Warshaw Group Inc. v. Materialink LLC

Background

On September 13, 2023, the Court entered a default judgment against Materialink LLC and in favor of Warshaw Group Inc. for $166,704.48, plus $22,118.08 in prejudgment interest and post-judgment interest under 28 U.S.C. § 1961. To collect the judgment, Warshaw served an information subpoena on Materialink’s registered agent. Materialink did not respond.

On June 3, 2024, the Court granted Warshaw’s motion to compel compliance with the subpoena. The Court ordered Materialink to provide full and complete responses within thirty days, by July 3, 2024, and warned that Materialink could be held in contempt for failing to comply. The Court denied Warshaw’s earlier contempt motion as premature and reserved jurisdiction to award appropriate fees and costs.

Materialink did not comply with the June 3 Order. On July 3, 2024, Warshaw moved for an order holding Materialink in contempt, arguing that Materialink should be subject to a fine or imprisonment. Warshaw also asked the Court to reserve jurisdiction over fees and costs arising from the subpoena noncompliance.

Legal standard

The Court explained that a judgment creditor may obtain discovery from a judgment debtor or another person under Federal Rule of Civil Procedure 69(a). Under New York law, an information subpoena may seek information about a judgment debtor’s assets and other matters relevant to satisfying a judgment. Failure to comply with a subpoena may be punished as contempt.

For civil contempt, the Court required proof that: (1) the violated order was clear and unambiguous; (2) noncompliance was shown by clear and convincing evidence; and (3) the alleged contemnor did not make a diligent, reasonable attempt to comply. Civil contempt sanctions may coerce future compliance, compensate for past noncompliance, or serve both purposes. A coercive sanction must use no more power than necessary to achieve compliance.

Ruling

The Court granted Warshaw’s motion and held Materialink in contempt for violating the June 3 Order. The Court found that the order clearly required complete subpoena responses by July 3, 2024; that Warshaw served Materialink with the subpoena and order; and that Materialink still had not responded. The Court concluded that these facts satisfied all three requirements for civil contempt.

The Court imposed progressive coercive fines designed to compel Materialink to respond. Materialink must pay a $300 daily fine to the Clerk of Court beginning November 21, 2024, and continuing until the earlier of December 14, 2024, or the date Materialink responds. If Materialink still had not responded, the fine would increase to $600 per day beginning December 15, 2024. The fines would continue no later than February 12, 2025. Any further coercive sanctions after that date would require a new application by Warshaw.

The Court also reserved jurisdiction to award Warshaw appropriate fees and costs related to Materialink’s noncompliance. Finally, the Court directed Warshaw to serve the subpoena and the order again by first-class mail with return receipt requested and by email, and to file proof of service.