Goya Foods, Inc. v. Wallack Management Co.

United States Court of Appeals
For the First Circuit

Nos. 01-1928
01-2497

GOYA FOODS, INC.,
Petitioner, Appellee,

v.

WALLACK MANAGEMENT CO. ET AL.,
Respondents, Appellants.

APPEALS FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF PUERTO RICO

[Hon. José Antonio Fusté, U.S. District Judge]

Before

Selya, Circuit Judge,

Coffin, Senior Circuit Judge,

and Lipez, Circuit Judge.

Stuart W. Berg, with whom Baer, Marks & Upham LLP was on
brief, for respondents-appellants Wallack Management Co. and 625
Park Corp.
H. Peter Haveles, Jr., with whom Cadwalader, Wickersham & Taft
was on brief, for respondent-appellant Ira Leon Rennert.
Arturo J. García-Solá, with whom Ira Brad Matetsky and
McConnell Valdés were on brief, for appellee.

May 17, 2002
 SELYA, Circuit Judge. These appeals represent yet

another chapter in a seemingly interminable intrafamilial dispute

that has run a litigatory gauntlet stretching from Puerto Rico to

New Jersey. See, e.g., Goya Foods, Inc. v. Unanue-Casal, 275 F.3d

124 (1st Cir. 2001); Goya Foods, Inc. v. Unanue, 233 F.3d 38 (1st

Cir. 2000), cert. denied, 532 U.S. 1022 (2001); Quiros Lopez v.

Unanue Casal (In re Unanue Casal), 998 F.2d 28 (1st Cir. 1993);

Unanue-Casal v. Unanue-Casal, 898 F.2d 839 (1st Cir. 1990); Goya

Foods, Inc. v. Unanue-Casal, 141 F. Supp. 2d 207 (D.P.R. 2001);

Goya Foods, Inc. v. Unanue-Casal, 982 F. Supp. 103 (D.P.R. 1997);

Goya Foods, Inc. v. Unanue-Casal (In re Unanue-Casal), 164 B.R. 216

(D.P.R. 1993); Goya Foods, Inc. v. Unanue-Casal (In re Unanue-

Casal), 159 B.R. 90 (D.P.R. 1993); Quiros-Lopez v. Unanue-Casal (In

re Unanue-Casal), 144 B.R. 604 (D.P.R. 1992); Unanue Casal v.

Unanue Casal, 132 F.R.D. 146 (D.N.J. 1989); In re Settlement of

Accounts of Unanue, 710 A.2d 1036 (N.J. Super. Ct. App. Div. 1998);

In re Settlement of Accounts of Unanue, 605 A.2d 279 (N.J. Super.

Ct. Law Div. 1991). This chapter arises out of a matched set of

interlocutory orders entered by the district court with a view

toward barring the transfer of certain assets held in the name of

the wife of a judgment debtor (including a lavish Park Avenue

cooperative apartment). Despite their knowledge of these court

orders, the appellants — Wallack Management Co., 625 Park

Corporation, and Ira Leon Rennert — participated in a sale of the

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apartment. Acting on the petition of the original plaintiff, Goya

Foods, Inc., the district court found the appellants in contempt,

and awarded substantial monetary sanctions. The appellants ask us

to overturn (or, at least, to modify) this award.

The outcome of these appeals hinges primarily upon a

complex issue of first impression as to whether Goya's failure to

comply strictly with the requirements for perfecting orders

prohibiting the alienation of property resulted in the expiration

of those orders upon the court's subsequent entry of judgment in

the underlying case (and, therefore, left the appellants free to

consummate the challenged transaction). This close question has

been well briefed and argued on both sides by able counsel. We

conclude that, notwithstanding Goya's failure to satisfy the

literal requirements of Rule 56.4 of the Puerto Rico Rules of Civil

Procedure, the relevant orders remained legally binding upon the

appellants, given their actual knowledge of the prohibition.

Largely on that basis, we affirm the district court's contempt

findings against the appellants. We find no fault with the court's

choice of a monetary sanction, but we conclude that the court

misapprehended the relationship of prejudgment interest to that

award. Consequently, we vacate the separate award of prejudgment

interest and remand for reconsideration of the amount of the

monetary sanction.

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I. BACKGROUND

In setting the stage, we draw heavily upon our previous

distillation of the relevant facts. See Goya Foods, Inc. v.

Unanue, 233 F.3d at 41-42. We add details only where necessary.

Goya was founded by Charles Unanue's father in 1936. The

company prospered. Charles served as a Goya executive from the

late 1940s until 1969, when internecine warfare led to his ouster.

This, in turn, prompted no-holds-barred litigation involving Goya,

Charles, Charles's father, and other relatives. Pursuant to

settlements reached in 1972 and 1974, Charles received more than

$4,400,000; in exchange, he surrendered his ownership interest in

Goya and agreed that he would neither contest his father's will nor

file any claims against his father's estate. The settlement

agreements further provided that if any signatory wrongfully sued

another signatory, the transgressor would be liable for liquidated

damages equal to twice the victor's litigation expenses.

Charles's father died in 1976. Eleven years later,

Charles claimed that he was entitled to an inheritance from his

parents' estates (including certain Goya shares that his father had

placed in trust). The trustees resisted the claim and sought a

judgment in a New Jersey state court barring Charles from

maintaining any action against either the trust or his parents'

estates. After protracted litigation, the New Jersey court

enforced the 1974 settlement agreement, enjoined Charles from

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pressing further claims of entitlement, and entered judgment for

Goya, pursuant to the liquidated damages clause, for approximately

$6,900,000. In re Unanue, No. M-128817 (N.J. Super. Ct. Ch. Div.

1995) (unpublished opinion).

In the midst of this odyssey, Charles repaired to Puerto

Rico and filed a petition for personal bankruptcy. From that point

forward, the battle continued in both New Jersey and Puerto Rico.

Among other initiatives, Goya filed an adversary proceeding in the

bankruptcy court in which it contended that Charles was concealing

assets by placing them in the names of various straws (including

his wife, Liliane Unanue).

Eventually, the bankruptcy court dismissed Charles's

insolvency petition without granting him a discharge. In re

Unanue-Casal, No. 90-04490, slip op. at 5 (Bankr. D.P.R. 1995).

With the shield of bankruptcy shattered and a state court judgment

in hand, Goya mounted a new offensive. It sued Charles and Liliane

Unanue in Puerto Rico's federal district court, asserting that

Charles was the beneficial owner of various assets held in

Liliane's name, and, therefore, that it was entitled to reach and

apply those assets to satisfy the New Jersey judgment. To ensure

against dissipation of the assets, Goya moved for the imposition of

provisional remedies.

The district court granted the motion on November 17,

1995, and issued an ex parte order prohibiting the alienation of

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various properties held in Liliane's name. Pertinently, the order

encompassed a cooperative apartment located at 625 Park Avenue in

New York City (the Apartment). In a companion order, the court

barred any transfer or other alienation of the cooperative shares

memorializing Liliane's interest in the Apartment.1 Goya then

transmitted copies of the district court's orders to both 625 Park

(the cooperative housing association that owned the building) and

Wallack Management (the building's managing agent).

Almost two years later, the district court resolved the

underlying litigation, holding, inter alia, that Charles was the

beneficial owner of the cooperative shares and the Apartment, and

entering judgment to that effect. Goya Foods, Inc. v. Unanue-

Casal, 982 F. Supp. at 109-12. Although the ruling ordinarily

would have cleared the way for Goya to levy against the Apartment,

the court stayed execution pending appellate review. Id. at 112.

In February 1998, Goya informed both Wallack Management and 625

Park of the district court's decision and requested that it be

notified before any disposition was made of the Unanues' interest

in the Apartment.

1
A cooperative apartment is one that is owned by a corporation
(the cooperative). The ownership interest in the apartment is held
and conveyed in the form of shares in the corporation (known as
cooperative shares). A shareholder's right to occupy the
particular apartment that he or she "owns" derives from a
proprietary lease entered into between the corporation (qua
landlord) and the shareholder (qua tenant).

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 That same month, Wallack Management informed Liliane that

she was in default of her obligation to make mandatory maintenance

payments to the cooperative, and that 625 Park would terminate her

interest and take possession of the Apartment unless she cured the

default. Adverting to this threat, Liliane asked the district

court for permission to sell the Apartment, and her attorney

informed Wallack Management that she had filed such a motion. The

court did not rule upon the request, but, rather, ordered counsel

to meet and discuss possible solutions to the dilemma.

In May 1998, Liliane agreed to sell the Apartment to

Rennert for $4,600,000. Prior to the closing, Rennert's attorneys

discovered that Goya had neglected either to record a cautionary

notice of lis pendens in the Manhattan land records or to file a

Uniform Commercial Code (UCC) statement anent the cooperative

shares. Concluding that the November 1995 orders had lapsed when

the district court entered judgment in November of 1997, Rennert's

counsel advised him that no effective judicial restraint precluded

Liliane from conveying clear title to the Apartment.2

The bylaws of the cooperative required 625 Park's

approval of any transfer of shares. After consultation with

counsel, 625 Park's board ratified the proposed sale of Liliane's

2
This conclusion was not self-evident. The attorney
originally retained by Liliane bowed out of the transaction based
on his belief that the proposed sale would, if consummated, violate
the November 1995 orders.

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shares (and, effectively, of the Apartment), on condition that

Rennert indemnify it for all loss, cost, or damage (including

litigation expenses) resulting from any challenge to the sale.

Rennert agreed to hold both Wallack Management and 625 Park

harmless, and the transaction proceeded.

The closing took place in June of 1998. From the

$4,600,000 purchase price, Wallack Management, acting as Liliane's

broker, received a $276,000 commission. Liliane's net proceeds

(well in excess of $4,000,000) were wired to a Swiss bank account.

The final version of the sales agreement included a confidentiality

clause.

Goya did not learn of the transaction until October of

2000. It immediately brought the matter to the district court's

attention. The court directed Charles and Liliane to appear

personally and show cause why they should not be adjudged in

contempt for violating the November 1995 orders. When neither

defendant appeared at the appointed time — the record suggests that

both Charles and Liliane sought sanctuary abroad — the court held

them in contempt, issued warrants for their arrest, and dissolved

the preexisting stay (thus allowing execution of the outstanding

judgment). Twenty-three days later, we affirmed the district

court's original judgment. We upheld, inter alia, the finding that

several properties held in Liliane's name (including the Apartment

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and the cooperative shares) were in actuality owned by Charles.

Goya Foods, Inc. v. Unanue, 233 F.3d at 44-46, 48.

Goya next petitioned the district court to hold Wallack

Management, 625 Park, and Rennert in civil contempt for defying the

November 1995 orders. The court directed the appellants to show

cause why they should not be so cited. The appellants made a

proffer but, following Goya's counter-proffer and a non-evidentiary

hearing, the district court determined that all three appellants

had violated the November 1995 orders by participating in the

purchase of the Apartment and the cooperative shares despite their

actual knowledge of those orders. Goya Foods, Inc. v. Unanue-

Casal, 141 F. Supp. 2d at 219, 224. Accordingly, the court

adjudged the appellants in civil contempt, and held them jointly

and severally liable to Goya for the $4,600,000 purchase price.3

Id. at 224. Although the appellants filed a notice of appeal,

Rennert, acting pursuant to a court order, deposited the sum of

$4,6000,000 in the registry of the district court (presumably in

lieu of a supersedeas bond). After some further skirmishing (not

relevant here), the court embellished the original award with

prejudgment interest. Goya Foods, Inc. v. Unanue-Casal, Civ. No.

95-2411 (D.P.R. Oct. 5, 2001) (unpublished opinion). A second

3
The district court also stated that it would grant attorneys'
fees to Goya, see Goya Foods, Inc. v. Unanue-Casal, 141 F. Supp. 2d
at 224, but the record on appeal contains no indication that a fee
award has eventuated. In all events, these appeals do not raise
any issues anent attorneys' fees.

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appeal followed. We consolidated the two appeals for briefing and

oral argument.

Our analysis is divided into three parts. We start by

grappling with the thorny issue of whether the unperfected November

1995 orders survived the entry of judgment in November 1997. Next,

we address the other aspects of the district court's finding of

contempt. Finally, we review the assessment of a monetary sanction

and the award of prejudgment interest.

II. THE NOVEMBER 1995 ORDERS

The crux of these appeals is whether the November 1995

orders precluding the transfer of the Apartment and the cooperative

shares were legally effective against the appellants when Rennert

acquired the assets in June of 1998. Our starting point is the

acknowledged power of a federal district court to issue orders

"providing for seizure . . . of property for the purpose of

securing satisfaction of the judgment ultimately to be entered in

the action." Fed. R. Civ. P. 64. By its terms, that rule allows

a federal court to borrow provisional remedies created by state

law. For this purpose, Puerto Rico is deemed the functional

equivalent of a state. E.g., HMG Prop. Investors, Inc. v. Parque

Indus. Rio Canas, Inc., 847 F.2d 908, 912-13 (1st Cir. 1988).

Following this paradigm, the court below made use of Rule

56 of the Puerto Rico Rules of Civil Procedure, 32 P.R. Laws Ann.

app. III, R. 56. In pertinent part, that rule empowers a court, on

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an ex parte application, to issue provisional remedies that it

deems "necessary to secure satisfaction of [an anticipated]

judgment." Id. R. 56.1. Such remedies include "an order of

attachment or of prohibition to alienate." Id. R. 56.4. The rule

then provides, however, that:

The attachment and prohibition to alienate
real property shall be effected by recording
them with the Registry of Property and
notifying the defendant. In case of personal
property, the order shall be carried out by
depositing the personal property in question
in court or with the person designated by it
under the claimant's responsibility.

Id.

The appellants appear to concede, at least tacitly, that

the district court intended the November 1995 orders to secure

Goya's potential recovery against Charles Unanue, and that those

orders constituted legally binding restraints while Goya's case

against Charles and his ostensible straws (including Liliane) was

pending in the district court. The appellants maintain, however,

that when the court entered final judgment in that case in November

of 1997 — in their view, the stay of execution and the ensuing

appeal make no difference — the provisional remedies envisioned by

those orders lapsed because Goya had not perfected them as required

by Rule 56.4.

This argument derives from the language of Rule 56.4.

Focusing on the drafters' use of the word "shall," the appellants

posit that the rule's recordation and seizure requirements are

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obligatory. Since the remedies granted by the district court vis-

à-vis the Apartment and the cooperative shares were provisional and

Goya never properly perfected them (it neither recorded the

prohibition against alienation of the Apartment nor ensured that

the cooperative shares were physically seized and delivered to the

court or some other properly designated custodian), the appellants

argue that those remedies expired upon the entry of judgment and,

thus, were no longer in effect some seven months later (when

Rennert acquired the assets).

Distilled to bare essence, we must determine the effect

of Goya's failure to comply with the recordation and seizure

requirements of Rule 56.4 prior to the district court's entry of

judgment. In the first instance, this is an abstract legal

question. Consequently, we afford de novo review. McCarthy v.

Azure, 22 F.3d 351, 354 (1st Cir. 1994); Liberty Mut. Ins. Co. v.

Comm'l Union Ins. Co., 978 F.2d 750, 757 (1st Cir. 1992).

The district court held that strict compliance with the

recordation and seizure requirements of Rule 56.4 was not necessary

in every situation. Goya Foods, Inc. v. Unanue-Casal, 141 F. Supp.

2d at 219. At first blush, that holding squares with the core

principle that undergirded our decision in HMG Property Investors.

There, we noted that the Supreme Court of Puerto Rico has construed

Rule 56 expansively:

Rule 56 of the Rules of Civil Procedure
confers upon the court sufficient flexibility

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 to issue the measures which it deems necessary
or convenient, according to the circumstances
of the case, to secure the effectiveness of
the judgments. Its only limitation is that
the measure be reasonable and adequate to the
essential purpose of the same, which is to
guarantee the effectiveness of the judgment
which in due time may be rendered. This
flexibility, so necessary for the
administration of justice, is the greatest
virtue of Rule 56, virtue which we should
promote and preserve instead of mystifying it
with technical concepts and requirements.

847 F.2d at 913-14 (quoting F. D. Rich Co. v. Super. Ct., 99 P.R.R.

155, 173 (1970)). As this passage evinces, and as we concluded in

HMG Property Investors, flexibility is the hallmark of Rule 56.

This emphasis on flexibility is important in considering

how Rule 56.4's recordation and seizure requirements are intended

to operate. At bottom, those requirements serve to protect the

interests of innocent third parties (e.g., potential acquirers) who

come upon the scene unaware that property standing in a defendant's

name is subject to a priority lien. The recordation and seizure

requirements enable such a third party, in the exercise of due

diligence, to learn about attachments, restrictions on alienation,

and other impediments to the passage of marketable title. See,

e.g., 30 P.R. Laws. Ann. § 2051 (explaining that one of the

purposes of the Puerto Rico Registry of Property is to facilitate

the recordation of "judicial opinions which may affect the legal

capacity of the owners of record").

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 We think it follows that if the raison d'etre of the

recordation and seizure requirements is to furnish notice that

specific property is subject to a court-imposed restriction, the

receipt of actual notice by a particular third party about the

existence of that restriction satisfies the rule's notice-giving

function as to that party. Indeed, insisting upon strict

compliance with the recordation and seizure requirements as to a

third party possessing such knowledge would plunge the courts into

the very vortex that the Supreme Court of Puerto Rico has

endeavored to avoid. See F. D. Rich Co., 99 P.R.R. at 173 (warning

against "mystifying" Rule 56 "with technical concepts and

requirements").

In this spirit, the Puerto Rico courts have demonstrated

their readiness to look to the facts and circumstances of each

case, as opposed to requiring unblinking, lockstep compliance with

the recordation and seizure requirements of Rule 56.4. The

decision in Freeman v. Superior Court, 92 P.R.R. 1 (1965), is a

good example. There, corporate shareholders aspired to block a

real estate transaction on the ground that the defendant was not

authorized to act on the corporation's behalf. Id. at 6-7. They

obtained an interlocutory order forbidding the parties to the

transaction from consummating it and served the order on the

affected parties. In an ensuing challenge, the Supreme Court of

Puerto Rico construed the order as a prohibition against alienation

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and concluded that it had become effective as to the parties in

interest at the moment that it was served upon them,

notwithstanding the plaintiffs' failure to record it. Id. at 21-

22. That order "effectively and firmly secured" the "effectiveness

of any judgment" that thereafter might be entered in the

plaintiffs' favor. Id. at 22.

The decision in Suarez v. Superior Court, 85 P.R.R. 522

(1962), is cut from the same cloth. There, the trial court granted

the plaintiff's motion to freeze the defendant's bank account. Id.

at 523-24. The plaintiff served the defendant with notice of the

freeze order, but neither seized the account nor deposited the

passbook into the registry of the court. Id. at 524. On

certiorari review, the Supreme Court of Puerto Rico determined that

the order was "of the nature of a prohibition to alienate" under

Rule 56.4 and upheld it as against the defendant (who had actual

notice). Id. at 529.

Freeman and Suarez share three salient similarities. In

each case, the movant (the party procuring the prohibitory order)

failed to comply with Rule 56.4's recordation or seizure

requirements. Yet in each case, the movant timely apprised the

complaining party of the court-imposed provisional remedy. And,

finally, in each case the Supreme Court of Puerto Rico overlooked

the lack of strict compliance with the requirements of Rule 56.4

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because the complaining party had received actual notice of the

prohibition in a timeous fashion.

Given these precedents, we decline to insist upon strict

compliance here. As said, the underlying purpose of Rule 56.4's

recordation and seizure requirements is to provide notice — and the

present appellants plainly knew of the November 1995 orders well

before they closed the transaction.4 Consequently, there is no

reason why the failure to record the prohibition against alienation

should blunt the legal force of the court's orders vis-à-vis the

appellants.

The appellants attempt to convince us otherwise by

reference to a pair of Puerto Rico cases.5 In the first such case,

4
In December 1995, Goya sent via certified mail copies of the
November 1995 orders, accompanied by an explanation of the legal
context surrounding them, to 625 Park and Wallack Management.
While no such mailing was directed to Rennert — Goya did not know
of his existence until well after he had acquired the Apartment —
Rennert has acknowledged that he too received copies of the orders
"sometime in 1995 or early 1996." To cinch matters, the district
court found that each of the appellants received timely notice of
its 1997 decision holding that Charles was the beneficial owner of
the cooperative shares (and, thus, of the Apartment), Goya Foods,
Inc. v. Unanue-Casal, 982 F. Supp. at 111-12, and the appellants do
not challenge this finding. Thus, each of the appellants had
actual notice of the November 1995 orders and of their relationship
to the Apartment and the cooperative shares.
5
The appellants also cite two bankruptcy court decisions. See
Quadrel Leasing de P.R., Inc. v. Carlos A. Rivera, Inc. (In re
Carlos A. Rivera, Inc.), 130 B.R. 377, 381-82 (Bankr. D.P.R. 1991);
FDIC v. Debtor & Trustee (In re Moscoso Villaronga), 111 B.R. 13,
16 (Bankr. D.P.R. 1989). Neither case adds anything to the
equation, and we decline to accord particular significance to these
decisions. See Blinzler v. Marriott Int'l, Inc., 81 F.3d 1148,
1151 (1st Cir. 1996) (explaining that a federal court applying

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Stargus Properties v. Superior Court, 101 P.R.R. 139 (1973), the

trial court entered a standstill order effectuating "the

prohibition to dispose of, or any condemnation proceeding over the

property object of this litigation." Id. at 143. The defendants

nonetheless sold a particular piece of property arguably affected

by the order. Even though the defendants claimed not to have known

about the standstill order and the plaintiff could provide no proof

of service, the trial court found them in contempt. Id. at 144.

The Puerto Rico Supreme Court vacated the finding,

concluding that the standstill order had not been "entered or

processed according to the provisions of Rule 56 of the Rules of

Civil Procedure." Id. at 146. In so holding, the court enumerated

the order's myriad defects, including the fact that it had been

issued sua sponte; that it completely failed to describe any

specific properties; that the plaintiffs had neglected to record

the order in the Registry of Property; and that, in all events, the

plaintiffs had not posted a proper bond. Id. at 146-47. These

combined infirmities were so severe that it is difficult, if not

impossible, to argue that the court attached decretory significance

to the failure to record, standing alone. We conclude, therefore,

that Stargus is sui generis, and that the decision does not stand

for the broad proposition that the Puerto Rico Supreme Court always

state law must heed the "rules of substantive law enunciated by the
state's highest judicial authority").

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insists upon strict compliance with the recordation and seizure

requirements of Rule 56.4.

The appellants' second case, Cooperativa Central v.

Flores, 68 P.R.R. 672 (1948), involved an attachment of commercial

goods owned by a merchant defendant. Pursuant to the trial court's

order, a marshal inventoried the goods in the defendant's shop and

designated a depository. Id. at 673. The court subsequently

ordered the goods sold at public auction. Id. at 673-74. The

Supreme Court of Puerto Rico halted the sale and voided the

attachment on the ground that the goods were not in custodia legis

(and, therefore, not properly seized) because the marshal lacked

the authority to designate a depository. Id. at 675-76. Whatever

Flores may teach as to how attachments of fungible goods must be

handled — a matter on which we take no view — we do not read the

decision as mandating, without exception, strict compliance with

Rule 56.4. Indeed, it seems safe to conclude that the Puerto Rico

Supreme Court's subsequent decision in Suarez, plainly relaxing

Rule 56.4's technical seizure requirements, 85 P.R.R. at 529,

trumps the appellants' proposed reading of Flores.

To sum up, Stargus and Flores cannot bear the weight that

the appellants pile upon them. The case law teaches that strict

compliance with the recordation and seizure requirements of Rule

56.4 is not essential in every case. Nor do we discern any other

colorable argument supporting the appellants' position that the

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provisional remedies expired upon the district court's entry of

judgment. While interlocutory orders sometimes may merge into a

judgment, e.g., John's Insulation, Inc. v. L. Addison & Assocs.,

Inc., 156 F.3d 101, 105 (1st Cir. 1998), it is unreasonable to

assume that any such merger occurred here. After all, timely

appeals ensued, and the district court specifically stayed the

execution of the judgment pending the completion of those appeals.6

Goya Foods, Inc. v. Unanue-Casal, 982 F. Supp at 112. In a

practical sense, the judgment rendered by the district court was

not final until "the availability of appeal [was] exhausted."

Griffith v. Kentucky, 479 U.S. 314, 321 n.6 (1987).

That ends this aspect of the matter. We reject the

appellants' call for a mechanical construction of Rule 56.4 in

favor of a flexible construction that recognizes the practicalities

and the equities of individual situations. Following that path, we

hold that a failure to comply with the recordation and/or seizure

requirements of Rule 56.4, without more, does not render a court

order containing a prohibition against alienation invalid as to a

third party with actual notice of the terms of that restraint.

Given the idiosyncratic circumstances of this case — especially the

6
This stay comported with the practice in the commonwealth
courts. See 32 P.R. Laws Ann. app. III, R. 53.9 (stipulating that
the judgment of a Puerto Rico court is automatically stayed once it
is appealed). Given this fact, it seems reasonable to assume that
the Puerto Rico legislature did not intend provisional remedies
issued under Rule 56.4 to expire automatically upon the entry of
judgment in the trial court.

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appellants' patent knowledge of the November 1995 orders and Goya's

lack of a well-defined route for fulfilling Rule 56.4's recordation

and seizure requirements7 — we conclude that, even after the entry

of judgment, the November 1995 orders continued to safeguard Goya's

contingent interest in Charles's assets as to persons having actual

knowledge of those orders, and that the Apartment and the

cooperative shares remained subject to those orders when the

appellants participated in the June 1998 transaction.

III. CIVIL CONTEMPT

We next address whether the district court's findings of

civil contempt were properly grounded. This assessment employs

multiple standards of review. We scrutinize the lower court's

factfinding for clear error. Project B.A.S.I.C. v. Kemp, 947 F.2d

11, 15 (1st Cir. 1991). Withal, we evaluate its ultimate finding

on contempt for abuse of discretion, approaching that inquiry

7
The Apartment was located in New York City, so Goya was
unable to file a cautionary notice in the Puerto Rico Registry of
Property; and Goya likely was precluded from recording such a
notice in New York's real estate records because New York law
considers shares in a cooperative apartment to be personal
property. See In re Estate of Carmer, 530 N.Y.S.2d 88, 89 (N.Y.
1988). It is equally problematic whether the shares could have
been physically seized, or whether Goya, without Liliane's
cooperation, could have perfected a UCC-9 filing in New York. See
N.Y. U.C.C. § 9-203(1)(a) (1998). After all, Liliane not only fled
the country but also defied other court orders to deposit assets in
the registry of the court (e.g., the Emperor Equities shares).
Whatever the answers to these questions, the absence of a
straightforward methodology for satisfying the recordation and
seizure requirements of Rule 56.4 represents an additional
consideration that militates in favor of relaxing those
requirements here.

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"flexibly, with due regard for the circumstances." Langton v.

Johnston, 928 F.2d 1206, 1220 (1st Cir. 1991). In performing that

tamisage, we remain mindful that an error of law is the functional

equivalent of an abuse of discretion. In re Grand Jury Subpoena,

138 F.3d 442, 444 (1st Cir. 1998).

The fact that the appellants were not parties to Goya's

suit against the Unanues does not inoculate them against charges of

civil contempt. Nonparties may be liable for civil contempt

notwithstanding their nonparty status. See Microsystems

Software, Inc. v. Scandinavia Online AB, 226 F.3d 35, 43 (1st Cir.

2000); G. & C. Merriam Co. v. Webster Dictionary Co., 639 F.2d 29,

34-35 (1st Cir. 1980). The critical datum is whether the nonparty

"was in active concert or participation with the party specifically

enjoined." Microsystems, 226 F.3d at 43. To satisfy that

criterion, "the nonparty must be legally identified with that

defendant, or, at least, deemed to have aided and abetted that

defendant in the enjoined conduct." Id.

Here, the district court rested its contempt finding upon

an "aiding and abetting" theory. The legal underpinning of such a

theory is impeccable: it has long been recognized that a nonparty

may be held in civil contempt if, and to the extent that, he

knowingly aids or abets an enjoined party in transgressing a court

order. See, e.g., Gemco Latinoamérica, Inc. v. Seiko Time Corp.,

61 F.3d 94, 98 (1st Cir. 1995). The question, then, reduces to

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whether the district court's deployment of the theory finds

sufficient footing in the record.

There are two elements essential to invocation of this

theory. The first is state of mind: a nonparty must know of the

judicial decree, and nonetheless act in defiance of it. The second

is legal identification: the challenged action must be taken for

the benefit of, or to assist, a party subject to the decree. Here,

both elements are foregone conclusions.

It cannot be gainsaid that each of the appellants had

actual knowledge of the November 1995 orders. See supra note 4.

This constitutes a solid foundation for the district court's

finding that the appellants possessed the requisite state of mind

to trigger civil contempt liability.

The appellants attempt to confess and avoid. They admit

knowledge of the November 1995 orders, but asseverate that they

lacked the requisite state of mind because they honestly believed

that those orders had lapsed. This asseveration is unpersuasive.

When a legitimate question exists as to the scope or

effectiveness of a court's order, those who know of the decree, yet

act unilaterally, assume the risk of mistaken judgments. See

Infusaid Corp. v. Intermedics Infusaid, Inc., 756 F.2d 1, 2 (1st

Cir. 1985) (emphasizing that a party who harbors "doubt about the

lawfulness of a proposed course of action" always can "ask the

district court for guidance"). Adhering to this principle, the

-22-
appellants could have asked the district court for clarification as

to the enduring vitality of the November 1995 orders, but they

eschewed that course. They chose instead to rely on their own

judgment as to whether the orders remained in effect. In so doing,

the appellants acted at their peril. See McComb v. Jacksonville

Paper Co., 336 U.S. 187, 192 (1949).

The identification element is similarly open-and-shut.

Liliane Unanue was a party to the underlying action and, thus, a

person subject to the November 1995 orders. The record here

permits no reasonable conclusion but that the appellants aided and

abetted Liliane's violation of those orders. After all, each of

the three appellants played an essential role in consummating the

forbidden transaction. Wallack Management offered the Apartment

for sale, located a purchaser, and shepherded the transaction to

its climax. 625 Park facilitated the sale by placing its

imprimatur on the transfer of the Apartment and the cooperative

shares. Rennert purchased the Apartment and the shares from

Liliane, and executed an indemnity agreement in order to induce

others to approve the transaction. In view of these actions, we

must uphold the district court's finding that each of the

appellants knowingly aided and abetted a party's (Liliane Unanue's)

defiance of the November 1995 orders.

Given the foregoing, the conclusion seems inescapable

that the appellants are susceptible to liability for civil

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contempt. The appellants nonetheless attempt to refute this

conclusion, protesting that they acted throughout in good faith.

The district court gave this protestation short shrift, and so do

we.

The law is firmly established in this circuit that good

faith is not a defense to civil contempt. Star Fin. Servs., Inc.

v. AASTAR Mortgage Corp., 89 F.3d 5, 13 (1st Cir. 1996); accord

McComb, 336 U.S. at 191 ("An act does not cease to be a violation

of a law and of a decree merely because it may have been done

innocently."). The appellants fail to advance any sound reason why

this rule should not apply to nonparties. For our part, we

perceive no principled basis for allowing nonparties (but not

parties) to invoke a good-faith defense. We hold, therefore, that

nonparties are not entitled to raise a good-faith defense in a

civil contempt proceeding.

In a related vein, the appellants note that a contempt

finding will not lie unless the putative contemnor violates a court

order that is clear and unambiguous. Kemp, 947 F.2d at 16.

Starting from this premise, the appellants contend that the

uncertainty surrounding the effectiveness of the November 1995

orders prevents Goya from fulfilling this requirement. Their

contention is wide of the mark.

The test is whether the putative contemnor is "able to

ascertain from the four corners of the order precisely what acts

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are forbidden." Gilday v. Dubois, 124 F.3d 277, 282 (1st Cir.

1997) (citation omitted). Focusing the test within the four

corners of a document limits the inquiry to an examination of that

document's text. E.g., United States v. Anderson, 921 F.2d 335,

337-38 (1st Cir. 1990). Thus, the "clear and unambiguous" standard

applies to the language of the relevant court order, not to its

effectiveness. See Star Fin. Servs., 89 F.3d at 13 (concentrating

on the "unequivocal language" of the relevant order). This is as

it should be. Were we to honor the appellants' thesis — that

cobbling together a plausible legal argument about the

effectiveness of an order renders the order unclear or ambiguous

for contempt purposes — we would contradict our precedents

emphasizing that the "clear and unambiguous" inquiry is limited to

the four corners of the order itself. Consequently, we reject the

appellants' attempt to widen the lens of this inquiry to include

uncertainties about the legal efficacy of the November 1995 orders

(apart from those that might be inherent in the language of the

orders).

Turning to the language of the orders, it is difficult to

imagine how the November 1995 orders could have been worded in a

clearer, more unambiguous way. Those ukases plainly forbade not

only the Unanues but also "their agents, employees, and all persons

. . . acting in concert with them" from "alienating or in any way

assigning, transferring, selling, or otherwise disposing or

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encumbering [the Apartment,] including [the] cooperative shares

[associated therewith]." This language leaves no room for doubt as

to what the court intended.

The last piece of the puzzle is the requirement that the

moving party establish by clear and convincing evidence that the

putative contemnor violated the relevant court order. Kemp, 947

F.2d at 16; Langton, 928 F.2d at 1220. Here, the appellants left

behind an extensive paper trail memorializing the events leading up

to the transfer of the Apartment and the shares, and that

documentary array constitutes overwhelming proof that they

knowingly participated in a transaction expressly prohibited by the

November 1995 orders.

The appellants do not seriously question this conclusion,

but, rather, insist that the lower court was obliged to hold an

evidentiary hearing before it could find, by clear and convincing

evidence, that the appellants had abridged the November 1995

orders. This insistence is misplaced. In conjunction with the

show-cause order, Goya introduced documentary evidence that

established what the appellants knew, when they knew it, and the

nature of the various actions that they took.8 The appellants

8
The evidence showing that the appellants chose to participate
in bringing about the transfer of the Apartment and the cooperative
shares despite their actual knowledge of the ukases prohibiting
that very eventuality included a memorandum written by Wallack
Management's chief executive officer in March 1998 indicating his
awareness that an operative restraint "presently" prohibited
Liliane Unanue from selling the Apartment; 625 Park's steadfast

-26-
failed to contradict this evidence. The record, therefore,

disclosed no genuine issue of material fact as to the appellants'

roles. Given that void, an evidentiary hearing would have been a

waste of time. See Morales-Feliciano v. Parole Bd., 887 F.2d 1, 6-

7 (1st Cir. 1989) (explaining that a party has a right to an

evidentiary hearing in a civil contempt proceeding only if, and to

the extent that, genuine issues of material fact exist).

That ends our discussion of the liability issue. For the

reasons elucidated above, we conclude that the district court did

not abuse its discretion in finding the appellants in civil

contempt.

IV. CONTEMPT SANCTIONS

The court below initiated the civil contempt proceeding

under its inherent power. See Shillitani v. United States, 384

U.S. 364, 370 (1966). Its authority to assess a sanction for

contempt derives from the same source. Roadway Express, Inc. v.

Piper, 447 U.S. 752, 764 (1980). A trial court has wide discretion

in its choice of sanctions. Ray v. Eyster (In re Orthopedic "Bone

Screw" Prods. Liab. Litig.), 132 F.3d 152, 156 (3d Cir. 1997).

Once the trial court has chosen a particular sanction, appellate

review is for abuse of discretion. EEOC v. Local 28 of Sheet Metal

refusal to consummate the sale unless and until Rennert agreed to
indemnify it against potential liability; and the confidentiality
clause through which Liliane and the appellants attempted to sweep
the entire transaction under the rug.

-27-
Workers Int'l Ass'n, 247 F.3d 333, 336 (2d Cir. 2001); R.I. Hosp.

Trust Nat'l Bank v. Howard Communications Corp., 980 F.2d 823, 829

(1st Cir. 1992). When money is the sanction of choice, the abuse

of discretion standard pertains not only to the trial court's

selection of the sanction but also to its quantification of the

award. Rolex Watch U.S.A., Inc. v. Crowley, 74 F.3d 716, 721 (6th

Cir. 1996); Eck v. Dodge Chem. Co. (In re Power Recovery Sys.,

Inc.), 950 F.2d 798, 802-03 (1st Cir. 1991).

Federal courts are empowered to issue civil contempt

sanctions to "protect[] the due and orderly administration of

justice and . . . maintain[] the authority and dignity of the

court." Roadway Express, 447 U.S. at 764. In a civil contempt

proceeding, a monetary sanction, assessed for the purpose of

compensating the complainant for losses sustained by reason of the

contemnor's acts, is within the universe of permissible sanctions.

See United States v. United Mine Workers, 330 U.S. 258, 303-04

(1947). Thus, make-whole relief is a commonplace sanction for

civil contempt. So too are normal embellishments such as

attorneys' fees and costs. G. & C. Merriam, 639 F.2d at 41.

The amount of an award of make-whole relief, like the

amount of any monetary sanction that is remedial in nature, cannot

be plucked out of thin air. The amount of such a sanction must be

established by competent evidence, and must bear a reasonable

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relationship to the actual losses sustained by the injured party.

United Mine Workers, 330 U.S. at 304.

In this case, the lower court crafted a sanction with the

evident purpose of compensating the complainant for losses

sustained in consequence of the contemnors' violation of the

November 1995 court orders. To be specific, the court assessed a

compensatory sanction in the amount of $4,600,000 (the price paid

for the Apartment), and then tacked on roughly $1,400,000 in

prejudgment interest. As we explain below, the peculiar path that

the court took in arriving at the latter figure needlessly

complicated the matter.

We take first things first. The appellants' argument

that the base amount assessed was inherently speculative, or

grossly excessive, or both, is without merit. We rejected a

similar argument in Gemco Latinoamérica, a case in which a nonparty

bank had helped to arrange payments that violated an outstanding

attachment. 61 F.3d at 98. The district court held the bank in

civil contempt and imposed a sanction in the form of money damages.

Id. We affirmed both the court's choice of a monetary sanction and

its use of the funds that had been diverted as a measure of the

amount. Id. at 98-100. In reaching this result, we explained that

the bank's facilitative role made it "responsible for the full

effect" of the dissipated funds. Id. at 100. That precedent is

instructive here.

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 Goya held a valid judgment against Charles Unanue, and

the district court had determined, in a decision since affirmed by

this court, that the judgment could be partially enforced by

levying against the Apartment and the cooperative shares. Goya's

opportunity to execute against those assets was frustrated by the

surreptitious sale and the subsequent transfer of the lion's share

of the proceeds to a Swiss bank account. The appellants each

played a facilitative role in consummating that forbidden

transaction. Under the circumstances, the value of the vanished

assets, as reflected by the purchase price actually paid in the

contumacious transaction, strikes us as an equitable yardstick for

measuring Goya's loss. See id. at 98, 100 (calculating damages for

contemnor's illegal seizure of store's inventory based upon

purchase price offered by a willing buyer); cf. Engine Specialties,

Inc. v. Bombardier Ltd., 605 F.2d 1, 20 (1st Cir. 1979) (basing

monetary contempt sanction upon contemnor's actual sales). We

hold, therefore, that the district court acted well within the

realm of its discretion in awarding Goya the base sum of

$4,600,000.

This leaves the question of prejudgment interest. If the

purpose of remedial contempt sanctions is to make an aggrieved

party whole, then it follows that a court should be able to fashion

sanctions that take into account not only the actual loss stemming

from the contumacious conduct but also the time value of any

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associated deprivation of funds. Accordingly, we hold that

prejudgment interest, as a theoretical matter, is an acceptable

component of a remedial sanction for civil contempt. See generally

McComb, 336 U.S. at 193 ("The measure of the court's power in civil

contempt proceedings is determined by the requirements of full

remedial relief.").

Despite this holding, the award of prejudgment interest,

as rendered in the case at bar, is problematic. The court opted to

apply Puerto Rico's prejudgment interest rule, 32 P.R. Laws Ann.

app. III, R. 44.3(b), lock, stock, and barrel to determine whether

prejudgment interest should be granted, and if so, in what amount.

In charting this course, the court seems to have lost sight of the

fact that it was operating under the aegis of its inherent power,

and instead approached the sanctions issue as if it were issuing an

award of damages in, say, a tort action.

The genesis of this decision is not clear. We note,

however, that the original action was brought by Goya under the

court's diversity jurisdiction. See 28 U.S.C. § 1332(a). We think

it likely, therefore, that the district court relied upon

precedents teaching that, in diversity cases, state law determines

"whether and how much pre-judgment interest should be awarded."

Fratus v. Republic W. Ins. Co., 147 F.3d 25, 30 (1st Cir. 1998);

see also Comm'l Union Ins. Co. v. Walbrook Ins. Co., 41 F.3d 764,

774 (1st Cir. 1994) (stating that a federal court sitting in

-31-
diversity jurisdiction ordinarily should apply the law that a local

court sitting in the forum state would deem controlling in respect

to prejudgment interest).

The difficulty is that the Fratus rule is inapposite

here. Given that the district court convened the contempt

proceeding under its inherent power, the court was free to award

prejudgment interest as part and parcel of the contempt sanction,

or to decline to do so, as a matter of federal law. The Puerto

Rico rule simply was not controlling.9

The beacon by which we must steer is the Supreme Court's

decision in Chambers v. NASCO, Inc., 501 U.S. 32 (1991). There,

the district court, sitting in diversity jurisdiction, invoked its

inherent power and assessed attorneys' fees as a sanction for bad-

faith conduct during the litigation. Id. at 40-42. Before the

Supreme Court, the sanctioned party contended that the trial judge

was not free to order the payment of attorneys' fees as a sanction

for bad-faith conduct unless applicable state law recognized such

a praxis. The Court rejected this contention, explaining that

since the trial judge based the fee award on the sanctioned party's

9
Of course, the federal court, had it desired to make an
interest award, could have drawn upon any reasonable statutory
benchmark (state or federal) to set an appropriate rate. See
Cottrill v. Sparrow, Johnson & Ursillo, Inc., 100 F.3d 220, 224-25
(1st Cir. 1996) (observing that courts fashioning awards under
ERISA may use either state or federal rates in computing
discretionary awards of prejudgment interest). But, this was not
what the district court did.

-32-
conduct during the course of the litigation, the use of federal law

as the source of authority for the award did not contravene the

Erie principle. Id. at 51-53 (citing Erie R.R. Co. v. Tompkins,

304 U.S. 64 (1938)). Extrapolating from Chambers, we hold that

when a federal district court sits in diversity jurisdiction, its

inherent power to impose monetary sanctions for contumacious

conduct during the course of litigation is not circumscribed by the

forum state's law regarding the imposition of sanctions. Accord

People by Abrams v. Terry, 45 F.3d 17, 23-24 (2d Cir. 1995). We

see no reason why this principle should not apply ex proprio vigore

to prejudgment interest when such an award is imposed as part of a

civil contempt sanction in a federal district court.

Based on the foregoing, we decline the parties' joint

invitation to confront the difficult, nuanced question of whether

the facts of record here bring this case within the confines of

Rule 44.3(b). Rather, we strike the district court's award of

prejudgment interest under that rule. But we do not stop there.

Although the district court employed the wrong vehicle en route to

an award of prejudgment interest, it plainly intended to afford

make-whole relief by taking into account, to some extent, the time

value of money. Under the circumstances, and in fairness to the

parties, we think that the court is entitled to reconsider the

question of remedies in light of our holding.

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 We view the district court's options as broad. On the

one hand, it may decide to leave well enough alone ($4,600,000 is,

after all, a substantial amount of money). On the other hand, it

may decide that the equities counsel in favor of some increase in

the base award to compensate Goya for the time value of the

vanished purchase price. The parties have not briefed these

issues, and we believe that it should be open to them and to the

lower court, on remand, to explore such potential modifications to

the judgment. E.g., FDIC v. Consol. Mortgage & Fin. Corp., 805

F.2d 14, 21 (1st Cir. 1986) (remanding issue neither briefed nor

argued on appeal for further consideration).

V. CONCLUSION

We need go no further. For the reasons stated, we affirm

the judgment in part, vacate it in part, and remand for further

proceedings consistent with this opinion. As to those anticipated

proceedings, we intimate no view of either the propriety or the

wisdom of any particular outcome.

Affirmed in part, vacated in part, and remanded. Two-thirds costs

are taxed in favor of the appellee.

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