Michael Williamson v. Recovery Limited Partnership
467 F. App'x 382
6th Cir.2012Background
- In re rem proceeding, CX and RLP were involved with the S.S. Central America treasure, with CADG as agent for disputes over ownership and proceeds.
- Thompson organized RLP and chaired CX; Directors Gilman D. Kirk, Michael J. Ford, James F. Turner, and W. Arthur Cullman were CX directors/managers of RLP.
- Plaintiffs Dispatch Printing and Donald Fanta invested in CX and RLP; CADG acted as defendant-entitys’ agent; CX’s and RLP’s counsel represented CADG in a related case.
- Three Ohio actions (2005–2006) were consolidated and removed to the Southern District of Ohio; a July 20, 2006 Consent Order required production for KPMG review and limited costs.
- KPMG conducted a forensic accounting review; the Consent Order allocated costs for KPMG and CX’s operating agreement, and preserved court jurisdiction for further issues.
- Plaintiffs moved for contempt in 2007–2008; district court found CX and RLP in contempt for failing to timely produce inventories/work papers, and awarded damages totaling $234,982 jointly against defendants (accounting fees and attorney fees) with Cullman excluded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the district court properly held contempt and awarded damages. | CADG/Dispatch asserts clear, willful violations of the Consent Order by CX, RLP, and Directors. | Defendants contend ambiguity and lack of willful disobedience; interpretations favored in Liberte; some damages incompatible with conduct. | Yes; contempt and damages affirmed for CX, RLP, and most Directors, with Cullman reversed. |
| Whether failure to produce inventory of Up Treasure was willful contempt. | Delays impeded accounting and violated the Consent Order's inventory production mandate. | Any delays were not willful or caused by contempt; interpretations of orders may have been in good faith. | Willful contempt established; delayed production violated the Consent Order and caused significant cost. |
| Whether failure to produce Alexander's work papers supported contempt damages. | Nonproduction of work papers violated April 30, 2007 order and delayed accounting. | Disputes over privilege and interpretation of the order; some steps taken; not all work papers produced timely. | Contempt for failure to produce work papers sustained; damages appropriately awarded. |
| Whether the Directors are personally liable given their resignations and control over compliance. | Directors owed fiduciary and statutory duties and had authority to ensure compliance with the order. | Some directors resigned before or during the order; cannot be held liable for acts post-resignation. | Cullman reversed; Turner affirmed; others affirmed; directors personally liable where they failed to act to enforce compliance. |
Key Cases Cited
- Liberte Capital Grp., LLC v. Capwill, 462 F.3d 543 (6th Cir. 2006) (ambiguities must be construed in contempt analysis)
- Glover v. Johnson, 199 F.3d 310 (6th Cir. 1999) (clear and convincing evidence required for contempt)
- Rylander, United States v., 460 U.S. 752 (U.S. Supreme Court 1983) (burden to show impossibility of compliance when raising defense)
- Grace v. Center for Auto Safety, 72 F.3d 1236 (6th Cir. 1996) (ambiguities resolved in favor of party charged with contempt)
- Gary's Elec. Serv. Co., The, 340 F.3d 373 (6th Cir. 2003) (contempt sanctions may compensate the complainant)
- Telling v. Bellows-Claude Neon Co., 77 F.2d 584 (6th Cir. 1935) (corporate officers bear responsibility for compliance with decrees)
- United States v. Fleischman, 339 U.S. 349 (1950) (corporate directors bear responsibility for orders to comply)
- Coccia, 598 F.3d 293 (6th Cir. 2010) (courts speak through written judgments; no ambiguity in written orders)
- Omnipoint Holdings, Inc. v. City of Southfield, 355 F.3d 601 (6th Cir. 2004) (interpretation of orders; not specific to contempt)