Friedman v. Landau et al

Filing 180

ORDER TO SHOW CAUSE, SCHEDULING ORDER & MEMORANDUM, The court REJECTS the R&R 175 and ORDERS Borzouye to SHOW CAUSE in writing, by no later than 7/6/2018, why the court should not issue an order directing the United States Marshals to take him into their custody and hold him in their custody until such time as he purges his civil contempt by paying the Self Help Defendants what they are owed pursuant to the Sanctions Order. The Self Help Defendants shall submit their reply, if any, by no later than 7/13/2018. The court further DIRECTS Borzouye and the Self Help Defendants to appear at a hearing before the undersigned on 7/17/2018 at 02:30 PM in Courtroom 4D South before Judge Nicholas G. Garaufis. The Court will not consider any request s by Borzouye for adjournment of this hearing. The court HOLDS IN ABEYANCE entry of an order of contempt against Borzouye pending the court's determination of the proper sanction, if any, for his contempt. Service of this order upon Borzouye 9;s counsel of record by ECF shall be deemed sufficient notice. If Borzouye does not timely respond to the order to show cause or appear at the hearing on July 17,2018, the court will find him in contempt of court and issue a warrant for his arrest. So Ordered by Judge Nicholas G. Garaufis on 6/27/2018. (Lee, Tiffeny)

V/F
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
-X

ROBERT FRIEDMAN,
ORDER TO SHOW CAUSE,

Plaintiff,

SCHEDULING ORDER &
MEMORANDUM

-againstll-CV-3210(NGG)
(JO)
SELF HELP COMMUNITY SERVICES,INC., et al.
Defendants.
X

NICHOLAS G. GARAUFIS,United States District Judge.

Before the court is a motion by Defendants United Jewish Appeal, Inc.; United Jewish

Appeal-Federation of Jewish Philanthropies ofNew York; United Jewish Appeal Federation of
New York Charitable Fund LLC; and Self Help Community Services, Inc., and its employees
(collectively, the "Self Help Defendants")for coercive contempt sanctions against non-party
Richard Borzouye,former counsel for Plaintiff Robert Friedman (the "Second Contempt
Motion"). (Apr. 26,2018, Request to Renew Mot. for Contempt("2d Contempt Mot.")

(Dkt. 169).) Last year, following submission ofthe Self Help Defendants' first attempt to have

the court impose contempt sanctions upon Borzouye (the "First Contempt Motion")
(May 9,
2017, Appl. That Borzouye Show Cause ("1st Contempt Mot.")(Dkt. 150)), the undersigned
referred this matter to Magistrate Judge James Orenstein for a report and recommendation
("R&R")(Sept. 7, 2017, Order). On May 21,2018, Judge Orenstein issued a sua sponte R&R
recommending that the court deny the Self Help Defendants' various requests for coercive
sanctions. (See May 21,2018, R&R("R&R")(Dkt. 175).) For the following reasons, the court
REJECTS the R&R and ORDERS Borzouye to SHOW CAUSE why coercive contempt

sanctions, including imprisonment, should not issue against him.

I.

BACKGROUND

The latest chapter in this long-running case is a sad one indeed. On March 17, 2015,

following a pattern of misconduct and poor performance by Borzouye in the course of his
representation of Friedman, the court imposed sanctions against him pursuant to Federal Rule of
Civil Procedure 11. (See Mar. 17, 2015, Mem.& Order(Dkt. 121) at 9-11, 13; Clerk's J.

(Dkt. 122).) After briefing, the court ordered Borzouye to pay $20,000 to the Self Help
Defendants(the "Sanctions Order"). (See Feb. 17,2017, Mem.& Order ("Feb. 17,2017,
M&O")
(Dkt. 143) at 7; Clerk's J.(Dkt. 144).) When Borzouye did not pay the sanctions despite

repeated requests, the Self Help Defendants moved to hold Borzouye in contempt of court(1st
Contempt Mot.)and the court ordered him to show cause why he should not be held in contempt

(the "OTSC")(see Aug. 10,2017, Order to Show Cause("OTSC")(Dkt. 154)). Borzouye did
not respond to the OTSC. (See Sept. 7,2017, Order.) The undersigned referred this matter to
Judge Orenstein, who, after Borzouye declined to appear at a mandatory status conference,
announced that he would recommend that the court hold Borzouye in detention until he complied

with the Sanctions Order. (See Oct. 5, 2017, Min. Entry (Dkt. 156).) At a status conference on

January 25, 2018,the Self Help Defendants and Borzouye—^who had, by this point, been
suspended from the practice oflaw in New York State—announced their intention to attempt to

negotiate a payment plan to satisfy Borzouye's outstanding debt. (See Jan. 25,2018, Min. Entry
(Dkt. 161); Tr. of Jan. 25, 2018, Status Conference ("Jan 25 Conf. Tr.")(Dkt. 178).) On
March 13, 2018, Borzouye and the Self Help Defendants agreed to a payment schedule and

stipulation offorbearance. (Stipulation & Order of Forbearance(Dkt. 167).) Judge Orenstein
deemed the motion for coercive sanctions to be moot, and this story had a happy ending...
almost. (See Mar. 13, 2018, Order.)

On April 26, 2018,the Self Help Defendants informed the court that they never received

Borzouye's first payment, which was due on April 1,2018. (2d Contempt Mot.) They reached
out to Borzouye's attorney to figure out what had gone wrong, but the attorney stated that he too
had not been able to reach his client to resolve this issue. (Id at 1.) At that point, the Self Help
Defendants averred that they had "done all that is reasonably] possible to compel Mr.

Borzouye's compliance with the orders ofthis Court" and renewed their request for coercive

sanctions.^ (Id at 2.) At a status conference on May 8, 2018, Borzouye's attorney asked for "a
little more time" on behalf of his client and proposed that Borzouye assign to the Self Help
Defendants a $10,000 lien against his proceeds from another case. (Tr. of May 8, 2018, Status

Conference("May 8 Conf. Tr.")(Dkt. 179)3:18-21, 6:16-7:1.) Judge Orenstein ordered the
parties to try to work out an agreement and to report back to the court"by the end ofthe week."
ad 8:22-23.) That Friday, however,the Self Help Defendants reported that they had "received
no information" from Borzouye or his attorney concerning "the existence and value ofthe

$10,000 lien." (SelfHelp Defs. May 11,2018, Letter(Dkt. 174).) Accordingly, the Self Help
Defendants reiterated their request to hold Borzouye in coercive detention. (Id.I

On May 21, 2018, Judge Orenstein issued an R&R recommending that the court deny the
Self Help Defendants' request that the court issue a warrant for Borzouye's arrest. (R&R.)
Although "frustrat[ed] at the inability to find a better resolution"(id at 1), Judge Orenstein
found that a civil contempt sanction would not be appropriate in this instance because "the
record does not suffice to demonstrate that Borzouye's failure to pay the Self Help Defendants

' addition to the request for Borzouye's incarceration, which the Self Help Defendants submit is "now the only
In
efficacious remedy," Aey have requested, at various points iu time:(1)award ofthe Self Help Defendants' fiill
lodestar rate in attorneys' fees;(2)award of additional weekly sanctions until paid;(3)award of additional
attorneys' fees incurred to compel Borzouye's compliance with the Sanctions Order; and(4)Borzouye's referral for

possible disciplinary proceedings. (1st Contempt Mot.; SelfHelp Defs. Resp. to OTSC("Defs. OTSC Resp.")^kt.
155);2d Contempt Mot.; 2d Contempt Mot. at 1 (requesting that the Court"renew" the First Contempt Motion).)
^

what he owes them has been willful"(id. at 3). Noting that the Self Help Defendants "continue
to have an enforceable judgment against Borzouye," Judge Orenstein advised that they "retain

the right to renew their request at any time if they learn that Borzouye has become able to pay
the amount owed but fails to do so." (Id at 4.)

The Self Help Defendants timely objected to the R&R. (Self Help Defs. Objs. to R&R
("Objs.")(Dkt. 176);
^R&R at 4("Any objections to this Report and Recommendation must
be [filed] no later than June 4, 2018.").) In particular, the Self Help Defendants object to the
following:

a)
The R&R's conclusion that Borzouye has shown
"contrition" and a "sincere desire to find some way to satisfy his
debt";

b)
The R&R's conclusion that it was the [Self Help]
Defendants' burden to prove that Borzouye has no assets rather than
it being Borzouye's burden to prove his inability to pay the Rule 11
sanction (as modified by forbearance agreement);
c)
The R&R's conclusion that Borzouye must have no assets
because he refused to pay even after he was warned that he could be
arrested; and

[d]) The R&R's recommendation that this Court deny the request
to issue a warrant for Borzouye's arrest.
(Objs. at 1-2.) Borzouye did not submit a response to the Self Help Defendants' objections.

Fed. R. Civ. P. 72(b)(2)("A party may respond to another party's objections within 14 days after
being served with a copy.").
n.

LEGAL STANDARDS

In reviewing an R&R fi-om a magistrate judge regarding a dispositive motion, the district

court"may adopt those portions ofthe Report to which no objections have been made and which
are not facially erroneous." Romero v. Bestcare Inc.. No. 15-CV-7397(JS), 2017 WL 1180518,
at *2(E.D.N.Y. Mar.29,2017)
(mtemal citation omitted);
^Impala v. U.S. Dep't of Justice.
4

670 F. App'x 32,32(2d Cir. 2016)(summary order)("[F]ailure to object timely to a magistrate's
report operates as a waiver of any further judicial review ofthe magistrate's decision ,..
(intemal citation omitted)); Gesualdi v. Mack Excavation & Trailer Serv.. Inc.. No.09-CV-2502

(KAM),2010 WL 985294, at *1 (E.D.N.Y. Mar. 15, 2010)("Where no objection to the[R&R]
has been filed, the district court need only satisfy itself that there is no clear error on the face of
the record."(intemal quotation marks and citation omitted)). "A decision is 'clearly erroneous'
when the Court is,'upon review ofthe entire record, left with the definite and firm conviction
that a mistake has been committed.'" DiPUato v. 7-Eleven. Inc.,662 F. Supp. 2d 333, 339-40

(S.D.N.Y. 2009)(quoting United States v. Snow,462 F.3d 55,72(2d Cir. 2006)).
The district court must review de novo "those portions ofthe report...to which

objection is made." 28 U.S.C. § 636(b)(1); s^ Fed. R. Civ. P. 72(b)(3). To obtain this de novo
review, an objecting party "must point out the specific portions ofthe[R&R]"to which objection
is made. Sleepv's LLC v. Select Comfort Wholesale Corp.. 222 F. Supp. 3d 169, 174(E.D.N.Y.

2016); see also Fed. R. Civ. P. 72(b)(2)("[A] party may serve and file specific written objections
to the [R&R]."). If a party "makes only conclusory or general objections, or simply reiterates his

original arguments, the Court reviews the[R&R]only for clear error." Pall Corp. v. Entegris.
Inc.. 249 F.R.D. 48,51 (E.D.N.Y. 2008)(citations omitted); see also Mario v.P & C Food Mkts..
Inc.. 313 F.3d 758, 766(2d Cir. 2002)(holding that plaintiffs objection to an R&R was "not

specific enough" to "constitute an adequate objection under...Fed. R. Civ. P. 72(b)").
in.

DISCUSSION
A.

Notice

"Before [Borzouye] may be held in contempt, due process requires that he receive notice
that he is a defendant in a contempt hearing, and that if he is to face the possibility of

incarceration, that he be afforded the right to counsel." Bank of Credit & Commerce Int'l
rOverseas) Ltd. v. Tamraz. No.97-CV-4759(SHS),2006 WL 1643202, at *3(S.D.N.Y. June 13,
2006k accord SerVaas Inc. v. Mills, 661 F. App'x 7,9(2d Cir. 2016)(summary order); see also
Leser v. U.S. Bank Naf1 Ass'n. No. 09-CV-2362(KAM),2011 WL 1004708, at *7(E.D.N.Y.

Mar. 18, 2011)(collecting cases); Local Civ. R. 83.6(a)("A proceeding to adjudicate a person in

civil contempt... shall be commenced by the service of a notice of motion or order to show
cause."). The court finds that the notice given to Borzouye regarding the contempt proceeding,
including the possibility ofincarceration, comports with the due-process requirements.
While Borzouye was still proceeding pro se. the court and the Self Help Defendants

promulgated a number of documents relating to the possibility of contempt against him: the First
Contempt Motion; the court's OTSC;the Self Help Defendants' response to the OTSC; Judge
Orenstein's order that Borzouye needed to appear at a status conference on October 5,2017,lest
he face incarceration; and,finally. Judge Orenstein's promise that a recommendation of custodial
sanctions would be forthcoming. The problem is that there is no evidence that any ofthese
documents was served on Borzouye. The Self Help Defendants provided the court with copies
ofletters sent to Borzouye, but there is no proof of service that would allow the court to be
certain that these documents ever reached him.

Indiv. R. 1(C). While the court and Judge

Orenstein sent copies of all court documents to Plaintiff it is not true that these documents
necessarily would have reached Borzouye, especially given that Borzouye was relieved as
counsel to Plaintiff on March 7,2014. (See Mar. 7,2014, Min. Entry(Dkt. 99).) The court

additionally notes that at least one document mailed to Plaintiff was returned as undeliverable.

(Notice of Mail Returned as Undeliverable (Dkt. 157).) Even though Borzouye certainly seemed
on notice ofthe possibility of contempt,including incarceration, during the January 25, 2018,

status conference (see Jan. 25 Conf. Tr. 5:3-6), the court will not rely on any events prior to this
point in determining whether he has notice ofthe contempt proceedings, given the great stakes at
issue here and the heightened need for notice.

Since January 24,2018,however, Borzouye has been represented by counsel. rSee
Jan. 24,2018, Letter(Dkt. 160).) The court considers Borzouye to have had notice ofany

statements by the court or parties regarding the possibility of contempt sanctions following this

point, whether made during court conferences or in documents filed with the court. See Local
Civ. R. 5.2(a). Borzouye thus has notice ofthe Second Contempt Motion, which renewed all the

requests in the First Contempt Motion. In addition, at the status conference on May 8,2018,
Judge Orenstein and Borzouye's attorney engaged in a discussion ofthe propriety of coercive
custody. (See May 8 Conf. Tr. 4:4-8 (statement of Michael E. Talassazan, attorney for
Borzouye:'T think, you know,a stiff penalty of, you know, coercive custody might push the

progress even further back ...[and] Ijust don't see the good ofthrowing him in.").) Borzouye
is well aware of the requested sanctions at this point in time, as well as his ability to respond in
opposition, something which he has neglected to do.
All told, there is no question that Borzouye received notice ofthe civil contempt

proceedings against him,that he was afforded the opportunity to respond to the Self Help
Defendants' motion for contempt, and that he has taken advantage of his right to counsel. The
court's imposition ofthe requested contempt sanctions would thus not violate Borzouye's right
to due process.
B.

Whether Borzouye Is in Contempt of Court

In denying the Self Help Defendants' motion for coercive sanctions,the R&R seems to

have bypassed the question of whether Borzouye is actually in contempt of court and proceeded

directly to the question of what sanctions, if any, are appropriate. (See R&R at 2-4.) The court
finds that it was clear error for the R&R not to examine carefully the question of whether

Borzouye is in contempt of court. ^In re Grand Jury Subpoena Issued June 18. 2009. 593 F.3d

155, 157(2d Cir. 2010)
("We review a finding of contempt imder an abuse of discretion standard
that is 'more rigorous' than usual.").

"A court ofthe United States shall have power to punish by fine or imprisonment, or
both, at its discretion, such contempt ofits authority, and none other, as ...[d]isobedience or

resistance to its lawful writ, process, order, rule, decree, or command." 18 U.S.C. § 401(3). As
directed by the Second Circuit, a finding ofcontempt must be made following a determination of
whether "(1)the order the contemnor failed to comply with is clear and unambiguous,(2)the

proof ofnoncompliance is clear and convincing, and(3)the contemnor has not diligently

attempted to comply in a reasonable manner." Paramedics Electromedicina Comercial. Ltda. v.
GE Med. Svs- Infn. Techs.. Inc.. 369 F.3d 645,655(2d Cir. 2004)(quotation marks omitted).

The movant bears the burden of establishing these three factors. Latino Officers Ass'n City of
N.Y..Inc. V. Citv ofNew York.558 F.3d 159,164(2d Cir. 2009).

Because the R&R made no particularized findings as to any ofthese factors, the court
will now do so. After review,the court finds that Borzouye is in contempt of court.
1.

Whether the Court's Orders Have Been Clear and Unambiguous

"There is no dispute that the court has issued a lawful order requiring Borzouye to pay

$20,000(plus interest)to the Self Help Defendants, nor is there any dispute that Borzouye
understands both the substance ofthe order and his obligation to comply." (R&R at 2.) The
R&R does not, however, ask the essential question of whether the language ofthe order was
sufficiently clear and unambiguous so as to permit Borzouye "to ascertain from the four comers

8

ofthe order precisely what acts are [required]." See King v. Allied Vision. Ltd.. 65 F.3d 1051,
1058(2d Cir. 1995)(quotation marks omitted).

The Self Help Defendants argue that Borzouye should be held in contempt for failure to

comply with the court's February 17,2017, order directing him to pay $20,000 to the Self Help
Defendants. (1st Contempt Mot. at 2(citing Feb. 17,2017, M&O).) The court was direct in its
conunand: There is nothing unclear or ambiguous about an order that states,"The court imposes
a sanction of$20,000 and ORDERS Richard D. Borzouye,Plaintiffs former counsel, to pay this

amount to the SelfHelp Defendants." (Feb. 17, 2017, M&O at 7.) Subsequently,the court

ordered Borzouye"TO SHOW CAUSE in writing, by no later than August 18,2017, why:(1)he
should not be held in contempt for failiug to pay the sanctions amount ordered by this court."

(OTSC at 2.) It would be impossible to argue that there was any "uncertainty in the minds of
those to whom [the Sanctions Order][was]addressed"—i^, Borzouye—regarding what was

required of him. S^ King.65 F.3d at 1058 (quotation marks omitted). The court's conclusion
on this point is not altered by the addition ofthe stipulation, which, while not an order ofthe
court, plainly set forth Borzouye's repayment obligations and was agreed to by him. (See

Stipulation & Order of Forbearance.) All evidence points to a findmg that the Self Help
Defendants have established the fibrst element ofcontempt.
2.

Whether Proof of Borzouve's Noncompliance Is Clear and Convincing

The R&R sets forth a number of examples of how Borzouye has defaulted on many of his

obligations and "missed conference after conference." (See R&R at 2.) While these examples
are good evidence that Borzouye has not complied with the Sanctions Order, it was error for the
R&R not to ask whether such evidence is "clear and convincing" proof of noncompliance.
Evidence is clear and convincing when it "demonstrate[s] that the thing to be proved is highly

probable or reasonably certain." Fresh Meadow Food Servs.. LLC v. RB 175 Corp.. 549 F.
App'x 34,35-36(2d Cir. 2014)
(summary order).

The Self Help Defendants have given the court sufficient evidence of Borzouye's

noncompliance with both the Sanctions Order and the Order to Show Cause. They state that
Borzouye(1)ignored two payment demands they made following issuance ofthe Sanctions

Order,(2)failed to oppose their original contempt motion,(3)failed to respond to the OTSC,as
directed by the court,(4)failed to appear for the October 5, 2017, conference, and(5)has now

failed to make payments pursuant to the April 1,2018, stipulation. (Defs. OTSC Resp. at 2; 2d
Contempt Mot. at 1.) These statements are well home out by the record, which features

numerous examples ofBorzouye's flouting the court's orders. Because the Self Help Defendants
have shown by clear and convincing evidence that Borzouye has violated a specific provision of
the Sanctions Order,s^ Perez v. Danburv Hosp.. 347 F.3d 419,425(2d Cir. 2003), the court
finds that they have established the second element of contempt.

3.

Whether Borzouve Has Diligentlv Attempted to Complv in a Reasonable
Manner

Finally, the R&R contains no discussion of whether Borzouye has diligently attempted to
comply with the court's order in a reasonable manner. While this element is similar to the
previous element—^whether proof of an alleged contemnor's noncomphance is clear and

convincing—^they must be examined separately.^
The Self Help Defendants have submitted numerous examples not only of Borzouye's
failure to comply with the court's order, but also of his complete lack of effort in complying.

^ It is easy to imagine,for example, an alleged contemnor who has not made payments as required by a sanctions
order, but who nevertheless should not be held in contempt because of efforts he or she has made towards securing
the necessary funds. Cf. M. Geller. Ltd. v. Sauillante. No. 14-CV-5673(JFK),2017 WL 894425, at *2(S.D.N.Y.
Mar. 6,2017).
10

See supra Section 111(A)(2). Following entry ofthe Sanctions Order in February 2017, he did not

respond to any ofthe court's orders or to the Self Help Defendants' attempts at communication
until Judge Orenstein scheduled a status conference in January 2018. At that point, Borzouye

did not explain why he had been incommunicado or apologize for the problems caused by his
I

continued disappearance—^rather, his only statement was a letter, through his attorney, requesting
an adjournment ofthe conference. (See Jan. 24, 2018, Letter.) At the January 25,2018, status
conference, Borzouye's attomey claimed that his client had "every intention to pay the sanction."
(Jan. 25 Tr. 8:2-6.) And,although all seemed well when Borzouye offered to work out a

payment plan with the Self Help Defendants(s^id 8:7-12), the fact ofthe matter is that he has
not once communicated in writing his inability to make any payments. Offering thinly supported
excuses after the fact does not show diligence; it shows disregard for the seriousness ofthe
situation. Cf. Am. Honda Motor Co. v. V.M. Paolozzi Imports. Inc.. No. lO-CV-955,2012 WL

3822132, at *3(N.D.N.Y. Sept.4,2012)(rejecting contemnors' claims of diligence because they
had "submitted nothing to the Court... beyond conclusory assertions to support their alleged
financial inability to comply").

Borzouye's alleged inability to pay the $20,000 sanction could be relevant to the

diligence inquiry,s^ id.; however, given Borzouye's demonstrated lack of diligence since the
outset of contempt proceedings, combined with his silence in response to the Self Help
Defendants' objections, the court finds that the Self Help Defendants have established the third
and final element of contempt.
*

*

*

The Self Help Defendants have met their burden of establishing that Borzouye is in

contempt of court. Accordingly,the court REJECTS the R&R insofar as it does not grant the

11

Self Help Defendants' request for an entry of contempt against Borzouye. The court ORDERS

that Borzouye be held in contempt of court but,for reasons discussed below, holds this order in

abeyance pending further proceedings. The court will now consider what sanctions are proper.
C.

What Sanctions Should Issue

"If a party is adjudged to be in civil contempt,the court must determine what sanctions
are necessary to secure future compliance with its order and to compensate the complaining party
for past noncompliance." Tamraz. 2006 WL 1643202, at *3. Civil contempt sanctions may be
tailored either to "secure future compliance with court orders"("coercive sanctions") or to

"compensate the party that has been wronged"("compensatory sanctions"). Paramedics. 369
F.3d at 657. "Arrest is an appropriate coercive sanction for civil contempt, so long as its purpose

is not punitive but is instead to compel the contemnor to perform the required act." Tamraz.
2006 WL 1643202, at *3.

The Self Help Defendants object to Judge Orenstein's recommendation that the court not
issue an order for Borzouye's arrest due to a lack ofevidence that his failure to pay has been
willful, as well as the factual conclusions upon which that recommendation is based; these

portions ofthe R&R are therefore reviewed de novo. (See Objs. at 3-4.) While the R&R
correctly notes that custodial sanctions may not be imposed unless the contemnor has acted
willfully(R&R at 3), this is not the beginning—or,for that matter, the end—ofthe inquiry into
the proper measure ofcontempt sanctions. Instead, the Second Circuit has directed courts to
consider "(1)the character and magnitude ofthe harm threatened by the continued contumacy,
(2)the probable effectiveness ofthe sanction in bringing about compliance, and(3)the
contemnor's financial resources and the consequent seriousness ofthe sanction's burden." N.Y.

12

State NatU Org. for Women v. Terry. 886 F.2d 1339,1353(2d Cir. 1989). It was clear error for
the R&R not to do so.

1.

Character and Magnitude ofthe Harm

First, the character and magnitude ofthe harm caused by Borzouye's continued

contumacy are substantial. As this court has previously recognized,"Borzouye's misconduct
was extreme" and "the Self Help Defendants incurred substantial attorneys' fees as a direct result
of his actions." (Feb. 17, 2017, M&O at 6.) The court awarded the Self Help Defendants

$20,000, which it stated "adequately reflects the seriousness of[his] misconduct" and hoped
would "deter similar flagrant misconduct by him and others in the future." (Id at 6-7.) Since the
issuance ofthe Sanctions Order,the harm to the Self Help Defendants has only grown: They

attest that they have "been forced to incur over $5,000 in additional attomeys' fees to obtain
compliance by filing an order to show cause for contempt; filing various follow-up letters;
attending two settlement conferences; and negotiating and drafting a settlement agreement." (2d
Contempt Mot. at 1.) Additionally, both this court and Judge Orenstein have expended a great

deal oftime and judicial resources attempting to secure Borzouye's compliance; ifthere is some
way to ensure Borzouye's compliance with the Sanctions Order, it should issue as soon as
possible.
2.

Effectiveness

Second, a coercive contempt sanction is likely to be effective—contingent, of course,
upon a finding of abihty to pay. At this point, there is no reason for the coxirt to believe that

Borzouye will comply with the Sanctions Order. Borzouye has delayed paying the required
relief for over a year and has contmued to ignore the court's orders and the Self Help
Defendants' communications despite being on notice of his obligation to pay. In responding and

13

replying to this order, both Borzouye and the Self Help Defendants should advise the court of
whether further financial sanctions are likely to be effective or whether a warrant for Borzouye's

arrest, if permissible, is the only way to bring him into compliance with the court's orders.
3.

Ability to Pav

Finally,the court is unable to conclude at this point whether Borzouye has the ability to
pay further sanctions, let alone the sanctions he already owes. While the questions of
Borzouye's inability to pay the sanctions from the Sanctions Order and whether he could afford

further sanctions are distinct questions,^ the court will consider them together, for the answers
are likely to be the same.

Unlike with the other two prongs ofthe Terry test, the R&R did consider whether
Borzouye has the ability to pay the sanctions that haye been leyied against him. (R&R at 3-4.)

The R&R first found that the Self Help Defendants "haye not adduced any proof that
"Borzouye has assets beyond those he described." (Id at 3.) Additionally, eyen if Borzouye

were hiding assets from the court, the R&R assumed that he would haye reyealed them by this
point given "the very explicit warnings ... that continued non-compliance would result in
incarceration." Qd) The R&R concluded that "arresting and detaining Borzouye would be an

impermissibly punitive sanction rather than a properly coercive one." (Id.) The Self Help
Defendants submit that "the R&R has impermissibly reversed the burden ofproof as to
Borzouye's inability to pay the sanction. (Objs. at 3.) They claim that the R&R's finding of

^ In order for the court to impose monetary contempt sanctions, whether compensatory or coercive, it must conclude
that the contemnor has the ability to pay additional sanctions.^Huber v. Marine Midland Bank. 51 F.3d 5,10(2d
Cir. 1995)("[A] party's complete inability, due to poverty or insolvency, to comply with an order to pay courtimposed monetary sanctions is a defense to a charge of civil contempt"). On the other hand, while the court need
not determine whether the contemnor has the ability to pay further sanctions ifit wants to issue a warrant for the
contemnor's arrest, such an order is only proper ifthe court finds that the contemnor's refusal to pay previously
ordered sanctions does not stem firom the contemnor's inability to pay.
Spectacular Venture. L.P. v. World Star
Int'l. Inc.. 927 F. Supp. 683,685(S.D.N.Y. 1996)("[I]f an order of arrest would be likely to produce the desired
result, the Court would issue it.").
14

Borzouye's inability to pay was thus in error because "Borzouye has not even attempted to meet"
his burden of proof. Qd. at 4-5.)

First, the R&R erred in faulting the Self Help Defendants for "not adduc[ing] any proof
that "Borzouye has assets beyond those he describes." (See R&R at 3.) As the alleged
contemnor, Borzouye "bears the burden ofproducing evidence of his inability to comply."
Huber v. Marine Midland Bank. 51 F.Sd 5,10(2d Cir. 1995)(citing, inter alia. United States v.
Rvlander. 460 U.S. 752,757(1983)). If a coercive sanction would be proper but for Borzouye's
supposed inability to pay,the onus is on him to make that defense. S^ Yimbv.Inc. v. Fedak.
No. 17-CV-223(PAC),2017 WL 2693719, at *3(S.D.N.Y. June 22, 2017)("It is true that a

party may defend against a contempt by showing that compliance is factually impossible, but

that party bears the burden of production m raising the defense."(alterations adopted)(quotation
marks omitted)). So while the movant,in arguing that coercive contempt sanctions are proper,
must raise an inference ofthe contemnor's ability to pay,the burden must shift to the contemnor

to rebut the inference. It would be unfair to expect the wronged party to produce evidence ofthe
contemnor's inability to pay, especially ifthe contemnor has, as here, consistently refused to
produce necessary information or respond to communications from the opposing party. The Self
Help Defendants have made out the required inference but, at this point, no further facts are
available. The R&R was incorrect to find for Borzouye on this point without shifting the burden
to him.

Second,the R&R did not properly analyze Borzouye's supposed inability to pay the
sanctions levied against him. "[IJnability to pay is a defense only when it is impossible for the
contemnor to pay any portion ofthe ordered disgorgement...." SEC v. Zubkis. No. 97-CV-

8086(JGK),2003 WL 22118978, at *4(S.D.N.Y. Sept. 11,2003)(emphasis added). He must

15

establish his inability "clearly, plainly, and unmistakably." Huber. 51 F.3d at 10. "Conclusory
statements are inadequate to carry this burden." Id On this point the Self Help Defendants are
exactly right:
Borzouye has not submitted a single affidavit, statement of assets
and liabilities, bank statement, brokerage account statement, tax
return, or any other document to meet his burden of demonstrating
an inability to pay the Rule 11 sanction. The only representations
made on this issue were the oral hearsay statements of his attorney,
Michael E. Talassazan.

(Objs. at 4.) The R&R was wrong to rely on this shallow body ofevidence in concluding that
Borzouye is unable to pay the $20,000 sanction. (R&R at 3.) Even if Borzouye is experiencing
"significant financial hardship" fid.!, that does not necessarily explain why he has so far refused
to pay ai^ ofthe outstanding judgment against him. The only factual arguments as to

Borzouye's inability to pay come from the Self Help Defendants, who present evidence of
Borzouye's "[fjamily income and assets." (Objs. at 4.) While the court takes no position on the
persuasiveness ofthe evidence presented by the Self Help Defendants, the court notes that this is
the kind of documentation with which courts must grapple before making a finding ofinability to

pay.'^ It may be the case that getting Borzouye to pay the outstanding sanctions against him
would be like "trying to get blood from a stone"(May 8 Conf. Tr. 8:3-4), but the court must
receive further documentation on this point before making a conclusion either way.
4.

Willfulness

"|T|mprisonment is an appropriate sanction for contempt ofa court order directing an
individual to make a particular payment." Spectacular Venture, L.P. v. World Star IntT. Inc..

927 F. Supp. 683,685(S.D.N.Y. 1996). In order to imprison a contemnor to compel compliance

^ And,as noted above, it is now incumbent upon Borzouye to produce evidence rebutting the inference made by the
Self Help Defendants that he does have the ability to pay a portion ofthe sanctions against him.
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with the court's orders, the court must find that the contemnor's disobedience is willful. See

Armstrong v. Guccione,470 F.3d 89,101 (2d Cir. 2006); see also Spectacular Venture. 927 F.

Supp. at 685 ("[I]f the contemnor can establish that he or she is unable to comply with the
Court's order, the contempt sanction must be lifted because it ceases to have a useful coercive
effect."). "Contempt is willful where the contemnor had actual notice ofthe court's order, was

able to comply with it, did not seek to have it modified, and did not make a good faith effort to
comply." EEOC v. Local 638. 889 F. Supp. 642,670-71 (S.D.N.Y. 1995)(internal citation
omitted), affd in part rev'd in part on other grounds. 81 F.3d 1162(2d Cir. 1996).
Judge Orenstein denied the Self Help Defendants' request that the court issue a warrant
for Borzouye's arrest because of a lack of evidence that "Borzouye's failure to pay the Self Help
Defendants what he owes them has been willful." (R&R at 3.) To make this finding, he relied,

essentially, on two factors: Borzouye's supposed contrition; and his supposed inability to pay.
The court already dealt with the Self Help Defendants' objections to the R&R's findings as to
Borzouye's inability to pay; here, the court discusses the objection to the R&R's finding as to
Borzouye's contrition.

The R&R's discussion of whether Borzouye "has shown contrition and an apparently
sincere desire to find some way to satisfy his debt" seems to get at the fourth willfulness factor—

whether the contemnor has made a good faith effort to comply with the court's order.^ See
Local 638. 889 F. Supp. at 671. The R&R does not cite any evidence in support of Borzouye's
supposed contrition. (See R&R at 3-4.) On the other hand,the Self Help Defendants submit that
Borzouye has demonstrated a lack of contrition by(1) defaulting on the first payment owed

^ The court is not quite conviDced that a contemnor's sincere contrition can save him or her from the imposition of
contempt sanctions, but the court will nonetheless consider any arguments that Borzouye has on this point.

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pursuant to the March 13, 2018,payment schedule and stipulation offorbearance, and(2)failing
to provide necessary information to the Self Help Defendants about a $10,000 lien that he
allegedly offered to assign as partial payment ofthe debt. (Objs. at 2-3.)
The court finds that more evidence is needed before a conclusion may be made as to

whether Borouzye has made a good faith effort to comply with the court's orders, although the
court is inclined to find that he has not. Borzouye's only expression of contrition in the record is
his attorney's statement at the January 25,2018, status conference that his client was'Very, very
remorseful." (Jan. 25 Tr. 6:17-18.) Before this point, Borzouye had missed various court
appearances and mandatory submission deadlines. Since that point, he has missed three payment

deadlines pursuant to the stipulation offorbearance. And yet, not once has he thought to express
his contrition in writing to the court or the parties. Nor did he apologize at the May 8,2018,

status conference, which was held solely to discuss Borzouye's failure to make payment under
the stipulation offorbearance. Borzouye's attorney has recited for the court a litany of

unfortunate circumstances that have befallen Borzouye, none of which the court has any reason
to doubt, but the existence ofthese events does not, by itself, establish Borzouye's lack of
willfulness.

Before the court may impose the coercive sanction ofimprisonment, it must give
Borzouye a chance to show that he has made good faith efforts to comply with the deadlines in

this case.^ Additionally, as discussed above, Borzouye will be permitted to prove that he is

® While courts sometimes place the burden of proving the contemnor's willfuhiess on the movant,see King v. Allied
Vision. Ltd.. 919 F. Supp. 747, 752(S.D.N.Y. 1996)(placing the burden for proving the contemnor's willfulness on
the complaining party prior to awarding attorneys' fees), the court will consider the Self Help Defendants to have
met their burden if Borzouye does not produce evidence rebutting the inference of willfulness raised by the Self
Help Defendants.
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unable to comply \\dth the court's order (i.e.. that he caimot pay the sanctions levied against
him).
*

*

*

This saga has dragged out long enough. Following Borzouye's anticipated submission,
the court will consider the appropriateness offurther sanctions in ensuring the swift resolution of

this matter.^ Courts do not lightly undertake the imposition of sanctions, nor do they issue orders
ofcontempt without full consideration ofthe gravity ofthe request. Accordingly, before
Borzouye's own inaction forces the court to impose a drastic remedy,the court urges bim to be

promptly forthcoming with the court and the Self Help Defendants.
IV.

CONCLUSION- ORDER TO SHOW CAUSE

The court REJECTS the R&R(Dkt. 175) and ORDERS Borzouye to SHOW CAUSE in
writing, by no later than July 6,2018, why the court should not issue an order directing the
United States Marshals to take him into their custody and hold him in their custody until such

time as he purges his civil contempt by paying the Self Help Defendants what they are owed
pursuant to the Sanctions Order. The court DIRECTS Borzouye to include in his response

evidence regarding his ability to pay the Sanctions Order. The Self Help Defendants shall
submit their reply, if any, by no later than July 13, 2018. The court further DIRECTS Borzouye
and the Self Help Defendants to appear at a hearing before the undersigned on July 17,2018, at
2:30 P.M.,in the United States District Coiirt, Eastern District ofNew York,225 Cadman Plaza

East, Courtroom 4D South, Brooklyn, New York. The court will not consider any requests by

' discussed above, the court caimot impose custodial or additional monetary sanctions on Borzouye without
As
giving him one last chance to produce relevant evidence. The court would be inclined to refer Borzouye for
disciplinary proceedings, except that the First Department ofthe New York Supreme Court, Appellate Division, has
apparently already gotten there. See In re Borzouve. 73 N.Y.S.Sd 61 (App. Div. 2018)(suspending Borzouye from
the practice oflaw in New York State).
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Borzouye for adjournment ofthis hearing. The court HOLDS EST ABEYANCE entry of an order

of contempt against Borzouye pending the court's deterniination ofthe proper sanction, if any,
for his contempt. Service ofthis order upon Borzouye's counsel ofrecord by EOF shall be

deemed sufficient notice. If Borzouye does not timely respond to the order to show cause or
appear at the hearing on July 17,2018,the court will find him in contempt of court and
issue a warrant for his arrest.

SO ORDERED.

s/Nicholas G. Garaufis
Dated: Brooklyn, New York

ICHOLAS G. GARAUFI

June5^ 2018

United States District Judge

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