Free Order on Motion to Continue - District Court of Colorado - Colorado

Case 1:01-cv-00275-JLK

Document 935

Filed 04/18/2007

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Judge John L. Kane Civil Action No. 01-cv-00275-JLK DOMINICK PAOLONI, et al., Plaintiffs, vs. DONALD I. GOLDSTEIN, et al., Defendants, and NBSA, LLC, et al., Relief Defendants. ________________________________________________________________________ ORDER ________________________________________________________________________ This matter is before me on Plaintiffs'Motion for Continuation of Contempt Proceedings (Doc. 905), filed March 14, 2007. Having carefully considered the Motion, the parties'memoranda of law supporting and opposing the Motion and all applicable legal authorities, and being fully advised in the premises, I rule as follows: The factual and procedural background relevant to this matter is well known to the parties and accurately set forth in Plaintiffs'motion. It suffices to say here that, following my decision holding Mr. Wolok in civil contempt for violation of the March 2, 2001 Preliminary Injunction this action, I ordered him to cure his contempt by paying

Case 1:01-cv-00275-JLK

Document 935

Filed 04/18/2007

Page 2 of 3

$262,499.00 into the Registry of the Court no later than February 15 or be subject to arrest until he so complied. Just before this deadline, Mr. Wolok instituted Chapter 7 bankruptcy proceedings in the United States Bankruptcy Court for the Eastern District of Michigan. The question presented by Plaintiffs'motion is whether my orders holding Mark Wolok in civil contempt and directing him to cure the violation may be enforced in light of this bankruptcy filing and the automatic stay provisions of 11 U.S.C. § 362. I have concurrent jurisdiction with the bankruptcy court to decide the applicability of the automatic stay to these contempt orders. See, e.g., NLRB v. Edward Cooper Painting, Inc., 804 F.2d 934, 939 (6th Cir. 1986); In re Baldwin-United Corp. Litig., 765 F.2d 343, 347 (2nd Cir. 1985). As Plaintiffs acknowledge, the decision on this issue turns on whether the civil contempt proceeding is in aid of collecting a judgment or debt owed to Plaintiffs, in which case the automatic stay applies, or whether the contempt order was issued to uphold the dignity of the court, in which case the amount due under the order is exempt under 11 U.S.C. § 523(a)(7) as a fine, penalty or forfeiture. See, e.g., US Sprint Commc' Co. v. Buscher, 89 B.R. 154 (D. Kan. 1988). The difficulty in this case is that n the contempt order here serves both purposes. Mr. Wolok has flagrantly disregarded the Preliminary Injunction issued by this court, and the contempt order was intended to uphold the dignity and authority of the court in the face of this conduct. To cure this contempt, however, Mr. Wolok must pay into the Registry of this Court the amount by which Plaintiffs have been damaged as a result of his violations of the Preliminary
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Case 1:01-cv-00275-JLK

Document 935

Filed 04/18/2007

Page 3 of 3

Injunction. See Order (Doc. 846) at 5 (Dec. 15, 2006); Order on Motion for Reconsideration (Doc. 871) at 2 (Jan. 30, 2007). The Preliminary Injunction, in turn, was intended to prevent the dissipation of assets claimed by Plaintiffs in this litigation. Thus, the amount to be deposited into the Court' Registry under my contempt orders seeks to s recover and preserve these funds and thereby aids Plaintiffs in their effort to recover these monies from Mr. Wolok. Under these circumstances, I cannot construe the amount due from Mr. Wolok under my contempt orders as purely a contempt fine that is exempt from the automatic stay provision of 11 U.S.C. § 362. Accordingly, I DENY Plaintiffs'motion and maintain my order staying the contempt proceeding and Plaintiffs'claims against Mr. Wolok unless and until the bankruptcy court grants relief from the automatic stay. IT IS SO ORDERED. Dated this 18th day of April, 2007. s/John L. Kane John L. Kane, Senior District Judge United States District Court

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