and is essential for the purpose of assuring that the retarded residents of Pennhurst are being transferred to community facilities that are safe, sanitary and beneficial to their habilitation. The Hearing Master conducts hearings for each Pennhurst resident for whom a community living arrangement has been prepared for the purpose of determining whether the proposed transfer from Pennhurst to the Community is "voluntary", as well as for the purpose of determining whether the proposed community living arrangement will be beneficial to his or her habilitation. The Court is vitally concerned that no retarded resident of Pennhurst or any other member of the plaintiff class be transferred to any community living arrangement that is not beneficial to his or her habilitation. The Masters' offices ensure that the poor sanitation, safety, habilitation, and training conditions found to exist at Pennhurst are not duplicated on a smaller scale in community living arrangements.
For the reasons set forth in its Memorandum of January 6, 1982, the Court found the Commonwealth defendants likewise in contempt for their failure to comply with the Court's Orders of August, September, October, and November. In its Memorandum of August 25, 1981, the Court detailed its reasons for holding the Commonwealth defendants in contempt. Essentially, the Court found that Secretary O'Bannon and the Department had failed to act with due diligence and steadfast purpose to comply with the valid Orders of this Court. As a result, the Masters' offices were without funding.
The Court, in its Memorandum of August 25, 1981, concluded that it possessed inherent equitable powers to effectuate compliance with its Orders through the imposition of civil contempt fines. The Court rejected Commonwealth defendants' argument that Secretary O'Bannon had acted in good faith, finding good faith inapplicable to a civil contempt proceeding. Furthermore, the Court found that she had not acted in good faith. The Court also rejected the Commonwealth defendants contention that the action of the Legislature raised a state law barrier to compliance by the Commonwealth defendants. See Memorandum of August 25, at 13-22. Thus, after various challenges to the Court's contempt Order, the Commonwealth defendants began paying a civil contempt fine of $ 10,000.00 per day.
The Commonwealth defendants, while paying $ 10,000.00 per day in fines, have nevertheless failed to comply with this Court's Orders of June 4, 1981, July 14, 1981, August 20, 1981, September 16, 1981, October 22, 1981, November 18, 1981, and November 24, 1981, ordering them to pay a total of $ 406,478.27 into the Registry of this Court for the purpose of defraying the costs of the Special Master and the Hearing Master. To date, the Commonwealth defendants have paid only $ 35,000.00 of this amount.
The Commonwealth defendants maintain that they have been unable to comply with the funding Orders of this Court because the Legislature failed to appropriate a special fund for the Masters' offices for the fiscal year 1981-82 and that, therefore, no funds will be forthcoming from the Commonwealth defendants for the remainder of the fiscal year. The Court remains unimpressed with this contention and has not been persuaded that the Commonwealth defendants have been totally without funds sufficient to comply with the Court's Orders. Nevertheless, the Court finds that the contempt of the Commonwealth defendants has inflicted a continuous harm on the plaintiff class which will continue until at least July 1, 1982.
On July 24, 1981, at the hearing on the Order to show cause why the Commonwealth defendants should not be held in civil contempt, the Commonwealth defendants advised the Court that they did not intend to comply with the Court's Orders concerning the expenses of the Masters. However, the Commonwealth defendants stated at that hearing that they were not "contest(ing) the underlying validity of (the Court's) Orders. (N.T. at 100).
The United States Supreme Court has stated that "federal courts are not reduced to issuing injunctions against state officers and hoping for compliance. Once issued, an injunction may be enforced.... If a state agency refuses to adhere to a court order, a financial penalty may be the most effective means of insuring compliance." Hutto v. Finney, 437 U.S. 678, 690-91, 98 S. Ct. 2565, 2573, 57 L. Ed. 2d 522 (1978).
Liability for civil contempt accrues when a defendant violates an order, knowing it to have been issued. Thompson v. Johnson, 410 F. Supp. 633 (E.D.Pa.1976), aff'd, 556 F.2d 568 (3d Cir. 1977). The purpose of a civil contempt remedy is to coerce compliance with the court order and to compensate the party who is the beneficiary of the court order for the failure to comply. Cromaglass Corp. v. Ferm, 500 F.2d 601, 604 (3d Cir. 1974); U. S. v. Spectro Foods Corp., 544 F.2d 1175, 1176, 1182-83 (3d Cir. 1976).
On December 4, 1981, the Commonwealth defendants filed with this Court a motion to "modify" the contempt order and "purge" them of the contempt. Commonwealth defendants styled this request as a motion pursuant to Rule 60(b) of the Federal Rules of Civil Procedure. However, a close examination of the relief requested by the Commonwealth defendants and the reasoning supporting that request shows their motion is a motion addressed to the Court's inherent power to purge defendants of contempt. The Court has therefore considered the motion as one requesting a purging of the Commonwealth defendants' contempt and termination of their obligation to continue payment of the daily fines.
Although the Commonwealth defendants have taken no affirmative action to comply with the Court's Orders, they have paid a daily fine of $ 10,000.00 per day. These payments now exceed $ 1,200,000.00. To date, twelve orders of this Court requiring funding for the Masters have gone unheeded by the Commonwealth defendants. The Masters' offices regained funding for full-scale operation on October 21, 1981, when, pursuant to this Court's Order of October 20, 1981, $ 87,314.40 and $ 13,695.60 in funds created by the Commonwealth defendants' payment of the civil contempt fines were transferred to the Special Master and the Hearing Master, respectively.
On December 11, 1981, the Court transferred $ 80,371.21 of the fine payments to the Special Master and $ 13,588.48 of the fine payments to the Hearing Master to enable these offices to continue full-scale operation after the funds transferred on October 20, 1981 were exhausted. Thus far, the offices of the Special Master and the Hearing Master have spent approximately $ 130,000.00 of the funds generated by the payment of civil contempt fines during the period October 21, 1981 through January 3, 1982.
As the Commonwealth defendants have pointed out, they have paid into the Court Registry more money than the Masters' budgets for the fiscal year in question. They assert, and the Court acknowledges, that it seems inequitable to continue collecting fines when the funds collected exceed the amounts needed to enable the Masters' offices to operate. For this reason, the Court will relieve the Commonwealth defendants of their obligation to continue paying the $ 10,000.00 per day civil contempt fine.
As this Court determined in its Memorandum of October 21, 1981, 526 F. Supp. 423, a federal court possesses broad equitable power to apply funds generated by civil contempt fines in order to accomplish the purpose of the injunction violated. See Memorandum of October 21, 1981 at 427-428. The Special Master and the Hearing Master are necessary to ensure that members of the plaintiff class receive the full constitutional and statutory rights to which they are entitled. This Court will continue to exercise its equitable right to apply the fund resulting from fine payments in order to carry out its injunctive orders.
Since transferring some of the fund created by the payment of civil contempt fines on October 21, 1981, this Court has required that the Special Master and the Hearing Master each week submit to the Court a list of proposed expenditures for the week. The Court reviews these expenditures, approving only those that are consistent with the Court' s Memorandum of October 21, 1981, 526 F. Supp. 423, and Order of October 20, 1981. Since the Masters' offices resumed full-scale operation on October 21, 1981, expenditures have averaged $ 10,665.00 per week for the Special Master and $ 1,699.00 per week for the Hearing Master. Extrapolated, this would result in expenditures of approximately $ 550,000.00 per year for the Special Master and $ 90,000.00 per year for the Hearing Master, compared with the 1981-82 proposed budgets submitted by the Commonwealth defendants to the Legislature totaling $ 900,000.00. These recent expenditures indicate a reduction of more than 25 percent in the Masters' budgets. The Masters have taken steps, pursuant to the Court's close supervision, to operate in the least costly and most efficient manner possible.
The Court has requested the Special Master and the Hearing Master to provide the Court with a budget through June 30, 1982 conditioned on the representations of the Commonwealth defendants that they will perform meaningful reviews of the individual habilitation plans developed for members of the plaintiff class. These submissions indicate that, for the 1981-82 fiscal year ending June 30, 1982, the Special Master and the Hearing Master will require $ 343,585.00.
In approving the budget of the Special Master for the 1981-82 fiscal year, which ends on June 30, 1982, the Court has assumed that the Commonwealth defendants will adequately perform the task, which they have agreed to undertake, of reviewing individual habilitation plans and will in the future commence the essential task of conducting meaningful inspection of all community living arrangements to which the members of the plaintiff class are transferred so that the health, safety, and habilitation hazards found to exist at Pennhurst are not duplicated on a smaller scale in the community. The Court will, therefore, enter an Order authorizing the Clerk of the Court to pay on the first day of February, March, April, May, and June such sums as are approved by this Court for the purpose of operating the Masters' offices. The remainder of the fund generated by the Commonwealth defendants' payment of civil contempt fines will be held in interest-bearing accounts pending further orders of this Court.
The Order authorizing continued funding to the Offices of the Special Master and the Hearing Master through June 30, 1982, which the Court will enter on this date, does not involve funds that will be needed to pay past due obligations incurred by the Offices of the Special Master and the Hearing Master during the July 1, 1981 to October 21, 1981 period when the Masters were deprived of funding prior to this Court's Order of October 20, 1981 transferring funds resulting from the civil contempt fines. The Court will direct the Masters to submit to this Court detailed accounts of these past obligations and will at a later date enter an Order transferring from the fund resulting from fine payments a sufficient amount to pay such of these obligations as are approved by the Court. The Special Master and the Hearing Master shall submit these reports on or before February 15, 1982.
The Commonwealth defendants, although they have failed to comply with the Orders of this Court, will nevertheless be purged of the contempt in view of the fact that they have paid fines in an amount sufficient to comply with this Court's injunctive Orders requiring them to pay the costs of the Masters, and will be relieved of this obligation to continue to pay $ 10,000.00 per day in coercive and compensatory civil contempt fines. An appropriate Order will be accordingly entered.
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