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SILVA RUN WORLDWIDE LIMITED v. GAMING LOTTERY CORPORATION

April 4, 2003

SILVA RUN WORLDWIDE LIMITED, PLAINTIFF,
v.
GAMING LOTTERY CORPORATION, ET AL., DEFENDANTS. IN RE GAMING LOTTERY SECURITIES LITIGATION THIS DOCUMENT RELATES TO: PROSKAUER ROSE LLP, PETITIONER, V. GALAXIWORLD.COM LIMITED AND JACK BANKS, RESPONDENTS.



The opinion of the court was delivered by: Robert P. Patterson, Jr., United States District Judge

OPINION AND ORDER

On September 13, 2002, Proskauer Rose LLP ("Proskauer") moved for an order and judgment (1)(a) pursuant to Local Civil Rule 83.9(a) holding Respondent, Jack Banks, in civil contempt for his failure to comply with this Court's order dated May 8, 2002 requiring Banks to dismiss his Ontario action; (b) requiring Banks to pay weekly fines into Court until he complies with this Court's order dated May 8, 2002; and (c) awarding damages to Proskauer as compensation for fees and expenses incurred as a result of Banks' contempt of the order dated May 8, 2002, including the fees and costs incurred in making this motion, and providing for the future award of damages for future fees and expenses so incurred; and (2) directing entry of judgment against Respondents Banks and GalaxiWorld.com, Limited ("GalaxiWorld") (collectively, "Respondents") in the amount of the attorneys' fees and costs incurred by Proskauer as a result of Banks' and GalaxiWorld's noncompliance with this Court's January and March 2000 payment orders as authorized by this Court in its contempt order dated February 8, 2001. In re Gaming Lottery Security Litigation, 2001 U.S. Dist. Lexis 1204, *18 (S.D.N.Y. 2001). The motion was supported by an affirmation of Leon P. Gold dated September 10, 2002 ("Gold Affirmation"), an affidavit of Karen E. Clarke dated April 3, 2002 ("Clarke Affidavit"), and further supported by a reply affirmation of Gold dated October 14, 2002 ("Gold Reply Affirmation") attaching Proskauer's bills and expenses.

Facts

From January 2000 to February 2001, the Court and the Second Circuit Court of Appeals fully adjudicated an attorney/client dispute between Proskauer and GalaxiWorld and Banks, (the "Ancillary Proceeding") ancillary to two related actions before this Court, In re Gaming Lottery Securities Litigation, 96 Civ 5567, and Silva Run Worldwide Ltd. v. Gaming Lottery Corp., et al., 96 Civ 3231. During this period, this Court, attempting to enforce the Court's judgment, entered orders requiring Galaxi World and Banks, as President, to comply with post-judgment discovery demands by Proskauer in its efforts to cause Galaxi World to pay the outstanding fees (currently over $400,000) due Proskauer.*fn1 The Court of Appeals affirmed the judgments entered on January 10, 2001. Silva Run Worldwide Ltd., et. al. v. Galaxiworld.com Ltd., 242 F.3d 367 (2d Cir. 2001).

Finally, after a year of repeated enforcement orders, this Court in an opinion and order filed February 13, 2001, (1) held GalaxiWorld and Banks in contempt for their failures to comply with the January and March 2000 judgments and subsequent payment orders, and failures to appear, produce documents and give testimony concerning the location of GalaxiWorld's assets; (2) dismissed their affirmative claims asserted in the Silva Run case; and (3) ruled that Proskauer should be entitled to recover its attorneys' fees and costs incurred due to the Respondents' actions of noncompliance relating to the Court's payment orders of January 13, 2000, January 26, 2000 and March 6, 2000. (Gold Affm., Exh. F at 3-4. See also, In re Gaming Lottery Securities Litigation, 2001 U.S. Dist. Lexis 1204 (S.D.N.Y. 2001).

Notwithstanding that the attorney/client dispute had been fully adjudicated in the Ancillary Proceeding and affirmed by the Court of Appeals on January 10, 2001, Banks initiated an action in Ontario, Canada, on January 14, 2002, against Proskauer and several of its attorneys, one of whom was deceased, claiming $400,000,000 in compensatory damages and $10,000,000 in punitive damages. The claims either were, or could have been, litigated in the Ancillary Proceeding. Accordingly, on Proskauer's motion dated April 14, 2002, this Court issued an opinion and order dated May 8, 2002, enjoining Banks from proceeding with the Ontario action and ordering him to dismiss that action. (Gold Affm., Exh. C at 19.) See also, Silva Run Worldwide Ltd., v. Gaming Lottery Corp., 2002 U.S. Dist. Lexis 8307 (S.D.N.Y. 2002). Proskauer has brought the instant motion requesting damages and sanctions due to Banks' failure to obey this Court's order dated May 8, 2002, and also applying for the attorneys' fees permitted by this Court's order filed February 13, 2001.

Oral argument on Proskauer's motion was held on October 15, 2002. At that argument, Proskauer pointed out that Banks had pressed ahead with his Ontario action, despite the clear and unambiguous order of the Court dated May 8, 2002, and despite Proskauer's suggestion of a temporary stay of the Ontario suit pending Banks' appeal of the May 8, 2002 order. (October Hearing Transcript at 2-3.) Proskauer argued that Banks intentionally refused to comply with the Court's order dated May 8, 2002, and requested damages and an order imposing a fine of $1,000 per week for Banks' non-compliance with the order dated May 8, 2002. (Id. at 5.) Banks did not dispute that he had not obeyed this Court's order dated May 8, 2002, but argued that since he had appealed that order, this Court should take no action pending the appeal.*fn2 (Id. at 21, 23-24.) After hearing the parties, this Court granted Proskauer's request (1) for an order, pursuant to Local Civil Rule 83.9(a), holding Respondent Banks in civil contempt for failure to comply with this Court's order dated May 8, 2002 requiring Banks to dismiss his Ontario action, and (2) for an order requiring Banks to pay weekly fines of $1,000 into Court until he complies with the May 8, 2002 order. (Id. at 45-46, 56.) This order was fully justified because Banks had not obtained a stay pending appeal. See, Maness v. Meyers, 419 U.S. 449, 458 (1975); McDonald v. Head Criminal Court Supervisor Officer, et. al., 850 F.2d 121, 124 (2d Cir. 1988).

With respect to the second branch of the current motion, Proskauer pointed out in this Court's opinion and order filed February 13, 2001, holding Banks and GalaxiWorld in contempt for their failure to comply or make any reasonable or diligent efforts to comply with the Court's payment orders dated January 13, 2000, January 26, 2000, and March 6, 2000, the Court had also ordered that "Galaxi World and Banks . . . pay Proskauer's attorneys' fees and costs incurred as a result of their non-compliance with the Court's payment orders in an amount to be determined in a future supplemental proceeding upon Proskauer's application." (Gold Affm., Exh. F at 4; Oct. Hrg. Tr. at 9-10.) Banks argued in opposition to the motion, based on declarations attached to his opposing papers, that Banks had lacked the ability to cause Galaxi World to comply with the payment orders and that, therefore, there was no basis to hold Banks in contempt. (Declaration of Jack Banks, dated October 4, 2002, at ¶¶ 4, 6.) Banks' argument overlooks the following: (1) that the payment orders of January 13, January 26, and March 6, 2000, ordered Banks, who, at the time, was President and Chief Executive Officer of GalaxiWorld, to cause GalaxiWorld to pay Proskauer the outstanding fees, and that the Second Circuit affirmed those orders on January 10, 2001; (2)(i) that this Court's order dated February 9, 2001 found that GalaxiWorld and Banks had not met "their burden to demonstrate an inability to comply with the orders, either currently or in the past" (Gold Affm., Exh. F at 3); (ii) that `Banks had asserted an inability to comply with the orders but has not proffered any evidence thereof' (id.); (iii) that the Court ordered that "GalaxiWorld and Banks shall be required to pay Proskauer's attorneys fees and costs incurred as a result of their noncompliance . . ." (id. at 4); and (3) that Banks and Galaxi World did not file an appeal from the order dated February 9, 2001. Accordingly, it is clear that Respondents' opposing papers are collateral attacks on the prior orders of this Court dated January 13, January 16 and March 6, 2000, and February 9, 2001, and a collateral attack on the decision of the Second Circuit of January 10, 2001, affirming the payment orders of January and March 2000, each of which is res judicata.

Nevertheless, since Respondents' counsel objected to the amounts of time charges and expenses for which Proskauer was requesting payment (see Gold Reply Affm., Exhs. G, H, I and M), and had only received exhibits itemizing those charges the night before argument, the Court granted Respondents' application for a hearing with respect to Proskauer's time charges and expenses on both branches of Proskauer's motion. (Oct. Hrg. Tr. at 47.)

On December 18, 2002, this Court held an evidentiary hearing pursuant to Respondents' request during the argument of the motion. (Id. at 35-36.) At the December evidentiary hearing, Proskauer submitted documentary and testimonial evidence of (1) Proskauer's damages incurred as a result of Bank's contempt of the Court's May 8, 2002 anti-suit injunction order, which covered both bills submitted by Stikeman Elliott, Proskauer's Canadian counsel (December Hearing, Exhs. G and 10), and the attorneys' time charges and expenses incurred by Proskauer itself (Dec. Hrg., Exhs. 2, 3, 4, 5, 6, 7) arising from Banks' failure to observe the May 8, 2002 order, not including: (a) its fees in connection with Respondents' appeal of that order (see Oct. Hrg. Tr. at 49), and (b) time of Proskauer's partners conferring as clients with Stikeman Elliott (see id. at 50),*fn3 and (2) Proskauer's damages incurred as a result of Banks and GalaxiWorld's actions in failing to cooperate in judicial enforcement proceedings in contempt of the Court's January and March 2000 payment orders, based on only Proskauer's own internal fees and expenses. (See Dec. Hrg. Exh. 11.) The fees of Bart Schectman, outside collection counsel for Proskauer, were not included. (See id. at ¶ 7.)

Discussion

Stikeman Elliott Charges

With respect to the first branch of the application, Proskauer submitted four bills from Stikeman Elliott (Dec. Hrg., Exhs. G, 10), each of which contained Stikeman Elliott's attorneys' contemporaneous records of time and expenditures from mid-May to mid-November 2002 in connection with Banks' Canadian action (Gold Reply Affm. at ¶ 6, Exh. G; Dec. Hrg, Exhs. G, 10) and a summary chart identifying and totaling the portions of these bills for which Proskauer sought compensation in this contempt application (U.S. $26,044.76). (Dec. Hrg., Exh. 9; Dec. Hrg. Tr. at 128-130, 132-133.)

Respondents do not object to Stikeman Elliott's specific charges, but (1) argue that the U.S. dollar amounts requested should be calculated at the conversion rate applicable at the time that the Stikeman Elliott bills were paid, instead of at the date of the motion (Dec. Hrg. Tr. at 131); (2) state, without specification, that the bills reflect substantial duplication, especially in "conducting research" between Stikeman Elliott and Proskauer (Banks' Memorandum in Opposition dated December 27, 2002 at 8); and (3) argue that the amount and reasonableness of attorneys' ...


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