Appellant, Daniel Weiss, was found guilty, in a civil proceeding, of fraudulent sales of securities through a rather large "boiler room" operation. As a result of that trial, he was ordered to disgorge $2.8 million. Upon failure to make any payments whatsoever, Weiss was found in contempt and ordered to pay five percent of the sum or face incarceration. Again Weiss paid nothing and was confined. Several months later, Weiss filed a motion with the district court to terminate the contempt order and release him from prison. The district court denied this motion and Weiss remains incarcerated. For the reasons that follow, we AFFIRM the district court's finding of civil contempt and its denial of Weiss's motion to terminate the contempt order.
On October 21, 1988, following a bench trial, Weiss was ordered by the district court to disgorge within ten days $2,883,107.00 for fraudulently selling off-exchange futures contracts to the public, in violation of Sections 4a and 4b(A) of the Commodity Exchange Act,
Almost exactly one year after the court entered its order to disgorge, Weiss still had not shelled out a penny. On a motion brought by plaintiffs-appellees, Commodity Futures Trading Commission (CFTC) and the State of Florida, Senior District Judge C. Clyde Atkins held a hearing to determine whether Weiss's failure to pay was grounds for contempt.
Weiss admitted that he did not institute judicial proceedings against his debtors and that his attempts to secure repayment consisted only of contacting the debtors. Weiss further testified that his only remaining asset was his home, with an equity value of $60,000. However, he claimed that he was unable to sell the house because of an IRS tax lien. Weiss also explained that he did not seek salaried employment during 1989 and that he and his wife were living off of her salary and her student loans. Plaintiffs presented no evidence at the hearing to rebut Weiss's evidence or to otherwise prove that Weiss was in fact able to meet the terms of the disgorgement order.
On March 14, 1990, the district court issued an order finding Weiss in civil contempt for failure to comply with the October 21, 1988 disgorgement order. Judge Atkins rejected Weiss's attempt to reargue the $2.8 million figure in the disgorgement order and found unconvincing Weiss's explanations
After several months in prison, Weiss filed a motion asking the district court to terminate its March 14, 1990 order of civil contempt claiming that the time he had spent in jail was proof that he did not have the funds required to pay the $144,155.35 due under that order. Weiss's motion was denied on July 24, 1990, and Weiss remains incarcerated to this date.
Weiss appeals the district court's contempt order of March 14, 1990, and its July 24, 1990 order denying his request to terminate the contempt order.
We must consider the following issues on appeal: (1) whether the district court erred in refusing to allow Weiss to reargue the amount he was required to pay in the underlying disgorgement order; (2) whether the district court was clearly erroneous in finding that Weiss failed to prove that he was unable to comply with the district court's disgorgement order; and (3) whether the civil contempt order of March 14, 1990 continues to be coercive.
A. The Amount of the Order
Initially, Weiss argues that the district court erred by not considering evidence that he received $1.4 million, as opposed to $2.8 million, for his part in the commodities investment fraud. The district court determined that Weiss had already argued that issue and was not entitled to reargue it in the contempt proceeding. Weiss does not dispute the findings of the district court. Instead, he contends that the different burdens of proof used in the two proceedings (a preponderance of the evidence standard in the commodities investment fraud trial and a clear and convincing evidence standard in the civil contempt hearing) make inappropriate the use of issue preclusion in the latter, civil contempt hearing. Weiss relies on § 28(4) of the Restatement (Second) of Judgments (1982), which provides in relevant part:
See also In re Braen, 900 F.2d 621, 624 (3d Cir.1990), cert. denied, ___ U.S. ___, 111 S.Ct. 782, 112 L.Ed.2d 845 (1991). Weiss's argument falls short of the mark, however, because the different burdens, as they are used in the two proceedings, do not measure the same issue. In the commodities investment fraud trial, the plaintiffs proved by a preponderance of the evidence that Weiss engaged in fraudulent activity and received $2.8 million. In the civil contempt hearing, the plaintiffs must prove by clear and convincing evidence, only, that Weiss violated an outstanding court order, not that he received $2.8 million. Furthermore, in a civil contempt proceeding the underlying order is not at issue. The court will not reconsider the legal or factual basis of the order alleged to have been disobeyed. Direct appeals are available to test such conclusions. As the Supreme Court observed in Maggio v. Zeitz, 333 U.S. 56, 69, 68 S.Ct. 401, 408, 92 L.Ed. 476 (1948):
See also United States v. Rylander, 460 U.S. 752, 756-57, 103 S.Ct. 1548, 1552, 75 L.Ed.2d 521 (1983) (defendant in civil contempt proceeding could not attack enforcement order on ground that he never had possession or control of the documents he was required to produce when that issue had already been determined by the enforcement order). Therefore, we hold that the district court did not err in finding that Weiss was not permitted to reargue the $2.8 million figure. That controversy has been litigated and resolved.
B. Civil Contempt
Weiss next argues that the district court erred by holding him in civil contempt and incarcerating him when he has no money to comply with the court's order. A party seeking civil contempt bears the initial burden of proving by clear and convincing evidence that the alleged contemnor has violated an outstanding court order. See Citronelle-Mobile Gathering, Inc. v. Watkins, 943 F.2d 1297, 1301 (11th Cir.1991); Combs v. Ryan's Coal Co., 785 F.2d 970, 984 (11th Cir.), cert. denied, 479 U.S. 853, 107 S.Ct. 187, 93 L.Ed.2d 120 (1986). Once a prima facie showing of a violation has been made, the burden of production shifts to the alleged contemnor, who may defend his failure on the grounds that he was unable to comply. Rylander, 460 U.S. at 757, 103 S.Ct. at 1552 ("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."); United States v. Roberts, 858 F.2d 698, 701 (11th Cir.1988); United States v. Hayes, 722 F.2d 723, 725 (11th Cir.1984). The burden shifts back to the initiating party only upon a sufficient showing by the alleged contemnor. The party seeking to show contempt, then, has the burden of proving ability to comply. Combs, 785 F.2d at 984 ("The party seeking the contempt citation retains the ultimate burden of proof ..."); In re Battaglia, 653 F.2d 419, 423 (9th Cir.1981).
It is undisputed that CFTC and the State of Florida met their initial burden of proving by clear and convincing evidence that Weiss did not comply with the terms of the October 21, 1988 order to disgorge $2.8 million. He had not come forward with one dollar. The burden of production then shifted to Weiss. Weiss argues that he met this burden and properly established the defense of present inability to comply and that it was then up to CFTC and the State of Florida to prove that he was in fact capable of paying. We disagree.
In order to succeed on the inability defense, the alleged contemnor "must go beyond a mere assertion of inability," Hayes, 722 F.2d at 725, and establish that he has made "in good faith all reasonable efforts" to meet the terms of the court order he is seeking to avoid. Roberts, 858 F.2d at 701; Combs, 785 F.2d at 984 ("We construe this requirement strictly. `Even if the efforts he did make were "substantial," "diligent" or "in good faith," ... the fact that he did not make "all reasonable efforts" establishes that [respondent] did not sufficiently rebut the ... prima facie showing of contempt.'" (quoting Hayes, 722 F.2d at 725)); United States v. Rizzo, 539 F.2d 458, 465 (5th Cir.1976).
On appeal, the district court's finding that the contemnor has not met his burden of production in presenting his defense of present inability to comply is a factual determination entrusted to the sound discretion of the court and subject to the clearly erroneous rule. Roberts, 858 F.2d at 701; Combs, 785 F.2d at 983.
C. Continued Incarceration
Weiss's final argument to this court is that the district court, in its order of July 24, 1990, erred in its determination that the civil contempt order had not lost its coercive effect. Civil contempt sanctions are, of course, employed by the courts to secure compliance with their orders. See In re Grand Jury Investigation (Braun), 600 F.2d 420, 422 (3d Cir.1979) ("Embedded in Anglo-American law is the inherent power of the judiciary to coerce obedience to its orders by summarily holding a recalcitrant person ... in civil contempt, and then imprisoning him until he complies."). However, when civil contempt sanctions lose their coercive effect, they become punitive and violate the contemnor's due process rights. In re Grand Jury Proceedings (Howald), 877 F.2d 849, 850 (11th Cir.1989). Therefore, when considering a motion to terminate a civil contempt order, "the district court must make an individualized determination as to whether there exists a realistic possibility that the contemnor will [comply]." Id.; see also Simkin v. United States, 715 F.2d 34, 37 (2d Cir.1983) ("As long as the judge is satisfied that the coercive sanction might yet produce its intended result, the confinement may continue. But if the judge is persuaded ... that the contempt power has ceased to have a coercive effect, the civil contempt remedy should be ended."). The burden is on the contemnor to prove that
Weiss maintains that the time he has spent in prison is proof that he cannot comply. The district court rejected this argument finding:
(2d Supp.R. at 2-3) We agree. Prison time, in and of itself, will not satisfy Weiss's burden of proving that there exists no "realistic possibility" that he can comply with the court's contempt order. While each passing month of incarceration may strengthen Weiss's claim of inability, see United States ex rel. Thom v. Jenkins, 760 F.2d 736, 740 (7th Cir.1985) ("[I]t can be assumed that at a certain point any man will come to value his liberty more than [the amount of money the order requires him to pay] and the pride lost in admitting that he has lied."), many months or perhaps even several years may pass before it becomes necessary to conclude that incarceration will no longer serve the purpose of the civil contempt order. Id. There was no abuse of discretion in denying Weiss's motion to terminate the contempt order.
For the foregoing reasons we AFFIRM the district court's March 14, 1990 order of civil contempt and its July 24, 1990 order denying Weiss's motion to terminate civil contempt.