THE NATIONAL SPIRITUAL ASSEMBLY OF THE BAHÁ‘ÍS OF THE UNITED STATES OF AMERICA UNDER THE HEREDITARY GUARDIANSHIP, INC., Plaintiff, υ. NATIONAL SPIRITUAL ASSEMBLY OF THE BAHÁ‘ÍS OF THE UNITED STATES OF AMERICA, INC., Defendant-Appellant, υ. FRANKLIN D. SCHLATTER, JOEL B. MARANGELLA, PROVISIONAL NATIONAL BAHÁ‘Í COUNCIL OF THE UNITED STATES, et al., Respondents-Appellees.
No. 08-2306
United States Court of Appeals For the Seventh Circuit
ARGUED FEBRUARY 20, 2009—DECIDED NOVEMBER 23, 2010
Amy J. St. Eve, Judge.
Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 1:64-cv-01878
SYKES, Circuit Judge. This appeal is from a civil-contempt proceeding alleging violations of an injunction entered more than four decades ago. The case is complicated not just by the passage of time but also because it arises in the context of a religious schism, and the individuals and groups against whom contempt sanctions are sought were not parties to the original litigation. The underlying suit was a trademark and property dispute between the American Bahá‘í church—formally known as the National Spiritual Assembly of the Bahá‘ís of the United States of America, Inc. (“National Spiritual Assembly“)—and a dissident group incorporated in 1964 under the like-sounding name of the National Spiritual Assembly of the Bahá‘ís of the United States of America Under the Hereditary Guardianship, Inc. (“Hereditary Guardianship“). In 1966 a district-court judge enjoined the Hereditary Guardianship from using the trademarked names and symbols of the National Spiritual Assembly. Within months the Hereditary Guardianship dissolved, and the dissenting faithful thereafter disagreed among themselves over issues of spiritual leadership and doctrine. This disagreement eventually produced a second schism. Over time the former followers of the Hereditary Guardianship established several new religious groups and a publishing firm, all operating in varying ways in the name of the Bahá‘í faith.
Forty years later, the National Spiritual Assembly returned to the district court and asked for contempt sanctions against several of these groups and their principals for allegedly violating the terms of the 1966 injunction.
We think these two important opinions can be reconciled. The common-law rule expounded in Alemite—essentially codified in
Although the district court should have applied Merriam, the judge‘s findings are thorough enough to permit us to resolve the privity question without a remand. The respondent nonparty religious groups and their principals are not sufficiently identified in interest with the Hereditary Guardianship to permit a conclusion that they had their day in court back in 1966. We affirm.
I. Background
A. The Bahá‘í Schism and the 1966 Injunction
The Bahá‘í faith originated in Persia in 1844 with the teachings of the Báb, who foretold that God would soon reveal a prophet to the world. In 1863 Bahá‘u‘lláh, one of the Báb‘s followers, announced that he was this prophet and began several decades of spiritual teaching and writing. With Bahá‘u‘lláh‘s death in 1892, spiritual leadership passed to his eldest son, Abdu‘l-Bahá. Abdu‘l-Bahá died in 1921, and his eldest grandson, Shoghi Effendi, then led the faith as its Guardian. Effendi died unexpectedly in 1957 without having clearly designated a successor. Spiritual authority passed temporarily to the Hands of the Cause of God, a group of 27 Effendi-appointed spiritual leaders who stewarded the religion until 1963. At that
The National Spiritual Assembly, whose predecessor organization was formed in the United States in 1909, recognizes and accepts this described line of succession. Charles Mason Remey did not. Remey, one of Effendi‘s appointed Hands, proclaimed in 1960 that Effendi‘s spiritual authority had passed to him as the Second Guardian of the Faith. The other Hands rejected this claim, believing that Effendi was the first and last Guardian of the Faith, and they expelled Remey from their ranks. The National Spiritual Assembly likewise views Remey as a schismatic figure.
In 1962 Remey instructed his followers to establish the National Spiritual Assembly of the Bahá‘ís of the United States Under the Hereditary Guardianship. The Hereditary Guardianship was incorporated in New Mexico in 1964, and it served as the coordinating body for an affiliation of individuals, groups, and local spiritual assemblies in the United States dedicated to Remеy‘s Guardianship. The Hereditary Guardianship itself was comprised of nine “Members” who essentially acted as a board of directors and, at least initially, followed Remey‘s declarations and directives.1
In the year of its incorporation, the Hereditary Guardianship commenced a civil action against the National Spiri-
and also sued for all other properties and funds in the National Spiritual Assembly‘s possession. The National Spiritual Assembly in turn asserted counterclaims against the Hereditary Guardianship for trademark infringement and unfair competition, among other causes of action.
Shoghi Effendi was the only Guardian of the Baha‘i Faith, and there is no Guardian at the present time and has been none since 1957. The procedures followed by the Hands of the Cause and the succession of authority from Shoghi Effendi to The Universal House of Justice were in full accordance with the controlling documents and sacred writings and teachings of the Faith.
Nat‘l Spiritual Assembly v. Nat‘l Spiritual Assembly, No. 64 C 1878, 1966 WL 7641, at *2 (N.D. Ill. 1966). The judge also found that the National Spiritual Assembly “is the highest authority of the Baha‘i Faith in the continental United States, and has been recognized and authorized as such by The Universal House of Justice and its predecessor supreme Baha‘i Faith authorities.” Id. at *3. On the basis of these and other findings of fact, Judge Austin concluded that “[t]here is only one Baha‘i Faith,” and that the National Spiritual Assembly is the “highest authority for the Faith in [the] continental United States and is entitled to exclusive use of the marks and symbols of the Faith.” Id. at *11. The judge went on to hold that the National Spiritual Assembly owned valid trademarks in several specific Bahá‘í symbols, names, and phrases including a trademark in the word “Bahá‘í“—all of which the Hereditary Guardianship had infringed. Judge Austin then entered the following injunction:
IT IS ORDERED, ADJUDGED AND DECREED that the counter-defendant, [the Hereditary Guardianship], its officers, agents, servants, employees, attorneys, and all persons in active concеrt or participation with them, including [affiliated local groups], and individuals, or any of them, be and they are hereby enjoined from using in their activities the designations “National Spiritual Assembly of the Baha‘is of the United States of America Under the Hereditary Guardianship, Inc.,” “Baha‘i News Bureau,” “Baha‘i Round Robin,” “Baha‘i,” trademark representations of the Baha‘i House of Worship, the Arabic design “The Greatest Name,” and any other designation which by colorable imitation or otherwise is likely to be mistaken for or confused with [the National Spiritual Assembly‘s] name or marks as indicated above or is likely to create the erroneous impression that [the Hereditary Guardianship‘s] religious activities, publications or doctrines originate with [the National Spiritual Assembly], and from otherwise competing unfairly with [the National Spiritual Assembly] or infringing [the National Spiritual Assembly‘s] rights.
Id. at *12.
Remey acquiesced in the injunction, and he forbade the Hereditary Guardianship and its followers from pursuing reconsideration or appeal “regardless of consequences.” A few months later, in December 1966, the Hereditary Guardianship ceased all activities and dissolved. Remey eventually reconstituted his church and changed his title to the “First Guardian of the Abha Faith.”
In 2006 the National Spiritual Assembly returned to court seeking contempt sanctions against five religious organizations and individuals—all remnants of the Hereditary Guardianship but nonparties to the original litigation—for allegedly violating the 1966 injunction. The National Spiritual Assembly contended that the alleged contemnors were in privity with the Hereditary Guardianship and therefore bound by the injunction. The named respondents can be classified into two groups. The first includes Joel Marangella, Frank Schlatter, and the Provisional National Bahá‘í Council of the United States, Inc. The second includes the Second International Bahá‘í Council d/b/a Bahá‘ís Under the Provisions of the Covenant (“Second International Council“) and Bahá‘í Publishers Under the Provisions of the Covenant (“Bahá‘í Publishers“). We offer a brief description of each.
1. The First Group of Alleged Nonparty Contemnors
Joel Marangella was the president of a council that functioned essentially as a liaison between Remey and the Hereditary Guardianship. While not a board member of the Hereditary Guardianship, Marangella was actively involved in the organization and participated in some aspects of the underlying litigation, basically as a trusted assistant to Remey. A few years after the Hereditary Guardianship dissolved, Marangella split with Remey and forced a second schism. He proclaimed himself to be Remey‘s appointed Third Guardian of the Bahá‘í Faith. Remey disputed Marangella‘s
Franklin Schlatter was a founding board member and officer of the Hereditary Guardianship. He appears to have been involved with the Hereditary Guardianship‘s activities to a considerable degree and was part of the board that voted to sue the National Spiritual Assembly. When the Remey-Marangella schism occurred, Schlatter followed Marangella and served as secretary of the Provisional National Council (and its predecessors) from 1978 through 2001. In 1997 Marangella appointed Schlatter as a Hand of the Cause of God to assist and act on his behalf.
The Provisional National Council governs all believers within the United States who recognize Marangella as the Third Guardian, much like Hereditary Guardianship governed those who recognized Remey as the Second Guardian. Marangella personally appoints all Provisional National Council board members and
2. The Second Group of Alleged Nonparty Contemnors
The Second International Council and Bahá‘í Publishers were created by Dr. Leland Jensen, who signed the incorporation papers for the Hereditary Guardianship and served as a board member from April 1963 to May 1964. In 1964, however, Jensen lost reelection to the board, and he thereafter disassociated himself from any formal governance role in the Hereditary Guardianship. Accordingly, he was not a board member when the Hereditary Guardianship sued the National Spiritual Assembly, nor did he have any role in the litigation. Dr. Jensen continued to follow Remey‘s Guardianship, however, and when he and his wife moved to Missoula, Montana, sometime later that year, they established a small community of believers there.
In 1969 Dr. Jensen formed the Bahá‘í Publishers as a publishing trust and incorporated it in Montana in 1987. Bahá‘í Publishers publishes books and pamphlets on Dr. Jensen‘s interpretation of the beliefs of the Bahá‘í faith “under the Provisions of the Covenant.” Dr. Jensen also helped establish the Second International Council in 1991, which was incorporated two years later. The Second International Council handles administrative responsibilities for believers in the Bahá‘í faith “under the Provisions of the Covenant” and describes its “main responsibility” as “giv[ing] guidance to anybody who requests it.” Jensen died in 1996.
Judge Austin had long since died by the time the National Spiritual Assembly returned to court in 2006, so the contempt motion was assigned to Judge Amy St. Eve. She authorized limited discovery and then held an extensive evidentiary hearing on the question of whether the alleged nonparty contemnors were in privity with the Hereditary Guardianship and thus bound by the injunction. She concluded they were not. In reaching this decision, Judge St. Eve declined to follow the First Circuit‘s decision in Merriam, 639 F.2d 29, on which the National Spiritual Assembly had substantially relied in support of its privity claim. But she made detailed findings about the relationship of each of the alleged contemnors to the Hereditary Guardianship and/or Remey, and based on those findings, concluded that they could not be bound. This appeal followed.
II. Analysis
The National Spiritual Assembly argues that the district court committed legal errоr by rejecting the First Circuit‘s holding in Merriam that a key officer or employee of an enjoined but later dissolved corporation can be “legally identified” with the corporation and therefore personally bound by the injunction. As a more general matter, the National Spiritual Assembly challenges the district court‘s conclusion that the five nonparty alleged contemnors were not in privity with the Hereditary Guardianship and therefore are not bound by the 1966 injunction. We agree with the first of these arguments. Merriam is not, as the
A. The Effect of Presbyterian Church
Before proceeding, a few words about the substance of the underlying injunction and its relationship to the civil-procedural questions at issue in this case. The injunction was entered in 1966, before the Supreme Court‘s decision in Presbyterian Church in the United States v. Mary Elizabeth Blue Hull Memorial Presbyterian Church, 393 U.S. 440 (1969), but after Kedroff v. St. Nicholas Cathedral of Russian Orthodox Church in North America, 344 U.S. 94 (1952). Kedroff constitutionalized the general common-law principle announced in Watson v. Jones, 80 U.S. (13 Wall.) 679 (1871), that civil authorities may not make judgments about religious controversies when deciding church property disputes. Kedroff, 344 U.S. at 116 (The church-autonomy principle recognized in Watson “must now be said to have federal constitutional protection as a part of the free exercise of religion against state interference.“).
Building on Kedroff, the Supreme Court held in Presbyterian Church that “the First Amendment severely circumscribes the role that civil courts may play in resolving church property disputes.” 393 U.S. at 449. The Court acknowledged that “[c]ivil courts do not inhibit [the] free
Considered in light of these First Amendment limitations on the court‘s authority, certain aspects of the 1966 injunction are troubling. The decree declares that “there is only one Baha‘i Faith,” that Shoghi Effendi was its last Guardian and none has come since, and the National Spiritual Assembly was its representative and “highest authority” in the United States and was “entitled to exclusive use of the
But a contempt proceeding is ordinarily not the proper place for collateral attacks on the underlying injunction. See Pasadena City Bd. of Educ. v. Spangler, 427 U.S. 424, 439-40 (1976); Walker v. City of Birmingham, 388 U.S. 307 (1967); Reich v. Sea Sprite Boat Co., 50 F.3d 413, 415 (7th Cir. 1995); see also 11A CHARLES ALAN WRIGHT ET AL., FEDERAL PRACTICE AND PROCEDURE § 2960, at 391 (2d ed. 1995) (“[T]he general principle appears to be that obedience to a decree is required, even though the issuing court has based its decision on an incorrect view of the law, unless there was no opportunity for effective review of the decree.“). We do not have the substance of the 44-year-old decree before us. Still, resolving the procedural questions at issue in this case requires some sensitivity to the constitutional concerns inherent in church property claims. Presbyterian Church is in the background and circumscribes the inquiry. Applying neutral privity principles is permissible; pronouncing on matters of religious succession is not.
We review the district court‘s denial of contempt sanctions for abuse of discretion. Autotech Techs. LP v. Integral Research & Dev. Corp., 499 F.3d 737, 751 (7th Cir. 2007); Stotler & Co. v. Able, 870 F.2d 1158 (7th Cir. 1989). A court abuses its discretion when it bases its decision on a legal error or on clearly erroneous factual findings. United States v. Silva, 140 F.3d 1098, 1101 n.4 (7th Cir. 1998); In re L & S Indus., Inc., 989 F.2d 929, 932 (7th Cir. 1993) (similar standard of review for district court‘s determination of existence of privity); see Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 401 (1990) (noting abuse-of-discretion standard of review is equivalent to clear-error standard of review when reviewing a district court‘s factual findings). Factual findings are not clearly erroneous unless “‘the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.‘” Anderson v. City of Bessemer City, 470 U.S. 564, 573 (1985) (quoting United States v. U.S. Gypsum Co., 333 U.S. 364, 394-95 (1948)).
As the proponent of the contempt motion, the National Spiritual Assembly had the following burden:
To prevail on a request for a contempt finding, the moving party must establish by clear and convincing evidence that (1) a court order sets forth an unambiguous command; (2) the alleged contemnor violated that command; (3) the violation was significant, meaning the alleged contemnor did not substantially comply with the order; and (4) the alleged contemnor failed to make a reasonable and diligent effort to comply.
C. Injunctions and Nonparties
This appeal raises the question of the proper reach of an injunction—more specifically, the extent to which an injunction binds persons who are not parties to the action in which it is entered. “‘It is a principle of general application in Anglo-American jurisprudence that one is not bound by a judgment in personam in a litigation in which he is not designated as a party or to which he has not been made a party by service of process.‘” Taylor v. Sturgell, 553 U.S. 880, 884 (2008) (quoting Hansberry v. Lee, 311 U.S. 32, 40 (1940)); see also Richards v. Jefferson County, 517 U.S. 793, 798 (1996); Martin v. Wilks, 490 U.S. 755, 761 (1989); Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 110 (1969). This principle is based on the “‘deep-rooted historic tradition that everyone should have his own day in court.‘” Taylor, 553 U.S. at 892-93 (quoting Richards, 517 U.S. at 798). It limits the extent to which a judgment is given preclusive effect in a subsequent suit, see id. at 891-95, and (more pertinent here) the extent to which an injunction may be enforced against nonparties, see Zenith Radio, 395 U.S. at 110-11; see also Lake Shore Asset Mgmt. Ltd. v. Commodity Futures Trading Comm‘n, 511 F.3d 762, 766-67 (7th Cir. 2007).
(2) Persons Bound. The order binds only the following who receive actual notice of it by personal service or otherwise:
(A) the parties;
(B) the parties’ officers, agents, servants, employees, and attorneys; and
(C) other persons who are in active concert or participation with anyone described in Rule 65(d)(2)(A) or (B).
By its terms,
This aspect of the rule is not implicated in this case. Although the individual defendants might have qualified as “officers” or “agents” of the Hereditary Guardianship in June of 1966 when the injunction was entered, after the organization was dissolved in December of that year, they obviously no longer held that status. They cannot, in other words, act in their official capacities to cause the Hereditary Guardianship to violate the injunction.
As to other nonparties who might properly be bound by an injunction, the Supreme Court has explained that
derived from the common-law doctrine that a decree of injunction not only binds the parties defendant but also those identified with them in interest, in “privity” with them, represented by them or subject to their control. In essence it is that defendants may not nullify a decree by carrying out prohibited acts through aiders and abettors, although they were not parties to the original proceeding.
Regal Knitwear Co. v. N.L.R.B., 324 U.S. 9, 14 (1945). Broadly speaking, both the rule and the common-law doctrine contemplate two categories of nonparties potentially bound by an injunction. One includes nonparties acting in concert with a bound party; many cases hold that a nonparty may be held in contempt if he aids or abets an enjoined party in violating an injunction. Id.; Chase Nat‘l Bank v. City of Norwalk, Ohio, 291 U.S. 431, 436 (1934); S.E.C. v. Homa, 514 F.3d 661, 673-77 (7th Cir. 2008); Rockwell Graphic Sys., Inc. v. DEV Indus., Inc., 91 F.3d 914, 919 (7th Cir. 1996). This principle is codified in subsection (2)(C) of the rule, which provides that nonparties “who are in active concert or participation with” a bound party are themselves bound and may be liable for aiding and abetting the party‘s contempt. See
The other category is captured under the general rubric of “privity.” It is generally accepted that an injunction may be enforced against a nonparty in “privity” with an enjoined party. E.g., Golden State Bottling Co. v. N.L.R.B., 414 U.S. 168, 179-80 (1973); Regal Knitwear, 324 U.S. at 14;
The concept of privity, however—both in preclusion doctrine and in the law of injunctions—is ultimately bounded by due procеss, which starts from a “presumption that each person has a right to her day in court.” Martin H. Redish & William J. Katt, Taylor v. Sturgell, Procedural Due Process, and the Day-in-Court Ideal: Resolving the Virtual Representation Dilemma, 84 NOTRE DAME L. REV. 1877, 1881 (2009); see also Richards, 517 U.S. at 798 (“[T]here are clearly constitutional limits on the ‘privity’ exception . . . .“); Regal Knitwear, 324 U.S. at 13 (“The courts, nevertheless, may not grant an enforcement order or injunction so broad as to make punishable the conduct of persons who acted independently and whose rights have not been adjudged according to law.“); Tice, 162 F.3d at 971 (cautioning against too relaxed an approach to privity because
Both preclusion doctrine and
The caselaw suggests that when it comes to injunctions, the concept of nonparty privity has at least two subcategories. One line of cases holds that an injunction will bind nonparty successors in interest to an enjoined party. E.g., Golden State Bottling Co., 414 U.S. 168; Regal Knitwear, 324 U.S. at 14-15; Walling v. James V. Reuter, Inc., 321 U.S. 671 (1944); Reich, 50 F.3d 413; Panther Pumps & Equip. Co. v. Hydrocraft, Inc., 566 F.2d 8 (7th Cir. 1977); see also Operation Rescue Nat‘l, 80 F.3d at 70 (“[A party may not] circumvent a valid court order merely by making superficial changes in the organization‘s name or form . . . .“). Another line of cases holds that a nonparty may be bound by an injunction if the nonparty is otherwise “legally identified” with the enjoined party. See, e.g., Merriam, 639 F.2d at 37-40; see also Flowdata, 154 F.3d at 1352 (using “legal identification” test and favorably citing
The main dispute in this case centers on the First Circuit‘s decision in Merriam, and specifically whether its articulation of the “legal identity” basis for privity is doctrinally sound. The question arises here because the district court thought Merriam was inconsistent with the Second Circuit‘s famous articulation in Alemite of the principles on which nonparties may be held in contempt and the related limits on the court‘s adjudicative power. In Alemite the underlying suit involved four brothers alleged to be partners in a business that was infringing the plaintiff‘s patent. Two of the brothers were never served, and the case proceeded to trial against the remaining two, John and Joseph Staff. Joseph was dismissed as a defendant after John testified that the business belonged solely to him and he merely employed Joseph as a salesman. The court then enjoined John Staff and “his agents, employees, associates and confederates” from infringing the plaintiff‘s patent. Sometime later Joseph left his brother‘s employ, “set up in business for himself, and was proved to have infringed the patent.” Alemite, 42 F.2d at 832. The plaintiff initiated contempt proceedings against Joseph. Though he was no longer John‘s employee, and John himself was not involved in Joseph‘s infringement of the patent, the district court found Joseph—a nonparty to the injunction action—in contempt. Id.
The Second Circuit reversed. In a decision by Judge Hand, the court explained the background legal principles as follows:
[N]o court can make a decreе which will bind any one but a party; a court of equity is as much so limited as a
court of law; it cannot lawfully enjoin the world at large, no matter how broadly it words its decree. If it assumes to do so, the decree is pro tanto brutum fulmen, and the persons enjoined are free to ignore it. It is not vested with sovereign powers to declare conduct unlawful; its jurisdiction is limited to those over whom it gets personal service, and who therefore can have their day in court. Thus, the only occasion when a person not a party may be punished, is when he has helped to bring about, not merely what the decree has forbidden, because it may have gone too far, but what it has power to forbid, an act of a party. This means that the respondent must either abet the defendant, or must be legally identified with him.
Id. at 832-33. Joseph Staff was not himself a party to the injunction and was no longer employed by John, the enjoined party; he had not aided or abetted a violation of the injunction by John, the bound party. Accordingly, the court held that Joseph could not be found in contemрt. Id. at 833. “The District Court,” the Second Circuit explained, “had no more power in the case at bar to punish the respondent than a third party who had never heard of the suit.” Id.
In Merriam the First Circuit invoked Alemite in another case involving two brothers, but with a different result: Merriam held that a “key employee” of a corporation could be personally bound by an injunction against the corporation even after he ceased being an agent of the company. 639 F.2d at 39. Brothers John and George Hoskins opened a small reference-book marketing company known as the
George Hoskins did not. In 1976, still employed by Webster Dictionary, George incorporated Webster Publishing Company and two related corporations, the business of which bore “a striking resemblance to that of Webster Dictionary Company.” Id. at 34. After Webster Dictionary ceased operations, George Hoskins, through Webster Publishing, continued to use Merriam‘s tradenames and marks in much the same way as Webster Dictionary had. The district court held that George Hoskins and Webster Publishing were bound by the injunction against Webster Dictionary and found them in contempt.
The First Circuit reversed based on a lack of clarity in the district court‘s order and remanded with a detailed
But the court went on to conclude that a person could be “legally identified” with an enjoined corporation and thus personally bound by the injunction if he was a “key employee” of the corporation, had a significant role in the underlying litigation, and was closely identified with the bound party in other relevant respects. Id. at 37. Impor-
[T]hat George Hoskins was a “key employee” of Webster Dictionary Company as well as “the principal” of [Webster Publishing] . . . is insufficient to support the district court‘s conclusion that George Hoskins was bound by the injunction. The central reason that one who is not a party to the action in which the injunction was issued cannot be bound by it is that he has not had his day in court with respect to the validity of the injunction. Cf. Alemite, supra. Absent an opportunity to contest liability, his knowledge of the injunction is not sufficient to bind him as an individual, id., as distinguished from prohibiting him from acting in the forbidden way on behalf of the enjoined party. Thus, the relevant inquiry is not merely whether (in addition to having knowledge of the injunction) George Hoskins was a “key employee” of Webster Dictionary Company but whether he had such a key role in the corporation‘s participation in the injunction proceedings that it can be fairly said that he has had his day in court in relation to the validity of the injunction.
Id. The court issued these remand instructions to the district court:
The evidence raises a fact issue as to whether this is a case of the same person continuing to do essentially the same thing with the same high degree of practical control, discretion and responsibility,
before and after the injunction, with knowledge of the injunction, and after participating in the enjoined firm‘s corporate decisionmaking regarding its position in the injunction proceedings. If it is found that George Hoskins was legally identified with Webster Dictionary Company in this way, then he is bound by the injunction and the appellant corporations founded by him are also subject to it.
The upshot of Merriam is that a key employee, officer, direсtor, shareholder, or other central figure in an enjoined corporation can be personally bound by the injunction even after the company has dissolved, provided he had a controlling role in the injunction proceedings and is otherwise so “closely identified” with the enjoined corporation that it may reasonably be said that he had his day in court when the injunction was issued.4 These important qualifiers keep Merriam within the limits of due process.
Though Alemite and Merriam reached very different results, the two opinions can be reconciled. For starters, Alemite specifically noted that a nonparty to an injunction proceeding may be held in contempt for violating the injunction when the nonparty “either abet[s] the defendant, or [is] legally identified with him.” 42 F.2d at 833 (emphasis added). Moreover, Alemite‘s result—that a salesman is not bound along with his corporation—is consistent with Merriam‘s holding that a “key employee,” without more, is not legally identified with the enjoined company. Merriam, 639 F.2d at 37. To be sure, there are factual differences between the two cases, but we find no tension between the two as a legal matter. See id. at 39 (distinguishing Alemite on these grounds). Both cases recognizе the following categories of nonparty contempt liability: (1) aiders and abettors; and (2) those who are legally identified with the enjoined party. “Legal identity” usually means successors and assigns, but it can include a limited class of other nonparties as well—provided the evidence establishes a very close identity of interest and such significant control over the organization and the underlying litigation that it is fair to say that the nonparty had his day in court when the injunction was issued.
The district court read Zenith Radio more generally to stand for the proposition that “a non-party cannot be personally bound by an injunction unless that non-party has had an actual day in court in its own right.” That‘s a true statement, but the “day in court” at issue in Zenith Radio refers to the nonparty‘s opportunity to contest whether he acted in concert with a party contemnor or was in privity and therefore bound by the injunction. If after an appropriate hearing the court concludes that the nonparty was in privity with the enjoined party, Zenith Radio does not require relitigation of the underlying controversy. (To the contrary, as we have noted, the general rule is that contempt proceedings may not be used to collaterally attack the injunction.) Merriam does not hold, or even suggest, that a court may find a nonparty in contempt without acquiring personal jurisdiction over him and providing an opportunity to contest the grounds for finding him bound by and in contempt of the injunction. Merriam does not violate the rule in Zenith Radio.5
Finally, though we have few cases in this area, none conflict with the approach taken in Merriam, and one suggests substantial agreement. Reich v. Sea Sprite Boat Co. held that the president and sole shareholder of Sea Sprite,
Accordingly, it was a mistake to reject Merriam. A key officer, employee, or shareholder of an enjoined corрoration may be personally bound by the injunction after the corporation dissolves if he is so closely identified in interest and had a controlling role in the corporation and in
D. Marangella, Schlatter, and the Provisional National Council
Although it rejected Merriam, the district court‘s findings are sufficiently detailed and supported by the record that we can affirm the court‘s no-privity finding without a remand. Of particular importance are the court‘s findings regarding the dissimilarities between the Hereditary Guardianship and the Provisional National Council, and the break between Remey and his followers on the one
The district court concluded that the Provisional National Cоuncil, which represents those who accept Marangella as the Third Guardian, is substantially dissimilar to the Hereditary Guardianship; the record supports this conclusion. Although Marangella, Schlatter, and other members of the Provisional National Council were actively involved in the Hereditary Guardianship in the 1960s, the record reflects that after the injunction was issued and the Hereditary Guardianship dissolved, the remnants of this dissident group scattered. After a two-year period of dormancy, Marangella announced his own Guardianship and broke with Remey on matters of successorship, doctrine, and governance. Schlatter followed him, and a new religious organization was established, albeit (eventually) operating in the same place and with some of the same people as were involved in the Hereditary Guardianship. The new group, in due course, took the name “Provisional National Council.” The district court specifically found that “the vast weight of the record evidence establishes that the [Provisional National Council] was not formed for the purpose of escaping the con-
These findings and conclusions are sufficient to defeat any claim that Marangella, Schlatter, and the Provisional National Council are “legally identified” with the Hereditary Guardianship and therefore in privity with it and bound by the 1966 injunction. This is so even assuming Marangella and Schlatter could be considered “key” officers or agents of the Hereditary Guardianship. The doctrinal differences—especially when combined with the passage of time—make it clear as a matter of law that the Provisional National Council and its principals cannot be considered “legally identified” with the Hereditary Guardianship or Remey. To take note of these differences is not to decide a religious dispute; the district court‘s findings and conclusions do not transgress Presbyterian Church. Accordingly, even when Merriam is taken into account, the district court‘s no-privity conclusion as to this group of alleged contemnors was correct.
The National Spiritual Assembly also challenges the district court‘s decision that the Second International Council and Bahá‘í Publishers are not bound by the injunction. It offers two reasons for binding these nonparties: First, they were created by Jensen, who (the argument goes) was personally bound by the injunction; and second, they are successors in interest to Remey, who also was personally bound by the injunction.
1. The Jensen Connection
The district court rejected the contention that the Second International Council and Bahá‘í Publishers were in privity with the Hereditary Guardianship through Jensen. After declining to apply Merriam, the judge explicitly entered an alternative holding that Jensen was not legally identified with the Hereditary Guardianship even if Merriam applied. The judge acknowledged that Jensen was an incorporator of the Hereditary Guardianship, that he served as one of its first board members, and that contemporaneous evidence suggested that Jensen remained a follower of the Hereditary Guardianship during the underlying litigation. Nevertheless, the court found that Jensen disassociated himself from any governing role in the organization shortly after serving his one-year term on the board. This was well before the underlying injunction was issued.
The National Spiritual Assembly disputes these findings. It argues that Jensen‘s extensive involvement with the Hereditary Guardianship prior to the underlying litigation
The National Spiritual Assembly argues in the alternative that Jensen (and by extension, the Second International Council and the Bahá‘í Publishers) should be bound by the injunction because Jensen remained an adherent and the Hereditary Guardianship adequately represented its believers’ interests in the underlying suit against the National Spiritual Assembly. The Supreme Court in Taylor and our own recent decision in Tice recognize that the concept of privity in preclusion doctrine includes a very limited adequate-representation category. See Taylor, 553 U.S. at 894 (observing that “adequate representation” by “someone with the same interests who [wa]s a party” to the earlier suit sufficed for privity purposes “in certain limited circumstances,” including “properly conducted class actions” and “suits brought by trustees, guardians, and other fiduciaries“); Tice, 162 F.3d at 973 (“[U]nless a formal kind of successor interеst is involved . . . , there should be some indication . . . that the second party either had participated or had a legal duty to participate.“); see
A finding of privity based on “adequate representation” in the circumstances of this case would be entirely unwarranted. The Hereditary Guardianship did not conduct the underlying litigation as anything like a fiduciary for its members, and there is no evidence to suggest it was acting in a representative capacity for its followers personally. To find privity based on “adequate representation” here would treat every suit by an organization as having res judicata and contempt implications for the organization‘s members individually. This is contrary to the Supreme Court‘s language in Taylor carefully limiting the scope of the adequate-representation category of privity.
At bottom, this argument is an appeal to the theory of “virtual representation,” which the Supreme Court has firmly rejected in the field of claim preclusion. Taylor, 553 U.S. at 904. Having rejected virtual-representation theory in its traditional res judicata setting, we see no reason why the Supreme Court would view it more favorably in the context of injunctions. The district court properly rejected the attempt to bind the Second International Council and Bahá‘í Publishers through Jensen.
2. The Remey Connection
The National Spiritual Assembly also argues that the Second International Council and Bahá‘í Publishers are
The district court treated the trademark-registration filings as nonbinding evidentiary admissiоns rather than binding judicial admissions. See Help at Home, Inc. v. Med. Capital, L.L.C., 260 F.3d 748, 753 & n.2 (7th Cir. 2001); Higgins v. Mississippi, 217 F.3d 951, 954 (7th Cir. 2000); Murrey v. United States, 73 F.3d 1448, 1455 (7th Cir. 1996); Keller v. United States, 58 F.3d 1194, 1198 n.8 (7th Cir. 1995). The National Spiritual Assembly apparently agrees with this characterization, but argues that the court gave them insufficient weight. We find no fault with the district court‘s treatment of this factual matter. Other than the version of spiritual-leadership succession described in trademark filings, the National Spiritual Assembly offered no evidence of a link between Remey and the Second International Council or Bahá‘í Publishers. Indeed, Remey had no involvement in either organization and died more than 25 years before the Second International Council was established. Neither the Second International Council nor Bahá‘í Publishers received any money, property, or other assets from Remey or the Hereditary Guardianship. On
AFFIRMED.
11-23-10