United States Court of Appeals
For the First Circuit
No. 02-2483
GOYA FOODS, INC.,
Petitioner, Appellee,
v.
WALLACK MANAGEMENT CO. ET AL.,
Respondents, Appellants.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. José Antonio Fusté, U.S. District Judge]
Before
Selya, Circuit Judge,
Stapleton,* Senior Circuit Judge,
and Howard, Circuit Judge.
H. Peter Haveles, Jr., with whom Douglas Koff and Cadwalader,
Wickersham & Taft LLP were on brief, for appellant Rennert.
Stuart W. Berg and Brown Raysman Millstein Felder & Steiner
LLP on brief for corporate appellants.
Ira Brad Matetsky, with whom Arturo J. García-Solá and
McConnell Valdés were on brief, for appellee.
September 8, 2003
_______________
*Of the Third Circuit, sitting by designation.
SELYA, Circuit Judge. In this appeal, we revisit a
contempt sanction imposed by the United States District Court for
the District of Puerto Rico. By way of prelusion, we offer here
only a sketch of antecedent events. The reader who hungers for
more intimate familiarity with the facts should consult our last
previous opinion in this matter. See Goya Foods, Inc. v. Wallack
Mgmt. Co., 290 F.3d 63, 67-70 (1st Cir. 2002) (Goya I) (cataloguing
other reported cases and summarizing the thirty-year history of
this seemingly interminable intrafamilial dispute).
The tale began in 1969, when Charles Unanue was ousted
from the family business, Goya Foods, Inc. (Goya). He later
accepted a settlement of $4,400,000 in exchange, inter alia, for
his promise that he would neither contest his father's will nor
file a claim against his father's estate. When the family
patriarch died, however, Charles broke this promise. The contest
that he mounted in 1976 boomeranged: after prolonged litigation in
the New Jersey state courts, Goya obtained a judgment against him
in the approximate amount of $6,900,000.
Charles Unanue then contrived a series of gambits
designed to shield his assets from this judgment. These
machinations included a sham bankruptcy, numerous attempts to
conceal assets, and the creation of a fictitious investor. Even
while interest was accruing on the New Jersey judgment, Goya
persisted in its efforts to enforce that judgment. It eventually
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sued Charles Unanue and his wife, Liliane, in Puerto Rico's federal
district court, seeking to reach and apply an assortment of assets
that had been placed in Liliane's name. In 1995, the district
court issued a provisional order prohibiting the alienation of
these holdings (including Liliane's shares in a luxurious
cooperative apartment complex located at 625 Park Avenue in
Manhattan).
Goya promptly notified respondent-appellant 625 Park
Corp. and respondent-appellant Wallack Management Co. (the
building's owner and managing agent, respectively) of the
provisional order. In 1997, the court entered judgment in Goya's
favor but stayed execution of the judgment pending appellate
review. Goya Foods, Inc. v. Unanue-Casal, 982 F. Supp. 103, 112
(D.P.R. 1997). Goya notified the corporate appellants of the
district court's decision and requested that it be told before any
disposition was made of the Unanues' interest in the apartment.
The notices went unheeded. On June 19, 1998, Liliane
sold the cooperative shares (and, thus, the apartment) to
respondent-appellant Ira Leon Rennert for $4,600,000. The
appellants acted in concert: Rennert closed despite knowing of the
provisional order and the ensuing district court decision, and both
Wallack Management and 625 Park took steps to facilitate the
transaction. Liliane and Charles lost little time in absconding
with the net proceeds.
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Goya did not learn of the sale until October of 2000. It
quickly asked the district court for assistance. The court
dissolved the stay of execution.1 It thereafter held the appellants
in civil contempt, imposing a joint and several sanction of
approximately $6,000,000 (comprising $4,600,000 on account of the
sale price and roughly $1,400,000 in prejudgment interest). Goya
Foods, Inc. v. Unanue-Casal, 141 F. Supp. 2d 207, 224 (D.P.R.
2001), supplemented by Goya Foods, Inc. v. Unanue-Casal, Civ. No.
95-2411, slip op. (D.P.R. Oct. 5, 2001) (unpublished). We affirmed
the finding of contempt but vacated the award because the district
court had considered itself bound to follow 32 P.R. Laws Ann. App.
III, R. 44.3, and, thus, erroneously had deemed Goya entitled to
prejudgment interest as a matter of law. Goya I, 290 F.3d at 79-
80. We explained 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." Id. at 80. To correct this error, we
remanded for reconsideration of the amount of the sanction, making
clear that the lower court's options ranged from including no
prejudgment interest component in the sanction to including any
reasonable amount as a proxy for the time value of money. Id. If
1
On November 28, 2000 — a few weeks after Goya sought the
district court's intervention — we affirmed the 1997 judgment. See
Goya Foods, Inc. v. Unanue, 233 F.3d 38, 48 (1st Cir. 2000).
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the district court elected to follow the latter course, it was free
to "draw[] upon any reasonable statutory benchmark (state or
federal) to set an appropriate rate." Id. at 79 n.9.
On remand, the district court noted the breadth of its
inherent authority, concluded that the sanction should include a
prejudgment interest component, and stated with little ceremony
that "taking into consideration the idiosyncrasies of this case,"
Puerto Rico's statutory interest rate (10.5%) constituted an
appropriate measure. Goya Foods, Inc. v. Unanue-Casal, Civ. No.
95-2411, slip op. at 2 (D.P.R. Sept. 25, 2002) (unpublished). On
this basis, the court reimposed the original $6,000,000 sanction,
which included a $1,400,000 prejudgment interest component
representing simple interest at the rate of 10.5% per annum on the
sale price of the cooperative shares for the period from June 19,
1998 (the date when the sale occurred) to May 11, 2001 (the date
when Rennert deposited an amount equal to the sale price in the
registry of the district court). This appeal ensued.
The appellants complain variously that (1) the district
court should have made specific findings as to whether and to what
extent Goya suffered an actual loss, above and beyond the sale
price of the cooperative shares, deriving from their contumacious
conduct; (2) the court's use of a 10.5% interest rate
overcompensated Goya; and (3) in all events, the court should not
have included prejudgment interest for the period between the date
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of sale and the date on which we affirmed the right to levy on
assets standing in Liliane Unanue's name, see supra note 1. As we
shall explain, these arguments are unavailing (and, for the most
part, misguided).
We review a trial court's decision as to the amount of a
monetary sanction only for abuse of discretion. Chambers v. NASCO,
Inc., 501 U.S. 32, 55 (1991); Goya I, 290 F.3d at 77-78; Johnson v.
A.W. Chesterton Co., 18 F.3d 1362, 1366 (7th Cir. 1994). This is
a deferential standard, and a party who seeks to overturn a
monetary sanction on grounds of excessiveness bears a heavy burden.
See Jones v. Winnepesaukee Realty, 990 F.2d 1, 5 (1st Cir. 1993);
see also Anderson v. Beatrice Foods Co., 900 F.2d 388, 394 (1st
Cir. 1990) (explaining that "the imposition of sanctions is
essentially a judgment call, and as such, seems best left to the
judicial officer most familiar with the case") (citation and
internal quotation marks omitted). Of course, trial courts do not
have unbridled license to pluck dollar figures out of thin air and
incorporate them in sanctions. See Roadway Exp., Inc. v. Piper,
447 U.S. 752, 764-65 (1980); Navarro-Ayala v. Nunez, 968 F.2d 1421,
1426-27 (1st Cir. 1992). But mathematical exactitude is not
required: so long as a sanction is reasonably proportionate to the
offending conduct, the trial court's quantification of it ought not
to be disturbed. United States v. United Mine Workers, 330 U.S.
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258, 303 (1947); Long v. Steepro, 213 F.3d 983, 986 (7th Cir.
2000); Navarro-Ayala, 968 F.2d at 1426-27.
In this case, the lower court acted well within the scope
of its authority. Contrary to the appellants' importunings, it was
not necessary either for Goya to prove the actual time value of the
wrongfully withheld funds or for the court to make specific
findings derived from admissible evidence. It suffices if, on
whole-record review, the sanction appears reasonable in amount and
the rationale behind it is evident. Foval v. First Nat'l Bank of
Commerce, 841 F.2d 126, 130 (5th Cir. 1988).
The sanction in this case easily passes through that
screen. The first time around, the district court made pellucid
the basis for the sanction, the algorithm by which it had
calculated the amount, and the reasoning that drove the decision.
We approved the sanction in every particular save only the court's
erroneous assumption that it was bound by Puerto Rico law to
include a prejudgment interest component. Goya I, 290 F.3d at 77-
79. The second time around, nothing changed except that the court,
freed from the imagined constraints of its earlier assumption,
elected as a matter of discretion to include a prejudgment interest
component in the overall sanction and to peg that component to the
statutory interest rate prescribed by local law. The basis for the
court's action was crystal clear; more specific findings were not
required.
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The appellants' second argument need not detain us.
Their determined assault on the district court's appointed interest
rate is little more than whistling past the graveyard. In essence,
they claim that the 10.5% rate yields more interest than Goya
conceivably could have earned, considering the performance in the
relevant time frame of the New York Stock Exchange, the Manhattan
real estate market, treasury bills, and the like. But this appeal
revolves around the propriety of a sanction, not around the
pinpoint accuracy of an award for economic loss. Goya's actual
loss is not the issue. We explain briefly.
In crafting a monetary sanction, a court must bear in
mind not only the factual circumstances of the particular case but
also the purpose for imposing the sanction in the first place. See
Navarro-Ayala, 968 F.2d at 1426-27 (collecting cases); Willy v.
Coastal Corp., 915 F.2d 965, 968 (5th Cir. 1990). Because one
purpose behind such a sanction is to compensate the aggrieved party
for harm suffered in consequence of the sanctioned party's acts,
United Mine Workers, 330 U.S. at 304, the sanction "must bear a
reasonable relationship to the actual losses sustained by the
injured party." Goya I, 290 F.3d at 78. This does not mean,
however, that compensation is the only factor the ordering court
can consider. The opposite is true. Chambers, 501 U.S. at 53-54
& n.15; Hutto v. Finney, 437 U.S. 678, 691 n.17 (1978).
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Sanctions stem, in part, from a need to regulate conduct
during litigation. Chambers, 501 U.S. at 53. Thus, a sanction may
properly have a punitive aspect. See id. Similarly, deterrence
may be considered in fixing the amount of a monetary sanction. See
United Mine Workers, 330 U.S. at 303; Jones, 990 F.2d at 6. Given
these multiple purposes, a monetary sanction need not be perfectly
commensurate, dollar for dollar, with the aggrieved party's actual
loss. See United States v. Kouri-Perez, 187 F.3d 1, 6 n.2, 10 (1st
Cir. 1999); United States v. Marquardo, 149 F.3d 36, 40 (1st Cir.
1998); see also Media Duplic. Servs., Ltd. v. HDG Software, Inc.,
928 F.2d 1228, 1242 (1st Cir. 1991) (applying this principle to
Rule 16(f) sanctions).
In this case, we previously ruled that the district court
had discretion to include a prejudgment interest component in the
monetary sanction. Goya I, 290 F.3d at 80. We now hold that the
court acted within the realm of its discretion in settling upon the
statutory 10.5% rate as a basis for calculating that component.
For one thing, the appellants' contumacious conduct rendered it
impossible to determine with certainty what rate of return Goya
would have earned on the sale proceeds. In fairness, then, doubts
ought to be resolved against the contemnors. With that in mind,
the statutory rate represented an equitable estimate.2 See
2
Indeed, our earlier opinion invited the district court, if it
decided to include an interest component, to "draw[] upon any
reasonable statutory benchmark (state or federal)" in choosing an
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Cottrill v. Sparrow, Johnson & Ursillo, Inc., 100 F.3d 220, 225
(1st Cir. 1996) (noting that a statutory interest rate "is an
objective measure of the value of money over time"). For another
thing, the appellants' conduct was egregious, see Goya I, 290 F.3d
at 75-77, and the district court reasonably could have believed
that punishment and the need to deter others called for generosity.
See Chambers, 501 U.S. at 56-57; Fox v. Acadia State Bank, 937 F.2d
1566, 1571 (11th Cir. 1991) (per curiam).
The appellants' final argument also lacks force. The
record reveals an adequate basis for the district court's decision
to start the interest accrual clock on the date of the sale rather
than on the date that we affirmed the reach-and-apply judgment.
The appellants committed the contempt at the moment that Rennert
purchased the cooperative shares. Had they first notified the
district court, the court would have been able to protect Goya's
interests by, say, blocking the sale altogether (thus securing for
the putative creditor the future appreciation in the value of the
apartment) or ordering the sale proceeds deposited in the registry
of the court (thus earning interest from that time forward). Given
these realities, the appellants cannot now be heard to complain
about the court's decision to treat the closing date as the
starting point for the accrual of interest.
interest rate. Goya I, 290 F.3d at 79 n.9.
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We need go no further. A trial court's power to assert
its authority over a contemnor is broad. When the court orders the
contemnor to purge the contempt by paying a monetary sanction, a
reviewing court must tread lightly. Chambers, 501 U.S. at 55. In
this case, the court below fashioned a condign sanction that was in
reasonable proportion to the facts before it. The sanction must,
therefore, stand.
Affirmed.
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