The opinion of the court was delivered by: HAROLD BAER, JR., District Judge[fn1] [fn1] Audrey Roofeh, a fall 2003 intern in my Chambers and a second year law student at Benjamin N. Cardozo School of Law, provided substantial assistance in the research and drafting of this opinion.
Defendants, and Third Party Plaintiffs Lennox Lewis, Lennox
Lewis Enterprises, Inc., and New Jersey Sports Productions, Inc., d/b/a,
Main Events (collectively "Lewis"), move for an order pursuant to
18 U.S.C.A. § 401 and Federal Rule of Criminal Procedure ("Fed.R. Crim.
P.") 42(1) holding plaintiffs and third party defendants Panix
Promotions, Ltd., Panix of the U S., Inc, and Panos
Eliades*fn2(colletively "Panix Parties ") in civil contempt of this
Court February 15, 2002 Order ("February 15 Order" or "Order"), (2)
incarcerating Panos Eliades until such time as Panix Parties comply with
then Court ordered obligations, and (3) appointing an Assistant
United States Attorney or other prosecutor to initiate criminal contempt
against the Panix Parties. For the foregoing reasons, Lewis' motion
for civil contempt is granted in part and denied
in part, and his request for criminal proceedings is denied.
The final judgment that serves as the basis for this motion was the
culmination of a lawsuit initiated by the Panix Parties against Lewis,
for breach of contract. Lewis counterclaimed for breach of contract,
fraud, breach of fiduciary duty, and violations of the Racketeer
Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962.
On February 14, 2002, following a jury trial, a verdict in favor of Lewis
was rendered, awarding Lewis $6,821,159 for breach of fiduciary duty,
$396,082 for RICO violations, and $56,400 for fraud, and awarding
$681,469 to Main Events for the fight promotion. On the following day,
this Court issued the February 15 Order, restricting Panix Parties from
engaging in certain transactions that could dilute its liquidity, thereby
jeopardizing Lewis' recovery.*fn3
The February 15 Order (1) restrained and enjoined Panix Parties from
transferring or encumbering any assets other than in the ordinary course
of business, (2) forbade the Panix Parties from engaging in any
transaction with a value in excess of £3,500, or engaging in
multiple transactions with a value in excess of £5,000 in any one
day, without the Courts written approval, (3) ordered Panix Parties to
produce to Lewis copies of all of their books and records, (4) ordered
Panix Parties to execute written authorizations so that Lewis could
acquire Panix Parties' financial information directly from banks,
tenants, lenders, and credit card companies, and (5) ordered Eliades to
be deposed about his financial affairs.
Lewis makes the following contempt allegations: (1) Panix Parties
promoted a fight card on May 10, 2002, (2) Eliades paid a $7,000 hotel
bill, (3) Eliades made an £11,000 wire transfer for an overdraft,
(4) Eliades transferred title to a Mercedes-Benz, (5) Eliades allowed a
charge to be registered against his property at 24 Parliament Hill
("Parliament Hill Property"), (6) Eliades transferred his interest in
Treptos Investments to Rita Moustaka to avoid Lewis discovery of this
asset, (7) Panix Parties paid off approximately £46,000 of
unsecured debt to Barclay's Bank, (8) Panix Parties violated discovery
obligations concerning financial disclosure, (9) Eliades perjured
himself in his testimony about Aris Kaissides, and (10) Eliades
failed to follow both the per diem and transactional spending
limits of the Order.
A. Standard of Review for Contempt
"A party may not be held in contempt unless the order violated by the
contemnor is clear and unambiguous, the proof of non compliance
is clear and convincing, and the contemnor was not reasonably diligent in
attempting to comply." Equal Employment Opportunity Comm'n, et al. v.
Local 638, 81 F.3d 1162, 1171 (2d Cir. 1996) (internal quotations
and citations omitted); Peterson v. Vallenzano, 858 F. Supp. 40,
41 (S.D.N.Y. 1994). A "clear and unambiguous order" is one "specific and
definite enough to apprise those within its scope of the conduct that is
being proscribed." New York State Nat'l Org. for Women v. Terry,
886 F.2d 1339, 1352 (2d Cir. 1989), quoting In re Baldwin
United Corp., 770 F.2d 328, 339 (2d Cir. 1985). Any sanction imposed
by this Court for non compliance must be calculated either "to
coerce future compliance with the Court's order, or to compensate the
complainant for losses stemming from the contemnor's past noncompliance."
A. V. By Versace, Inc. v. Gianni Versace, S.p.A., 279 F. Supp.2d 341,
354 (S.D.N.Y. 2003), citing United States v. United Mine
Workers, 330 U.S. 258, 303-04 (1947); Perfect Fit Indus, v. Acme
Quilting Co., 673 F.2d 53, 56-57 (2d Cir. 1982).
In the case of civil sanctions, the contemnor's actions need not be
willful. See Yurman Design Inc. v. Chaindom Enters., Inc., 99
Civ. 9307, 2003 WL 22047843, at *2 (S.D.N.Y. Aug 29, 2003) (quotation
omitted). The burden of proof is on the party (here Lewis) seeking to
hold the other in civil contempt, and is satisfied by the production of
"clear and convincing" evidence. See Levin v. Tiber Holding
Corp., 277 F.3d 243, 250 (2d Cir. 2002). "[T]he clear and convincing
standard requires a quantum of proof adequate to demonstrate a
`reasonable certainty' that a violation has occurred." Id.,
citing Callanan Indus., Inc. v. White, 510 N.Y.S, 2d 230, 231
(3d Dep't 1986). A party may overcome a finding of civil contempt is
required or proving that (1) the Order is vague and indefinite as to
whether a particular action is required or prohibited, (2) the party
lacked knowledge of the terms of the Order, or (3) the proof of the
violation is not clear and convincing. See Sacco v. Burke,
764 F. Supp. 918, 921 (S.D.N.Y. 1991).
Criminal contempt, pursuant to 18 U.S.C. § 401, provides a vehicle
through which the Court may rectify contempt of its authority by fine or
imprisonment Taking such necessary action is "regarded as
essential to ensuring that the Judiciary has a means to vindicate its own
authority without complete dependence on the other Branches."
ACLI Gov't Sec. Inc., v. Rhoades, 989 F. Supp. 462, 468
(S.D.N.Y. 1997), quoting Young v. United States, 481 U.S. 787,
795 (1987). To hold a party in criminal contempt, "the government must
prove beyond a reasonable doubt that: (1) the court entered a reasonably
specific order; (2) the defendants knew of that order; (3) the defendants
violated that order; and (4) their violation was willful." U.S. v.
Lynch, 162 F.3d 732, 734 (2d Cir. 1998), quoting United States
v. Cutler, 58 F.3d 825, 834 (2d Cir. 1995). Therefore, the burden on
a party seeking to hold another in criminal contempt is greater than the
burden on a party seeking only civil redress as criminal contempt
requires willful disobedience and demands proof beyond a
reasonable doubt.*fn4 Because "criminal contempt is a crime in the
ordinary sense" (Int'l Union et al. v. Bagwell,
512 U.S. 821, 826 (1994), quoting Bloom v. Illinois, 391 U.S. 194,
201 (1968)), "criminal penalties may not be imposed on someone who has
not been afforded the protections that the Constitution requires of such
criminal proceedings." Int'l Union, 512 U.S. at 826, quoting
Hicks v. Feiock, 485 U.S. 624, 632 (1988).
The distinction between civil and criminal contempt is determined by
the substance of the proceeding, and "character and purpose" of the
sanction involved. Gompers v. Bucks Stove & Range Co.,
221 U.S. 418, 441 (1911). When the Court holds a party in civil contempt,
"the punishment is remedial, and for the benefit of the complainant."
Id. On the other hand, for criminal contempt, "the sentence is
punitive, to vindicate the authority of the court." See also
Int'l Union, 512 U.S. at 828.
B. Alleged Violations of the February 15 Order
1. 24 Parliament Hill Property
Lewis asserts that Eliades violated the February 15 Order by allowing a
lien to be registered against his Parliament Hill Property on February
21, 2002.*fn5 Eliades claims that since July 1988, Barclays Bank
had a "legal charge" over the property at Parliament House security for a
loan to Panix Promotions Limited and Eliades. Eliades 1st Aff. ¶ 3.
Eliades further claims that in November 2001 he decided to transfer the
security held by Barclays Bank to Managa Properties, in exchange for
Managa's settling a debt of £750,000, owed by Eliades to Barclays.
Eliades 1st Aff. Exh. 2. Lewis asserts that the documents for this
Property are fraudulent, as demonstrated by the fact that there are two
mortgage documents one dated January 25, 2002, and the second,
indicating the same transaction, dated February 8, 2002. Burstein Aff.
While these mortgage documents reflect dates before the February 15
Order, the charge for the property was entered after the February 15
Order. While Eliades does not dispute the date of entry, he asserts that
he initiated the transaction as early as October 31, 2001, well before
the date of the Order, and only the formal entering of the charge
postdated the Order. Eliades 1st Aff. Exh. 2. Further, because it is the
responsibility of the mortgagee to register the transaction (Eliades 2d.
Aff. ¶¶ 13-18), the timing of the register was not within Eliades'
control, and therefore, it would be unfair to hold Eliades in contempt as
a result of this chronology. This Court agrees. While Lewis is correct in
asserting that the value of the property, $2,000,000, is significant,
this does not alter the fact that Eliades had entered into this
transaction long prior to the February 15 Order. This Court credits
Eliades' defense that the February 15 Order "is vague and indefinite as
to whether a particular action [here, conduct that pre-dates the Order
but whose finalization post dates the Order] is required or
prohibited." Sacco, 764 F. Supp. at 921; see also City of
New York v. Local 28, Sheet Metal Workers' Int'l Ass'n,
170 F.3d 279, 282 (2d Cir. 1999) (a "party may be held in [civil] contempt
only if it is proven by clear and convincing evidence that the party
violated a clear and unambiguous order of the court."). Further, this
Court is adverse to find contempt stemming from the actions of a
non-party, unless it can be shown that the non party received
actual notice of the injunction and was acting in active concert or
participation with the parties named in the injunction.*fn6 See
Marshall v. Blasters, Drillrunners, and Miners Union, Local 29, 78
Civ. 4619, 1980 WL 2150 at *2 (S.D.N.Y. Apr 14, 1980), citing Vuitton
et Fils S.A. v. Carousel Handbags, 592 F.2d 129-130 (2d Cir. 1979).
Here, Managa's equitable lien on 24 Parliament Hill came into effect
before the February 15 Order was issued and it is unclear whether Managa
had actual notice of the injunction on the date that the lien was
registered. Finally, the support that Lewis provides for his claim of
fraudulent documentation which amounts only to the presentation
agreements, with different dates falls far short of that
necessary to prove "by a reasonable certainty" that the overdraft
agreement, signed by Mr. S. Kalli of Barclays Bank (Eliades 1st Aff. Exh.
1), is ...