Citigroup Inc. v. Seade

Background

The court had previously granted Citigroup Inc.’s unopposed motion to compel arbitration, ordered Luis Sebastian Sayeg Seade to participate in arbitration, and ordered him to withdraw claims in a Mexican case that fell within the parties’ arbitration agreements. The court also stayed the federal case while arbitration proceeded, with exceptions including enforcement of the ordered injunctive relief.

On the same day, the court issued a preliminary injunction requiring Seade, by February 3, 2022, to dismiss without prejudice claims in the Mexican case arising out of or related to whether benefits under certain plans applied. Citigroup submitted proof that the earlier opinion and preliminary injunction had been served on Seade. Citigroup then moved for an order holding Seade in civil contempt because he had dismissed no claims in the Mexican case.

Civil Contempt

The court explained that civil contempt required Citigroup to show three things: the order was clear and unambiguous, the evidence of noncompliance was clear and convincing, and Seade had not diligently tried to comply in a reasonable way.

The court found all three requirements satisfied. First, the preliminary injunction clearly required Seade to dismiss the specified claims by February 3, 2022. Second, Seade’s failure to withdraw any claims from the Mexican case was clear and convincing evidence that he violated the injunction. The court relied in part on its earlier conclusion that some of Seade’s Mexican claims appeared to arise from or relate to the plans and might be required to go to arbitration. Third, Seade had not appeared before the court, claimed that compliance was impossible, or otherwise made a reasonable effort to comply.

The court also found that Seade’s contempt was willful for purposes of awarding legal fees. It concluded that he had actual notice of the injunction, could have complied, did not ask the court to modify it, and did not make a good-faith effort to comply.

Sanctions

The court granted Citigroup’s motion to hold Seade in civil contempt and imposed both coercive and compensatory sanctions. Coercive sanctions are intended to encourage future compliance. The court ordered a fine of $5,000 per day beginning March 4, 2022, if Seade had not withdrawn the required claims by then. The fine would increase by $5,000 per day every ten days: $5,000 per day from March 4 through March 13, $10,000 per day from March 14 through March 23, and $15,000 per day from March 24 through April 2. The fine would end when Seade withdrew the required claims, and no fine would be imposed if he complied before March 4. Any further coercive sanctions would require a new application to the court.

The court also ordered Seade to reimburse Citigroup for the reasonable attorneys’ fees and costs Citigroup incurred in bringing the contempt motion. Citigroup was required to submit supporting documentation by March 14, 2022, and Seade could respond by March 28, 2022. Citigroup could file a reply by April 4, 2022.

Disposition

The court granted Citigroup’s motion to hold Seade in civil contempt. It ordered Seade to immediately dismiss without prejudice the specified claims in the Mexican case, comply with the other requirements of the preliminary injunction, pay the stated daily fines if he failed to comply by the deadline, and reimburse Citigroup’s reasonable attorneys’ fees and costs. The clerk was directed to close the contempt motion.