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Wachovia Securities, LLC v. Nola

June 5, 2008


The opinion of the court was delivered by: Judge Robert W. Gettleman


Defendant Nola, LLC, has filed an objection to Magistrate Judge Arlander Keys' Report and Recommendation dated February 19, 2008 (the "R&R"), recommending that defendant should be found "in civil contempt of court and that an appropriate fine should be imposed" for violating a series of orders intended to enforce a judgment in favor of plaintiff Wachovia Securities, LLC, in the sum of $1,387,355.39 entered by Judge Filip (who was previously assigned to this case) on February 16, 2006. Because the factual and procedural history recited by Magistrate Judge Keys in the R&R is not materially disputed, the court incorporates the R&R and attaches it to this memorandum opinion and order. For the reasons discussed below, the court denies defendant's objections to the R&R.

As mentioned above, defendant acknowledges the sorry procedural history of the post-judgment proceedings, but objects to Magistrate Judge Keys' conclusions that it "strung the plaintiff and this court along, when, by its own admission, it chose to designate Mr. Nichols, a member of the LLC, knowing that by designating 'a member of [the] LLC, rather than an employee or officer, [defendant's] ability to compel Mr. Nichols' actions [was] limited'" (quoting from defendant's response to plaintiff's motion for sanctions). Defendant also objects to Magistrate Judge Keys' conclusion that it continuously mislead plaintiff and the court into believing that Mr. Nichols would be produced for his deposition, and that defendant never intended to have Mr. Nichols' deposition taken. Having carefully considered Magistrate Judge Keys' R&R, as well as the extensive record in this matter, this court concludes that Magistrate Judge Keys' could have reached no other conclusions and finds that his recommendation for a finding of civil contempt is fully supported by the record.*fn1

Defendant's position can be distilled into a single proposition: that because it is a defunct company without assets, it was entitled to designate a witness to appear at a Rule 30(b)(6) examination pursuant to the post-judgment citation to discover assets over whom it had no power to compel his appearance at the examination. Although Judge Filip had suggested that Leon Greenblatt, the president of defendant's manager (Teltech Systems, Inc.), who had served as the corporate representative at the creditors' committee meeting in the underlying bankruptcy proceeding, should be tendered as defendant's 30(b)(6) representative, and although, in a February 14, 2008, order from which no objection has been taken, Magistrate Judge Keys (after more than a year of inexcusable delays) ordered defendant to produce Mr. Greenblatt for a deposition, defendant has insisted that it was under no obligation to produce anyone but James Nichols, a citizen of the United Kingdom over whom defendant ultimately claimed it had no control.

This court is startled by a statement in defendant's reply brief in support of its objection to the R&R (filed on May 1, 2008) that Mr. Greenblatt resigned as President of Teltech Systems, Inc. (defendant's manager) "sometime in the last year or so." If this is true, Mr. Greenblatt was President of defendant's manager, and therefore (as Magistrate Judge Keys' held) had the "sole and exclusive authority to run [defendant] and make investment decisions on its behalf," at the time the citation was originally served in March 2006, as well as on February 27, 2007, when Magistrate Judge Keys first ordered defendant to produce its designated witness (Mr. Nichols) for a deposition in Chicago.*fn2 Rather than producing the appropriate corporate representative, Mr. Greenblatt, defendant continued to designate Mr. Nichols, over whom it had no control and who defendant had every reason to believe would not travel to the United States to appear for the citation examination.

If this isn't "stringing along" the court and the plaintiff, nothing is. It has been 27 months since judgment was entered, 26 months since the citation was issued, two years since Judge Filip initially entered a rule to show cause on the citation, 15 months since Magistrate Judge Keys ordered defendant to produce a Rule 30(b)(6) designee for deposition in Chicago, one year since Judge Filip ordered Mr. Nichols to travel to Chicago for a deposition, 11 months since Magistrate Judge Keys issued a similar order and threatened to hold Nichols in contempt of court, and three months since Magistrate Judge Keys ordered defendant to produce Greenblatt for a deposition (none of which orders were appealed). Enough is enough.

Both Illinois and federal law contemplate the possibility that a party risks a contempt citation for willful failure to comply with a citation to discover assets. See 735 Ill. Comp. Stat. § 5/2-1402; 28 U.S.C. § 1826(a). The remarkable patience displayed by both Judge Filip, the district judge who had previously been assigned to this case, and Magistrate Judge Keys, the magistrate judge to whom Judge Filip assigned the responsibility to enforce the citation to discover assets, has been rewarded by defendant's obstinance, dissembling, and inordinate and willful delay, resulting in a unacceptable waste of judicial resources. Accordingly, the court denies defendant's objection to Magistrate Judge Keys' February 19, 2008, R&R, and confirms his recommendation that defendant is in civil contempt of this court. In addition to the sanctions previously imposed by Magistrate Judge Keys, defendant is hereby fined the sum of $500.

The court notes that this entire matter is probably moot at this point. Although the court set the case for ruling on today's call, plaintiff failed to appear. Defendant's counsel informed the court that Mr. Greenblatt had in fact recently appeared at a citation examination (although he disclaimed appearing as a Rule 30(b)(6) witness because he was no longer employed by defendant). Plaintiff's failure to appear at today's hearing seems to confirm the fact that defendant is defunct and without any resources to pay a fine or the judgment, and that the entire exercise of appealing Magistrate Judge Keys' report and recommendation was unnecessary and a further waste of judicial resources.

Robert W. Gettleman United States District Judge


Magistrate Judge Arlander Keys


Plaintiff Wachovia Securities, LLC ("Wachovia"), was awarded a $1.38 million judgment against Defendant, NOLA, LLC ("NOLA"). In an attempt to exercise its rights as a judgment creditor, Plaintiff seeks to conduct a citation examination to discover NOLA's assets, pursuant to Federal Rule of Civil Procedure 30(b)(6). NOLA designated James Nichols, a citizen of the United Kingdom, as its corporate representative. Mr. Nichols, however, has not appeared and NOLA has failed to appoint anyone in his place, delaying any progression of the examination for more than a year. Plaintiff filed a motion seeking sanctions against NOLA and Mr. Nichols because of their failure to comply with this Court's order that Mr. Nichols appear for his deposition.

The Court issued a Memorandum Opinion and Order on February 14, 2008 resolving the following issues: whether sanctions should be issued against Mr. Nichols for his failure to appear for the court-ordered citation examination; whether NOLA should be required to appoint another corporate representative; and whether NOLA and Mr. Nichols, jointly and severally, should be required to pay Wachovia's attorney's fees and costs for failure to comply with the court-ordered discovery. Plaintiff also seeks a contempt finding against NOLA. Because the parties have not consented to the Court's jurisdiction for all matters in the case, the Court does not have contempt powers over the parties. Therefore, the Court is issuing its Report and Recommendation to the ...

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