The opinion of the court was delivered by: SHARON E. GRUBIN
REPORT AND RECOMMENDATION TO THE HONORABLE KIMBA M. WOOD
SHARON E. GRUBIN, United States Magistrate Judge:
This is a report and recommendation on the motion filed herein by plaintiff, the Securities and Exchange Commission, for an order holding defendant Albert DeAngelis in civil contempt.
On August 8, 1989 your Honor filed an Opinion after trial that DeAngelis had violated the federal securities laws by trading on inside information and ordered that he was to disgorge all profits together with prejudgment and postjudgment interest. A Final Judgment and Order was entered on September 28, 1989 (hereinafter "Judgment"). Payment was due within 30 days. The amount of profit was $ 362,536.01 and prejudgment interest came to $ 253,382.81, for a total of $ 615,918.82. Although DeAngelis did not seek a stay of the Judgment nor make payment of any kind, he appealed the decision. The Second Circuit affirmed your Honor's Judgment, and DeAngelis filed a petition in the United States Supreme Court for a writ of certiorari which was denied on October 1, 1990.
The SEC filed its instant motion for contempt on November 16, 1990 and DeAngelis responded by claiming an inability to pay, and your Honor thereafter referred the matter to me. On October 8, 1991, an evidentiary hearing was held at which DeAngelis presented himself as his only witness and his tax returns for 1988 through 1990 as his only documentary evidence. After the hearing I indicated that, because he was unable to present any meaningful explanation of his financial circumstances, DeAngelis had failed to sustain his burden of showing an inability to make any payment. DeAngelis then requested the opportunity to present further evidence, and the hearing was resumed on January 23, 1992.
At the resumed hearing testimony was given by the attorney who had represented DeAngelis in the trial before your Honor, by DeAngelis's son-in-law who has prepared his tax returns since 1983 and by DeAngelis's wife, and further documentary evidence was received. Thereafter, a report on the value of the house owned by DeAngelis and his wife was made by a court-appointed real estate expert. DeAngelis submitted supplemental material in August to which the SEC responded last month. The SEC now proposes on the basis of the evidence presented that DeAngelis be found in contempt and ordered to make a lump sum payment of $ 100,000 and continuing monthly payments of $ 2,000. The SEC also requests that he be enjoined from selling or encumbering his home without further order of the court. Because I find, for the reasons set forth below, that the relief requested is warranted and, indeed, quite reasonable, I recommend that it be granted.
DeAngelis is a 69-year-old retiree who goes daily to his Union headquarters to act as a delegate. He receives no salary, but does receive $ 150 per week from the Union as "automobile reimbursement" to cover his car expenses for traveling daily to the Union.
He lives with his wife and supports her. A 22-year-old grandson lives with them who, although gainfully employed, does not contribute to household expenses. DeAngelis's income consists annually of his pension of $ 49,365, Social Security of about $ 7,000, payments on the sale of Motel Montreal, which is a property in eke George that had been partly owned by him, of $ 17,333 in principal and $ 10,920 in interest, and the $ 7,800 in automobile reimbursement. Mrs. DeAngelis also receives her own Social Security of about $ 5,000.
DeAngelis claims to have no savings and to have lost all the profits he made on his insider trading through subsequent stock market transactions prior to entry of the Judgment. Broken down monthly, the total household income from the above sources is $ 8,152 per month. DeAngelis's listing of household expenses totals $ 82,939 annually, or $ 6,911 per month. Based on the foregoing, DeAngelis contends that the difference between income and expenses, which comes to available cash of $ 1,241 per month, is insufficient to enable him to comply with the Judgment in the manner proposed by the SEC. He proposes that his obligation be met by simply continuing the $ 1,500 monthly payment he is now making pursuant to my order last October which, he contends, already creates a great hardship. I find his position untenable.
A party may be held in civil contempt for the failure to comply with an order of the court if (1) the order was clear and unambiguous, (2) proof of noncompliance is clear and convincing, and (3) the party has not been reasonably diligent and energetic in attempting to do what was ordered. See EEOC v. Local 580, Int'l Ass'n of Bridge, Structural & Ornamental Ironworkers, Joint Apprentice-Journeyman Educ. Fund, 925 F.2d 588, 594 (2d Cir. 1991); New York State Nat'l Org. for Women v. Terry, 886 F.2d 1339, 1351 (2d Cir. 1989), cert. denied, 495 U.S. 947, 109 L. Ed. 2d 532, 110 S. Ct. 2206 (1990); EEOC v. Local 638 . . . Local 28 of Sheet Metal Workers' Int'l Ass'n, 753 F.2d 1172, 1178 (2d Cir. 1985), aff'd, 478 U.S. 421, 92 L. Ed. 2d 344, 106 S. Ct. 3019 (1986); Powell v. Ward, 643 F.2d 924, 931 (2d Cir.) (per curiam), cert. denied, 454 U.S. 832, 70 L. Ed. 2d 111, 102 S. Ct. 131 (1981).
There is no doubt here that DeAngelis is in contempt of your Honor's Final Judgment and Order. Its requirement of disgorgement was clear and unambiguous, and it is not in dispute that he paid not one penny of the amount until my order last year requiring $ 1,500 monthly. What DeAngelis appears to argue is that he has been "reasonably diligent and energetic," see EEOC v. Local 580, Int'l Ass'n of Bridge, Structural & Ornamental Ironworkers, Joint Apprentice-Journeyman Educ. Fund, 925 F.2d at 594, in attempting to comply with the Judgment to the best of his ability. He contends that since the time of the Judgment he has been unable financially to comply with it but has acted in good faith through his attorneys to resolve the matter. He says that he believed his attorneys would work something out with the SEC and that the matter was therefore under control. According to DeAngelis's attorney, shortly after the Judgment was entered, he contacted the SEC, told it DeAngelis could not pay the amount required, and offered to pay $ 50,000 over five years in full satisfaction of the $ 615,918.82. That offer was refused by the SEC. After the Second Circuit rejected DeAngelis's appeal of this Court's decision, his attorney made the same offer of $ 50,000 again. The offer was again rejected outright by the SEC. Then, DeAngelis's petition for certiorari was denied by the United States Supreme Court, and when the SEC staff attorney contacted DeAngelis's attorney asking about payment, the same $ 50,000 offer was made. DeAngelis's attorney says the matter was left open at that point, although the SEC claims otherwise -- that, as previously, the offer was rejected. (The SEC's position on what happened at this point is, of course, far more plausible, since there is no apparent reason why it would have taken under consideration, after all avenues of appeal for DeAngelis had been exhausted, an offer that it had seen fit to reject soundly earlier.) In any event, DeAngelis was told by his attorney that the offer had not been accepted, yet DeAngelis did nothing further because, he claims, he thought his attorney would "work it out," so he simply waited to hear from him.
Even accepting the foregoing explanation by DeAngelis, it is insufficient to avoid a finding of contempt. The party seeking a finding of contempt need not show that violation of the order was willful, and good faith is not a defense. Nor may the alleged contemnor rely on his own inadvertence, misunderstanding or advice from counsel. McComb v. Jacksonville Paper Co., 336 U.S. 187, 191, 93 L. Ed. 599, 69 S. Ct. 497 (1949); EEOC v. Local 638 . . . Local 28 of Sheet Metal Workers' Int'l Ass'n, 753 F.2d at 1178; Donovan v. Sovereign Sec., Ltd., 726 F.2d 55, 59 (2d Cir. 1984); NLRB v. Maine Caterers, Inc., 732 F.2d 689, 690 (1st Cir. 1984); TWM Mfg. Co. v. Dura Corp., 722 F.2d 1261, 1273 (6th Cir. 1983), cert. denied, 479 U.S. 852, 93 L. Ed. 2d 117, 107 S. Ct. 183 (1986); NLRB v. Blevins Popcorn Co., 212 U.S. App. D.C. 289, 659 F.2d 1173, 1183, 1184, 1186 (D.C. Cir. 1981); Commodity Futures Trading Comm'n v. Premex, Inc., 655 F.2d 779, 785 n.11 (7th Cir. 1981); NLRB v. J.P. Stevens & Co., 563 F.2d 8, 16 (2d Cir. 1977), cert. denied, 434 U.S. 1064, 55 L. Ed. 2d 765, 98 S. Ct. 1240 (1978); Oil, Chemical & Atomic Workers Int'l Union v. NLRB, 178 U.S. App. D.C. 278, 547 F.2d 575, 581 (D.C. Cir. 1976), cert. denied sub nom. Angle v. NLRB, 431 U.S. 966, 53 L. Ed. 2d 1062, 97 S. Ct. 2923 (1977); NLRB v. Ralph Printing & Lithographing Co., 433 F.2d 1058, 1062 (8th Cir. 1970), cert. denied, 401 U.S. 925, 27 L. Ed. 2d 829, 91 S. Ct. 883 (1971). In NLRB v. J.P. Stevens & Co., the Second Circuit explained as follows:
Respondents argue, however, that, even if there were violations of the order, the violations were not willful, and they maintain that they should not be found in civil contempt unless they acted with deliberate or careless disregard of our prior order. This contention . . . misconstrues the purpose of a civil contempt proceeding where the contemnor is offered the opportunity to purge himself of contempt by complying with prescribed purgation conditions.
In this context, the longstanding rule is that good faith or lack of wilfulness is not a defense that the petitioner must negate. The rule is a salutary one, for the purpose of a motion for civil contempt . . . "is not to punish intentional misconduct, but rather to enforce compliance with an order of the court and to remedy any harm inflicted on one party by the other party's failure to comply."
563 F.2d at 16 (quoting Oil, Chemical & Atomic Workers Int'l Union v. NLRB, 547 F.2d at 581 (citations omitted)). DeAngelis appears to claim that his belief that it was sufficient to pay nothing while awaiting further negotiations by his attorney was based on his attorney's advice. But advice of counsel has never been a defense to contempt. In United States v. Goldfarb, 167 F.2d 735 (2d Cir. 1948) (per curiam), the defendant failed to appear to testify in response to a grand jury subpoena, although, at the designated time, his attorney appeared at the grand jury room and informed the Assistant United States Attorney that the defendant could not be there because of an important business engagement but was willing to appear on another day. The defendant ...