United States District Court, S.D. New York
OPINION & ORDER
HONORABLE PAUL A. CROTTY, United States District Judge.
Fedak and New York Yimby LLC (together, "Movants")
seek civil contempt sanctions against Yimby, Inc.
("Yimby") and its CEO, Daniel George. They argue
that Yimby and George should be sanctioned for failure to
comply with this Court's orders requiring production of
certain original documents and payment of $30, 000. Yimby
opposes Movants' request; and also seeks a stay pending
appeal of the Court's prior orders.
Court holds Yimby and George in civil contempt. They must pay
Movants' reasonable attorney's fees and costs
incurred in pursuing this contempt order. Further, the Court
denies Yimby's request for a stay pending appeal,
commenced this action against Movants for monetary damages
and injunctive relief in connection with property Movants
allegedly wrongfully took. On Friday, February 10, 2017,
Yimby moved for a temporary restraining order
("TRO"). Dkt. 22, The Court heard argument that day
and granted the TRO. Dkt. 22; Dkt. 44. Yimby never posted the
required $250, 000 bond, and the TRO never became effective.
Wednesday, February 15, 2017, Yimby's counsel notified
the Court that it could no longer rely on material evidence
submitted in support of Yimby's TRO motion. Dkt. 31-2.
Yimby's counsel also advised that Yimby "consented
to allow [counsel] to seek dismissal of this matter in its
entirety." Id. The Court held a conference that
conference, it became apparent that an employment agreement
purporting to bear Fedak's signature ("Employment
Agreement") was a forgery. This Employment Agreement,
attached to the operative complaint and submitted in support
of the TRO motion, was of central importance to the
Court's decision to grant the TRO. Plaintiffs counsel
even described the Employment Agreement as a
"linchpin" to the case itself. See Feb.
15, 2017 Tr. 8, Dkt. 42. It was clear that George's
declaration in support of the TRO motion was false. The Court
vacated the TRO, explained that it would dismiss the action
pursuant to Fed.R.Civ.P. 41(a)(2), and requested that
Movants' counsel, Steven M. Wagner, bring the forged and
false documents to the attention of the United States
Attorney's Office for the Southern District of New York.
Id. 4, 6-7. The Court further stated "I'm
going to impose sanctions in the amount of $30, 000"
(the amount sought by Movants for legal fees incurred), which
"George will have to pay." See Id. 11, 13.
requested that the Court order Yimby to produce the original
Employment Agreement, as well as the originals of any
shareholder's agreement purportedly signed by Fedak
("Shareholder's Agreement") or promissory note
purportedly signed by Fedak ("Promissory Note") in
order to have them examined by a certified document examiner.
See Id. 7-9. According to Wagner, if the originals
were produced within approximately 30 days, a document
examiner might be able to determine if the signatures were
new. See Id. at 3.
February 16, 2017, the Court entered an order ("February
16 Order") dismissing the action pursuant to
Fed.R.Civ.P. 41(a)(2); directing "that by February 24,
2017, [Yimby] pay [Movants] $30, 000 for [Movants']
attorney's fees, time and expenses" ("Payment
Order"); and ordering that by close of business on
February 17, 2017, Yimby turn over to Movants the original
Employment Agreement and any original version of the
Shareholder's Agreement or Promissory Note purportedly
signed by Fedak ("Turnover Order"). Dkt. 31.
February 21, 2017, Wagner reported that Yimby had indicated
its intention not to pay the $30, 000, or to produce the
originals of the Employment Agreement, Shareholder's
Agreement, or Promissory Note, as the Court had directed.
See Dkt. 32. George had sent Wagner a letter on
February 17, 2017, attaching a copy of the Employment
Agreement, and noting that it was a "facsimile."
Id. at 4. George stated that as far as he knew,
"no original exists." Id. Also attached to
George's letter was an unsigned Shareholder's
Agreement, and a "facsimile" of a Promissory Note
signed by George. Id.
Court held a conference on February 22, 2017. Wagner
requested that the Court consider contempt proceedings
against George for failure to comply with the February 16
Order, and also that the Court amend its February 16 Order
"to have dismissal be with prejudice." See
Feb. 22, 2017 Tr. 4-5, Dkt. 46. The Court asked George about
the location of the original, and George stated that he was
"not in possession of an original." Tr. 5. He also
said that his and "the company's process for
document management is to scan the documents and store them
digitally;" originals "are generally recycled
[(i.e., destroyed)] after they have been
scanned." Id. The Court scheduled a contempt
hearing and permitted Wagner to depose George to inquire as
to the originals, "in addition to everything else that
you may want." Id. 4, 12.
February 23, 2017, the Court entered an order ("February
23 Order") "that the February 16, 2017 dismissal of
this action pursuant to Fed.R.Civ.P. 41(a)(2) is with
prejudice" and also "that [Yimby] produce Daniel
George for a deposition by [Movants] forthwith." Dkt.
33. On March 1, 2017, Yimby moved the Court to reconsider its
order dismissing the action with prejudice, and requested an
additional 90 days to pay Movants the $30, 000 required by
the Payment Order. Dkt 35. Movants opposed Yimby's motion
on March 2, 2017, and the Court heard argument on Yimby's
motion on March 3, 2017. Dkt. 36.
addition to discussing Yimby's then-pending
reconsideration motion, the Court also heard from the parties
on the issue of contempt. Despite the Court's February 16
Order, Yimby had only made one $5, 000 payment to Movants, on
March 2, 2017. Mar. 3, 2017 Tr. 2, 30, Dkt. 49. Further,
neither Yimby nor George had produced any originals of the
Employment Agreement, Shareholder's Agreement, or
Promissory Note. Id. 2. At George's deposition
on March 2, 2017, George invoked his Fifth Amendment
privilege in response to questions relating to the Employment
Agreement. Id. Yimby's counsel explained the
basis for George's assertion of his Fifth Amendment
privilege: "Mr. George has been referred to the U.S.
Attorney's office and is already in criminal contempt of
this court and therefore under the Fifth Amendment he really
should not be testifying with respect to anything related to
the employment agreement or what he does with original
documents." Id. 30-31.
Yimby had not complied with the Court's February 16
Order, Movants stated that they intended to seek contempt
sanctions including, among other things, cancellation of
Yimby's trademark registration, which Movants contend was
improperly obtained. See Id. at 4, 36-38. The Court
responded, "it's clear to me that Mr. George has not
complied with the Court's order and sanctions are
appropriate. You want to tell me what you want, I'll
consider it." Id. 39.
March 6, 2017, the Court denied Yimby's motion for
reconsideration and its request for an extension of time
("March 6 Order"). Dkt. 39.
March 8, 2017, Movants submitted the transcript of
George's March 2 deposition and detailed the sanctions
they sought against both Yimby and George in light of the
failure to produce the original documents and pay only $5,
000 of the $30, 000 in attorney's fees. Mar. 8 Letter,
Dkt. 48; George Dep. Tr., Dkt. 48-1. Specifically, Movants
requested: (1) reimbursement for additional legal fees
incurred since the February 16 Order; (2) an order that Yimby
and George provide access to the computer that the Employment
Agreement and Promissory Note were originally scanned to
before being recycled; (3) an order that George produce
certain documents, including financial records, that Movants
requested pursuant to the Notice of Deposition issued to
George; (4) an order that Yimby and George provide Movants
access to certain electronic services and data, and related
requests; (5) an order cancelling Yimby's
"YIMBY" trademark, and related requests; and (6) an
order cancelling certain copyright ...