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Shmuely v. Transdermal Specialties, Inc.

United States District Court, E.D. Pennsylvania

July 10, 2019

YOCHEVED SHMUELY, et al Plaintiffs,
v.
TRANSDERMAL SPECIALTIES, INC. et al Defendants.

          MEMORANDUM OPINION AND ORDER

          RICHARD A. LLORET, U.S. MAGISTRATE JUDGE

         BACKGROUND

         On September 10, 2018, the plaintiffs filed a motion to enforce the settlement agreement that the parties had entered into. See Doc. No. 43. The plaintiffs alleged that the defendants breached the settlement agreement by failing to pay $120, 000 by August 31, 2018. Id. They requested that the Court enter an order directing the defendants to pay the settlement amount, along with prejudgment interest and attorneys' fees related to the filing of the motion to enforce. Id.

         After considerable negotiation occurred in this and a related case, by Order of May 21, 2019, I granted the plaintiffs' motion to enforce the settlement, and provided relief directing payment of the settlement amount, prejudgment interest, and attorneys' fees. Doc. No. 63. By separate order the same day, I scheduled a hearing for June 4, 2019. Doc. No. 64. Mr. Redding did not show up for the hearing and did not contact my chambers to explain why he did not. By Order of June 10, 2019, I directed Bruce K. Redding, Jr., to file an affidavit explaining why he failed to appear at the motion hearing scheduled for June 4, 2019. Doc. No. 67. Mr. Redding has failed to supply the affidavit on or before June 18, 2019, as commanded. The Order was mailed to Mr. Redding at his last known address. It was returned undeliverable by the U.S. Post Office. Doc. No. 70. It was mailed again to an updated address on June 27, 2019. Id. (unnumbered entry following Doc. No. 70). To date there has been no response by Mr. Redding.

         Plaintiffs' Memorandum of Law in Further Support of Plaintiffs' Request to Hold Defendants in Contempt (Doc. No. 66) explains Mr. Redding's various failures to abide by my orders. I directed plaintiffs' counsel to supply additional information by my Order of June 17, 2019. See Doc. No. 68. Plaintiffs' counsel complied by letter on June 24, 2019, which is attached as an exhibit to this Order. The plaintiffs' letter of June 24, 2019, details the ways in which Mr. Redding and the other defendants have failed to comply with my previous orders. Id.[1]

         As plaintiffs' letter of June 24, 2019 reveals, the defendants have not provided any financial statements affirmed under oath, any financial statements certified by an accountant as having been prepared in accordance with generally accepted accounting principles, or any affidavit concerning the defendants' efforts to obtain financing to pay the defendants' settlement obligation of $120, 000.

         The defendants have filed nothing to suggest that they do not owe the money they agreed to pay under the settlement agreement. The defendants have filed nothing to suggest that the plaintiffs' calculation of attorneys' fees and costs, together with interest, is incorrect. See Doc. No. 66-1, at 2. I find that the defendants owe the money they agreed to pay, and that plaintiffs' claims for attorneys' fees and interest are appropriate. I will discuss the issue whether the defendants, particularly Mr. Redding, are in contempt of court, and if so, what remedy I should impose.

         DISCUSSION

         Contempt authority has been conferred upon magistrate judges by statute. See 28 U.S.C. § 636(e).[2] Section 636(e)(4) addresses civil contempt authority in consent cases:

In any case in which a United States magistrate judge presides with the consent of the parties under subsection (c) of this section, and in any misdemeanor case proceeding before a magistrate judge under section 3401 of title 18, the magistrate judge may exercise the civil contempt authority of the district court. This paragraph shall not be construed to limit the authority of a magistrate judge to order sanctions under any other statute, the Federal Rules of Civil Procedure, or the Federal Rules of Criminal Procedure.

28 U.S.C. § 636(e)(4) (emphasis added); see also Wallace v. Kmart Corp., 687 F.3d 86, 91- 92 (3d Cir. 2012) (recognizing that magistrate judges are authorized to “‘exercise the civil contempt authority of the district court' in civil cases where the magistrate judge is presiding by consent of the parties pursuant to 28 U.S.C. § 636(c)” (quoting 28 U.S.C. § 636(e)(4)).

         The parties consented to the jurisdiction of a magistrate judge for all proceedings and entry of final judgment, pursuant to 28 U.S.C. § 636(c). See Doc. No. 37 (reference order). Accordingly, I have the same civil contempt authority as a district judge.[3]

         A district court has the “inherent power to enforce compliance with their lawful orders through civil contempt.'” Spallone v. United States, 493 U.S. 265, 276 (1990) (quoting Shillitani v. United States, 384, U.S. 364, 370 (1996)); see also Schutter v. Herskowitz, No. 07-3823, 2008 WL 4822012, at *4 (E.D. Pa. Nov. 6, 2008) (Strawbridge, J.). To hold an individual in civil contempt, [4] the court must find that “(1) a valid court order existed, (2) the [individual] had knowledge of the order, and (3) the [individual] disobeyed the order.” John T. ex. rel. Paul T. v. Del. Cty. Intermediate Unit, 318 F.3d 545, 552 (3d Cir. 2003) (quoting Harris v. City of Phila., 47 F.3d 1311, 1326 (3d Cir. 1995)); see also Lawn Doctor, Inc. v. Rizzo, 646 Fed.Appx. 195, 199 n.4 (3d Cir. 2016) (not precedential). These elements must be proven by clear and convincing evidence. Robin Woods Inc. v. Woods, 28 F.3d 396, 399 (3d Cir. 1994) (citing to Quinter v. Volkswagen of America, 676 F.2d 969, 974 (3d Cir. 1982)). The petitioning party has the burden in civil contempt proceedings. Lawn Doctor, Inc., 646 Fed.Appx. at 201 (citing to Howard Johnson Co., Inc. v. Khimani, 892 F.2d 1512, 1516 (11th Cir. 1990)).

         While “good faith is not a defense to civil contempt, ” see Robin Woods Inc., 28 F.3d at 399, an inability to comply or an ambiguity in the court order may excuse noncompliance. See United States v. Rylander, 460 U.S. 752, 757 (1983) (“Where compliance is impossible, neither the moving party nor the court has any reason to proceed with the civil contempt action.”); Robin Woods Inc., 28 F.3d at 399 (“[T]here is a ‘longstanding salutary rule in contempt cases that ambiguities and omissions in orders redound to the ...


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