Axial Group, LLC v. Zachert
- James Oetken
- 1:21-cv-07323
- U.S. District Court · Southern District of New York
- 5
In Axial Group v. Zachert, Judge Oetken held the judgment debtors in contempt and imposed fines for ignoring an information subpoena.
Axial Group, LLC could use the contempt order, subpoena response requirement, daily fines, and attorney-fee and cost process to pursue collection of its judgment. Zachert Private Equity GmbH and Olaf Zachert were required to respond to the information subpoena and face the specified daily coercive fines until they did so.
What happened
Axial Group, LLC had obtained a $750,000 default judgment against Zachert Private Equity GmbH and Olaf Zachert, but the debtors did not pay or answer an information subpoena about collecting the judgment. They also failed to make a later settlement payment and did not respond to Axial Group’s motion.
The court held the debtors in contempt, ordered them to answer the subpoena, and imposed a $1,000 daily fine beginning November 29, 2023. The fine would increase to $2,500 per day beginning December 30, 2023, if they still had not responded. The court also ordered payment of Axial Group’s attorney fees and costs and required detailed information about those amounts.
Judge Oetken issued the order in Axial Group, LLC v. Zachert Private Equity GmbH et al. on November 21, 2023. The order states that the debtors had to respond by December 29, 2023, and that the fines would continue until they responded.
The detailed version
- Axial Group, LLC v. Zachert · No. 1:21-cv-07323
- James Oetken
- Nov. 21, 2023
Background
Axial Group, LLC was the judgment creditor, and Zachert Private Equity GmbH and Olaf Zachert were the judgment debtors. On March 20, 2023, the court entered a $750,000 default judgment against the debtors, plus Axial Group’s costs and attorney fees. A default judgment is a judgment entered after a party does not defend the case; the opinion does not describe the underlying claims.
On June 21, 2023, Axial Group served an information subpoena and restraining notice on the judgment debtors. A post-judgment information subpoena seeks information that may help a creditor collect a judgment. The parties later entered a settlement agreement under which the debtors agreed to pay $480,000, but they did not make that payment. After the default, the agreement gave them until September 8, 2023, to respond to the subpoena. They did not respond, despite repeated requests from Axial Group.
Axial Group filed a motion seeking an order compelling compliance, a contempt finding, compensatory and coercive daily fines, and additional attorney fees and expenses. The debtors did not respond to the motion and did not dispute the facts presented in it.
Court’s analysis
The court relied on Federal Rule of Civil Procedure 69(a)(2), which permits a judgment creditor to obtain discovery to help enforce a judgment, and Rule 45(g), which allows a court to hold a person in contempt for failing, without an adequate excuse, to obey a subpoena or related order.
The court held the judgment debtors in contempt because they failed to comply with the information subpoena. The court noted that they had negotiated a post-judgment settlement but then failed to comply with the agreement, including the extended subpoena-response deadline. Because the debtors offered no excuse, the court inferred that their conduct was part of a larger effort to delay or avoid the judgment.
The court also imposed coercive fines. A coercive fine is intended to encourage future compliance rather than compensate for past losses. The court found that the continued refusal to comply threatened Axial Group’s ability to collect the judgment and that a monetary fine was suited to encouraging compliance. It set the fine at $1,000 per day from November 29, 2023, until the earlier of December 29, 2023, or the date the debtors responded. Beginning December 30, 2023, the fine would increase to $2,500 per day until they responded.
The court further ordered the judgment debtors to pay Axial Group’s attorney fees and costs related to the contempt and enforcement effort. It stated that the debtors’ conduct was more than careless because they actively negotiated with Axial Group and then failed to respond as promised. The order required Axial Group’s counsel to submit, by December 29, 2023, a detailed description of the work performed, fees, hours, and reasonable costs related to the motion.
Disposition
The court ordered that Zachert Private Equity GmbH and Olaf Zachert were in contempt of court; that they respond to the information subpoena by Friday, December 29, 2023; that they pay the specified daily coercive fines; and that Axial Group’s counsel submit the requested fee and cost information. The body of the opinion identifies the subpoena as dated June 21, 2023, while the conclusion refers to it as dated June 11, 2023.
Read the full 5-page opinion on CourtListener, the free public archive maintained by the Free Law Project.