E-Smart Technologies, Inc. et al v. Drizin et al

Filing 380

MEMORANDUM AND ORDER RE: CIVIL CONTEMPT. Signed by Judge William B. Shubb on 5/18/2011. (lmh, COURT STAFF) (Filed on 5/18/2011)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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----oo0oo----

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E-SMART TECHNOLOGIES, INC., a
Nevada Corporation, and IVI
SMART TECHNOLOGIES INC., a
Delaware Corporation,

NO. CIV. 3:06-05528 MHP

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MEMORANDUM AND ORDER RE: CIVIL
CONTEMPT

Plaintiffs,
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v.
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WAYNE DRIZIN, MICHAEL GARDINER,
ELECTRONIC PLASTICS CORPORATION,
and A CARD COMPANY,

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Defendants.
_______________________________/

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----oo0oo---21
Plaintiffs e-Smart Technologies, Inc. (“e-Smart”) and

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IVI Smart Technologies Inc.1 initiated this action in 2006

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against defendants Wayne Drizin, Michael Gardiner, Electronic

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Although IVI Smart Technologies Inc. is affiliated with
e-Smart and did not have independent representatives at the
settlement conference, the Order to Show Cause giving rise to the
civil contempt hearing was limited to e-Smart and its
representatives, thus the court’s decision is limited to e-Smart.
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Plastics Corporation, and A Card Company, alleging that

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defendants stole trade secrets in plaintiffs’ biometric smart

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cards.2

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a smart card Gardiner brought to the settlement conference

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disappeared, resulting in civil contempt charges against e-Smart

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and four of its representatives.

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I.

Factual and Procedural Background
The settlement conference at issue was held on August

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In the fifth settlement conference held in this matter,

12, 2010, before Magistrate Judge Zimmerman and lasted the entire

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day.

The attendees at the settlement conference included Mary

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Grace (e-Smart’s Chief Executive Officer), Tamio Saito (e-Smart’s

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Chief Technology Officer), Marcello Soliven (e-Smart’s Director

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of Wireless Research and Development), Ananth Krishnan (research

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engineer for e-Smart) (referred to collectively as “e-Smart

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representatives”), Christopher Lilly (plaintiffs’ counsel),

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Drizin, Gardiner, and Magistrate Judge Zimmerman’s student

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extern.

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seated around the conference table in Magistrate Judge

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Zimmerman’s library.

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not be productive, Magistrate Judge Zimmerman broke the parties

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up, bringing Gardiner and Drizin into his personal chambers and

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having plaintiffs’ counsel and representatives remain in the

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library.

When the settlement conference began, the attendees were

Upon concluding that a joint session would

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Put simply, the biometric smart cards at issue in this
dispute are credit-card-sized cards used for identification
purposes that have the capability of reading and confirming the
user’s fingerprint. Although plaintiffs and other companies have
allegedly been producing these cards for quite some time, not a
single card has been sold in the United States, according to
Drizin.

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When Gardiner and Drizin were alone with Magistrate

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Judge Zimmerman in his chambers, Gardiner produced a biometric

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smart card that had a picture of George Washington on it and was

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manufactured by Fidelica, a company that is not involved in this

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lawsuit.

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significant piece of evidence because it contained the very trade

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secrets that defendants had allegedly stolen from plaintiffs and

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thus provided evidence that e-Smart’s card did not contain trade

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secrets.

According to Gardiner, the Fidelica card was a

Magistrate Judge Zimmerman took the Fidelica card to e-

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Smart’s representatives in the library, explained defendants’

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position about the card’s value in the settlement process, and

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showed the representatives the card.

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the card, and the last time Magistrate Judge Zimmerman saw the

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card, it was in Saito’s hand.

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conference, Gardiner indicated that the card had not been

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returned to him, at which time he accompanied Magistrate Judge

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Zimmerman to the library and Magistrate Judge Zimmerman

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instructed everyone present to search their personal effects for

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the card.

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Grace and Saito examined

At the end of the settlement

Magistrate Judge Zimmerman attempted to have a marshal

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come search the attendees for the card; however, the United

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States Marshal’s Office persuaded him not to conduct a search

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because the female marshal who would need to search Grace had

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left for the day and could take about one hour to return.

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Magistrate Judge Zimmerman thus concluded the conference and

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requested the parties to search for the card again that evening.

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The following day, Magistrate Judge Zimmerman issued a sealed

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order requiring the e-Smart representatives to make every effort
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to locate the card and allowing them to return it anonymously to

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the court by August 20, 2010.

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(Docket No. 324.)

When the Fidelica card was not returned by August 20,

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2010, Magistrate Judge Zimmerman certified his version of the

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facts pursuant to 28 U.S.C. § 636(e) to Judge Patel as

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constituting civil contempt, stating that he “has reason to

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believe e-Smart, through one or more of its representatives,

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still has the missing card, or disposed of it, to prevent it from

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being used as evidence by defendants.”

(Docket No. 328.)

Judge

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Patel subsequently issued an Order to Show Cause against e-Smart

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and its representatives, requiring them to “show cause why you

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should not be adjudged guilty of criminal and/or liable for civil

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contempt and this action be dismissed with prejudice.”

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No. 329.)

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included declarations by its representatives denying that they

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took the Fidelica card and giving their version of the events

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leading up to the disappearance of the card.

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States Attorney’s Office declined to initiate criminal contempt

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charges, Judge Patel appointed Stephen E. Taylor and Jonathan A.

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Patchen of the Taylor & Company Law Offices, LLP, to prosecute

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the civil contempt charges.

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(Docket

E-Smart responded to the Order to Show Cause and

After the United

Because Magistrate Judge Zimmerman would serve as a key

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witness in the civil contempt hearing, the undersigned, a judge

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from outside of the district, was assigned to preside over the

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contempt hearing.

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hearing, the court finds e-Smart in civil contempt.

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Memorandum constitutes the court’s findings of fact and

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conclusions of law.

After conducting a four-day evidentiary

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This

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II.

Discussion

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A court’s power of contempt is regarded as an

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“inherent” power that is “necessary to the exercise of all

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others.”

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U.S. 821, 831 (1994).

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in civil contempt any person who [] disobeys a specific and

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definite order of the court.”

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265 (9th Cir. 1984).

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proceedings.

Int’l Union, United Mine Workers of Am. v. Bagwell, 512
“A district court has the power to adjudge

Gifford v. Heckler, 741 F.2d 263,

“Intent is not an issue in civil contempt

The sole question is whether a party complied with

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the district court’s order.”

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1240 (9th Cir. 1983) (internal citations omitted).

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Donovan v. Mazzola, 716 F.2d 1226,

“Judicial sanctions in civil contempt proceedings may,

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in a proper case, be employed for either or both of two purposes;

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to coerce the defendant into compliance with the court’s order,

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and to compensate the complainant for losses sustained.”

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States v. United Mine Workers of Am., 330 U.S. 258, 303-04

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(1947); accord United States v. Bright, 596 F.3d 683, 695-96 (9th

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Cir. 2010) (“Civil contempt is characterized by the court’s

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desire to compel obedience to a court order or to compensate the

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contemnor’s adversary for the injuries which result from the

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noncompliance.” (quoting Falstaff Brewing Corp. v. Miller Brewing

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Co., 702 F.2d 770, 778 (9th Cir. 1983))) (internal quotation

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marks omitted).

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United

“The standard for finding a party in civil contempt is

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well settled: The moving party has the burden of showing by clear

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and convincing evidence that the contemnors violated a specific

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and definite order of the court.”

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1069 (9th Cir. 2002).

In re Bennett, 298 F.3d 1059,

The clear and convincing evidence standard
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requires the moving party to “place in the ultimate factfinder an

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abiding conviction that the truth of its factual contentions are

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‘highly probable.’”

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(1984).

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offered in support of them “instantly tilt[s] the evidentiary

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scales in the affirmative when weighed against the evidence [the

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non-moving party] offered in opposition.”
A.

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Colorado v. New Mexico, 467 U.S. 310, 316

Factual contentions are highly probable if the evidence

Id.

Determining Who Took the Fidelica Card
Based on the evidence presented at the hearing, the

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court finds, by clear and convincing evidence, that the Fidelica

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card was taken by one of the e-Smart representatives at the

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conference because only they had the opportunity to take the

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card.

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convinced Mary Grace took the card based on her lack of credible

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and consistent testimony about the events that day and the

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evidence revealing her motive to take it.3

Further, of the e-Smart representatives, the court is

Magistrate Judge Zimmerman credibly testified4 that,

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after Gardiner produced the e-Smart card in his chambers, he went

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to the library without Gardiner or Drizin to show the e-Smart

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representatives the Fidelica card.

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e-Smart representatives, Magistrate Judge Zimmerman testified

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that he last saw the card in Saito’s hand and the e-Smart

After giving the card to the

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As credibility was a central issue at the hearing, the
character of the e-Smart representatives, Gardiner, and Drizin
was relevant and considered by the court. The court did not,
however, consider or rely on any of the exhibits defendants
submitted after Grace’s testimony, which are filed as Docket
Numbers 368 to 374.
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The court finds Magistrate Judge Zimmerman’s testimony
credible on all material issues and accepts his testimony as the
most accurate account of the relevant events.
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representatives testified that the card was placed on the library

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table when they finished examining it.

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that the card remained in the library after Magistrate Judge

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Zimmerman showed it to the e-Smart representatives.

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there is conflicting testimony about when and for how long

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Gardiner and Drizin returned to the library during the remainder

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of the settlement discussions, all of the parties agree that

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every time Gardiner and Drizin returned to the library, they were

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accompanied by Magistrate Judge Zimmerman.

Thus, it is undisputed

Although

The e-Smart

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representatives were thus the only individuals left in the

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library alone with the card and therefore the only individuals

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who had the opportunity to take the card outside the presence of

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Magistrate Judge Zimmerman.

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E-Smart has attempted to suggest that, even though only

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its representatives had access to the card in the library,

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Gardiner and Drizin snuck into the library to take the card after

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the e-Smart representatives left for lunch.

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declarations and at the hearing, the e-Smart representatives

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state that the Fidelica card was on the conference table in the

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library when they left for lunch and gone when they returned from

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lunch.

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mentioned to Magistrate Judge Zimmerman when everyone was looking

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for the card at the close of the settlement conference and was

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raised for the first time in the declarations.

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Zimmerman’s judicial assistant also credibly testified that she

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escorted Gardiner and Drizin out of chambers during the lunch

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break, which would have precluded them from sneaking into the

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library to take the Fidelica card.

In their

Significantly, however, this explanation was never

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Magistrate Judge

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E-Smart has also tried to suggest that, based primarily

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on their prior felony convictions, Gardiner’s and Drizin’s

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character makes it just as likely that they took the card.

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the court did not find Drizin to be a credible witness and finds

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him, like Grace, to display the typical characteristics of a con-

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artist, none of the evidence creates a plausible scenario under

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which Drizin had the motive or opportunity to take the Fidelica

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card.

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While

As for Gardiner, not only did he lack the opportunity

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to take the Fidelica card, but the court finds it is even less

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plausible that he would take the very card he brought to the

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settlement conference in the hopes of getting plaintiffs in

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trouble.

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court does not believe his prior misconduct paints him to be of

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as bad character as e-Smart suggests.

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fraud, his sentence included only a $10,000.00 fine and three

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years probation and he cooperated with the government.

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has the impression that Gardiner tends to be gullible to

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fraudulent schemes, and the court therefore is inclined to

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believe that he was himself a victim as well as a perpetrator in

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that case.

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Although Gardiner has been convicted of a felony, the

While he was convicted for

The court

The only other individuals who had access to the

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library were Magistrate Judge Zimmerman’s staff, which included

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his judicial assistant and a student extern who accompanied him

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for part of the settlement conference.

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any evidence suggesting even a remote possibility that these

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The record is devoid of

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individuals took the e-Smart card.5

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Accordingly, the e-Smart representatives were the only

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individuals with the opportunity to take the card and, of the e-

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Smart representatives, the evidence persuades the court that

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Grace was the one who took the card.

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Judge Zimmerman’s credible testimony about what occurred when he

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originally introduced the card, Grace’s testimony about the

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events was amorphous and appeared to develop as she testified.

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For example, when questioned about the technology on the Fidelica

In contrast to Magistrate

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card, Grace capriciously interjected that she actually asked

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Magistrate Judge Zimmerman to hold onto the card:

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I said, why in the world would he [(Gardiner)]--in fact,
I said to the Judge, I said, “Judge would you hold this
card? Would you hold this card with the special master
in the court, so” . . . “we can prove this is stolen, our
stolen technology. Not just on the ID Smart cards, but
now on the Fidelica cards that they had the audacity to
bring into court.”

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(Apr. 20, 2011, Tr. 59:2-9.)

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with a majority of Grace’s testimony--non-responsive to the

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actual question, Grace’s testimony that she asked Magistrate

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Judge Zimmerman to hold onto the Fidelica card was not

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corroborated by any other witness and was absent from her

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original declaration filed in response to Judge Patel’s Order to

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Show Cause.

Not only was this answer--along

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Grace also testified that, when the Fidelica card was

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presented, Gardiner indicated that he knew the technology on it

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Magistrate Judge Zimmerman’s testimony about contacting
the Marshal’s Office indicates his law clerk was in chambers
later that day. Nothing in the testimony suggests--nor can this
court surmise--any reason why the law clerk, or any other court
employee, would have taken the card.
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was stolen from e-Smart and that he had previously prepared an

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affidavit to that effect.

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asking Magistrate Judge Zimmerman to hold onto the card, any

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suggestion that Gardiner had prepared such an affidavit is absent

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from any of the e-Smart representatives’ declarations.

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Grace testified that some of the testimony missing from her

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declaration was in her notes and that e-Smart’s attorney failed

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to include it, she neither produced her notes nor denied that she

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reviewed her declaration before signing it.

Similar to her new testimony about

Although

As this declaration

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was prepared in response to the Order to Show Cause, the

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importance of her account of what happened was clear.

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absence of such significant testimony from her declaration and

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her addition of it for the first time at the hearing leaves the

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court firmly convinced that Grace is developing an ever-changing

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story to cover up for her misconduct in taking the Fidelica card.

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The

With respect to her motive to take the card, the court

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finds it highly probable that Grace was simply taking back what

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she, in her way of perceiving things, believed belonged to e-

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Smart.

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initially presented the card to the e-Smart representatives,

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Grace “sort of did a -- like, a double-take, you know,” giving

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him the impression that she thought defendants had “found

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something.”

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that the Fidelica card had e-Smart’s “stolen technology,” (Apr.

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20, 2011, Tr. 49:9), and told Magistrate Judge Zimmerman that

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Fidelica “was another company that has stolen our trade secrets.”

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(Apr. 7, 2011, Tr. 57:9-10.)

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believed the Fidelica card Gardiner produced at the settlement

Magistrate Judge Zimmerman testified that when he

(Apr. 7, 2011, Tr. 57:2-4.)

Grace also testified

Grace further testified that she

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conference “was stolen from us, from e-Smart, and brought into

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the conference.”

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to the card and purported belief that it was stolen from e-Smart

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and contained e-Smart’s stolen technology, along with her

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demeanor throughout her testimony and obvious animosity toward

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Gardiner and Drizin,6 convinces the court that Grace felt

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justified in simply taking back what she asserted belonged to her

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company.

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(Apr. 20, 2011, Tr. 66:4-7.)

Grace’s reaction

Grace’s testimony and demeanor also persuade the court
that she has skated through her various ventures as a flim-flam

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Throughout her testimony, Grace constantly tried to
slip in negative comments about Gardiner and Drizin, making her
disdain for them anything but discreet. The following is one
example:
[MR. PATCHEN]: My question is: If the Fidelica card was
not using the trade secrets of e-Smart, then you would
have no objection to Mr. Gardiner producing a card that
was like Fidelica.
A:
I can’t answer that question. Because, like Mr.
Satio explained, I’m not qualified to answer what card
has what on it.
I would have to ask experts if this card in any way
-- it has been derived from our technology, has been -these are all ex-employees. These people -- have you
ever seen their entire background?
Q:
My question for you, Ms. Grace -A:
Okay. Their entire background that we’re -- it
includes owning a brothel by -- there was a book written
last year called “The Man who Took America to War” that
said he -THE COURT:
Don’t get into it -THE WITNESS:
-- laundered money for the Mafia, and he
-MR. PATCHEN:
Your honor, move to strike.
THE WITNESS:
I mean, these people are -- he’s
defrauded so many of our investors and shareholders that
we can bring in here that he would -THE COURT:
Wait, don’t -THE WITNESS:
He would guarantee them he would give
them triple their money back. And then -- . . . .
(Apr. 20, 2011, Tr. 62:10-23.)
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artist who fabricates information in an attempt to extort a

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profit.

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required “10-K” Securities and Exchange Commission filings since

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2007, Grace first evaded the question and, when the court

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repeated the question, she could not give a consistent or clear

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answer:

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For example, when asked why e-Smart had not filed its

Well, we filed it -- we have not filed it, on the advice
of counsel. And, we will be preparing it. But, we are
looking at different reorganization -- I mean,
restructuring of the company. And on advice of counsel,
we will do it. We have -- you know, we have informed our
attorneys. I -- I act on advice of counsel, but -- and,
it will be. I mean, we are in the process of trying to
get the 10-Ks filed.

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(Id. at 92-93:5.)

Grace also repeatedly evaded questions by

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resorting to an explanation that e-Smart has six hundred

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shareholders and her utmost concern is for those shareholders.

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The court was unpersuaded, however, that e-Smart is anything more

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than a sham company or that Grace’s concern for its shareholders

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extends beyond the financial gain they bring her.

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Based on her demeanor testifying and conduct during the

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settlement process of this case, the court is also convinced that

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Grace views the judicial process as a mere tool to conduct

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business rather than an avenue to resolve disputes.

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Judge Zimmerman, who spent more hours attempting to settle this

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case than in any other case, testified that he was under the

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impression that Grace was not negotiating in good faith during

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the settlement process.

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Gardiner and Drizin with a colleague, Grace’s comment about her

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strategy also reflects her use of litigation as an improper

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business tool: “I believe if we can put the pressure of a second

Magistrate

When discussing a separate case against

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lawsuit on both Gardiner and Drizin, that we can resolve both

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suits exponentially [sic].”

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(Defs.’ Ex. Y.)

The testimony of the other e-Smart representatives does

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not create any reason to doubt that Grace took the card.

The

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court did not find Soliven to be a credible witness and does not

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believe his testimony that Gardiner and Drizin left belongings

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close to the card and, after the e-Smart representatives returned

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from lunch, that the card and belongings on the table were gone.

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Krishnan did not appear to have an independent recollection of

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the details of what occurred that day and appeared to simply

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agree with the general story advanced by his colleagues.

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based on his defensive and argumentative demeanor throughout his

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testimony, the court finds it highly probable that, even though

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he did not take the Fidelica card, Saito would not disclose the

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fact that Grace took it if he was privy to that information.

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Lastly,

Accordingly, when contrasted to the lack of any

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plausible scenario under which another individual took the

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Fidelica card, the evidence establishing that Grace had the

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opportunity and motive to take the card, along with her lack of

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credibility as witness, convinces the court that it is highly

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probable that Grace took the Fidelica card on August 12, 2010.

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B.

Determining Whether Civil Contempt Occured
Having found that Grace took the Fidelica card, the

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next question is whether the Special Prosecutor proved, by clear

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and convincing evidence, that her conduct “violated a specific

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and definite order of the court.”

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1069.

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Cir. 1992), the Special Prosecutor argues that e-Smart can be

In re Bennett, 298 F.3d at

Relying on United States v. McGainey, 37 F.3d 682 (D.C.

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held in civil contempt if Grace obstructed the administration of

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justice even if her conduct did not violate a specific court

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order.

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In McGainey, the appellate court upheld McGainey’s

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conviction for criminal contempt after he made a threatening

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gesture in the galley of a courtroom during a criminal trial.

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Id. at 685-86.

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was based on 18 U.S.C. § 401(1), which empowers the court to hold

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an individual in criminal contempt for “[m]isbehavior . . . in

His conviction for criminal contempt, however,

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its presence or so near thereto as to obstruct the administration

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of justice.”

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684 (identifying the elements of criminal contempt as

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“misbehavior of a person, in or near to the presence of the

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court, which obstructs the administration of justice, and which

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is committed with the required degree of criminal intent”).

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a criminal contempt conviction under § 401, courts have held that

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“[w]illfulness is an essential element.”

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Laurins, 857 F.2d 529, 534 (9th Cir. 1988).

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18 U.S.C. § 401(1); see also McGainey, 37 F.3d at

For

United States v.

At first blush, McGainey appears easily distinguishable

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as it dealt with criminal, not civil, contempt and § 401 governs

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criminal, not civil, contempt.

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repeatedly stated that § 401, although appearing in the criminal

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code, applies equally to civil contempt.

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Powers, 629 F.2d 619, 624 (9th Cir. 1980) (“Title 18 U.S.C. §§

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401 and 402 provide federal courts statutory authority to punish

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contemptuous actions.

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civil contempt and contains no limitation on the power of the

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district court to impose fine or imprisonment for a violation.”);

The Ninth Circuit, however, has

See United States v.

Section 401 applies to both criminal and

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United States v. Miller, 588 F.2d 1256, 1262 (9th Cir. 1978)

2

(same); cf. Britton v. Co-op Banking Grp., 916 F.2d 1405, 1409

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n.4 (9th Cir. 1990) (noting that a district court may impose

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civil contempt pursuant to 18 U.S.C. § 401(3), which provides for

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criminal contempt for “[d]isobedience or resistance to [the

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court’s] lawful writ, process, order, rule, decree, or

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command”).7
Despite indicating that § 401 provides authority for

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civil and criminal contempt, the Ninth Circuit has never held

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that obstruction of justice, without the violation of a specific

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court order, is sufficient to give rise to civil contempt.

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the issue were to be properly raised before the Ninth Circuit,

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this court doubts that the Ninth Circuit would continue to rely

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on § 401 for civil contempt.

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criminal contempt and relying on caselaw for the standards

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governing the court’s inherent civil contempt power is also

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consistent with the Supreme Court’s criminal and civil contempt

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decisions.

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(1978) (citing § 401 as authority for criminal contempt and a

If

Limiting application of § 401 to

See, e.g., Hutto v. Finney, 437 U.S. 678, 690-91

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Presumably, if § 401 could be relied on for civil
contempt, the caselaw requiring the requisite level of intent for
criminal contempt under § 401 would not apply to civil contempt.
See McComb v. Jacksonville Paper Co., 336 U.S. 187, 191 (1949)
(“Civil as distinguished from criminal contempt is a sanction to
enforce compliance with an order of the court or to compensate
for losses or damages sustained by reason of noncompliance.
Since the purpose is remedial, it matters not with what intent
the defendant did the prohibited act.”); Perry v. O’Donnell, 759
F.2d 702, 705 (9th Cir. 1985) (“Although willfulness is a
necessary element of criminal contempt, we find it significant
that civil contempt may be established even though the failure to
comply with the court order was unintentional.”); United States
v. Asay, 614 F.2d 655, 661 (9th Cir. 1980) (“Willfulness is not
an element of civil contempt.”).
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prior Supreme Court decision as authority for civil contempt);

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Bagwell, 512 U.S. 821 (omitting any reference to § 401 in its

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lengthy discussion of civil contempt).
Relying on subsection 401(1) to find civil contempt

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absent a court order would also conflict with the unequivocal and

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long-standing precedent requiring disobedience of a court order

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for civil contempt.

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298 F.3d at 1069; see also Labor/Comty. Strategy Ctr. v. L.A.

9

Cnty. Metro. Transp. Auth., 564 F.3d 1115, 1123 (9th Cir. 2009)

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(“For issuance of a contempt order against MTA to be proper, BRU

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must establish (1) that [the contemnor] violated the court order,

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(2) beyond substantial compliance, (3) not based on a good faith

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and reasonable interpretation of the order, (4) by clear and

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convincing evidence.”) (internal quotation marks omitted); Gates

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v. Shinn, 98 F.3d 463, 472 (9th Cir. 1996) (“Civil contempt is

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appropriate only when a party fails to comply with a court order

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that is both specific and definite.”) (internal quotation marks

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omitted).

See Gifford, 741 F.2d at 265; In re Bennett,

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Not only does the precedent in this circuit state that

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civil contempt cannot occur absent disobedience of an order from

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the court, none of the parties cited and this court was unable to

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find a single Ninth Circuit case in which a party has been

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adjudged in civil contempt absent a court order.

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be thorough, this court conducted a Westlaw search for every

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published Ninth Circuit decision that used the term “civil

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contempt.”

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of each of those cases confirmed that the Ninth Circuit has never

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addressed, in a published opinion, a district court’s

In an effort to

The search revealed 298 cases and the court’s review

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adjudication of civil contempt absent disobedience of a court

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order giving rise to the contempt.8

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Accordingly, in light of the clear precedent in this

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circuit and the absence of a single Ninth Circuit decision in

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which a contemnor was found in civil contempt absent disobedience

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of a court order, the court concludes that an individual can be

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found in civil contempt only for violation of a specific and

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definite court order, not for the obstruction of justice in the

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absence of a court order.

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Because e-Smart cannot be held in civil contempt absent

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one of its representative’s disobedience of a specific and

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definite order of the court, the court must determine whether

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Grace’s conduct violated a court order.

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contend that Magistrate Judge Zimmerman issued an order

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prohibiting taking the card, and thus Grace’s theft of the card

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did not constitute civil contempt.

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initially missing at the close of the settlement conference,

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Magistrate Judge Zimmerman instructed the parties to “conduct a

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really good search” because he “want[ed] the card found.”

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7, 2011, Tr. 67:6-10.)

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Judge Zimmerman wanted the missing card returned immediately, his

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instructions to the e-Smart representatives did not clearly

None of the parties

When the Fidelica card was

(Apr.

Although it was clear that Magistrate

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The brevity of four per curiam decisions prevents the
court from determining whether an order gave rise to the civil
contempts at issue in the appeals, but nothing suggests that
orders were not issued in each of the cases. See Hughes v.
Sharp, 476 F.2d 975 (9th Cir. 1973); Olsen v. United States, 446
F.2d 912 (9th Cir. 1971); Matter of Bowden, 444 F.2d 546 (9th
Cir. 1971); Bd. of Governors of the Fed. Reserve Sys. v.
Transamerica Corp. & Bank of Am., Nat’l Trust & Sav. Ass’n, 184
F.2d 326 (9th Cir. 1950).
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constitute an order from the court.

Most tellingly, Magistrate

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Judge Zimmerman used the verb “jawbone” to describe his efforts

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to have the card returned, which included telling the e-Smart

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representatives that searches would be performed.

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Dictionary.com, http://dictionary.reference.com/browse/jawbone

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(defining the informal use of jawbone as “to attempt to influence

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or pressure by persuasion rather than by the exertion of force or

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one’s authority, as in urging voluntary compliance with economic

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guidelines”) (last accessed May 12, 2011).

See

Because Magistrate

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Judge Zimmerman did not clearly order the card returned the day

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of the settlement conference, Grace’s refusal to return the card

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at the settlement conference cannot amount to civil contempt.

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On the day after the settlement conference, however,

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Magistrate Judge Zimmerman issued a clear, unequivocal, and

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specific order to the e-Smart representatives.

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stated:

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The sealed Order

IT IS HEREBY ORDERED that everyone who participated in
yesterday’s settlement conference shall make every effort
to locate the missing smart card (with a picture of
George Washington on it) and return it to the Court. It
may be returned anonymously by sending it to [chambers].
. . . Counsel for plaintiff is ORDERED to serve a copy of
this Order on every one of plaintiff’s representatives
and to file a declaration of service. If the card is not
returned by August 20, 2010, I will turn the matter over
to the FBI to investigate or certify the facts to Judge
Patel to determine if there has been spoliation of
evidence.

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(Docket No. 324.)

Grace does not deny receiving notice of this

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order and, other than denying that she originally stole the

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Fidelica card, Grace does not defend on the grounds that she

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could not comply with Magistrate Judge Zimmerman’s Order.9

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Accordingly, after stealing the e-Smart card during the

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settlement conference, Grace was in contempt of court when she

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failed to return it by August 20, 2010, in violation of the

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August 13, 2010, Order.

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C.

Determination of the Appropriate Remedy
As the adjudication of civil contempt concludes the

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need for Magistrate Judge Zimmerman to serve as a witness to the

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events at the settlement conference on August 12, 2010, the

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conflict resulting from Judge Patel or another judge in the

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Northern District presiding over the civil contempt hearing no

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longer exists.

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to determine whether the appropriate remedy is dismissal with

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prejudice, as suggested in the Order to Show Cause, or some

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lesser sanction, such as one of the alternatives the Special

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Prosecutor suggested in his memorandum of April 20, 2011.

Accordingly, the court will defer to Judge Patel

(See

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It could be hypothesized that Grace was unable to
return the card because she had destroyed or discarded it. See
generally United States v. Rylander, 460 U.S. 752, 757 (1983)
(“In a civil contempt proceeding . . . , a defendant may assert a
present inability to comply with the order in question. . . . It
is settled, however, that in raising this defense, the defendant
has a burden of production.”). But see Falstaff Brewing Corp. v.
Miller Brewing Co., 702 F.2d 770, 782 n.7 (9th Cir. 1983) (“This
court, in dicta, has asserted that self-induced inability [to
comply] is not a defense to a charge of compensatory civil
contempt.”) (citing United States v. Asay, 614 F.2d 655, 660 (9th
Cir. 1980)). Even assuming inability to comply could serve as a
defense in this case, none of the evidence before the court
suggests that Grace would have discarded or destroyed the card
before Magistrate Judge Zimmerman issued his Order. To the
contrary, the court finds it highly probable that, after
successfully stealing what she believed belonged to her, Grace
would have held on to the card. Moreover, even if Grace
discarded the card, the Order--issued less than twenty-four hours
after she could have discarded it--unequivocally ordered her to
“make every effort to locate the missing card.” (Docket No.
324.)
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1

Docket No. 363 (suggesting that appropriate remedies could be

2

ordering “reimbursement of Defendants[’] costs associated with

3

retaining and preparing [an] expert” to testify about the

4

technology on the Fidelica card, “a preclusion order, a shift of

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the burdens of production and/or persuasion, or an order

6

requiring payment for Defendants’ costs to locate and subpoena

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production of a replacement Fidelica card”).)

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9

NOW, THEREFORE plaintiff e-Smart Technologies, Inc., is
hereby adjudged in civil contempt of the court’s Order of August

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13, 2010.

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to Judge Patel for all further proceedings, including

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determination of the appropriate remedy to enforce this Order.

13
14

(Docket No. 324.)

This matter is hereby referred back

IT IS SO ORDERED.
DATED:

May 18, 2011

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