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Friedman v. Self Help Community Services, Inc.

United States District Court, E.D. New York

June 28, 2018

ROBERT FRIEDMAN, Plaintiff,
v.
SELF HELP COMMUNITY SERVICES, INC., et al., Defendants.

          ORDER TO SHOW CAUSE, SCHEDULING ORDER & MEMORANDUM

          NICHOLAS G. GARAUFIS, UNITED STATES DISTRICT JUDGE.

         Before the court is a motion by Defendants United Jewish Appeal, Inc.; United Jewish Appeal-Federation of Jewish Philanthropies of New York; United Jewish Appeal Federation of New York Charitable Fund LLC; and Self Help Community Services, Inc., and its employees (collectively, the "Self Help Defendants") for coercive contempt sanctions against non-party Richard Borzouye, former counsel for Plaintiff Robert Friedman (the "Second Contempt Motion"). (Apr. 26, 2018, Request to Renew Mot. for Contempt ("2d Contempt Mot.") (Dkt. 169).) Last year, following submission of the Self Help Defendants' first attempt to have the court impose contempt sanctions upon Borzouye (the "First Contempt Motion") (May 9, 2017, Appl. That Borzouye Show Cause ("1st Contempt Mot.") (Dkt. 150)), the undersigned referred this matter to Magistrate Judge James Orenstein for a report and recommendation ("R&R") (Sept. 7, 2017, Order). On May 21, 2018, Judge Orenstein issued a sua sponte R&R recommending that the court deny the Self Help Defendants' various requests for coercive sanctions. (See May 21, 2018, R&R ("R&R") (Dkt. 175).) For the following reasons, the court REJECTS the R&R and ORDERS Borzouye to SHOW CAUSE why coercive contempt sanctions, including imprisonment, should not issue against him.

         I. BACKGROUND

         The latest chapter in this long-running case is a sad one indeed. On March 17, 2015, following a pattern of misconduct and poor performance by Borzouye in the course of his representation of Friedman, the court imposed sanctions against him pursuant to Federal Rule of Civil Procedure 11. (See Mar. 17, 2015, Mem. & Order (Dkt. 121) at 9-11, 13; Clerk's J. (Dkt. 122).) After briefing, the court ordered Borzouye to pay $20, 000 to the Self Help Defendants (the "Sanctions Order"). (See Feb. 17, 2017, Mem. & Order ("Feb. 17, 2017, M&O") (Dkt. 143) at 7; Clerk's J. (Dkt. 144).) When Borzouye did not pay the sanctions despite repeated requests, the Self Help Defendants moved to hold Borzouye in contempt of court (1st Contempt Mot.) and the court ordered him to show cause why he should not be held in contempt (the "OTSC") (see Aug. 10, 2017, Order to Show Cause ("OTSC") (Dkt. 154)). Borzouye did not respond to the OTSC. (See Sept. 7, 2017, Order.) The undersigned referred this matter to Judge Orenstein, who, after Borzouye declined to appear at a mandatory status conference, announced that he would recommend that the court hold Borzouye in detention until he complied with the Sanctions Order. (See Oct. 5, 2017, Min. Entry (Dkt. 156).) At a status conference on January 25, 2018, the Self Help Defendants and Borzouye-who had, by this point, been suspended from the practice of law in New York State-announced their intention to attempt to negotiate a payment plan to satisfy Borzouye's outstanding debt. (See Jan. 25, 2018, Min. Entry (Dkt. 161); Tr. of Jan. 25, 2018, Status Conference ("Jan 25 Conf. Tr.") (Dkt. 178).) On March 13, 2018, Borzouye and the Self Help Defendants agreed to a payment schedule and stipulation of forbearance. (Stipulation & Order of Forbearance (Dkt. 167).) Judge Orenstein deemed the motion for coercive sanctions to be moot, and this story had a happy ending... almost. (See Mar. 13, 2018, Order.)

         On April 26, 2018, the Self Help Defendants informed the court that they never received Borzouye's first payment, which was due on April 1, 2018. (2d Contempt Mot.) They reached out to Borzouye's attorney to figure out what had gone wrong, but the attorney stated that he too had not been able to reach his client to resolve this issue. Id. at 1.) At that point, the Self Help Defendants averred that they had "done all that is reasonably] possible to compel Mr. Borzouye's compliance with the orders of this Court" and renewed their request for coercive sanctions.[1] (Id. at 2.) At a status conference on May 8, 2018, Borzouye's attorney asked for "a little more time" on behalf of his client and proposed that Borzouye assign to the Self Help Defendants a $10, 000 lien against his proceeds from another case. (Tr. of May 8, 2018, Status Conference ("May 8 Conf. Tr.") (Dkt. 179) 3:18-21, 6:16-7:1.) Judge Orenstein ordered the parties to try to work out an agreement and to report back to the court "by the end of the week." (Id. 8:22-23.) That Friday, however, the Self Help Defendants reported that they had "received no information" from Borzouye or his attorney concerning "the existence and value of the $10, 000 lien." (Self Help Defs. May 11, 2018, Letter (Dkt. 174).) Accordingly, the Self Help Defendants reiterated their request to hold Borzouye in coercive detention. (Id.)

         On May 21, 2018, Judge Orenstein issued an R&R recommending that the court deny the Self Help Defendants' request that the court issue a warrant for Borzouye's arrest. (R&R.) Although "frustrat[ed] at the inability to find a better resolution" (id. at 1), Judge Orenstein found that a civil contempt sanction would not be appropriate in this instance because "the record does not suffice to demonstrate that Borzouye's failure to pay the Self Help Defendants what he owes them has been willful" (Id. at 3). Noting that the Self Help Defendants "continue to have an enforceable judgment against Borzouye," Judge Orenstein advised that they "retain the right to renew their request at any time if they learn that Borzouye has become able to pay the amount owed but fails to do so." Id. at 4.)

         The Self Help Defendants timely objected to the R&R. (Self Help Defs. Objs. to R&R ("Objs.") (Dkt. 176); see R&R at 4 ("Any objections to this Report and Recommendation must be [filed] no later than June 4, 2018.").) In particular, the Self Help Defendants object to the following:

a) The R&R's conclusion that Borzouye has shown "contrition" and a "sincere desire to find some way to satisfy his debt";
b) The R&R's conclusion that it was the [Self Help] Defendants' burden to prove that Borzouye has no assets rather than it being Borzouye's burden to prove his inability to pay the Rule 11 sanction (as modified by forbearance agreement);
c) The R&R's conclusion that Borzouye must have no assets because he refused to pay even after he was warned that he could be arrested; and
[d]) The R&R's recommendation that this Court deny the request to issue a warrant for Borzouye's arrest.

(Objs. at 1-2.) Borzouye did not submit a response to the Self Help Defendants' objections. See Fed. R. Civ. P. 72(b)(2) ("A party may respond to another party's objections within 14 days after being served with a copy.").

         II. LEGAL STANDARDS

         In reviewing an R&R from a magistrate judge regarding a dispositive motion, the district court "may adopt those portions of the Report to which no objections have been made and which are not facially erroneous." Romero v. Bestcare Inc.. No. 15-CV-7397 (JS), 2017 WL 1180518, at *2 (E.D.N.Y.Mar. 29, 2017) (internal citation omitted); see Impala v. U.S. Dep't of Justice. 670 Fed.Appx. 32, 32 (2d Cir. 2016) (summary order) ("[F]ailure to object timely to a magistrate's report operates as a waiver of any further judicial review of the magistrate's decision ...." (internal citation omitted)); Gesualdi v. Mack Excavation & Trailer Serv., Inc., No. 09-CV-2502 (KAM), 2010 WL 985294, at *1 (E.D.N.Y. Mar. 15, 2010) ("Where no objection to the [R&R] has been filed, the district court need only satisfy itself that there is no clear error on the face of the record." (internal quotation marks and citation omitted)). "A decision is 'clearly erroneous' when the Court is, 'upon review of the entire record, left with the definite and firm conviction that a mistake has been committed.'" DiPilato v. 7-Eleven, Inc., 662 F.Supp.2d 333, 339-40 (S.D.N.Y. 2009) (quoting United States v. Snow, 462 F.3d 55, 72 (2d Cir. 2006)).

         The district court must review de novo "those portions of the report... to which objection is made." 28 U.S.C. § 636(b)(1); see Fed. R. Civ. P. 72(b)(3). To obtain this de novo review, an objecting party "must point out the specific portions of the [R&R]" to which objection is made. Sleeov's LLC v. Select Comfort Wholesale Corp., 222 F.Supp.3d 169, 174 (E.D.N.Y. 2016); see also Fed.R.Civ.P. 72(b)(2) ("[A] party may serve and file specific written objections to the [R&R]."). If a party "makes only conclusory or general objections, or simply reiterates his original arguments, the Court reviews the [R&R] only for clear error." Pall Corp. v. Entegris, Inc., 249 F.R.D. 48, 51 (E.D.N.Y. 2008) (citations omitted); see also Mario v. P & C Food Mkts., Inc., 313 F.3d 758, 766 (2d Cir. 2002) (holding that plaintiffs objection to an R&R was "not specific enough" to "constitute an adequate objection under... Fed.R.Civ.P. 72(b)").

         III. DISCUSSION

         A. Notice

         "Before [Borzouye] may be held in contempt, due process requires that he receive notice that he is a defendant in a contempt hearing, and that if he is to face the possibility of incarceration, that he be afforded the right to counsel." Bank of Credit & Commerce Int'l (Overseas) Ltd. v. Tamraz, No. 97-CV-4759 (SHS), 2006 WL 1643202, at *3 (S.D.N.Y. June 13, 2006): accord SerVaas Inc. v. Mills, 661 Fed.Appx. 7, 9 (2d Cir. 2016) (summary order); see also Leser v. U.S. Bank Nat'l Ass'n, No. 09-CV-2362 (KAM), 2011 WL 1004708, at *7 (E.D.N.Y. Mar. 18, 2011) (collecting cases); Local Civ. R. 83.6(a) ("A proceeding to adjudicate a person in civil contempt... shall be commenced by the service of a notice of motion or order to show cause."). The court finds that the notice given to Borzouye regarding the contempt proceeding, including the possibility of incarceration, comports with the due-process requirements.

         While Borzouye was still proceeding pro se, the court and the Self Help Defendants promulgated a number of documents relating to the possibility of contempt against him: the First Contempt Motion; the court's OTSC; the Self Help Defendants' response to the OTSC; Judge Orenstein's order that Borzouye needed to appear at a status conference on October 5, 2017, lest he face incarceration; and, finally, Judge Orenstein's promise that a recommendation of custodial sanctions would be formcoming. The problem is that there is no evidence that any of these documents was served on Borzouye. The Self Help Defendants provided the court with copies of letters sent to Borzouye, but there is no proof of service that would allow the court to be certain that these documents ever reached him. See Indiv. R. I(C). While the court and Judge Orenstein sent copies of all court documents to Plaintiff, it is not true that these documents necessarily would have reached Borzouye, especially given that Borzouye was relieved as counsel to Plaintiff on March 7, 2014. (See Mar. 7, 2014, Min. Entry (Dkt. 99).) The court additionally notes that at least one document mailed to Plaintiff was returned as undeliverable. (Notice of Mail Returned as Undeliverable (Dkt. 157).) Even though Borzouye certainly seemed on notice of the possibility of contempt, including incarceration, during the January 25, 2018, status conference (see Jan. 25 Conf. Tr. 5:3-6), the court will not rely on any events prior to this point in determining whether he has notice of the contempt proceedings, given the great stakes at issue here and the heightened need for notice.

         Since January 24, 2018, however, Borzouye has been represented by counsel. (See Jan. 24, 2018, Letter (Dkt. 160).) The court considers Borzouye to have had notice of any statements by the court or parties regarding the possibility of contempt sanctions following this point, whether made during court conferences or in documents filed with the court. See Local Civ. R. 5.2(a). Borzouye thus has notice of the Second Contempt Motion, which renewed all the requests in the First Contempt Motion. In addition, at the status conference on May 8, 2018, Judge Orenstein and Borzouye's attorney engaged in a discussion of the propriety of coercive custody. (See May 8 Conf. Tr. 4:4-8 (statement of Michael E. Talassazan, attorney for Borzouye: "I think, you know, a stiff penalty of, you know, coercive custody might push the progress even further back ... [and] I ...


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