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Buschmeier v. G&G Investments

January 14, 2009

PETRA BUSCHMEIER, PLAINTIFF / JUDGMENT CREDITOR,
v.
G&G INVESTMENTS, INC., DEFENDANT / JUDGMENT DEBTOR.



The opinion of the court was delivered by: Terrence F. McVerry United States District Court Judge

MEMORANDUM OPINION AND ORDER OF COURT

The principal issue addressed herein is whether John J. Ghaznavi and Patrick T. Connelly ("Respondents") have violated the Order of Court on July 15, 2004, and should therefore be found in contempt of Court, and, if so, the appropriate sanction(s) for such contempt.*fn1

Background

The parties, Respondents, counsel, and the Court are familiar with the extensive background facts of this case and, therefore, the Court will not detail the facts again. However, the following is a brief recitation of the procedural facts salient to the issues presently pending before the Court.

Petra Buschmeier ("Buschmeier") commenced this action against G&G Investments, Inc. ("G&G"), in September 2003 with the filing of a Writ of Execution. Neither John J. Ghaznavi ("Ghaznavi) nor Patrick T. Connelly ("Connelly") were named parties to the execution proceeding; however, throughout the course of this litigation, both Ghaznavi and Connelly have, through counsel, made numerous filings and other responses to the Court.

Chronology of Discovery Disputes

Buschmeier alleges that since 2003 G&G has continuously failed, neglected, and/or refused to provide requested and appropriate discovery responses in full and complete fashion.

On July 24, 2003, Buschmeier served upon G&G her First Set of Interrogatories and Requests for Production in Aid of Execution of Judgment in which she sought, inter alia, various financial and accounting records, tax returns, information about assets and financial holdings, claims against, claims made by, real estate information, and all supporting documentation of "G&G, its owners, parents, subsidiaries, and/or affiliates," from the period of January 1988 to the present.

On August 24, 2003, G&G served its Answers and Objections to the discovery requests wherein it stated, inter alia, that it "does not have the funds to satisfy the final judgment in this matter" and objected to the majority of the interrogatories and requests for production which had been served upon it. G&G initially provided approximately 195 pages of documents which related solely to G&G. Subsequently, additional documents of G&G were produced. However, G&G objected to any attempt by Buschmeier to discover any information and documents which related to its owners, parents, subsidiaries, and/or affiliates:

G&G further objects to [these Requests] as being overly broad, irrelevant and improper on the basis that [they] seek[] discovery regarding individuals and entities against which Plaintiff does not have a judgment.

On January 23, 2004, counsel for Buschmeier and counsel for G&G had a phone conference at which time it was decided that the discovery disputes could not be resolved. Accordingly, on February 13, 2004, counsel for Buschmeier filed a Motion to Compel Full and Complete Responses to Petra Buschmeier's First Set of Interrogatories and Requests for Production In Aid of Execution of Judgment against G&G.

By Order of Court dated July 15, 2004, the Court granted the Motion to Compel.*fn2

Moreover, the Court denied and overruled the objections of G&G, but for its objection to the time frame which the Court limited. The Court ordered that G&G "supplement in full, in the manner requested by Buschmeier in her Motion to Compel, its responses to Interrogatory Numbers 1 through 24 and Request for Production Numbers 1 through 24 on or before July 30, 2004." July 15, 2004, Order of Court, Document No. 44 (emphasis in original).

On July 22, 2004, Stanley J. Parker, Esquire, and Gregory J. Krock, Esquire, both of the law firm Buchanan Ingersoll filed a Motion for Entry of Order of Court Permitting Withdrawal As Counsel for G&G (Document No. 49). Buchanan Ingersoll informed the Court that due to the non-payment of its fees the firm had not participated in the preparation of supplemental responses. On August 3, 2004, the Court denied the motion to withdraw without prejudice finding that "the law requires a corporation to be represented by an attorney-at-law in all litigation and matters for adjudication before a court of law and substitute or alternate counsel on behalf of Defendant has not been proposed in the motion filed by counsel of record . . . ." Order of Court, Document No. 54.

Unbeknownst to the Court, by correspondence of July 29, 2004, counsel for Buschmeier was advised that over sixty (60) boxes of documents had been assembled by and at the direction of Connelly in response to the Order of Court dated July 15, 2004. Counsel for Buschmeier was informed that the boxes were stored and available for inspection at an off-site location of G&G at 4790 William Flinn Highway.

On August 6, 2004, G&G filed a Motion for Reconsideration of Order, Or, Alternatively, for Fee Petition in which it argued that it was under no obligation to comply with the Order of Court dated July 15, 2004, while its Motion for Reconsideration was pending. The Court subsequently denied the Motion for Reconsideration.

On September 30, 2004, Attorney Parker, as counsel for G&G, advised counsel for Buschmeier that "essentially all business records and files which were located at G&G's offices were consumed by the flood waters, contaminated with sewage and rendered unreadable. . . . and that "essentially all of the G&G documents are no longer available."*fn3 Mr. Parker also advised that the "non-party documents" stored at 4790 William Flinn Highway were "unaffected by the recent flood and . . . remain available for your review." Apparently, the sixty-plus boxes of documents were not reviewed by counsel for Buschmeier until January and February 2006.

On November 1, 2004, Frederick B. Goldsmith, Esquire, counsel for Buschmeier, filed an Emergency Motion for Omnibus Relief in which she requested, inter alia, that Ghaznavi and Connelly, as well as their counsel, be held in contempt for "their flagrant violation of this Court's direct and plainly-worded July 15, 2004 Order directing production to Buschmeier's counsel by July 30, 2004 . . . . " Buschmeier also informed the Court that G&G had stopped paying medical and life insurance benefits on behalf of the retirees of Hillsboro Glass Co. and had incorrectly informed the retirees that ownership of Hillsboro Glass and/or Glenshaw Glass had been transferred "to the Court for further transfer to Mrs. Petra Buschmeier." Further, G&G advised the Hillsboro retirees that if they had "any questions regarding the continuation of [] medical and life insurance programs," they were to contact Buschmeier through her attorney, Frederick B. Goldsmith, whose name, address, and phone number was listed in the Notice. Additionally, on August 25, 2004, Connelly wrote Clark Cameron of the United Steel Workers and again stated that "effective July 22, 2004, the ownership of Hillsboro Glass Company was transferred to Mrs. Petra Buschmeier. . . I am unaware of any reason why [counsel for Buschmeier] would state to you that his client Petra Buschmeier is not the owner of Hillsboro Glass Company. . . ."

On March 24, 2005, Attorney Goldsmith withdrew his representation of Buschmeier. However, she remained represented by attorneys William Kealy and Robert Ray. On January 11, 2006, attorneys Arnd N. von Waldow and Timothy J. Cornetti, of the Reed Smith law firm, entered their appearance as counsel for Buschmeier.

By Memorandum Opinion and Order dated October 7, 2005, the Court granted in part and denied in part Buschmeier's Emergency Motion for Omnibus Relief. The Court held "that the law firm representing G&G Investments is not without some blame in G&G Investment's failure to comply with the Court's Order [of July 15, 2004, however,] the Court does not find that the actions, or rather more precisely the inactions, of the law firm rise to the level of civil contempt." Memorandum Op. at 11-12. However, with respect to G&G, the Court stated, in pertinent part, as follows: it remains unclear why G&G Investments did not produce the documents in accordance with the Court's Order of July 15, 2004, especially since it appears from G&G Investment's response to Plaintiff's Emergency Motion that the documents destroyed by the flood were documents that G&G Investments had compiled (and placed in boxes on the floor) to produce in response . . . It is obvious from this response that the requested documents had, at long last, been assembled, compiled and boxed for delivery to Plaintiff's counsel. However, rather than deliver or give notification to Plaintiff's counsel of their availability, the boxes of documents were left unattended on the floor of an office for days, weeks or months until allegedly destroyed by flood waters.

Memorandum Op. at 12. The Court ordered that Ghaznavi and Connelly should show written cause under oath why they should not be held personally liable for civil contempt. In addition, the Court instructed that both Ghaznavi and Connelly should explain what measures they had taken to preserve and restore the documents, whether hard and/or electronic copies existed of any of the documents or other materials which were the subject of the Order of Court dated July 15, 2004 , and whether it remained possible for any such materials to be recreated or otherwise reconstituted from any other source(s).

Further, the Court found that the conduct of G&G in misleading the retirees of Hillsboro Glass Co. and summarily cutting off their medical and life insurance benefits "was nothing less than unconscionable." The Court ordered, again, that Ghaznavi and Connelly were to show written cause why they should not be held personally liable for civil contempt for the communications and actions regarding the retirees of Hillsboro Glass Co. and Glenshaw Glass. On October 27, 2004, both Ghaznavi and Connelly filed affidavits in response to the Order.

On October 28, 2005, G&G filed a Notice of Appeal to the United States Court of Appeals for the Third Circuit with regard to the Order which denied Buchanan Ingersoll permission to withdraw as counsel for G&G and their request for additional counsel fees.

In January and February of 2006, Buschmeier's recently retained counsel reviewed the sixty-three (63) boxes of documentation which had been compiled in response to the Order of Court of July 15, 2004, and stored at 4790 William Flinn Highway since July 29, 2004. Upon completion of review, counsel for Buschmeier wrote to Stanley J. Parker, Esquire, counsel for G&G,*fn4 and informed him that the produced documents failed to completely respond to the outstanding discovery requests. Counsel for Buschmeier noted that while the produced documentation contained accounts receivable files with invoices and copies of checks to pay such invoices dating back to 1998, there was no information regarding the assets, financial accounts, realty holdings, personal property holdings, and income tax returns of the owners, parents, or affiliates of G&G as had been specifically requested.

After receipt of the correspondence from counsel for Buschmeier, G&G produced limited additional documents, exclusive to G&G. Again, G&G did not produce any documents which pertained to its owners, parents, subsidiaries and/or affiliates.

On June 1, 2006, Buschmeier deposed Judy Miles, a long-time office employee of numerous Ghaznavi-controlled entities, and in December of 2006, Buschmeier deposed the 30(b)(6) Designated Representative of G&G, Patrick T. Connelly. It is noted that although Patrick T. Connelly was the 30(b)(6) Designated Representative of G&G and appeared for deposition in December 2006, he was neither an employee nor an officer or director of G&G at the time, having resigned such positions in September and October 2005.

The depositions apparently confirmed that G&G, its owners, parents, subsidiaries, and affiliates possessed the information and documentation that G&G had been ordered to produce in the July 15, 2004, Order of Court, but G&G had not yet produced the requested information.

On January 25, 2007, the Court of Appeals for the Third Circuit issued an Opinion in which it permitted Buchanan Ingersoll and its attorneys to withdraw from their representation of G&G, but affirmed the District Court's denial of attorney fees. The mandate was issued on February 16, 2007, and the Court, thereafter, granted Buchanan Ingersoll's renewed motion to withdraw on February 21, 2007. G&G has been without counsel in this litigation since February 21, 2007, when Buchanan Ingersoll was permitted to withdraw from the case per the Circuit Court Opinion.

On July 17, 2007, Buschmeier filed her Complaint in Contempt in which she requests that Ghaznavi and Connelly be found in civil contempt for the failure of G&G to comply with the Order of Court of July 15, 2004, as well as for their conduct related to the Hillsboro Glass retiree communication. Specifically, Buschmeier alleges that Ghaznavi and Connelly should be held in contempt by virtue of their respective positions as officers and directors of G&G. An evidentiary hearing on the Complaint in Contempt was conducted on December 18 and 19, 2007.

On December 11, 2007, G&G filed a voluntary petition for bankruptcy under Chapter 7 of the United States Bankruptcy Code, in the United States Bankruptcy Court, Western District of Pennsylvania. See Bankruptcy Case Number 07-27811-MBM. By Order of Court on December 19, 2007, the Court ruled that while the automatic stay of section 362 of the Bankruptcy Code was applicable to the underlying collection lawsuit, the evidentiary hearing on the Complaint in Contempt was not stayed insofar as the Complaint in Contempt was against Ghaznavi and Connelly, personally and individually, as officers and directors of G&G and that the automatic stay of section 362 of the Bankruptcy Code did not extend to these individuals in their capacity as corporate officers.

Over a two day period from December 18 - 19, 2007, a contempt hearing was conducted by this Court. All interested participants were represented by counsel who presented and argued the issues skillfully and effectively. At the hearing, the interests of Petra Buschmeier were represented by Timothy J. Cornetti, Esquire, and Justin H. Werner, Esquire of the Reed Smith law firm. Ghaznavi and Connelly were represented by William F. Ward, Esquire, and Hugh F. McGough, Esquire, of Ward McGough, LLC. The following witnesses testified during the contempt hearing: July Miles, Joseph Scherle, Darlene Paulovich, Patrick T. Connelly, Stanley J. Parker, and John J. Ghaznavi.

By Order of Court dated December 20, 2007, counsel were directed to submit proposed Findings of Fact and Conclusions of Law, with a brief in support and/or opposition, on or before February 4, 2008. Thereafter, counsel were permitted to submit Rebuttal Findings, Conclusions, and/or brief(s) in opposition on or before February 20, 2008.

The parties timely filed their proposed Findings of Fact and Conclusions and Rebuttal Findings. Therefore, this matter is ripe for disposition.

Standard of Review

In order to find a party in civil contempt, the Court "must find that (i) a valid court order existed, (ii) the [party] had knowledge of the order, and (iii) the [party] disobeyed the order." John T. ex rel. Paul T. v. Delaware County Intermediate Unit, 318 F.3d 545, 552 (3d Cir. 2003) (quoting Harris v. City of Philadelphia, 47 F.3d 1311, 1326 (3d Cir. 1995)). A finding of civil contempt must be supported by "clear and convincing evidence." Id. Thus, "[a] contempt citation should not be granted if there is ground to doubt the wrongfulness of the [party]'s conduct." Harris, 47 F.3d at 1326. Similarly, the "resolution of ambiguities ought to favor the party charged with contempt." Id. However, "[t]he validity of the underlying order is not open to consideration." Id.

The burden is on the defendant to "introduce evidence beyond 'a mere assertion of inability,' and to show that it has made 'in good faith all reasonable efforts to comply.' " Harris, 47 F.3d at 1324 (citations omitted). However, good faith alone is not a defense to civil contempt and willfulness is not a necessary element. Robin Woods, Inc. v. Woods, 28 F.3d 396, 399 (3d Cir. 1994).

The Supreme Court of the United States has long recognized the duty of a corporate officer to comply with a court order ...


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