In the Matter of the Application of JUDITH L. HANCOCK, Petitioner,
ARTS4ALL, LTD. a/k/a "A4A MOBILE, LTD." Respondent. For an Order Under Sections 725 (c) and 1315 (c) And (d) of the New York Business Corporation Law and the New York Common Law Directing an Inspection of The Stockholders Ledger, Financial Statements, And Other Books and Records of Arts4All, Ltd. And Directing Disclosure Of Arts4All's Payment of Legal Fees of Its Officers and Directors, And For an Order Under Section 211 Of the Delaware General Corporation Law And New York Common Law Compelling Arts4All, Ltd. to Hold Timely Annual Shareholders Meetings, Index No. 604417/2006
MARCY S. FRIEDMAN JUDGE:
This is a proceeding brought by Judith L. Hancock (Hancock), a shareholder of Arts4All, Ltd. a/k/a "A4A Mobile, Ltd" (Arts4All), for access to the company's books and records. The petition sought production of 17 specific "Items." By decision and order dated January 6, 2009, this Court (Fried, J.) referred the issue of whether Hancock was entitled to relief under her first and second demand requests to a Special Referee to hear and report. By report dated June 26, 2009, Special Referee Louis Crespo recommended that Arts4All be ordered to produce "Items 1, 5, 6, 7, 8, 10, 11, 12, 15, 16, and 17." (Hancock Aff. In Support, Ex. 2 [Special Referee Louis Crespo's Report and Recommendation dated June 26, 2009 [Special Referee's Report]] at 37.) By order dated January 26, 2010 (January 26, 2010 order), this Court (Fried, J.) confirmed the Special Referee's Report. (Hancock Aff., Ex. 3.) On April 26, 2012 at a status conference, the court (Fried, J.) granted Hancock leave to file a motion seeking to punish Arts4All for contempt of his prior order.
Hancock moved to punish Arts4All, Arts4AH's counsel Zachary R. Greenhill, Esq. and Greenhill's law firm, Law Offices of Zachary R. Greenhill, P.C. (collectively, Greenhill) for contempt. In a decision on the record on February 26, 2013 (February 26, 2013 decision), the transcript of which was so ordered on March 18, 2013, the court denied the branch of the motion to punish Arts4All for contempt, without prejudice to a new motion to be brought on by order to show cause. The court granted the motion only to the extent of ordering that Greenhill produce "the items referred to in Item 12 of the attachment to the petition and ordered by the Referee, in Paragraph 41 of his Report." (See Feb. 26, 2013 Transcript at 21.) Item 12 was a demand for "[l]egal engagement letters, retention agreements and legal bills" between Greenhill and Arts4All. The March 18, 2013 order directed that the Item 12 documents be produced within thirty days of service of the order on Greenhill with notice of entry.
Hancock now moves for an order (i) seeking to punish Arts4All for contempt of the January 26, 2010 order; and (ii) seeking to punish Greenhill for contempt for, among other things, making "new manifestly false statements of alleged fact to the Court after petitioner filed her first contempt motion, " and for assisting Arts4All in continuing to violate the January 26, 2010 order. (See Order to Show Cause dated April 3, 2013.)
New York Judiciary Law §753(A)(1) provides that a court has the power to punish, by fine or imprisonment, "disobedience to a lawful mandate of the court" which defeats, impairs, impedes, or prejudices the rights of a party to a civil action or proceeding. For a party to be held in contempt "[i]t must appear, with reasonable certainty, that the order has been disobeyed, that the party "had knowledge of the court's order, " and that "prejudice to the right of a party to the litigation [has been] demonstrated." (McCormick v Axelrod. 59 N.Y.2d 574, 583 .) The party seeking an order to punish for contempt must establish by clear and convincing evidence that the alleged contemnor violated the clear and unequivocal mandate of the court. (See Simens v Darwish. 104 A.D.3d 465, 466 [1st Dept 2013]; Cervena v Bressler. 2013 NY Slip Op 5789, *1 [2d Dept 2013].)
In the moving papers, Hancock alleges that Arts4All should be punished for failing to produce the documents ordered to be produced by the January 26, 2010 order. On May 22, 2013, after the instant contempt motion was served,  Arts4All produced the documents that it claims are responsive to the Items which the confirmed Special Referee's Report recommended be produced. (Greenhill Aff, ¶ 47.) In the reply papers, Hancock acknowledges that certain documents were produced. However, she alleges that the production was inadequate as to six of the requested Items. (Hancock Reply Aff, ¶ 12.) According to Hancock, these six Items were deficient because documents were missing or because the affidavit attesting that responsive documents do not exist was insufficient. (Id.. ¶¶ 11-12.)
Specifically, Hancock alleges that Arts4All's production of Item 6 was insufficient because Arts4All has not provided New York Tax Form CT-240 for 2000, 2001, and 2003, as directed by the Special Referee. (Special Referee's Report, Conclusions of Law, 122.) Greenhill claims that Arts4All "was not required to file ... these New York CT-240 forms." (Greenhill Aff, ¶52.) The court holds that if these CT-240 forms exist, Arts4All must produce them. If they do not exist, then Arts4All must produce an affidavit on personal knowledge. Throughout this opinion, when an affidavit on personal knowledge is directed, Arts4All shall produce an affidavit by a custodian of Arts4All's records that a diligent search of the records was made, the date thereof, and that such items were not found.
Hancock further alleges that Arts4All's production of Item 7 was insufficient because Arts4All failed to provide any Delaware franchise tax returns for 2005-2008, as directed by the Special Referee. (Special Referee's Report, Conclusions of Law, ¶ 22.) Greenhill, in his affidavit in opposition, attests that Arts4All "was not required to file ... Delaware returns." (Greenhill Aff., ¶ 52.) This court finds that if these documents exist, they should be produced by Arts4All. If the Delaware tax returns or franchise tax returns do not exist, then Arts4All must produce an affidavit on personal knowledge.
In her reply affidavit, Hancock also alleges that Arts4All has failed to produce Item 11 which requests "[t]he videotapes produced by the two cameras that Arts4All used to film the shareholders meeting held on December 28, 2005." (Petition, Attachment A.) Hancock asserts that she attended the shareholders meeting on December 28, 2005 and saw that there were two videocameras present. (Hancock Reply Aff, ¶ 13.) Hancock also attests that, after that meeting, she "viewed the footage of such meeting on an ordinary television set in Arts4All's offices." (Id.)
The Special Referee recommended
"... that an order issue directing Arts4All, Ltd., to turn over a copy of (Item 11) the films, photographs, videotapes or audio tapes of the shareholder meeting within 30-days of the service of an order and if no such document or film or tape or audio or the like exist, then it be ordered to submit a detailed affidavit by a current officer or director of the respondent explaining in detail the factual circumstances of the nonexistence of the same as well as a detail [sic] explanation by the person with knowledge describing the efforts made to locate the subject document noted above and explaining why it or copies or any other format of the recording of such shareholder meeting could not be found or why same do not exist or whether the same may exist in original form. Morever, such affidavit should be as detailed as to whether any such original or videotape was discarded or destroyed and the circumstances of such destruction or discarding in view of the litigation that existed and was ongoing between the parties."
(Special Referee's Report, Conclusions of Law, ¶ 34.) Greenhill asserts in his affidavit that "[t]hese Items do not exist." (Greenhill Aff, ¶ 60.) He further cites the affidavit of Arts4All's former president Richard Humphrey, sworn to on July 12, 2011, stating that a videotape does not exist of the December 28, 2005 annual shareholders meeting. (Greenhill Aff, Ex. D [Humphrey Aff], ¶ 15.) Humphrey suggests that the videotape does not exist because Justice Rolando Acosta, who presided over a prior proceeding between the parties, never ordered production of the videotape, (id.) Humphrey's assertions are irrelevant, as they ignore the Special Referee's express directives as to production of the videotape or an affidavit detailing the reasons for the non-production. This court therefore holds that if a recording of the December 28, 2005 shareholders meeting exists in any format, it must be produced by Arts4All. To the extent that Arts4All argues that Hancock's failure to pay production costs is a basis for withholding material responsive to this item (Humphrey Aff, ¶ 15.), Arts4All has not produced any order conditioning the production on payment by Hancock. Moreover, the Special Referee's Report unconditionally directs production. If a recording of the December 28, 2005 shareholders meeting does not exist, then Arts4All shall produce an affidavit on personal knowledge with the information specified in the Special Referee's Report.
Hancock also alleges that Arts4All has failed to produce documents related to Item 16, which calls for "Arts4All's document retention policy in effect at any time after January 1, 2001." (Petition, Attachment A.) Greenhill attests that Arts4All "has produced these documents to petitioner." (Greenhill Aff., ¶ 64.) Hancock states that she has "personal knowledge that a document retention policy was adopted in or about 2001" and that Arts4All has not produced any documents relating to any policy on retention of documents. (Hancock Reply Aff, ¶ 24.) Arts4All is directed to either produce any written documents setting forth the document retention policy or an affidavit on ...