Benthos Master Fund, Ltd. v. Etra

Background

Benthos had obtained confirmation of a $5,254,561.12 arbitration award against Aaron Etra, and the court entered judgment on August 12, 2020. Benthos then began post-judgment discovery—information gathered to locate assets and enforce a judgment—under federal and New York procedures. Benthos served subpoenas seeking financial records, account information, credit-card records, escrow agreements, and information about Etra’s legal, paymaster, and escrow-related services. Benthos also served a restraining notice under New York law barring Etra from transferring property in which he had an interest, subject to statutory exceptions.

The opinion states that Etra repeatedly failed to provide information required by the subpoenas and court orders. The court had previously held him in civil contempt several times and imposed escalating daily fines. The opinion also describes incomplete and allegedly false disclosures, including Etra’s failure to identify certain accounts, produce current bank and credit-card statements, provide escrow agreements, and account for money received from services. Etra proceeded without a lawyer for most of the case, although the court appointed counsel for the civil-contempt proceeding.

Civil Contempt for Disobeying Court Orders

The court held that the September 2022 and October 2022 orders were clear and unambiguous, that Benthos proved Etra’s noncompliance by clear and convincing evidence, and that Etra had not made diligent efforts to comply. The court therefore held Etra in civil contempt.

To purge, or end, that contempt, Etra was required to provide specified information and records, including:

- A complete accounting of money received from legal, paymaster, escrow-related, or other services from August 1, 2017, through the present. - Missing statements for identified bank accounts, including a European account and the account into which his Social Security payments were being deposited. - Current statements for specified Piermont and M&T accounts. - Statements for five identified credit-card accounts. - Complete, final, executed escrow agreements for identified clients, or credible admissible evidence that Etra did not possess or control an agreement. - Communications concerning his finances, efforts to satisfy the judgment, and the services he provided. - A list of all financial accounts in which he had an interest from August 1, 2017, through August 2, 2022.

After release, Etra was required to provide monthly bank and credit-card statements on the first business day of each month, itemize his current monthly living expenses within thirty days, and continue producing required information.

Civil Contempt for Violating the Restraining Notice

The court found the original restraining notice valid and held that it clearly prohibited Etra from disposing of covered property. The court found clear and convincing evidence that Etra violated it because his records showed that he received tens of thousands of dollars after the notice was served, did not make corresponding payments toward the judgment, and spent money on travel and other expenses. The court excluded $21,580.50 in identified Social Security payments as exempt and calculated $94,070.78 in unexplained deposits that could be required to purge the contempt. The court did not hold Etra in contempt for violating the second restraining notice because Benthos had not obtained the required court permission to serve a second notice concerning the same judgment.

Sanctions and Disposition

The court concluded that escalating monetary fines had not secured compliance and that custody was an appropriate coercive civil-contempt sanction. Etra was ordered to remain in custody until he produced the required documents and information and paid Benthos $94,070.78. The amount could be reduced if Etra proved that some deposits were legally exempt or that he could not pay, and it could be increased if Benthos presented credible admissible evidence of additional covered funds.

The court granted Benthos’s motion to hold Etra in civil contempt and denied without prejudice its motion to hold him in criminal contempt. The court also ordered Etra to surrender his passport, computer, and cell phones to his attorney; prohibited travel outside the United States until he satisfied the judgment; authorized Benthos to conduct a forensic examination of his electronic devices under a forthcoming order; and required ongoing production and transfer of non-exempt funds. Judge Valerie Caproni directed the clerk to terminate the motion at docket entry 209 and mail the order to Etra.