United States of America v. Lax et al

Filing 241

REPORT AND RECOMMENDATION and CERTIFICATION OF FACTS CONSTITUTING CONTEMPT: For the reasons in the attached Report and Recommendation concerning Plaintiff's 175 and 216 Motions for Contempt, it is respectfully recommended that The Honorable I. Leo Glasser issue an order to show cause as to why Martin Ehrenfeld should not be found in contempt at a date and time to be set by Judge Glasser. In the event Judge Glasser finds Ehrenfeld to be in contempt, the undersigned recommends the imposi tion of a $1,000 daily sanction to secure his compliance with the document and deposition subpoenas and the undersigned's orders to comply with those subpoenas.Plaintiff is directed to serve a copy of this Report & Recommendation on Mart in Ehrenfeld by all known email addresses, text message to any known phone numbers, and certified mail to his last known address, and file proof of service on the docket by June 9, 2021. Any objection to this Report and Recommendation must be filed in writing with the Clerk of Court within fourteen (14) days of service. 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b). Failure to timely file any such objection waives the right to appeal the District Courts Order. Caidor v. Onondaga Cty., 517 F.3d 601, 604 (2d Cir. 2008). Ordered by Magistrate Judge Peggy Kuo on June 7, 2021. (Jochnowitz, David)

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UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
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UNITED STATES OF AMERICA,
Plaintiff,

REPORT &
RECOMMENDATION

-againstMOSHE LAX, individually, as an executor of the
Chaim Lax Estate, as a trustee of the Chaim Lax
Family Trust, and as a trustee of the GAMA Trust;
ZLATY SCHWARTZ, individually, as executor of
the Chaim Lax Estate, as trustee of the Chaim Lax
Family Trust, and as a trustee of the GAMA Trust;
SHAINDY LAX; JUDITH LAX; J.L., a minor; 299
HEWES STREET REALTY CORP; 308 HEWES
STREET REALTY CORP; JBAM REALTY LLC,
a/k/a JBAM REALTY 2 LLC; BEN ZION
JACOBOWITZ; TOBY JACOBOWITZ; SL
HOLDINGS I, LLC; SL HOLDINGS II, LLC; SL
HOLDINGS III, LLC; SL HOLDINGS IV, LLC;
SL HOLDINGS V, LLC; DIAMOND
DYNAMICS LLC; KGK JEWELRY LLC;
CONGREGATION BAIS YEHUDAH
D’GANITCH; LX HOLDINGS LLC; MORRIS
SCHLAGER; GITTY SCHLAGER; JOSEPH
GREEN; HANNAH GREEN; HENNY GREEN;
and HERSHI GREEN,

18-cv-04061 (ILG)(PK)

Defendants.
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Peggy Kuo, United States Magistrate Judge:
Plaintiff United States of America filed a Letter Motion for Certification of Contempt (Dkt.
175) and a Second Letter Motion for Certification of Contempt (Dkt. 216, collectively, the “Motions”),
concerning third-party Martin Ehrenfeld’s failure to comply with document and deposition subpoenas
and with the undersigned’s orders to comply with those subpoenas. The Motions seek an order
imposing a $1,000 daily sanction until Ehrenfeld complies with the subpoenas and the undersigned’s
orders.
For the reasons below, the undersigned certifies the following facts to The Honorable I. Leo
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Glasser and respectfully recommends that he issue an order to show cause as to why Martin Ehrenfeld
should not be found in contempt at a hearing to be held at a date and time to be set by Judge Glasser.
PROCEDURE ON A MOTION FOR CIVIL CONTEMPT
“United States magistrate judges have limited civil contempt authority.” Ferrara v. BD Haulers
Inc., No. 11-CV-940 (ADS) (ARL), 2018 WL 3625347, at *3 (E.D.N.Y. Apr. 30, 2018), R&R adopted,
2018 WL 4087914 (E.D.N.Y. Aug. 27, 2018). Magistrate judges may issue orders of contempt for
misbehavior in the judge’s presence and may exercise criminal and civil contempt authority in
misdemeanor cases and in civil cases in which the parties have consented to magistrate judge
jurisdiction. 28 U.S.C. § 636(e)(2)-(4). In all other instances, the magistrate judge
shall forthwith certify the facts to a district judge and may serve or cause to be
served, upon any person whose behavior is brought into question under this
paragraph, an order requiring such person to appear before a district judge upon a
day certain to show cause why that person should not be adjudged in contempt by
reason of the facts so certified. The district judge shall thereupon hear the evidence
as to the act or conduct complained of and, if it is such as to warrant punishment,
punish such person in the same manner and to the same extent as for a contempt
committed before a district judge.
28 U.S.C. § 636(e)(6)(B)(iii). In certifying the facts, “the magistrate judge’s role is to determine whether
the moving party can adduce sufficient evidence to establish a prima facie case of contempt.” Hunter
TBA, Inc. v. Triple V Sales, 250 F.R.D. 116, 118 (E.D.N.Y. 2008) (internal quotations omitted).
The undersigned accordingly certifies the following facts to Judge Glasser pursuant to 28
U.S.C. § 636(e)(6)(B)(iii).
CERTIFIED FACTS
A.

Martin Ehrenfeld’s Failure to Comply with a Document Subpoena

1. On November 14, 2019, Ehrenfeld was personally served with a subpoena requiring him
to produce documents to the Plaintiff on November 22, 2019. (“Document Subpoena,”
Dkt. 153-1; Declaration of Pingping Zhang (“Zhang Decl.”), Dkt. 153-2; Ex. A to Zhang
Decl., “Proof of Service,” Dkt. 153-3).
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2. The Document Subpoena stated that Ehrenfeld was “COMMANDED to produce”
certain specifically identified documents to the United States’ Attorney’s Office on
November 22, 2019 at 10:00 am. (Document Subpoena at 1; see also id. at 7 (identifying
eleven specific requests for certain categories of documents).)
3. As of December 3, 2019, Plaintiff did not receive the requested documents. (Ex. B to
Zhang Decl., “Dec. 3, 2019 Letter,” Dkt. 153-4.)
4. On December 3, 2019, Plaintiff’s counsel sent Ehrenfeld a letter requesting that he
produce the subpoenaed documents by December 13, 2019. (Zhang Decl. ¶ 3; Dec. 3,
2019 Letter.) The letter informed Ehrenfeld that if the government did “not receive the
requested documents and information by December 13, 2019, the United States will have
to file a motion to seek an order from the U.S. District Court for the Eastern District of
New York to compel your compliance with the subpoena.” (Dec. 3, 2019 Letter; Zhang
Decl. ¶ 3.)
5. On December 17, 2019, Ehrenfeld called Plaintiff’s counsel and “told her that there is no
need to move to compel and that he is willing to cooperate with the government.” (Zhang
Decl. ¶ 4.) Ehrenfeld indicated that he had the requested information in his Gmail account
and asked for a delay in production “until after the 2019 holidays.” (Id.)
6. On January 3, 2020, Plaintiff’s counsel sent Ehrenfeld an email “proposing certain
protocols for Mr. Ehrenfeld to produce the electronic information stored in his [G]mail
account.”

(Id. ¶ 5; Ex. C. to Zhang Decl., “Jan. 3, 2020 Email,” Dkt. 153-5.)

Acknowledging

Ehrenfeld’s

“concern

with

[a]

Kovel

arrangement” 1

covering

1 A Kovel agreement would potentially extend the attorney-client privilege to communications with a non-lawyer,
such as an accountant, working with a lawyer and client when “the communication [is] made in confidence for
the purpose of obtaining legal advice from the lawyer.” See United States v. Kovel, 296 F.2d 918, 921-923, (2d Cir.
1961).

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communications between Ehrenfeld and Defendant Moshe Lax, Plaintiff proposed,
among other things, that Ehrenfeld produce a copy of any such agreement. (Jan. 3, 2020
Email.) Plaintiff’s counsel further suggested that if Ehrenfeld did not have a copy of the
purported Kovel agreement, he could “provide any contemporaneous documents proving
the existence of such agreement and the terms of the agreement (e.g., scope of subject
matters, date range, etc.).” (Id.) Plaintiff offered to “work with Moshe Lax to identify the
scope of the privileges, if any, and a set of search terms/filters.” (Id.)
7. On January 7, 2020, Ehrenfeld indicated to Plaintiff’s counsel “that he would look for a
Kovel[] agreement requested by the United States and would call [Plaintiff’s counsel] by late
on January 9 or early on January 10[, 2020].” (Zhang Decl. ¶ 6.)
8. Plaintiff’s counsel did not receive any call from Ehrenfeld on either January 9 or January
10, 2020. (Id. ¶ 7.)
9. On January 14 and January 16, 2020, Plaintiff’s counsel called Ehrenfeld three times, and
on January 14, 2020, Plaintiff’s counsel sent Ehrenfeld a text message asking him to call
her back. (Id. ¶ 8.) Ehrenfeld “did not answer or return any of the phone calls,” and
Plaintiff’s counsel was unable to reach Ehrenfeld. (Id. ¶¶ 8-9.)
10. On February 27, 2020, Plaintiff’s counsel spoke to Ehrenfeld by telephone concerning
compliance with the Document Subpoena. (Declaration of Ali Gadelhak, “Gadelhak
Decl.,” Dkt. 240 ¶ 3.) Ehrenfeld explained that he recently underwent surgery and was
recovering in Florida. (Id.) Ehrenfeld stated that there might be a Kovel agreement that
would prevent his compliance with the Document Subpoena. (Id.) Plaintiff’s counsel
requested a copy of the agreement. (Id.)
11. On March 16, 2020, Plaintiff filed a letter motion to compel Ehrenfeld’s compliance with
the Document Subpoena. (Dkt. 153.)
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12. A telephone hearing on the motion to compel was held before the undersigned on May
13, 2020. (Minute Entry Dated May 14, 2020.) Ehrenfeld appeared by telephone. (Id.)
Ehrenfeld stated that Defendant Moshe Lax had asserted attorney-client privilege over
emails between Ehrenfeld and Defendant Lax, and that Ehrenfeld and Defendant Lax had
Kovel agreements with various law firms. The minute entry for the May 13, 2020 hearing
states:
Mr. Ehrenfeld is directed to produce the Kovel[] agreements or
information as to why such information is inaccessible, to
Plaintiff, by May 27, 2020. Mr. Ehrenfeld is further directed,
if asserting privilege, to produce a privilege log, by June 30,
2020.
(Minute Entry Dated May 14, 2020 (emphasis in original).)
13. Plaintiff filed proof of service by email of the minute entry for the May 13, 2020 hearing
on Ehrenfeld. (“Plaintiff’s Proof of Service of May 14, 2020 Minute Entry,” Dkt. 155.)
14. On June 22, 2020, Plaintiff’s counsel spoke to Ehrenfeld by telephone, and Ehrenfeld told
Plaintiff’s counsel that he was unable to locate any Kovel letters “despite reaching out to
accounting firms and a law firm.” (Gadelhak Decl. ¶ 4.) Plaintiff’s counsel asked which
firms Ehrenfeld contacted, but Ehrenfeld refused to tell him. (Id.) Later that day,
Ehrenfeld sent Plaintiff’s counsel a screenshot of a series of text messages between
Ehrenfeld and an attorney at the law firm Morrison Cohen regarding “the [d]ocument
production for the DOJ matter vs. Moshe Lax.” (Id.; see also Ex. A to the Gadelhak Decl.,
“Attachment to June 22, 2020 Emails,” Dkt. 240-1.) The Morrison Cohen attorney wrote
to Ehrenfeld on Thursday, May 28, “We have been unable to locate the documents you
seek. Apologies.” (Attachment to June 22, 2020 Emails at 3.) Plaintiff’s counsel emailed
Ehrenfeld on June 22, 2020 asking if Ehrenfeld had any proof of similar communications
with other law firms, but Ehrenfeld did not respond. (Id. at 1; Gadelhak Decl. ¶ 4.)
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15. On July 17, 2020, Plaintiff’s counsel emailed Ehrenfeld requesting a status update
regarding Ehrenfeld’s compliance with the Document Subpoena. (Gadelhak Decl. ¶ 5;
Ex. B to the Gadelhak Decl., “July 17, 2020 Email,” Dkt. 240-2 at 1.) Ehrenfeld did not
reply to that email. (Gadelhak Decl. ¶ 5.) Plaintiff’s counsel tried to call Ehrenfeld, but
his voicemail box was full. (July 17, 2020 Email at 1.)
16. On July 28, 2020, the parties appeared before the undersigned for a status hearing by
telephone. (Minute Entry and Order dated July 28, 2020.) Ehrenfeld did not appear at
that hearing. (Id.) Plaintiff made an oral request for an order to show cause why Ehrenfeld
should not be held in contempt for failure to comply with the Court’s May 14, 2020 order.
(Id.) The undersigned granted the request and ordered Ehrenfeld “to show cause why he
should not be held in contempt for failure to comply with the Court order of May 14,
2020 ordering him to make certain productions no later than June 30, 2020.” (Id.)
17. A show cause hearing was scheduled for August 4, 2020. (Id.)
18. Plaintiff notified Ehrenfeld of the August 4, 2020 hearing by serving him with a copy of
the July 28, 2020 Order by email and first class U.S. Mail to his last known address on July
30, 2020. (“Plaintiff’s Certificate of Service of July 28, 2020 Order,” Dkt. 164.)
19. Ehrenfeld did not appear at the August 4, 2020 show cause hearing. (Minute Entry and
Order dated Aug. 7, 2020.)
20. On August 7, 2020, the undersigned ordered Ehrenfeld to comply with the Document
Subpoena and produce all the documents demanded by August 20, 2020:
The Court finds that Mr. Ehrenfeld has not presented any evidence of
a Kovel[] agreement that would prevent him from complying with the
subpoena. Accordingly, Martin Ehrenfeld is ordered to comply
with the subpoena at [153-1] forthwith and produce all the
documents demanded. If he fails to comply by August 20, 2020,
the Court respectfully recommends that Mr. Ehrenfeld be found in
contempt and that a daily sanction be imposed on him until he
complies.
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(Id. (emphasis in original).)
21. On August 10, 2020, Plaintiff served Ehrenfeld by email with a copy of the August 7, 2020
order and a copy of the Document Subpoena dated November 1, 2019. (“Plaintiff’s
Certificate of Service of August 7, 2020 Order,” Dkt. 166.)
22. As of May 27, 2021, Ehrenfeld has produced no documents pursuant to the Document
Subpoena or the August 7, 2020 order. (Gadelhak Decl. ¶ 7.)
B.

Martin Ehrenfeld’s Failure to Comply with a Deposition Subpoena

1. On November 27, 2020, Plaintiff filed a letter motion requesting an order authorizing
alternative service of a deposition subpoena on Ehrenfeld by email, text message, and mail
to his last known address. (“Plaintiff’s Letter Motion for Alternate Service,” Dkt. 183.)
2. On December 1, 2020, the undersigned granted Plaintiff’s request for alternative service
of a deposition subpoena on Ehrenfeld. (Order dated Dec. 1, 2020.) The deposition
subpoena was ordered to be served by email and text message, as well as by mail to
Ehrenfeld’s last known address. (Id.)
3. The deposition subpoena stated that “Martin Ehrenfeld a/k/a Mordechai Ehrenfeld” was
“COMMANDED to appear at the time, date, and place set forth below to testify at a
deposition to be taken in this civil action.” (“Deposition Subpoena,” Dkt. 205-1 at 3.)
The subpoena clearly stated that Ehrenfeld either needed to appear at the U.S. Attorney’s
Office for the Eastern District of New York, “or a suitable alternative with sufficient
internet connectivity and a web camera” on January 5, 2020 at 9:00 am. (Id.)
4. The United States served Ehrenfeld with the Deposition Subpoena by email on December
18 and 29, 2020 at two email addresses (Ex. 1 to Motion to Compel Deposition,
“December 2020 Emails,” Dkt. 205-1); by text message on December 22, 2020 (Ex. 2 to
Motion to Compel Deposition, “December 2020 Text Message Screenshots,” Dkt. 2057

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2); and by mail to his last known address on December 23, 2020 (Ex. 3 to Motion to
Compel Deposition, “FedEx Proof of Delivery,” Dkt. 205-3).
5. Ehrenfeld failed to appear for his deposition on January 5, 2021. (Gadelhak Decl. ¶ 6;
“Motion to Compel Deposition,” Dkt. 205 at 1; “Amended Motion to Compel
Deposition,” Dkt. 206 at 1.)
6. On January 15, 2021, the undersigned ordered Ehrenfeld to appear and give testimony at
a February 4, 2021 remote deposition:
This matter is before the Court on the United States’ Unopposed
Letter Motion to Compel Third-Party Martin Ehrenfeld’s Compliance
with the United States’ Subpoena. For the reasons stated in the
motion, and for good cause shown, the Court hereby GRANTS the
United States’ motion.
Martin Ehrenfeld is ORDERED to appear and provide testimony on
February 4, 2021, at the time and location as set forth in the United
States’ Subpoena, ECF No. 205-1.
(January 15, 2021 Order, Dkt. 208 at 1 (emphasis in original).) The United States was
directed to serve a copy of the January 15, 2021 Order on Ehrenfeld by email and text
message. (Id. at 2.)
7. On January 15, 2021, the United States served a copy of the January 15, 2021 Order on
Ehrenfeld by email and text message. (“Plaintiff’s Certificate of Service of January 15,
2021 Order,” Dkt. 209.)
8. Ehrenfeld failed to appear for his deposition on February 4, 2021. (Gadelhak Decl. ¶ 6.)
9. As of May 27, 2021, Ehrenfeld has not appeared for any deposition. (Id. ¶ 7.)
DISCUSSION
A court may hold a party in contempt if “(1) the order the contemnor failed to comply with is
clear and unambiguous, (2) the proof of noncompliance is clear and convincing, and (3) the contemnor
has not diligently attempted to comply in a reasonable manner.” Paramedics Electromedicina Comercial,
8

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Ltda. v. GE Medical Systems Information Technologies, Inc., 369 F.3d 645, 655 (2d Cir. 2004) (quoting King
v. Allied Vision, Ltd., 65 F.3d 1051, 1058 (2d Cir. 1995)). The violation need not be willful. Id. (citing
Donovan v. Sovereign Sec. Ltd., 726 F.2d 55, 59 (2d Cir. 1984)).
The undersigned’s orders to produce documents and appear for a deposition were clear and
unambiguous. The August 7, 2020 Order states, “Martin Ehrenfeld is ordered to comply with the
subpoena at [153-1] forthwith and produce all the documents demanded” (emphasis in original).
The January 15, 2021 Order states, “Martin Ehrenfeld is Ordered to appear and provide testimony on
February 4, 2021, at the time and location as set forth in the United States’ Subpoena, ECF No. 2051.” (emphasis in original).) The Document Subpoena and the Deposition Subpoena were similarly
clear and unambiguous. (See Document Subpoena at 1, 7 (commanding Ehrenfeld to produce eleven
sets of documents by November 22, 2019); Deposition Subpoena (commanding Ehrenfeld to appear
in person or by video for a deposition on January 5, 2020 at 9:00 am.).)
Ehrenfeld’s non-compliance is clear and convincing. He has not produced documents, and
he has failed to appear for his scheduled deposition. (Gadelhak Decl. ¶¶ 6-7.) Moreover, there is no
evidence that Ehrenfeld has made any effort to comply with the Court’s orders, let alone a diligent or
reasonable effort. He has not produced a privilege log, a copy of a Kovel agreement that extends Moshe
Lax’s attorney-client privilege to him or any information sufficient for Plaintiff to ascertain the scope
of any such privilege. After his last appearance on May 13, 2020, he has failed to appear for court
conferences to explain his failures or describe any ambiguity in the orders or subpoenas. He did not
respond to Plaintiff’s counsel’s emails to ask any questions, request an extension of time to produce
documents, or request to reschedule the deposition. The undersigned therefore finds sufficient
evidence to establish a prima facie case of contempt.
CONCLUSION
The undersigned certifies the foregoing facts, and respectfully recommends that The
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Honorable I. Leo Glasser issue an order to show cause as to why Martin Ehrenfeld should not be
found in contempt at a date and time to be set by Judge Glasser. In the event Judge Glasser finds
Ehrenfeld to be in contempt, the undersigned recommends the imposition of a $1,000 daily sanction
to secure his compliance with the document and deposition subpoenas and the undersigned’s orders
to comply with those subpoenas.
Plaintiff is directed to serve a copy of this Report & Recommendation on Martin Ehrenfeld
by all known email addresses, text message to any known phone numbers, and certified mail to his
last known address, and file proof of service on the docket by June 9, 2021. Any objection to this
Report and Recommendation must be filed in writing with the Clerk of Court within fourteen (14)
days of service. 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b). Failure to timely file any such objection
waives the right to appeal the District Court’s Order. Caidor v. Onondaga Cty., 517 F.3d 601, 604 (2d
Cir. 2008).

SO ORDERED:

Peggy Kuo

PEGGY KUO
United States Magistrate Judge

Dated:

Brooklyn, New York
June 7, 2021

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