U.S. COMMODITY FUTURES TRADING COMMISSIONER

v.

ROBERT ESCOBIO

PER CURIAM:

This case involves the enforcement of a judgment the Commodity Futures Trading Commission (“CFTC") obtained against Robert Escobio. Among other things, the judgment ordered Escobio to pay $1,543,892 within 10 days in restitution to the investors who fell victim to his commodity-fraud scheme. Instead of enforcing the restitution order pursuant to legal remedies provided by the Federal Debt Collection Procedures Act ("FDCPA"), the CFTC asked the District Court to enforce Escobio's payment of restitution pursuant to its civil contempt power.

Following a show-cause hearing, the Court held Escobio in contempt for failing to pay the restitution as ordered. Rather than sanctioning Escobio's contempt, however, the District Court sua sponte modified its restitution order and required Escobio to pay $350,000 within 10 days of its revised order, and $10,000 per month thereafter. If Escobio failed to make any of the payments, on receipt of “written notice from the CFTC,” the Court would order the U.S. Marshals Service to take him into custody and jailed.

Escobio appeals the District Court's contempt adjudication and its sua sponte modification of the restitution provisions of its judgment. Concluding that those provisions constitute a money judgment enforceable under the FDCPA, but not by the District Court's civil contempt power, we vacate the Court's contempt adjudication and its modification of the restitution provisions of its judgment.²

I.

A.

This is not the first time this case has been before us. The current appeal arises from the CFTC seeking to enforce a judgment that we partially upheld. See Commodity Futures Trading Comm'n v. S. Tr. Metals, Inc., 894 F. 3d 1313 (11th Cir. 2018). As we explained there, Escobio was the Chief Executive Officer and Director of Southern Trust. Id. at 1319. The CFTC, acting on a customer complaint, investigated Southern Trust and Escobio (collectively, the "Defendants") for commodities fraud. Id. at 1320. The CFTC filed suit against the Defendants alleging that they had engaged in two illegal schemes in violation of the Commodities Exchange Act (“CEA"). Id. at 1321.

In the first, which we deemed the "unregistered-futures scheme," the CFTC alleged that the Defendants were not registered as futures commission merchants. Id. In the second, the "metals-derivative scheme," the CFTC alleged that the Defendants accepted money from investors for metals, but instead invested the money in metal derivatives. Id. In addition, the complaint alleged, the Defendants charged these investors interest for nonexistent loans. Id. at 1322.

Following a bench trial, the District Court entered a judgment awarding restitution for losses the investors incurred from both schemes. Id. at 1328. For³

the metals-derivative scheme, it ordered the Defendants to pay $1,543,892. Id. For the unregistered-futures scheme, it ordered the Defendants to pay $559,725. Id. The Court held the Defendants jointly and severally liable and ordered payment of the “Restitution Obligation” within ten days. The Court appointed the National Futures Association¹ as Monitor to collect and distribute the restitution payments to those who lost money in connection with the two schemes.² The Court ordered Defendants to cooperate with the Monitor, including executing any documents necessary to release funds for payment toward the Restitution Obligation. The Court further made each investor who suffered a loss an intended third-party beneficiary under Rule 71 of the Federal Rules of Civil Procedure. The Court also permanently enjoined the Defendants from participation in commodities trading and ordered other civil penalties, payable to the CFTC.

Escobio appealed. On January 22, 2018, we determined that the "CFTC did not prove that the Defendants' violations in the unregistered-futures scheme caused

any loss” and vacated that portion of the restitution award. Commodity Futures Trading Comm'n v. S. Tr. Metals, Inc., 880 F. 3d 1252, 1268 (11th Cir. 2018).

On rehearing on July¹², 2018, we arrived at the same outcome, but by different reasoning. S. Tr. Metals, Inc., 894 F. 3d at 1313. We vacated the restitution award for the unregistered-futures scheme after determining that the registration violation did not proximately cause the loss as required by the CEA. Id. at 1335. We affirmed the restitution award for the metals-derivative scheme. Id. Our mandate issued on October 26, 2018.

B.

In March 2018, while Escobio's appeal was pending, the CFTC moved the District Court to issue an order requiring Escobio to show cause for his failure to pay the Restitution Obligation and the civil penalties. Escobio challenged the motion, arguing that the Restitution Obligation and the civil penalties are money judgments that cannot be enforced pursuant to the civil contempt power. The District Court decided that it could invoke the contempt power to coerce payment of the Restitution Obligation, but that it lacked any authority to coerce payment of the civil penalties. The Court reasoned that because restitution was an equitable remedy-not a money judgment-it could be enforced by the civil contempt power⁵

rather than by the remedies provided by the Federal Debt Collection Procedures Act ("FDCPA").

The District Court then granted the CFTC's motion and ordered Escobio to show cause for his failure to pay the Restitution Obligation. The District Court held evidentiary hearings on October 24 and 25, 2018—a few months after we granted rehearing in Southern Trust Metals, but one day before we issued our mandate. During the hearing, Escobio testified that he had paid approximately $3,525 to the restitution fund. He claimed that he could not afford to pay more than $100 per month toward the Restitution Obligation.

On March 18, 2019, the District Court held Escobio in contempt for failing to pay the Restitution Obligation. The Court found that Escobio did not lack the ability to pay the ordered restitution in full given the significant value of his assets, discretionary spending, the benefits of his and his wife's incomes, and money received from other sources.

1.

Based on evidence Escobio presented, the District Court concluded that he had at least $941,447 in assets. The Court identified the following assets:

• An individual retirement account (“IRA") worth $300,000; • A joint securities-investment account worth $35,000; • $3,000 in a joint checking account; 6

• $554,000 of equity in a co-owned Florida house; • $21,000 of personal property.³

Escobio and his wife, Susan Escobio, jointly own the securities-investment account, the checking account, and the Florida house. Escobio argued that these joint assets are exempt under state law. He also argued that his IRA is exempt from consideration under state law.

The District Court rejected Escobio's arguments. It reasoned that “courts have broad equitable powers to reach assets otherwise protected by state law to satisfy an order for restitution." The Court found that because Escobio withdrew approximately $250,000 from his IRA following the entry of the final judgment, he made a "deliberate, conscious choice to pay his own expenses instead of paying the judgment." The Court ruled that “Escobio cannot insulate himself from the restitution order by keeping his assets in an IRA to spend as he chooses.” The

Court also found that Escobio had the “unfettered ability to withdraw money" from the joint investment and checking account. Citing to SEC v. Bilzerian, 112 F. Supp. 2d 12, 27 n.29 (D.D.C. 2000), but without further analysis, the District Court determined that despite Florida's "homestead exemption," it could consider the value of Escobio's house in determining his ability to pay. The District Court also noted that Escobio provided no reason that his personal property could not be sold to satisfy the Restitution Obligation.

2.

The Court also considered Escobio's expenses and both of the Escobios' incomes. The Court acknowledged that Escobio makes approximately $30,000 to $40,000 per year as a pilot. However, the Court found that Escobio's prioritization of discretionary payments as well as multiple international travel trips evidenced "willful evasion of the Court's judgment." The Court found that under "principles of equity," it could consider the income that Mrs. Escobio makes as the president of Southern Trust. The Court determined that Mrs. Escobio's income was directly attributable to “Escobio's transfer of shares (and title) to her” and that, because

Southern Trust continues to operate and benefit Escobio in the same way as it did before he was barred from participating in the company, the Court could consider the benefits he derives from it.

3.

The District Court also considered the $200,000 to $300,000 in “loans" that Escobio had received from family, friends, and other unidentified sources in its determination of his ability to pay. The Court did not credit Escobio's testimony that these were repayments. Moreover, the Court reasoned, Escobio used this money for personal expenses but could have used it to pay the Restitution Obligation.

4.

After finding that it could consider Escobio's jointly-held assets, both Escobios' incomes, the extensive discretionary spending, and the unidentified "loans," the Court concluded that Escobio had not demonstrated his inability to comply with the final judgment. On March 18, 2019, the District Court held Escobio in civil contempt for failing to pay the Restitution Obligation (hereinafter the "Contempt Order"). But it did not immediately sanction him for the failure. Instead, the Court ordered Escobio to pay $350,000 to the CFTC within ten days "or be subject to coercive sanctions." The Court further ordered Escobio to pay off⁹

the balance of the outstanding restitution award at the rate of $10,000 per month "or face coercive sanctions, which shall issue on motion by the CFTC." In a separate paragraph, the Court stated "should Robert Escobio not pay the sums identified above within ten (10) days of the issuance of this Order, upon written notice from the CFTC of the infringing Defendant's noncompliance, a warrant for his arrest shall issue and the United States Marshal Service is authorized to take Escobio into custody and incarcerated until such time as he fully complies with this Court's Order." Escobio appeals the Contempt Order.

C.

Escobio requested a stay of the Contempt Order pending his appeal from both the District Court and this Court. It was denied. Meanwhile, after receiving notice from the CFTC that Escobio had failed to make the required upfront payment, the District Court ordered Escobio to voluntarily surrender to the U.S. Marshals Service on April¹, 2019 (hereinafter the “First Incarceration Order"). Two days later, Escobio filed an amended notice of appeal from the First Incarceration Order. Escobio paid $350,000 and thereby purged the contempt. The Court ordered his release from custody on April 26, 2019.

On August 13, the CFTC moved the District Court to issue coercive sanctions based on Escobio's failure to pay the $10,000 monthly installments. On 10

August 19—the day before oral argument in the current appeal, the District Court, without first issuing an order for Escobio to show cause, held Escobio in contempt and ordered him to surrender to the U.S. Marshals Service on August 20, 2019 (hereinafter the “Second Incarceration Order"). The CFTC thereafter filed a certificate that Escobio had paid the amount in arrears and the District Court ordered his release from custody on August 22, 2019.

II.

A.

We have jurisdiction to review the Contempt Order under 28 U.S.C. § 1291. Section 1291 imposes a finality test for appellate review. Contempt citations issued post judgment are subject to the test of finality and are not immediately appealable unless there is “both a finding of contempt and a noncontingent order of sanction." Combs v. Ryan's Coal Co., 785 F. 2d 970, 977 (11th Cir. 1986); see also Mamma Mia's Trattoria, Inc. v. Original Brooklyn Water Bagel Co., 768 F. 3d 1320, 1325 (11th Cir. 2014).

In Combs, we distinguished orders that are “conditional or subject to modification" from those that impose a fine or penalty within a time certain that may not be avoided by some other form of compliance. 785 F. 2d at 977. Conditional orders reflect an ongoing effort by the district court to prod the¹¹

contemnor into compliance. Id. The bar against appellate review of conditional contempt orders exists to avoid "disrupting" this “continuing, orderly course of proceedings." Id. at 976 (quoting Drummond Co. v. Dist. 20, United Mine Workers of Am., 598 F. 2d 381, 384 (5th Cir. 1979)). A district court has essentially "place[d] the keys of the prison cell in the contemnor's pocket" by encouraging the contemnor to comply with the order prior to the imposition of any sanctions. Id. at 977. But once sanctions are imposed, review of the order no longer "tie[s] the hands of the district court" because the district court has gone beyond just prodding compliance. Id.5

Therefore, and as we recently explained, "[w]hen a sanction is entered as a result of the contempt finding,” it “render[s] the contempt judgment final and ma[kes] both the finding of contempt and the later sanction order appealable under 28 U.S.C. § 1291." PlayNation Play Sys., Inc. v. Velex Corp., 939 F. 3d 1205, 1212 (11th Cir. Sept. 24, 2019) (second and third alteration in original) (quoting Sizzler Family Steak Houses v. W. Sizzlin Steak House, Inc., 793 F. 2d 1529, 1533 n.1

(11th Cir. 1986)). In such circumstances, the judgment and the order containing the finding of contempt merge and become subject to review on appeal. Id. (citing Akin v. PAFEC Ltd., 991 F. 2d 1550, 1563 (11th Cir. 1993)). We have jurisdiction to review the First Incarceration Order and the underlying Contempt Order based on Escobio's amended notice of appeal.⁶

The CFTC argues that despite the imposition of sanctions for the upfront $350,000 payment—we lack jurisdiction to review the portion of the Contempt Order that relates to future monthly payments because those sanctions are conditional. But because the imposition of sanctions rendered the Contempt Order final, we can review the entire order, including the previously conditional sanctions. The Contempt Order also provides that the warrant for Escobio's arrest "shall issue” as soon as the CFTC notifies the Court of Escobio's noncompliance. There is nothing for the District Court to modify once it is notified of Escobio's noncompliance. And in Sizzler, we concluded that a contempt order that imposed a "prospective fine scale" was immediately appealable. 793 F. 2d at 1534 n.2. Actual imposition of a penalty is not necessary for appellate review as “[b]eing placed under the threat of future sanction” is "an unconditional present sanction." Id.; see also Chairs v. Burgess, 143 F. 3d 1432, 1435 (11th Cir. 1998) (“[W]e can

review the district court's order to the extent that contempt was found and a prospective fine—the $23.00 per day was then imposed on the State.”). The necessity of notifying the Court of the contemnor's noncompliance does not deprive us of jurisdiction to review the Contempt Order.

B.

The CFTC next argues that the issue is moot because Escobio has purged the contempt. It is well established that “once a civil contempt order is purged, no live case or controversy remains for adjudication.” In re Grand Jury Subpoena Duces Tecum, 955 F. 2d 670, 672 (11th Cir. 1992) (collecting cases) (holding that the appeal was moot because the contemnor had "completely purged his contempt"). To decide whether Escobio can justifiably challenge an order adjudicating him in contempt when the amount has already been paid would violate the constitutional prohibition against this Court “decid[ing] abstract, hypothetical or contingent questions." Id. at 671–72; see also RES-GA Cobblestone, LLC v. Blake Const. & Dev., LLC, 718 F. 3d 1308, 1314 (11th Cir. 2013) (holding that the contemnor's challenge to the $250 per day contempt fine was moot because he had agreed to pay the accrued fine).

The District Court held Escobio in contempt for his failure to pay the Restitution Obligation in full and Escobio faces jail time each month that he fails to make a $10,000 payment. Because Escobio has not “completely purged his

14

contempt," we can review the Contempt Order on the merits as it relates to future monthly payments.⁷

Moreover, the Contempt Order morphed the Restitution Obligation into a different kind of scheme. The District Court attempted to use a coercive in personam order to enforce an installment payment plan with incarcerative sanctions if Escobio did not comply. Injunctive relief is considered moot only if "(1) it can be said with assurance that there is no reasonable expectation that the alleged violation will recur and (2) interim relief or events have completely and irrevocably eradicated the effects of the alleged violation." Reich v. Occupational Safety & Health Review Comm'n, 102 F. 3d 1200, 1201 (11th Cir. 1997).

Escobio's adherence to the new payment structure does not negate the possibility

that he will fail to pay in the future nor has it "completely and irrevocably" paid off the restitution award. His challenge to the payment scheme is not moot.

C.

Next, we must determine whether the District Court had jurisdiction to issue the Contempt Order. The filing of a notice of appeal generally divests a district court of jurisdiction as to those issues involved in the appeal. RES-GA Cobblestone, 718 F. 3d at 1314; see also Weaver v. Fla. Power & Light Co., 172 F. 3d 771, 773 (11th Cir. 1999). The appeal lasts until we issue the mandate. Zaklama v. Mount Sinai Med. Ctr., 906 F. 2d 645, 649 (11th Cir. 1990); see also Martin v. Singletary, 965 F. 2d 944, 945 (11th Cir. 1992) (“The stay of the mandate ... delays the return of jurisdiction to the district court to carry out our judgment in that case."). Here, Escobio argues that the District Court lacked jurisdiction to hold the evidentiary hearings on its order to show cause because our mandate had not yet been issued.⁸

However, an appeal does not automatically stay the enforcement of a judgment. Wright & Miller, 16A Fed. Prac. & Proc. Juris. § 3954 (5th ed. 2019). A party can move to have the judgment stayed upon appeal. Fed. R. Civ. Pro. 62;

Fed. R. App. P. 8. Escobio did so—and his motion was denied. Absent entry of a stay, a district court retains jurisdiction to enforce its judgment—via contempt or other means during the pendency of an appeal. Sergeeva v. Tripleton Int'l Ltd., 834 F. 3d 1194, 1202 (11th Cir. 2016); see also Resolution Tr. Corp. v. Smith, 53 F. 3d 72, 76–77 (5th Cir. 1995).

III.

Because we have jurisdiction to consider this live controversy, we turn now to the merits. Escobio first argues that the District Court had no authority to adjudge him in contempt and that the CFTC was limited to the enforcement remedies provided by the FDCPA to collect on the Restitution Obligation. Escobio also claims that the District Court erred by considering exempt assets and Mrs. Escobio's income in its consideration of his ability to pay the Restitution Obligation. We agree on the first point and need not reach the second.

A.

Whether a district court can invoke its civil contempt power to enforce a judgment depends on the nature of that judgment. Injunctions, and other coercive equitable remedies, have historically been enforceable via the court's civil contempt powers. Money judgments, on the other hand, are enforceable "by a writ of execution, unless the court directs otherwise.” Fed. R. Civ. P. 69. The

17

procedure of that execution is governed by state law, or, when applicable, federal law. Id.

This case hinges on a federal statute that enables the CFTC to seek "equitable remedies," including “restitution" for customer losses, against any person found to have violated the CEA. The CFTC argues that the District Court has the inherent power of civil contempt to enforce this “equitable" restitution. Escobio argues that the Restitution Obligation is a money judgment and there is no federal law that authorizes the use of civil contempt to enforce this money judgment. We agree with Escobio.

First, we describe the statutory scheme at issue and how the District Court concluded that the restitution constitutes an equitable remedy. Second, we explain why the restitution at issue here is, in fact, a money judgment—a remedy at law, rather than a remedy at equity.