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PANIX PROMOTIONS, LTD. v. LENNOX LEWIS

March 4, 2004.

PANIX PROMOTIONS, LTD. and PANIX OF THE U.S. INC., Plaintiffs, -against- LENNOX LEWIS, LENNOX LEWIS ENTERPRISES, INC. and NEW JERSEY SPORTS PRODUCTIONS, INC., d/b/a/ MAIN EVENTS, Defendants LENNOX LEWIS, Third-Party Plaintiff, -against- PANOS ELUDES, MILTON CHWASKY, RICHARD ASHKENS and KYRIACOS ANTONIOU, d/b/a/ LEE CHRISTIAN & CO., Third Party Defendants


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.

OPINION AND ORDER

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 proceedings Page 2 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.

I. BACKGROUND

  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 Page 3 himself in his testimony about Aris Kaissides, and (10) Eliades failed to follow both the per diem and transactional spending limits of the Order.

  II. DISCUSSION

 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 Page 4 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. Page 5 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. ¶ 2.

  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 of two Page 6 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 ...


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