Arma Yates, LLC, et al v. Arma Care Center, LLC et al

Filing 196

MEMORANDUM Opinion and Order: Judgment Creditors' motion for a rule to show cause against Jon Robertson 138 , as recently supplemented 189 , is granted in part and denied in part. Signed by the Honorable Thomas M. Durkin on 5/14/2018. Mailed notice.(ym, )

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
ARMA YATES, LLC, et al.,
Plaintiffs,
v.
ARMA CARE CENTER, LLC, et al.,
Defendants.

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No. 15 C 7171
Judge Thomas M. Durkin

MEMORANDUM OPINION & ORDER
For the reasons set forth below, plaintiffs Arma Yates LLC, Florence Heights
Associates LLC, Hutchinson Kansas LLC, Minnesota Associates LLC, Ogden
Associates LLC, Peabody Associates Two LLC, Sedgwick Properties LLC, and
Wellington Subleasehold LLC’s (“Judgment Creditors’”) motion for a rule to show
cause

against

defendant

Jon

Robertson

(“Robertson”)

[138],

as

recently

supplemented [189], is granted in part and denied in part.
Background
On July 14, 2016, this Court entered an agreed order requiring the
production of certain records prior to Robertson’s deposition in this case. R. 84. The
order required Robertson to “produce, on or before July 21, 2016, all business
records and correspondence dating at least as far back as the filing of this lawsuit,
to the extent such documents are in his possession or under his control, related to:
. . . d. Details regarding any transfer of the [Esther Johnson Trust (‘Trust’)], or any

assets held in or by the Trust, overseas or elsewhere including, if possible, an
accounting of Trust funds transferred.” R. 84 ¶ 1. Judgment Creditors believe that
Robertson did not produce all Trust-related documents that were in his possession
or control. Robertson claims that he produced all relevant documents in his
possession or control.
On December 16, 2016, this Court entered judgment in favor of Judgment
Creditors in the amount of over $30 million. R. 107. The judgment remains largely
unsatisfied. Judgment Creditors issued citations to discover assets on March 10,
2017. R. 108; R. 112. When Judgment Debtors failed to comply with the citations,
Judgment Creditors followed up with motions to compel, and this Court granted
those motions. R. 114; R. 116; R. 127. On April 15, 2017, the Court entered a
turnover order specifically directing Robertson to comply with the citations. R. 128;
R. 130.
On May 22, 2017, Judgment Creditors moved for a rule to show cause. R. 138.
That motion sought, among other things, an order for “Judgment Debtors J.
Robertson and [his wife] S. Robertson . . . to appear before the Court to answer
questions, under oath, propounded by the Court and counsel for Judgment
Creditors.” Id. at 7. At a show cause hearing on May 31, 2017, the Court granted
Judgment Creditors’ request and ordered an evidentiary hearing to take place. R.
142.
The evidentiary hearing was subsequently postponed several times, first by
Robertson’s request for a continuance (R. 157) and then by Robertson and his wife’s

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two successive bankruptcy filings (R. 159; R. 163). The first bankruptcy case was
dismissed by the United States Bankruptcy Court for the District of Utah on
September 20, 2017. R. 160-1. In the second bankruptcy case, the Bankruptcy Court
issued an order on December 4, 2017 “confirm[ing] that the automatic stay has
terminated with respect to the Debtors under 11 U.S.C. § 362(c)(3) as to any actions
by the Judgment Creditors with respect to the judgment debt owed to them by the
Debtors” and expressly authorizing this Court to convene a show cause hearing in
this case. R. 164-1 at 2-3.
After continued scheduling difficulties (see R. 167; R. 168; R. 173), the Court
ultimately conducted a two and a half hour evidentiary hearing on March 1, 2018.
R. 186. The Robertsons and one of the Judgment Creditors’ counsel appeared by
video. R. 187 at 1. At the end of the hearing, the Court authorized Judgment
Creditors to supplement their motion for rule to show cause. Id. at 87. Judgment
Creditors filed a supplement a few weeks later (R. 189), Robertson responded (R.
193), and the Judgment Creditors replied (R. 194).
Analysis
As set forth in Judgment Creditors’ supplement to their motion for rule to
show cause, Judgment Creditors seek three forms of relief against Robertson: (1)
“civil contempt (until such time as he provides credible evidence as to the location of
the Trust’s assets or transfer of same), [2] criminal contempt (incarceration for
providing perjurious testimony and material misrepresentations . . . ), and/or [3] a
referral to an appropriate United States Attorney’s Office for prosecution for

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providing false statements and testimony, and/or bankruptcy fraud.” R. 189 at 2.
The Court addresses each form of requested relief in turn.
Civil Contempt. “To hold a party . . . in civil contempt, the district court
must be able to point to a decree from the court which set[s] forth in specific detail
an unequivocal command which the party . . . in contempt violated.” Jones v.
Lincoln Elec. Co., 188 F.3d 709, 738 (7th Cir. 1999). As the Jones court further
explained:
civil contempt proceedings may be classified into two categories.
Coercive sanctions, which are really the essence of civil contempt, seek
to induce future behavior by attempting to coerce a recalcitrant party
or witness to comply with an express directive from the court.
Remedial sanctions, by contrast, are backward-looking and seek to
compensate an aggrieved party for losses sustained as a result of the
contemnor’s disobedience of a court’s order or decree made for the
aggrieved party’s benefit. However, irrespective of the nature of the
civil contempt, whether it be coercive or remedial, any sanction
imposed by the court must be predicated on a violation of an explicit
court order.
Id.
Here, Judgment Creditors seek coercive and remedial civil contempt
sanctions. But Judgment Creditors do not show that Robertson violated “a decree
from the court which set[s] forth in specific detail an unequivocal command.” Id.
Judgment Creditors cite this Court’s motion to compel and turnover orders in
general terms without identifying a specific decree in those orders they claim
Robertson violated. Judgment Creditors also point to this Court’s July 14, 2016
order for Robertson to produce “[d]etails regarding any transfer of the Trust, or any
assets held in or by the Trust, overseas or elsewhere including, if possible, an

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accounting of Trust funds transferred.” R. 84 ¶ 1. Importantly, however, this order
obligated Robertson to produce these records only “to the extent such documents
[we]re in his possession or under his control.” Id. And Robertson testified repeatedly
at the evidentiary hearing that he had produced all records in his possession or
under his control. R. 187 at 67, 71, 74-75.
As this Court summarized at the end of the evidentiary hearing: “I didn’t
hear anything today from . . . Robertson [or his wife] that they have records that
they have refused to produce.” Id. at 85. Judgment Creditors responded that
Robertson could potentially obtain further records, including bank records
documenting the alleged sale of assets from the Trust since 2014 as reflected in
Robertson’s bankruptcy schedules.1 Id. at 86; see also id. at 66, 73-75. But as this
Court explained, “Mr. Robertson said he doesn’t have the money to go seek copies of
any bank records because the banks don’t give them to you for free.” Id. at 86-87; see
also id. at 75 (Robertson testified: “I am confident there’s bank records. I can’t
afford to go buy the bank records. I gave what I had.”). This Court instructed
Judgment Creditors that “[t]hat’s certainly something [they] could pursue if [they]
wanted.” Id. at 87.

Robertson and his wife claim that nearly all of their assets were taken by the
IRS following Robertson’s guilty plea and conviction for tax evasion in 2014, and
that the Robertsons then sold their jewelry, furniture, and art over a period of time
beginning in 2014 to cover their living and legal expenses. See R. 193 at 4-5. The
Robertsons claim that Judgment Creditors “refuse to believe that the U.S.
Government got into the Robertsons’ pockets” first “and essentially cleaned the
Robertsons out.” Id. at 5.

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The point that gives the Court pause are the May 2016 Trust dissolution
documents, which Robertson disclosed for the first time in his response to Judgment
Creditors’ supplemental filing. R. 193 at 27-30. These documents were specifically
raised at the evidentiary hearing, and Robertson testified that he did not have them
in his possession. R. 187 at 66. Then, “like manna from heaven” as the Judgment
Creditors put it in their reply (R. 194 at 3), Robertson attached the Trust
dissolution documents to his post-hearing response.
Although Robertson does not explain in his response how he obtained these
documents, the Court does not find evidence of a violation of an unequivocal Court
command based on Robertson’s attachment of these documents to his response.
Robertson explained at the evidentiary hearing that it was his understanding that
the Trust dissolution documents were produced by his counsel to Judgment
Creditors. Id. at 66; see also id. at 62. Robertson explained that after he and his wife
signed the dissolution documents, he returned them to his counsel. Id. at 62.
Robertson made a consistent representation in a March 15, 2018 proceeding in
bankruptcy court. He stated that the Trust dissolution documents were “in the
possession of the firm that handled it in Colorado” and not in his possession at that
time. R. 194-1 at 14. Robertson’s bankruptcy attorney then represented that he
would “contact [the Colorado firm] and get them.” Id. It seems likely that Robertson
obtained the Trust dissolution documents through his bankruptcy counsel after this
hearing, and that is why he was able to attach them to his April 3, 2018 response.
R. 193. Furthermore, these documents are not evidence helpful to the Judgment

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Creditors that Robertson would have had reason to deliberately withhold. Rather,
they support Robertson’s testimony about the Trust being dissolved. See R. 189 at
12 (Judgment Creditors raising question as to whether the Trust was ever in fact
dissolved).
The remaining discussion in Judgment Creditors’ supplement focuses on
evidence of perjury by Robertson. But as Judgment Creditors acknowledge (R. 189
at 6), perjury alone does not warrant a punishment of civil contempt. E.g., Ex parte
Hudgings, 249 U.S. 378, 383 (1919) (“in order to punish perjury in the presence of
the court as a contempt there must be added to the essential elements of perjury
under the general law the further element of obstruction to the court in the
performance of its duty”); Jones, 188 F.3d at 739 (“acts of false swearing or perjury,
standing alone, are insufficient to constitute civil contempt”).
In sum, Judgment Creditors have not met their burden to prove that
Robertson violated a specific, unequivocal Court command. It would be one thing if
Robertson had never shown up for an evidentiary hearing as ordered, or if he
refused to answer questions at that hearing. But that is not the case here. Further,
the remedy sought by the Judgment Creditors is to hold Robertson in contempt
until he “provides credible evidence as to the location of the Trust’s assets or
transfer of same.” R. 189 at 2. But this Court cannot compel production of evidence
that a party testifies is not in his possession or control unless or until there is
credible reason to find that it is in the party’s possession or control. As such, the
Court denies the Judgment Creditors’ request to hold Robertson in civil contempt.

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See, e.g., Porter v. Creative Nail Design, Inc., 1990 WL 52299, at *2 (N.D. Ill. Apr.
11, 1990) (“Because no specific court order was violated, the court denies plaintiff’s
petition for a rule to show cause” and civil contempt).
Criminal Contempt. “The essential elements of a finding of criminal
contempt under 18 U.S.C. § 401(3) are a lawful and reasonably specific order of the
court and a willful violation of that order.” Doe v. Maywood Hous. Auth., 71 F.3d
1294, 1297 (7th Cir. 1995). “The text of § 401(3) doesn’t contain a willfulness
requirement, but [the Seventh Circuit], like all circuits, hold[s] that it is a necessary
element that must be proved beyond a reasonable doubt.” United States v. Trudeau,
812 F.3d 578, 588 (7th Cir. 2016), cert. denied, 137 S. Ct. 566 (2016). “[W]illfulness
means a volitional act done by one who knows or should reasonably be aware that
his conduct is wrongful.” Id. For the same reasons the Court rejected Judgment
Creditors’ argument for civil contempt sanctions based on the lack of a specific court
order violated by Robertson, the Court rejects Judgment Creditors’ argument that
the higher bar for criminal contempt is satisfied.
Referral to United States Attorney’s Office. Judgment Creditors do,
however, set forth significant evidence that Robertson has committed perjury and/or
bankruptcy fraud. See, e.g., R. 187 at 10, 17-19 (despite Robertson’s testimony that
“no cash was ever contributed to th[e] [T]rust,” records appear to show that cash
was transferred); id. at 26-29 (evidence that artwork, jewelry, and furniture items
listed in May 8, 2016 letter to this Court purporting to contain “a list and
description of any assets . . . that have been conveyed away [by Robertson] since

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May 1, 2014” are not listed in Robertson’s bankruptcy schedules); id. at 57
(impeachment of Robertson based on his deposition testimony about whose idea it
was to establish the Trust); compare id. at 60-61 (impeachment of Robertson based
on his deposition testimony about whose decision it was to dissolve the Trust) with
R. 193 at 4-5 (Robertson’s new assertion in his response that the Trust was
dissolved “as part of [his] deal with the government” in connection with his prior
criminal conviction for tax evasion); compare R. 148 ¶ 29 (Robertson declaring that
“[t]he [T]rust has never been a holding company of the defaulted defendants”) with
R. 187 at 58 (Robertson’s testimony authenticating organization chart appearing to
show that the Trust was a holding company for the defaulted defendants).
The Seventh Circuit has found referral to a United States Attorney’s Office
appropriate based on a litigant’s flouting of his duty to be honest with the court.
Neal v. LaRiva, 765 F.3d 788, 791 (7th Cir. 2014); accord Negrete v. Nat’l R.R.
Passenger Corp., 547 F.3d 721, 722 (7th Cir. 2008) (“because it appears that Negrete
may have committed perjury, we refer this opinion to the United States Attorney”).
This Court “order[s] the Clerk of this court to send copies of this opinion and the
case file to the United States Attorney” for the District of Utah, where Robertson’s
bankruptcy proceeding is ongoing, “so that he may consider the question whether
[Robertson] should be prosecuted for the crime of perjury, 18 U.S.C. § 1621,”
bankruptcy fraud, “or any other offense that he deems appropriate.” See Neal, 765
F.3d at 791.

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Conclusion
For these reasons, Judgment Creditors’ motion for a rule to show cause
against Robertson (R. 138), as recently supplemented (R. 189), is granted in part
and denied in part. The Court orders the Clerk of this Court to send copies of this
opinion and the case file to the United States Attorney for the District of Utah to
consider whether Robertson should be prosecuted for the crimes of perjury,
bankruptcy fraud, or any other offense that the United States Attorney deems
appropriate.

ENTERED:

Honorable Thomas M. Durkin
United States District Judge

Dated: May 14, 2018

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