Aetna Casualty & Surety Co. v. Markarian

United States Court of Appeals
For the First Circuit

No. 95-1270
AETNA CASUALTY & SURETY CO.

Plaintiff, Appellee,
v.

JACK MARKARIAN,

Defendant, Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS

[Hon. William G. Young, U.S. District Judge]

Before

Stahl and Lynch, Circuit Judges,

and O'Toole, District Judge.*

Kenneth R. Berman, with whom Rhonda B. Parker and Sherin & Lodgen

LLP were on brief, for appellant.

David S. Douglas, with whom Howard S. Veisz, Gregg Kanter and

Kornstein, Veisz & Wexler LLP, and Glenda Ganem and McGovern, Hug,

Welch & Ganem LLP were on brief, for appellee.

June 4, 1997

*Of the District of Massachusetts, sitting by designation.

LYNCH, Circuit Judge. Jack Markarian, against whom
LYNCH, Circuit Judge.

appellee Aetna Casualty and Surety Company has a civil

judgment, appeals from the entry of a writ of ne exeat

against him. The writ, which is essentially a form of

equitable bail, was issued ex parte in the District of

Massachusetts in February 1995. It prohibits Markarian, an

American citizen who is employed and lives with his family in

Massachusetts, from leaving the state or removing any of his

assets from the state without the court's permission. The

writ required Markarian to surrender his passport to a United

States Marshal, and violation of its terms is punishable by

detention in a federal facility.

Markarian raises federal statutory and

constitutional objections to the issuance of the writ. We

vacate the writ without reaching the constitutional issues,

although they are not frivolous. The writ of ne exeat,

governed by Fed. R. Civ. P. 69 and Mass. R. Civ. P. 4.3(c),

is not available as a tool in an ordinary civil collection

action like this. It may only issue in furtherance of "a

judgment or order requiring the performance of an act, the

neglect or refusal to perform which would be punishable by

the court as a contempt." Mass. R. Civ. P. 4.3(c). The All

Writs Act, 28 U.S.C. 1651, does not negate this state

requirement for issuance of the writ.

I.

The facts of the underlying civil action brought by

Aetna against Markarian are of little importance to the

present appeal. Suffice it to say that Aetna was the victim

of a fraudulent autobody insurance claim scheme, and that

Markarian along with some relatives and the companies they

controlled were the perpetrators of the scheme. A e t n a

brought suit in federal district court in Massachusetts,

asserting claims under civil RICO, Massachusetts common law,

and the Massachusetts deceptive trade practices statute. A

jury found in Aetna's favor on most of the claims in the

complaint, and in November 1993 the district court entered

judgment holding Markarian and his 22 co-defendants jointly

and severally liable for over $6 million. Markarian and some

of the defendants were also found individually liable for

over $1.5 million under Mass. Gen. Laws Ch. 93A. This court

affirmed the judgment in December 1994. Aetna Cas. & Sur.

Co. v. P & B Autobody, 43 F.3d 1546 (1st Cir. 1994).

Judgment in hand, Aetna sought to identify and

seize assets. It commenced a supplementary process

proceeding in federal court under Fed. R. Civ. P. 69 and

Mass. Gen. Laws Ch. 224, 14 seeking an order transferring

ownership of Markarian's non-exempt assets. Aetna also filed

an ex parte application for the writ of ne exeat and

supported it with an affidavit stating that Markarian and

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his co-defendants were secreting assets to render them immune

to supplementary process.

The district court issued the writ of ne exeat in

February 1995, finding that Markarian and his co-defendants

had been moving assets out of the jurisdiction as part of an

effort to prevent enforcement of the judgment and that there

was a strong likelihood that they would continue to do so.

The district court also found that there was an immediate

likelihood that the co-defendants would depart the

jurisdiction or the United States.

In March 1995, Markarian appealed from the writ and

filed a suggestion of bankruptcy. The bankruptcy filing

resulted in an automatic stay of the supplementary process

proceedings, see 11 U.S.C. 362(a), and later in March,

Markarian moved this court to stay the appeal from the writ.1

This court issued an order holding the appeal in abeyance and

directing counsel to report back after the decision from the

bankruptcy court. Markarian then moved to vacate the writ

before the bankruptcy court, which denied the motion without

prejudice in November 1995 and referred Markarian back to the

district court. See In re Jack Markarian, No. 95-40961

(Bankr. D. Mass. Nov. 20, 1995).

1. The writ does not appear to fall within the terms of the
Automatic Stay provision of the Bankruptcy Code, see 11

U.S.C. 362, and thus the writ and the appeal from the writ
were not stayed automatically by the bankruptcy filing.

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The district court in March 1996 denied Markarian's

motion to vacate the writ, stating that it lacked

jurisdiction over the matter. Markarian moved for

clarification of this ruling. While that motion was pending,

in July 1996, the bankruptcy court ruled that Markarian's

debts to Aetna were not dischargeable because they arose out

of fraud. See In re Jack Markarian, No. 95-40961 (Bankr. D.

Mass. Jul. 31, 1996). However, the bankruptcy court deemed

the issue close enough to stay the order of non-

dischargeability and certify the case to the First Circuit

Bankruptcy Appellate Panel, where it is now pending. In

October 1996, the district court, ruling on Markarian's

motion for clarification of the refusal to vacate the writ of

ne exeat, denied the motion "on the merits" without opinion

or findings. This appeal followed.

II.

Aetna argues that there is no appellate

jurisdiction, saying the writ is no more than an

interlocutory order to preserve assets until its separate

supplementary process proceedings against Markarian are

completed.2 We disagree. At issue is not a supplementary

process order but a writ of ne exeat: Aetna's motion papers

and the order issuing the writ make no reference to

2. The supplementary process proceedings cannot resume until
the conclusion of the bankruptcy proceedings unless the stay
is lifted.

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supplementary process, and the writ, by its terms, does not

expire with the termination of the supplementary process

proceedings. The writ is effectively an injunction over

which this court has jurisdiction pursuant to 28 U.S.C.

1292(a). See United States v. Shaheen, 445 F.2d 6, 7 (7th

Cir. 1971). We also note Markarian's argument that issuance

of the writ was an error of law, and thus the writ may well

be an appealable collateral order. See id. at 7 n.2.

III.

Where a money judgment has been entered in federal

court, enforcement of the judgment is governed by Fed. R.

Civ. P. 69, which provides that the procedures to be used are

those of the state in which the district court sits, unless

there is an applicable federal statute. Aetna availed itself

of state process, seeking a writ of ne exeat.

Massachusetts procedure permits issuance of the

writ only in support of an order punishable by the court as a

contempt. See Mass. R. Civ. P. 4.3(c). A money judgment is

not such an order.3 "[T]he writ of ne exeat has never been

issued in aid of legal, as distinguished from equitable,

process, or for the purpose of obtaining security from a

3. The Massachusetts supplementary process statute, however,
provides that violation of a supplementary process order may
be punishable as a contempt. See Mass. Gen. Laws Ch. 224,

16. We do not reach the question of whether the writ may be
used after a supplementary process order has been issued and
there has been a violation. That is not the case here.

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defendant in at action of law." Moore v. Valda, 23 N.E.

1102, 1103 (Mass. 1890) (per curiam). "[W]hen a party fails

to satisfy a court-imposed money judgment the appropriate

remedy is a writ of execution, not a finding of contempt."

Combs v. Ryan's Coal Co., 785 F.2d 970, 980 (11th Cir. 1996);

see also Shuffler v. Heritage Bank, 720 F.2d 1141, 1147-48

(9th Cir. 1983). It follows that the issuance of the writ

was error. See Gabovitch v. Lundy, 584 F.2d 559, 560 (1st

Cir. 1978) (failure to comply with state procedure

invalidated writ of execution).

These are not mere formalisms. The writ of ne

exeat is an ancient writ. It hearkens back to the days when

debtors were imprisoned for failure to pay their debts. The

writ is itself a form of civil arrest. Caselaw on the writ

has narrowed its use to situations resulting from equitable

debt rather than debts recoverable at law. See 65 C.J.S. Ne

Exeat 4, at 396 (1966). The Massachusetts rule is

similarly circumscribed.

Indeed, the Reporter's Notes to the Massachusetts

rule providing for the writ of ne exeat express concern about

the constitutionality of the writ, even circumscribed as it

is. The Massachusetts courts, recognizing that the writ

operates in restraint of personal liberties, have held that

the writ "is to be granted with caution" and "is to be

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continued in force with caution." Cohen v. Cohen, 64 N.E.2d

689, 693 (Mass. 1946).

Aetna's motion for a writ of ne exeat finds no

ground on which to rest. Rule 69 does not provide that

ground independently, because it directs that "[p]rocess to

enforce a judgment for the payment of money shall be a writ

of execution, unless the court directs otherwise. The

procedure on execution . . . shall be in accordance with the

practice and procedure of the state in which the district

court is held . . . ." The "otherwise" clause is narrowly

construed. See Combs, 785 F.2d at 980. It does not

authorize enforcement of a civil money judgment by methods

other than a writ of execution, except where "well

established principles [so] warrant." 13 J. Moore, Moore's

Federal Practice 69.02, at 69-5 to -7 (3d ed. 1997); see

also Hilao v. Estate of Marcos, 95 F.3d 848, 854 (9th Cir.

1996).4

4. One such situation is where an action for contempt has
been instituted for failure to pay an obligation imposed by
statute in order to enforce the public policies embodied in
the statutory scheme. See, e.g., McComb v. Jacksonville

Paper Co., 336 U.S. 187, 193-95 (1949). Another is where

there has been a congressional determination to provide the
government with the ability to seek a writ of ne exeat in

furtherance of enforcing tax obligations. See, e.g., 26

U.S.C. 7402(a). A third is where the judgment is against a
state which refuses to appropriate funds through the normal
process provided by state law. See, e.g., Spain v.

Mountanos, 690 F.2d 742, 744-45 (9th Cir. 1982); Gary W. v.

Louisiana, 622 F.2d 804, 806 (5th Cir. 1980). In contrast,

the size of the award and the difficulties in enforcing the
judgment due to the location of the assets and the

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This court has held that "the legislative history

and judicial application of Rule 69(a) make clear that the

first sentence of the Rule expresses a limitation on the

means of enforcement of money judgments and does not create a

general power to issue writs of execution in disregard of the

state law incorporated by the rest of the Rule." Gabovitch,

584 F.2d at 560-61. The state remedy is the exclusive route

here. See id. at 561.

Aetna also points to the All Writs Act, 28 U.S.C.

1651, but does not develop its argument. The point is not

well taken. The All Writs Act "does not authorize [federal

courts] to issue ad hoc writs whenever compliance with

statutory procedures appears inconvenient or less

appropriate." Pennsylvania Bureau of Correction v. United

States Marshals Serv., 474 U.S. 34, 43 (1985). Where, as

here, there is a statutory procedure which "specifically

addresses the particular issue at hand, it is that authority,

and not the All Writs Act, that is controlling." Id.

Indeed, there is every reason not to reach to find the All

Writs Act applicable where "the courts have consistently read

Rule 69(a) as limiting all federal process on money judgments

uncooperativeness of the judgment debtor are not the types of
extraordinary circumstances which warrant departure from the
general rule that money judgments are enforced by means of
writs of execution rather than by resort to the contempt
power of the courts. See Hilao, 95 F.3d at 855.

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to the type of process available under state law."

Gabovitch, 584 F.2d at 561.

This opinion does not condone Markarian's failure

to pay his judgment debt, nor does it fail to appreciate

Aetna's frustration. It simply holds that the legal

predicate for issuance of the extraordinary writ of ne exeat

is lacking and so issuance of the writ was error.

The order granting the writ is reversed and the

writ is vacated. No costs.

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