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Close-Upinternational, Inc., Federal State Unitary Enterprise v. Joseph Berov

January 10, 2011

CLOSE-UPINTERNATIONAL, INC., FEDERAL STATE UNITARY ENTERPRISE KINOKONT SERNMOS FILM, AND KINOVIDEOOBYEDINENIE KRUPNY PLAN, PLAINTIFFS-APPELLEES,
v.
JOSEPH BEROV, DEFENDANT-APPELLANT.



10-4967-cv

Close-Up International, Inc. v. Berov

SUMMARY ORDER

Rulings by summary order do not have precedential effect. Citation to a summary order filed on or after January 1, 2007, is permitted and is governed by Federal Rule of Appellate Procedure 32.1 and this court's Local Rule 32.1.1. When citing a summary order in a document filed with this court, a party must cite either the Federal Appendix or an electronic database (with the notation "summary order"). A party citing a summary order must serve a copy of it on any party not represented by counsel.

At a stated term of the United States Court of Appeals for the Second Circuit, held at the Daniel Patrick Moynihan United States Courthouse, 500 Pearl Street, in the City of New York, on the 10th day of January, two thousand eleven.

PRESENT: PETER W. HALL, DEBRA ANN LIVINGSTON, DENNY CHIN, Circuit Judges.

Motion for bail pending appeal of an order of contempt imposed in the United States District Court for the Eastern District of New York (Trager, J.). UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND DECREED, that the case is REMANDED to the district court pursuant to United States v. Jacobson, 15 F.3d 19, 21-22 (2d Cir. 1994), for clarification of the basis for and scope of the contempt order and to address Berov's application for bail pending appeal, if necessary. Such hearings as may be necessary shall commence within seven days of the entry of this decision and shall be concluded as expeditiously as reasonably possible.

In April 2002, Close-Up International, Inc. ("Close-Up"), Kinovideoobyedinenie Krupny Plan, and Federal State Unitary Kinokontsern Mosfilm (collectively "plaintiffs") sued Joseph Berov and other defendants for copyright and trademark infringements. In November 2007, the district court entered a judgment of nearly three million dollars against Berov. We affirmed that decision in June 2010. See Close-Up Int'l, Inc. v. Berov, 382 F. App'x 113 (2d Cir. 2010) (summary order). In November 2010, Judge Trager entered an order holding Berov in contempt of court and ordering his arrest and detention until he pays the full judgment, plus interest, and the plaintiffs' attorneys' fees incurred in connection with that and prior contempt applications.

Berov now appeals that order and moves for bail pending appeal, arguing that he should be granted bail because he is not a flight risk and the contempt order was invalid because it was issued without a hearing. Because the nature of the district court's order is unclear, we REMAND the case to the district court to clarify the factual basis of the contempt finding and the purgation conditions that will secure Berov's release. If Berov again has occasion to seek bail pending appeal from the clarified contempt order, that application should be heard in the district court in the first instance.

I. Background

In April 2002, plaintiffs filed a civil suit against Berov and other defendants in the Eastern District of New York, alleging that the defendants were responsible for, inter alia, copyright and trademark infringement on hundreds of Russian language videos. In May 2006, the district court granted partial summary judgment in favor of the plaintiffs on the issue of liability. In March 2007, the court, noting that it appeared that Berov might have an intent to defraud his creditors and frustrate the enforcement of any judgment in plaintiffs' favor, entered a pre-judgment order of attachment against Berov for eleven million dollars. In April 2007, that order was amended and replaced with a new order of attachment for eleven million dollars under which: (1) plaintiffs were allowed to file liens on two pieces of real property owned by Berov in Brooklyn; (2) Berov was obligated to provide a schedule of all of his real property assets to plaintiffs; (3) Berov was ordered not to sell his real property for anything less than fair market value or to place any other mortgages or encumbrances on his properties; and (4) Berov was ordered to deposit with the Eastern District of New York all proceeds from any sale of his real estate. In June 2007, a jury awarded actual damages of $1,404,000.00 to plaintiffs.

In September 2007, plaintiffs moved to hold Berov in contempt, asserting that he had taken mortgage loans on certain properties in violation of the April 2007 order. In response Berov argued that: (1) the violations were harmless and not willful; (2) his other property assets were sufficient to meet the requirements of the judgment; and (3) the April 2007 order should be reduced because the June 2007 jury verdict demonstrated that plaintiffs would not receive the full $11 million they expected. The court did not rule on plaintiffs' contempt motion because of Berov's assurances that they had an attachment adequate to support the expected final judgment.

In November 2007, the court entered a judgment of $2,827,004.88 jointly and severally against Berov and Rigma American Corporation and Group. Berov filed a timely appeal to this Court. He also applied to the district court for a stay of judgment pending appeal, asserting that he would be irreparably harmed if the judgment were enforced because he lacked the assets to pay the judgment. In December 2007, the district court denied this request. It noted that Berov's argument was contrary to his prior position that plaintiffs had secured an attachment on his property sufficient to enforce the final judgment.

While the appeal of the underlying money judgment was pending, in May 2008, plaintiffs requested an order from the district court: (1) finding Berov in contempt for obtaining mortgage loans totaling $787,226 on his property, allowing his property to fall into foreclosure, and failing to cooperate with plaintiffs' requests for information about his assets, in violation of the April 2007 Order; (2) directing that Berov transfer to the plaintiffs shares owned in Florida companies which own property in order to allow plaintiffs to place a lien on the property; (3) requiring Berov to produce documents as requested by the plaintiffs and to appear for deposition; and (4) restraining Berov from transferring his assets. Berov responded that he had complied with plaintiffs' requests and was trying to raise funds to satisfy the judgment. On June 12, 2008, the plaintiffs wrote to the court alleging that, "Mr. Berov said that during the past few months he has been transferring and hiding his assets and now Close-Up will no longer be able to collect on the judgment." That day, the court found Berov in contempt and ordered that Berov: (1) be restrained from transferring any assets including real property or personal property; (2) transfer to plaintiffs his stock certificates for Florida companies holding properties and all documents of ownership of real property in the United States and abroad; (3) appear for a deposition and produce all documents requested by plaintiffs; and (4) disgorge the mortgage loan proceeds he received in contempt of the court's prior order. That June 2008 order further provided that "if Joseph Berov violates any provision of the Order, upon application of plaintiffs demonstrating such violation, he [will] be ordered to appear before this Court and surrender his passports or the imposition of other appropriate sanctions."

In December 2008, plaintiffs filed a letter with the court alleging that Berov had fraudulently taken out multi-million dollar loans secured by his New York properties which he then allowed to go into default in order to avoid payment, and that he held millions of dollars in assets in the Dominican Republic, Russia, and the Republic of Georgia. Plaintiffs also sought to transfer state foreclosure proceedings on certain of Berov's property to the district court's jurisdiction to ensure that plaintiffs would be paid as creditors. Following that letter, the court allowed plaintiffs to intervene in the foreclosure proceedings, and a year later in December 2009, following negotiations between Berov and the plaintiffs, the parties agreed to a partial settlement of the case and a ...


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