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

Filing 730

ORDER. After reviewing plaintiffs' and defendant Mr. Shayota's submissions ( #724 , #726 , #727 ) in response to the court's June 5, 2014 order to show cause, and for the reasons set forth in the attached order, the court orders the following: (1) Mr. Shayota is 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 $300 per month, due on the 1st of August 2014 and each month thereafter, until he has deposited $40,000. He shall note his name, the case name, and docket number on each check or money order. (2) Mr. Shayota is ordered to provide to plaintiffs proof of monthly family income and receipts and/or bank statements for every expenditure over $100 on a monthly basis, due the 1st of August 2014 and each month thereafter. (3) The court's November 30, 2012 preliminary injunction is amended to allow for the payment of reasonable living expenses in the amount of $1400 per month by Mr. Shayota, provided Mr. Shayota complies with (1) and (2) above. Ordered by Judge Kiyo A. Matsumoto on 7/25/2014. (Alagesan, Deepa)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
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INNOVATION VENTURES, et al.,
Plaintiffs,
-against-

ORDER
12-CV-5354 (KAM)(RLM)

ULTIMATE ONE DIST. CORP., et al.,
Defendants.
----------------------------------X
MATSUMOTO, United States District Judge:
On November 30, 2012, the Court entered a preliminary
injunction against defendant Justin Shayota enjoining him from,
inter alia, secreting, transferring, or conveying any assets
(the “Asset Freeze Order”). (ECF No. 191, Order Granting Prelim.
Inj. at 6.)
On May 2, 2014, after independent communication
between Mr. Shayota and plaintiffs Innovation Ventures, et al.
(“Plaintiffs”),1 counsel for Mr. Shayota filed a letter with the
court requesting a pre-motion conference regarding a motion to
eliminate or modify the Asset Freeze Order to allow for Mr.
Shayota to spend his current income on living expenses. (ECF No.
720, Letter to Judge Matsumoto at 2.) In support of his proposed
motion, Mr. Shayota submitted as exhibits (1) a single pay stub
reflecting $1000 in net pay for a period of two weeks, (2) a

1

See ECF No. 720, Letter to Judge Matsumoto at 1 (describing history of
communications), Exhibit A (Letter from Pls. to Shayota dated April 25,
2014).

screenshot of an account statement for a 2014 Ford Explorer,
taken from a smartphone, reflecting a $571.19 balance, and (3) a
screenshot of a cellphone bill for $306.46, reflecting monthly
charges of approximately $140 per month, also taken from a
smartphone. (Id. at 6-11.) On May 12, 2014, Plaintiffs responded
that they would consent to modification of the Asset Freeze
Order for Mr. Shayota’s reasonable, documented living expenses,
provided that Mr. Shayota (1) provide the court and parties with
sufficient documentation of his current income and financial
obligations and (2) place some amount of money in escrow, until
$40,000 has been accumulated, each month prior to his release
from the asset freeze. (ECF No. 721, Letter from G. Potter to
Judge Matsumoto at 3.)
After a telephone conference with counsel for
Plaintiffs and Mr. Shayota, the Court, unsatisfied with the
incomplete account of Mr. Shayota’s financial circumstances,
ordered Mr. Shayota on June 5, 2014 to show cause as to why he
should not be ordered to place $40,000 into the court’s escrow
account. (Minute Entry of June 5, 2014.) The Court ordered Mr.
Shayota to present “documentation for all expenses, whether paid
directly or indirectly by him, and sources of income, whether
received directly or indirectly by him, including all supporting
documentation for such expenses and income.” (Id.)

Mr. Shayota responded to the Court’s order on June 12,
2014, requesting complete elimination of the asset freeze or, in
the alternative, modification of the Asset Freeze Order to allow
Mr. Shayota to use all of his current income to support himself
and his family. (ECF No. 724, Resp. to Order to Show Cause at 12.) Mr. Shayota also provided what he claimed were “all
documents and information in his possession regarding his
financial condition....”2 (Id. at 2.)
In a response dated June 19, 2014, Living Essentials
expressed concern regarding the completeness and authenticity of
Mr. Shayota’s financial documentation and renewed its request
that the court order Mr. Shayota either (1) to place $40,000
into escrow immediately; or (2) to make regular deposits into
escrow of an amount certain until $40,000 is deposited. (ECF No.
726, Let. in Response, at 3.) Living Essentials also asked that,
pending deposit of the full $40,000 amount, the total asset

2

The materials provided by Mr. Shayota included a photocopied paystub in the
amount of $863.17 from S&P Equipment Servicing, Inc. for the period March 16,
2014 to March 31, 2014 (ECF No. 724-1, Decl. of Justin Shayota (“Shayota
Decl.”) Ex. 1), an S&P payroll summary for period January 1, 2014 to June 10,
2014 (Shayota Decl. Ex. 2), a payroll summary for Mrs. Shayota from Midway
Dental Supply for the period March 1, 2014 to March 15, 2014 (Shayota Decl.
Ex. 3), where Mr. Shayota claims his wife is employed (Shayota Decl. ¶ 5.), a
printout dated June 12, 2014 from Ford Credit indicating outstanding lease
payments of roughly $530 per month (Shayota Decl. Ex. 4), a printout of a
Credit Karma credit report (Shayota Decl. Ex. 5), an online bill summary from
Verizon Wireless for the period April 16, 2014 to May 15, 2014 in the amount
of $153.25(Shayota Decl. Ex. 6), a copy of a residential lease in the name of
Mr. Shayota’s wife, scheduled to begin on June 18, 2014, at the rental rate
of $1,100 per month, that has not been countersigned (Shayota Decl. Ex. 7),
and a spreadsheet of what Mr. Shayota claims are transaction records from his
bank account in addition to a printout of transactions for the month of May
2014 from Level One Bank (Shayota Decl. Ex. 8).

freeze against Mr. Shayota remain in place without modification,
and reserved its right to seek contempt sanctions if Mr. Shayota
did not comply with any order from the court. (Id.)
In reply, Mr. Shayota provided a May 30, 2014 bank
account statement (ECF No. 727, Letter from J. Shayota, Ex. 1),
his wife’s March and April bank account statements (Id. Ex. 2),
and a Verizon Wireless bill for the period May 16, 2014 to June
15, 2014 (Id. Ex. 3).
Based on Mr. Shayota’s continued violation of the
Asset Freeze Order and the court’s interest in preserving the
possibility of equitable remedies given Plaintiffs’ likelihood
of success on the merits, the court finds that ordering Mr.
Shayota to deposit funds in the clerk’s interest-bearing account
pending judgment on the merits is appropriate at this time. In
entering the November 30, 2013 preliminary injunction, the court
invoked its authority to order the restraint of Mr. Shayota’s
assets in order to ensure availability of final equitable relief
for Plaintiffs. See, e.g., Gucci America, Inc. v. Weixing Li,
No. 10 Civ. 4974, 2011 WL 6156936, at *3 (S.D.N.Y. Aug. 23,
2011) (“A district court, therefore, ‘has authority to freeze [a
defendant's] assets insofar as they could be used to satisfy an
award of ... profits pursuant to Plaintiffs' Lanham Act
Claims.’”) (internal citations omitted). Mr. Shayota has
conceded that he is spending funds in violation of the asset

freeze, thereby frustrating both the order and a likely future
judgment. “Ensuring compliance with a prior order is an
equitable goal which a court is empowered to pursue even absent
a finding of contempt.” Berger v. Heckler, 771 F.2d 1556, 1569
(2d Cir. 1985); see also Transatlantic Reinsurance Co. v.
Ditrapani, No. 90 Civ. 3884, 1991 WL 12135, at *4-5 (S.D.N.Y.
Jan. 28, 1991).
The court has reviewed the partial financial
documentation belatedly provided by Mr. Shayota, which gives the
court a limited snapshot of various one-month time periods
between January and June 2014, and finds that Mr. Shayota is
able to contribute regular payments to an escrow fund, based on
his current net income of $1726.34 per month and documented
reasonable living expenses.3 Because Mr. Shayota is unable to
make a lump sum deposit of $40,000, his admitted personal gain

3

After review of Mr. Shayota’s financial documentation, the court notes that
it does not consider all of Mr. Shayota’s expenditures to constitute
reasonable living expenses (e.g., multiple $104 payments for DirecTV cable
services), and that the bank statements provided by Mr. and Mrs. Shayota
contain many unexplained cash deposits and withdrawals.
Given that Mrs. Shayota works, her income is available to contribute to the
family expenses, which include rent in the amount of $1,100 per month,
cellular telephone service in the amount of approximately $150 per month, Mr.
Shayota’s lease of an expensive SUV in the amount of approximately $530 per
month, and presumed expenses for food, gas, and other necessities that have
not been presented to the court. Based on its review of the documentation
submitted by Mr. Shayota, the court finds that the amount of ordered monthly
payments will allow the Shayotas to continue to pay for reasonable family
expenses with their combined income (including Mr. Shayota’s reported monthly
salary of $1,726.34 and Mrs. Shayota’s reported income of at least $500 per
month).

from the underlying counterfeit 5-Hour Energy scheme,4 the court
orders Mr. Shayota to place $300 per month in an interestbearing account maintained by the clerk of this court, starting
August 1, 2014, pending the resolution of this matter in order
to prevent the frustration of any future judgment. Mr. Shayota
is further ordered to provide Plaintiffs with documentation of
any increases in his family income and any expenditure over $100
on a monthly basis. Recognizing that Mr. Shayota has a limited
income and considerable expenses to support his family, the
court modifies its November 30, 2012 preliminary injunction and
orders (1) that starting August 1, 2014, Mr. Shayota pay $300
per month on the first of each month to the clerk of this court,
and (2) that he may pay reasonable living expenses in the amount
of $1400 per month, so long as he provides documentation each
month to Plaintiffs as provided above. Mr. Shayota is advised
that continued failure to comply with the court’s orders will
result in contempt sanctions.

4

At his November 1, 2013 deposition taken pursuant to the court’s expedited
discovery order, Mr. Shayota testified that he was paid $8,000 cash monthly
from May to October for his involvement in the 5-Hour Energy operation. (ECF
No. 721, Letter from Geoffrey Potter, Ex. A, Dep. of J. Shayota at 308:25309:14.)

CONCLUSION
For the foregoing reasons, the court orders the
following:
(1) Mr. Shayota is 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 $300 per month, due on the 1st of
August 2014 and each month thereafter, until he has
deposited $40,000. He shall note his name, the case
name, and docket number on each check or money order.
(2) Mr. Shayota is ordered to provide to
Plaintiffs proof of monthly family income and receipts
and/or bank statements for every expenditure over $100
on a monthly basis, due the 1st of August 2014 and each
month thereafter.
(3) The court’s November 30, 2012 preliminary
injunction is amended to allow for the payment of
reasonable living expenses in the amount of $1400 per
month by Mr. Shayota, provided Mr. Shayota complies
with (1) and (2) above.

SO ORDERED.
Dated:

July 25, 2014
Brooklyn, New York
___________/s/______________
Kiyo A. Matsumoto
United States District Judge
Eastern District of New York