First Capital Real Estate Investments, L.L.C. v. SDDCO Brokerage Advisors, LLC

Background

SDDCO Brokerage Advisors, LLC moved for an order holding First Capital Estate Investments, LLC and its managing member, Suneet Singal, in civil contempt. SDDCO also sought sanctions and attorney’s fees and expenses. The motion concerned a January 21, 2020 order directing First Capital to respond by January 28, 2020, to SDDCO’s April 5, 2019 information subpoena.

SDDCO argued that First Capital’s responses were inadequate and showed that the company had not diligently complied with the order. It sought a monetary sanction of $25,000 plus $1,000 per day, increasing daily, until compliance. First Capital argued that it had answered the subpoena on time and that SDDCO had not shown what additional information was required. Singal submitted an affidavit stating that he was not a party to the action or the underlying proceeding and had answered the subpoena only in his corporate capacity as First Capital’s managing member.

Legal standard

Because the alleged contempt concerned conduct before a magistrate judge, the court explained that it could certify facts to a district judge only if SDDCO presented enough evidence to establish an initial case of civil contempt. Civil contempt requires a clear and unambiguous order, clear and convincing proof of noncompliance, and a failure to make a reasonable and diligent effort to comply.

Ruling

As to Singal, the court denied SDDCO’s request because the January 21 order was directed at First Capital, not Singal. Since the order did not require Singal to take any action, he could not have violated it.

As to First Capital, the court found that the order clearly required a response by January 28, 2020, and that SDDCO acknowledged receiving First Capital’s subpoena response on that date. The court therefore found clear and convincing evidence of compliance, rather than noncompliance. The court stated that an allegedly deficient response, without more, was insufficient to establish an initial case for civil contempt.

The court declined to certify facts for a civil-contempt finding because SDDCO had not provided sufficient evidence. It also concluded that sanctions, including attorney’s fees, were not warranted. Accordingly, the court denied SDDCO’s motion for contempt and sanctions.