Opinion
24 Misc. 84 (KMK)(JCM)
05-16-2024
AMMEX CORPORATION, Movant, v. NY HEALTHLIFE, LLC, Respondent.
REPORT AND RECOMMENDATION
JUDITH C. McCARTHY, UNITED STATES MAGISTRATE JUDGE
To the Honorable Kenneth M. Karas, United States District Judge:
On February 22, 2024, AMMEX Corporation (“AMMEX”) moved to compel NY Healthlife, LLC (“Healthlife”), to comply with a properly issued subpoena. (Docket Nos. 1, 4, 5). On February 27, 2024, the Court ordered Healthlife to respond to the motion by March 12, 2024. (Docket No. 7). Healthlife failed to respond. On March 18, 2024, the Court provided Healthlife with a final opportunity to comply with its Order. (Docket No. 13). Healthlife again failed to respond.
On April 12, 2024, the Court issued an Order to Show Cause, directing Healthlife to appear on May 6, 2024, to “(1) explain its failure to abide by this Court's Orders; and (2) show cause why [the Court] should not [] grant AMMEX's Motion to Compel compliance with the subpoena ....” (Docket No. 16). AMMEX properly served this Order, as well as all other Court orders, on Healthlife. (Docket Nos. 9, 10, 14, 15, 17, 18). Healthlife failed to appear at the hearing, and has failed to contact the Court.
I. MAGISTRATE JUDGE'S CONTEMPT AUTHORITY
“On a motion for civil contempt, a United States magistrate judge shall certify facts constituting civil contempt to the district judge, unless the case is one in which the magistrate judge presides with the consent of the parties under 28 U.S.C. § 636(c), or it is a misdemeanor case proceeding under 18 U.S.C. § 3401.” Valencia v. 3108 N. Blvd LLC, 20 Civ. 5293 (OEM)(VMS), 2024 WL 412993, at *1 (E.D.N.Y. Feb. 5, 2024), report and recommendation adopted, 2024 WL 1327314 (E.D.N.Y. Mar. 28, 2024). 28 U.S.C. § 636(e)(6)(B)(iii) requires the magistrate judge to “certify the facts to a district judge . . . 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.” The purpose of this certification is “‘to determine whether the moving party can adduce sufficient evidence to establish a prima facie case of contempt.'” Gov't Emps. Ins. Co. v. N. Med. Care, P.C., No. 20 CV 1214 (FB)(LB), 2021 WL 7906537, at *1 (E.D.N.Y. Nov. 3, 2021) (quoting Church v. Steller, 35 F.Supp.2d 215, 216-17 (N.D.N.Y. 1999)), report and recommendation adopted sub nom. Gov't Emp. Ins. Co. v. N. Med. Care, P.C., 2021 WL 7906536 (E.D.N.Y. Dec. 29, 2021). “Under the certification process, the magistrate judge may conduct a hearing.” Hunter TBA, Inc. v. Triple V Sales, 250 F.R.D. 116, 118 (E.D.N.Y. 2008). “A magistrate judge may also recommend that certain contempt sanctions be imposed, where warranted by the record.” Benthos Master Fund, Ltd. v. Etra, No. 1:20-cv-03384 (AJN)(KHP), 2022 WL 1527315, at *5 (S.D.N.Y. Mar. 14, 2022), report and recommendation adopted in part, 2022 WL 1555543 (S.D.N.Y. May 16, 2022). Once a magistrate judge certifies facts that constitute contempt, the district judge decides “whether the conduct constitutes contempt and, if so, what sanctions are appropriate ....” JSC Foreign Econ. Ass'n Technostroyexport v. Int'l Dev. & Trade Servs., Inc., No. 03 Civ. 5562 (JGK)(AJP), 2006 WL 1148110, at *1 (S.D.N.Y. Apr. 28, 2006).
II. CERTIFIED FACTS
The Court hereby certifies that AMMEX has set forth a prima facie case for contempt against Healthlife based on the following facts:
1. AMMEX sells “high-quality disposable gloves,” and “protect[s] the quality of its products” by allowing only “Authorized Sellers” to “sell [AMMEX's] products to enduser consumers in the United States.” (Docket No. 5 at 1).
2. Authorized Sellers may not sell AMMEX's products to others who, in turn, re-sell AMMEX's products, who are referred to as “Unauthorized Resellers.” (Id.).
3. AMMEX filed a lawsuit in the United States District Court for the Western District of Washington (“Washington Action”) against unknown John Doe Defendants to, in part, discover information on these Unauthorized Resellers. (Docket No. 4-1); see also AMMEX Corporation v. John Does 1-10, No. 2:23-cv-01411-JHC (W.D. Wash.).
4. Contemnor Healthlife is a former Authorized Seller and, allegedly, a current Unauthorized Reseller, selling AMMEX's products through an Amazon online storefront. (Docket No. 4 ¶ 3).
5. In the Washington Action, AMMEX sought leave to serve expedited discovery to identify John Doe Defendants who are Authorized Sellers of AMMEX products and have sold AMMEX products to Unauthorized Resellers like Healthlife. (See Docket No. 4-2).
6. The purpose of the subpoena on Healthlife is “to learn the identity of its sources of AMMEX product[s], who AMMEX believes are the John Doe Authorized Sellers.” (Docket No. 5 at 2).
7. On October 17, 2023, in the Washington Action, the Honorable John H. Chun granted AMMEX's request to serve a third-party subpoena on Healthlife. (Docket No. 4-3).
8. AMMEX attempted to serve the subpoena at 51 Forest Road, Suite 316-259, Monroe, New York 10950 (“Forest Road address”), an address affiliated with Healthlife's store front on www.amazon.com, called VerSure. (Docket No. 4-4 at 2) (Docket No. 20 ¶ 2).
9. Service failed at this address because it is a post office box. (Docket No. 20 ¶ 2).
10. AMMEX conducted an “additional investigation,” and identified the residential address of Healthlife's principal, Joe Brach, as 26 Smith Farm Road, Monroe, New York 10950 (“Smith Farm Road address”). (Id. ¶ 3).
11. On October 21, 2023, AMMEX served the subpoena on Joe Brach's residence at the Smith Farm Road address. His wife accepted service. (Docket No. 4-4 at 3).
12. AMMEX's subpoena sought: (i) all documents and information with contact information relating to Healthlife's suppliers of AMMEX products; and (ii) sales records, invoices, account credits or other documents related to Healthlife's purchase of AMMEX products. (Id. at 6).
13. The subpoena commanded Healthlife to comply, object, or otherwise respond to the subpoena on November 6, 2023. (Id. at 2).
14. On November 1, 2023, Healthlife's principal, Joe Brach, spoke to AMMEX's attorney and told him that Healthlife “would not comply with the subpoena.” (Docket No. 4 ¶ 9).
15. Healthlife did not timely comply with the subpoena, nor did it serve written objections to it. (See generally id. ¶¶ 9-13).
16. After the initial deadline passed, “AMMEX sent a follow-up letter on November 20, 2023 enclosing the subpoena and requesting a response by November 29, 2023.” (Id. ¶ 11).
17. On December 18, 2023, counsel for AMMEX again spoke with Mr. Brach, who made it clear he would not comply, specifically stating “that he would not ‘help' AMMEX, [and] that he wished he could show counsel what finger he was holding up,” which counsel took to mean his middle finger. (Docket No. 20 ¶ 4). Mr. Brach never denied owning Healthlife, or that he sold AMMEX products. (See id.).
18. AMMEX commenced the instant proceeding seeking to enforce its subpoena against Healthlife on February 22, 2024. (Docket No. 1).
19. On February 27, 2024, the Court ordered Healthlife “to file a response to [AMMEX's] Motion by March 12, 2024.” (Docket No. 7).
20. AMMEX served the Court's February 27, 2024 Order on Healthlife through the New York Secretary of State, and by mailing copies to both the Forest Road address and the Smith Farm Road address, by regular mail and FedEx overnight delivery. (Docket Nos. 9, 10).
21. Healthlife failed to respond to the Court's February 27, 2024 Order.
22. On March 18, 2024, the Court issued an Order to Show Cause, directing Healthlife, by April 1, 2024, “to: (1) explain its failure to abide by this Court's Order, and (2) SHOW CAUSE why: (i) the Court should not deem AMMEX's Motion to Compel fully submitted, and (ii) impose sanctions on Healthlife for its failure to comply with the Court's February 27, 2024 Order.” (Docket No. 13).
23. The Court warned Healthlife that “[f]ailure to abide by this Order to Show Cause will result in the Court deeming the matter fully submitted and unopposed.” (Id.).
24. AMMEX served the Court's March 18, 2024 Order on Healthlife through the New York Secretary of State, and by mailing copies to both the Forest Road address and the Smith Farm Road address, by regular mail and FedEx overnight delivery. (Docket Nos. 14, 15).
25. Healthlife failed to abide by the Court's March 18, 2024 Order.
26. On April 12, 2024, the Court issued another Order to Show Cause, ordering Healthlife and AMMEX to appear for a conference on May 6, 2024, so Healthlife could: “(1) explain its failure to abide by this Court's Orders; and (2) show cause why the undersigned should not (i) grant AMMEX's Motion to Compel compliance with the subpoena, and (ii) impose sanctions on Healthlife for its failure to comply with the Court's February 27, 2024 and March 18, 2024 Orders.” (Docket No. 16).
27. AMMEX served the Court's April 12, 2024 Order on Healthlife through the New York Secretary of State and by mailing copies to both the Forest Road address and Smith Farm Road address by regular mail and FedEx overnight delivery. (Docket Nos. 17, 18).
28. All FedEx deliveries were confirmed, and none were returned. (Docket Nos. 20 ¶ 5; 201).
29. AMMEX also attempted to personally serve the April 12, 2024 Order on Healthlife at the Smith Farm Road address seven separate times over the course of four days, but Mr. Brach never answered. The server noted cars in the driveway, and cameras on the property. (Docket Nos. 17 ¶ 5; 17-1 at 2).
30. AMMEX also e-mailed a copy of the Court's April 12, 2024 Order to an e-mail address believed to belong to Mr. Brach. (Docket No. 17 ¶ 8).
31. Counsel also tried to call Mr. Brach, but Mr. Brach did not answer. (Docket No. 17 ¶ 7).
32. Healthlife failed to appear at the May 6, 2024 conference in violation of the Court's April 12, 2024 Order.
III. ANALYSIS
Under Federal Rule of Civil Procedure 45(g), a court “may hold in contempt a person who, having been served, fails without adequate excuse to obey the subpoena or an order related to it.” Fed.R.Civ.P. 45(g). “A contempt order is warranted only where the moving party establishes by clear and convincing evidence that the alleged contemnor violated the district court's edict.” Nimkoff Rosenfeld & Schechter, LLP v. RKO Properties, Ltd., No. 07 Civ. 7983 (DAB)(HBP), 2014 WL 1201905, at *4 (S.D.N.Y. Mar. 24, 2014). A contemnor may be held in civil contempt where “(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.” Id. Courts have the power to impose contempt based on the contemnor's failure to comply with a subpoena. PaineWebber Inc. v. Acstar Ins. Co., 211 F.R.D. 247, 249 (S.D.N.Y. 2002). The violation need not be willful. Donovan v. Sovereign Sec., Ltd., 726 F.2d 55, 59 (2d Cir. 1984).
Civil contempt is employed “to coerce compliance with the court's order or compensate the complaining party for losses incurred resulting from the contemnor's conduct.” Ahamed v. 563 Manhattan Inc., No. 19 CV 6388 (EK)(CLP), 2023 WL 4986364, at *4 (E.D.N.Y. July 6, 2023), report and recommendation adopted in part, 2023 WL 6283280 (E.D.N.Y. Sept. 26, 2023). Civil contempt proceedings are “‘remedial and compensatory . . . not punitive ....'” Manhattan Indus., Inc. v. Sweater Bee by Banff, Ltd., 885 F.2d 1, 5 (2d Cir. 1989) (quoting Sunbeam Corp. v. Golden Rule Appliance Co., 252 F.2d 467, 469 (2d Cir. 1958)). “The compensatory goal of civil contempt sanctions is ‘met by awarding to the plaintiff any proven damages.'” Al Hirschfeld Found. v. Margo Feiden Galleries Ltd., 438 F.Supp.3d 203, 207 (S.D.N.Y. 2020) (quoting Weitzman v. Stein, 98 F.3d 717, 719 (2d Cir. 1996)). Thus, courts must consider “(1) the character and magnitude of the harm threatened by continued contempt, (2) the probable effectiveness of the proposed sanction, and (3) the financial consequence of that sanction upon the contemnor.” In re Grand Jury Witness, 835 F.2d 437, 443 (2d Cir. 1987) (citing United States v. United Mine Workers of Am., 330 U.S. 258, 304 (1947)).
Healthlife is in open defiance of AMMEX's subpoena, and should be held in contempt. First, the subpoena was clear and unambiguous. It was addressed to Healthlife, and clearly identified that it sought “all documents and information containing Contact Information relating to Suppliers from whom You have purchased AMMEX Products,” and “sales records, invoices, account credits, or other documents related to AMMEX Products You have purchased.” (Docket No. 4-4 at 6). Moreover, the subpoena detailed the date, time, and place to send the documents. (See id. at 2). Furthermore, it contained the relevant language from Rule 45(c), (d), (e), and (g) of the Federal Rules of Civil Procedure, which details how Healthlife could properly object to the subpoena. (Id. at 4); see Valencia, 2024 WL 412993, at *2 (recommending contempt where “the subpoenas identified the date, time, and location at which [the contemnors] were required to appear and produce the requested documents and information”). Thus, the subpoena was clear and unambiguous.
Second, the proof of Healthlife's noncompliance is clear and convincing. Healthlife stated it would not comply with the subpoena, saying it would not “help” AMMEX, and invited AMMEX to sue them. (Docket No. 4 ¶¶ 9, 12). It also ignored several follow-up phone calls and e-mails from AMMEX. (Id. ¶¶ 10-12). To date, Healthlife has not complied with the subpoena, nor provided AMMEX with written objections to it. In addition, Healthlife has ignored three of this Court's Orders, (Docket Nos. 7, 13, 16), and failed to attend the hearing on May 6, 2024, as directed, evincing a clear intent not to comply with the subpoena. Third, Healthlife has not diligently attempted to comply with the subpoena in a reasonable manner. Healthlife did not appear in this proceeding, told AMMEX that it did not intend to comply, (see Docket No. 4 ¶¶ 912), and has repeatedly failed to comply with this Court's Orders. Accordingly, it is undeniable that Healthlife has met all the requirements to be held in contempt.
IV. CONCLUSION
For the foregoing reasons, the Court respectfully recommends holding Healthlife in contempt for failing to respond to AMMEX's subpoena, and sanctioning them for such contempt. Sanctions “may include but [are] not limited to an award of monetary sanctions, an award of attorneys' fees to be paid by the contemnor[] to the moving party, continuing financial sanctions until the contempt is purged, and/or arrest.” Valencia, 2024 WL 412993, at *2.
AMMEX is directed to serve a copy of this Report and Recommendation on Healthlife and file proof of service with the Court by May 22, 2024.
V. NOTICE
Pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b)(2) of the Federal Rules of Civil Procedure, the parties shall have fourteen (14) days from receipt of this Report and Recommendation to serve and file written objections. See Fed.R.Civ.P. 6(a) and (d) (rules for computing time). If copies of this Report and Recommendation are served upon the parties by mail, the parties shall have seventeen (17) days from receipt of the same to file and serve written objections. See Fed.R.Civ.P. 6(d). Objections and responses to objections, if any, shall be filed with the Clerk of the Court, with extra copies delivered to the chambers of the Honorable Kenneth M. Karas at the United States District Court, Southern District of New York, 300 Quarropas Street, White Plains, New York, 10601, and to the chambers of the undersigned at said Courthouse.
Requests for extensions of time to file objections must be made to the Honorable Kenneth M. Karas and not to the undersigned. Failure to file timely objections to this Report and Recommendation will result in a waiver of objections and will preclude later appellate review of any order of judgment that will be rendered. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), 6(b), 6(d), 72(b); Caidor v. Onondaga Cty., 517 F.3d 601, 604 (2d Cir. 2008).