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Leadsinger, Inc. v. Cole

August 4, 2006

LEADSINGER, INC., PLAINTIFF,
v.
EDWARD J. COLE, DEFENDANT.



The opinion of the court was delivered by: Henry Pitman, United States Magistrate Judge

OPINION AND ORDER

I. Introduction

I write to resolve three motions for contempt that plaintiff has made in this action.

By notice of motion dated September 20, 2005 (see Docket Items 37, 43, hereinafter "Contempt Motion I"), plaintiff moves for (1) an Order holding defendant in civil contempt, (2) certification of the facts to the district court for criminal contempt proceedings, (3) $4,050,000 in compensatory damages and (4) attorney's fees, based on defendant's alleged violation of an ex parte temporary restraining order issued by the Supreme Court of the State of New York, New York County (Smith, J.), on April 27, 2005 and subsequently amended on May 25, 2005.*fn1

By notice of motion dated November 28, 2005 (see Docket Items 40, 41, 42, 44,*fn2 hereinafter "Contempt Motion II"), plaintiff also moves for (1) an Order holding defendant in civil contempt, (2) certification of the facts to the district court for criminal contempt proceedings, and (3) attorney's fees, based on defendant's alleged violation of my September 26, 2005 Order (see Docket Item 26).

Finally, by notice of motion dated December 26, 2005 (see Docket Items 45, 46, 47, 48, 49, hereinafter "Contempt Motion III"), plaintiff moves for "judgment against defendant pursuant to the Court's inherent authority and to the extent applicable, [Fed.R.Civ.P.] 16," based on defendant's additional violations of my September 26, 2005 Order.

The parties have consented to my exercising plenary jurisdiction over this action pursuant to 28 U.S.C. § 636(c) (Docket Item 7). The following constitutes my findings of fact and conclusions of law pursuant to Local Rule 83.9(c).

II. Findings of Fact

A. Background and Procedural History

Plaintiff, ES Electrosales Leadsinger Co. Ltd. ("Leadsinger"), is in the business of selling karaoke products on both a wholesale and retail basis. On or about April 20, 2004, plaintiff entered into a contract with defendant, Edward J. Cole, pursuant to which Cole became Leadsinger's national sales manager for a one-year period (see Second Amended Complaint ("2d Am. Compl.") at ¶¶ 4-5 (Docket Item 21)).

Although the contract contained an automatic extension provision, plaintiff alleges that Cole resigned from his position several days before the contract expired (see 2d Am. Compl. ¶¶ 6-7). Plaintiff also claims that, inter alia, Cole, both personally and through his sister, Sharon Cole, who was Cole's putative agent, violated the confidentially provision in the contract by sending e-mails "to Leadsinger's employees and/or representatives disparaging Leadsinger and unjustifiably attempting to create doubt about the quality of Leadsinger's products to thereby interfere with sales" (2d Am. Compl. ¶ 17). Plaintiff further alleges that beginning in or about April 15, 2005, Cole and his sister began sending e-mails in which they threatened to, among other things, interfere with Leadsinger's business relationships, as well as threatening to contact the family of Leadsinger's president, Jerry Choe, to disclose Choe's alleged personal indiscretions (see 2d Am. Compl. ¶¶ 20-22).

On April 22, 2005, plaintiff filed a verified complaint in the Supreme Court of the State of New York, New York County, seeking a preliminary injunction, temporary restraining order and money damages as against defendant based on the following claims:

(1) injurious falsehood, (2) interference with contract, and (3) interference with prospective advantage. Although not set forth as a separate claim, the complaint also alleged that defendant "received advances exceeding any commissions he may have earned" (see Notice of Removal, dated June 15, 2005 (Docket Item 1)).

Also on April 22, 2005, plaintiff filed an order to show cause seeking an ex parte temporary restraining order against defendant (see Docket Item 1). On April 26, 2005, the Honorable Karen Smith, Justice, Supreme Court of the State of New York, New York County, declined to sign the application because plaintiff was "seek[ing] monetary relief for the alleged wrong committed by defendant" and, therefore, "a TRO or preliminary and permanent injunctive relief [was] not appropriate" (see Docket Item 1).

Following Justice Smith's denial, plaintiff filed a supplemental affidavit in support of its application for a temporary restraining order which stated, in pertinent part: "Plaintiff meant to inform this Court that damages were only being sought for defendant's breach of contract in conjunction with one customer, HH Gregg Appliances and Electronics . . ." (Docket Item 1). Plaintiff simultaneously filed an amended verified complaint seeking damages only in connection with HH Gregg Appliances and Electronics (see Docket Item 1).

Based on these papers, Justice Smith signed the order to show cause and entered a temporary restraining order against defendant on April 27, 2005 (see Docket Item 1; see also Ex. 2 attached to Affidavit of Paul W. Siegert, Esq. in Support of Motion for Contempt of Court, sworn to on September 19, 2005 ("Siegert 9/19/05 Aff.") (Docket Item 37)).

Justice Smith's Order stated:

ORDERED that pending the hearing of this motion, the defendant, Edward J. Cole, his servants, agents and employees are temporarily enjoined and restrained from communicating or making any other contact by mail, telephone, e-mail, voice-mail or other means with Leadsinger, Leadsinger's existing customers, potential customers of Leadsinger of which defendant is aware, sales representatives, management, or with the family of Jerry Choe and from harrassing [sic], menacing, intimidating or threatening Jerry Choe or his family, and it if further

ORDERED that service of a copy of this Order and all the papers upon which it was granted including the summons and complaint shall be made upon the defendant personally on or before the 3rd day of May, 2005 and that such service shall be deemed sufficient. (Siegert 9/19/05 Aff. Ex. 2).

Plaintiff's counsel e-mailed the order to defendant on April 27, 2005 and attempted, albeit unsuccessfully, to serve defendant with the Order and the supporting papers, as directed, by May 3, 2005 (Siegert 9/19/05 Aff. ¶¶ 8, 18-19). Since plaintiff was unable to serve defendant by May 3, 2005, plaintiff sought and was granted an amended order to show cause and a temporary restraining order from Justice Smith on May 25, 2005. The amended order was identical to the April 27 order quoted above; however, the deadline for service upon defendant was extended to June 1, 2005 (Siegert 9/19/05 Aff. ¶ 19 and Ex. 17). Plaintiff was personally served with the amended order to show cause and the supporting papers on May 27, 2005 (Siegert 9/19/05 Aff. ¶ 19 and Ex. 18).

The case was subsequently removed from the Supreme Court of the State of New York, New York County, to this Court by Notice of Removal filed June 15, 2005 (Docket Item 1). Federal jurisdiction is based on diversity of citizenship. See 28 U.S.C. § 1332(a)(1).

Following removal, by notice of motion dated July 22, 2005 (Docket Item 9), plaintiff moved for an Order holding defendant in contempt of Justice Smith's temporary restraining order. Plaintiff argued that defendant had violated Justice Smith's order by directly communicating with Leadsinger's customers, Jerry Choe (Leadsinger's president) and other members of Leadsinger management. That motion was denied without prejudice for, inter alia, plaintiff's failure to set forth with particularity the damages resulting from defendant's alleged violation of Justice Smith's order (see Docket Items 19, 20).

By notice of motion dated September 20, 2005, plaintiff moved for a preliminary injunction and temporary restraining order seeking to enjoin defendant from contacting Leadsinger's customers, potential customers, sales representatives, management and the family of Jerry Choe, as well as from posting a website referring to Leadsinger.*fn3 I held a hearing on September 23, 2005 and, for the reasons stated on the record in open court, entered an order on September 26, 2005 that (1) denied plaintiff's application for a preliminary injunction and (2) provided the following directive to defendant:

Pending further order of the court, defendant is directed to refrain from directly contacting plain-tiff's principals and their family members; if defendant wishes to contact plaintiff, he is directed to do so through counsel. (see Docket Item 26; see also Transcript of the September 23, 2005 Hearing ("9/23/05 Tr.") at 169-86).

On December 19, 2005, I held a conference to resolve a motion to withdraw by defendant's counsel and to address the briefing schedule for two pending motions for contempt. Defendant personally participated in the conference by telephone. During the conference, I granted defendant's counsel's motion to withdraw and provided defendant with the following warning and direction:

THE COURT: The second issue that I want to address today is there are two pending applications to hold you in contempt, Mr. Cole. . . . On September 26th, I issued an order directing you not to contact plaintiff, plaintiff's principles, or family members directly. And it appears that you have done so.

MR. COLE: Yes, sir, I have.

THE COURT: Why? Why have you violated my order? Before you go further --. . . .

THE COURT: Well, tell you what, Mr. Cole. On reflection, don't say anything. I'm considering whether I should refer this matter to the United States Attorney's Office under Federal Rule of Criminal Procedure 42 for criminal prosecution. So don't say anything else.

MR. COLE: Okay.

THE COURT: Mr. Cole, . . . let me warn you that every instance of criminal contempt carries with it [] -- if you are found guilty . . . a potential sentence of up to thirty days imprisonment. My September order directing you not to contact plaintiff or its principles or their family members still stands.

I am repeating that direction to you. You are not to contact plaintiff, plain-tiff's principles, or the family members of plaintiff's principles. If you feel you need to communicate with plaintiff's principles about something, you are directed to do so through their attorney, Mr. Siegert. Do you understand that? . . . .

MR. COLE: Okay, Your Honor. I understand.

THE COURT: Mr. Cole, you ought to retain new counsel as soon as practicable. You may be facing a very serious situation here. (Transcript of the December 19, 2005 conference ("12/19/05 Tr.") at 6-7, 9-11).

By Order dated December 19, 2005, I also provided defendant with the following admonition:

Mr. Cole is reminded that my September 26, 2005 Order remains in effect. I remind Mr. Cole that he is directed to refrain from directly contacting plain-tiff's principals and their family members; if defendant wishes to contact plaintiff, he is directed to do so through counsel. (Docket Item 52).

B. Findings of Fact With

Respect to Contempt Motion I

As noted above, defendant was served with Justice Smith's May 25th amended order to show cause, containing the temporary restraining order, on May 27, 2005 (Siegert 9/19/05 Aff. ¶ 19 and Ex. 18). Justice Smith's temporary restraining order provided, in pertinent part:

ORDERED that pending the hearing of this motion, the defendant, Edward J. Cole, his servants, agents and employees are temporarily enjoined and restrained from communicating or making any other contact by mail, telephone, e-mail, voice-mail or other means with Leadsinger, Leadsinger's existing customers, potential customers of Leadsinger of which defendant is aware, sales representatives, [and] management . . . (Siegert 9/19/05 Aff. Ex. 17).

However, even after being served with the temporary restraining order, defendant repeatedly contacted members of Leadsinger's management, namely Jerry Choe, Leadsinger's president, director and a shareholder, K.H. Lee, Leadsinger's vice-president, director and a shareholder, and Steve Kim, Leadsinger's executive vice-president, director and a shareholder (see Reply Declaration of Paul W. Siegert, Esq., dated January 21, 2006 ("Siegert 1/21/06 Decl."), at ¶¶ 6-7; Declaration of Paul W. Siegert, Esq., dated December 26, 2006 ("Siegert 12/26/05 Decl."), at ¶ 4; Affidavit of Paul W. Siegert, Esq. in Support of Motion for Contempt of Court, sworn to on November 28, 2005 ("Siegert 11/28/05 Aff."), at ¶ 4).

Specifically, defendant sent e-mails on a nearly daily basis and sometimes many times per day to either Jerry Choe, K.H. Lee and/or Steve Kim. Defendant sent e-mails to these individuals on: May 29, 30 and 31, 2005 and June 2, 3, 4, 6, 7, 8, 9, 10, 11, 12 and 13, 2005 (see Siegert 9/19/05 Aff. ¶ 20 and Ex. 20-23, collectively).

C. Findings of Fact With Respect to Contempt Motion II and Contempt Motion III

As set forth above, my September 26, 2005 Order directed defendant:

Pending further order of the court, defendant is directed to refrain from directly contacting plain-tiff's principals and their families members; if defendant wishes to contact plaintiff, he is directed to do so through counsel. (Docket Item 26). Indeed, during the September 23, 2005 hearing, I specifically provided defendant with the following directive:

Mr. Cole, the defendant, [is] not to have any direct contact with plaintiff, with Mr. Choe or Mr. Choe's immediate family.

That is, he should not write to them. He should-n't e-mail them. He shouldn't call them. . . . (9/23/05 Tr. at 185).

Defendant not only concedes actual knowledge of my Order in both letters and e-mails (see Siegert 11/28/05 Aff. ¶ 5 and, collectively, Ex. 5), he also candidly admits that he violated my order and welcomes the possibility of incarceration for his violations (see Siegert 11/28/05 Aff. ¶ 6 and, collectively, Ex. 6). For example, in an e-mail dated November 22, 2005 sent to, inter alia, Jerry Choe, K.H. Lee and Steve Kim, defendant states:

Attached is a letter I sent to Judge Pittman [sic] this morning admitting my personal contact with the Plaintiff in an effort to settle this matter since Mr. Siegert (admittedly) continues to refuse to communicate settlement offers to his client . . . .

If Judge Pittman [sic] wishes to incarcerate me for making a good faith settlement offer to the Plaintiff, I will happily serve my time. I have lost everything, so what does 30, 60, 90 or 120 days in jail mean to me? (Siegert 11/28/05 Aff. Ex. 6).

The record here shows that defendant sent e-mails to Jerry Choe on October 26, 2005, November 23, 24, 25, 26, 27 and 29, 2005 and December 6, 11, 12, 13, 14, 15, 16, 17, 18, and 19, 2005 (see Siegert 11/28/05 Aff. ¶ 4 and, collectively, Ex. 4; Siegert 12/26/05 Decl. at ¶ 4 and, collectively, Ex. 4). In addition, defendant also sent e-mails to K.H. Lee and Steve Kim, both of whom, as noted above, are principles of Leadsinger, on October 17, 18 and 20, 2005, November 1, 3, 5, 7, 9, 11, 14, 15, 16, 18, 21, 22, 23, 24, 25, 27, 28, 29, and 30, 2005 and December 6, 8, 9, 12, 13, 14, 16, 17 and 19, 2005 (see Siegert 11/28/05 Aff. ¶ 4 and, collectively, Ex. 3; Siegert 12/26/05 Decl. at ¶ 4 and, collectively, Exs. 3-4).

Moreover, even after I admonished defendant during the December 19, 2005 conference and reminded him in my Order of that date to refrain from contacting plaintiff's principals (see Docket Item 52; see also 12/19/05 Tr. at 6-7, 9-11), defendant continued to send e-mails to K.H. Lee and Steve Kim from December 27, 2005 through January 18, 2006 (see Siegert 1/21/06 Decl. at ¶ 7).

III. Conclusions of Law

A. Magistrate Judge's Authority Under 28 U.S.C. § 636(e) to Rule on Plaintiff's Motions for Contempt

When the parties have consented to a magistrate judge's exercising plenary jurisdiction over an action pursuant to 28 U.S.C. § 636(c), as they have in the present action (see Docket Item 7), "the magistrate judge may exercise the civil contempt authority of the district court." 28 U.S.C. § 636(e)(4); see also United States v. Montgomery Global Advisors V LLC, 04-00733 (EDL), 2005 WL 2249092 at *1 (N.D. Cal. Aug. 1, 2005) (same); British Int'l Ins. Co. Ltd. v. Seguros La Republica, S.A., 90 Civ. 2370 (JFK)(FM), 2001 WL 958975 at *1 (S.D.N.Y. Aug. 22, 2001) (explaining that "28 U.S.C. § 636(e) has recently been modified to give United States magistrate judges expanded contempt powers"). ...


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