The opinion of the court was delivered by: Lewis A. Kaplan, United States District Judge.
This is a motion to hold defendants Verity International, Ltd.
("Verity"), Robert Green and Marilyn Shein in civil contempt of court for
failing to comply with the preliminary injunction previously entered in
this action.*fn1 There are no issues of fact.
This is an action by the FTC against, insofar as is relevant to this
motion, the operators of a billing service for Internet pornographers.
The general nature of the action and the claims asserted here are set
forth in the Court's opinion granting the plaintiff's motion for a
preliminary injunction, familiarity with which is assumed.*fn2
Among the forms of relief the FTC sought in its motion for a
preliminary injunction were an asset freeze and a direction that
defendants Verity, Green and Shein, all of whom are foreigners, provide
full and truthful disclosure of their financial condition. While these
defendants contested the propriety of a preliminary injunction in general
and the necessity for a freeze order in particular, they did not
otherwise resist the FTC's request for an order requiring disclosure of
their financial condition. Indeed, when the Court ruled in the
Commission's favor, it directed that the Commission serve a proposed form
of order and afforded these defendants the opportunity to respond. When
these defendants responded to the FTC's proposed
form of order, which
contained financial disclosure provisions, with their own proposed form,
they essentially adopted the Commission's form on these points.
The two provisions of the order at issue here are Section III.E and V.
The former provides that defendants are ordered to "[p]rovide plaintiff
access to the defendants' records and documents held by financial
institutions outside the territorial United States, by signing the
Consent to Release of Financial Records attached [to the injunction] as
Attachment A." The latter provides:
"IT IS FURTHER ORDERED that within twenty-one (21)
days after entry of this Order, each defendant shall
provide to counsel for the Commission a completed
financial statement, on the forms attached hereto as
Attachment B for the individual defendants and
Attachment C for the corporate defendant, accurate as
of the date of entry of this Order."
The FTC acknowledges that Verity has complied with these provisions of
the preliminary injunction, albeit belatedly, and no longer seeks to hold
it in contempt. Green and Shein, however, are another matter. Neither has
complied with either Section III.E or V. In fact, although they appear to
have told their prior counsel that they would comply at least with
Section V by January 25, 2001, they changed their mind, leading to the
withdrawal of prior counsel.*fn3 Now, both have submitted declarations
stating that they have not complied, and do not intend to comply, with
those provisions of the preliminary injunction. They add that they
"realize that there is no legal excuse for [their] disobedience of those
aspects of the Court's Order, and [that they] have been advised by
[their] attorneys to comply with the order in its entirety."*fn4
As defendants concede, a finding of contempt is appropriate if there
was a clear and valid order and defendants, knowing of the order, failed
to comply and made no diligent effort to do so.*fn5 As Green and Shein
further concede, these requirements, with two minor quibbles, have been
satisfied here. Certainly defendants knew of the order and deliberately
made no effort to comply with it. Indeed, Green and Shein have submitted
declarations acknowledging that there is no legal excuse for their
failure to comply. Nevertheless, their counsel has advanced two arguments
in opposition to holding them in contempt.
In most circumstances, the validity of an order is not an appropriate
consideration on a contempt motion, as a court order ordinarily must be
obeyed unless and until it is reversed or vacated. The only exceptions
are where the order exceeds the court's jurisdiction or is "transparently
invalid."*fn6 Moreover, an alleged contemnor will not be heard to allege
even the transparent invalidity of a court order unless the defendant has
made "some good faith effort to seek emergency relief from the appellate
court" or shown compelling circumstances such as a need for immediate
action.*fn7 Nevertheless, Green and Shein contend that Section III.E, which
required them to provide the FTC with consents allowing the Commission to
access their foreign bank records, and Section V, which required the
submission of financial statements, are transparently invalid because the
forms attached to the injunction wrongly would have required them to
attest that the forms were executed voluntarily rather than pursuant to
court order.*fn8 The argument is utterly without merit.
To begin, there is every reason to conclude that the forms would have
been executed voluntarily. The FTC proposed an injunction requiring the
execution of these forms. Green and Shein not only did not object to that
aspect of the order, they incorporated it into the form of order that
they proposed to the Court.*fn9 But there is no need to rely on this, as
their position must be rejected on other grounds.
In this case there was nothing stopping Green and Shein from raising
their objection to the wording of the form of consent and of the
financial statements. Their contention that they could not object earlier
because they lacked counsel is without merit. The Court's opinion
inviting proposed forms of the preliminary injunction was issued on
December 13, 2000, more than a month before defendants fired the second
firm that represented them.*fn10 In fact, defendants did respond and
object to other aspects of the order in their December 21 submission.
Even if they had lacked counsel earlier than in fact was the case, it
would be difficult to see why defendants, having voluntarily discharged
their counsel,*fn11 should be heard to claim that they were prevented by
their own act from objecting to ...