June 26, 2020

Sanctions imposed on a party held in contempt for failure to comply with a confirmed arbitration award

In this action the U. S. Circuit Court of Appeals, 2nd Circuit, affirmed a federal District Court's final orders holding the Defendants, entities in the private sector, in contempt for failing to comply with a confirmed arbitration award and the District Court's awarding the Petitioner [Union] attorneys’ fees as a contempt sanction.

Citing New York State National Organization for Women v. Terry, 886 F.2d 1339, the Circuit Court explained that "The power to punish parties for contempt is inherent in all courts, and 'A sanction imposed to compel obedience to a lawful court order or to provide compensation to a complaining party is civil'* in nature'" and a court may hold a party in contempt if the court determines that:

1. The order the party failed to comply with is clear and unambiguous;

2. The proof of noncompliance is clear and convincing; and

3. The offending party has not diligently attempted to comply in a reasonable manner.

The court opined that ”civil contempt sanctions serve two purposes: to coerce a party into compliance, or to compensate the adverse parties for any losses suffered as a result of the lack of compliance" and could include appropriate attorney fees** and costs to a victim of contempt.

Although the Defendants had argued that the District Court had improperly resolved certain wage-related disputes because the parties’ collective bargaining agreement makes arbitration the exclusive remedy for settling disputes about express terms or conditions of the agreement and because the arbitration award directed that disputes over past damages be adjudicated in an arbitration proceeding, the Circuit Court pointed out that the controlling collective bargaining agreement explicitly exempts actions such as the Union’s effort here -- to “enforce, vacate or modify awards.”

Further, the Circuit Court noted that the Defendant's failed to challenge the wage rates involved until months after the district court ordered Defendants to pay employees at those rates, holding that the District Court properly concluded that any objection to the rates was waived by Defendants.

Thus, ruled the Circuit Court, the District Court did not exceed its authority in addressing the wage disputes nor was the sanction imposed improperly punitive.

In the words of the Circuit Court of Appeals, “Judicial sanctions in civil contempt proceedings may, in a proper case, be employed for either or both of two purposes; to coerce the defendant into compliance with the court’s order, and to compensate the complainant for losses sustained”*** and the district court ensured that the sanctions also served a compensatory purpose by ordering that they be paid to the opposing party (rather than to the court) to offset fees incurred in seeking compliance.

Characterizing the District Court's award as a classic compensatory sanction, the Circuit Court approved the award imposed -- $100,000 — half of what the Union requested -- and "a third of the tab for the coercive sanctions initially imposed" as being entirely within the bounds of the District Court’s discretion.


* Note, 42 U.S. Code § 1995 address criminal contempt proceedings.

** The Circuit Court observed that "[i]ndependent of the contempt regime, a district court may also assess attorneys’ fees when a party has acted in bad faith, vexatiously, wantonly, or for oppressive reasons." 

*** See F.T.C. v. Verity Int’l, Ltd., 443 F.3d 48.

The decision is posted on the Internet at:


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