United States Court of Appeals
For the First Circuit
No. 04-2669
UNITED STATES OF AMERICA,
Appellee,
v.
STEPHEN A. SACCOCCIA,
Defendant,
JACK HILL, ESQ., and W. KENNETH O'DONNELL, ESQ.,
Appellants.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
[Hon. Ernest C. Torres, Chief U.S. District Judge]
Before
Boudin, Chief Judge,
Stahl, Senior Circuit Judge,
and Lynch, Circuit Judge.
W. Kenneth O'Donnell for appellants.
Michael P. Iannotti, Assistant United States Attorney, with
whom Robert Clark Corrente, United States Attorney, and Michael E.
Davitt and Patrick Murphy, Asset Forfeiture and Money Laundering
Section, United States Department of Justice, were on brief, for
appellee.
December 23, 2005
LYNCH, Circuit Judge. This case presents the question of
whether appellants, a pair of criminal defense attorneys, committed
civil contempt when they accepted legal fees from their client in
the face of an earlier protective order restraining the defendant
client from disbursing certain assets.
The appellants, attorneys Jack Hill and W. Kenneth
O'Donnell, began representing the client, Stephen Saccoccia, in
1991 and 1992, respectively. Saccoccia and his co-defendants were
convicted in 1992 and 1993 in separate trials; their appeals from
the criminal convictions were resolved against them in 1995.
The government first sought in 1998 to recover virtually
all of the fees paid to counsel. The government did not at that
time pursue a contempt theory; instead, it sought to reach the sums
paid to the lawyers both before and after trial as forfeited funds
under the Racketeer Influenced and Corrupt Organizations Act
(RICO), 18 U.S.C. § 1961 et seq. The district court rejected the
government's forfeiture claim as to fees paid before the jury's
verdict of conviction. It allowed the claims for fees paid after
the jury verdict but before entry of the judgment of conviction --
an approximately three-month span in 1993.
This court vacated the order as to the post-verdict fees.
The government then tried again, via a motion filed in 2004, to
obtain an award of the post-verdict fees, this time utilizing a
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civil contempt theory. The district court again agreed and ordered
the defense lawyers to turn over these fees to the government.
We reverse. We find that the Protective Order at issue
in this case did not clearly and unambiguously enjoin Hill and
O'Donnell from accepting the attorneys' fees in question, and so
the civil contempt finding cannot stand.
I.
A. The Indictment, Protective Order, and Trial
In 1991, Saccoccia, his wife, and a host of other
defendants were indicted for crimes arising out of a scheme to
launder $140 million in illegal drug distribution proceeds.1 See
United States v. Saccoccia (Saccoccia V), 342 F. Supp. 2d 25, 27
(D.R.I. 2004). Saccoccia, his wife, and several of the other
defendants were charged with, inter alia, one count of RICO
conspiracy. See United States v. Saccoccia (Saccoccia IV), 354
F.3d 9, 11 (1st Cir. 2003). The indictment contained a forfeiture
count for the defendants' interests in various assets; these
included named bank accounts, business property and proceeds
(including gold and jewelry), and "$140,000,000 in U.S. currency in
that such sum in the aggregate represents the proceeds the said
defendants obtained directly and indirectly from the racketeering
activity."
1
A superseding indictment was returned on July 22, 1992.
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Four days after the initial indictment was returned, the
district court, pursuant to 18 U.S.C. § 1963(d)(1)(A),2 entered an
ex parte Protective Order ("the Order") enjoining Saccoccia and the
other defendants, and their agents and attorneys, from transferring
assets that the government alleged would be forfeitable upon
conviction. See Saccoccia V, 342 F. Supp. 2d at 27. The
interpretation of that Order is at issue in this case. The Order
banned the transfer of specific assets, such as certain bank
accounts. It also stated that Saccoccia and his agents, attorneys
and others, "shall not, without approval of this Court . . .
alienate, dissipate, [or] transfer . . . or . . . take, or cause to
be taken, any action which . . . would have the effect of . . . in
any way diminishing the value of any property named in Attachment
A to this Order." Attachment A includes among the named property
the following: "$140,000,000 in U.S. currency for which the
defendants . . . are jointly and severally liable."
Saccoccia's attorneys were concerned from the outset
about whether any attorneys' fees paid by Saccoccia would be
subject to forfeiture. In early 1992, shortly after Saccoccia was
2
This provision authorizes the court to enter a restraining order
or injunction "to preserve the availability of property described
in [the criminal forfeiture provision, § 1963(a)] . . . upon the
filing of an indictment or information" charging a RICO violation
and "alleging that the property with respect to which the order is
sought would, in the event of conviction, be subject to
forfeiture." 18 U.S.C. § 1963(d)(1)(A).
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indicted, appellant Hill and another attorney met with Assistant
United States Attorneys (AUSAs) James Leavey and Michael Davitt and
asked them about their office's policy regarding forfeiture of the
fees paid to defense attorneys. See United States v. Saccoccia
(Saccoccia III), 165 F. Supp. 2d 103, 106 (D.R.I. 2001), aff'd in
part, vacated in part, 354 F.3d 9 (1st Cir. 2003). Leavey told
them that the U.S. Attorney's Office in Rhode Island had never
sought to forfeit reasonable fees paid to attorneys. Id.
Specifically, Hill testified that Leavey said "that he and the
Government in Rhode Island had never done that. It was not their
policy to do that, and . . . they did not intend to do that,
subject to the caveat of reasonableness, in terms that monies
received were reasonable, in light of the services rendered and
expenses and so forth." However, Leavey testified at a 1999
forfeiture hearing that he also told the two defense attorneys that
day that "this case may be the first one" where a forfeiture of
reasonable attorneys' fees would be sought.
A couple of weeks later, Hill and the other attorney
again met with Leavey, this time to discuss the possibility of a
plea agreement for Saccoccia. Id. Leavey stated during that
discussion that if the parties reached agreement on a plea, Leavey
would include in the written plea agreement a provision that the
government would not seek forfeiture of reasonable attorneys' fees.
Id.
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Later, in the fall of 1992, appellant O'Donnell told
Leavey that he, too, might represent Saccoccia and asked about the
government's forfeiture policy. Id. Leavey essentially repeated
what he had told Hill, stating to O'Donnell that the U.S.
Attorney's Office in Rhode Island had never sought to forfeit
reasonable attorneys' fees. Id. O'Donnell later testified that
Leavey told him during that conversation "that [Leavey] was aware
that there were other assets out there that hadn't been
specifically frozen, and [Leavey] essentially said that . . . if
you find . . . an asset which isn't frozen, you can have it for
attorney's fees, as long as it's reasonable and as long as none of
it goes to Saccoccia or his wife." O'Donnell also testified that
Leavey's assurances -- that his office had never sought forfeiture
of fees and had no intention of doing so in this case -- were
reiterated to him by the then-U.S. Attorney for the District of
Rhode Island during a telephone call shortly after O'Donnell's
conversation with Leavey.3
On September 28, 1992, during a hearing before the
district court,4 attorneys for Saccoccia and other defendants
3
In a later conversation, on April 5, 1996, Leavey told O'Donnell
that his office "did not intend to move to forfeit his legal fee"
but would do so if "[then-Attorney General] Janet Reno said to do
it."
4
The district judge who presided over this hearing, Saccoccia's
subsequent trial, and the forfeiture and contempt litigation is not
the same judge who had entered the Protective Order.
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argued in support of their motions to compel the government to
reveal precisely which of Saccoccia's assets it had frozen, and
upon what authority, so that defense counsel could look to any
unfrozen accounts for legal fees and defense costs. During that
hearing, an attorney representing Mrs. Saccoccia suggested that
there was a "race for the proceeds" developing between the
government and defense counsel; he told the court that he had at
one point called AUSA Leavey to tell him about an unfrozen account
in Switzerland and Leavey replied, "don't tell me because if you
tell me I am going to have to go get it." AUSA Leavey argued in
response that the government should not be forced to specify the
frozen accounts for the defense because that would give Saccoccia
"free rein to go to all the other accounts that he has," if he had
any at all. He suggested that the defense should instead give the
government a list of all of Saccoccia's assets, and the government
would then tell the defense which (if any) were unfrozen. Later in
the hearing, he characterized the government's position as: "[G]ive
us assets of a hundred and forty million dollars and everything
over that is yours for legal counsel."
The district court denied the defense motions. In so
doing, it noted its understanding that "the Government cannot
deprive a criminal Defendant of his only assets available for
attorneys' fees without any showing that the assets are connected
to illegal activity." However, it said that that was not the
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situation before the court. The main legal precedent the defense
team cited for its position was distinguishable, the court said,
because in that case,
the Government had left the Defendant with
nothing but the shirt on his back. So that,
in effect, what the Government had done was
taken all of the assets of the Defendant and
left the Defendant unable to pay counsel.
There's been no such showing in this
case. . . . It would seem to the Court that
the minimum . . . that the Defendants would
have to present . . . to the Court [is
something] to indicate that the tying up of
their assets is depriving them of funds needed
to conduct their defense and that is lacking.
Saccoccia eventually went to trial; on March 12, 1993,
the jury found him guilty of one count of RICO conspiracy, as well
as numerous substantive (i.e. non-conspiracy-based) counts of money
laundering and related offenses under 18 U.S.C. §§ 1952, 1956, and
1957. The jury determined, as part of its finding as to the
substantive counts, that Saccoccia had laundered $9,382,757.
However, it did not make any finding as to RICO forfeiture;
Saccoccia waived jury trial on that issue, and no finding was made
as to RICO forfeiture prior to sentencing. See United States v.
Saccoccia (Saccoccia I), 823 F. Supp. 994, 997 & n.1 (D.R.I. 1993),
aff'd, 58 F.3d 754 (1st Cir. 1995).
-8-
The district court sentenced Saccoccia on May 12, 1993,5
to a 660-year term of imprisonment and a fine in excess of $15
million; the court also, pursuant to RICO, ordered Saccoccia to
forfeit in excess of $136 million. On June 4, 1993, the court
issued a written opinion explaining its forfeiture conclusion and
reiterating that Saccoccia had to forfeit more than $136 million.
Id. at 1006. Judgment of conviction entered on June 10, 1993; the
conviction, sentence, fine, and forfeiture were affirmed on appeal
in 1995. United States v. Saccoccia (Saccoccia II), 58 F.3d 754
(1st Cir. 1995).
B. The Fees
The issues on appeal, more than twelve years after
Saccoccia's conviction, concern the fees received by his attorneys
in the period between the jury verdict on March 12, 1993, and the
imposition of sentence, opinion on forfeiture, and judgment of
conviction, on May 12, June 4, and June 10, 1993, respectively. In
an earlier proceeding (discussed further below), the district court
found that appellant Hill received a total of $504,985 in fees.
Saccoccia III, 165 F. Supp. 2d at 107. Of that total, Hill
received $250,000 before the jury verdict against Saccoccia, while
"[t]he remaining $254,985 was received on March 25, 1993." Id. It
is this $254,985 which is still at issue as to Hill. All but
5
The government stated in its brief that sentence was imposed on
May 18, not May 12. We use the date set forth in the records of
the district court.
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$25,000 of Hill's total fee was paid in the form of checks or wire
transfers from a Swiss attorney, Valentin Landman; the payments
ranged in size from $20,000 to $229,985. Id. The remaining
$25,000 was delivered, in cash, to appellant O'Donnell's office.
Id. The date of this cash transfer is not clear; O'Donnell stated
in a deposition that it was "between February 17 and March" of
1993, but could not provide a more exact date.
O'Donnell, meanwhile, was also receiving payment of his
own fees. The district court found that "[b]etween January 1993
and April 1993, O'Donnell received approximately $410,000. One
hundred twenty-five thousand dollars of that amount was delivered
anonymously to his office in cash installments ranging from $25,000
to $50,000." Id. The court found that O'Donnell kept $107,500 of
the total as payment for his fees, while the rest was given to him
for distribution to co-defense attorneys and others. Id.
O'Donnell received $65,000 of his total fee before Saccoccia was
found guilty and the remaining $42,500 in the weeks after the jury
verdict. Id. As to O'Donnell, it is the $42,500 which the
government now seeks to recover.
During an August 11, 1999 hearing, O'Donnell testified
that various gold and jewelry merchants in Rhode Island and
Massachusetts had told him, before Saccoccia's trial, that they had
done legitimate business with Saccoccia over the years and that
they had records to prove it. O'Donnell also testified that he was
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told by Saccoccia that some of the monies the defense attorneys
received as fees were the proceeds of loans Saccoccia had made
earlier that were being repaid by the debtors, while other funds
used for attorneys' fees stemmed from loans made to Saccoccia by
others. Specifically, O'Donnell testified that Saccoccia said one
of the payments consisted of the proceeds of a loan Saccoccia had
made that had nothing to do with illegality but instead stemmed
from "his other businesses." O'Donnell also stated that Saccoccia
told him "on several occasions" that a large sum of money that had
been wired to defense counsel from Switzerland for fees stemmed
from funds loaned to Saccoccia by "an individual and a bank." He
further testified that he had seen documents that "appeared . . .
to be loan documents, promissory notes" bearing Saccoccia's
signature, which confirmed for him that the latter payments were
indeed loan proceeds. He stated: "Loan proceeds that never touched
the Saccoccia's [sic] hands are not covered by that [protective]
order, I would think. Accounts receivable owed to him that . . .
never touched his hands and were never in his possession aren't
encompassed by that order either."
C. The First Proceeding for Forfeiture of Attorneys' Fees
After the defense attorneys had received the disputed
funds but before the filing of any motion seeking a return of fees
on grounds of forfeiture, the government sought leave in August
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1993, pursuant to 18 U.S.C. § 1963(k),6 to depose various defense
attorneys, including appellants, on the subject of their legal fees
and Saccoccia's assets generally. At a February 18, 1994, hearing
on the application, the district court asked AUSA Leavey whether
the purpose of deposing the attorneys to learn about their fees was
to forfeit them. Leavey replied:
The purpose at this point, Your Honor, would
be to locate the money that [Saccoccia] now
has and to seize them [sic] to satisfy the
judgment. If there is a next step after that,
in going after attorneys' fees that he has
already paid the attorneys, we are not at that
stage at this point.
The district court granted the government's § 1963(k) application
on August 28, 1995; pursuant to that order, Hill and O'Donnell were
deposed on March 28 and 29, 1996.
The government filed a motion on January 23, 1998, based
on the deposition testimony and evidence from the criminal trials,
seeking to compel Hill, O'Donnell, and several other defense
attorneys involved in the Saccoccia case to turn over their fees.
Specifically, the government sought the return of $504,985 from
Hill and $107,500 from O'Donnell. It argued that the fees were
forfeitable under 18 U.S.C. § 1963(c), which applies to "proceeds"
of a RICO conspiracy that have been transferred by a defendant to
another person, or § 1963(m), which makes other property of a
6
Section 1963(k) permits the court, upon application of the
United States, to "order that the testimony of any witness relating
to the property forfeited be taken by deposition."
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defendant forfeitable as "substitute assets" when the "proceeds"
cannot be located. See Saccoccia III, 165 F. Supp. 2d at 105.
Alternatively, the government argued that if the fees were not
forfeitable under § 1963(c) or (m), they were forfeitable
nonetheless because they had been transferred in violation of the
Order. Id. This was purely a statutory RICO forfeiture argument
and not a contempt argument. Id. at 114.
On July 31, 2001, the district court issued its decision,
finding for the government in part and ordering Hill and O'Donnell
to disgorge $254,985 and $42,500, respectively. Id. Those were
the amounts, the district court found, that Hill and O'Donnell had
received after the March 1993 jury verdict against Saccoccia. It
reasoned that prior to the verdict, Hill and O'Donnell were
"reasonably without cause to believe" the money used to pay them
was subject to forfeiture, 18 U.S.C. § 1963(c), and therefore even
though the funds were in fact proceeds of money laundering
violations, they were not forfeitable under § 1963(c). Saccoccia
III, 165 F. Supp. 2d at 111-12. The same result did not obtain for
post-verdict fees, the court held, because "[a]t that point, there
no longer was any reasonable doubt about the Saccoccias' guilt, and
it had become clear that virtually all of their assets were
proceeds of their RICO violations." Id. (emphasis added).
The district court rejected the government's alternative
argument that all the fees, including pre-jury verdict payments,
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had to be disgorged because their acceptance violated the Order.
It wrote that the argument "does not withstand scrutiny." Id. at
113. The court explained:
The mere fact that an order is entered
enjoining the transfer of property does not
make the property forfeitable. Nor does the
property become forfeitable solely because it
is transferred in violation of such an order.
If that were so, property described in or
transferred in violation of such an order
would become forfeitable even if it, later,
was determined not to be "property described
in subsection (a) [of 18 U.S.C. § 1963]." Such
legal alchemy would violate the plain language
of subsection (d)(1).
Id. at 113-14 (quoting 18 U.S.C. § 1963(d)(1)).
Hill and O'Donnell appealed, arguing that the district
court's order was improper because they had already spent the
post-verdict fees in question. Saccoccia IV, 354 F.3d at 12. This
court agreed, holding that the "substitute assets" provision, 18
U.S.C. § 1963(m), "plainly does not afford an avenue through which
the government may reach a third party's untainted assets as a
substitute for tainted assets which the third party had already
transferred prior to the date of forfeiture." Saccoccia IV, 354
F.3d at 13. We vacated the portion of the district court's
decision requiring Hill and O'Donnell to forfeit their post-verdict
fees and remanded for further proceedings. Id. at 15-16.
D. The Attempt to Recover Fees on a Civil Contempt Theory
On February 5, 2004, in the wake of this court's decision
in Saccoccia IV, the government filed a motion seeking to compel
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Hill and O'Donnell to turn over the money still at issue -- the
$254,985 received by Hill and the $42,500 received by O'Donnell
after March 12, 1993 -- on the ground that, in accepting those
fees, the attorneys had committed civil contempt by violating the
1991 Protective Order. The district court accepted this argument:
on October 25, 2004, it found Hill and O'Donnell in contempt and
ordered that they disgorge the post-verdict fees. Saccoccia V, 342
F. Supp. 2d at 32-33.
In its decision, the district court examined whether the
government had established, by clear and convincing evidence, that
the attorneys had engaged in civil contempt. It utilized the usual
civil contempt inquiry: (1) whether the alleged contemnor had
notice of the order; (2) whether the order was clear, definite, and
unambiguous; (3) whether the alleged contemnor had the ability to
comply with the order; and (4) whether the alleged contemnor
violated the order. Id. at 30-32. There was no doubt that the
attorneys had notice of the Order. Id. at 31. As to prong (2),
Hill and O'Donnell had argued that the Order was unclear, inter
alia, "because it was impossible for them to determine whether a
particular one hundred dollar bill paid to them as part of their
fees" came from the specific $140 million in U.S. currency that had
been enjoined. Id. at 32. The district court rejected this
argument, writing:
[Hill and O'Donnell] appear to rely on what
some courts have referred to as the "four
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corners" rule which states that prohibited
conduct must be ascertainable from the "four
corners" of the order. However, that reliance
is misplaced. The "four corners" rule simply
requires that the prohibited conduct be
clearly described in the order itself. In
this case, the Protective Order does clearly
describe the prohibited conduct. It
specifically enjoins the transfer of the
"$140,000,000 in U.S. currency for which the
defendants are jointly and severally liable."
Id. (citation omitted). The court found that the attorneys could
have complied with the Order by simply refusing to accept post-
verdict fees. Id. Finally, the court found that the Order had
been violated because "there is no question that the fees at issue
were part of the $140,000,000 referred to in the Protective Order."
Id.
Hill and O'Donnell timely appealed.7
II.
In civil contempt cases, we first look to the text of the
order to determine whether it is clear. As to findings of fact, we
7
On appeal, Hill and O'Donnell renew their argument, rejected
by the district court, that the government's motion was barred by
laches and take issue with many of the district court's findings of
fact and conclusions as to civil contempt. Because of our
disposition of this case, we need only address appellants'
contention that the district court erred in finding that the Order
was "clear and unambiguous" in barring their acceptance of fees.
Hill and O'Donnell also challenge the jurisdiction of the
district court, and this court, on the grounds that (1) the
district court lost the authority to enforce the Order at the time
of judgment in Saccoccia's criminal case, and (2) alternatively, a
four-year statute of limitations should apply to civil contempt
motions. We find these arguments meritless and do not discuss them
further.
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review for clear error, while "[t]he trial court's ultimate finding
on contempt is reviewed for abuse of discretion." Project
B.A.S.I.C. v. Kemp, 947 F.2d 11, 15-16 (1st Cir. 1991).
Importantly, though, "our review will proceed more searchingly
when, as here, we are confronted with a finding of contempt than
when we are called upon to consider a finding exonerating a
putative contemnor from a charged contempt." Id. at 16.
A. Substantive Principles of Civil Contempt
Civil contempt may be imposed to compel compliance with
a court order or to compensate a party harmed by non-compliance.
McComb v. Jacksonville Paper Co., 336 U.S. 187, 191 (1949).
However, "[r]ecognizing the contempt power's virility and damage
potential, courts have created a number of prudential principles
designed to oversee its deployment." Project B.A.S.I.C., 947 F.2d
at 16. As the district court properly noted, the proof must
establish (1) that the alleged contemnor had notice that he was
"within the order's ambit," id. at 17; (2) that the order was
"clear and unambiguous," e.g., Accusoft Corp. v. Palo, 237 F.3d 31,
47 (1st Cir. 2001) (quoting Project B.A.S.I.C., 947 F.2d at 16);
(3) that the alleged contemnor had the ability to comply, see
United States v. Rylander, 460 U.S. 752, 757 (1983) (stating that
"where compliance is impossible, neither the moving party nor the
court has any reason to proceed with the civil contempt action");
and (4) that the order was indeed violated, Project B.A.S.I.C., 947
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F.2d at 16. This court has sometimes combined the related "clear
and unambiguous" and violation prongs, asking whether "the putative
contemnor has violated an order that is clear and unambiguous."
Id. When the question turns on findings of fact, "a complainant
must prove civil contempt by clear and convincing evidence." Id.
(internal quotation marks omitted) (quoting Langton v. Johnston,
928 F.2d 1206, 1220 (1st Cir. 1991)).
We focus on the "clear and unambiguous" prong together
with the violation prong. This court has, over the years, provided
guidance as to how the "clear and unambiguous" requirement should
be analyzed. First, "[t]he test is whether the putative contemnor
is 'able to ascertain from the four corners of the order precisely
what acts are forbidden.'" Goya Foods, Inc. v. Wallack Mgmt. Co.,
290 F.3d 63, 76 (1st Cir. 2002) (quoting Gilday v. Dubois, 124 F.3d
277, 282 (1st Cir. 1997)). The purpose of this "four corners" rule
is to assist the potential contemnor by narrowly cabining the
circumstances in which contempt may be found. It is because "[t]he
consequences that attend the violation of a court order are
potentially dire," Project B.A.S.I.C., 947 F.2d at 17, that "courts
must 'read court decrees to mean rather precisely what they say,'"
id. (quoting NBA Properties, Inc. v. Gold, 895 F.2d 30, 32 (1st
Cir. 1990)). As the Supreme Court has written:
The judicial contempt power is a potent
weapon. When it is founded upon a decree too
vague to be understood, it can be a deadly
one. Congress responded to that danger by
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requiring that a federal court frame its
orders so that those who must obey them will
know what the court intends to require and
what it means to forbid.
Int'l Longshoremen's Ass'n v. Philadelphia Marine Trade Ass'n, 389
U.S. 64, 76 (1967) (identifying the specificity requirements of
Fed. R. Civ. P. 65(d) as relevant to certain contempt inquiries);
see also Sanders v. Air Line Pilots Ass'n, Int'l, 473 F.2d 244, 247
(2d Cir. 1972). Along the same lines, "we must read any
ambiguities or omissions in . . . a court order as redound[ing] to
the benefit of the person charged with contempt." NBA Properties,
895 F.2d at 32 (second alteration in original) (internal quotation
marks and citation omitted).
Finally, if the "clear and unambiguous" test is to have
any content, it cannot be applied in the abstract. The question is
not whether the order is clearly worded as a general matter;
instead, the "clear and unambiguous" prong requires that the words
of the court's order have clearly and unambiguously forbidden the
precise conduct on which the contempt allegation is based. See
Perez v. Danbury Hosp., 347 F.3d 419, 424 (2d Cir. 2003) (rejecting
district court's finding that an order was clear and unambiguous
where the district court "appeared to rule in a vacuum and failed
to evaluate whether the order was 'clear and unambiguous' with
reference to the conduct in question"). The Order in this case,
therefore, must have "left no reasonable doubt" that an attorney
would be violating its terms were that attorney to accept the post-
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guilty verdict attorneys' fees in question. Project B.A.S.I.C.,
947 F.2d at 17.
B. Application of the Civil Contempt Requirements
We discuss two questions -- first, the meaning of the
Order, and second, the adequacy of the evidence to show that the
payments came out of assets restricted by the Order. The two
issues are interconnected. The clarity of the Order is judged in
connection with the facts presented. Here, as we discuss, the
Order does not say that all of Saccoccia's assets are restricted,
nor does it say that all assets received from Saccoccia become
restricted on a finding of guilt. As to the evidence, the
government did not prove that these particular payments to the
attorneys came out of restricted assets.
1. The Order's Text and Context
The relevant portion of the Order8 states that it barred
Saccoccia and his attorneys from alienating, dissipating, or
transferring "$140,000,000 in U.S. currency for which the
defendants . . . are jointly and severally liable."
It is true that the purpose of the Order was to preserve
assets so that they would be available for later forfeiture should
the government prevail on its forfeiture claim. Beyond that,
8
The Order also contained a number of specific injunctions as to
bank accounts, gold, and other assets. We focus on the $140
million provision because the government and the district court
relied on it. See Saccoccia V, 342 F. Supp. 2d at 32.
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however, the exact relationship between the forfeiture laws and the
Order was not specified. More fundamentally, we think that the
Order did not clearly establish that there were no assets from
which fees could be paid.
The phrase "$140,000,000 in U.S. currency" does not
itself identify assets or state whether it is inclusive of all
assets belonging to Saccoccia. Further, the Order did not itself
distinguish between tainted and substitute assets; it instead
referred only to assets "for which [Saccoccia is] jointly and
severally liable." A reasonable person, reading the Order in 1993,
could have had legitimate doubts as to whether it restrained any
"substitute assets," as defined by 18 U.S.C. § 1963(m). Indeed,
that year, several courts held that such substitute assets may not
be restrained prior to conviction. See, e.g., In re Assets of
Martin, 1 F.3d 1351, 1362 (3d Cir. 1993) (holding that 18 U.S.C. §
1963(d)(1)(A) does not authorize pre-conviction restraints on
substitute assets).9
9
The fact that appellants accepted fees in the face of an unclear
Order does not run afoul of the different rule that where an order
is by its terms clear and unambiguous, a party's subjective doubt
about the order's scope or effectiveness does not render the order
ambiguous. See Goya, 290 F.3d at 75-76 ("[T]he appellants could
have asked the district court for clarification as to the enduring
vitality of the November 1995 orders, but . . . [t]hey 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."). Here the Order itself was unclear.
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Thus the Order, when issued, could have been interpreted
in various ways. It could have meant that the court believed that
all of Saccoccia's assets were tainted and that none could be used
to pay attorneys' fees; but it did not say that expressly or even
impliedly. It could have meant that at least $140 million in
assets had to be preserved for the government, and that any party,
including a lawyer, seeking payment of any kind from the Saccoccia
coffers had to satisfy the court that he was being paid from the
unprotected excess or would risk losing the assets. But it did not
expressly say that either. It also could have been read to mean
that the government had the right to identify up to $140 million in
tainted assets that would be frozen, but also bore the burden of
making specific identifications, leaving any of Saccoccia's assets
not yet so identified presumed untainted and therefore freely
transferable.
Context further reinforces that there was ambiguity about
what the Order required and what it did not. It is entirely
consistent with the four corners rule (which is meant to protect
alleged contemnors) to look at context offered by the alleged
contemnors to demonstrate that there was ambiguity in the terms of
the Order. See Danbury Hosp., 347 F.3d at 424-25 (applying four
corners rule and noting that the district court had previously
expressed an understanding of a consent decree that would not have
prohibited appellants' conduct and considering that fact in its
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"clear and unambiguous" analysis). Early on, Hill and O'Donnell
requested clarification from the government, via the district
court, as to which of Saccoccia's assets could be used to pay
attorneys' fees. At the 1992 hearing, the district court found
there had been no showing that the government had "taken all of the
assets of the Defendant and left the Defendant unable to pay
counsel."10 If the district court had understood the Order to block
all payment of attorneys' fees from whatever source, one would not
have expected it to make such a statement.
In summary, the Order's text did not clearly state that
it covered all of Saccoccia's assets. Only six months before the
payments at issue, there was no clear understanding that all of
Saccoccia's assets were in fact covered or that there were no
assets from which reasonable attorneys' fees could be paid.
Defense counsel's efforts to obtain clarity had been rebuffed;
moreover, the district court had commented that the government
could not deprive Saccoccia of his only assets for paying
attorneys' fees without a showing that the assets were connected to
illegal activity.
10
The government added to the bevy of contradictory signals. For
example, the AUSA would, understandably, not commit on whether the
government would ever seek forfeiture of attorneys' fees, even from
the Protective Order funds, and on whether, in any event, there
were funds available outside the Protective Order.
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As discussed next, the government failed to produce
evidence demonstrating that the payments were within the activities
expressly forbidden by the Order.
2. The Government's Approach
The district court reasoned that any ambiguities that
existed at the time the Order was entered were resolved by the
evidence adduced at trial and by the jury verdict. Essentially,
the court accepted the government's position that after the
verdict, and even before entry of judgment of conviction, it was
perfectly clear that (1) all of Saccoccia's assets were subject to
the Order, (2) the payments received in this period came from
Saccoccia's assets, and so necessarily came from assets subject to
the Order, and (3) acceptance of these particular assets violated
the Order.
The district court's ruling may reflect a sort of common-
sense judgment that by the time the verdict of guilt was delivered,
it was clear that there was little chance Saccoccia would have any
funds to pay his lawyers after paying off the inevitable forfeiture
of funds, and that the lawyers should have had less confidence in
accepting the payments once the guilty verdict was rendered. These
are not unreasonable assumptions. The government chose to proceed
under a contempt theory, however, and the law of civil contempt
requires much more precision. And that rationale is ill-suited to
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the language of the Order. The government's evidence does not show
that the terms of the Order were violated.
The jury made no determination as to the amount Saccoccia
was required to forfeit pursuant to RICO, or as to the provenance
of particular funds, or as to the total amount of Saccoccia's
assets. It simply returned a general verdict of guilt as to the
RICO charge, leaving it to the judge to make findings of fact as to
forfeiture at sentencing. The payments at issue here came before
the court made those findings of fact.
Further, even the district court's June 4, 1993 opinion
regarding forfeiture did not find that all of Saccoccia's assets
stemmed from money laundering. See generally Saccoccia I, 823 F.
Supp. 994. In fact, no fact-finder has ever reached such a
conclusion; even in its much later decision as to fee forfeiture
under the RICO statute, the district court found only that
"virtually all of [Saccoccia's] assets were proceeds of [his] RICO
violations." Saccoccia III, 165 F. Supp. 2d at 112 (emphasis
added); see also id. at 111 (finding that Saccoccia's businesses
were "not particularly profitable" and that they were "primarily"
fronts for money laundering).
Given its choice of a contempt theory, the government had
the burden of proof to show, by clear and convincing evidence, that
the attorneys' acceptance of post-jury verdict fees fell within the
list of activities expressly forbidden by the Order. Based on this
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record, the government, which presented no new evidence in support
of its contempt motion but instead relied on the record and the
district court's prior findings, failed to carry that burden.
III.
The fact that this case involves attorneys' fees rather
than payments for other purposes gives the lawyers no advantage.
Fees paid to attorneys from the criminal proceeds of their clients
are not held sacred. They may be reached by the government, and
Congress, under RICO, has set clear parameters for the forfeiture
of attorneys' fees. See generally Caplin & Drysdale, Chartered v.
United States, 491 U.S. 617 (1989). This case does not involve the
use of those RICO procedures. Rather, the principles involved here
are of civil contempt, a serious sanction requiring unmistakably
clear notice to the person involved of what is required. Those
standards were not met here.
We reverse the district court's order of contempt and
remand for entry of judgment for appellants. No costs are awarded.
Reversed.
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