The Creditor's Remedy Against A Debtor's Interest In An LLC Or Partnership
Seven Arts Pictures
Seven Arts Pictures, Inc. v. Jonesfilm, 2013 WL 599661 (5th Cir., Feb. 18, 2013).
See Fed. Rule of Appellate Procedure 32.1 generally governing citation of judicial decisions issued on or after Jan. 1, 2007. See also Fifth Circuit Rules 28.7, 47.5.3, 47.5.4. (Find CTA5 Rule 28 and Find CTA5 Rule 47)
United States Court of Appeals, Fifth Circuit.
SEVEN ARTS PICTURES, INCORPORATED, a Nevada Corporation, Plaintiff–Appellant,
JONESFILM, a Pennsylvania Joint Venture, Defendant–Appellee,
Leeway Properties, Incorporated, Garnishee–Appellant.
Peter M. Hoffman, Interested Party–Appellant.
Feb. 18, 2013.
Attorneys and Law Firms
Joshua Michael Palmintier, Esq., Degravelles, Palmintier, Holthaus & Fruge', L.L.P., Baton Rouge, LA, for Plaintiff–Appellant.
M. Claire Durio, Esq., Douglass Wynne, Jr., Simon, Peragine, Smith & Redfearn, L.L.P., David Felicien Waguespack, Esq., Carver, Darden, Koretzky, Tessier, Finn, Blossman & Areaux, L.L.C., New Orleans, LA, for Defendant–Appellee.
Appeals from the United States District Court for the Eastern District of Louisiana, USDC No. 2:09–MC–4814.
Before HIGGINBOTHAM, SMITH, and ELROD, Circuit Judges.
JERRY E. SMITH, Circuit Judge:*
*1 It is a truth "universally acknowledged," that courts of justice have inherent power to require "submission to their lawful mandates." Anderson v. Dunn, 19 U.S. (6 Wheat.) 204, 227 (1821). The question is whether the district court abused its discretion by requiring Peter Hoffman to submit to its lawful mandates. Hoffman ignored the court's orders for months based on what he thought were "substantial justifications," which he neglected to share with the court. Because the court did not abuse its discretion in that or any other of its rulings, we affirm.
Jonesfilm holds judgments of almost $1 million from state and federal courts in California against Hoffman and several companies controlled by or affiliated with him (the "judgment debtors"), including Seven Arts Pictures, Inc. ("SAP"). Upon learning that Hoffman and the other judgment debtors owned or controlled several Louisiana limited liability companies, Jonesfilm registered the judgments in federal court, seeking to enforce and collect on them. In October 2010, the court ordered Hoffman and the judgment debtors to produce Schedule K–1s, financial statements, and tax returns (the "charging orders"). Instead of objecting to the charging orders or asking the court to modify or vacate them, Hoffman just ignored them.
In January 2011, the district court garnished funds held on behalf of the judgment debtors by the Louisiana companies ("garnishees"), including Leeway Properties, Inc. ("Leeway"), and ordered the garnishees to answer garnishment interrogatories. The garnishees, including Leeway, were served with the garnishment order on January 27, 2011.
Leeway initially asserted that it held no garnished funds as of January 27.1 Months later, however, Leeway admitted that it had actually held $174,769.56—received from a judgment debtor, and subsequently transferred to Hoffman, two other judgment debtors, and the judgment debtors' certified public accountants ("CPAs")—on that date. Leeway professed to know nothing about who owned the funds. The funds had been transferred without authorization, Leeway averred, by an employee seeking to cover up her embezzlement scheme.
In March, Jonesfilm asked the court to hold Hoffman and the judgment debtors in contempt for failing to comply with the charging orders, to compel the garnishees to completely and accurately answer the garnishment interrogatories, and for attorney's fees. In August, it asked the court to order Leeway and Hoffman to deliver the garnished funds immediately. The court referred both motions to a magistrate judge ("MJ").
The MJ issued his report and recommendations in October 2011, finding that the judgment debtors, including Hoffman, had disobeyed the charging orders by failing to deliver financial documents; that Leeway held $174,769.56 of garnished funds when served with the garnishment order; that in violation of the garnishment order, $74,769.56 had been transferred to judgment debtors, including Hoffman, and $100,000 had been transferred to pay the judgment debtors' CPAs; that the garnishees' interrogatory answers were and continued to be inaccurate and incomplete; and that Jonesfilm had incurred necessary and reasonable fees of $21,357.50 to pursue its contempt and compulsion motions.
*2 The MJ recommended that the district court hold Hoffman and the other judgment debtors in contempt for disobeying the charging orders; that it order Hoffman and Leeway to deliver $174,769.56 of garnished funds to Jonesfilm; that it compel Leeway to provide complete and accurate supplemental interrogatory answers; and that it award Jonesfilm $21,357.50 in attorney's fees. After considering objections, the court approved and adopted the MJ's report and ordered the recommended relief. SAP, Hoffman, and Leeway appeal.
"We review contempt orders and sanctions imposed thereunder for an abuse of discretion." Whitcraft v. Brown, 570 F.3d 268, 271 (5th Cir.2009). We review the district court's factual findings for clear error and its conclusions of law de novo. Id. The court's discretion to impose sanctions includes the authority to award damages2 and attorney's fees.3 Reviewing the imposition of such sanctions, "we will not substitute our judgment for that of the district court." City of Jackson, 359 F.3d at 731. We also review discovery rulings, including rulings on motions to compel, for abuse of discretion. Wiwa v. Royal Dutch Petroleum Co ., 392 F.3d 812, 817 (5th Cir.2004).
"A movant in a civil contempt proceeding bears the burden of establishing by clear and convincing evidence (1) that a court order was in effect, (2) that the order required certain conduct by the respondent, and (3) that the respondent failed to comply with the court's order." Martin v. Trinity Indus., Inc., 959 F.2d 45, 47 (5th Cir.1992). Hoffman and SAP acknowledge that the charging orders required them to disclose various financial documents to Jonesfilm and that they failed to do so. Nonetheless, they assert that the district court abused its discretion by holding them in contempt without considering the "substantial justification" for their conduct.4
The court did not abuse its discretion. A litigant may not "make himself a judge of the validity of orders which have been issued, and by his own act of disobedience set them aside, ... [otherwise,] the 'judicial power of the United States' would be a mere mockery." Gompers v. Buck's Stove & Range Co., 221 U.S. 418, 450 (1911). When a party violates a court order without objecting to it, asking the court to modify or vacate it, or even informing the court why it cannot or will not obey it, the court may hold the party in contempt without first deciding whether the disobedience was justified.
None of the cases cited by Hoffman and SAP holds otherwise. In A & H Sportswear Co. v. Victoria's Secret Stores, Inc., 134 F.Supp.2d 668, 670 (E.D.Pa.2001), for example, the court noted that a party should not be held in contempt "where there is ground to doubt the wrongfulness of the [party's] conduct." The issue was whether there was an order binding on the party, not whether the party had some justification for defying the court. Id. The decision in In re C.B.S., Inc., 570 F.Supp. 578 (E.D.La.1983),5 is similarly inapposite. There, the district court exercised its discretion not to hold CBS in criminal contempt for refusing to hand over a transcript of an upcoming 60 Minutes episode to a judge who needed to decide whether to enjoin the broadcast. Id. at 584–85. Among the reasons for the decision were that the judge's contemplated prior restraint would have been unconstitutional, that CBS had "continually objected" to the order, and that CBS had "little or no time to seek writs to appeal." Id. Even if Hoffman and SAP's proffered justifications were legitimate, they failed to object to the charging orders in any way in advance of the contempt proceedings.
*3 Supposing Hoffman and SAP had objected to the charging orders, their proffered justifications are insubstantial. They claimed that (1) the district court lacked personal jurisdiction over Hoffman6 and that (2) they should not have been required to release tax returns, which, in SAP's case, were not available at the time.
Hoffman maintains that the district court lacked jurisdiction over him because he resides in California and has not had continuous and systematic contacts with Louisiana. Jonesfilm responds that Hoffman waived his objection to jurisdiction and is subject to general jurisdiction in Louisiana in any event.
Whether the court properly exercised jurisdiction over a defendant is a question of law that we review de novo. Bullion v. Gillespie, 895 F.2d 213, 216 (5th Cir.1990). Where the alleged facts are disputed, "the party who seeks to invoke the jurisdiction of the district court bears the burden of establishing contacts by the nonresident defendant sufficient to invoke the jurisdiction of the court." Id. at 216–17 (quoting WNS, Inc. v. Farrow, 884 F.2d 200, 203 (5th Cir.1989)). Where a court considers whether to dismiss for lack of personal jurisdiction without holding an evidentiary hearing, the party seeking to invoke jurisdiction must make only a prima facie showing, and the court must accept as true that party's allegations and resolve all factual disputes in its favor. Guidry v. U.S. Tobacco Co., 188 F.3d 619, 625 (5th Cir.1999).7
"A federal court sitting in diversity must satisfy two requirements to exercise personal jurisdiction over a nonresident defendant." Pervasive Software, Inc. v. Lexware GmbH & Co. KG, 688 F.3d 214, 220 (5th Cir.2012). "First, the forum state's long-arm statute must confer personal jurisdiction. Second, the exercise of jurisdiction must not exceed the boundaries of the Due Process Clause of the Fourteenth Amendment." Id. Because Louisiana's long-arm statute extends personal jurisdiction to the limits of due process, we need only consider the limitations of the Fourteenth Amendment. See Dickson Marine Inc. v. Panalpina, Inc., 179 F.3d 331, 336 (5th Cir.1999).
No one contends that this suit arises out of Hoffman's contacts with Louisiana. Therefore, personal jurisdiction is proper only if his contacts with the state were "continuous and systematic," giving the state general jurisdiction over any action brought against him,8 and if it would be fair to subject him to suit there. See Wilson v. Belin, 20 F.3d 644, 647 (5th Cir.1994). In evaluating fairness, we consider (1) the burden on Hoffman, (2) Jonesfilm's interest in securing relief, (3) Louisiana's interests, (4) the judicial system's interest in obtaining an efficient resolution of controversies, and (5) the shared interest of the states in furthering fundamental substantive social policies. Bullion, 895 F.2d at 216 n.5.
Jonesfilm presents overwhelming evidence of Hoffman's continuous and systematic contacts with Louisiana.9 Hoffman repeatedly claimed residence there, served as a registered agent for a Louisiana limited liability company (which required him, by law, to be a Louisiana citizen residing there), had an ownership interest in and managed real estate in Louisiana, and engaged in substantial business within the state. Although Hoffman disputes Jonesfilm's contentions, Jonesfilm has made a prima facie showing, especially given that "the court must accept as true the nonmover's allegations and resolve all factual disputes it its favor." Guidry, 188 F.3d at 625.
*4 It was fair to subject Hoffman to suit in Louisiana. He has held himself out as a resident of the state, and the burden on him is minimal seeing as much of his business is done in the state and he owns residences there. Jonesfilm seeks to satisfy its outstanding judgments against Hoffman using his Louisiana property, which gives Louisiana an interest in the outcome of this litigation.
Additionally, this is one of several lawsuits among these parties pending in the Eastern District of Louisiana. The district court has expended substantial time and resources adjudicating these various matters, and judicial efficiency weighs in favor of exercising jurisdiction. Ultimately, these factors indicate that exercising general personal jurisdiction over Hoffman comports with "traditional notions of fair play and substantial justice." Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). Therefore, Hoffman is subject to general jurisdiction in Louisiana; his conduct was not substantially justified by the court's supposed lack of jurisdiction over him.
Hoffman and SAP contend that they should not have been ordered to disclose their tax returns in postjudgment discovery. This court rejected a similar argument in FDIC v. LeGrand, 43 F.3d 163, 165 (5th Cir.1995), and affirmed a holding of civil contempt against a party who had failed "to comply with a post-judgment discovery order compelling the production of his federal income tax returns." "The scope of postjudgment discovery is very broad to permit a judgment creditor to discover assets upon which execution may be made." Id. at 172. When a judgment creditor seeks information regarding a judgment debtor's financial position, the "relevance of the tax returns to a judgment creditor is virtually presumed." Id. A judgment debtor opposing production of relevant material would be required "to show that other sources exist from which the information" sought could be obtained. Id.
Hoffman and SAP have presented no evidence establishing other sources from which Jonesfilm could have obtained the information in their tax returns. Furthermore, Hoffman and SAP do not even assert that they should not have been ordered to disclose the other financial documents that they failed to produce. The district court did not abuse its discretion by holding them in contempt for failing to turn over their financial documents, including tax returns.
SAP's assertion that its tax returns were unavailable fails to justify its behavior. It also demonstrates the fundamentally misguided nature of Hoffman and SAP's argument and reveals the depth of their contempt for the district court. If SAP's tax returns were unavailable, the proper response was to inform the court of that fact, not to ignore orders until a contempt motion was brought. Any of SAP and Hoffman's justifications could have supported a motion to modify or vacate the charging orders, but none of them comes close to justifying the utter disregard for the district court.
*5 Leeway and Hoffman object to the order requiring them immediately to deliver $174,769.56 in garnished funds to Jonesfilm. Neither disputes (1) that as of January 28, 2011, when Leeway was served with the garnishment order, Leeway had $174,769.56 in a City National Bank account; (2) that the money had been received by Leeway from a judgment debtor; or (3) that, after the money was garnished, and in violation of the garnishment order, the funds were transferred to Hoffman, two of his co-judgment debtors, and the judgment debtors' CPAs.
Leeway contends that it should not have been ordered to deliver the money to Jonesfilm, because it does not know who owns the money, it was unaware of the money when garnished, and the funds were transferred as part of an embezzlement scheme by a former employee. Leeway presented the same arguments to the MJ, who rejected them. Nothing in Leeway's brief alleges any error of law or fact by the district court.
Before concluding that the court did not abuse its discretion as to Leeway, we pause briefly to point out the thin evidence of any embezzlement scheme. Leeway references a police report and a bank's letter to Hoffman but has presented no independent evidence to support its claims. The report and the letter consist entirely of allegations made by SAP and Hoffman to the police and to the bank, respectively. Furthermore, before the MJ, Leeway maintained the bank's investigation would take an additional ninety days. That was over a year ago, yet Leeway has brought no additional evidence to support its allegations.
Hoffman maintains that he should not have been ordered to deliver the money to Jonesfilm, because he was not subject to the garnishment order and cannot be held responsible for the unauthorized transfer of funds. Despite that conclusional argument, he was subject to the garnishment order. Orders granting injunctions bind "the parties' officers, agents, servants, employees, and attorneys" and "other persons who are in active concert" with them or with the parties. Fed R. Civ. P. 65(d)(2) .10
Hoffman was therefore subject to the garnishment order in two ways. First, he served as director, officer, bank statement recipient, bank signatory, keeper of the books, and manager of Leeway. Second, he acted "in active concert" with Leeway, because he personally, or companies of which he was CEO, or his CPAs, received every penny of the garnished funds from Leeway.
As this court recognized in Waffenschmidt v. MacKay, 763 F.2d 711, 717 (5th Cir.1985), "[a]n injunction binds not only the parties subject thereto, but also nonparties who act with the enjoined party." In that case, the district court enjoined MacKay, and all persons acting in concert with him, from transferring any funds received from the Waffenschmidts. Id. at 714. MacKay was ordered to deposit certain funds with the court, which he was unable to do because he had transferred them to nonparties, in violation of the injunction. Id. The court found two of the nonparties in contempt, and imposed fines in the amounts received, because they were agents or employees of MacKay and acted "in active concert" with him by receiving the funds. Id. at 715 We upheld the fines, finding that the court had not clearly erred when it held that they received the money with knowledge of the injunction. Id . at 723–26.
*6 Hoffman's attempts to distinguish Waffenschmidt are unpersuasive. He characterizes the garnishment order as "a discovery order," not an injunction. That portion of the order instructing the garnishees to answer interrogatories was a discovery order; the portion garnishing funds and ordering their seizure by the U.S. Marshal granted an injunction.11 Hoffman also protests that the injunction in Waffenschmidt was specifically directed at all persons "acting in concert" with the defendant. Under Rule 65, however, orders bind persons "in active concert," irrespective of whether the court recites that specific language.
Hoffman's argument that the funds were transferred by an employee who was not authorized to do so, as part of an embezzlement scheme, is unsupported by any independent evidence. The district court did not abuse its discretion by implicitly rejecting it.
Leeway contends that the district court erred by granting Jonesfilm's motion to compel answers to the garnishment interrogatories. In ten pages of briefing, Leeway fails to cite a single binding authority or respond in any way to the substance of the order. A brief perusal of the district court's docket reveals Leeway's fundamental mistake—it cut and pasted its argument from the motion it won, not the motion it lost.
Jonesfilm moved to compel answers to the garnishment interrogatories in March, and to compel production of subpoenaed documents from Leeway in September. The court granted the first motion but denied in part and dismissed in part the second. Leeway appealed the first; no one appealed the second. Nonetheless, almost all of Leeway's brief on this issue is cut and pasted from its response to the second motion. Therefore, most of Leeway's arguments—that its response to the subpoena was sufficient, its objections were valid, and other sources existed from which Jonesfilm could obtain the subpoenaed information—are irrelevant.
Leeway's only pertinent argument is that the garnishment interrogatories exceeded the scope of Louisiana's garnishment procedures. But under the federal rules, judgment creditors are allowed to seek postjudgment discovery from "any person," using "the procedure of the state where the court is located" or the federal rules. Fed.R.Civ.P. 69(a).12 Even if Leeway had fulfilled its obligations under Louisiana law, nothing precluded Jonesfilm from propounding interrogatories under the federal rules. The district court did not abuse its discretion by ordering Leeway to answer those interrogatories accurately and completely.
SAP and Leeway argue that the district court was incorrect in ordering them to pay attorney's fees to Jonesfilm. Specifically, they maintain the court erred by (1) not conducting an evidentiary hearing and by awarding (2) fees for all legal work incurred in Louisiana, (3) fees in excess of $2000, and (4) fees incurred to seek further disclosure from the garnishees.
*7 SAP and Leeway rely on Cook v. Ochsner Foundation Hospital, 559 F.2d 270 (5th Cir.1977), to support their demand for an evidentiary hearing. There, we reversed as to the amount of attorney's fees and remanded for an evidentiary hearing, because "[t]he affidavits filed created conflicts which must be resolved and, in the absence of a stipulation that the trial court will rule based upon the affidavits, such a conflict requires a due process hearing." Id. at 273. Despite SAP and Leeway's assertions, they are not entitled to an evidentiary hearing as a matter of course.13 Jonesfilm submitted affidavits detailing its hours and fees, to which SAP and Leeway did not object. Nor did they request an evidentiary hearing. Because there was no conflict that needed to be resolved, because the MJ judge had full knowledge of the relevant facts, and because attorney's fees are usually mandated where a party violates a court order on a discovery matter,14 the MJ was not required to hold an evidentiary hearing.
As to the remaining objections, the MJ consulted extensive caselaw and carefully considered the reasonableness of the hourly rates and the hours expended. The MJ even trimmed thousands of dollars from Jonesfilm's requested fees, because some of the work "contributed very little to the arguments ... on the motion." Nothing in SAP and Leeway's citation-free, conclusional arguments suggests that the court abused its discretion.
It has not escaped our notice that Hoffman, SAP, and Leeway openly defied the district court's order. They appealed it but failed to ask the court to stay the order pending appeal. Adding to their, especially Hoffman's, ongoing demonstration of contempt for the judicial process, they failed to "comply promptly with the order pending appeal," as was their obligation absent a stay.15 After nearly a year, the district court held them in contempt again, for disobeying the order. Hoffman, SAP, and Leeway would be wise to fulfill their obligations to the court without delay.
Pursuant to 5th Cir. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5th Cir. R. 47.5.4.
Hoffman—Leeway's vice president, secretary, director, signatory of bank accounts, addressee and recipient of bank statements, bookkeeper, recordkeeper, and manager—signed the interrogatory answers on behalf of every garnishee except Leeway. Susan Hoffman, his wife, who owned the company but knew little about its financial records, signed for Leeway.
See Am. Airlines, Inc. v. Allied Pilots Ass'n, 228 F.3d 574, 585 (5th Cir.2000) (noting the district court's "broad discretion" in assessing compensatory damages).
See United States v. City of Jackson, 359 F.3d 727, 732 (5th Cir.2004).
Hoffman and SAP also contend that Federal Rule of Civil Procedure 37(a) applied to Jonesfilm's motion for contempt and required the district court to consider their substantial justification for disobedience. In their two-paragraph argument, they cite no authority for the proposition that Rule 37(a) applied, so "we consider the challenge abandoned for being inadequately briefed." L & A Contracting Co. v. S. Concrete Servs., Inc., 17 F.3d 106, 113 (5th Cir.1994); See also Fed. R.App. P. 28(a)(9) (requiring "citations to the authorities ... on which the appellant relies"). Furthermore, even if Rule 37 applied, it grants the court discretion to treat "as contempt of court the failure to obey any order except an order to submit to a physical or mental examination." Fed.R.Civ.P. 37(b)(2)(A). The court need not consider a litigant's "substantial justification" except as a reason not to require the litigant to pay otherwise mandatory attorney's fees. Fed.R.Civ.P. 37(b)(2)(C). In any case, Hoffman and SAP's justifications were not substantial. See infra. Finally, officers of this court would be well advised to read more carefully before asserting demonstrable falsehoods such as "[t]he only reference to 'contempt' in Rule 37 is in (b)(1)...."
An appeal brought by private prosecutors was dismissed for lack of jurisdiction under the name United States v. McKenzie, 735 F.2d 907 (5th Cir.1984).
SAP did not appeal the order denying SAP's motion to dismiss for lack of jurisdiction.
Hoffman failed to ask the district court to dismiss for lack of jurisdiction until after he had filed the notice of appeal, which places this appeal in an usual procedural posture-we are not directly reviewing a ruling of the district court. Meanwhile, the district court has ruled, three times, in various permutations of litigation between these parties, that Hoffman is subject to general jurisdiction in Louisiana. See Seven Arts Pictures, Inc. v. Jonesfilm, Nos. 09–4814, 09–4815, 2012 WL 5398439, at *10 (E.D.La. Nov. 1, 2012); Leeway Props., Inc. v. Jonesfilm, No. 11–2628, 2012 WL 4471848, at *5 (E.D.La. Sept. 27, 2012); Jonesfilm v. Hoffman, No. 11–1994, 2012 WL 4325461, at *3–5 (E.D.La. Sept. 20, 2012). Because all of the necessary evidence is in the record before us, and because we do not wish to waste judicial resources, we assume, arguendo, that Hoffman has preserved his objection, and we proceed to rule on its merits.
See Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 n.9, 415 (1984); Holt Oil & Gas Corp. v. Harvey, 801 F.2d 773, 779–80 (5th Cir.1986) (finding general jurisdiction based on defendant's "constant and extensive personal and business connections" with forum state).
See also Hoffman, 2012 WL 4325461, at *4–5 (holding Hoffman subject to general jurisdiction in Louisiana).
Persons to be bound must "receive actual notice" of the order "by personal service or otherwise." Fed.R.Civ.P. 65(d)(2). Hoffman does not dispute that he received actual notice of the order, with which he was served as registered agent for two of the garnishees.
See Int'l Longshoremen's Ass'n, Local 1291 v. Phila. Marine Trade Ass'n, 389 U.S. 64, 75 (1967) (stating that an order qualified as " 'order granting an injunction' with the meaning of Rule 65(d)" where "it was an equitable decree compelling obedience under the threat of contempt").
See also LeGrand, 43 F.3d at 171 (rejecting argument that "state procedural rules apply to the determination of the post-judgment discovery issue").
See, e.g., Alizadeh v. Safeway Stores, Inc., 910 F.2d 234, 236–37 & 237 n.2 (5th Cir.1990) (holding that no hearing was required where judge had full knowledge of relevant facts, parties had opportunity to submit motions explaining positions, and no special circumstances existed); Gulf Union Indus., Inc. v. Formation Sec., Inc., 842 F.2d 762, 766–68 (5th Cir.1988) (holding that refusal to hold hearing was not a denial of due process where attorney's fees were required under law, proponents submitted detailed affidavits, and opponents had opportunity to object but submitted only conclusional statements).
See, e.g., Fed.R.Civ.P. 37(b)(2)(C).
Maness v. Meyers, 419 U.S. 449, 458–59 (1975) ("Persons who make private determinations of the law and refuse to obey an order generally risk criminal contempt even if the order is ultimately ruled incorrect.").
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Seven Arts Filmed Entertainment Ltd. v. Jonesfilm, 2013 WL 4018659 (5th Cir., Aug. 8, 2013).
This case was not selected for publication in the Federal Reporter. Not for Publication in West's Federal Reporter. See Fed. Rule of Appellate Procedure 32.1 generally governing citation of judicial decisions issued on or after Jan. 1, 2007. See also Fifth Circuit Rules 28.7, 47.5.3, 47.5.4. (Find CTA5 Rule 28 and Find CTA5 Rule 47)
United States Court of Appeals, Fifth Circuit.
SEVEN ARTS FILMED ENTERTAINMENT LIMITED, an English corporation, Plaintiff–Appellant,
JONESFILM, a Pennsylvania joint venture, Defendant–Appellee,
Leeway Properties, Incorporated, Garnishee–Appellant.
Peter M. Hoffman; Seven Arts Filmed Entertainment Limited, Interested Parties–Appellants.
Aug. 8, 2013.
Attorneys and Law Firms
Joshua Michael Palmintier, Esq., Degravelles, Palmintier, Holthaus & Fruge', L.L.P., Baton Rouge, LA, for Plaintiff–Appellant/Interested Parties–Appellants.
William J. Wegmann, Jr., Esq., Wegmann & Adams, L.L.C., METAIRIE, LA, for Garnishee–Appellant.
David Felicien Waguespack, Esq., Carver, Darden, Koretzky, Tessier, Finn, Blossman & Areaux, L.L.C., New Orleans, LA, for Defendant–Appellee.
Appeals from the United States District Court for the Eastern District of Louisiana, USDC No. 2:09–MC–4814.
Before REAVLEY, ELROD, and GRAVES, Circuit Judges.
*1 For the second time in six months, Appellants ask us to review the propriety of the district court's findings regarding jurisdiction and contempt. See Seven Arts Pictures, Inc. v. Jonesfilm, 512 F. App'x 419 (5th Cir.2013) (unpublished).1 Here, again, we find no reversible error in the district court's findings and therefore AFFIRM.
By this time, the parties and the court are intimately familiar with the relevant facts. Nevertheless, we provide a brief summary of the events preceding the order that gives rise to the instant appeal, which demonstrate Appellants' continuing disregard for the lawful mandates of the judiciary. Indeed, as discussed below, the contempt order at issue here is the third such order entered against Appellant Peter Hoffman and companies that he owns or affiliates with (collectively, the “judgment debtors“).
Since 2005, Jonesfilm has been involved in a series of arbitrations and lawsuits with the judgment debtors, including Cinevisions and Appellant Seven Arts Filmed Entertainment, Ltd. (“SAFE“). In 2007, the U.S. District Court for the Central District of California confirmed an arbitration award and entered judgment in favor of Jonesfilm and against the judgment debtors for almost $300,000 plus attorneys' fees, costs, and interest. After the California district court entered this judgment, Jonesfilm filed a motion for contempt against the judgment debtors. The California district court granted Jonesfilm's motion in part, holding Hoffman, Cinevisions, and SAFE (among other entities) in contempt for failing to comply with its judgment and awarding Jonesfilm $14,300 in attorneys' fees. The Ninth Circuit affirmed the California district court's order. Seven Arts Pictures PLC v. Jonesfilm, 311 F. App'x 962, 965 (9th Cir. Feb. 12, 2009). According to Jonesfilm, neither Hoffman nor any other judgment debtors have purged the California contempt order.
Through discovery in the California proceeding, Jonesfilm learned that Hoffman and other judgment debtors own or control several Louisiana limited-liability companies. Thus, Jonesfilm registered the California judgment in the U.S. District Court for the Eastern District of Louisiana. The district court ordered Hoffman and the other judgment debtors to produce Schedule K–1s, financial statements, and tax returns.2 It also garnished funds held on behalf of the judgment debtors by Louisiana companies, including Appellant Leeway Properties, Inc. (“Leeway“). On Jonesfilm's motion, the district court later determined that Hoffman, the other judgment debtors, and Leeway disobeyed these orders; accordingly, in November 2011, it held them in contempt and ordered them to deliver the garnished funds and pay Jonesfilm more than $21,000 in attorneys' fees. We affirmed the district court's order. See Seven Arts Pictures, Inc., 512 F. App'x at 422–28.
Hoffman and Leeway did not ask the district court to stay the November 2011 contempt order pending their appeal, but they did not comply with it either. So, in November 2012 the district court held them in contempt for disobeying it. We referenced this development in our February 18 decision and admonished Hoffman and Leeway that they “would be wise to fulfill their obligations to the court without delay.“ Id. at 428. Rather than heed our guidance and comply with the district court's first or second contempt orders, Hoffman and Leeway brought this appeal challenging the November 2012 contempt order. SAFE also appeals, challenging the district court's exercise of personal jurisdiction over it.
*2 We review a district court's contempt orders and the sanctions that it imposed pursuant to those orders for an abuse of discretion. Whitcraft v. Brown, 570 F.3d 268, 271 (5th Cir.2009) (citing United States v. City of Jackson, 359 F.3d 727, 731 (5th Cir.2004)). We review the district court's underlying findings of fact for clear error and its conclusions of law de novo. Id. (citing City of Jackson, 359 F.3d at 731). The district court's determination that it has personal jurisdiction over a defendant is a conclusion of law and, therefore, is subject to de novo review. Quick Tech., Inc. v. Sage Grp. PLC, 313 F.3d 338, 343 (5th Cir.2002) (citing Mink v. AAAA Dev. L.L.C., 190 F.3d 333, 335 (5th Cir.1999)). Applying these standards here, we find no reversible error in the district court's November 2012 order.
The district court did not abuse its discretion. As the Supreme Court has explained:
[A]ll orders and judgments of courts must be complied with promptly. If a person to whom a court directs an order believes that order is incorrect the remedy is to appeal, but, absent a stay, he must comply promptly with the order pending appeal. Persons who make private determinations of the law and refuse to obey an order generally risk criminal contempt even if the order is ultimately ruled incorrect.
Maness v. Meyers, 419 U.S. 449, 458 (1975) (emphasis added); see also Hornbeck Offshore Servs., L.L.C. v. Salazar, 713 F.3d 787, 792 (5th Cir.2013) (recognizing that federal courts' inherent contempt power “promotes the due and orderly administration of justice and safeguards the court's authority“ (internal quotation marks and citation omitted)). Here, as we explained in our February 18 decision, Appellants did not seek to stay the district court's November 2011 contempt order, nor did they comply with it. See Seven Arts Pictures, Inc., 512 F. App'x at 428. This disregard for the district court's order was but one installment in the continuing tale of Appellants' contemptuous conduct. The district court's thirty-one page opinion comprehensively discussed these facts, the governing legal principles, and the appropriateness of the sanctions that it imposed. We see no reversible error in the district court's well-reasoned analysis or conclusions.3 See Hornbeck Offshore Servs., 713 F.3d at 792 (“[A] district court is entitled to a degree of flexibility in vindicating its authority against actions that ... violate the reasonably understood terms of [its] order[s].“).
We further conclude that the district court correctly determined it has jurisdiction over SAFE.4 As an initial matter, we observe that the district court first determined that it had jurisdiction over SAFE in a September 2012 order that denied SAFE's motion to dismiss for lack of personal jurisdiction in a separate but closely-related action. See Jonesfilm v. Hoffman, No. 11–1994, 2012 WL 4325461, at *5–8 (E.D.La. Sept. 20, 2012). SAFE did not file a notice of appeal from that September order; to the contrary, it joined with Hoffman in filing an Amended Answer and has continued to litigate that action. Moreover, the district court's September order explained in detail SAFE's contacts with Louisiana, the benefits associated with those contacts, and SAFE's intertwined and intimate relationship with Hoffman and other entities over which the district court has jurisdiction. See id. at *5–8. For the reasons stated in the district court's September 2012 order and reiterated in its November 2012 contempt order, we agree that the district court may assert jurisdiction over SAFE.
*3 For the foregoing reasons, we AFFIRM the district court's order.
Pursuant to 5th Cir. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5th Cir. R. 47.5.4.
In light of this decision, Appellants withdrew their arguments in this appeal regarding the district court's jurisdiction over Peter Hoffman and the district court's order denying a motion to transfer under 28 U.S.C. sec. 1404(a).
In the prior appeal, Hoffman and Seven Arts Pictures, Inc. (“SAP“) contended that the district court should not have ordered them to disclose their tax returns in post-judgment discovery. Seven Arts Pictures, Inc., 512 F. App'x at 424–25. In support of this argument, they asserted that the tax returns were unavailable. Id. at 425. But, as we explained, this argument is just one more example of the depth of the contemptuous conduct:
If SAP's tax returns were unavailable, the proper response was to inform the court of that fact, not to ignore the orders until a contempt motion was brought. Any of SAP and Hoffman's justifications could have supported a motion to modify or vacate the charging orders, but none of them comes close to justifying the utter disregard for the district court.
The district court's November 2011 contempt order listed “Seven Arts Entertainment Limited“ as a judgment debtor; however, there is no such entity. As part of its November 2012 contempt order, the district court corrected this error to name “Seven Arts Entertainment, Inc.“ and “Seven Arts Filmed Entertainment Limited“ as separate judgment debtors. Appellants contend that the district court had no authority to make this revision because Seven Arts Entertainment, Inc. is not a judgment debtor. We reject this argument. The California district court's judgment confirming the arbitration award in favor of Jonesfilm explicitly states that it is binding on the judgment debtors' successors. We agree with the district court that Seven Arts Entertainment, Inc. is the successor of the named judgment debtor Seven Arts Pictures PLC.
The district court also determined that it has jurisdiction over judgment debtor Cinevisions because it is the alter ego of Hoffman. On appeal, Hoffman and SAFE contend that this conclusion was error. We disagree. The district court's alter ego analysis was sound. Moreover, Cinevisions did not file a notice of appeal. That Hoffman challenges the district court's finding on Cinevisions's behalf only serves to reinforce the district court's conclusion that Cinevisions is in fact Hoffman's alter ego. See Order, Nos. CV–05–1292 & CV–06–2387 (C.D.Cal. Feb. 26, 2008) (recognizing that NTTS Productions Ltd. was an alter ego of Hoffman and noting that NTTS transferred all of its assets to Cinevisions).
= = = = = = = = = =
Seven Arts Pictures, Inc. v. Jonesfilm, 2012 WL 5398439 (E.D.La., 2012).
United States District Court, E.D. Louisiana.
SEVEN ARTS PICTURES, INC., et al, Plaintiffs
Civil Action Nos. 09–4814, 09–4815.
Nov. 1, 2012.
Attorneys and Law Firms
Seven Arts Pictures, Inc., pro se.
Seven Arts Filmed Entertainment Limited, pro se.
Seven Arts Pictures, PLC, pro se.
Justin Paul Lemaire, Stone, Pigman, Walther, Wittmann, LLC, New Orleans, LA, for Defendant
ORDER AND REASONS
JANE TRICHE MILAZZO, District Judge.
*1 The matters before the Court are a Motion for Judgment Against Judgment Debtors and Garnishees for Their Disobedience of this Court's November 15, 2011 Order (Doc. 121) ("Motion for Contempt") filed by Jonesfilm and a Motion to Dismiss for Lack of Jurisdiction and/or Alternatively Motion to Transfer Venue (Doc. 126) filed by Cinevisions, Peter Hoffman, Seven Arts Filmed Entertainment Limited and Seven Arts Entertainment Inc. For the following reasons, Defendant's Motion for Disobedience of this Court's November 15, 2011 Order is GRANTED and Plaintiffs' Motion to Dismiss for Lack of Jurisdiction and/or Alternative Motion to Transfer is DENIED.
In 2002 a dispute arose out of the alleged misconduct of Defendant Peter Hoffman's Company, NTTS Productions, Ltd., with respect to certain Jonesfilm motion picture rights. Jonesfilm instituted an arbitration proceeding against Defendant Peter Hoffman ("Hoffman") and his affiliate company, NTTS Productions, Ltd. ("NTTS"), before the American Film Marketing Assocation ("AFMA"). On July 20, 2004, the AFMA arbitration tribunal issued a declaration of rights in favor of Jonesfilm and a monetary award to Jonesfilm against NTTS. The order was confirmed by the Superior Court for Los Angeles County, California in December 2004. On March 18, 2005, the Los Angeles Superior Court amended its judgment to include Hoffman as a Judgment Debtor in the action as the alter ego of NTTS, finding him jointly and severally liable for its obligation under the judgment.
In August 2005, Jonesfilm instituted an arbitration proceeding against Peter Hoffman affiliates Cinevisions ("CV"), Seven Arts Pictures, Inc. ("SAP"), Seven Arts Filmed Entertainment Limited ("SAFE"), and Seven Arts Pictures, PLC ("PLC") before the Independent Film & Television Alliance ("IFTA"). On June 22, 2006, the IFTA arbitrator issued a monetary award and other relief in favor of Jonesfilm and against the Peter Hoffman affiliates, CV, SAP, SAFE and PLC, jointly and severally. The arbitrator awarded Jonesfilm $291,911.00 plus interest at the rate of ten percent per annum and $131,752.56 for attorneys' fees and other arbitration costs. The United States District Court for the Central District of California confirmed the arbitration award on June 19, 2007. The Court further awarded $246,186.53 representing the combined attorneys' fees and other arbitration costs plus interest at ten percent per annum starting from January 16, 2007.
On July 25, 2007 Jonesfilm filed a motion for contempt against the judgment debtors and Hoffman alleging that they failed to comply with the June 19, 2007 Judgment. The United States District Courtforthe Central District of California issued an order on February 26, 2008 holdingthe judgment debtors and Hoffman in contempt, and awarded Jonesfilm $14,300.00 in attorneys' fees.
Judgment debtors subsequently appealed both the June 19, 2007 Judgment and the February 26, 2008 Order to the United States Court of Appeals for the Ninth Circuit. The Ninth Circuit affirmed both the Judgment and Order on February 12, 2009.
*2 Jonesfilm alleges that the judgment debtors have failed to make any payments toJonesfilm and have further failed to satisfy any other obligations imposed by these previous judgments. Jonesfilm conducted discovery which confirmed that Hoffman and other Judgment Debtors have interests in Louisiana properties and, in light of their failure to pay Jonesfilm on the previous judgments, began actions in this Court to collect on and enforce its judgments. Thus, on July 31, 2009 Jonesfilm registered the June 19, 2007 Judgment in this Court.
On October 6, 2010 Jonesfilm sought, and this Court issued, charging orders against the judgment debtors' membership interests in five Louisiana limited liability companies. The Court's order also required the judgment debtors to deliver financial statements, tax returns, and K–1 documentation of the judgment debtors and the Louisiana limited liability companies.
On March 25, 2011 Jonesfilm filed a Motion for Contempt with respect to the judgment debtors' alleged failure to comply with such charging orders and to compel answers to certain garnishment interrogatories. On August 15, 2011 Jonesfilm filed a Motion for Order Requiring Immediate Delivery by Garnishee Leeway Properties, Inc. and Judgment Debtor Peter Hoffman of Funds and Other Relief. On October 26, 2011 Magistrate Judge Knowles issued a Report and Recommendation on these two Motions. On November 15, 2011 this Court approved the Magistrate Judge's Findings and Recommendation and adopted it as its own. Accordingly, this Court granted Jonesfilm's Motion for Contempt and Motion Requiring Immediate Delivery of funds. Additionally, the Court awarded Jonesfilm $21,357.50 in attorneys' fees.
On December 16, 2011 Jonesfilm filed a Motion for Contempt in relation to this Court's November 15, 2011 Order. (Doc. 121.) Esplanade Pictures LLC ("Esplanade"), SAP, Seven Arts Filmed Entertainment Louisiana, LLC ("SAFE LA"), Seven Arts Pictures Louisiana (Equicap), LLC ("Equicap"), Seven Arts Post LLC ("Post"), 807 Esplanade Avenue MT LLC ("807"), collectively "Garnishees," filed their Memorandum in Opposition on January 24, 2012. (Doc. 128.) Leeway Properties, Inc. ("Leeway") filed its memorandum in opposition on January 24, 2012. (Doc. 129.) Jonesfilm filed a supplemental memorandum on February 1, 2012. (Doc. 138.) Jonesfilm replied to the Garnishees opposition and Leeway's opposition on February 1, 2012. (Docs.140,142.) Peter Hoffman and SAP filed a memorandum in opposition on February 13, 2012. (Doc. 149.) Jonesfilm's Motion for Contempt was taken under submission on February 15, 2012.
On January 17, 2012 CV, Hoffman, SAFE, and Seven Arts Entertainment Inc. ("SAE") filed a Motion to Dismiss for Lack of Jurisdiction and/or Motion to Transfer to the Central District of California. (Doc. 126.) Jonesfilm opposed the Motion on January 27, 2012. (Doc. 133.) The Plaintiffs filed their reply memorandum on February 13, 2012. (Doc. 150.) Plaintiffs' Motion was taken under submission on February 15, 2012.
LAW AND ANALYSIS
I. Motion for Contempt
*3 Jonesfilm requests the Court (1) to enter judgment against Leeway and Hoffman in the amount of $174,769.56 which this Court had previously orderthey immediately deliver, but which they have not, plus interest from January 28, 2011; (2) to compel each judgment debtor to deliver its financial statements and tax returns to Jonesfilm for 2007 through 2011 in accordance with this Court's November 15, 2011 Order; (3) to compel each garnishee to fully answer the Garnishment Interrogatories with complete and responsive answers in accordance with Magistrate Judge Knowles' Report and Recommendation and this Court's November 15, 2011 Order; (4) to award Jonesfilm reasonable attorneys' fees and costs not less than $7,977.00 against the judgment debtors and garnishees jointly and severally as a result of obtaining compliance with this Court's November 15, 2011 Order; and (5) to correct a typographical error in the third decretal paragraph which conjoins Seven Arts Entertainment Inc. and Seven Arts Filmed Entertainment Limited. For the following reasons the Court grants all requested relief in Jonesfilm's Motion for Contempt.
A. Legal Standard
"A movant in a civil contempt proceeding bears the burden of establishing by clear and convincing evidence (1) that a court order was in effect; (2) thatthe order required certain conduct by the respondent; and (3) that the respondent failed to comply with the court's order." Test Masters Educ. Services, Inc. v. Singh, 428 F.3d 559, 581–582 (5th Cir.2005) (internal citations and quotations omitted). "The contemptuous actions need not be willful so long as the contemnor actually failed to comply with the court's order." American Airlines Inc. v. Allied Pilots Ass'n, 228 F.3d 574,581 (5th Cir.2000); see also McComb v. Jacksonville Paper Co., 336 U.S. 187, 191(1949) ("an act does not cease to be a violation of the law and of a decree merely because it may have been done innocently").
B. Jonesfilm's Allegations of Contempt
(i) Immediate Delivery of $174,769.56
Jonesfilm asserts that Leeway and Hoffman continue to disobey the Court's November 15, 2011 Order requiring "immediate delivery" of $174,769.56 disbursed by Leeway in violation of the Court's January 26, 2011 Garnishment Order. (Doc. 121–1 at 2.) Additionally, neither Leeway nor Hoffman have provided any accounting or tracing of the wrongfully transferred funds. (Id.) Jonesfilm contends that, due to these failures, it is entitled to damages pursuant to Louisiana Civil Code Article 2502. (Id. at 10–11.) Jonesfilm further argues that interest should accrue at the California statutory rate of ten percent per annum on the $174,769.56 beginning on January 28, 2011 for the same reasons that Judge Knowles found that California's remedies of a constructive trust and a constructive or equitable lien should apply to the $174,769.56. (Id. at 12.) Leeway opposes these arguments and asserts that because $0.00 is in its bank account and that it cannot rescind the unauthorized account transfers then it cannot immediately transfer what it does not have. (Doc. 129 at 2–3.) Leeway also notes that it is still awaiting the outcome of the investigation into the wrongful transfers. (Id.)
*4 This Court finds that a court order was in effect. (See Doc. 114.) Moreover, the Order required Leeway and Hoffman to immediately deliver to the U.S. Marshal the sum of $174,769.56 and to deliver a full and complete accounting and tracing of any and all disbursements and proceeds to the extent that Leeway and Hoffman had disbursed any of these monies. (See Doc. 114; see also Doc. 82.) Thus, the only inquiry this Court must determine is whether or not Leeway and Hoffman failed to comply with the Order.
This Court finds that the evidence provided to the Court establishes conclusively that Leeway and Hoffman have failed to comply with this Court's Order. (See Doc. 121.) This Court finds that Leeway's arguments are mere excuses and can in no way circumvent their duties to comply with this Court's Order.
"All orders and judgments of courts must be complied with promptly." Maness v. Meyers, 419 U.S. 449, 458 (1975). If a party feels that a court "[o]rder is incorrect the remedy is to appeal, but, absent a stay, he must comply promptly with the order pending appeal." Id. "Persons who make private determinations of the law and refuse to obey an order generally risk criminal contempt even if the order is ultimately ruled incorrect." Id. at 458–459 (internal citations omitted). While an appeal has been taken concerning this Court's Order, there has been no request for a stay and therefore Hoffman and Leewayshould have immediately complied with the Order of the Court. Simply arguing that there has been fraudulent activity or $0.00 in the garnishees accounts does not relieve a party of their duty to comply with an Order of the Court. See Blackwelder v. Collins, 252 F.2d 854, 855 (D.C.Cir.1958) ("judgments do not require the payment of any specifically identified or identifiable money, and would be satisfied bythe payment of the amount in legal tender from any source"). Accordingly, this Court finds Leeway and Hoffman to be in contempt.
(ii) Production of Financial Statements and Tax Returns
Jonesfilm asserts that no Judgment Debtor has delivered its financial statements or tax returns for 2007–2010, except for some extracts from filings of PLC and SAE with the SEC, despite being ordered to do so by this Court. (Doc. 121–1 at 13.) SAP argues that the entirety of Jonesfilm's Motion should be dismissed pending the appeal to the Fifth Circuit. (Doc. 128.) Leeway does not oppose this portion of Jonesfilm's Motion. (See Doc. 129.) In Hoffman's Supplemental Memorandum he argues that he is not in violation of the Court Order as he sent the 2010 returns for himself and SAP as an attachment to a letter on February 3, 2012. (Doc. 149 at 2; see also Doc. 149–1.)
This Court finds that a court order was in effect. (See Doc. 114.) Moreover, the Order required the "judgment debtors, to the extent that they have not already done so, [to] comply with the District Court's Charging Order dated October 6, 2010 no later than fourteen days from the date of this Report and Recommendation. (Doc. 109 at 14; see also Doc. 114.) Thus, the only inquiry this Court must determine is whether or not the judgment debtors failed to comply with the Order.
*5 The affidavit of Barry Goldin provides that Hoffman, SAP and SAFE have not delivered his or its financial statements for any of the years 2007 through 2010 or any of 2011 to Jonesfilm. (Doc. 121–2 at para. 12.) Moreover, "no Judgment Debtor has delivered any tax returns for any period to Judgment CreditorJonesfilm." (Id.) Lastly, "the only financial statements obtained byJonesfilm were extracts from filings with the [United States Securities and Exchange Commission] ("SEC") of [PLC] and its successor Seven Arts Entertainment, Inc." (Id.)
A party accused of contempt for disobedience of a court order can defend by showing a present inabilityto comply with the order. United States v. Rylander, 460 U.S. 752,757 (1983).That party, however, bears the burden of production. Id.; see also F.D.I.C. v.. LeGrand, 43 F.3d 163, 170 (5th Cir.1995) Hoffman, in refuting Jonesfiilm's arguments, merely produces a letter sent to Jonesfilm, and does not attach any of the tax returns or financial statements that he supposedly provided. This Court does not find this letter sufficient to bear the burden of overcoming Mr. Goldin's sworn affidavit. Moreover, as noted in section (B)(i), infra, the notion that an appeal has been taken does not overcome a litigant's obligation to abide by an Order of the Court. As such, this Court finds the judgment debtors to be in contempt.
(iii) Responses to Garnishment Interrogatories
Jonesfilm asks the Court to hold Garnishees in contempt and sanction them for failing to obeythe November 15, 2011 Order requiring them to supplementtheir interrogatory answers with "any post-June 30, 2010 transactions and agreements with" Judgment Debtors. (Doc. 121–1 at 21.) Jonesfilm highlights that Garnishee Leeway has not provided any supplemental interrogatory answers. (Id. at 20.) Additionally, Jonesfilm notes that much of the Garnishees responses are deficient. (Id. at 19) (Garnishees responses are improper because they (1) continue to deny having agreements with or owing monies to Judgment Debtors, in contravention of SEC filings; (2) fail to provide information relating to transactions with SAE or any Judgment Debtors; (3) continue to assert objections already overruled by the Court; (4) provide non-responsive answers; (5) fail to attach a privilege log) (see also Doc. 121–2 at paras. 12–21.)
Leeway did not file an opposition to this portion of Jonesfilm's argument. SAP opposes these allegations and asserts that Jonesfilm's Motion for Contempt should be dismissed until the Fifth Circuit has ruled on the issues of contempt, which are currently under appeal. (Doc. 128 at 2.) Additionally, SAP notes that even though it has appealed this Court's previous Order of Contempt, it has nonetheless attempted to comply with this Court's Order by supplementing garnishment interrogatories, and that intends to continue to do so. (Id.) SAP also attaches a letter from Peter Hoffman, counsel for SAP, to David Waguespack, counsel for Jonesfilm, which notes thatJonesfilm's Motion for Contempt is inappropriate because Jonesfilm did not "meet and confer" to discuss lingering issues with the interrogatory responses or respond to a memorandum sent to them along with the Supplemental Interrogatory Responses that invited Jonesfilm to advise them if they believed that anything further was needed. (Doc. 128–1.) SAP claims that Jonesfilm asserts numerous falsehoods in its Motion, and that a letter SAP sent to Jonesfilm "confirm[s] the truth of the supplemental answers to garnishment interrogatories provided by SAP and the garnishees." (Id.)
*6 This Court finds that a court order was in effect. (See Doc. 114.) Moreover, the Order compelled the garnishees to "[s]upplement and amend their responses to the garnishment interrogatories" in accordance with the Report and Recommendation. (Doc. 109 at 14; see also Doc. 114.) Thus, the only inquiry this Court must determine is whether or not the judgment debtors failed to comply with the Order.
The Court finds that Leeway's complete failure to supplement its interrogatory answers merits a finding that they are in contempt. As for the other Garnishees' supplemental responses, this Court finds that while Jonesfilm's criticisms of garnishees' responses are not without merit, it is not entirely clear that the responses do not comply with this Court's Order. Judge Knowles' Report and Recommendation, adopted as an Order of the Court, requires garnishees to supplement their interrogatory responses with "related company balance[s]" between garnishees and judgment debtors, and also requires an accounting of "financial transfers and obligations that occurred before service of the garnishment interrogatories." (Doc. 109 at 11–12.) Jonesfilm's primary criticism of garn ishees' supplemental responses isthatthey continue to omit anyfinancial relationship between garnishees and SAE. Garnishees' response is that SAE is not a judgment debtor.
Based on the stricttext of Judge Knowles' Report and Recommendations (Doc. 109) and this Court's Order adopting them (Doc. 114), Garnishees are correct—SAE is not properly listed as a judgment debtor. There is strong merit, however, to Jonefilm's assertions that SAE has previously been listed as a judgment debtor in this Court's Garnishment Order (Doc. 17) and that SAE legally must be considered a judgment debtor as the successor of Judgment Debtor PLC because of the original California judgment and SAE's own SEC filings asserting its status as successor to PLC. Accordingly, the Court hereby amends its Order to specifically rule that SAE is a judgment debtor and will defer on making a decision concerningthe compliance of the supplemental responses until Garnishees have a chance to provide the necessary information as pertaining to SAE.
(iv) Attorneys Fees, Costs and Sanctions
As previously noted, all requirements for a motion for civil contempt are satisfied in this case. Additionally, because neither Judgment Debtors nor Garnishees have applied for a stay of the proceedings or provided affirmative proof as to why they cannot comply with the Court Order to supplement discovery and deliverfunds tothe Court, this Courtfindsthatthe Judgment Debtors and Garnishees are in contempt of this Court's Order.
"[Federal Rule of Civil Procedure] 37(b) empowers the courts to impose sanctions for failures to obey discovery orders. In addition to a broad range of sanctions, including contempt, [Rule] 37(b)(2) authorizes the court to impose a concurrent sanction of reasonable expenses, including attorney's fees, caused by the failure to obey a discovery order." Smith & Fuller, P.A. v. Cooper Tire & Rubber, Co., 685 F.3d 486, 488 (5th Cir.2012) (quoting FalstaffBrewing Corp. v. Miller Brewing Co., 702 F.2d 770, 784 (9th Cir.1983)). Ultimately, "[t]he district court has broad discretion under Rule 37(b) to fashion remedies suited to the misconduct." Id. (quoting Pressey v. Patterson, 898 F.2d 1018, 1021 (5th Cir.1990)) (internal quotations omitted).
*7 Rule 37(b)(2)(c) specifically provides that instead of or in addition to the remedies found in Rule 37(b)(A)(i)-(vii):
[t]he court must order the disobedient party, the attorney advising that party, or both to pay the reasonable expenses, including attorney's fees, caused by the failure, unless the failure was substantially justified or other circumstances make an award of expenses unjust.
Fed.R.Civ.P. 37. The Court finds that this is the appropriate sanction in this case. Thus, the Court finds that $15,000.00 should cover reasonable expenses, including attorney's fees, caused by the failures of the Judgment Debtors and Garnishees.
(v) Correction of Decretal Paragraph
Jonesfilm maintains that this Court's November 15, 2011 Order "inadvertently and erroneously conjoined the names of ... twoJudgment Debtors ["Seven Arts Entertainment Inc. and Seven Arts Filmed Entertainment Limited"] into one name "Seven Arts Entertainment Limited." (Doc. 121–1 at 23.) Jonesfilm points outthatthis Court previously named Seven Arts Entertainment Inc. as a Judgment Debtor in its January 26, 2011 Garnishment Order. (Doc. 121–1 at 4)(citing Doc. 17 at 1). Jonesfilm also argues that Seven Arts Entertainment Inc. is necessarily a Judgment Debtor because Seven Arts Entertainment Inc. is the acknowledged successor of Judgment Debtor Seven Arts PLC and the California Judgment at issue explicitly states that it is fully binding on all Judgment Debtor's successors. (Doc. 121–1 p. 3; see also Id. at 17 n. 7, citing Doc. 121–2.) Hoffman, however, claims that SAE is not a Judgment Debtor. (Doc. 149 at 4–5.) Hoffman claims that this fact is "established in the Affidavit of Peter Hoffman filed with his Reply to [Jonesfilm's] Opposition to Judgment Debtor's Motion To Dismiss or Transfer This Action, filed February 3, 2012." (Id.)
This Court could find no support for Hoffman's arguments located in any affidavit on the record. (See Docs. 128, 129, 149, 150.) Additionally, this Courtfinds merit in Jonesfilm's assertions. As such, this Court hereby amends its third decretal paragraph to name Seven Arts Entertainment, Inc. and Seven Arts Filmed Entertainment Limited as the appropriate judgment debtors.
Based on the foregoing;
IT IS HEREBY ORDERED that Judgment Debtors and Garnishees are found in contempt of Court. IT IS FURTHER ORDERED:
1. That Judgment Debtor Peter Hoffman and Garnishee Leeway Properties must immediately deliver the $174,769.56 of garnished funds. Hoffman and Leeway must deliver these funds within fourteen days.
2. Judgment Debtors must deliver within fourteen days their financial statements and tax returns for the years 2007 through 2010, and 2011 to the extent available in order to comply with this Court's November 15, 2011 Order.
3. Garnishee Leeway, Garnishee Seven Arts Entertainment, Inc., and other Garnishees shall provide proper supplemental garnishment interrogatory answers within fourteen days in order to comply with this Court's November 15, 2011 Order.
*8 4. Judgment Debtors and Garnishees deliverwithin fourteen daysthe $21,357.50 in attorneys fees that they were required to pay under this Court's November 15, 2011 Order.
IT IS FURTHER ORDERED that Judgment Debtors and Garnishees are hereby sanctioned, jointly and severally, in the amount of $15,000.00. This amount shall be paid to Judgment Creditor Jonesfilm within fourteen days of this Order.
IT IS FURTHER ORDERED that each day after the fourteen days in which Judgment Debtors and Garnishees do not provide the appropriate funds, responses, financial statements, and/or tax returns they will be found in contempt and sanctioned $500.00 per day until they comply fully and completely with this Order of the Court and the Court's November 15, 2011 Order.
IT IS FURTHER ORDERED that the third decretal paragraph of this Court's November 15, 2011 Order be amended to reflect two Judgment Debtors that Seven Arts Entertainment, Inc. and Seven Arts Filmed Entertainment Limited are the appropriate Judgment Debtors and not "Seven Arts Entertainment Limited."
II. Motion to Dismiss for Lack of Jurisdiction
Before the Court are Defendants Peter Hoffman, Seven Arts Filmed Entertainment Limited, Seven Arts Entertainment Inc. and CineVisions Motion to Dismiss for Lack of Personal Jurisdiction or, Alternatively, Motion to Transfer Pursuant to 28 U.S.C. sec. 1404(a). (Doc. 126.) For the following reasons the Motion is denied.
A. Legal Standard
"Where a defendant challenges personal jurisdiction, the party seekingto invokethe power of the court bears the burden of proving thatjurisdiction exists." Luv N' Care, Ltd. v. Insta–Mix, Inc., 438 F.3d 465, 469 (5th Cir.2006) (citing Wyatt v. Kaplan, 686 F.2d 276, 280 (5th Cir.1982)). When a court rules on a motion to dismiss for lack of personal jurisdiction without holding an evidentiary hearing, as in this case, the nonmoving party must only make a prima facie showing, and the court must accept as true the nonmover's allegations and resolve all factual disputes in its favor. Guidry v. U.S. Tobacco, Co., Inc., 188 F.3d 619, 625 (5th Cir.1999). "In determining whether personal jurisdiction exists, the trial court is not restricted to a review of the plaintiff's pleadings." Jobe v. ATR Marketing, Inc., 87 F.3d 751, 753 (5th Cir.1996). The Court may consider matters outside the complaint, including affidavits, interrogatories, depositions, or any combination of the recognized methods of discovery. Id. (citing Colwell Realty Investments v. Triple T. Inns of Arizona, 785 F.2d 1330 (5th Cir.1986)).
"A federal court sitting in diversity must satisfy two requirements to exercise personal jurisdiction over a nonresident defendant." Pervasive Software, Inc. v. Lexware CMBG & Co. KG, ––– F.3d ––––, No. 11–50097, 2012 WL 2948453, at *4 (5th Cir. July 20, 2012). First, the forum state's long-arm statue must accord personal jurisdiction. Id. Second, the forum state's exercise of jurisdiction must comport with the Due Process Clause of the Fourteenth Amendment. Id. (citing Mink v. AAA Dev. LLC, 190 F.3d 333, 335 (5th Cir.1999)). Louisiana's long-arm statute extends jurisdiction to the full limits of due process. See La. R.S. sec. 13:3201, etseq. Thus, the Court's inquiry must focus on whether subjecting Hoffman, SAFE, CV, and SAE to suit in Louisiana would be consistent with the Fourteenth Amendment. See Dickson Marine, Inc. v. Panalpina, Inc., 179 F.3d 331, 336 (5th Cir.1999).
*9 "The Due Process Clause protects an individual's liberty interest in not being subject to the binding judgments of a forum with which he has established no meaningful 'contacts, ties, or relations.' " Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985) (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 329 (1945)). The Due Process Clause protects a corporation, as it does an individual. Int'l Shoe, 326 U.S. at 319. Ultimately, the Due Process clause permits the exercise of personal jurisdiction over a nonresident defendant when (1) a defendant has purposefully availed itself ofthe benefits and projections of theforum state byestablishing "minimum contacts" with the forum state; and (2) exercising personal jurisdiction over the defendant does not offend "traditional notions of fair play and substantial justice." Latshaw v. Johnston, 167 F.3d 208, 211 (5th Cir.1999)(citing Int'l Shoe, 326 U.S. at 316).
"Minimum contacts" can be established through specific jurisdiction or general jurisdiction. Alpine View Co. Ltd. v. Atlas Copco AB, 205 F.3d 208, 215 (5th Cir.2000). Specific personal jurisdiction exists when a defendant has purposely directed its activities, or availed itself of the privileges of conducting its activities, toward the forum state and the controversy arises out of or is related to those activities. Burger King, 471 U.S. at 472. General personal jurisdiction exists when the defendant has engaged in continuous and systematic activities in the forum state, regardless of whether or not it is related to the plaintiff's cause of action. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408,415 (1984).
"If a nonresident defendant has sufficient related or unrelated minimum contacts with the forum, we mustthen consider whether the 'fairness' prong ofthe jurisdictional inquiry is satisfied." Wilson v. Belin, 20 F.3d 644,647 (5th Cir.1994) (citing Asahi Metal Indus. Co. v. Superior Court, 480 U.S. 102, 105 (1987)). The fairness inquiry is determined by analyzing several factors. Asahi, 480 U.S. at 113. These factors are: (1) the burden upon the nonresident defendant; (2) the interests of the forum state; (3) the plaintiff's interest in securing relief; (4) the judicial system's interest in obtaining an efficient resolution of controversies; and (5) the shared interest of the states in furthering fundamental substantive social policies. Bullion v. Gillespie, 895 F.2d 213, 216 n. 5 (5th Cir.1990) (internal citations omitted).
B. Arguments of the Parties
Hoffman, SAFE, CV and SAE ("Moving Parties") argue that this Court does not have jurisdiction over them by means of either "specific" or "general" jurisdiction. Regarding the absence of specific jurisdiction, Moving Parties argue that "there is no conceivable relationship between the alleged breaches and torts giving rise to the two judgments ... and any contacts with Louisiana of any Moving Party." (Doc. 126–1 at 6.) As to general jurisdiction, Moving Parties assert that they do not have offices or other "continuous and systematic contacts" with Louisiana. (Id. at 5), and specifically that SAE has no ownership interest in any Louisiana LLC's and conducts "no business activities in Louisiana." (Id. at 4.) Moving Parties assert that the burden for establishing general jurisdiction is high, and that Jonesfilm has not and cannot otherwise meet this "difficult test" for establishing continuous and systematic contacts with Louisiana. (Id. at 6–7.)
*10 In opposition, Jonesfilm argues that this Court has general jurisdiction over Moving Parties for any of four reasons: (1) for the same reasons this Court has general jurisdiction over co-Judgement Debtor SAP; (2) Moving Parties have "substantial, systematic, ongoing contacts with Louisiana more than sufficient" for a finding of general jurisdiction; (3) Moving Parties submitted no affidavit in support of the factual assertions in their motion; and/or (4) Moving Parties submitted to the jurisdiction of this Court by voluntarily making a general appearance on July 27, 2011 before Judge Knowles. (Doc. 133 at 2.) Specifically as to SAE, Jonesfilm argues that due to SAE's relationship as a parent of SAFE and both companies' relationships with SAP and Hoffman this Court has proper jurisdiction. (Doc. 133 at 16–17.) Jonesfilm also asserts that there is no "clear line of demarcation among the Seven Arts companies," including SAE. (Id. at 18–19). As for CV, Jonesfilm alleges that CV is merely the "alter ego" of Hoffman and other Judgment Debtors, such that jurisdiction over Hoffman confers jurisdiction over CV. (See Id. at 20.)
C. Analysis of the Individual Parties
(i) Peter Hoffman
This Court has already found that it has general jurisdiction over Peter Hoffman. See Jonesfilm v. Hoffman, No. 11–1994, 2012 WL 4325461, at *4 (E.D.La. Sept. 20, 2012) (Peter Hoffman "[h]as engaged in continuous and systematic contacts, both of a personal and business nature, such that it would not be unconstitutional to exercise jurisdiction over him.") In that decision, this Court noted that Peter's residency in Louisiana indicated a general submission to the state's power. Id. The Court found that Hoffman "[n]ot only had continuous contacts with the state of Louisiana, but [had] significantly benefitted from the state of Louisiana" both personally and professionally. Id. at *5. Furthermore, this Court held "[t] hat the fairness inquiry lends in favor of this Court having general personal jurisdiction over Peter [Hoffman]." Id. Ultimately, the Court ruled "[t]hat the assertion of general personal jurisdiction over Peter [Hoffman] does not deprive him of his due process liberty interests and suit in this forum is proper." Id. For these reasons Hoffman's Motion is denied.
(ii) Seven Arts Filmed Entertainment Limited
This Court has already found that it has general jurisdiction over Seven Arts Filmed Entertainment Limited. See Jonesfilm v. Hoffman, No. 11–1994,2012 WL 4325461, at *6 (E.D.La. Sept. 20, 2012) ("[a]lthough SAFE may be a British Corporation with its offices and employees in London ... this Court [has] jurisdiction [over SAFE] based not only on SAFE's contacts with the forum, but also based on the contacts of SAP and Peter [Hoffman].") In that ruling, this Court found that "SAFE has sufficient and continuous contacts and benefits from the state of Louisiana such that jurisdiction is proper." Id. at *7. In addition to these individual contacts, the Court also found that due to the PLC–SAP–SAFE relationship it is "[a]ppropriate to consider the contacts that SAP and other Seven Arts affiliates have with the forum to determine whether jurisdiction exists." Id. Ultimately, the Court held that "[d]ue to SAFE's own contacts and because a presence is maintained in Louisiana by SAFE's affiliates, including SAP and other Seven Arts Louisiana limited liability companies, and Peter Hoffman, its agent and controlling officer, the constitutional requirements of due process are clearly satisfied." Id. at *8. For these reasons, SAFE's motion is denied.
*11 CV arguesthat it is an "inactive California corporation owned by Hoffman that ceased active business in 2003 when its assets were transferred to [SAP]." (Doc. 126–1 at 4.) Jonesfilm, however, asserts that CV is the "alter ego" of Hoffman and other Judgment Debtors. (Doc. 133 at 20.)
[F]ederal courts have consistently acknowledged that it is compatible with due process for a court to exercise personal jurisdiction over an individual or a corporation that would not ordinarily be subject to personal jurisdiction in that court when the individual or corporation is an alter ego or successor of a corporation that would be subject to personal jurisdiction in that court. The theory underlying these cases is that, because the two corporations (or the corporation and its individual alter ego) are the same entity, the jurisdictional contacts of one are the jurisdictional contacts of the other ...
Patin v. Thoroughbred Power Boats Inc., 294 F.3d 640, 653 (5th Cir.2002). Therefore, if the Court decides that Hoffman and CV are alter-egos, the same reasoning by which jurisdiction may be found over Hoffman applies equally to CV.
"Cinevisions entered into an Agreement with Seven Arts Pictures dated as of October 1, 2002, pursuant to which Cinevisions purportedly transferred its Second Picture and related rights to Seven Arts Pictures, Inc.... Hoffman signed that Asset Transfer Agreement, on behalf of Cinevisions and Seven Arts Pictures, Inc." (Doc. 133–4 at para. 18.) Per this Transfer Agreement, "Cinevisions purported to assign to Seven Arts Pictures, Inc. all Cineivisons' right, title, and interest ... and Seven Arts Pictures, Inc. assumed all of the obligations, responsibilities, and liabilities." (Id. at para. 19) (internal quotations omitted). After transferring all of its assets to SAP, "Cinevisions was purportedly left without assets and inactive." (Id. at para. 20.)
On the other hand, documentation provided to this Court reveals that CV is being utilized in activities on behalf of Hoffman, PLC and Leeway. During previous proceedings, evidence was adduced that Hoffman was, subsequent to the transfer agreement, "[p]aid compensation by and through Cinevisions of $416,666.62 during the year ended December 31, 2003 and $150,000.00 duringthe year ended December 31, 2004." (Id.) In addition to Hoffman receiving compensation from CV after the company was purportedly inactive, CV was also utilized when opening up a business checking account for Leeway Properties, a Louisiana corporation. (Doc. 133–2.) Interestingly, in the City National Bank documentation Peter Hoffman is listed as a signatory on the account. (Id.) Presumably, via this City National Bank checking account, Hoffman and Leeway both were able to exchange funds, receive funds and be in receipt of statements by utilizing CV. Lastly, in PLC's SEC filings, it represented that CV was pursuing a Canadian legal action on their behalf, despite the fact that Hoffman and SAP argue that it is inactive. (Doc. 52–2 at 20, 26.)
*12 In determining whether a corporation is an alter ego of an individual, a court is directed to "consider the totality of the circumstances, including the total dealings of the corporation and the individual, the amount of the financial interestthe individual has in the corporation, the ownership and the control that the individual maintains over the corporation, and whether the corporation has been used for personal purposes." Chao v. Occupational Safety and Health Review Comm'n, 401 F.3d 355, 380 (5th Cir.2005) (quoting Estate of Lisle v. Comm'r of Internal Revenue, 341 F.3d 364, 375–76 (5th Cir.2003). In making this assessment, "[c]ourts need to look beyond formalities and records to determine the true economic relationship between the entities." Id. (citing United States v. Jon–T Chems., 768 F.2d 686, 693 (5th Cir.1985).
This Court notes that a central figure to all of these companies is Peter Hoffman, to which this Court has already found that it has jurisdiction over. In addition to CV's inter-relationship with Hoffman, CV also has a relationship with companies that Hoffman controls and is affiliated with, including SAP, PLC, and Leeway. Hoffman has continually benefitted from these relationships. Moreover, it is evident that Hoffman and Hoffman's affiliates continue to utilize CV, despite his contentions that it is inactive.
Based on these facts, the Court finds that CV is an alter ego of Hoffman. As an alter go of Hoffman, this Court can properly exercise general jurisdiction over CV, as this Court has general jurisdiction over Hoffman. Thus, Cinevisions motion is denied.
(iv) Seven Arts Entertainment Inc.
Seven Arts Entertainment, Inc. is a Nevada corporation of which Hoffman is its CEO, director, and controlling figure. (Doc. 133–1 at para. 4.) While SAE is the successor of PLC, SAE is also a parentto its wholly owned subsidiary Seven Arts Filmed Entertainment Limited, which this Court has already found that it has jurisdiction over. See Doc. 133–11; see alsoJonesfilm v. Hoffman, No. 11–1994,2012 WL 4325461, at *6 (E.D.La. Sept. 20, 2012). In addition to its relationships with PLC and SAFE, SAE has a relationship with SAP through which SAE obtains or transfers rights or assets related to its business. (Doc. 133–11 at 6.) In light of these relationships, this Court must determine whether or not SAE's operations are so intertwined with SAFE, SAP, and/or Peter Hoffman such that those contacts are attributable to SAE.
After an examination of the facts surrounding the operations of a parent and subsidiary, the Court may establish jurisdiction over one based on the contacts of the other. See Kelly v. Syria Shell Petroleum Dev. B.V., 213 F.3d 841, 856 (5th Cir.2000). "Ordinarily, where a parent and an affiliate or two affiliate companies maintain separate identities, jurisdiction over one does not provide a basis of jurisdiction over the other." Oyuela v. Seacor Marine (Nigeria), Inc., 290 F.Supp.2d 713, 722 (E.D.La.2003) (quoting Cannon Mfg. Co. v. Cudahy Packing Co., 267 U.S. 333 (1925)). On the other hand, "[t]here may be instances in which the parent so dominates the subsidiary that they do not in reality constitute separate and distinct corporate entities ..." Dalton v. R & W Marine, Inc., 897 F.2d 1359,1363 (5th Cir.1990) (quoting Hargrave v. Fireboard Corp., 710 F.2d 1154,1159 (5th Cir.1983); Southmark Corp v. Life Investors, Inc., 851 F.2d 763 (5th Cir.1988)). Ultimately, "the degree of control exercised by the parent company must be greater than that normally associated with common ownership and directorship" for jurisdiction to be established based on the alternate's contacts with the forum state. Oyuela, 290 F.Supp.2d at 722 (quoting Kelly, 213 F.3d at 856 (5th Cir.2000)).
*13 SAE represents in its SEC filings that it is partyto a "related company agreement" with SAP. Notably, this Court has already found that it has jurisdiction over SAP. See Seven Arts Pictures, Inc., et al v. Jonesfilm, No. 09–4814,2011 WL 2461701, at *4–6 (E.D. La., June 17, 2011). Pursuant to this agreement, SAP provides services for SAE at no fee other than Peter Hoffman's salary and the direct third party costs of the Los Angeles office. (Doc. 133–11 at 6.) The services provided by SAP are at the requests of the management of SAE and include "[a]ccounting services, audits of distribution statements, collection of accounts receivable, supervision of production of motion pictures and similar day-to-day aspects of [SAE's] business." (Id.) SAE further representsthat it has made and received advances to and from SAP and various Louisiana limited liability companies. (Id.) The balances of these combined accounts were $1,768,212 and $2,725,974 as of September 30, 2011 and June 30, 2011, respectively. (Id.)
In addition to these services, SAE also shares with SAP all personnel, operations, monies, logo, letterhead and other materials without any line of demarcation. (Doc. 52–2 at 15.) Through common officers, shared offices, logo, letterhead, email addresses and bank accounts SAE and the other Seven Arts companies are part of the larger Seven Arts group engaged in the production and distribution of films in Louisiana and the redevelopment of property located in Louisiana. (Id.) Hoffman has also testified that the cash flow between the Seven Arts companies is various and something that is unable to be characterized. (Doc. 52–2 at 13.) This Court further notes that the same counsel represents PLC, SAP and SAE in these proceedings.
In addition to SAE's significant relationship with SAP and Hoffman'svarious other Seven Arts affiliates, SAE also notes in its filings that Hoffman controls and has agreements with his various companies that "[p]rovide that all revenues related to [SAE's] business payable to Hoffman or any of these related party companies is due to [SAE] ..." (Doc. 133–11 at 6.) Thus, the agreement to which SAE is a partyto providesfor Hoffman's employment compensation of $500,000.00 peryear, expense reimbursement and benefits. (See, e.g., Docs. 133–8, 133–9, 133–10.)
Hoffman has also testified that while rendering services in Louisiana through SAP, it was for the benefit of PLC. (Doc. 52–2 at 15.) Specifically, Hoffman asserted that PLC is the ultimate beneficiary of the services that he performs in the United States. (Id.) Thus, SAE, as PLC's successor is the beneficiary of these contacts that both Hoffman and SAP have made in the state of Louisiana. (Doc. 133–1 at paras. 50–51.)
In the end, this Court finds that due to SAE's various relationships with Hoffman, SAFE and SAP this Court finds that it is appropriate to use the contacts of these affiliates to determine whether jurisdiction exists. See Oyuela, 290 F.Supp.2d at 723. Thus, consideringthe inter-mingling of the Seven Arts companies and Hoffman and the benefits that SAE receives from the state of Louisiana, this Court finds that the constitutional requirements are clearly satisfied and this Court has proper jurisdiction over SAE. Consequently, SAE's Motion to Dismiss is denied.
D. Alternative: Motion to Transfer
(i) Legal Standard
*14 "Forthe convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought or to any district or division to which all parties have consented." 28 U.S.C.A. sec. 1404(a) (West 2012). "The moving party bears the burden of demonstrating that the case should be transferred to an alternate forum." Laitram Corp. v. Hewlett–Packard Co., 120 F.Supp.2d 607, 608 (E.D.La.2000) (citing Time, Inc. v. Manning, 366 F.2d 690,698 (5th Cir.1966)). To prevail, the moving party must demonstrate good cause. In re Volkswagen of America, Inc., 545 F.3d 304, 315 (5th Cir.2008) (internal quotation and citation omitted). Good cause is shown by satisfying the statutory requirements and clearly demonstrating that the transfer isforthe convenience of the parties and witnesses and also in the interest of justice. Id.
In making this assessment, courts are directed to look to the factors enunciated by the Supreme Court in GulfOil Corp v. Gilbert, 330 U.S. 501(1947). The private interest factors include (1) plaintiff's choice of forum; (2) the place of the alleged wrong; (3) convenience of the witnesses; (4) convenience of the parties; and (5) all other factors relating to the expeditious and efficient adjudication of the dispute. See Laitram, 120 F.Supp.2d at 608. The public interest factors include (1) the administrative difficulties in two jurisdictions; (2) local interests; (3) conflict of laws; and (4) the fairness of subjecting citizens in an unrelated forum to jury duty. See Id. In the end, however, the initiating party's choice of forum is entitled to great weight and should rarely be disturbed. See GulfOil Corp., 330 U.S. at 508 (1947).
Moving Parties allege that this case should be transferred under 28 U.S.C. sec. 1404(a) to the United States District Court of the Central District Court of California ("Los Angeles District Court") because "all parties have accepted jurisdiction in the Los Angeles District Court and all evidence and witnesses related tothe Moving Parties are available in that District." (Doc. 126–1 at 8.) Moving Parties note that the agents or employees who have knowledge of the activities of any Judgment Debtor neither live nor reside in Louisiana. (Doc. 150 at 7.) Additionally, they note that there are no books, records or documents of any kind maintained in Louisiana because this information is located in California. (Id. at 8.) Moving Parties further argue that a venue transfer is appropriate because the California court issued the judgment sought to be collected on and California law should apply to all discovery concerns. (Doc. 126–1 at 8.) Lastly, Moving Parties assert that there is no reason to burden this Court with these judgment debtor proceedings. (Id.)
Jonesfilm opposesthe transfer and contendsthat Moving Parties' request is nearly identical to a previous motion already filed and denied by this Court. (Doc. 133 at 21; see also Doc. 60.) Jonesfilm further claims that Moving Parties have not met their burden of making "a convincing showing of the need for a 28 U.S.C. sec. 1404 transfer." (Id. at 22.) (internal quotations omitted). Jonesfilm concludes that California is not an appropriate venue because Judgment Creditors are currently seekingto enforce liens on properties in Louisiana, none of the Louisiana Garnishees have consented to jurisdiction in California, many of the non-party witnesses live in Louisiana, and this Court has a strong interest adjudicating the disobedience of its own orders. (Id. at 22–25.)
*15 This Court finds that Moving Parties have not shown good cause such that a transfer to the Los Angeles District Court is appropriate. Moreover, this Court finds that the factors weigh in favor of keeping the litigation here.
Significant to the Court is that Jonesfilm is pursuing its remedies under various California judgments through the Louisiana Courts because Jonesfilm was unable to effectively enforce in California its liens and rights as to Louisiana real estate and Louisiana Garnishees. Moreover, a California court may not be able to subpoena documents or compel the presence of or testimony of Louisiana witnesses. Additionally, this Court finds it difficult to comprehend that a California Court would be more effective at dealing with liens on real property located within the state of Louisiana than a Louisiana Court. Last but not least, the Court notes that this is one of four pending cases involving the same or similar parties and the same or similar underlying California judgments within the Eastern District of Louisiana.
Ultimately, this Court finds that the Moving Parties have failed at meeting their burden to show that the Los Angeles District Court is the appropriate forum in which Jonesfilm can adequately enforce its rights. In this case, the Court exercises its discretion and finds that this case should not be transferred to the United States District Court of the Central District of California. Such a transfer would be inconvenient and not in the interests of justice. As such, Moving Parties motion is denied.
For the foregoing reasons, the Motion for Judgment Against Judgment Debtors and Garnishees for Their Disobedience of this Court's November 15, 2011 Order (Doc. 121) filed by Jonesfilm is GRANTED and the Motion to Dismiss for Lack of Jurisdiction and/or Alternatively Motion to Transfer Venue (Doc. 126) filed by Cinevisions, Peter Hoffman, Seven Arts Filmed Entertainment Limited and Seven Arts Entertainment Inc. is DENIED.
= = = = = = = = = = =
Seven Arts Pictures, Inc. v. Jonesfilm, 2011 WL 5078166 (E.D.La., Slip Copy, Oct. 26, 2011).
United States District Court, E.D. Louisiana.
SEVEN ARTS PICTURES, INC., et al.
Civil Action Nos. 09–4814, 09–4815.
Oct. 26, 2011.
Seven Arts Pictures, Inc., pro se.
Seven Arts Filmed Entertainment Limited, pro se.
Seven Arts Pictures, PLC, pro se.
Justin Paul Lemaire, Stone, Pigman, Walther, Wittmann, LLC, New Orleans, LA, for Jonesfilm.
REPORT AND RECOMMENDATION
DANIEL E. KNOWLES, III, United States Magistrate Judge.
*1 On July 27, 2011, the Motion for Contempt for Disobedience of Court Orders and to Compel Answers to Garnishment Interrogatories [Doc. # 33] FN1 came on for oral hearing before the undersigned. Present were Joshua Palmintier on behalf of plaintiffs and their affiliates, David Waguespack on behalf of defendant Jonesfilm ("Jonesfilm") and M. Claire Durio and Guy Smith on behalf of garnishee Leeway Properties, Inc. ("Leeway"). After the oral hearing, the Court took the motion under advisement.
FN1. The District Court referred the motion to this Court on June 20, 2011. [Doc. # 61].
While the motion was under advisement, Jonesfilm filed a Motion for Order Requiring Immediate Delivery by Garnishee Leeway Properties, Inc. and Judgment Debtor Peter Hoffman of Funds and Other Relief [Doc. # 82] FN2 and the Motion of Judgment Creditor Jonesfilm to Compel Production of Subpoenaed Documents from Garnishee Leeway Properties, Inc. [Doc. # 92].FN3 The Court set the two motions for oral hearing on September 22, 2011. After the oral hearing, the Court also took these two motions under advisement. Having reviewed the motions, the oppositions, the case law and the parties' oral arguments, the Court rules as follows.
FN2. The District Court referred the motion to this Court on October 4, 2011. [Doc. # 107].
FN3. This motion is the subject of a separate order issued simultaneously with this report and recommendation.
On March 15, 2005, Jonesfilm received from the Superior Court for Los Angeles County an order and judgment confirming an arbitration award. The order found Peter Hoffman to be an alter ego of NTTS Productions Ltd. and liable for a $290,911 judgment (plus interest).FN4 That judgment was made executory by a March 14, 2006 order of the Civil District Court for the Parish of Orleans.
FN4. This Report and Recommendation will variously refer to Hoffman and all of the companies with which he is affiliated—both those in and outside Louisiana—as the "judgment debtors" or the "corporate judgment debtors." When it is necessary to refer to a specific individual person or corporate entity, the Court will do so.
Jonesfilm also obtained a June 19, 2007 order that confirmed a monetary judgment of $537,097.53 plus interest against several companies controlled by and affiliates of Hoffman. Jonesfilm also filed that judgment from the Central District of California in this Court. Jonesfilm contends that after all of the accrued interest, judgment debtors owe it approximately $920,000.00
Jonesfilm also filed in this Court a February 26, 2008 contempt judgment from the Central District of California that granted it additional monetary sanctions against Hoffman and the corporate judgment debtors, jointly and severally, for failing to abide by the June 19, 2007 judgment's turnover and disclosure provisions. The California District Court explicitly found that Hoffman lacked credibility and had a history of stone-walling and misrepresentation. The United States Court of Appeals for the Ninth Circuit upheld both the June 19, 2007 judgment and the February 26, 2008 contempt judgment. The United States Supreme Court denied review, and the judgments are now final and binding. Judgment debtors have failed to honor the judgments.
In 2010, Jonesfilm learned that Hoffman and the corporate judgment debtors own and control several Louisiana limited liability companies, including Seven Arts Pictures Louisiana, L.L.C. Through filings with the Securities and Exchange Commission ("SEC"), Jonesfilm also learned that Hoffman had transferred millions of dollars to and through the Louisiana companies.
II. Jonesfilm's Motion for Contempt for Disobedience of Court Orders and to Compel Answers to Garnishment Interrogatories
A. The Parties' Contentions
*2 On October 6, 2010, the District Court here issued an order that directed the judgment debtors to (1) produce to Jonesfilm within 30 days of the date of the order any Schedule K1s or amendments thereto relating to their membership interest in the Louisiana companies for the years 2007 through 2010; and (2) deliver to Jonesfilm any financial statements or tax returns of the judgment debtors or of the Louisiana companies.
On January 26, 2011, the District Court ordered the Louisiana companies, as garnishees, to respond to garnishment interrogatories. The garnishees are Seven Arts Pictures Louisiana, LLC, Seven Arts Filmed Entertainment Louisiana, LLC, Seven Arts Pictures Louisiana (Equicap), LLC, Seven Arts Post LLC, Seven Arts Esplanade Development, LLC, Esplanade Pictures LLC, and Leeway Properties, Inc. (collectively, "garnishees").
Jonesfilm contends that Hoffman, as agent for the companies, failed to sufficiently respond to or provided false responses to the garnishment interrogatories. Jonesfilm contends that garnishee Leeway, owned by Hoffman's wife and a company that has received over $2 million from the judgment debtors, refuses to disclose the location of its books and records. Jonesfilm also argues that each garnishee refused to answer Interrogatory Nos. 8, 9, 10, 11 and 12. Jonesfilm asks the Court to compel garnishees to respond fully and completely to the garnishment interrogatories.
Citing case law, Jonesfilm notes that it has established by clear and convincing evidence that an order from this Court was in effect, the order required specific conduct on the part of the judgment debtors, and the judgment debtors have failed to perform said conduct. Jonesfilm thus asks the Court to find the judgment debtors in contempt of Court, order the judgment debtors to perform the conduct required in the Court's earlier order and pay the costs and attorneys' fees that it incurred for having had to file this motion.
2. Leeway's Opposition
Leeway admits that Hoffman's wife owns 100% of its interest. Leeway notes that it is only a garnishee in this lawsuit. Leeway also notes that it objected to several of the interrogatories because they (1) addressed transactions that occurred before service of the garnishment interrogatories or (2) sought information about persons and companies with whom Leeway transacts business. Citing the Louisiana Code of Civil Procedure, Leeway contends that garnishment interrogatories are limited to what property, if any, the garnishee possesses that belongs to the judgment creditor. La.Code Civ. Proc. 2411(A). Leeway contends that there is no continuing duty of disclosure. When it responded to the interrogatories, Leeway stated that it did not owe money to, nor was it holding any property of, Hoffman or the other judgment debtors. Leeway also stated that it has not paid nor distributed any money or other things of value to Hoffman or another judgment debtor. Leeway contends that its objections to any event that occurred before service of the garnishment interrogatories are proper.
3. Seven Arts Pictures, Inc.'s Opposition
*3 Seven Arts Pictures, Inc. ("Seven Arts") is a managing member of all garnishees save for Leeway and appears specially to object on their behalf. Seven Arts argues that no Louisiana law permits the fishing expedition in which Jonesfilm has engaged by propounding interrogatories against persons not parties to this lawsuit and not judgment debtors and that relate to (1) general questions regarding each garnishee's assets, (2) the signatures on the garnishee's bank accounts, (3) garnishee tax returns, (4) the "custodians" of garnishee's books and records, and (5) the accountants or other persons engaged by garnishees for financial and tax reporting. Making the same argument as Leeway, Seven Arts contends that the garnishees properly responded to the interrogatories when it stated that it possesses no property and owes no money to the judgment debtors.
4. Jonesfilm's Reply
Jonesfilm first notes that neither opposition opposes the motion for contempt. Jonesfilm contends that judgment debtors do not dispute their disobedience of the Court's orders. Jonesfilm thus argues that the Court should grant its motion and award its costs and attorneys' fees and notes that no party contests the validity of any time charged or the billing rates of its counsel. It has submitted an updated affidavit that includes an updated description of time charged and expenses incurred.
Jonesfilm contends that the only garnishee that objected to the motion to compel was Leeway. Jonesfilm argues that Seven Arts, as a judgment debtor, is not a proper objector and asks the Court to strike all unsworn and unverified statements from both Leeway's and Seven Arts's objections.
Jonesfilm also notes that no garnishee timely responded to the garnishment interrogatories within 15 days from the date of service and argues that such untimely responses have two consequences. First, Jonesfilm's time to traverse garnishees' responses did not begin to run until notice of their answer. Second, because it had already filed its motion to compel before it received judgment debtors' responses, Jonesfilm is entitled to a mandatory award of attorneys' fees.
Citing Federal Rule of Civil Procedure 69, Jonesfilm contends that it is entitled to post-judgment discovery. Jonesfilm notes that post-judgment discovery is broad and permits a judgment creditor to discover assets on which execution of a judgment may be made. Jonesfilm alleges that it has obtained documents that prove that judgment debtors were owed a "related company balance" of more than $3 million by garnishees. Jonesfilm argues that both federal and Louisiana law provide broad sanctions for failure to respond to court-ordered discovery.
Jonesfilm notes that Leeway does not dispute that Hoffman is actually in control of and the beneficial owner of Leeway; that Hoffman and other judgment debtors transferred $2 million to Leeway in the last several years; and that Seven Arts's SEC filings admit that Leeway owes judgment debtors $3 million.
5. Seven Arts' Objection to Jonesfilm's Reply
*4 Seven Arts notes that it did not fail to oppose the motion for contempt. It filed a motion to dismiss for lack of personal jurisdiction in which it objected to any ruling by this Court, a motion that the District Court ultimately denied. Seven Arts also notes that the affidavit of Hoffman supports its opposition memorandum. Seven Arts further contends that it timely responded to the interrogatories within 15 days of having received them.FN5
FN5. Seven Arts also argues that garnishment interrogatories against it and the other judgment creditors is inappropriate because the Court lacks personal jurisdiction over them. This argument is now moot given the District Court's denial of the motion to dismiss for lack of personal jurisdiction.
6. Seven Arts' Supplemental Opposition
Seven Arts notes that it advised counsel for Jonesfilm in February 2011 that its federal tax returns were incomplete as were the financial statements on which they are based. Seven Arts contends that because of the public policy against the unnecessary public disclosure of tax returns, Jonesfilm must demonstrate a "compelling need" for such documents and that it can not obtain the information through "less intrusive means." Seven Arts argues that the tax returns are relevant only to what distribution may be due to any judgment debtor after the date of this Court's order. Seven Arts disputes that any tax returns before 2009 are relevant.
Seven Arts also argues that sanctions are inappropriate because it had substantial justification for withholding any documents. Seven Arts notes that it contested this Court's exercise of personal jurisdiction over it and the other judgment debtors, and there was thus a genuine dispute over a legal issue.
Seven Arts argues that should the Court award sanctions, they must be limited to the reasonable legal fees incurred for having had to file the motion and not all legal fees incurred. Seven Arts contends that such an amount should be limited to less than $2,000.00.
7. Jonesfilm's Sur–Reply
Jonesfilm notes that a court order must be obeyed promptly unless a party moves to stay or vacate it or moves the court to reconsider it. Jonesfilm notes that no party moved to stay or vacate the District Court's order, and a contempt proceeding is thus proper.
Jonesfilm also notes that judgment debtors have no substantial justification for failing to produce the documents given that the District Court denied their motion to dismiss for lack of personal jurisdiction on June 17, 2011.
Lastly, Jonesfilm asserts that it is entitled to all of its fees and costs that it incurred in trying to enforce this Court's order.
8. Jonesfilm's Supplemental Memorandum
Jonesfilm filed a final supplement to its motion in which it outlines and provides an affidavit in support of further attorneys' fees incurred as a result of this motion.
Jonesfilm also notes that Leeway supplemented and amended its answers to the garnishment interrogatories and now informs Jonesfilm that it has learned of a bank account that contained $174,769.56 at the time of service of the garnishment interrogatories. (This bank account and funds are the subject of the second motion, discussed below.)
B. Law and Analysis
*5 Generally, "[a] movant in a civil contempt proceeding bears the burden of establishing by clear and convincing evidence 1) that a court order was in effect, 2) that the order required certain conduct by the respondent, and 3) that the respondent failed to comply with the court's order." Martin v. Trinity Indus., Inc., 959 F.2d 45, 47 (5th Cir.1992). A court order binds not only the parties subject thereto, but also non-parties who act with the party under court order. See NLRB v. Laborers' Int'l Union of N. Am., AFL–CIO, 882 F.2d 949, 954 (5th Cir.1989) ("[A]ny party who knowingly aids, abets, or conspires with another to evade an injunction or order of a court is also in contempt of that court."); Waffenschmidt v. MacKay, 763 F.2d 711, 726 (5th Cir.1985) (citing Ex Parte Lennon, 166 U.S. 548, 555 (1897)); see also Fed.R.Civ.P. 65(d)(2) (stating that every injunction and restraining order "binds ... the following who receive actual notice of it by personal service or otherwise: (A) the parties; (B) the parties' officers, agents, servants, employees, and attorneys; and (C) other persons who are in active concert or participation with anyone described in Rule 65(d)(2)(A) or (B)"). Although good faith is not a defense to a civil contempt order, good faith is relevant to whether a non-party knowingly aided or abetted another in violating a court order. Waffenschmidt, 763 F .2d at 726.
1. Whether a court order was in effect
This is undisputed. The District Court entered its Charging Order on October 7, 2010 [Doc. # 6] and the order to respond to the garnishment interrogatories on January 26, 2011 [Doc. # 17].
2. Whether the order required certain conduct
This is also undisputed. The Charging Order directed the judgment debtors to (1) produce to Jonesfilm within 30 days of the date of the order any Schedule K–1s or amendments thereto relating to their membership interest in the Louisiana companies for the years 2007 through 2010; and (2) deliver to Jonesfilm any financial statement or tax return of the judgment debtors or of the Louisiana companies.
In addition, the Order dated January 26, 2011 directed the garnishees to "answer under oath the accompanying interrogatories, categorically and in writing, as the law directs." [Doc. # 17 at p. 2 (footnote omitted) ].
3. Whether the judgment debtors failed to comply with the court order
The issue, then, is whether judgment debtors and/or garnishees failed to comply with the Court's orders, i.e., by failing to produce the requested documents and/or by failing to properly respond to the garnishment interrogatories. With regard to the Charging Order dated October 6, 2010, the Court finds that this issue merits little discussion.
As noted above, the Charging Order directed the judgment debtors to (1) produce to Jonesfilm within 30 days of the date of the order any Schedule K–1s or amendments thereto relating to their membership interest in the Louisiana companies for the years 2007 through 2010; and (2) deliver to Jonesfilm any financial statement or tax return of the judgment debtors or of the Louisiana companies. The language of the order is clear and unambiguous. While judgment debtors may argue that any documents before 2009 are irrelevant, such an argument is of no moment. No party or garnishee moved to vacate or modify the District Court's Charging Order, and no one asked the District Court to reconsider it. As far as this Court is aware from the evidence before it, judgment debtors failed to completely comply with the District Court's Charging Order, and, in this Court's opinion, such disobedience merits an order of contempt.
*6 With regard to the evidence before it, the Court notes that the majority of the transactions cited by Jonesfilm occurred before January 28, 2011, the date of the service of the garnishment interrogatories. The Court can not help but notice that garnishment interrogatory Nos. 1, 3, 4, 5, 6, 8 and 9 include language identical or similar to the following: "at the time of service of these interrogatories or at any time since...." ( See, e.g., Aff. of Barry L.Goldin, Ex. 14, att'd to Jonesfilm's Mem. Supp.). Because Jonesfilm limited these garnishment interrogatories to "at the time of service" of the garnishment interrogatories" or "thereafter," there is very little evidence in the record to support any financial transaction that occurred after January 28, 2011. Thus, from the evidence before the Court, garnishees' responses to the interrogatories are for the most part proper because they address only the financial relationship between garnishees and judgment debtors as it existed after the date of service of the garnishment interrogatories.
Jonesfilm note, inter alia, that the exhibits reveal
(i) a transfer from Judgment Debtors to Leeway Properties (owned by Hoffman's wife) of at least approximately $2 million during the period from June 22, 2006 through August 15, 2010, including $1,673,983.48 from Judgment Debtor Seven Arts Filmed Entertainment Limited Entertainment and $394,964.59 from Judgment Debtor Seven Arts Pictures, Inc. [Aff. of Barry L. Goldin, Exs. 9 & 10];
(ii) the accrual and transfer of another at least $400,000 since January 1, 2008 between judgment debtor Seven Arts Filmed Entertainment Limited and other judgment debtors and, on the other hand, Seven Arts Pictures Louisiana L.L.C. [ Id., Exs. 6 & 7]; and
(iii) another more than $1,045,000 of purported "producer" and other fees paid by Louisiana affiliates to judgment debtor Hoffman and his wife Susan [ Id., Ex. 11];
(iv) other fund transfers to and from the Louisiana affiliates that result in a related company balance as of January 31, 2011 of $3,106,397, reported in judgment debtors Form 20F filing with the SEC [ Id., Ex. 12 at pp. 35, 37, 68–9]; and
(v) judgment debtors Seven Arts Pictures, PLC's SEC filings admit that the garnishees owe approximately $3 million to judgment debtors. [ Id., Ex. 12 at pp. 68–69].
The dates of these financial transactions reveal that transaction numbers (i), (ii) and (iii) occurred well before the service of the garnishment interrogatories. Thus, given the limiting language of the interrogatories themselves, the Court can not find that the garnishees' responses are improper as to the limited interrogatories.
However, there is some evidence in the record to support Jonesfilm's contention that garnishees failed to wholly respond to the garnishment interrogatories, and that evidence is noticeable and troubling. As noted above in the block quote, the exhibits to Jonesfilm's motion—specifically, transaction numbers (iv) and (v)—reflect that there existed a related company balance between judgment debtors and garnishees of approximately $3 million on January 31, 2011—after service of the garnishment interrogatories. ( Id., Ex. 12 at pp. 35, 37, 68–9). Any related company balance should have been addressed by the garnishees in their responses because the balance existed after service of the interrogatory and after seizure. The "related company balance" should have been reflected somewhere in the garnishees' responses to the interrogatories, but they were not.
*7 In addition, garnishment interrogatory Nos. 2 and 7 are not so limited temporally in their language as the interrogatories listed above. These two garnishment interrogatories ask, in pertinent part:
2. Do you hold or have a right to any money, promissory notes, tax or other credits or other rights, assets or property for or in which any of the Judgment Debtors has any beneficial ownership or other beneficial interest whatsoever, whether directly or indirectly and whether matured or unmatured.
7. Have you made any payment, novation, compromise, or arrangement to or with or obtained any receipt of discharge or acquittances of any kind from any of the Judgment Debtors, directly or indirectly?
( See id., Ex. 14). Because no temporal limitation confines these two garnishment interrogatories, garnishees' responses should have reflected other financial transfers and transactions that occurred before service of the garnishment interrogatories, but no response did so. Indeed, apart from Seven Arts Pictures Louisiana (Equicap), L.L.C., an inactive limited liability company, and despite the exhibits attached to Jonesfilm's memorandum, all of the other garnishees responded identically, either simply answering "no" to each interrogatory or objecting on the ground of the seven general objections listed at the beginning of each garnishee's responses. The Court finds this unacceptable.
In addition, the Court overrules six of the seven general objections FN6 on the ground that the garnishees have failed to provide any legal support for them. The crux of garnishees' objections here—coupled with the argument in their motion—is that Jonesfilm is not entitled to any information other than what property of judgment debtors, if any, the garnishee had in its possession at the time that it received the garnishment interrogatories. Garnishees' argument presents an extremely narrow view of Federal Rule of Civil Procedure 69.FN7
FN6. The Court does not overrule Objection No. 2, grounded in the attorney-client and/or work-product privilege. To the extent that the garnishees withhold information on either of these grounds, however, the garnishees must produce a privilege log to allow Jonesfilm the opportunity to challenge any such assertion of privilege.
FN7. This Court finds that neither Jonesfilm nor the garnishment interrogatories themselves are limited to the strictures of Louisiana Code of Civil Procedure article 2411. Assuming for purposes of this footnote only that Leeway and the other garnishees are correct in arguing that they had only to respond to the interrogatories with respect to any property of the judgment debtors in their possession at the time the interrogatories were served, nothing precludes Jonesfilm from also propounding interrogatories under Rule 69.
Under Rule 69, "[t]he scope of post-judgment discovery is very broad to permit a judgment creditor to discover assets upon which execution may be made. Some courts have applied a two-part test in determining whether returns should be produced." F.D.I. C. v. LeGrand, 43 F.3d 163, 172 (5th Cir.1995) (citing United States v. Bonanno, 119 F.R.D. 625, 627 (E.D.N.Y.1988)). The party who seeks production of the documents must show their relevance to the inquiry. Id. Then, the burden shifts to the party who opposes production to show that other sources exist from which the information contained in the withheld documents may be readily obtained. See id. Rule 69 permits the judgment creditor to propound discovery on "any person," not just a judgment debtor or a garnishee. Fed.R.Civ.P. 69(a)(2). The Court's review of the garnishment interrogatories reveals that they are both relevant and reasonably calculated to lead to evidence of judgment debtors' property. No garnishee has complied with its burden by pointing to another source from which Jonesfilm may obtain such information.
*8 Garnishees' terse and unresponsive responses remain suspect to this Court, given the related company balance that existed between some of the garnishees and judgment debtors on January 31, 2011. In addition, and as discussed in detail below with regard to another motion by Jonesfilm, garnishee Leeway belatedly revealed the existence of a bank account with approximately $174 thousand in it, such sum disappearing from the bank account shortly after service of the garnishment interrogatories. (The Court elaborates on this issue further with regard to the motion below.) For these reasons, the Court finds that garnishees failed to completely and adequately respond to the garnishment interrogatories.
IT IS RECOMMENDED that the Motion for Contempt for Disobedience of Court Orders and to Compel Answers to Garnishment Interrogatories [Doc. # 33] be GRANTED.
IT IS FURTHER RECOMMENDED that judgment debtors, to the extent that they have not already done so, shall comply with the District Court's Charging Order dated October 6, 2010 no later than fourteen (14) days from the date of this Report and Recommendation.
IT IS FURTHER RECOMMENDED that no later than fourteen (14) days from the date of this Report and Recommendation, garnishees be compelled supplement and amend their responses to the garnishment interrogatories in line with this Report and Recommendation. Garnishees' objections to the garnishment interrogatories are overruled, except as to Objection No. 2.
IT IS FURTHER RECOMMENDED that judgment debtors Peter Hoffman, Seven Arts Pictures, Inc., Seven Arts Pictures PLC, Seven Art Entertainment Limited and Cinevisions and garnishees Seven Arts Pictures Louisiana, LLC, Seven Arts Filmed Entertainment Louisiana, LLC, Seven Arts Pictures Louisiana (Equicap), LLC, Seven Arts Post LLC, Seven Arts Esplanade Development, LLC, Esplanade Pictures LLC, and Leeway Properties, Inc. be ordered to pay the amount of attorneys' fees incurred by Jonesfilm to enforce the District Court's orders as outlined below in Section VI.
IV. Motion for Order Requiring Immediate Delivery by Garnishee Leeway Properties, Inc. and Judgment Debtor Peter Hoffman of Funds and Other Relief
A. The Parties Contentions
Jonesfilm notes that during discovery, Leeway's counsel admitted that Hoffman is the vice president, secretary and director of Leeway and also the signatory for Leeway's bank accounts. Indeed, Susan Hoffman testifed at the oral hearing on July 27, 2011 that she knows almost nothing concerning the activities of Leeway. As noted above, also on July 27, 2011, Leeway supplemented and amended its earlier responses to the garnishment interrogatories by noting that a Leeway bank account at City National Bank ("City National") in California contained $174,769.56. Leeway admitted that the owner of the funds is unknown and that City National was to investigate the receipt and transfer of the funds. Although Leeway informed Jonesfilm that it would follow up and keep Jonesfilm updated, Jonesfilm contends that it has received no further response from Leeway. Jonesfilm argues that pursuant to the garnishment order, Leeway should have delivered the funds to the U.S. Marshal. Jonesfilm asks the Court to order Leeway to deliver said funds to it plus statutory interest accruing thereon from the date that Leeway should have delivered the funds to the U.S. Marshal.
*9 Jonesfilm notes that the California District Court's contempt order also imposed a constructive trust and a constructive and equitable lien in favor of Jonesfilm for the $41,766.00 (plus legal interest) that it imposed as sanctions. Jonesfilm contends that the case law on which the California court relied to impose the constructive trust continues to apply here, as the underlying money judgments here were issued by courts in California under California law; Leeway's City National account in which those funds were held is also located in California; the address for Leeway in the bank account documents is a California address [c/o judgment debtor Peter Hoffman's company Cinevisions in California]; and the bank statements and other books and records for that account are maintained by judgment debtor Peter Hoffman at his California offices. Jonesfilm argues that Louisiana law has also recognized the imposition of constructive trusts. Jonesfilm thus asks the Court to provide an accounting and tracing of those funds and should confirm the imposition of a constructive trust and a constructive and equitable lien on any such disbursed funds and the proceeds thereof.
Jonesfilm also seeks its legal fees and costs incurred for its efforts to enforce this and the California court's orders.
2. Leeway's Opposition
Attaching a letter from City National to its opposition, Leeway notes that it is still waiting for a letter with the outcome of City National's investigation into the account and the funds. Leeway expects the outcome of the investigation to reveal that the transfers into and out of Leeway's account were part of a fraudulent scheme to embezzle monies and of no effect.
Leeway has learned that Marcia Matthews, a former bookkeeper of Seven Arts, allegedly transferred the funds into the account. Seven Arts terminated Matthews on March 18, 2011. Matthews had been transferring monies to and from various accounts to disguise the amounts that she was stealing. The Los Angeles Police Department ("LAPD") Report indicates that Matthews had been embezzling monies from Seven Arts for approximately two years. Leeway notes that it had never authorized the transfers. Leeway contends that neither it nor Susan Hoffman had knowledge of the monies in the bank account when Leeway answered the garnishment interrogatories. Leeway had allegedly closed the account in August 2010. Leeway thus asks the Court to continue this motion until the LAPD and City National investigations are concluded.
3. Jonesfilm's Reply
In its reply, Jonesfilm generally re-hashes its earlier arguments. A few salient points are as follows:
(1) Jonesfilm lists the individual transfers that constitute the total transfer of $74,769.56 from Leeway to judgment debtors.
(2) Jonesfilm notes that Peter Hoffman failed to file an opposition to its motion, and, thus, the motion should be granted as unopposed with regard to Peter Hoffman.
(3) Jonesfilm asks the Court to strike Susan Hoffman's affidavit in support of Leeway's opposition given her testimony at the earlier hearing before this Court that she has no first-hand personal knowledge of the matters that she describes in her affidavit.
*10 (4) Jonesfilm now seeks a total of $6,749.00 in fees and costs (including the $3,767.00 to reply to Leeway's opposition).
4. Leeway's Supplemental Memorandum
After the oral hearing on the motion, the Court ordered Leeway to file a supplemental memorandum to address the status of City National's investigation of Matthews' alleged embezzlement. Leeway did so. In the memorandum, Leeway maintains that the investigation is to take an additional 90 days, but City National's conclusion depends on the actions of law enforcement, actions that are outside City National's and Leeway's control.
Leeway also informs the Court that notices of wire transfers into and out of Leeway's account with City National can be available for production to Jonesfilm by September 28, 2011.
5. Jonesfilm's Supplemental Memorandum
Jonesfilm points out that on September 28, 2011, Leeway produced a copy of the notice of the February 22, 2011 wire transfer. The notice reveals that Leeway transferred the $100,000.00 to RBSM, L.L.P., the independent certified public accountant of judgement debtor Seven Arts Pictures PLC.
Accordingly, Jonesfilm contends that all of the evidence that it has submitted to the Court confirms that Leeway disbursed to judgment debtors all $174,769.56 in the City National account at the time Leeway received the District Court's garnishment order: (1) $74,769.56 transferred from January 28 to February 22, 2011 to account number 0010185797 (judgment debtor Peter Hoffman), account number 00112411186 (judgment debtor Seven Arts Filmed Entertainment Limited), and account number 00112874151 (judgment debtor Seven Arts Pictures Inc.); and (2) $100,000.00 transferred on February 22, 2011 to RBSM, L.L.P.
B. Law and Analysis
Under the law of Louisiana, a garnishment proceeding is nothing more than a streamlined legal process for a creditor's seizing property of a judgment debtor in the hands of a third party. First Nat'l Bank of Commerce v. Boutall, 422 So.2d 1159, 1161 (La.1982). Garnishment proceedings are governed by Louisiana Code of Civil Procedure articles 2411–2417. Article 2411(B) states that upon service of the petition, citation, and interrogatories, seizure is thereby effected against any property of, or credit due, the judgment debtor. La.Code. Civ. Proc. art. 2411(B). In short, the seizure of property belonging to a judgment debtor and under the possession and control of the garnishee is effective upon service of the garnishment petition, citation and interrogatories. Id.
This motion merits little discussion. Here, the seizure of property was effected on January 28, 2011, when Leeway was served with the District Court's garnishment order. Leeway violated the garnishment order by transferring to the accountant of judgment debtors the aforementioned funds after it received the garnishment order. Leeway has wholly failed to convince this Court that—indeed, it has not even addressed whether—these monies were not owed to nor the property of judgment debtors, especially given that Leeway transferred the funds to judgment debtors and judgment debtors' accountant after service of the garnishment interrogatories. Accordingly,
*11 IT IS RECOMMENDED that the Motion for Order Requiring Immediate Delivery by Garnishee Leeway Properties, Inc. and Judgment Debtor Peter Hoffman of Funds and Other Relief [Doc. # 82] be GRANTED.
V. Attorneys' Fees
Because this Court has found judgment debtors in contempt of the District Court's orders and that garnishees failed to adequately respond to the garnishment interrogatories, and, with respect to Leeway, transferred garnished funds after effective seizure by the District Court's order, the Court finds appropriate an award of reasonable attorneys' fees to Jonesfilm for having had to file the motions to enforce the orders.
A. The Lodestar Approach
The United States Supreme Court and the Fifth Circuit have oft-repeated that a request for attorneys' fees should not spawn major ancillary litigation. Hensley v. Eckerhart, 461 U.S. 424, 437 (1983); Associated Builders & Contractors of La., Inc. v. Orleans Parish School Bd., 919 F.2d 374, 379 (5th Cir.1990). A court's discretion in fashioning a reasonable attorney's fee is broad and reviewable only for an abuse of discretion, i.e., it will not be reversed unless there is strong evidence that it is excessive or inadequate, or the amount chosen is clearly erroneous. Hopwood v. State of Tex., 236 F.3d 256, 277, n. 79 (5th Cir.2000); Hensley, 461 U.S. at 436–37.
To determine a reasonable fee, the court must provide a concise but clear explanation of its reasons for the fee award, making subsidiary factual determinations regarding whether the requested hourly rate is reasonable, and whether the tasks reported by counsel were duplicative, unnecessary, or unrelated to the purposes of the lawsuit. Hensley, 461 U.S. at 437–39, 103 S.Ct. at 1941–43; Associated Builders and Contractors, 919 F.2d at 379. The Fifth Circuit has noted that its "concern is not that a complete litany be given, but that the findings be complete enough to assume a review which can determine whether the court has used proper factual criteria in exercising its discretion to fix just compensation." Brantley v. Surles, 804 F.2d 321, 325–26 (5th Cir.1986).
In assessing the reasonableness of attorneys' fees, the court must first determine the "lodestar" by multiplying the reasonable number of hours expended and the reasonable hourly rate for each participating attorney. See Hensley, 461 U.S. at 433; Green v. Administrators of the Tulane Educ. Fund, 284 F.3d 642, 661 (5th Cir.2002); Migis v. Pearle Vision, Inc., 135 F.2d 1041, 1047 (5th Cir.1998); La. Power & Light Co. v. Kellstrom, 50 F.3d 319, 324 (5th Cir.1995). The fee applicant bears the burden of proof on this issue. See Riley v. City of Jackson, 99 F.3d 757, 760 (5th Cir.1996); Kellstrom, 50 F.3d at 324; In re Smith, 996 F.2d 973, 978 (5th Cir.1992).
1. Reasonable Hourly Rates
Turning to the affidavits submitted by Jonesfilm's counsel, this Court must determine whether the hourly rates of $325.00/hour for David Waguespack and $250.00/hour for Barry L. Goldin are reasonable given counsel's ability, competence, experience, and skill. David Waguespack is a partner in his law firm with 20 years of experience, and Barry L. Goldin, according to the case law, has approximately 34 years of legal experience.
*12 This Court's review of the case law in this district for the past two years reveals that the requested hourly rates are within or below the range for lawyers of similar skill and experience in the legal community this district. See, e.g., Johnson v. Big Lots Stores, Inc., 639 F.Supp.2d 696, 701 (E.D.La.2009) (awarding $300.00/hour for partners, $225.00/hour for associates, and $75.00/hour for paralegals); Entergy La., L.L. C. v. The Wackenhut Corp., Civ. A. No. 09–7367, 2010 WL 4812921 (E.D.La. Nov. 17, 2010) (awarding $175.00/hour to attorney with 16 years of experience); Wilson v. Tulane Univ., Civ. A. No. 09–7451, 2010 WL 3943543 (E.D.La. Oct. 4, 2010) (awarding $250.00/hour and $160.00 hour to attorneys with 25 and four years experience respectively); Hebert v. Rodriguez, Civ. A. No. 08–5240, 2010 WL 2360718 (E.D. La. June 8, 2010) (awarding $300.00/hour to attorney with 33 years of experience); Gulf Coast Facilities Mgmt, L.L.C. v. BG LNG Servs ., L.L.C., Civ. A. No. 09–3822, 2010 WL 2773208 (E.D.La. July 13, 2010) (awarding $300.00/hour to attorneys with 17 years experience and $180.00/hour and $135.00/hour to attorneys with seven years and two years experience respectively); Belfor USA Group, Inc. v. Bellemeade Partners, L.L.C., Civ. A. No. 09–158, 2010 WL 6300009 (E.D.La. Feb. 19, 2010) (awarding $210.00/hour, $250.00/hour and $180.00/hour to attorneys with 20, ten and four years experience respectively); Marks v. Standard Fire Ins. Co., Civ. A. No. 09–1947, 2010 WL 487403 (E.D.La. Feb. 3, 2010) (awarding $185.00/hour to attorney with seven years of experience).
Considering the prevailing market rates in the Greater New Orleans area and the reasonable fees set by the courts in this district, the Court finds that the aforesaid hourly rates are reasonably similar to other hourly rates in this district. The Court finds that $325.00/hour is a reasonable rate for the services of David Waguespack and $250.00/hour is a reasonable rate for Barry L. Goldin.
2. Reasonable Hours Expended
The Court must next determine whether the number of hours that plaintiff's counsel expended on the litigation was reasonable. The burden of proving the reasonableness of the hours expended is on the fee applicant. Mota v. Univ. of Tex. Houston Health Science Ctr., 261 F.3d 512, 528 (5th Cir.2001). As a general proposition, all time that is excessive, duplicative, and/or unproductive should be excised from any award of attorney's fees. Watkins v. Fordice, 7 F.3d 453, 457 (5th Cir.1993). Attorneys must exercise "billing judgment" by "writing off unproductive, excessive, or redundant hours" when seeking fee awards. Walker v. U.S. Dep't of Hous. & Urban Dev., 99 F.3d 761, 769 (5th Cir.1996). The fee seeker's attorneys "are charged with proving that they exercised billing judgment." Id. at 770. When billing judgment is lacking, the court must exclude from the lodestar calculation the hours that were not reasonably expended.
*13 This Court has reviewed the affidavits submitted on behalf of Jonesfilm's counsel and finds some of the hours expended by counsel to be unreasonable. With regard to the contempt motion, David Waguespack alleges that he expended a total of 14 hours, and Barry L. Goldin alleges that he expended a total of 60.1 hours. The Court's review of the pleadings filed in connection with this motion reveals that the majority of the work was necessary but that some of the filings were unnecessary. Specifically, the Court finds that six of the hours expended by Waguespack and 11.9 of the hours expended by Goldin were unnecessary in that they were expended in response to plaintiffs' sur-replies and contributed very little to the arguments—and thus the resolution of—on the motion. The Court will strike those hours. Accordingly, the Court finds that an award of $14,650.00 in attorneys' fees is reasonable with regard to the motion for contempt and to compel (8 hours at $325.00/hour for attorney Waguespack and 48.2 hours at $250.00/hour for attorney Goldin).
With regard to the motion to require immediate delivery, David Waguespack alleges that he expended a total of 5.1 hours and Barry L. Goldin alleges that he expended a total of 20.2 hours. The Court's review of the pleadings filed in connection with this motion reveals that the hours expended here were reasonable and necessary. The reply memorandum here contributed more than the aforementioned response to the sur-replies, in that it outlined and detailed many of the financial transactions at issue. Accordingly, and with regard to this motion, the Court finds that an award of $6,707.50 in attorneys' fees is reasonable with regard to this motion (5.1 hours at $325.00/hour for attorney Waguespack and 20.2 hours at $250.00/hour for attorney Goldin).
For the foregoing reasons,
IT IS RECOMMENDED that the Motion for Contempt for Disobedience of Court Orders and to Compel Answers to Garnishment Interrogatories [Doc. # 33] be GRANTED.
IT IS FURTHER RECOMMENDED that the Motion for Order Requiring Immediate Delivery by Garnishee Leeway Properties, Inc. and Judgment Debtor Peter Hoffman of Funds and Other Relief [Doc. # 82] be GRANTED.
IT IS FURTHER RECOMMENDED that judgment debtors Peter Hoffman, Seven Arts Pictures, Inc., Seven Arts Pictures PLC, Seven Art Entertainment Limited and Cinevisions and garnishees Seven Arts Pictures Louisiana, LLC, Seven Arts Filmed Entertainment Louisiana, LLC, Seven Arts Pictures Louisiana (Equicap), LLC, Seven Arts Post LLC, Seven Arts Esplanade Development, LLC, Esplanade Pictures LLC, and Leeway Properties, Inc. be held liable, jointly and severally, for an award of $21,357.50 in attorneys' fees incurred by Jonesfilm to enforce the District Court's orders as outlined above.
NOTICE OF RIGHT TO OBJECT
Objections must be: (1) specific, (2) in writing, and (3) served within fourteen (14) days after being served with a copy of this report. 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 1(a), 6(b) and 72(b). A party's failure to object bars that party from: (1) entitlement to de novo review by a district judge; and (2) appellate review of the un-objected-to factual findings and legal conclusions accepted by the district court, except upon grounds of plain error. Douglass v. United Servs. Auto. Ass'n, 79 F.3d 1415, 1430 (5th Cir.1996) ( en banc ).
by Jay Adkisson
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More Articles On Charging Orders click here
LAW REVIEW ARTICLES
by Jay Adkisson
For more on the historical background of Charging Orders and contemporary issues involving the same, see Jay Adkisson's article, Charging Orders: The Peculiar Mechanism, 61 South Dakota Law Review 440 (2016). Available at SSRN: https://ssrn.com/abstract=2928487
Analysis of Uniform Limited Liability Company Act Sections re Charging Orders
The Uniform Acts re Charging Orders and Transferable Interests (without Jay's comments):
Effect of Bankruptcy On The Debtor-Member's LLC Interest here
Collected Court Opinions On Charging Orders here and below
NATURE OF REMEDY
Distributions/Economic Rights - Creditors rights to distributional interests/economic rights
Prejudgment Relief - Freezing the interest and distributions pending judgment
Procedure - The procedure for obtaining a charging order and ancillary provisions
Unknown Interest - Where the debtor's interest, if any, has not been ascertained
Order Form Generally - Most issues to the form of the charging order
Order Form Future Interests - How the charging order affects subsequently-acquired interests
Exemptions - Available state and federal protections that may apply to charging orders
Conflicts-Of-Law - Determining which state's laws apply to a charging order dispute
Jurisdiction - Issues relating to the court's authority over out-of-state debtors and LLCs
Foreign Entities - Charging orders against out-of-state entities
Creditor Rights Restrictions - Limitations on creditors' management and informational rights
Information Rights - Creditors' ability to access information about the LLC
Management & Voting Rights - Rights of creditor after charging order issued
LIEN EFFECT AND PRIORITY
Lien - The lien effect of a charging order and priority issues
Compliance - Issues for the LLC and non-debtor members in complying with a charging order
Receiver - The role of the receiver in charging order proceedings
SINGLE MEMBER LLC
Single-Member LLCs - Enforcing the judgment against an LLC with a sole member
Foreclosure - Liquidation by judicial sale of the debtor's right to distributions
REPURCHASE AND REDEMPTION RIGHTS
Repurchase/Redemption Rights - Third-parties' ability to purchase the charged interest
Appeal - Issues relating to the appeal of a charging order
RELATION TO OTHER REMEDIES
Exclusivity - The charging order as the sole remedy available to creditors and exceptions
Voidable Transactions/Fraudulent Transfers - Issues relating to avoidable transfers of interests
Abstention - Attempts to collaterally attack the charging order in federal court
Bankruptcy - Treatment of the debtor/member's interest in bankruptcy
Intra-Member Disputes - Where one member obtains a charging order against another
Taxes - Tax issues relating to charging orders for all involved parties
= = = = =
Additional Court Opinions About charging orders (unsorted)
THE CHARGING ORDERS PRACTICE GUIDE
The Charging Order Practice Guide: Understanding Judgment Creditor Rights Against LLC Members, by Jay D. Adkisson (2018), published by the LLCs, Partnerships and Unincorporated Entities Committee of the Business Law Section of the American Bar Association, click here for more
Available for purchase directly from the ABA at https://goo.gl/faZzY6
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