Harris v. Jie et al

Filing 234

ORDER TO SHOW CAUSE as to defendant Zhao by 5/12/2017 why the Court should not increase her monthly payment to purge contempt; ORDER granting in part Plaintiff Thomas E Perez's 226 MOTION for Remedies or Relief from Defendants' continuing contempt, by Judge Robert S. Lasnik. (SWT)

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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE

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THOMAS E. PEREZ, Secretary of Labor,
United States Department of Labor,

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Plaintiff/Petitioner,

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v.

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NO. C13-877RSL
ORDER TO SHOW CAUSE

HUANG “JACKIE” JIE, an individual,
ZENG HONG ZHAO, an individual,
PACIFIC COAST FOODS, INC., a
Washington corporation doing business as J
& J COMFORT ZONE, INC. doing business
as SPA THERAPY,
Defendants/Respondents.

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This matter comes before the Court on the “Secretary’s Motion for Remedies In Light Of

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Defendants’ Misrepresentation To Lower Their Monthly Amount to Purge Contempt.” Dkt.

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# 226. The Secretary alleges that defendants have deliberately misrepresented their financial

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condition in at attempt to lower the Court-ordered payments required to purge contempt in the

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amount of $652,859.62. See Dkt. # 196. Having reviewed the memoranda, declarations, and

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exhibits of the parties, as well as the remainder of the record, the Court finds as follows.

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On March 24, 2015, after a jury found that defendants had violated the Fair Labor

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Standards Act (FLSA), the Court entered a judgment jointly and severally against defendants

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and in favor of the Secretary of Labor in the amount of $1,337,519.20. Dkt. ## 155, 157. The

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Court ordered defendants to deliver a cashier’s check or money order in the amount of

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ORDER TO SHOW CAUSE - 1

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$652,859.62 to the Department of Labor within seven days of the entry of judgment. Dkt. # 155.

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Defendants subsequently failed to make any payments toward satisfying the judgment, and after

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a hearing on defendants’ ability to afford the court-ordered payments, the Court found

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defendants in civil contempt of court for $652,859.62. Dkt. # 196. The Court ordered

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defendants to pay $1,800 immediately, then $2,500 per month to purge contempt.

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After defendants made the initial $1,800 payment in March 2016, defendant Huang

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“Jackie” Jie filed for Chapter 7 bankruptcy, and Defendant Zhao “Jenny” Hong requested an

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abatement of the monthly contempt payments pending appeal. Defendant Zhao argued that

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defendant Jie’s bankruptcy rendered her solely liable for the monthly payments, which she could

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not afford. Dkt. ## 197, 198, 203. In June 2016, the Court found that defendant Jie’s

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bankruptcy proceeding stayed enforcement of the judgment against him, and reduced the

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monthly contempt payment to $375 per month, an amount deemed reasonable for defendant

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Zhao to bear on her own. The Court also ordered defendant Zhao to provide a financial

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statement every three months, beginning July 1, 2016, documenting all household income and

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expenses. Finally, the Court ordered defendant Zhao to provide her yearly tax returns, and her

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companies’, to the Court within thirty days of filing them. Dkt. # 204.

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Defendant Zhao failed to file her financial statement until July 29, 2016, and when she

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did so, she failed to include all of the required documentation. Dkt. # 205. In response, the

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Secretary requested, and the Court granted, a second debtor’s examination. Dkt. ## 206, 207.

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Defendant Zhao and her counsel failed to appear for that examination, and an arrest warrant was

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issued. Dkt. ## 211, 212. Eventually, Magistrate Judge Brian Tsuchida granted defendant’s

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motion to recall the arrest warrant. Dkt. # 217. Magistrate Judge Tsuchida also granted the

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Secretary’s motion for sanctions in the amount of $608 against defendant Zhao and $2,000

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against defendant’s counsel (which was suspended on the condition that defense counsel fully

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comply with the Court’s orders). Dkt. # 224.

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In December 2016, the Secretary filed this motion for relief, arguing that defendant Zhao

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had misrepresented her financial condition and that in fact she had continued to maintain her

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ORDER TO SHOW CAUSE - 2

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“luxurious standard of living” while failing to purge contempt through the court-ordered

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payments. The Secretary asks the Court to find that defendant Zhao and defendant Jie have been

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fraudulently commingling their finances and that defendant Zhao is capable of greater monthly

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payments to purge contempt; to require defendant Zhao pay the full amount of damages still

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owed to the defendant’s employees (or alternatively to reinstate contempt payments of $5,000

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per month); to require defendant Zhao to surrender for liquidation certain luxury items that

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defendant has purchased; to continue requiring defendants to comply with the previously ordered

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financial reporting requirements; and to award the Secretary the fees and costs incurred in

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litigating defendants’ contempt. The Secretary further asks the Court to warn defendant Zhao

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that noncompliance with Court orders will result in seizure of defendant’s passport until

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compliance is achieved, or in the issuance of a warrant for defendant’s arrest.

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In response, defendant Zhao asserts that she is not “living a luxurious lifestyle” and

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explains in a sworn declaration that she has relied on credit cards to pay for her own living

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expenses and for those of her adult daughter, and that she currently has about $15,000 in credit

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card debt. Dkt. # 228. Defendant states that she been paying off her credit card bills using loans

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from her sisters, who live in China. Dkt. # 228.

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In January 2017, the Secretary filed a notification of defendant Zhao’s failure to file

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periodic reports detailing her income and expenses in October 2016 and January 2017, and

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failure to make timely payments. It appears that defendant Zhao made late – but complete –

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payments from July 2016 through December 2016, and a late and incomplete payment of $345

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in January 2017. Dkt. ## 230-1, 231.1 Defendant Zhao has not responded to the Secretary’s

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notification.

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Defendant Zhao does not contest the Secretary’s claim that she has failed to comply with

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It also appears that when the Secretary filed this motion for remedies, he mistakenly believed
that defendant Zhao’s monthly payments of $375 had all arrived over a month late. The corrected
declaration of Ilene Barton, Dkt. ## 230-1, 230-2, and the Secretary’s notification of defendant Zhao’s
continuing violation, Dkt. # 231, explain that defendant Zhao’s monthly checks were all actually about a
week late, rather than over a month late.

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ORDER TO SHOW CAUSE - 3

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the Court’s order requiring periodic financial reports detailing her income and expenses. Neither

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does defendant Zhao provide any specific documentation – other than her 2015 tax return and

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pay stubs from December, May, and June 2015, see Dkt. # 228 – in an attempt to refute the

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Secretary’s allegation that she can afford contempt payments of more than $375 per month.
At the same time, the documents and deposition transcripts provided by the Secretary do

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not conclusively show that defendant Zhao is capable of paying more than $375 per month.

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Rather, they suggest that defendant Zhao has not found regular employment (whether by choice

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or by circumstances beyond her control) and that she relies heavily on credit card debt to

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maintain her standard of living. Defendant Zhao’s two trips to China are not evidence that she

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has spent money on travel rather than on her contempt payments, as one of her relatives or

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friends could have purchased her plane tickets and otherwise funded her travel. And whether or

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not defendant Jie has commingled his finances with defendant Zhao’s in order to shield those

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funds from the ongoing bankruptcy proceedings is a matter for resolution by the bankruptcy

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court.

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The Court concludes that, given defendant Zhao’s regular (if tardy) monthly payments of

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$375, it is not necessary to imprison defendant Zhao or to seize her passport in order to enforce

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compliance with its contempt order. But updated documentation of defendant Zhao’s financial

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situation is required.

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Accordingly, defendant Zhao is hereby ORDERED TO SHOW CAUSE by Friday, May

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12, 2017, why the Court should not increase her monthly payment to purge contempt from $375

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to $1000. By May 12, 2017, Defendant Zhao must provide a sworn financial statement to the

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Court, using the form attached to this order as Exhibit A and attaching documentation showing

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all household income and expenses. The Secretary may file a response within 14 days.

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Defendant Zhao must then file an updated financial statement as described above by July 1,

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2017, and every three months thereafter until further order of the Court. Defendant Zhao must

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also provide the Court with her 2016 tax return, and her companies’, within 30 days of filing.

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ORDER TO SHOW CAUSE - 4

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The Secretary may file a response within 14 days of the filing of these tax returns.
Defendant Zhao must continue to pay the Secretary of Labor $375 by the first day of each

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month, as previously ordered. All payments to the Secretary shall be by certified check or

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money order made payable to “U.S. Department of Labor,” Attn: Jeannie Gorman, 300 Fifth

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Ave., Suite 1120, Seattle, WA 98104. If defendant Zhao fails to show cause as described above

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by May 12, 2017, the Court will enter an order increasing defendant Zhao’s monthly required

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payment to $1000 and imposing the Court’s previously suspended sanction of $2,000 against

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defendant Zhao’s attorney, Glyn Lewis, see Dkt. # 224.

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The Secretary’s motion for remedies (Dkt. # 226) is thus GRANTED in part. The Clerk

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of Court is directed to note this order to show cause on the Court’s calendar for Friday, May 12,

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2017.

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DATED this 20th day of April, 2017.
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A

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Robert S. Lasnik
United States District Judge

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ORDER TO SHOW CAUSE - 5

FINANCIAL STATEMENT
Perez v. Jie, et al. - Case No. C13-877RSL

This report is for the three month period from _________________ to __________________.
Check the box next to each entry if documentation is attached.
ALL AMOUNTS RECEIVED:
During this time period, I earned, borrowed, or otherwise received the following:
$ ____________ from ______________________ for ____________________;
$ ____________ from ______________________ for ____________________;
$ ____________ from ______________________ for ____________________;
$ ____________ from ______________________ for ____________________;
HOUSEHOLD EXPENSES:
During this time period, I paid household expenses of:
$________________ for mortgage/rent
$________________ for groceries
$________________ for water
$________________ for electricity
$________________ for phone/internet/tv
$________________ for transportation, including automobile costs
$________________ for other utility/utilities, of:
______________________________
______________________________
I incurred additional expenses of $___________ for ______________________
I incurred additional expenses of $___________ for ______________________
I incurred additional expenses of $___________ for ______________________
GIFTS:
During this period, I made gifts of or valuing the following amounts to the following
individuals for the following occasions/reasons:
$_______________

to _____________________ for __________________________;

$_______________

to _____________________ for __________________________;

$_______________

to _____________________ for __________________________;

Attach additional pages if more space is needed to complete this form.
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OTHER EXPENDITURES:
During this time period, I made the following purchases of over $250, whether in full,
partial, or on credit:
$_______________

for __________________________________________________;

$_______________

for __________________________________________________;

$_______________

for __________________________________________________;

$_______________

for __________________________________________________;

CHANGES TO FINANCIAL CONDITION:
During this period, my financial condition changed in that I opened, closed, deposited, withdrew,
or transferred the following amounts of over $250 from the following financial, credit, or other
accounts:
Institution: ______________________________ Acct. No.: __________________________
Reason for change: ___________________________ Amount affected: $___________________

Institution: ______________________________ Acct. No.: __________________________
Reason for change: ___________________________ Amount affected: $___________________

Institution: ______________________________ Acct. No.: __________________________
Reason for change: ___________________________ Amount affected: $___________________

I, ____________________________________ declare under the penalty of perjury that the
foregoing is true and correct.

Dated: ___________________________________
Location: _________________________________
Signature: ________________________________

Attach additional pages if more space is needed to complete this form.
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