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Current Developments in the Commercial Divisions of the
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Posted: September 10, 2018

Court Threatens Contemnor With Arrest if He Does Not Purge the Contempt

On August 14, 2018, Justice Schecter of the New York County Commercial Division issued a decision in  Kadosh v. Kadosh, 2018 NY Slip Op. 31976(U), threatening a contemnor with arrest if he does not purge his contempt, explaining:

A litigant who knowingly causes a court order to be violated may be held in contempt.

David himself was present when the court announced that an order was being issued memorializing the terms of withdrawal of money that the receiver was holding in escrow. To be sure, he was also in court when those terms were agreed upon and initially set forth on the record. There can be no doubt that he was aware of the court order and its provisions. His knowledge, moreover, is confirmed by his behavior. He waited several months and then stealthily personally contacted the receiver without asking or informing DHC. David’s assertion that he knew nothing of any court order defies credulity.

The evidence also conclusively establishes that David caused the August 2016 Order to be violated by asking the receiver to send him money in contravention of the order and in violation of DHC’s rights thereunder. David’s justification for his misconduct–that he did not lie to or defraud the receiver and that he was wholly entitled to the money despite the order to the contrary–compels a finding of contempt under the circumstances.

Allowing David to escape the consequences of his defiance of the August 2016 Order would make a mockery of adherence to judicial mandates. Whether he intended to mislead or coerce the receiver is irrelevant. David’s contention that he did not intend to undermine anyone’s interests or responsibilities and that he was entitled to the escrowed funds is both astonishing and belied by the record. He knew about the August 2016 Order, the reasons for it and that his fee dispute with DHC affected his rights to the escrowed money. The only reason for him to have sought the. funds from the receiver was to undermine DHC’s secured claim in contravention of the court’s order.

Though David’s actions do not excuse the receiver’s gross negligence, that the receiver foolishly succumbed to David’s request does not cleanse the wrongful nature of David’s conduct. David knew a court order barred him from touching the money, yet asked an officer of the court to give it to him anyway. He intentionally caused this court’s order to be violated. That is contempt. David, therefore, is liable for all losses caused by his contempt under Judiciary Law § 773, which include the movants’ attorneys’ fees in connection with these motions.

Because the purpose of civil contempt is to induce compliance with court mandates, David may purge his contempt by paying the $2.7 million that he improperly obtained into court. After all, that is what would be required to restore the parties’ status to what it was before the August 2016 Order was violated. If David does so, he may avoid having to pay the attorneys’ fees. If he does not, the court will not hesitate to issue an arrest warrant to induce compliance . While David finds no shortage of blame on the part of everyone else in this action, he is entirely devoid of contrition or recognition of the seriousness of his offense. He induced an officer of the court to wrongfully give him $2.7 million. Such conduct must be treated with the severity it deserves.

(Internal quotations and citations omitted).

No matter who you are or what kind of litigation you are involved in, you must obey the court’s orders. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have have been accused of violating a court order.

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