In this CPLR Article 13-A forfeiture action, plaintiff-claiming authority ("plaintiff" or "DA") moves by order to show cause ("OSC") to hold defendants Western Express International, Inc. ("Western Express") and Vadim Vassilenko (collectively "defendants"), as well as their counsel, John DeMaio, Esq. ("DeMaio" or "defense counsel"), in contempt of court pursuant to Judiciary Law ("JL") §753 based upon their violation of the preliminary injunction and order of attachment this court issued on January 20, 2009.^[FN1] OSC at Exh. D. In relevant part, that order restrained defendants "and all persons or entities having property of said defendants and having knowledge of this order . . . from transferring, and assigning, disposing of, encumbering, or secreting such property . . . to the extent of $4,782,910.66 . . ."

Defense counsel vehemently opposes the OSC on various grounds and cross-moves inter alia for sanctions against Assistant District Attorney Madeleine Guilmain personally.^[FN2] Plaintiff [*2]opposes the cross-motion.^[FN3]

This action's relevant factual and procedural background is set forth in several of this court's decisions/orders on prior motions and will only be repeated to the extent necessary. By decision and order dated September 22, 2009 this court inter alia denied defendants' motion pursuant to CPLR §1312(4) to release restrained funds to pay counsel fees. Defendants appealed that determination and the Appellate Division, First Department granted defendants a stay of this action (including the instant OSC) pending the appeal.^[FN4] The First Department unanimously affirmed this court's September 22, 2009 decision and order to the extent appealed from. See Morgenthau v Western Exp. Intl., Inc., 83 AD3d 521 (1st Dept 2011).

Meanwhile, having failed to obtain payment for outstanding legal fees under CPLR §1312(4), defendants executed a confession of judgment in the amount of $136,509.69 in favor of DeMaio for legal services rendered. Defense counsel filed the confession of judgment in the office of the New York County Clerk on May 7, 2010 under index number 106055/10 and thereafter served the DA's office with notice of entry thereof together with a restraining notice and two assignments by affidavit of defendants' interests in funds plaintiff is holding in escrow pursuant to the preliminary injunction.^[FN5] Plaintiff's OSC argues the foregoing acts violated the preliminary injunction and asks that defendants and DeMaio be held in contempt of court.^[FN6]

Proceedings for civil contempt are governed by JL §753, which provides in relevant part:

A. A court of record has power to punish, by fine and imprisonment, or either, a neglect or violation of duty, or other misconduct, by which a right or remedy of a party to a civil action or special proceeding, pending in the court may be defeated, impaired, impeded, or prejudiced, in any of the following cases: . . .

3. A party to the action or special proceeding, an attorney, counsellor, or other person . . . for any . . . disobedience to a lawful mandate of the court. [*3]

As succinctly stated in Collins v Telcoa Intl. Corp., 86 AD3d 549 (2d Dept 2011):

Where, as here, a party seeks an adjudication of civil contempt based upon a violation of a court order, he or she must establish a willful and deliberate violation of a lawful court order expressing a clear and unequivocal mandate. The burden of proof is on the party seeking the contempt adjudication, and the facts constituting the basis of the contempt must be proved by clear and convincing evidence. The question of whether to then grant a civil contempt motion and, if so, the fixing of the appropriate remedy, is addressed to the sound discretion of the motion court upon consideration of the surrounding circumstances. (Citations omitted).

Defendants Western Express and Vassilenko

In civil forfeiture actions, provisional remedies such as the injunction and attachment herein are granted to preserve assets and ensure their availability for possible forfeiture. See generally, CPLR §1312(3). Granting such relief allows the court to prevent the dissipation of a criminal defendant's assets, while other provisions of Article 13-A protect a defendant's interests by setting forth the circumstances whereby a defendant may obtain a vacatur or modification of any provisional remedy granted.

Here, the court rejects outright defense counsel's oversimplified argument that the preliminary injunction "makes no reference to a Confession of Judgment and does not prohibit it". The preliminary injunction's above-quoted language is broad and prohibits virtually any use of defendants' assets and property except for certain statutorily authorized purposes (such as, in an appropriate case, reasonable living expenses and legal fees).

The very timing of the subject transaction between defendants and their counsel is suspicious. Specifically, at the time DeMaio filed the confession of judgment, plaintiff's motion to enter a default judgment against defendants had been served and filed but was not yet submitted. By filing the confession of judgment, DeMaio's judgment attained priority status vis a vis the judgment the DA ultimately recovered in this forfeiture action.^[FN7] The ensuing restraining notice effectively advised plaintiff that defense counsel was laying claim to a portion of the funds the DA is holding in escrow - funds intended for forfeiture.

Having failed to obtain payment of counsel fees via the proper channels, defendants and their counsel should not be permitted to circumvent CPLR §1312(4)'s requirements for the release of attorney's fees from restrained funds. Such a result would violate the letter and spirit of Article 13-A. Further, it must be emphasized that had the defendants cooperated with the DA in providing financial disclosure rather than engaging in gamesmanship, this court would have readily granted their CPLR §1312(4) application and released the funds needed to pay defendants' reasonable attorney's fees, consistent with its past practice.

To grant a motion for civil contempt, the court must expressly find that the person's [*4]actions were calculated to or actually did defeat, impair, impede or prejudice the rights or remedies of a party to a civil proceeding. Clinton Corner H.D.F.C. v LaVergne, 279 AD2d 339, 341 (1st Dept 2001). Here, for the reasons set forth above, the DA has established by unrefuted evidence that defendants' execution of a confession of judgment in favor of their attorney violated the preliminary injunction's prohibition against transferring, assigning, disposing of and encumbering defendants' property, thereby defeating, impairing, impeding and prejudicing plaintiff's rights with respect to the judgment ultimately obtained in this forfeiture action. Accordingly, plaintiff's OSC to hold defendants in contempt is granted as to defendants Vassilenko and Western Express unless said defendants voluntarily vacate the confession of judgment filed under New York County Index No. 106055/10 within 30 days after service of a copy of this order with notice of entry.

Defense Counsel

With respect to the DA's request to hold DeMaio in contempt, it is readily apparent that, as defendants' counsel, DeMaio had knowledge of the preliminary injunction and order of attachment. It is also apparent that defense counsel acted in concert with defendants in connection with the execution ^[FN8] and filing of the confession of judgment which this court determined violated the preliminary injunction.

The court rejects DeMaio's argument that the preliminary injunction does not apply to him because he is not a person having property belonging to the defendants. Defense counsel reasons that once he entered the confession of judgment defendants "no longer had any right, title, or interest in the $136,509.69" and the preliminary injunction is limited to property in which defendants have an interest. This is a circular argument. The point is that defendants disposed of their assets with defense counsel's knowledge and assistance and diminished the amount available for forfeiture.

Similarly, the court finds no support in the governing statute for defense counsel's claim that plaintiff was required to commence a special proceeding against him as a non-party. JL §753(A)(3), quoted above, expressly allows the court to hold a party's attorney in contempt for disobedience of the court's lawful mandate.

Notwithstanding the foregoing, the court is constrained to deny the contempt motion as to DeMaio because the OSC was not properly served upon him. The OSC directed that it be "personally served" upon defendant Vassilenko on his own behalf and on behalf of defendant Western Express, and on DeMaio. The court expressly deleted the DA's proposed language requiring only that the contempt OSC be "delivered to" defendants and DeMaio because, as a non-party, personal service upon defense counsel pursuant to CPLR §308 was required. See Department of Hous. Preserv. & Dev. v Arick, 131 Misc 2d 950, 952-953 (Civ. Ct. NY Cty. 1986), revd on other grounds in Department of Hous. Preserv. & Dev. of City of New York v Chaney, 137 Misc 2d 1079 (App Term, 1st Dept. 1988). Here, DeMaio was not in his office when plaintiff attempted to serve the OSC and it was left with a receptionist at a general reception area and retrieved by his office manager. While this service arguably satisfies the requirements of CPLR 2103(b)(3), it does not satisfy CPLR §308(2)'s requirements for substituted service because no mailing was effectuated. Accordingly, the DA's OSC is denied [*5]with respect to DeMaio, albeit without prejudice to plaintiff making a subsequent application.

Cross-Motion

Defendants' cross-motion for sanctions is denied. In addition to the DA's bringing this purportedly frivolous OSC and failing to serve it properly, defense counsel cites various other errors and omissions by ADA Guilmain throughout the course of this entire litigation, including allegedly incorrect factual statements and misstatements of the law. Even if true, the alleged frivolous statements and/or misstatements were harmless and, like the failure to properly serve this OSC upon DeMaio, appear to be honest mistakes having no effect on the outcome of this action. None of the DA's alleged actions, alone or combined, rises to the level of frivolous conduct as defined in 22 NYCRR §130-1.1.

As to the within OSC, the court has granted plaintiff's request for contempt as against defendants and had the OSC been properly served upon defense counsel, would have granted it as to DeMaio. Clearly, the OSC was not frivolous. Defense counsel is reminded that frivolous conduct includes "the making of a frivolous motion for costs or sanctions . . ." 22 NYCRR §130-1.1[c]. For the foregoing reasons, the cross-motion is denied in its entirety.

The court has considered the parties' remaining arguments and finds same to be without merit. For the above reasons, it is hereby

ORDERED that plaintiff's OSC for civil contempt is granted as to defendants Vassilenko and Western Express unless said defendants voluntarily vacate the confession of judgment filed under New York County Index No. 106055/10 within 30 days after service of a copy of this order with notice of entry; and it is further

ORDERED that plaintiff's OSC for civil contempt is denied without prejudice as to defendants' counsel; and it is further

ORDERED that defendants' cross-motion is denied.

The foregoing constitutes this court's Decision and Order. Courtesy copies of this Decision and Order have been faxed to counsel for plaintiff and defendants.

Dated: August 22, 2011

_______________________

Hon. Martin Shulman, J.S.C.