Contempt Citation Against Feds for Post-BP Oil Drilling Moratorium Reversed — Stricter “Abuse of Discretion” Review for Contempt — Meaning of “Clear and Convincing” — Argument Waived by Inadequate Briefing

Hornbeck Offshore Servs., LLC v. Salazar, 2012 U.S. App. LEXIS 24355 (5th Cir. Nov. 27, 2012) (Note: 2 to 1 decision):

This case arises from the 2010 Deepwater Horizon accident in the Gulf of Mexico. An explosion killed 11 workers, caused the drilling platform to sink, and resulted in a major uncontrolled release of oil. At Presidential direction, those events prompted the Department of the Interior to prohibit all new and existing oil and gas drilling operations on the Outer Continental Shelf for six months. The district court preliminarily enjoined enforcement of the moratorium. The single issue on appeal is whether Interior's subsequent actions violated a specific provision of the court's injunction, justifying a finding of civil contempt. The district court was certainly correct that Interior immediately took steps to avoid the effect of the injunction, but we conclude none of those actions violated the court's order. We REVERSE. ***

FACTUAL AND PROCEDURAL HISTORY

The Deepwater Horizon tragedy occurred on April 20, 2010, as the Transocean drilling crew was preparing to temporarily abandon BP's discovery-well prospect 52 miles from shore in almost 5,000 feet of water in the Gulf of Mexico. The explosion and fire caused the platform to sink two days later. For almost three months, oil gushed from the wellbore in the sea floor.

On April 30, the President ordered Secretary of the Interior Ken Salazar to review the event and, within 30 days, to report on "what, if any, additional precautions and technologies should be required to improve the safety of oil and gas exploration and production operations on the outer continental shelf." That same day, with Order No. 3298, the Secretary established an Outer Continental Shelf Oversight Board.

About a week later, the Secretary announced that "as a result of the Deepwater Horizon explosion and spill, beginning April 20 -- the date of the explosion -- no applications for drilling permits [would] go forward for any new offshore drilling activity" until his report to the President. That report -- Increased Safety Measures for Energy Development on the Outer Continental Shelf -- was released on May 27. In addition to a variety of recommendations calling for new studies, regulations, and inspections, the Safety Report recommended (1) "a six-month moratorium on permits for new wells being drilled using floating rigs" and (2) "an immediate halt to drilling operations on the 33 permitted wells that [were] currently being drilled using floating rigs in the Gulf of Mexico." This six-month moratorium appeared in the Executive Summary but not in the body of the Safety Report.

The Safety Report represented that its recommendations had "been peer-reviewed by seven experts identified by the National Academy of Engineering." It would later come to light that five of those experts never reviewed or agreed to the blanket six-month moratorium. Although no wrongdoing was attributed to Interior, an Office of Inspector General report cited by the district court found that after expert review, White House officials had inappropriately modified it.

On the day after the Safety Report's release, May 28, 2010, the Secretary issued what the parties refer to as the "May Directive." The May Directive explained that based on the

report to the President, and further evaluation of the issue, [the Secretary] find[s] at this time and under current conditions that offshore drilling of new deepwater wells poses an unacceptable threat of serious and irreparable harm to wildlife and the marine, coastal, and human environment as that is specified in 30 C.F.R. 250.172(b).

. . . [The Secretary also] direct[ed] a six month suspension of all pending, current, or approved offshore drilling operations of new deepwater wells in the Gulf of Mexico and the Pacific regions. . . . For those operators who are currently drilling new deepwater wells, they shall halt drilling activity . . . . [and] the [Mineral Management Service ("MMS")] shall not process any new applications for permits to drill consistent with this directive.

Interior executed this directive by issuing a general Notice to Lessees and Operators of Federal Oil and Gas Leases ("NTL No. 2010-N04" or "Notice to Lessees"), effective May 30, which explained that MMS would not consider any new applications for six months in "deepwater," defined as depths greater than 500 feet. There were roughly 4,500 active leases in the Gulf's deepwater at the time. MMS also transmitted individual letters to the 33 operators of permitted wells that were being drilled at the time, providing notification that their activities were temporarily suspended "consistent with the Secretarial Directive and Notice to Lessees."

Hornbeck Offshore owns and operates a fleet of vessels that support deepwater exploration. It had contracts with nearly all of the operators of the 33 permitted wells ordered closed. Along with close to forty other companies involved in oil and gas drilling, exploration, and production, Hornbeck filed suit on June 7 seeking declaratory and injunctive relief. The complaint alleged that the May Directive and the Notice to Lessees were inadequately explained and justified, in violation of the Administrative Procedures Act ("APA"), and that in issuing the Directive and the Notice the Secretary exceeded his authority under the Outer Continental Shelf Lands Act ("OCSLA"), 43 U.S.C. § 1332.

Finding only the APA, not the citizen-suit provision of the OCSLA, pertinent, on June 22 the district court granted Hornbeck the preliminary injunction at the center of this case. That injunction ordered that Interior, MMS, and

their servants, agents, successor agencies and employees, and all persons in active concert of participation with them, who receive actual Notice of this Preliminary injunction [were] immediately prohibited from enforcing the Moratorium, entitled "Suspension of Outer Continental Shelf (OCS) Drilling of New Deepwater Wells" dated May 28, 2010, and NTL No. 2010-N04 seeking implementation of the Moratorium, as applied to all drilling on the OCS in water at depths greater than 500 feet.

The Secretary issued a press release responding to the injunction that day, stating that "[t]he decision to impose a moratorium on deepwater drilling was and is the right decision" and that the government would appeal the ruling to the Fifth Circuit. He concluded the release by announcing that on the basis of "ever-growing evidence, I will issue a new order in the coming days that eliminates any doubt that a moratorium is needed, appropriate, and within our authorities."

Simultaneously, Interior took some steps to comply with the injunction. Interior again sent individually addressed letters to the operators of the 33 wells at which it had ordered a halt to production, explaining that neither the Notice to Lessees "nor the order directing a suspension of operations [the May Directive] has legal effect on your operations at this time." In contrast to its actions in imposing the moratorium, though, Interior did not notify the industry-at-large, namely the operators and lease holders not currently drilling.

A letter bearing the subject line "Immediate Prohibition from Enforcing the Moratorium on Drilling New Deepwater Wells" went to all Interior employees on June 23. It excerpted the district court's order and explained that employees were "not to take any action to enforce the Moratorium issued on May 28, 2010, or to enforce NTL No. 2010-N04" until the Secretary gave additional orders.

Also on June 23, the Secretary appeared before the United States Senate Subcommittee on Interior, Environment, and Related Agencies. Though his scheduled topic was bureaucratic reorganizations affecting MMS, the Secretary made several comments about the moratorium that bear on this litigation.

Interior immediately appealed the injunction order to this court. It also filed a motion for a stay of the injunction. Interior noted in its filing that it intended to issue a new, similar moratorium. A divided panel of our court denied the stay request, without prejudice to the Secretary's "right to apply for emergency relief if he [could] show that drilling activity by deepwater rigs has commenced or [was] about to commence." Four days after that ruling, on July 12, 2010, Interior rescinded the May Directive. A "July Directive" was substituted. Without doubt, the new suspension directive was the same "in scope and substance." The difference was that it contained a more thorough explanation of reasons and referred to more voluminous evidentiary support. Interior returned to this court that day, arguing that we should vacate the district court's June 22 injunction of the May Directive as moot. We ruled that although the Secretary had "asserted substantial reasons suggesting mootness," our record was inadequate to decide the issue. A limited remand was ordered for the district court to consider the issue of mootness.

On remand, the district court held that the suit was not moot:

Because this Court has determined that the process leading to the first moratorium lacks probity; because this Court has determined that no rational nexus exists between the fact of the tragic Deepwater Horizon blowout and placing an attainder of universal culpability on every other deepwater rig operator in the Gulf of Mexico; because this Court has determined that the first moratorium is invalid in law; and because the Interior Secretary's second moratorium arguably fashions no substantial changes from the first moratorium, the government has failed to circumvent the voluntary cessation exception to mootness.

The court also stated that the rescission of the May Directive did have "some administrative force," a statement we would interpret later that month to mean that "the preliminary injunction enjoined no longer ha[d] any operative effect." Concluding further that any opinion by our "court on the merits and legality of the issuance of the preliminary injunction would address an injunction that is legally and practically dead," we dismissed Interior's merits appeal as moot on September 29.

After the district court denied Interior's motion to dismiss for mootness, but before this court's ruling on Interior's appeal, Hornbeck filed a motion to enforce the preliminary injunction. In that motion Hornbeck argued that by rescinding and replacing the May Directive, Interior had chosen to disobey the district court's order rather than permit it to undergo an orderly process of judicial review. On September 30, the district court determined that "[i]n light of the United States Court of Appeals for the Fifth Circuit's September 29th opinion declaring moot the appeal of the preliminary injunction, the plaintiffs' motion is DENIED."

The Secretary lifted the July Directive on October 12, 2010, which was a few weeks before the moratorium's anticipated six-month expiration. This effectively mooted the Hornbeck suit. Hornbeck moved for attorneys' fees on two bases: (1) civil contempt and (2) bad-faith litigation tactics. The district court expressly declined to reach the bad-faith basis. Instead, it concluded that "the plaintiffs have established the government's civil contempt of its preliminary injunction order" by clear and convincing evidence. It would later approve an award of both fees and costs of approximately $530,000. We now consider the actions the district court identified as contemptuous and analyze whether they violated its written order.

DISCUSSION

Inherent in the authority of the federal courts is the contempt power. See Roadway Express, Inc. v. Piper, 447 U.S. 752, 764, 100 S. Ct. 2455, 65 L. Ed. 2d 488 (1980). The availability of that sanction promotes "the due and orderly administration of justice" and safeguards the court's authority. Id. (quoting Cooke v. United States, 267 U.S. 517, 539, 45 S. Ct. 390, 69 L. Ed. 767 (1925)). "Because inherent powers are shielded from direct democratic controls," the Supreme Court instructs that "they must be exercised with restraint and discretion." Id. Rather than stemming from a "broad reservoir," they are "implied power[s,] squeezed from the need to make the court function." Crowe v. Smith, 151 F.3d 217, 226 (5th Cir. 1998) (internal quotations omitted).

We review contempt findings for abuse of discretion, but "review is not perfunctory." Id; see also United States v. Local 1804-1, Int'l Longshoremen's Ass'n, 44 F.3d 1091, 1095-96 (2d Cir. 1995) (appellate review of contempt order "more rigorous than would be the case in other situations in which abuse-of-discretion review is conducted"). Facts found by the district court will be accepted as true unless clearly erroneous, but "the interpretation of the scope of the injunctive order[] is a question of law to be determined by the independent judgment of this Court." Drummond Co. v. Dist. 20, United Mine Workers, 598 F.2d 381, 385 (5th Cir. 1979).

A. Civil Contempt Finding

"A party commits contempt when he violates a definite and specific order of the court requiring him to perform or refrain from performing a particular act or acts with knowledge of the court's order." Travelhost, Inc. v. Blandford, 68 F.3d 958, 961 (5th Cir. 1995). For civil contempt, this must be established by clear and convincing evidence. Id.

Clear and convincing evidence is that weight of proof which produces in the mind of the trier of fact a firm belief or conviction . . . so clear, direct and weighty and convincing as to enable the fact finder to come to a clear conviction, without hesitancy, of the truth of precise facts of the case.

Shafer v. Army & Air Force Exch. Serv., 376 F.3d 386, 396 (5th Cir. 2004) (quotation marks and citations omitted).

The district court identified the proper burden of proof and legal standards, then laid out the reasons for its contempt finding. The court identified three categories of action that it held, when viewed "in tandem" with the national importance of the case and the reimposition of the moratorium, supported a civil contempt finding. Specifically, it found "defiance" and "determined disregard" in (1) Interior's failure to seek a remand from the district court to the agency before taking new administrative action; (2) its continuously stated public resolve to restore the moratorium; and (3) its communications to industry that a new moratorium was in the offing.

Hornbeck and Interior dispute whether our law requires a remand in this type of situation. Each side has marshaled authorities.

Footnote 1. Compare Broussard v. U.S. Postal Serv., 674 F.2d 1103, 1108 n.4 (5th Cir. 1982) (stating that "prevailing jurisprudence" holds "that once a judicial suit is filed an agency should not unilaterally reopen administrative proceedings -- the agency should first ask the court to remand the case to it"); with Am. Farm Lines v. Black Ball Freight Serv., 397 U.S. 532, 542, 90 S. Ct. 1288, 25 L. Ed. 2d 547 (1970) (noting that "since the stay order did not forbid it from acting . . . , it was not necessary for the [agency] to seek permission of the court" before ruling).

This case does not hinge on whose view is correct. Although a district court need not "spell out in detail the means in which its order must be effectuated," the injunction's provisions must be "clear in what conduct they [have] mandated and prohibited." Am. Airlines, Inc. v. Allied Pilots Ass'n, 228 F.3d 574, 578-79 (5th Cir. 2000). The injunction did not state that Interior had to seek permission for a remand before developing additional rules on offshore drilling in the Gulf. The only mandate about returning to the court was that Interior provide a report describing "the manner and form" of its compliance with the injunction within 21 days. There has been no allegation that it failed in that duty. For Interior to have been in contempt, the injunction would have had to include an obligation to petition for a remand. Cf. Armstrong v. Exec. Office of the President, 1 F.3d 1274, 1289, 303 U.S. App. D.C. 107 (D.C. Cir. 1993) (vacating civil contempt against federal agencies because district court's "order did not expressly direct" cited conduct).

There were several communications to the industry manifesting Interior's "public resolve" to overcome the injunction. Six days after the injunction was entered, Interior convened a meeting in Washington, D.C., attended by Secretary Salazar and other high-ranking Interior officials. According to an affidavit from an attendee, the question was posed to the government representatives "whether deepwater drilling in the Gulf could resume at that time, given the existence of an injunction against the previously issued deepwater drilling moratorium." The response by an Interior Assistant Secretary was that it was his Department's intention "to issue a second moratorium," a statement the affiant understood as "a signal that the cost and expense of resuming drilling should not be undertaken by industry because the second moratorium would prevent that activity from continuing once it was issued."

The relevant public communications, acknowledged by Interior, are the Secretary's press release responding to the injunction and his testimony to Congress the next day. The press release does, as the district court recognized, evince a resolve to reissue the moratorium. That intent was made explicit before the Senate Subcommittee, just as it would be in Interior's motion for a stay in this court. ***

Taken together, the comments to industry, to the Senate, and to the public support the district court's factual conclusion that Interior was intent on reinstating a moratorium that imposed the same limitations as the May Directive from the moment the court enjoined it. Neither harboring that intent nor imposing a new moratorium, though, was a violation of the court order. The district court did not conclude otherwise. Hornbeck's motion for contempt focused "on the government's imposition of a second blanket moratorium hurried on the heels of the first." According to the district court, using the issuance of the July Directive as a reason for contempt would require reading its "preliminary injunction Order too broadly."

The district court explained that the injunction had been based on a finding that "the plaintiffs were substantially likely to prove that the process leading to the first moratorium was arbitrary and capricious" in violation of the Administrative Procedure Act. See, e.g., Jupiter Energy Corp. v. FERC, 407 F.3d 346, 349 (5th Cir. 2005) (explaining that the Act requires "reasoned analysis" and a cogent explanation for agency action). In "answer to the plaintiffs' quarrel with the second moratorium," the court explained that Interior took the position that it had "met the Court's concerns and resolved each of the procedural deficiencies in the first." Although the court expressed skepticism about whether that would be borne out, it then ruled that under "these facts alone," it "could not, at least not clearly and convincingly, find the government in contempt of the preliminary injunction Order." We agree. See Test Masters Educ. Servs., Inc. v. Singh, 428 F.3d 559, 582 (5th Cir. 2005).

Hornbeck's complaint also asserted that a six-month moratorium on all drilling exceeded the authority delegated to Interior under the Outer Continental Shelf Lands Act. The court never reached that issue. Had the May Directive been enjoined on that basis, this would be a very different case. Instead, the sole justification for the preliminary injunction that did issue was a procedural failure to explain. The court order did not explicitly prohibit a new, or even an identical, moratorium. It is true that the district court identified additional potential APA deficiencies in the process surrounding the July Directive, but those potential defects are presented here as a basis supporting the contempt. Hornbeck's "victory" was fleeting and frustrating to its goal of actually allowing drilling to proceed. ***

Interior was carrying out a policy decision made by the President. On display throughout was the "decision, activity . . . and dispatch" that the Framers envisioned for the Executive Department of government. The Federalist No. 70, at 423 (Alexander Hamilton) (Clinton Rossiter ed., 1961). Litigation was not able to keep pace with these developments. See id. (discussing the Executive's unique role "in the most critical emergencies of the state"). The national importance of this case weakens, not strengthens, the propriety of the court's contempt finding. The controversial policy decisions that the May and July Directives reflected were made at the highest level of government. In implementing those decisions, we do not discern a violation of a clear provision of the district court's order by the words expressed or actions taken by the Secretary.

The district court dealt expeditiously and forcefully with extremely significant litigation. The potential APA violations that led to the initial injunction are not at issue today, but such violations, if significant, would justify a district court's consideration of an injunction. Our decision is a narrow one. We conclude that there is no clear and convincing evidence that Interior's actions after the injunction violated the clear terms of the injunction as drafted. Therefore, there was no civil contempt.

B. Bad Faith Litigation

In the alternative, Hornbeck suggests the Equal Access to Justice Act ("EAJA") as a basis for the award of attorneys' fees. See 28 U.S.C. § 2412(b), (d). Interior counters that this alternative is inadequately briefed. See Fed. R. App. P. 28(a)(9), (b). We agree.

Hornbeck's bare-bones briefing of this issue fails to explain how the substantive and procedural requirements for an award under the Act are satisfied. First, we have held that to impose that sanction the "court must make a specific finding that the sanctioned party acted in bad faith." Matta v. May, 118 F.3d 410, 416 (5th Cir. 1997). The court refrained from reaching the issue of bad faith and Hornbeck has offered no argument as to why that fact is not dispositive. Second, the party wishing to recover under this Act must "within thirty days of a final disposition in the adversary adjudication, submit to the agency an application which shows that the party is a prevailing party and is eligible to receive an award." Boland Marine & Mfg. Co. v. Rihner, 41 F.3d 997, 1006 (5th Cir. 1995). In Boland, we declined to resolve whether a party was entitled to attorneys' fees without evidence in the record that these procedures had been met. Id. Hornbeck has not alleged it complied.

Finally, without analysis, Hornbeck declares itself to be a prevailing party citing to Dearmore v. City of Garland, 519 F.3d 517, 521-24 (5th Cir. 2008). Dearmore announces a three-factor test for determining whether a plaintiff who receives a preliminary injunction is a prevailing party under a civil rights provision, 42 U.S.C. § 1988(b), when "the district court makes an unambiguous indication of probable success on the merits of his claim and the defendant subsequently moots the case before trial in direct response to the court's preliminary injunction order." Id. at 521, 524. Hornbeck has not engaged with any of those considerations. Importantly, it has not explained how it can escape from its decision to stipulate to dismiss the case or from the district court's conclusion that the July Directive did not moot the case because the voluntary-cessation exception applied. E.g., Pederson v. La. State Univ., 213 F.3d 858, 873 (5th Cir. 2000).

This potential basis for maintaining the award is waived because it has not been meaningfully briefed. Nat'l Bus. Forms & Printing, Inc. v. Ford Motor Co., 671 F.3d 526, 531 n.2 (5th Cir. 2012) (citing Fed. R. App. P. 28).

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