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GUESS, INC. v. CHANG

December 27, 1995

GUESS?, INC., Plaintiff,
v.
EDWIN CHANG a/k/a HOON CHANG AND KWANG MO CHOE; MICHELLE CHANG a/k/a MICHELLE C. BAEK AND IN S. PAEK; JAE HWAN KIM; and UNIQUE FASHIONS, Defendants.



The opinion of the court was delivered by: ASPEN

 MARVIN E. ASPEN, Chief Judge:

 Presently before this court are objections to three orders and recommendations of Magistrate Judge Rosemond, a motion for contempt and issuance of writs of sequestration and assistance, and defendant Michelle Chang's "Motion To Strike And Dismiss Guess?'s Amended Complaint Or In The Alternative For Summary Judgment, Or In The Alternative For A More Definite Statement." For the reasons set forth below, we grant in part and deny in part Guess?'s motion for contempt, overrule the defendants' objections to Magistrate Judge Rosemond's orders of August 25 and 28, overrule Guess?'s objections to Magistrate Judge Rosemond's order of August 23, and deny Michelle Chang's motion to strike and dismiss or for summary judgment.

 Although the facts of this case have already been laid out in our prior opinion, Guess?, Inc. v. Chang, 163 EF.R.D.F 505, 1995 U.S. Dist. LEXIS 19417 (N.D. Ill. 1995), we nonetheless must briefly reiterate the relevant background in order to resolve the instant matters. The plaintiff alleges that merchandise bearing counterfeit Guess? trademarks was sold and distributed in the Chicago area by defendant Unique Fashions and its Korean-American principals, who apparently have a limited command of the English language. Def.'s Obj. to 8/1/95 Rec., Ex. B. PP 5-6. *fn1" On June 15, 1994, Guess? filed the initial complaint against Edwin Chang, Unique Fashions, and Jae Hwan Kim, and the following day obtained an ex parte seizure order for approximately 500 counterfeit Guess? garments held by Unique Fashions. Soon afterwards, Guess? began negotiations with James T. Hyun, counsel for the defendants, in the hope of reaching a settlement. However, neither the defendants nor their attorney appeared before us, and on October 13, 1994 we granted Guess?'s motion for entry of default. We also granted Guess? leave to file an amended complaint in order to name Michelle Chang, Edwin Chang's wife, as a defendant. Instead of personally serving Michelle Chang, the plaintiff gave the amended complaint to Hyun based on its belief that he represented her as well as the other defendants. It was later learned that Hyun did not represent Michelle Chang and did not have authority to receive service on her behalf.

 As the chances of a negotiated settlement faded, Guess? moved for default judgment against all the defendants, and on February 17, 1995, we entered default judgment in the amount of $ 476,283 plus attorney's fees. On March 9-10, 1995, Guess? personally served "Citations to Discover Assets" on the defendants in the hopes of finding a means of satisfying the judgment. In addition to informing the defendants of their right to claim certain statutory exemptions at the time of the citation hearing, the Citations also stated:

 
YOU ARE PROHIBITED from making or allowing any transfer or other disposition of, or interfering with, any property not exempt from execution or garnishment belonging to the judgment debtors or to which the judgment debtors may be entitled or which may be acquired by or become due to the judgment debtors and from paying over or otherwise disposing of any money not so exempt, which is due or becomes due to the judgment debtors, until further order of court or termination of the proceedings.

 Def.'s Obj. to 8/1/95 Rec., Ex. 2.

 Pursuant to the Citations, Mr. Chang appeared (without counsel) at a status hearing before Magistrate Judge Rosemond on March 23, 1995, and indicated that he was unaware of the judgment entered against him. On April 6, 1985, Edwin Chang again appeared before Magistrate Judge Rosemond, this time accompanied by his wife Michelle Chang, but still without Mr. Hyun. After the status hearing Mr. Chang agreed to give sworn deposition testimony to Guess?'s attorney, at which time it was explained to Mr. Chang that, pursuant to the Citations, neither he nor his company were permitted to transfer or dispose of any assets. Edwin Chang Dep., at 45-46. Both Mr. Chang and Mrs. Chang indicated that although they previously did not understand this restriction in the Citations, they were now cognizant of its import. Id.; Michelle Chang Dep., at 21.

 After this meeting Guess? began to doubt the Changs' compliance with the terms of the Citation, and on June 20, 1995, obtained a turnover order from Magistrate Judge Rosemond. Based on information indicating that Mr. Chang possessed $ 5000 in cash, some valuable jewelry, and an "inventory of 'team jackets' valued at approximately $ 20,000.00-30,000.00," the magistrate judge ordered Mr. Chang to turn over all this property to Guess?. 6/20/95 Ord., at 3. *fn2" In addition, he ordered Michelle Chang to turnover $ 1000 in cash and certain pieces of jewelry. Soon thereafter, the defendants retained a new attorney, and moved before this court for a stay of the turnover order and a vacation of the default judgment. We denied the motion for a stay on June 27, 1995, and directed the defendants to comply with the magistrate judge's turnover order. On August 17, 1995, we denied Edwin Chang's motion to vacate the default, but granted Michelle Chang's motion to vacate because she had never been properly served with the Amended Complaint. Although vacating the default as to Ms. Chang, we declined to disturb the June 20, 1995 turnover order, observing that the magistrate judge's concerns over the defendants' violation of the Citations had not been alleviated. *fn3" Ms. Chang was properly served about a week later, and now, in what can best be described as a scatter-shot approach, she has moved to either strike or dismiss the complaint, order a more definite statement, or obtain summary judgment.

 In the meantime, prior to our ruling on the motion to vacate, Guess? sought an order of criminal contempt and the issuance of writs of sequestration and assistance, arguing that the defendants had failed to hand over any of the property identified in the June 20, 1995 turnover order. On July 21, 1995, two days after the motion was filed, the defendants made available to Guess? the jewelry referred to in the order, but did not deliver the $ 6000 in cash (claiming that they had no money) or the "team jackets" (ostensibly because they were held on consignment and were no longer in Edwin Chang's possession). After a hearing on the matter with counsel for both parties present, Magistrate Judge Rosemond issued a report and recommendation on August 1, 1995, recommending that we hold the Changs in contempt for either refusing to turnover the property identified in the June 20, 1995, or, if they no longer had the property, for violating the non-transfer provision of the March 1995 Citations. He recommended the Changs pay (1) $ 500 per day from June 27 (the date we denied the defendants' motion for stay of the turnover order) to July 21 (the date the defendants turned over the jewelry), for a total of $ 12,000; (2) $ 250 per day from July 21 until they complied with the turnover order; and (3) Guess?'s attorney's fees and costs in moving for contempt. In addition, the magistrate judge recommended issuing Writs of Sequestration and Assistance to seize the Changs' Infiniti automobile and other personal possessions in order to compel compliance with the turnover order. Finally, the magistrate judge issued a Rule to Show Cause why the Changs should not be held in criminal contempt, and ordered the defendants to appear on August 16, 1995.

 On August 9, 1995, Edwin Chang turned over to Guess? an inventory of jackets, pants, vests, and hats from Unique Fashions. In explaining why he did not turnover these items prior to that date, Mr. Chang claimed that he did not completely understand the turnover order of June 20, 1995. *fn4"

 At the August 16, 1995 hearing, the Changs appeared before Magistrate Judge Rosemond and presented an affidavit outlining their expenses since March 1995, as well as a motion to exempt certain property from the Citations. The magistrate judge confirmed his August 1 finding of contempt, but continued the Rule to Show Cause on criminal contempt pending our resolution of the objections filed by the defendants to his August 1 recommendations. The court also granted the defendants' motion to exempt $ 7,445 in borrowed funds, and $ 2,000 per month in living expenses, from the Citations. ...


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