IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________
No. 01-51153
Summary Calendar
_____________________
In The Matter Of: LARRY WILLIAMS, doing
business as Larry Williams Electrical
Maintenance & Construction; SHANNON BRITTON
WILLIAMS, doing business as Larry Williams
Electrical Maintenance & Construction,
Debtors.
LARRY DEAN WILLIAMS; SHANNON BRITTON WILLIAMS,
Appellants,
versus
INTERNATIONAL BROTHERHOOD OF ELECTRICAL
WORKERS, LOCAL 520,
Appellee.
__________________________________________________________________
Appeal from the United States District Court
for the Western District of Texas
_________________________________________________________________
July 26, 2002
Before JOLLY, BENAVIDES, and STEWART, Circuit Judges.
E. GRADY JOLLY, Circuit Judge:
In this appeal, the debtors, Larry and Shannon Williams,
challenge the bankruptcy court’s grant of summary judgment in favor
of the International Brotherhood of Electrical Workers, Local 520
(“IBEW”) allowing two claims against the debtors’ bankruptcy
estate. The claims are based on two separate audits of the
1
debtors’ books that were conducted to assess the damages caused by
the debtors’ breach of a collective bargaining agreement with the
IBEW. We conclude that the bankruptcy court properly granted
summary judgment in favor of the IBEW because the debtor may not
challenge either claim in these bankruptcy proceedings. The claim
based on the first audit is a final judgment not subject to
collateral attack in bankruptcy proceedings. The claim based on
the second audit is not subject to attack in these proceedings
because the debtors refused to cooperate in the audit on which the
claim is based. As a consequence, on appeal they may not complain
about the alleged inaccuracy of the audit report. Accordingly, we
affirm the judgments of the bankruptcy court and district court.
I
The claims at issue in this case arose out of a pre-petition
dispute between the IBEW and the debtors, who operated a now-
defunct electrical contracting business. In 1998, the debtors
signed a collective bargaining agreement in which they bound
themselves to hire employees for commercial construction projects
exclusively through the IBEW hiring hall. The next year, the IBEW
filed a grievance with the debtors alleging that they had breached
the agreement by hiring employees outside the hiring hall. A
Labor-Management Committee ultimately determined that the debtors
breached the agreement and caused damages to the IBEW and its
members. The IBEW then filed an action in federal district court
to enforce the arbitration award. After conducting a hearing, the
2
district court ordered the debtors to comply with the labor
agreement and awarded damages to the IBEW in an amount to be
determined by an audit of the debtors’ books. The ensuing audit
revealed that the debtors’ breach had caused the IBEW $155,855 in
damages between August 1998 and November 1999.
When the debtors failed to comply with the terms of the
district court’s order, the IBEW filed another action in federal
court to enforce the order. After a hearing on April 19, 2000, the
district court held the debtors in contempt of court and ordered
the debtors to pay the $155,855 in damages assessed in the earlier
audit in accordance with its first judgment. The district court
also awarded the IBEW (1) reasonable attorney fees incurred in
connection with the contempt proceedings and (2) damages caused by
the debtors’ continued failure to comply with the labor agreement.
The district court ordered a second audit of the debtors’ books to
assess the additional damages caused by the debtors’ conduct
between December 1, 1999 and April 19, 2000. The second audit
determined that the IBEW lost $106,911 as a result of the debtors’
defiance of the district court order between December 1, 1999 and
June 6, 2000.1
On May 8, 2000, less than three weeks after the district court
issued its order, the debtors filed for bankruptcy under Chapter 13
1
The bankruptcy court ordered the auditor to extend its review
to June 6, 2000, the date on which the collective bargaining
agreement between the debtors and the IBEW expired.
3
of the Bankruptcy Code. The IBEW promptly filed claims against the
debtors in the bankruptcy court based on the two district court
judgments. The debtors objected to these claims, arguing that (1)
the damage award based on the first audit incorrectly included
damages to third parties and (2) the second audit produced an
inaccurate estimate of the actual damages to the IBEW. In
response, the IBEW filed a motion for summary judgment on the value
of its claims against the debtors. With respect to the damages
based on the first audit, the IBEW argued that the district court’s
judgment is insulated from collateral attack because it constitutes
res judicata. The IBEW further argued that the damages assessed in
the second audit cannot be attacked because they are a final award
of a labor arbitration committee and because any inaccuracies were
caused by the debtors’ failure to cooperate with the auditor.2
The bankruptcy court held that the IBEW was entitled to
summary judgment with respect to its claim for $155,855 based on
the first audit. Observing that the debtors did not contest the
findings of the first audit during the contempt proceedings, the
bankruptcy court held that it could not “somehow ignore [the
district court’s contempt] order and redetermine what has already
been determined in litigation by the parties.” The bankruptcy
2
According to the IBEW, the auditor was required to estimate
the damages based on assumptions drawn from the first audit because
the debtors did not provide the auditor with certain invoices and
did not identify which projects were commercial projects covered by
the collective bargaining agreement.
4
court further held that the IBEW was entitled to summary judgment
with respect to the second claim for $106,911 because “the record
is devoid of any evidence from the non-moving party on the issue of
the appropriateness of [the] audit for the second period of time.”
The debtors appealed to the district court, and the district court
affirmed.
II
On appeal, the debtors challenge the bankruptcy court’s grant
of summary judgment with respect to both claims asserted by the
IBEW. Specifically, the debtors argue that the bankruptcy court
erred in holding that the claim based on the first audit is res
judicata and therefore not subject to collateral attack. On the
second claim, the debtors argue that (1) the record was not, in
fact, “devoid” of evidence of inaccuracy in the second audit and
(2) the bankruptcy court essentially ruled sua sponte on the
sufficiency of the debtor’s evidence without giving the debtors
adequate notice of its intent to do so. We now turn to address
each argument, reviewing de novo the bankruptcy court’s decision to
grant summary judgment in favor of the IBEW. See In re Mercer, 246
F.3d 391, 402 (5th Cir. 2001) (en banc).
A
The debtors first argue that the district court’s contempt
order awarding the IBEW $155,855 based on the first audit was not
“final” because it was the product of a mutual mistake by the
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parties that may be rectified under Federal Rule of Civil Procedure
60(b). Specifically, the debtors argue that the audit report
included damages to third parties to which the IBEW is not
entitled. We find it clear, however, that the district court’s
judgment satisfies all of the elements of res judicata. The
parties to the contempt order are identical to the parties in this
action, the district court had jurisdiction to enter the contempt
order, the contempt order was a final judgment on the merits, and
it resolved the same claim that the debtors now seek to challenge.
See Ellis v. Amex Life Ins. Co., 211 F.3d 935, 937 (5th Cir. 2000).
As a consequence, the bankruptcy court correctly granted summary
judgment on the IBEW’s claim for $155,855 because it is not subject
to attack in these bankruptcy proceedings.3
B
With respect to the claim based on the second audit, the
debtors argue that the bankruptcy court granted summary judgment in
favor of the IBEW on a ground that the IBEW did not urge below.
The debtors maintain that the bankruptcy court ruled in favor of
the IBEW based on the court’s finding that the debtors had produced
insufficient evidence of inaccuracies in the second audit report,
despite the IBEW’s failure to raise this issue in its motion for
3
The fact that a judgment may be subject to a motion for
relief under Fed. R. Civ. P. 60(b) does not affect the finality of
the judgment. If the debtors wish to move for relief from the
district court’s contempt order under Rule 60(b) on the ground that
it was based on a mutual mistake, the debtors must do so in the
district court that issued the order.
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summary judgment and despite record evidence of inaccuracies in the
report.
Even assuming that the bankruptcy court erroneously decided
this issue sua sponte without giving the debtors adequate notice,4
however, we may affirm on a legal ground raised by the appellee
below but not addressed by the bankruptcy court or argued on appeal
as an alternative rationale for affirmance.5 In this case, the
IBEW argued in the bankruptcy court that the debtors may not
challenge the accuracy of the second audit report because any
inaccuracy was the result of the debtors’ failure to provide the
auditor with the appropriate records. We agree.
4
In John Deere Co. v. American Nat. Bank, Stafford, 809 F.2d
1190, 1191-92 (5th Cir. 1987), we held that the district court may
not grant summary judgment based on insufficiency of the evidence
where that issue was not raised in the motion for summary judgment
and the nonmoving party was not given ten days to respond.
5
See Gulf Island, IV v. Blue Streak Marine, Inc., 940 F.2d
948, 952 (5th Cir. 1991) (“[W]e are free to affirm the dismissal on
any ground presented to the district court for consideration, even
though it may not have formed the basis for the district court's
decision.”); Bickford v. Int’l Speedway Corp., 654 F.2d 1028, 1031
(5th Cir. Unit B 1981) (“[R]eversal is inappropriate if the ruling
of the district court can be affirmed on any grounds, regardless of
whether those grounds were used by the district court.”); J. E.
Riley Inv. Co. v. Comm’r of Internal Revenue, 311 U.S. 55, 59
(1940) (affirming on alternative ground not raised in the trial
court or appellate court, noting that “[w]here the decision below
is correct it must be affirmed by the appellate court though the
lower tribunal gave a wrong reason for its action”); see also
Mesnick v. General Electric Co., 950 F.2d 816, 820 (1st Cir. 1991)
(“An appellate panel is not restricted to the district court's
reasoning but can affirm a summary judgment on any independently
sufficient ground.”); United States v. Rose, 346 F.2d 985, 989 (3d
Cir. 1965) (“[A]ffirmance may be based on any rationale supported
by facts incontrovertibly established in the record.”).
7
Although we have never spoken on this issue, it seems clear to
us that, under most circumstances, a party forfeits its right to
challenge the accuracy of an audit conducted pursuant to a court-
enforced arbitration award if the party refuses to cooperate in the
auditor’s investigation.6 In the bankruptcy court, the debtors did
not contest the auditor’s testimony that the debtors did not
cooperate in the audit. Nor did the debtors argue in the
bankruptcy court that the information sought by the auditor was not
available to them at the relevant time.7 Instead, they argued that
the failure to cooperate in an audit does not bar a later challenge
to the accuracy of the resulting report. More precisely, the
debtors argued that their failure to provide the auditor with
necessary information merely shifts the burden of demonstrating
that the audit report is inaccurate.
In making this argument, the debtors rely on cases decided
under the Fair Labor Standards Act. Under these cases, where an
employer keeps incomplete or inaccurate records, “an employee has
6
See Walters Sheet Metal Corp. v. Sheet Metal Workers Local
No. 18, 910 F.2d 1565, 1567 & n.2 (7th Cir. 1990) (“[The damage]
amount was set subject to a full audit of Walters' accounts.
Walters, however, refused to let the auditor review its records in
order to determine the accuracy of the amount. It now challenges
this amount, effectively asking this court to do the task of the
auditor. We refuse.” (citation omitted)).
7
To the contrary, the debtors based their argument that the
audit report was inaccurate on a later examination of the relevant
records. An affidavit submitted by Larry Williams indicates that,
after the audit, he was able to determine the actual amount of the
damages to the IBEW caused by his breach of the collective
bargaining agreement.
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carried out his burden if he proves that he has in fact performed
work for which he was improperly compensated and if he produces
sufficient evidence to show the amount and extent of that work as
a matter of just and reasonable inference.” Anderson v. Mt.
Clemens Pottery Co., 328 U.S. 680, 687-88 (1946); see also Skipper
v. Superior Dairies, Inc., 512 F.2d 409, 420 (5th Cir. 1975). Once
the employee carries his burden, “[t]he burden then shifts to the
employer to come forward with evidence of the precise amount of
work performed or with evidence to negative the reasonableness of
the inference to be drawn from the employee's evidence.” Anderson,
328 U.S. at 687-88; Skipper, 512 F.2d at 420.
We find that it would be inappropriate to extend this rule to
the present case. As noted above, this is not a case in which the
debtors simply failed to keep adequate records of the work
performed in violation of the collective bargaining agreement. The
debtors evidently possessed the records sought by the auditor but
elected not to produce them. Having made this decision, the
debtors cannot now complain about the resulting inaccuracies in the
report.8
To ensure that a party found to be in violation of a
collective bargaining agreement has an incentive to cooperate with
8
Similarly, courts routinely permit the jury to draw an
adverse inference from a party’s bad faith suppression or
destruction of material documents. See Caparotta v. Entergy Corp.,
168 F.3d 754, 756 (5th Cir. 1999) (citing Vick v. Texas Employment
Comm’n, 514 F.2d 734, 737 (5th Cir. 1975)).
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auditors acting pursuant to a court-enforced arbitration award, we
hold that, absent exceptional circumstances, the breaching party
forfeits its right to challenge the accuracy of an audit if the
party refuses to provide the auditor with information in its
possession that is necessary to reach an accurate assessment of
damages. Because the debtors in this case failed to cooperate with
the auditor in this manner, they were not entitled to challenge the
auditor’s report in the bankruptcy court. We therefore conclude
that the bankruptcy court appropriately granted summary judgment in
favor of the IBEW with respect to its claim based on the second
audit.
III
For the reasons set out above, the judgments of the district
court and bankruptcy court are
AFFIRMED.
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