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United States District Court, Southern District of New York

July 7, 2003


The opinion of the court was delivered by: James Francis, Magistrate Judge


The plaintiffs, who have obtained a judgment against the defendant, Daniel E. Carpenter, now seek to hold the defendant in contempt of court for failing to honestly disclose his assets during the course of his post-judgment deposition. The plaintiffs also seek various forms of equitable relief, including a court-imposed constructive trust over any of Mr. Carpenter's or his wife's assets, and an injunction preventing New England Mutual Life Insurance Company ("New England") or the Robert E. Burns Agency (the "Burns Agency") from making any change in their payments to any Benistar entity. For the reasons that follow, the plaintiffs' motion is denied.


The plaintiffs have obtained a judgment against Mr. Carpenter, and despite continuous efforts to satisfy the judgment, they have been unable to do so. The plaintiffs have conducted extensive post-judgment discovery in order to determine whether Mr. Carpenter has any income or assets. As part of that discovery, the plaintiffs deposed Mr. Carpenter in Connecticut, not as part of the instant action, but rather, in an action commenced in the United States District Court for the District of Connecticut in 2000. Israel v. Carpenter, 00-MC-546 (Conn. 2000). In that action, the plaintiffs registered this Court's judgment in Connecticut.

The plaintiffs contend that documents they received from New England pursuant to a subpoena demonstrate that Mr. Carpenter lied during his post-judgment deposition. (Plaintiffs' Memorandum of Law in Support of Motion to Hold Defendant in Contempt and for Other Relief ("Pl. Memo.") at 1-4; Plaintiffs' Notice of Motion to Hold Defendant in Contempt and for Other Relief dated October 11, 2002 ("Pl. Notice of Motion"), Exhs. B, C). They claim that these documents contradict Mr. Carpenter's repeated assertions that he had no ownership interest in companies known as Benistar Insurance Group ("Benistar Insurance"), Benistar Administrative Services, Benistar Property Exchange Trust Company, Inc., or Benistar Limited. (Deposition of Daniel E. Carpenter dated May 3, 2001 ("Carpenter Dep."), attached as Exh. A to the Pl. Notice of Motion at 36, 43, 91). Specifically, the plaintiffs note that the documents reflect that Mr. Carpenter signed a contract with New England on behalf of Benistar Insurance as its agent and sub-agent in early 1997. (Corporate Agent Contract (the "Contract") dated February 14, 1997, attached as Exh. B to the Pl. Notice of Motion). From this Contract as well as other commission statements, the plaintiffs infer that Mr. Carpenter is an owner of Benistar Insurance Group. (Pl. Memo. at 1-2). Based on the defendant's post-judgment deposition testimony, where he disavowed all ownership interests in any Benistar entity, the plaintiffs request that this Court hold the defendant in contempt. (Carpenter Dep. at 36, 91).

In addition to their contempt claim, the plaintiffs also seek various forms of equitable relief. These include an injunction prohibiting any change in the payee for any payments made by New England or the Burns Agency to any Benistar entity as well as the imposition of a constructive trust on any monies paid by New England or the Burns Agency to any Benistar entity.*fn1

I held hearings on January 29 and February 10, 2003, to explore the contempt issue. After the first hearing, I ordered that the defendant attend the February 10 hearing. Despite my order, Mr. Carpenter failed to appear.


A. Contempt

1. The Defendant's Deposition Testimony

"It is a firmly established principle that the power to punish for contempt is an inherent power of the federal courts." People of the State of New York by Abrams v. Terry, 45 F.3d 17, 23 (2d Cir. 1995); see Gompers v. Bucks Stove & Range Co., 221 U.S. 418, 450 (1911) ("the power of courts to punish for contempt is a necessary and integral part of the independence of the judiciary"). Federal courts "are universally acknowledged to be vested, by their very creation, with power to impose silence, respect, and decorum, in their presence, and submission to lawful mandates." Chambers v. NASCO, Inc., 501 U.S. 32, 43 (1991). A court's contempt power stems from the "`control necessarily vested in courts to manage their own affairs so as to achieve the orderly and expeditious disposition of cases.'" Id. (quoting Link v. Wabash Railroad Co., 370 U.S. 626, 630-31 (1962)).

There are two different types of contempt: civil and criminal. In order to determine whether a contempt is civil or criminal, the court must examine "the substance of the contempt proceeding and the `character and purpose' of the sanction involved." D'Orange v. Feely, 959 F. Supp. 631, 637 (S.D.N.Y. 1997) (citing Gompers v. Bucks Stove & Range Company, 221 U.S. 418, 441 (1911)). "A contempt sanction is considered civil if it is remedial and for the benefit of the complainant, and criminal if it is punitive, to vindicate the authority of the court." D'Orange, 959 F. Supp. at 637. For the following reasons, I conclude that a finding of either civil or criminal contempt is not warranted here.

A court's civil contempt power may only be invoked when "(1) the order the party allegedly failed to comply with is clear and unambiguous, (2) the proof of noncompliance is clear and convincing, and (3) the party has not diligently attempted in a reasonable manner to comply." New York State National Organization for Women v. Terry, 886 F.2d 1339 (2d Cir. 1989) (citing Equal Employment Opportunity Commission v. Local 638, Local 28 of Sheet Metal Workers International Association, 753 F.2d 1172, 1178 (2d Cir. 1985)); see D'Orange v. Feely, 959 F. Supp. 631, 635 (S.D.N.Y. 1997).

Here, the plaintiffs have failed to demonstrate that this Court should invoke its civil contempt power to punish the defendant for his allegedly untruthful deposition testimony. The plaintiffs have not demonstrated the fundamental tenet of a finding of civil contempt, namely, that the defendant has disobeyed a court order. Absent such a showing, this Court is not justified in invoking its contempt power. Thus, the plaintiffs' motion to find the defendant in contempt for purportedly lying at his deposition is denied.*fn2

With respect to criminal contempt, before an order of contempt can be imposed on a defendant he must be "afforded the Constitutional protections of a criminal proceeding, such as the right to remain silent and the standard of proof beyond a reasonable doubt." Terry, 886 F.2d at 1350. However, a court has the power to "refer [a] matter to the appropriate prosecuting authority, like the public prosecutor who the court can reasonably expect to accept responsibility for prosecution," when an individual "violates [the court's] orders." D'Orange, 959 F. Supp. at 637 (citing Young v. United States ex rel. Vuitton et Fils, S.A., 481 U.S. 787, 801 (1987)).

18 U.S.C. § 401, the criminal contempt statute, provides in pertinent part that:

A court of the United States shall have the power to punish by fine or imprisonment, or both, at its discretion, such contempt of its authority, and none other, as —
(1) Misbehavior of any person in its presence or so near thereto as to obstruct the administration of justice;
(3) Disobedience or resistance to its lawful writ, process, order, rule, decree, or command.
Here, referral to a prosecuting authority is unwarranted since the defendant did not violate any order of this Court and because his alleged misbehavior did not occur within the Court's presence.*fn3

2. The Defendant's Failure to Attend the Contempt Hearing
Although the plaintiffs only requested that this Court find the defendant in contempt due to his allegedly perjurious deposition testimony, his conduct after the filing of that motion raises serious concerns regarding his ability to follow a directive of this Court.

In connection with the plaintiffs' motion for contempt, I held two hearings to explore the issue in greater detail. After the conclusion of the first hearing, I determined that a two-week adjournment was appropriate in order to provide the plaintiffs with an opportunity to present more information regarding Mr. Carpenter's potentially sanctionable conduct. (Tr. at 69).*fn4 Accordingly, I ordered that Daniel Carpenter attend and testify at the hearing scheduled for February 10, 2003. (Order dated Jan. 31, 2003). Despite my Order, Mr. Carpenter did not attend the February 10 hearing. (Tr. 78-79).

As discussed above, even if Mr. Carpenter did lie during his deposition, that conduct alone would not warrant a finding of contempt because there was no violation of a court order. Accordingly, there was no compelling reason to require the defendant's presence at the hearing. Therefore, even though Mr. Carpenter's conduct was disrespectful, it would be anomolous to hold him in contempt for failing to appear.

B. Constructive Trust

The plaintiffs further request that this Court impose a "constructive trust on all monies paid by [New England] and/or the [Burns Agency] to any Benistar entity" since, the plaintiffs claim, the defendant maintains ownership interests in certain Benistar companies, specifically, Benistar Insurance. (Pl. Memo. at 3). Accordingly, they request that the Court impose a constructive trust on any monies paid to that entity.

The plaintiffs conclude that Mr. Carpenter is a owner of Benistar Insurance because he signed a contract between New England and Benistar Insurance as Benistar Insurance's corporate agent and sub-agent. (Contract at 1st unnumbered page). Section 1(G) of the Contract provides that "[o]nly a Subagent . . . or a transferee may own the stock of [Benistar Insurance]." (Contract at 1st numbered page). The plaintiffs proceed to argue that "[d]ocuments obtained by the Plaintiffs in post-judgment discovery establish that [New England] has been paying Benistar Ltd., LLC substantial commissions since at least 1998." (Pl. Memo. at 3). To support this proposition, the plaintiffs rely on "detailed commission statement[s]" of Benistar Limited from 1998 to 2002. (Pl. Notice of Motion, Exh. C). However, Section 1(G) of the Contract pertains to a sub-agent's ownership in Benistar Insurance, not Benistar Limited. Thus the commission statements of Benistar Limited are irrelevant since the plaintiffs have not provided any evidence that Mr. Carpenter owns any part of that company.

Moreover, even though the Contract indicates that Mr. Carpenter may have owned Benistar Insurance in 1997, the plaintiffs offer no support for the proposition that he currently maintains any ownership interest in that company. Furthermore, the fact that the Contract provides that "[o]nly a Subagent . . . or a transferee may own the stock of [Benistar Insurance]" does not prove that Mr. Carpenter ever owned that company's stock since the Contract does not state that every sub-agent must be an owner of Benistar Insurance. Thus, it would be inappropriate for this Court to impose a constructive trust on that company without more compelling evidence that Mr. Carpenter maintains an ownership interest in the company.

C. Injunctive Relief

The plaintiffs also request that this Court "issue an injunction barring any change in the payee of the payments currently being made by [New England] and/or [the Burns Agency] to any Benistar entity." (Pl. Memo. at 5). "A party seeking a preliminary injunction must establish irreparable harm and either (a) a likelihood of success on the merits or (b) sufficiently serious questions going to the merits and a balance of hardships tipping decidedly in its favor." Pogliani v. United States Army Corps of Engineers, 306 F.3d 1235, 1238 (2d Cir. 2002) (citation omitted).

Here, the plaintiffs' request for an injunction is denied because, as noted above, they have not sufficiently demonstrated Mr. Carpenter's ownership interests in any Benistar entity.

So Ordered.

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