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MCF AF, LLC v. Flechas

United States District Court, S.D. Mississippi, Northern Division

November 27, 2017




         Defendant Eduardo Flechas asks the Court to dismiss this contempt action against him, arguing that it is impossible for him to pay back the almost $400, 000 he spent in violation of an Asset Freeze Order. Having considered Flechas's testimony at the hearing, his account records, and the parties' briefing, the Court disagrees-the contempt order will remain in place.

         I. Factual Background

         On October 19, 2015, Eduardo Flechas agreed to be held in contempt and promised to pay back approximately $400, 000, which he spent in violation of the Court's Asset Freeze Order. Order [1-1] at 2. If he failed to purge the contempt within thirty (30) days, Flechas agreed to submit himself to incarceration. Id. at 3.

         In the beginning, Flechas made payments toward the contempt judgment, and the Court granted his repeated requests to postpone incarceration. Between October 20, 2015, and January 6, 2016, Flechas paid $64, 391.48 into the Court's registry.[1] But then Flechas's payments stalled, and the Court declined to further delay the inevitable. Beginning July 22, 2016, the Court ordered Flechas to submit himself to intermittent incarceration every other weekend at the Madison County Detention Center.

         Since incarceration commenced, Flechas has made one $5, 000 payment into the Court's registry.[2] And on March 16, 2017, the Court credited Flechas's contempt obligation in the amount of $35, 842.29, for funds which he had paid into the bankruptcy estate. Order [27]. To date, Flechas has received contempt credit for just over $105, 000.

         In his initial motion, Flechas represented that he had reached settlement agreements with all plaintiffs in the underlying lawsuit and argued that dismissal of the severed contempt action would allow the action to be “fully and finally concluded.” Def.'s Mot. [30] at 2. He asked the Court to dismiss the severed contempt action, vacate its Order of Confinement, and return his passport. Id.

         MCS responded in opposition, arguing that (1) the confinement was producing the desired effect (repayment), (2) Flechas has yet to fully purge his contempt, and (3) Flechas, a licensed attorney and experienced businessman, agreed to an even more stringent confinement than the Court ordered. Pl.'s Resp. [31] at 1. In reply, Flechas changed course, saying he does not have the ability or funds required to purge himself of contempt, so compliance is “impossible.” Def.'s Reply [32] at 2.[3] This representation prompted the Court to order Flechas to submit updated financial records and to set the matter for a hearing. The parties filed supplemental briefing following the August 16, 2017 hearing, and the Court is prepared to rule.

         II. Standard

         Courts have “the inherent power to enforce compliance with their lawful orders through civil contempt.” Shillitani v. United States, 384 U.S. 364, 370 (1966). Here, Flechas agreed to be held in civil contempt for violating the Court's Asset Freeze Order. He promised to repay the money he spent and submit himself to incarceration “until such time as the contempt is fully purged.” Order [1-1] at 4. This arrangement presents the classic case of the contemnor carrying the keys to his own prison. United States v. United Mine Workers of Am., 330 U.S. 258, 331 (1947).

         But Flechas now asserts that compliance is “impossible.” Def.'s Reply [32] at 2. In a civil-contempt proceeding, a defendant may assert an inability to comply, and where compliance is impossible, the Court may opt not to proceed with the civil contempt action. United States v. Rylander, 460 U.S. 752, 757 (1983). “It is settled, however, that in raising this defense, the defendant has a burden of production.” Id.

         III. Analysis

         A. Financial Ability

         1. Testimony

         To substantiate his claim that he is financially unable to repay the money, Flechas testified at the motion hearing that he has tried to “economize” by moving to a less expensive home, selling jewelry, transferring his children to a different private school, cancelling his health insurance, wearing machine-washable (versus dry-clean-only) clothing, limiting lunches out, and keeping a vehicle with over 200, 000 miles (versus replacing it). Tr. [44] at 3-5. He said he has undergone “a lifestyle change” and believes he has not spent money “foolishly.” Id. at 9.

         MCS challenged this assessment. It pointed out that Flechas had chosen to rent a four-bedroom, 2800-square-foot home in Northeast Jackson for $2, 300 per month, while less-expensive homes in the area, or in nearby Madison or Rankin County, were available. Id. at 11- 12. MCS also explored the cost of private school for Flechas's three children, which Flechas estimated at $800 per month. Id. at 13. MCS suggested that public school in either Madison or Rankin County would have ...

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