show cause why it should not be held in contempt for violating this Court's orders regarding commencement of demolition of the Bellaire Bridge (the "Bridge") pursuant to an Order of this Court, (Docs. 195 & 196). A hearing on this matter was held on February 20, 2013. For the foregoing reasons, this Court FINDS Plaintiff in contempt of court and hereby ORDERS as follows:
a) Plaintiff shall pay a fine in the amount of $5,000 as sanction for its prior conduct. Plaintiff shall deposit with the Court a certified check in this amount no later than 5 p.m. on February 27, 2013.
b) Plaintiff shall have 120 days, or until June 20, 2013, to procure the $1,000,000 bond (the "Bond") required to obtain a demolition permit (the "Permit") from the City of Benwood ("Benwood" or the "City"). Thereafter, Plaintiff shall pay to the Court a fine in the amount of $1,000 per day until Plaintiff procures the Bond.
c) Upon procuring the Bond, Plaintiff shall submit the bonding documentation to Benwood for consideration at the first regularly scheduled City Council meeting after the Bond is procured.
d) From the date on which the Permit is granted, Plaintiff shall have one week to commence demolition of the Bridge.
e) KDC shall promptly notify the Court in the event of any the following: Plaintiff's submission of an application for the Bond; approval of the Bond; Plaintiff's submission to Benwood of documentation of the approved Bond; approval of the Permit; commencement of demolition the Bridge. Plaintiff shall continue to submit to the bi-weekly status updates as previously ordered by this Court, (Doc. 201).
II. BACKGROUND
On December 23, 2009, this Court ordered the Plaintiff in this case to demolish the Bellaire Bridge ("the Bridge") by December 21, 2011. (Doc. 180.) KDC Investments, LLC ("KDC" or "Plaintiff") subsequently purchased the Bridge and, on July 25, 2011, this Court substituted KDC as Plaintiff, because KDC was in the best position to carry out the order of demolition. (Doc. 185.) One day before the demolition deadline, KDC moved for an extension of time. (Doc. 188.) On July 13, 2012, this Court granted KDC's motion in part, giving Plaintiff until November 30, 2012 to demolish the Bridge and warning that, if demolition was not complete by that time, the Court might resort to sanctions. (Doc. 191.)
KDC Investments, LLC was not the Plaintiff in this case at the time of the Court's order. This Court substituted KDC as Plaintiff after KDC purchased the Bridge. (Doc. 185.)
On November 30, 2012, the date of the new demolition deadline, KDC again moved for an extension of time, this time requesting a deadline of December 31, 2013. (Doc. 193.)
On December 4, 2012, the Court held a telephonic status conference on which KDC explained that demolition had not begun due to delay in obtaining the necessary demolition permit ("the Permit") from the City of Benwood, West Virginia ("Benwood" or the "City"). (See Doc. 195.) KDC stated, and counsel for Benwood confirmed, that KDC and Benwood had reached tentative agreement on the sole outstanding permitting condition in dispute: the terms of the escrow (the "Escrow") and/or bond (the "Bond") to be remitted by KDC. In addition, KDC still needed to submit to Benwood final documentation of insurance. KDC and Benwood anticipated receiving approval for their negotiated permitting agreement from Benwood's City Council (the "Council") when that body next sat on December 11, 2012.
Based on KDC's assurances Benwood's approval of the escrow agreement and KDC's insurance were the only barriers to the issuance of the permit, the Court denied Plaintiff's second motion for extension of time and ordered that
a) Plaintiff shall remit the necessary documentation of insurance to [Benwood] no later than December 6, so as to enable the issuance of insurance approvals on or before December 11, 2012.(Docs. 195 & 196 (Nunc Pro Tunc Order).) The Court also reminded Plaintiff of this Court's previous warning that failure timely to demolish the Bridge may result in sanctions. (Doc. 195 at 1.)
b) Plaintiff KDC shall commence demolition of the Bridge within seven (7) days of the date on which [Benwood] approves permits for the demolition.
c) In accordance with the above, in the event that KDC receives permitting approval from [Benwood] on December 11, 2012, Plaintiff shall so certify to the Court no later than December 12, 2012, and demolition of the Bridge shall commence no later than December 18, 2012.
d) In the event that [Benwood] does not approve the necessary permits on December 11, 2012, Plaintiff shall notify this Court immediately, so that a prompt status conference may be scheduled.
e) No later than December 18, 2012, Plaintiff shall submit to the Court a revised demolition timeline for the Bridge, detailing when each step and/or phase of the demolition process is scheduled to occur. The timeline shall use December 11, 2012 as the date on which permits are approved and December 18, 2012 as the date on which demolition is scheduled to commence.
On December 13, 2012, Plaintiff submitted a status report indicating that Plaintiff had provided Benwood with the "binder" for its liability insurance policy as of December 6, 2012, but that Benwood had requested a copy of the full policy, which Plaintiff did not have. Plaintiff stated that the full policy had been ordered from the insurance company and would be provided to Benwood upon receipt. Plaintiff further indicated that, at December 11, 2012 Council meeting, "Benwood approved [KDC's] escrow agreement and approved the permit contingent on the final review of [KDC's] insurance policy by Benwood's city attorney." (Doc. 198.) Finally, the status report stated that Plaintiff was "waiting for final escrow instructions from Benwood," and anticipated receiving the Permit on or about December 18, 2012. The same day, pursuant to this Court's December 5, 2012 Order, Plaintiff also filed an updated 450-day demolition timeline commencing December 18, 2012 and ending on March 12, 2014. (Doc. 193, Ex. 1.) The steps in the timeline correspond to the more detailed 7-stage demolition plan submitted to this Court on December 20, 2011. (See Doc. 188, Ex. 3.)
At some time subsequent to that report, KDC's efforts to secure the $500,000 cash needed for the Escrow fell through. The Court had not been informed previously that the cash for the Escrow had not been secured on the terms dictated by the approved agreement with Benwood.
On January 9, 2013, after verbally indicating to the Court that there had been delays in obtaining the Permit, Plaintiff filed a subsequent status report. (Doc. 199.) That report indicated that KDC and Benwood had been unable to reach agreement as to the terms of the Escrow, and that Plaintiff was instead "in the process of applying for sufficient bond to satisfy the [the City's] permit requirements." (Id.) Plaintiff stated that it anticipated receiving the Bond "within three weeks." (Id.) KDC's representative subsequently testified that it first received notice from Benwood that it would accept a $1,000,000 Bond in lieu of the Escrow on or about January 9, 2012.
On or about February 1, 2013, the Court received a verbal update from Plaintiff's counsel indicating that Plaintiff still had not obtained the Bond. Accordingly, on February 5, 2013, this Court ordered Plaintiff to submit periodic status updates every two weeks until such time as demolition commenced on the Bridge. (Doc. 201.)
On February 5, 2013, Plaintiff's counsel submitted a motion to withdraw as attorney for KDC. (Doc. 200.) On February 11, 2013 this Court held an ex parte telephonic status conference on the Motion to Withdraw, in which Plaintiff's counsel of record and Plaintiff's local counsel in Virginia participated. The Court understood from counsel's representations on that call that, as of that date, Plaintiff had not in fact taken any steps to apply for the Bond. On February 11, 2013, this Court denied the Motion to Withdraw, and issued an Order to Show Cause why Plaintiff should not be held in contempt for its failure to comply with this Court's prior order to demolish the Bridge. (Doc. 202.)
A show cause hearing on this matter was held on February 20, 2013. In its defense, Plaintiff asserts that it has "substantially complied" with Benwood's permitting requirements and that
Plaintiff states that it has taken the following steps to obtain the Permit:
1) Obtaining a West Virginia State Business License;
2) Obtaining a West Virginia State Contractors License;
3) Provide Benwood certified documentation of workers compensation;
4) Obtaining property and liability insurance in the amount of $5,000,000.00;
5) Provide Benwood a certified engineers report;
6) Provide Benwood a detailed demolition plan;
7) Provide Benwood a certified copy of the Coast Guard permit;
8) Provide Benwood a traffic control plan;
9) Provide Benwood a list of all subcontractors including their WV State business license, WV state Contractors License and WV state workers compensation certificates;
10) Provide Benwood a copy of the CSX Rail Transportation easement or certificate of approval to close the Benwood industrial tract at 8th Street;
11) Obtaining a traffic agreement with the tenants of the Benwood Industrial Park;
12) Provide Benwood a plan to relocate any resident who is grieved by the demolition.
only remaining unsatisfied requirement to obtain a permit to demolish the Bellaire Bridge is either 1) Plaintiff must place $500,000.00 in cash into escrow; or 2) Plaintiff must obtain a $1,000,000.00 bond naming Benwood as an interested party.(Doc. 203 at 2.) Testimony offered at the contempt hearing indicates that Plaintiff is pursuing the Bond, due to its inability to secure the cash for the Escrow on the terms dictated by the City. In the course of the proceedings, KDC apparently represented to its counsel that it had contacted two bond companies since January 9, 2013, but had made application to neither. Lee Chaklos ("Chaklos") of KDC later testified that Plaintiff had contacted four bond companies, but did not provide supporting evidence of these contacts at the hearing. Chaklos admitted that KDC had submitted no bond applications to date and stated that KDC was waiting to do so until it found a company willing to accept the Bridge as collateral for the Bond. Although Chaklos testified that KDC was diligently searching for the "right" bond company, he offered no concrete evidence in support of this assertion. Chaklos assured the Court that it could secure the Bond within 120 days.
III. LEGAL STANDARD
The purpose of contempt proceedings is "to enforce the message that court orders and judgments are to be taken seriously." Elec. Workers Pension Trust Fund of Local Union # 58, IBEW v. Gary's Electric Service Co., 340 F.3d 373, 385 (6th Cir. 2003) (citing NLRB v. Cincinnati Bronze, Inc., 829 F.2d 585, 590 (6th Cir. 1987)). Although the contempt power should not be used lightly, it "is a necessary and integral part of the independence of the judiciary, and is absolutely essential to the performance of the duties imposed on them by law. Without it they are mere boards of arbitration, whose judgments and decrees would be only advisory." Id. (quoting Gompers v. Buck's Stove & Range Co., 221 U.S. 418, 450 (1911)).
The decision whether to hold a person in contempt is within the trial court's sound discretion. Id. at 378 (citing Peppers v. Barry, 873 F.2d 967, 968 (6th Cir. 1989)). The court's discretion "includes the power to frame a sanction to fit the violation." Id. at 385 (quoting 11A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 2960, at 372-73 (2d ed. 1995)). In the context of civil contempt, "'[j]udicial sanctions ... may, in a proper case, be employed for either or both of two purposes; to coerce ... compliance with the court's order, and to compensate the complainant for losses sustained.'" Id. at 379 (quoting United States v. United Mine Workers of Am., 330 U.S. 258, 303-04 (1947)).
A litigant may be held in contempt if there is "clear and convincing evidence that shows that '[it] violated a definite and specific order of the court requiring [it] to perform or refrain from performing a particular act or acts with knowledge of the court's order.'" Elec. Workers Pension Trust Fund, 340 F.3d at 379 (quoting Cincinnati Bronze, Inc., 829 F.2d at 591). Once the burden of establishing such a violation has been met, "the burden shifts to the contemnor who may defend by coming forward with evidence showing that he is presently unable to comply with the court's order." Satyam Computer Services, Ltd. v. Venture Global Engineering, LLC, 323 Fed. Appx. 421, 433 (6th Cir. 2009) (emphasis in original) (quoting Elec. Workers Pension Trust Fund, 340 F.3d at 379). See United States v. Rylander, 460 U.S. 752, 757 (1983) ("Where compliance is impossible, neither the moving party nor the court has any reason to proceed with the civil contempt action. It is settled, however, that in raising this defense, the defendant has a burden of production.").
In the Sixth Circuit, recourse to the so-called Rylander defense to civil contempt "requires that the contemnor show that he is not responsible for the present inability to [comply]." Elec. Workers Pension Trust Fund, 340 F.3d at 383, 384 ("[W]e have decided that a showing of clean hands is essential to the Rylander defense."). In that context, courts consider "whether the [relevant party] took all reasonable steps within [its] power to comply with the court's order." Satyam, 323 Fed. Appx.at 430 (quoting Elec. Workers Pension Trust Fund, 340 F.3d at 379).
IV. ANALYSIS
1. Civil Contempt
This Court's Order that the Bellaire Bridge be demolished was issued over three years ago. Since granting Plaintiff's first request for an extension of time in July 2012, and delaying the demolition deadline until November 30, 2012, this Court has repeatedly warned that sanctions may result from failure to comply timely with the Court's order. Nonetheless, Plaintiff has continued to seek extensions and the Bridge remains standing.
Most recently, in its December 5, 2012 Order, this Court relied on KDC's representation that it had reached agreement with the County regarding the Escrow and ordered KDC to get all outstanding documentation to Benwood in time to be reviewed at the December 11, 2012 Council Meeting, so that demolition could commence on December 18, 2012. (Docs. 195 & 196 (Nunc Pro Tunc Order).) Not only did KDC fail to submit timely their full insurance policy to Benwood, but it failed to disclose to the Court that it had not in fact secured the requisite cash for the Escrow. In failing to perform timely the predicate tasks required to obtain final approval for the Permit on December 11, 2012, and therefore enable demolition to commence on December 18, 2012, KDC violated a definite and specific Order of this Court.
The burden therefore shifts to KDC to show that it is "presently unable to comply with the court's order" through no fault of its own. Satyam, 323 Fed. Appx. at 433 (emphasis in original); Elec. Workers Pension Trust Fund, 340 F.3d at 383. Although KDC asserts that it "substantially complied" with Benwood's permitting requirements, Sixth Circuit precedent "makes clear that the standard is 'whether the [relevant party] took all reasonable steps within their power to comply with the court's order.'" Satyam, 323 Fed. Appx.at 430 (quoting Peppers, 873 F.2d at 969).
KDC contends that is presently unable to satisfy Benwood's permitting requirements because it has been unable to secure the Escrow and/or the Bond on terms amenable to the City. Responsibility for Plaintiff's failure to obtain the Permit, however, lies partially with KDC itself. The evidence before the Court indicates that - as of the December 13, 2012 status report - Benwood had approved the terms of the negotiated Escrow, and given its preliminary approval for the Permit. In addition, as of January 9, 2012, Benwood had given KDC dispensation to bond the project for $1,000,000 in lieu of the Escrow. Thus, even accepting Plaintiff's assertions that its third party negotiations for the cash for the Escrow broke down through no fault of KDC's, KDC could and should have been taking all reasonable steps within its power to secure the Bond as an alternative means of meeting Benwood's permitting requirements.
And yet, in the six weeks between January 9, 2012 and February 20, 2012, KDC has contacted at most four bonding companies - if Chaklos's unsupported testimony is to be believed - and has submitted no applications to bond the Bridge demolition at all. Moreover, KDC's inaction directly contradicts representations made in the January 9, 2012 status report to this Court, namely that KDC was "in the process of applying for sufficient bond to satisfy the [the City's] permit requirements" and "anticipated receiving the bond within three weeks." (Doc. 199.) Plaintiff has failed to meet its burden to show that it took "all reasonable steps within [its] power to comply with the court's order,'" Satyam, 323 Fed. Appx. at 430, and therefore lacks the "clean hands" required to invoke the Rylander defense to civil contempt. Elec. Workers Pension Trust Fund, 340 F.3d at 383, 384 (citing Rylander, 460 U.S. 752).
This Court therefore FINDS Plaintiff KDC in contempt for failing to comply with this Court's Order regarding commencement of demolition of the Bellaire Bridge.
2. Sanctions
Having found KDC in contempt, the Court now turns to the question of appropriate sanctions. In civil contempt cases, judicial sanctions may be employed "for either or both of two purposes; to coerce ... compliance with the court's order, and to compensate the complainant for losses sustained.'" Id. at 379 (quoting United Mine Workers of Am., 330 U.S. at 303-04).
The Court finds that the circumstances of this case warrant sanctions to coerce compliance with the Court's demolition order. In light of Plaintiff's failure to take the steps in its power to secure the Permit, and accompanying misrepresentations to the Court regarding the status of its efforts to secure the Bond, Plaintiff is hereby ORDERED to pay to the Court a fine in the amount of $5,000. Plaintiff shall deposit with the Court a certified check in this amount no later than 5 p.m. on February 27, 2013.
Nor will the Court tolerate additional delay by KDC. The Court recognizes that Plaintiff's ability to complete demolition of the Bridge depends in part on action by third parties outside Plaintiff's control. Plaintiff represented at the show cause hearing that 120 days should be more than adequate to make application to and secure a bond from a bonding company that will accept Plaintiff's assets as collateral. Accordingly, the Court will grant Plaintiff the requested 120 days from the date of the show cause hearing, or until June 20, 2013, to procure the Bond. Thereafter, however, Plaintiff will be fined $1,000 per day until the Bond is procured.
Upon procuring the Bond, Plaintiff shall submit the bonding documentation to Benwood for consideration at the first regularly scheduled City Council meeting after the Bond is procured. From the date on which the Permit is granted, Plaintiff shall have one week to commence demolition of the Bridge.
Plaintiff is further ORDERED promptly to notify the Court in the event of any the following developments: Plaintiff's submission of an application for the Bond; approval of the Bond; Plaintiff's remittance of the Escrow; Plaintiff's submission to Benwood of documentation of the approved Bond or the remitted Escrow; approval of the Permit; commencement of demolition the Bridge. Plaintiff shall also continue to submit to the bi-weekly status updates previously ordered by this Court, (Doc. 201).
V. CONCLUSION
For the foregoing reasons the Court FINDS Plaintiff KDC in contempt of court and hereby ORDERS as follows:
a) Plaintiff shall pay a fine in the amount of $5,000 as sanction for its prior conduct. Plaintiff shall deposit with the Court a certified check in this amount no later than 5 p.m. on February 27, 2013.
b) Plaintiff shall have 120 days, or until June 20, 2013, to procure the Bond required to obtain the Permit from Benwood. Thereafter, Plaintiff shall pay to the Court a fine in the amount of $1,000 per day until Plaintiff procures the Bond.
c) Upon procuring the Bond, Plaintiff shall submit the bonding documentation to Benwood for consideration at the first regularly scheduled City Council meeting after the Bond is procured.
d) From the date on which the Permit is granted, Plaintiff shall have one week to commence demolition of the Bridge.
e) KDC shall promptly notify the Court in the event of any the following: Plaintiff's submission of an application for the Bond; approval of the Bond; Plaintiff's submission to Benwood of documentation of the approved Bond; approval of the
Permit; commencement of demolition the Bridge. Plaintiff shall continue to submit to the bi-weekly status updates as previously ordered by this Court, (Doc. 201).
IT IS SO ORDERED.
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Algenon L. Marbley
United States District Judge
(Doc. 203 at 1-2.)