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JSC FOREIGN ECONOMIC TECH. v. INT. DEV. AND TRADE

August 18, 2005.

JSC FOREIGN ECONOMIC ASSOCIATION TECHNOSTROYEXPORT, Plaintiff,
v.
INTERNATIONAL DEVELOPMENT AND TRADE SERVICES, INC., et al., Defendants.



The opinion of the court was delivered by: ANDREW PECK, Magistrate Judge

CERTIFICATION OF FACTS FOR CONTEMPT PURSUANT TO 28 U.S.C. § 636(e)
In response to Judge Koeltl's March 31, 2005 Order, this will constitute written certification of the facts supporting an order of contempt of defendant Brigitte Jossem for failing to comply with this Court's October 7, 2004 Order. Pursuant to 28 U.S.C. § 636(e)(6), Ms. Jossem is ordered to appear before Judge Koeltl, at a date and time to be set by Judge Koeltl's chambers, to show cause why she should not be adjudged in contempt by reason of the facts certified herein.
28 U.S.C. § 636(e)(6) (B) provides:
Upon the commission of any such act — . . . .
(B) in any other case or proceeding under subsection (a) or (b) of this section [636], or any other statute, where — (i) the act committed in the magistrate judge's presence may, in the opinion of the magistrate judge, constitute a serious criminal contempt punishable by penalties exceeding those set forth in paragraph (5) of this subsection,
(ii) the act that constitutes a criminal contempt occurs outside the presence of the magistrate judge, or
(iii) the act constitutes a civil contempt,
the magistrate judge shall forthwith certify the facts to a district judge and may serve or cause to be served, upon any person whose behavior is brought into question under this paragraph, an order requiring such person to appear before a district judge upon a day certain to show cause why that person should not be adjudged in contempt by reason of the facts so certified. The district judge shall thereupon hear the evidence as to the act or conduct complained of and, if it is such as to warrant punishment, punish such person in the same manner and to the same extent as for a contempt committed before a district judge.
FACTS
  The facts surrounding this action by JSC to collect an over $200 million judgment against defendant IDTS spell out an evasive game played by defendant Jossem and her co-defendant and mother Edith Reich and their shell corporations with which this Court and Judge Koeltl are all-too familiar. Only those facts relevant to the instant contempt proceedings are set forth below.*fn1

  Jossem's Dealings With Christie's And The Attachment Order Against Jossem

  On January 15, 2004 Jossem entered into a consignment agreement with Christie's for the sale of her artwork, jewelry and furniture. (Dkt. No. 452: JSC 4/11/05 Proposed Certification of Facts [hereinafter "COF"] ¶ 6; Dkt. No. 218: 6/23/04 Tiska Aff. Ex. 12: 1/15/04 "Consignment, Advance and Security Agreement.") On that same date, Jossem received a $350,000 advance from Christie's ("first Christie's advance") which, as per their agreement, was transferred by Christie's to the Mercantile Discount Bank in Israel into the account of "Patricia, Inc.," care of Michael Shine, Jossem and Reich's personal attorney in Israel. (JSC 4/11/05 COF ¶ 6; 3/3/05 Tiska Aff. Ex. 11: 1/14/04 Shine Email to Christie's & 1/15/04 "Inquire Customer Transfer" record.)

  On February 3, 2004, Judge Koeltl signed an Order to Show Cause for an order of attachment of Jossem's assets, which was served upon counsel for Jossem and the other defendants in this action. (JSC 4/11/05 COF ¶ 7; Dkt. No. 78: 2/4/04 Certificate of Service.) The next day, on February 4, 2004, under the same consignment agreement, Jossem arranged for a second Christie's advance, of $275,000. (JSC 4/11/05 COF ¶ 7; 6/23/04 Tiska Aff. Ex. 3: McGorry Dep. at 103-04; 6/23/04 Tiska Aff. Ex. 15: Annex I to 1/1/504 Consignment Agreement & 2/4/04 promissory note.)

  On February 6, 2004, Judge Koeltl held a hearing on JSC's motion for an order of attachment. (Dkt. No. 141: 2/6/04 Koeltl Conf. Transcript ("Tr.").) While the attachment motion was pending, Christie's wired the $275,000 second Christie's advance to an account in the name of defendants' Israeli law firm Herzog, Fox & Neeman at the United Mizrahi Bank in London as directed by Michael Shine on behalf of Jossem. (JSC 4/11/05 COF ¶ 8; 3/3/05 Tiska Aff. Ex. 11: 2/10/04 Shine Email & 2/12/04 "Inquire Customer Transfer" record; 6/23/04 Tiska Aff. Ex. 3: McGorry Dep. at 159-61.) On February 26, 2004, while the attachment order motion was still pending, Jossem entered into another consignment agreement with Christie's (Israel) (JSC 4/11/05 COF ¶ 9; 6/23/04 Tiska Aff. Ex. 18: 2/26/04 Consignment Agreement; 6/23/04 Tiska Aff. Ex. 3: McGorry Dep. at 136-38) and received an advance of $165,000 on that same day ("third Christie's advance") which was wired to the Herzog, Fox & Neeman account in London. (JSC 4/11/05 COF ¶ 9; 3/3/05 Tiska Aff. Ex. 11: 2/26/04 "Inquire Customer Transfer" record; 6/23/04 Tiska Aff. Ex. 19: 2/26/04 Jossem Promissory Note.)

  On March 13, 2004, Judge Koeltl signed the attachment order and faxed it to all counsel. (JSC 4/11/05 COF ¶ 10; 6/23/04 Tiska Aff. Ex. 21: 3/13/04 Koeltl Attachment Order.) Notwithstanding the order of attachment,*fn2 on March 17, 2004, Jossem consigned more jewelry to Christie's under her January 15, 2004 consignment agreement and arranged for another advance from Christie's for $180,000 which Jossem directed to be wired to the Herzog, Fox & Neeman London account. (JSC 4/11/05 COF ¶ 10; 6/23/04 Tiska Aff. Ex. 3: McGorry Dep. at 138-43; 6/23/04 Tiska Aff. Ex. 22: 3/17/04 Annex I to 1/15/04 Consignment Agreement; 3/3/05 Tiska Aff. Ex. 11: 3/18/04 "Inquire Customer Transfer" record.)

  Therefore, as of March 17, 2004, Jossem had arranged for $970,000 in advances from Christie's to be wired overseas. (JSC 4/11/05 COF ¶ 10; 6/23/04 Tiska Aff. Ex. 22: Annex I to 1/15/04 Consignment Agreement; see 3/3/05 Tisk Aff. Ex. 11: transfer records.) The final advance of $180,000 has been repatriated and is currently held in escrow by Jossem's former counsel, the Sonnenschein firm. (JSC 4/11/05 COF ¶ 10 n. 5; 3/3/05 Tisk Aff. Ex. 12: 10/25/04 Sonnenschein Letter.) The remaining funds that were spirited overseas, and are at issue on the contempt motion, total $790,000. (See JSC 4/11/05 COF ¶ 10 n. 5.)

  JSC's Discovery of the "Apartment Documents" and Its Application for Rule 37 Sanctions

  As a result of Jossem's (unrelated) failure to comply with the Attachment Order, Judge Koeltl granted JSC's request for an order directing the United States Marshals to seize certain property in Jossem's Manhattan and Amagansett residences. (See JSC 4/11/05 COF ¶ 11.) On May 11, 2004, during the course of the seizure in Jossem's Manhattan apartment, counsel for JSC observed thousands of documents that had not been produced despite discovery requests calling for their production.*fn3 (JSC 4/11/05 COF ¶ 11; 6/23/04 Tiska Aff. Ex. 29: Dunn Aff. ¶ 19.) One category of the "Apartment Documents" concerned Patricia, Inc. — the entity to which some of the Christie's advances were wired in Israel. (6/23/04 Tiska Aff. Ex. 1: 9/24/04 Feinberg Aff.) Jossem's counsel did not allow JSC to remove any of those documents from the apartment. (Id. ¶¶ 3-4.)

  According to JSC, Jossem has never produced any documents concerning Patricia, Inc. (Dkt. No. 452: JSC 4/11/05 COF ¶ 14.) Additionally, before the instant contempt motions were filed, Jossem had never produced any documents concerning her 2004 consignment agreement with Christie's and the $970,000 in advances she received from Christie's via overseas wire transfers. (Id.)

  After a series of hearings before me on May 21, 2004, June 14, 2004, June 28, 2004 and July 15, 2004, and numerous Orders and Memo Endorsed Orders, at a conference on September 21, 2004, this Court sanctioned Jossem pursuant to Federal Rule of Civil Procedure 37 and its inherent powers, ordering her to pay JSC's reasonable attorneys' fees for the "at least three, if not more, motions or applications" that JSC had to make in order to receive the documents. (JSC 4/11/05 COF ¶¶ 13-15; 3/3/05 Tiska Aff. Ex. 4: 9/21/04 Peck Conf. Tr. at 41.) See JSC Foreign Eco. Ass'n Technostroyexport v. International Dev. & Trade Servs., Inc., 03 Civ. 5562, 2005 WL 1958361 at *3-9 (S.D.N.Y. Aug. 16, 2005) (Peck, M.J.). The Court found the prejudice JSC incurred because of the delayed production of the Apartment Documents included, inter alia, that the money comprising the Christie's advances would have been subject to the Attachment Order had the documents been timely produced and therefore no expatriation would have been permitted. (Id. at 42.) Therefore, the Court ruled that "in fairness, the money ought to be brought back to the United States, where it will sit in an interest-bearing account. . . ." (Id.) Thus, as a "partial resolution," the Court "direct[ed] that Ms. Jossem directly or indirectly . . . inform the court of the whereabouts of the money that went to Israel that is at issue in this motion and exact details as to where it currently is." (Id. at 44.) Further, the Court made clear that if Mr. Shine would not provide the information and Jossem asserted her 5th Amendment privilege, then the Court would consider ordering "repatriation, which would be the first step presumably to ordering Ms. Jossem put in jail for contempt." (Id.) Jossem's response was due September 28, 2004. (Id. at 45.) While Jossem filed objections to the Court's award of attorneys' fees to JSC, she did not file timely objections to the September 21, 2004 repatriation-oriented order.

  The October 7, 2004 Order and Ensuing Events

  This Court's October 7, 2004 Memo Endorsed Order stated:
Based on the latest production of documents, and based on the motion by plaintiff and the hearing transcript, because of the highly unusual nature of this action (or rather the Reich-Jossem defendants' actions in connection with this case), and in light of the absence of information about the current location of the funds transferred to Israel, as a discovery sanction the Court orders Ms. Jossem to repatriate the funds to New York (to be put in the Marshal's custody pursuant to the prior attachment order) by 10/15/04 or face contempt charges.
(3/3/05 Tiska Aff. Ex. 7: 10/7/04 Peck Order.) Jossem did not file objections to the October 7, 2004 Order. (See JSC 4/11/05 COF ¶ 19.)

  Jossem did not repatriate the funds by October 15; instead, her counsel submitted a letter to the Court stating that they were "prepared to provide the Court with information as to the disbursement of those funds beyond the accounts to which they were initially transferred" as evidence to show Jossem's "present inability to comply" with the October 7, 2004 Order. (3/3/05 Tiska Aff. Ex. 8: 10/15/04 Sonnenschein Letter.) However, Jossem's counsel sought this Court's guidance as to how to comply with the Order without waiving Jossem's Fifth Amendment privilege. (Id.; see JSC 4/11/05 COF ¶ 20.) This Court's October 15, 2004 Memo Endorsed Order responded that: Defendants should see if plaintiff's counsel will agree to accepting this information on a "no waiver" (of the ...


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