On April 23, 2015, Justice Kornreich of the New York County Commercial Division issued a decision in Pensmore Investments, LLC v. Gruppo, Levey & Co., 2015 NY Slip Op. 30650(U), analyzing the standards for civil and criminal contempt.
In Pensmore Investments, the plaintiff sought to collect a judgment and obtain judgment collection-related discovery. It moved to hold two individuals with an interest in the judgment debtor (“Hugh” and “Wendy”) in civil and criminal contempt. The court denied the motion, explaining:
The instant contempt motion turns on the separate standards for civil and criminal contempt. Civil contempt has as its aim the vindication of a private party to litigation and any sanction imposed upon the contemnor is designed to compensate the injured private party for the loss of or interference with the benefits of the mandate. A defendant may be held in civil contempt when there is clear and convincing evidence that defendant knowingly disobeyed clear and unequivocal orders of the court. A hearing is not required to hold a party in civil contempt when there is no question of fact that a court order was knowingly violated.
Moreover, although the line between the civil and criminal contempt may be difficult to draw in a given case and the same act may be punishable as both a civil and a criminal contempt, the element which escalates a contempt to criminal status is the level of willfulness associated with the conduct. That being said, the purposes of civil contempt and criminal contempt differ. Civil contempt is designed not to punish but, rather, to compensate the injured private party or to coerce compliance with the court’s mandate; a criminal contempt, on the other hand, involves an offense against judicial authority and is utilized to protect the integrity of the judicial process and to compel respect for its mandates. Unlike civil contempt, the aim in a criminal contempt proceeding is solely to punish the contemnor for disobeying a court order, the penalty imposed being punitive rather than compensatory. To hold a party in criminal contempt, a hearing must be held and a willful disobedience of a court order must be proved beyond a reasonable doubt. Pursuant to Judiciary Law § 751, a party held in criminal contempt can be jailed for up to 30 days.
Plaintiff seeks criminal contempt. Plaintiff avers that only jail time will cause Hugh and Claire to take their obligations to plaintiff and the court seriously. While this may be true, at this juncture, the court will not order such a harsh remedy. Nor will the court hold either of them in civil contempt. While defendants are testing the limits of the court’s patience, the record on this motion does more to justify veil piercing than contempt since most of the money used to fund GLH appears to have come from Claire’s personal funds. But for Claire using her own money, GLH would not be able to pay its expenses, such as its payroll. None of the challenged transfers appear to have made it substantially more difficult for plaintiff to collect its judgment. The proper remedy is not contempt; it is veil piercing. Once GLH’s debt can be collected from whichever defendant has its cash, plaintiff can finally be made whole.
(Internal quotations and citations omitted) (emphasis added).