Innovation Ventures, LLC et al v. Ultimate One Distributing Corp. et al

Filing 605

MEMORANDUM AND ORDER re: Contempt Order of May 7, 2013: For the reasons discussed in the attached Memorandum and Order, the court hereby reinstates and modifies its May 7, 2013, contempt ruling as follows: (1) The Jamil Defendants are ordered to deposit into an interest-bearing account in the Clerk's Registry of the United States District Court for the Eastern District of New York $400,000 by August 16, 2013. In the event that the Jamil Defendants fail to deposit this amount into the Clerk's Registry by this date, a per diem fine of $300 shall be imposed against the Jamil Defendants jointly and severally until the full $400,000 has been received and verified by the Clerk's Office. Instructions for depositing funds into the Clerk's Registry by wire transfer are attached to this order. (2) The court's December 11, 2012, preliminary injunction is amended to allow for the payment of reasonable living expenses in the amount of $2,760 per month by Walid Jamil, and $4,150 per month by Raid Jamil. (3) Plaintiffs' request for the court to appoint a receiver to take charge of Charter's finances is denied without prejudice. Ordered by Judge Kiyo A. Matsumoto on 8/1/2013. (Beauchamp, Peter)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
----------------------------------X
INNOVATION VENTURES, et al.,
MEMORANDUM AND ORDER

Plaintiffs,

12-CV-5354 (KAM)(RLM)

-againstULTIMATE ONE DIST. CORP., et al.,
Defendants.
----------------------------------X
MATSUMOTO, United States District Judge:
BACKGROUND

On April 19, 2013, plaintiffs Innovation Ventures, et
al. (“Plaintiffs”) filed a motion for contempt against
defendants Raid and Walid Jamil (collectively, the “Jamil
Defendants” or “Defendants”) for Defendants’ failure to comply
with the terms of temporary restraining orders entered by the
court on November 13th and 27th, 2012, and stipulated
preliminary injunctions entered by the court on December 11,
2012.

(See ECF No. 525, Mot. for Contempt at 1.)

Plaintiffs

specifically argued that the Jamil Defendants violated the
court’s stipulated preliminary injunctions enjoining Defendants
from secreting, transferring, or conveying any assets by
gambling away tens of thousands of dollars at Detroit-area

1

casinos, and by otherwise expending assets.1

(See ECF No. 526,

Mem. in Supp. of Mot. for Contempt at 2-4.)

On April 26, 2013,

the Jamil Defendants filed a response in opposition to
Plaintiffs’ motion for contempt, in which Defendants argued
(1) that they “misunderstood the scope of the asset freeze,” and
(2) that the court should not grant the specific relief sought
by Plaintiffs.

(ECF No. 537, Response in Opp. at 2.)

On May 7, 2013, the court held oral argument on
Plaintiffs’ motion for contempt, at which the Jamil Defendants
admitted to having spent upwards of $224,000 at several Detroitarea casinos between December of 2012 and April of 2013.

(See

Minute Entry for Motion Hearing/Oral Argument of May 8, 2013.)
The court granted Plaintiffs’ motion for contempt on the record,
and ordered that the Jamil Defendants:
[D]eposit into an interest-bearing account
in the Clerk’s Registry of the United States
District Court for the Eastern District of
New York $1,000,000 by 5/15/13.
In the
event that the Jamil Defendants fail to
deposit
this
amount
into
the
Clerk’s
1

On December 10, 2012, the court ordered Walid Jamil “to submit
documentary materials in support of his request for living expenses in the
amount of $10,000 per month. Such materials should include, but are not
necessarily limited to, proof of rent or mortgage obligations, vehicle or
travel expenses, and other specific personal and family financial
obligations.” (See Order re Living Expenses dated Dec. 10, 2012.) In the
court’s December 11, 2012, Orders entering Preliminary Injunctions against
Walid and Raid Jamil, leave was granted to Defendants to request a monthly
allowance for the payment of reasonable living expenses, provided that the
Jamil Defendants submitted adequate documentation of their monthly expenses
for the court’s review. (See ECF No. 256, Stip. and Order to Prelim.
Injunction ¶ 6; ECF No. 258, Stip. and Order to Prelim. Injunction ¶ 6.) As
of the filing of Plaintiffs’ motion for contempt, neither of the Jamil
Defendants had submitted documentation in support of monthly living
allowances.

2

Registry by 5/15/13, a per diem fine of
$1,500 shall be levied against the Jamil
Defendants until the full $1,000,000 has
been received and verified by the Clerk’s
Office.
Prior
to
5/15/13,
the
Jamil
Defendants are permitted to present to the
court,
along
with
plaintiffs’
counsel,
documentation
that
supports
the
Walid
Defendants’ claim that a lesser amount
should be ordered held in escrow.
(Id.)
On May 15, 2013, the Jamil Defendants submitted a
letter in support of a lesser dollar amount being ordered
deposited by them into the court’s escrow account.
565, Ltr. to Judge re Contempt Ruling.)

(See ECF No.

The Jamil Defendants’

letter included twenty-five exhibits, consisting of bankruptcy
filings; mortgages; car loans; bank statements; tax returns;
paychecks; business and financial records relating to the
Defendants’ home healthcare company, Charter Home Healthcare,
LLC (“Charter”); declarations; and two itemized requests for
monthly living allowances.

(See generally id. at Exs. 1-25.)

In their letter to the court, the Jamil Defendants argue that
the above documents illustrate that the court’s $1,000,000
escrow order is “purely punitive in nature and unnecessary to
ensure compliance” with the court’s asset freeze orders.

(Id.

at 3.)
That same day, the court issued the following order:
Having timely received documentation in
support of the Jamil Defendants’ claim that
3

an amount less than $1,000,000 should be
ordered held in escrow, the court hereby
stays the imposition of a per diem fine of
$1,500 pending further order of the court.
Plaintiffs are permitted, but not required,
to file a response to the Jamil Defendants’
submissions no later than Friday, 5/17/13.
(Order re Ltr. to Judge of May 15, 2013).

Thereafter, on May

17, 2013, Plaintiffs filed a response to the Jamil Defendants’
May 15th submission, in which Plaintiffs attacked the
sufficiency of the Jamil Defendants’ income and asset
documentation, and requested (1) that the court reinstate its
May 7, 2013, contempt order; and (2) “appoint an independent
third-party, such as a receiver, to take charge of Charter’s
finances.”

(ECF No. 567, Ltr. in Response at 3.)
On May 22, 2013, Plaintiffs filed a further letter

with the court containing additional evidence of the Jamil
Defendants’ ongoing violations of the court’s asset freeze
orders.

(ECF No. 570, Ltr. Enclosing Additional Evid.)

In this

letter, Plaintiffs further detailed with subpoenaed exhibits
approximately $195,000 in losses at one casino alone by the
Jamil Defendants between January 1, 2013, and May 9, 2013.
id. at 1.)

(See

The Jamil Defendants responded to Plaintiffs’ May

22nd submission via letter on May 31, 2013, in which Defendants
opposed Plaintiffs’ request to appoint a receiver over Charter,
and renewed their request for the court to modify its
preliminary injunctions to allow for monthly living allowances
4

in the amount of $2,760 for Walid Jamil, and $4,150 for Raid
Jamil.

(See ECF No. 577, Ltr. in Response at 2.)
DISCUSSION

A.

The Court’s Contempt Order
Documentation provided by Plaintiffs from several

Detroit-area casinos frequented by the Jamil Defendants
illustrates that Defendants gambled upwards of $300,700 between
December 2012 and May 2013 in direct contravention of the
stipulated December 2012 asset freeze orders.

(See generally

ECF No. 527, Aff./Decl. in Supp. of Mot. for Contempt (“Potter
Decl.”) Exs. 4, 6-8 (Defendants’ MGM Grand Detroit player
reports totaling $50,000 in losses);2 Ltr. Enclosing Additional
Evid. Ex. A (Raid Jamil’s Greektown Casino Hotel Report Action
Journal totaling $55,700 cashed in); id. Exs. B-C (Defendants’
Motor City Casino Hotel Win/Loss Statements totaling $195,000 in
losses).

The Jamil Defendants have not disputed having gambled

away several hundred thousand dollars.

(See generally Tr. of

Oral Argument, Potter Decl. Ex. A; see also Ltr. to Judge re
Contempt Ruling at 2-3.)

2

Plaintiffs initially asserted that the Jamil Defendants had
gambled away more than $200,000 at the MGM Grand Detroit since November 2012;
however, Defendants correctly note that the MGM records indicate that
although $200,000 was “cashed in” during that period, only approximately
$50,000 constitutes losses. (Ltr. to Judge re Contempt Ruling at 2 n.4.)
Regardless of the fact that the full $200,000 cannot be said to have been
“lost” by Defendants, the court is troubled by the Jamil Defendants’
willingness to gamble any amount after stipulating to total asset freezes.

5

The Jamil Defendants, however, contend that the
court’s initial order for Defendants to deposit $1,000,000 into
a court escrow account is “excessive and unnecessary to ensure
compliance.”

(Ltr. to Judge re Contempt Ruling at 3.)

Further,

although Defendants “acknowledge that gambling was a violation
of the literal terms of the preliminary injunction,” they argue
that “Plaintiffs suffered no damages as a result, because the
source of the funds was not 5 Hour revenue or profit.”

(Id.)

Rather, the Jamil Defendants claim that the funds they gambled
with came from legal income and profits from the Jamil family’s
home-healthcare company, Charter.

(Id. at 2-3.)

According to

records provided by Defendants, Charter had a net income of
$121,407.97 from December 2012 through March 2013.

(See id.

Exs. 19-20.)
Walid and Raid Jamil’s paychecks from Charter suggest
that during the period from December 1, 2012, through May 10,
2013, Defendants earned a combined $4,637.29 every two weeks for
a total during that period of $55,647.48.

(See id. Ex. 18

(Defendants’ paychecks dated May 10, 2013).)3

Bank of America

account records for a Charter checking account reflect that from
December 2012 through March 2013, Raid Jamil, as sole owner of
the company, personally withdrew $197,051.95 in cash
3

Raid’s biweekly check for $2,362.08 + Walid’s biweekly check for
$2,275.21 = $4,637.29 every two weeks x 12 pay periods between December 1,
2012, and May 10, 2013 = $55,647.48.

6

withdrawals, checks made out to himself, and debit card payments
to the Motor City Casino Hotel.

(Id. Ex. 21.)

Thus, documents

before the court suggest that the Jamil Defendants collected
approximately $252,699.43 from Charter between December 1, 2012,
and May 10, 2013.
In their post-hearing submissions to the court, Walid
and Raid Jamil failed to comply with the court’s directive that
they respond to the request for financial documentation and
information set forth in Plaintiffs’ March 28, 2013, letter.
(Ltr. in Response at 1; Potter Decl. Ex. A, Oral Arg. Tr. at
42:1-11, 43:7-23.)

Instead, the Jamil Defendants request

monthly living allowances of $2,760 and $4,150, respectively.
(Id. at 1.)

The court, like Plaintiffs, has concerns about the

sufficiency of the documentation provided by Defendants in
support of the Defendants’ monthly allowance requests.

(See id.

Exs. 1-8, 24-25 (documentation of Defendants’ home mortgages,
car loans, property tax assessments, and other bills).)

Putting

aside the fact that the documents submitted in support of the
Jamil Defendants living expenses are in the name of other family
members such as spouses and parents, thus suggesting that
Walid’s and Raid’s spouses and parents may contribute to at
least some of the Jamil Defendants’ monthly household expenses,
Defendants’ submissions only cloud their financial picture.

7

(See Ltr. in Response Exs. G-O (accounts in the name of Awatif
Jamil, Walid’s wife).)
On the basis of the Defendants’ requests, the court
can infer that the Jamil Defendants jointly incurred
approximately $34,550 in living expenses between December 1,
2012, and May 1, 2013.4

Coupled with Defendants’ uncontested

total gambling expenditures for the same period of time in the
amount of $300,700, the Walid Defendants spent approximately
$335,250 between December 2012 and May 2013.

This figure is

$82,550.57 more than the $252,699.43 that Defendants document
having earned from Charter in income and profits during
approximately the same period of time.

In short, the court is

hard pressed to believe that “Walid and Raid Jamil do not have
the assets Plaintiffs believe they have.”
Contempt Ruling at 2.)

(Ltr. to Judge re

As Plaintiffs note, Defendants appear

“able to come up with substantial sums of money whenever they
desire to, even after sustaining substantial gambling losses.”
(Ltr. Enclosing Additional Evid. at 2.)

Indeed, the difference

between the Walid Defendants’ personal and gambling expenses,
and their Charter income/profits from December 2012 to May 2013
alone contradicts the purported completeness of Defendants’
financial disclosures.
4

Walid’s $2,760 in monthly expenses + Raid’s $4,150 in monthly
expenses = $6,910 in expenses per month x 5 months between December 1st and
May 1st = $34,550.

8

Furthermore, at his November 27, 2012, deposition
taken pursuant to the court’s expedited discovery order, Walid
Jamil testified that the underlying counterfeit 5-Hour Energy
scheme netted him profits of “[a]pproximately about $100,000,
but I’m owed a lot of money from the operation.”

(ECF No. 155,

Reply in Supp. (Decl. of Geoffrey Potter) Ex. 1, Dep. of Walid
Jamil at 37:15-16; id. at 214:23-215:9; see also Response in
Opp. at 2-3.)

Nowhere in their various submissions to the court

do the Jamil Defendants account for the location of these, or
any other, profits from the counterfeit scheme.

See Paramedics

Electromedicina Comercial, Ltda. v. GE Med. Sys. Info. Techs.,
Inc., 369 F.3d 645, 658 (2d Cir. 2004) (“A contemnor may be
excused from the burden of a civil contempt sanction if it lacks
the financial capacity to comply; but the contemnor bears the
burden of production in raising such a defense.”); Huber v.
Marine Midland Bank, 51 F.3d 5, 10 (2d Cir. 1995) (“The alleged
contemnor bears the burden of producing evidence of his
inability to comply. . . . If he offers no evidence as to his
inability to comply . . . or stands mute, he has not met his
burden.”) (internal quotation marks and citations omitted); see
also Close-Up Int’l, Inc. v. Berov, 474 Fed. App’x 790, 795 (2d
Cir. 2012) (citing Huber).

Thus, the court finds that the Jamil

Defendants have failed to satisfy their burden of showing that

9

they lack the financial capacity to deposit funds into the
Clerk’s Registry as ordered on May 7, 2013, and modified below.
Upon careful review of the parties’ respective
arguments and submissions, the court hereby reinstates and
modifies its May 7, 2013, contempt ruling as follows: the Jamil
Defendants are ordered to deposit into an interest-bearing
account in the Clerk’s Registry of the United States District
Court for the Eastern District of New York $400,000 by August
16, 2013.

In the event that the Jamil Defendants fail to

deposit this amount into the Clerk’s Registry by this date, a
per diem fine of $300 shall be imposed against the Jamil
Defendants jointly and severally until the full $400,000 has
been received and verified by the Clerk’s Office.

See Weitzman

v. Stein, 98 F.3d 717, 719 (2d Cir. 1996) (“[T]he district
judge, sitting in equity, is vested with wide discretion in
fashioning a remedy” for civil contempt of court orders).
B.

The Jamil Defendants’ Request for Monthly Allowances
The Jamil Defendants request a modification of the

court’s preliminary injunction to allow for the payment of
reasonable living expenses in the amount of $2,760 per month by
Walid Jamil, and $4,150 per month by Raid Jamil.
re Contempt Ruling at 2.)

(Ltr. to Judge

Notwithstanding concerns about the

adequacy of Defendant’s documentation to substantiate these
figures, the court reluctantly accepts the Jamil Defendants’
10

representation that they do not retain old bills or receipts
from grocery stores, gas stations, restaurants, etc.,
notwithstanding the court’s prior order that they submit
supporting documentation.

(Ltr. in Response at 1.)

Therefore,

the court’s December 11, 2012, preliminary injunction is hereby
amended to allow for the payment of reasonable living expenses
in the amount of $2,760 per month by Walid Jamil, and $4,150 per
month by Raid Jamil.
C.

Plaintiffs’ Request to Appoint a Receiver to Take
Charge of Charter’s Finances
In light of the substantial amounts of money that the

Jamil Defendants have taken from Charter and gambled away,
Plaintiffs request that the court appoint an independent thirdparty, such as a receiver, to take charge of Charter’s finances.
(Ltr. in Response at 3.)

District Courts are authorized to

appoint a receiver where “leaving the property [subject to suit]
in the hands of the judgment debtor creates a risk of fraud or
insolvency.”

Spotnana, Inc. v. Am. Talent Agency, Inc., No. 09

Civ. 3698, 2013 U.S. Dist. LEXIS 15208, at *17 (S.D.N.Y. Jan.
22, 2013); see also Republic of Phillipines v. New York Land
Co., 852 F.2d 33, 36 (2d Cir. 1988) (affirming district court
appointment of “special property advisor” to enforce preliminary
injunction).

11

Charter, however, is not a named party to this action;
nor is there evidence to suggest that the Jamil Defendants’
profits from the underlying 5-Hour Energy counterfeiting scheme
were comingled with Charter accounts.

See N. Face Apparel Corp.

v. TC Fashions, Inc., No. 05 Civ. 9083, 2006 U.S. Dist. LEXIS
14226, at *10 (S.D.N.Y. Mar. 30, 2006) (“District courts have
the ‘authority to freeze those assets which could [be] used to
satisfy an equitable award of profits.’” (quoting Levi Strauss &
Co. v. Sunrise Int’l Trading Inc., 51 F.3d 982, 987 (11th Cir.
1995))).

Although money from Charter has been wired directly to

Naftaunited.com, a company alleged to have helped facilitate
payments between the defendants involved in the underlying 5Hour Energy counterfeit scheme, unlike the profits of
counterfeit schemes, monies used to facilitate a violation of
the Lanham Act may not be subject to an asset freeze.

See

Klipsch Group, Inc. v. Big Box Store Ltd., No. 12 Civ. 6283,
2012 U.S. Dist. LEXIS 153137, at *15-16 (S.D.N.Y. Oct. 24, 2012)
(“[W]hile the Court agrees with Plaintiff that it has the power
to freeze assets to preserve a later award of an equitable
accounting, such a freeze should be confined in scope to the
likely profits of counterfeiting activity,”).
Therefore, Plaintiffs’ request for the court to
appoint a receiver to take charge of Charter’s finances is
denied without prejudice to renew in the event that Plaintiffs
12

submit evidence that Charter’s assets are directly linked to
Defendants’ profits from the alleged 5-Hour Energy
counterfeiting scheme.
CONCLUSION
For the foregoing reasons, the court reinstates and
modifies its May 7, 2013, contempt ruling as follows:
(1) The Jamil Defendants are ordered to deposit
into an interest-bearing account in the Clerk’s
Registry of the United States District Court for the
Eastern District of New York $400,000 by August 16,
2013. In the event that the Jamil Defendants fail to
deposit this amount into the Clerk’s Registry by this
date, a per diem fine of $300 shall be imposed against
the Jamil Defendants jointly and severally until the
full $400,000 has been received and verified by the
Clerk’s Office. Instructions for depositing funds
into the Clerk’s Registry by wire transfer are
attached to this order.
(2) The court’s December 11, 2012, preliminary
injunction is amended to allow for the payment of
reasonable living expenses in the amount of $2,760 per
month by Walid Jamil, and $4,150 per month by Raid
Jamil.
(3) Plaintiffs’ request for the court to appoint
a receiver to take charge of Charter’s finances is
denied without prejudice.

SO ORDERED.
Dated:

August 1, 2013
Brooklyn, New York
___________/s/______________
Kiyo A. Matsumoto
United States District Judge
Eastern District of New York

13

Instructions for Accepting Fedwire Deposits



Electronic funds transfers are receipted directly into the Department of Treasury, are
handled by the Federal Reserve Banking System, and are referred to as “Fedwire”
payment.



The Treasury FDS system is a computer-to-computer link between Treasury and the
Federal Reserve Bank of New York (FRBNY). This system provides the capability for:
(1) automated receipt and processing of funds transfers and (2) computer-assisted
generation of funds transfers between Treasury, FRBs, and other banks utilizing
Fedwire. Treasury maintains an account at FRBNY. As a result, banks that maintain an
account at an FRB may send funds transfers to Treasury over Fedwire for credit to the
account of the Treasury at FRBNY. Funds transfers between Treasury and banks that
do not maintain an account at an FRB are processed through correspondent banks that
do maintain an account at an FRB.



Credit Gateway is the Financial Management Service for Fedwire. The agency wishing
to accept Fedwire, makes an application to Credit Gateway for an account with the
Federal Reserve Bank to be set up. Once an account is set up the following instructions
should be provided to those making a payment by Fedwire.



Instructions for those wishing to make a payment by “Fedwire”:
Sender must provide the following information to the originating financial
institution:
Receiver:
Receiver routing number:
Beneficiary:
Originator to Beneficiary info:

TREAS NYC
021030004
D 00004653 USDC EDNY
Case number, defendants name, amount

For deposits in the amounts of $50 million or more the guidelines ask the receiving court
to provide the following information to the FMS Cash Forecasting Division
When providing notification, courts must report the following information:
• Name and address of the court;
• Name and telephone number of the point of contact;
• Agency Location Code;
• Treasury account title and account symbol number (i.e., 10X6855 for restitution,
10X6047 for registry funds);
• Description of the transaction;
• Transaction settlement date;

Court Attachment A

• Amount of the deposit or disbursement;
• Deposit or disbursement mechanism (Fedwire, check, etc.); and
• Name and location of the depositary or payee.
Report cash forecasting information to FMS' Cash Forecasting Division using the
following email address, facsimile, and/or telephone number:
E-mail address: [e-mail]
Fax numbers: 202-874-9984 or 202-874-9945
Telephone number: 202-874-9789
Confirmation of Collection
Confirmation of Collection
As funds transfer messages are received by Treasury, the messages are accumulated at the
level of each Agency Location Code (ALC).
The court will verify deposit information for accuracy. Errors must be promptly reported to the
Department of Treasury’s Financial Analysis Branch. 202-874-6900
Treasury’s Transaction Reporting System (TRS). The TRS allows the court to receive
immediate notification of incoming FDS deposits via online inquiry.
This method is intended to supplement the Daily Support Listing of FDS Deposits and SF 215C
which will be sent to the court through the mail.
The “fedwire” is handled as a check received in that day’s mail except the deposit has already
occurred. A receipt document in CCAM is created with accomplished date in block number 2 of
the SF215C.
The court will receipt all erroneous deposits into their suspense accounts (i.e. 6855XX) and
make a request to Credit Gateway for a reversal to be issued and an
SF 5515 debit voucher is recorded.

Court Attachment A