Federal Trade Commission v. Rincon Management Services LLC et al

Filing 178

MINUTE ORDER IN CHAMBERS DIRECTING LARRY STEPHENS AND BRYLAW FIRM, INC. TO SHOW CAUSE ON TUESDAY, NOVEMBER 20, 2012 AT 10 A.M. WHY THEY SHOULD NOT BE HELD IN CIVIL CONTEMPT by Judge Virginia A. Phillips. The Court ORDERS Stephens and Brylaw TO SHOW CAUSE in person on Tuesday, November 20, 2012 at 10 a.m., why they should not be so sanctioned. If Respondents fail to respond adequately to this Order, sanctions will issue. (See document for specifics) (mrgo)

PRIORITY SEND
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES -- GENERAL
Case No. EDCV 11-01623 VAP (SPx)

Date: October 22, 2012

Title:

FEDERAL TRADE COMMISSION -v- RINCON MANAGEMENT
SERVICES, LLC, et al.
===============================================================
PRESENT:
HONORABLE VIRGINIA A. PHILLIPS, U.S. DISTRICT JUDGE
Marva Dillard
Courtroom Deputy
ATTORNEYS PRESENT FOR
PLAINTIFFS:

None Present
Court Reporter
ATTORNEYS PRESENT FOR
DEFENDANTS:

None
PROCEEDINGS:

None
MINUTE ORDER DIRECTING LARRY STEPHENS AND
BRYLAW FIRM, INC. TO SHOW CAUSE ON TUESDAY,
NOVEMBER 20, 2012 AT 10 A.M. WHY THEY SHOULD
NOT BE HELD IN CIVIL CONTEMPT (IN CHAMBERS)

On February 25, 2012, the Court ordered Larry Stephens, individually and as
the agent for Brylaw Firm, Inc. ("Brylaw"), to turn over to the Receiver within seven
days any and all documents pertaining to ownership of, title to, and/or possession of
Defendants Jason R. Begley and Wayne W. Lunsford's investments, including
investments in Brazilian Bonds, the "Barbie" Venture, and "Black Canyon" ("the
Investments"). (Order (Doc. No. 96).) Plaintiff Federal Trade Commission now
reports that Stephens and Brylaw (collectively, "Respondents") have failed to turn
over any documents or information relating to the Investments.
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EDCV 11-01623 VAP (SPx)
FEDERAL TRADE COMMISSION v. RINCON MANAGEMENT SERVICES, LLC, et al.
MINUTE ORDER of October 22, 2012

On July 23, 2012, Plaintiff moved the Court to issue an Order to Show Cause
why Defendants Begley and Lunsford, their counsel, Stephens, and Brylaw should
not be held in contempt. (See Motion (Doc. No. 149).) Plaintiff withdrew its motion
as to Defendants' Counsel on July 25, 2012 (Doc. No. 151), and as to Defendants
Begley and Lunsford on August 14, 2012 (Doc. No. 161).
Plaintiff filed an Amended Motion for Order to Show Cause why Stephens and
Brylaw should not be held in contempt on September 4, 2012 (Doc. No. 163). On
September 12, 2012, the Court ordered Plaintiff to file supplemental briefing on the
Court's jurisdiction to hold non-parties in contempt (Doc. No. 167). Plaintiff filed its
Supplement on October 5, 2012 (Doc. No. 175).1
The Court, having considered all papers filed in support of Plaintiff's Motion,
finds the Motion appropriate for resolution without a hearing. See Fed. R. Civ. P. 78;
Local Rule 7-15. For the reasons set forth, the Court GRANTS the Motion and
ORDERS Stephens and Brylaw TO SHOW CAUSE in person on [DATE], why they
should not be held in civil contempt for their failure to turn over all documents
relating to the Investments.
LEGAL STANDARD
The Court will issue an order to show cause why a respondent should not be
held in contempt when the plaintiff makes a sufficient showing that the respondent
has failed to comply with specific provisions of the Court's order or injunction. See
In re Grand Jury Proceedings, 142 F.3d 1416, 1424 (11th Cir. 1998) (citing Wyatt v.
Rogers, 92 F.3d 1074, 1078 n.8 (11th Cir. 1996)).

1

Plaintiff's Amended Motion and Supplement (Docs. No. 163, 175) failed to
comply with Local Rules 5-4.5, 11-3.2, 11-3.5, and 11-5.3, which require mandatory
chambers copies to be single-sided, pre-punched, and blue-backed, with all exhibits
tabbed. In the future, Plaintiff is directed to submit mandatory chambers copies that
comply in all respects with the Federal Rules of Civil Procedure and the Local Rules.
Failure to do so may result in sanctions.
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EDCV 11-01623 VAP (SPx)
FEDERAL TRADE COMMISSION v. RINCON MANAGEMENT SERVICES, LLC, et al.
MINUTE ORDER of October 22, 2012

DISCUSSION
On February 25, 2012, the Court issued an order requiring Stephens,
individually and as the agent for Brylaw, to turn over to the Receiver within seven
days any and all documents pertaining to, among other things, ownership of, title to,
and/or possession of the Investments. (Doc. No. 96 ¶ 7.) Respondents did not
contact the Receiver to arrange for turnover; on April 3, 2012, the Receiver notified
Stephens that he intended to seek an Order to Show Cause for contempt against
Respondents for failing to comply with the Order. (Decl. of Richard Weissman
("Weissman Decl.") (Doc. No. 160) ¶ 7.) Two days later, Stephens contacted the
Receiver and arranged to turn over documents on a "flash drive." (Id. ¶ 8.) Upon
review, the Receiver determined that Stephens and Brylaw had failed to turn over
any records or information regarding the Investments (Id.) Stephens and Brylaw
have still not produced this information. (Id.)
Plaintiff has sufficiently alleged that Respondents have failed to comply with
the Court's order to turn over to the Receiver all documents related to the
Investments. Such noncompliance, if unexcused, is sanctionable as contempt. See
Labor/Cmty. Strategy Ctr. v. L.A. Cnty. Metro. Transp. Auth., 564 F.3d 1115, 1123
(9th Cir. 2009); Fed. Trade Comm'n v. Affordable Media, 179 F.3d 1228, 1239 (9th
Cir. 1999).
Although Respondents are not parties to this action, nonparties are "liable to
the same process for enforcing obedience to [an] order as if a party." Fed. R. Civ.
Proc. 71. Because Respondents were named in the Court's Order and provided
notice thereof, they may be held in contempt for violation of the Order as if they were
parties. See Irwin v. Mascott, 370 F.3d 924, 931 (9th Cir. 2004) (holding that "when
an injunction is addressed to a non-party and he is given notice of the injunction,"
the non-party may be held in contempt for violating the injunction); accord Peterson
v. Highland Music, Inc., 140 F.2d 1313, 1323 (9th Cir. 1998).

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EDCV 11-01623 VAP (SPx)
FEDERAL TRADE COMMISSION v. RINCON MANAGEMENT SERVICES, LLC, et al.
MINUTE ORDER of October 22, 2012

Accordingly, the Court ORDERS Stephens and Brylaw TO SHOW CAUSE in
person on Tuesday, November 20, 2012 at 10 a.m., why they should not be so
sanctioned. If Respondents fail to respond adequately to this Order, sanctions will
issue.
IT IS SO ORDERED.

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