Lahoud v. Tri-Monex, Inc. , 2011 Ohio 4120 ( 2011 )

[Cite as Lahoud v. Tri-Monex, Inc., 2011-Ohio-4120.]
Court of Appeals of Ohio
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
JOURNAL ENTRY AND OPINION
No. 96118
JIHAD LAHOUD, ET AL.
PLAINTIFFS-APPELLEES
vs.
TRI-MONEX, INC., ET AL.
DEFENDANTS-APPELLANTS
JUDGMENT:
AFFIRMED
Civil Appeal from the
Cuyahoga County Court of Common Pleas
Case No. CV-702167
BEFORE: Rocco, J., Stewart, P.J., and Celebrezze, J.
RELEASED AND JOURNALIZED: August 18, 2011
2
ATTORNEY FOR APPELLANTS
Aleksandar Rakic
1787 Pearl Road
Brunswick, Ohio 44212
ATTORNEYS FOR APPELLEES
Michael J. Downing
75 Public Square, Suite 920
Cleveland, Ohio 44113
Tania T. Nemer
McGinty, Hilow & Spellacy Co., LPA
1300 The Rockefeller Building
614 W. Superior Avenue
Cleveland, Ohio 44113
KENNETH A. ROCCO, J.:
{¶ 1} Defendants-appellants Tri-Monex, Inc., Hanan Khoury
(hereinafter referred to by her first name), Kameel Khoury, and Victor Jada
(hereinafter referred to by his first name) appeal from the trial court order
that found Hanan to be in contempt of court for refusing to answer certain
3
questions and produce certain documents at a deposition conducted by
plaintiffs-appellees Jihad Lahoud, Ibrahim Hamame, and Hessam Lahoud.
{¶ 2} Appellants present three assignments of error in which they
argue the trial court’s order should be reversed because: 1) the order
impermissibly required Hanan to incriminate herself; 2) the trial court did
not first review the documents to determine whether they were incriminating
before setting forth the purge condition; and 3) the trial court did not first
determine whether Hanan could obtain some of the documents appellees
requested before finding her in contempt.
{¶ 3} Upon a review of the record, this court disagrees. The trial
court’s order, consequently, is affirmed.
{¶ 4} The record reflects appellees filed a complaint against appellants
and two other named defendants1 in August 2009 that alleged five causes of
action, viz., illegal sales of securities, violation of Ohio’s “Corrupt Activities
Act” (the “CAA”), 2 fraud, conversion, and civil conspiracy against the
individual appellants, and “punitive damages.” The complaint stated that
Hanan was “owner/president of Tri-Monex.” In November 2009, appellants
1 Defendants in the underlying action, George T. George and James T.
George, are not part of this appeal.
2R.C. 2923.31 et seq.
4
filed a joint answer denying the pertinent allegations and raising several
affirmative defenses.
{¶ 5} On June 3, 2010, appellees filed a motion seeking an order
finding appellants Hanan and Victor in contempt for failing to appear at a
scheduled deposition. Appellees asserted that appellants sought to
reschedule the deposition twice previously, and requested an additional order
from the court “compelling their appearance to answer questions under oath.”
{¶ 6} The court held a hearing on appellees’ motion that same day. At
the outset, the court noted that the parties had agreed to a monetary
settlement, whereby Hanan and her sister would pay appellees “$50,000 by
June 25th”and then a “balance of the amount due, which is $750,000, * * * by
September 1st.”
{¶ 7} The trial court warned the defendants responsible for the
payment to appellees that it would “put an order on” with respect to the
settlement’s terms, and that “failure to comply with it can result in contempt
proceedings which includes * * * jail, if it is direct contempt. And, you could
end up staying in jail till you pay” the settlement.
{¶ 8} On June 7, 2010, the trial court issued a journal entry that stated
as follows:
5
{¶ 9} “Defendant Hahan (sic) Khoury is to pay as a settlement of this
matter $50,000.00 by 6/25/10 to plaintiffs and a balance of $750,000.00 by
9/1/10. Failure to comply will result in a contempt proceeding. Parties to
return [to court] on 9/9/10 at 2:00 p.m.”
{¶ 10} On September 9, 2010, appellees filed a motion for an order
compelling discovery. Appellees asserted they scheduled a deposition for
appellants Hanan and Victor on September 14, 2010, and since prior attempts
to depose them had been unsuccessful, they sought the court’s assistance.
{¶ 11} Contemporaneously, appellees also filed a motion to hold the
same two appellants “in contempt of court for failure to comply with the
court’s order of June 7, 2010.” Appellees asserted Hanan and Victor never
made the second payment due on the settlement.
{¶ 12} After the parties filed memoranda in support of their respective
positions on the issue, the court issued a journal entry that scheduled “the
depositions to be held on 11/3/10 at 1:00 p.m.” in the court’s jury room.
When the depositions proceeded on that day, appellees eventually called upon
the trial court “to discuss the propriety of * * * objections” appellants were
making as to some of the questions posed by appellees.
{¶ 13} In particular, appellants declined to either answer any questions
about either the location where the money appellees gave to Tri-Monex was
6
deposited, or whether Tri-Monex itself had any bank accounts that received
those funds. Appellants asserted the matters were protected by the Fifth
Amendment.
{¶ 14} The trial court wanted the record to “show that we’ve been here a
number of times with regards to this matter * * * .
{¶ 15} “ * * * [O]n the 9th of September, * * * the money hadn’t been paid
back. And [Hanan] said it was gonna’ come within a few days.
{¶ 16} “I believe we came back * * * maybe the 28th of October, and she
said that the money was in * * * Toronto, Canada, and she would have it back
immediately.
{¶ 17} “ * * *
{¶ 18} “And [on June 3, 2010,] I did tell Miss Khoury that if, in fact, she
did not pay she may be held in * * * contempt of Court. * * * ”
{¶ 19} At that point, the trial court asked appellees which questions
Hanan and Victor had refused to answer. Counsel for appellees stated that
his clients each had “deposited” certain sums “with Tri-Monex, and were
issued promissory
{¶ 20} notes, ostensibly signed by Miss Khoury,” and appellees wanted
to know “where those deposits were made, what bank, and what records does
she have as an officer of Tri-Monex.”
7
{¶ 21} The trial court stated that since Hanan already had
acknowledged she had appellees’ money, and “where it was located and that
she was gonna’ pay it back,” the court did not “see where this would be
incriminating by answering where she deposited in further criminal
proceedings that she would be protected by her right, her Fifth Amendment
rights, because she’s already said she had the money * * * .” On that basis,
the court ordered Hanan to answer the question as to where she deposited the
money, further stating that failure to obey the order “may result in contempt
proceedings.”
{¶ 22} After appellants’ counsel objected, appellees’ counsel interjected
that they also wanted to see the documents that had not been produced. In
answer to the court’s question, appellees’ counsel stated that the documents
had been “subpoenaed [on] two separate occasions”; the listed documents
included “corporate records of Tri-Monex, bank statements, copies of all
brokerage account statements or other investment accounts and copies of
personal financial tax returns.”
{¶ 23} According to appellees’ counsel, although Hanan “admitted that
Tri-Monex did have a bank account,” she invoked her Fifth Amendment right
and
8
{¶ 24} “refused to give the account number or answer any other
questions concerning the deposit of plaintiffs’ funds in those accounts.” The
trial court instructed Hanan to answer appellees’ questions, but her attorney,
on her behalf, invoked the Fifth Amendment.
{¶ 25} The trial court stated its belief that the matter had nothing to do
with the Fifth Amendment, because Hanan had “already appeared in court
saying she had the money. * * * [M]oney was received by Tri-Monex * * *
inasmuch as she is an officer of Tri-Monex,” the court reiterated its order to
answer and to provide the information appellees requested or be held in
contempt.
{¶ 26} When Hanan’s attorney once again stated that his client declined
to do so, the trial court found her in contempt of court and stated it would
impose a fine of a thousand dollars a day until she provided the information
to appellees. The court set a date “to come back in two weeks to pay the
amount of money that is due at that point,” and subsequently requested
appellees to “prepare the order” concerning the hearing.
{¶ 27} The next entry that appears on the court’s docket, dated
November 5, 2010, indicates a “contempt hearing [wa]s set” for November 19,
2010. On November 8, 2010, however, the trial court issued a journal entry
that stated
9
{¶ 28} in relevant part as follows:
{¶ 29} “This matter came on for hearing on November 3, 2010. During
a
{¶ 30} deposition conducted this day * * * , [Hanan] was asked to answer
questions concerning the deposit of certain funds belonging to [appellees] in
this case.
{¶ 31} “[Appellees’] counsel also requested * * * certain documents listed
* * * in the notice of deposition. [Hanan], having refused to answer said
questions, claiming Fifth Amendment protection, or provide the requested
documents, after being ordered to do so by the judge in open court, is hereby
found to be in Contempt of Court and is assessed a fine of One Thousand
Dollars ($1,000.00) per day for each day until she provides * * * the answers *
* * , and * * * documents.”
{¶ 32} Appellants filed a timely appeal of that order. They present the
following assignments of error.
{¶ 33} “I. The trial court erred in denying Appellants’ right to
assert their fundamental right against self-incrimination in violation
of the Fifth Amendment by requiring them to answer all questions
posed by Appellees.
10
{¶ 34} “II. The trial court erred in failing to make a factual
determination, before finding that Appellants did not have a Fifth
Amendment right, as to whether answering the questions and
discovery requests would have been personal and testimonial and
would have conceded certain facts, and, if so, whether any of the
concessions would have been self-incriminating.
{¶ 35} “III. The trial court erred in finding that Appellants did
not have a Fifth Amendment right where Appellants’ production of
documents would have been personal, testimonial and
self-incriminating.”
{¶ 36} Appellants argue the trial court’s contempt order was improper
because: 1) the order impermissibly required Hanan to incriminate herself; 2)
the trial court did not first review the documents to determine whether they
were incriminating before setting forth the purge condition; and 3) the trial
court did not first determine whether Hanan could obtain some of the
documents appellees requested before finding her in contempt. This court
disagrees that the trial court erred in making its contempt finding.
{¶ 37} Contempt is defined as a disregard of, or disobedience to, an order
or command of judicial authority. State v. Flinn (1982), 7 Ohio App.3d 294,
455 N.E.2d 691. This court cannot reverse a finding of contempt by a trial
11
court unless that court abused its discretion. State ex rel. Ventrone v. Birkel
(1981), 65 Ohio St.2d 10, 417 N.E.2d 1249; Offenberg v. Offenberg, Cuyahoga
App. Nos.
{¶ 38} 78885, 78886, 79425, and 79426, 2003-Ohio-269, ¶73. In
applying this standard of review, an appellate court is not free to substitute
its judgment for that of the trial court. In re Jane Doe 1 (1991), 57 Ohio
St.3d 135, 566 N.E.2d 1181, citing Berk v. Matthews (1990), 53 Ohio St.3d
161, 559 N.E.2d 1301.
{¶ 39} In Strauss v. Strauss, Cuyahoga App. No. 94129, 2010-Ohio-6166,
¶9-10, this court recently distinguished direct and indirect contempt as
follows:
{¶ 40} “A court may find the offending party in contempt for either
direct or indirect actions that constitute disobedience to an order. Pirtle v.
Pirtle, 2nd Dist. No. 18613, 2001-Ohio-1539. While a direct contempt occurs
within the court’s presence or with the court’s personal knowledge of facts
relating to the act, indirect contempt is ‘misbehavior that occurs outside the
actual or constructive presence of the court.’ Id. One accused of indirect
contempt is entitled to a ‘hearing on the charge, at which the court must
investigate the charge, hear any answer or testimony that the accused makes
or offers, and then determine whether the accused is guilty.’ Id.12
{¶ 41} “Although punishment is inherent in contempt, courts will
categorize the penalty as either civil or criminal based on the character and
purpose of the punishment. In re J.M., 12th Dist. No. CA2008-01-004,
2008-Ohio-6763, citing Brown v. Executive 200, Inc. (1980), 64 Ohio St.2d 250,
416 N.E.2d 610. While
{¶ 42} criminal contempt is characterized by an unconditional prison
sentence, civil contempt is marked by remedial or coercive punishment, doled
out for the ‘benefit of the complainant.’ Id.” (Emphasis added.)
{¶ 43} The importance of classifying the types of contempt is thus the
effect the classification has on the rights of the contemnor. Direct contempt
of court occurs in a way so closely related to the court itself that a finding may
occur summarily; the court is not required to deal with direct contempt by
providing the contemnor with a hearing. In re Purola (1991), 75 Ohio App.3d
306, 596 N.E.2d 1140.
{¶ 44} In contrast, indirect contempt of court does not occur in the
presence of the court, and a hearing is required to provide the contemnor with
the opportunity to explain his actions. Furthermore, if the indirect contempt
is criminal in nature, then intent to defy the court must be proven beyond a
reasonable doubt. Brown v. Executive 200, Inc.
13
{¶ 45} A sanction for civil contempt allows the contemnor to purge
himself of the contempt. Tucker v. Tucker (1983), 10 Ohio App.3d 251, 461
N.E.2d 1337. Once the contemnor complies with the court’s order, the
purpose of the contempt sanction has been achieved and the sanction is
discontinued. Cleveland v. Ramsey (1988), 56 Ohio App.3d 108, 110, 564
N.E.2d 1089.
{¶ 46} In this case, it is clear the trial court found Hanan to be in direct,
civil contempt for her failure to comply with two earlier orders, viz., the order
to pay appellees the remainder of the settlement amount by September 1,
2010; and also, the order to submit to the deposition conducted by appellees
on November 3, 2010. The trial court, therefore, was not required to provide
Hanan with a hearing prior to making its finding. Pursuant to Civ.R. 37(D),
Hanan was required to seek a protective order to protect her interests.
{¶ 47} Appellants argue the trial court’s finding nevertheless was
improper because the court was requiring Hanan to incriminate herself before
determining whether the documents contained incriminating information and
before determining whether she could actually produce them. As authority
for their position, they cite, inter alia, Curcio v. United States (1957), 354 U.S.
118, 77 S.Ct. 1145, 1 L.Ed.2d 1225. The facts in this case, however, are more
analogous to those addressed in United States v. Rylander (1983), 460 U.S.
14
752, 103 S.Ct. 1548, 75 L.Ed.2d 521, in which the United States Supreme
Court distinguished Curcio by observing as follows:
{¶ 48} “Rylander * * * was held in contempt for failure to comply with a
previous order of the District Court * * * . This order, unappealed from,
necessarily contained an implied finding that no defense of lack of possession
or control had been raised and sustained in th[e underlying] proceeding. The
only issue open
{¶ 49} to Rylander in defending the contempt proceeding was to show
inability to then produce, and because of the presumption of continuing
possession arising from the enforcement order, [citation omitted], if he sought
to defend on that ground he was required to come forward with evidence in
support of it. The fact that his refusal to come forward with such evidence
was accompanied by a claim of Fifth Amendment privilege may be an
adequate reason for the court not compelling him to respond to
cross-examination at the contempt hearing, but the claim of privilege is not a
substitute for relevant evidence.” (Emphasis in original; underscoring
added.)
{¶ 50} Similarly, in Elec. Workers Pension Trust Fund of Local Union
#58, IBEW v. Gary’s Elec. Service Co. (C.A.6, 2003), 340 F.3d 383. The court
stated:
15
{¶ 51} “When a court seeks to enforce its order or supervise its
judgment, one weapon in its arsenal is contempt of court. See NLRB v.
Cincinnati Bronze, Inc., 829 F.2d 585, 588 (6th Cir.1987). Recognizing that
the power ‘to punish for contempts’ should not be used lightly, the Supreme
Court has stated that this power ‘is a necessary and integral part of the
independence of the judiciary, and is absolutely essential to the performance
of the duties imposed on them by law. Without it they are mere boards of
arbitration, whose judgments and decrees
{¶ 52} would be only advisory.’ Gompers v. Buck’s Stove & Range Co.,
221 U.S. 418, 450, 31 S.Ct. 492, 55 L.Ed. 797 (1911). Contempt proceedings
enforce the message that court orders and judgments are to be complied with
in a prompt manner. Cincinnati Bronze, 829 F.2d at 590. With respect to
civil contempt proceedings, ‘[j]udicial sanctions * * * may, in a proper case, be
employed for either or both of two purposes; to coerce the defendant into
compliance with the court’s order, and to compensate the complainant for
losses sustained.’ United States v. United Mine Workers of Am., 330 U.S.
258, 303-04, 67 S.Ct. 677, 91 L.Ed. 884 (1947).
{¶ 53} “In order to hold a litigant in contempt, the movant must produce
clear and convincing evidence that shows that ‘he violated a definite and
specific order of the court requiring him to perform or refrain from performing
16
a particular act or acts with knowledge of the court’s order.’ Cincinnati
Bronze, 829 F.2d at 591 (quotation and brackets omitted). * * * Once the
movant establishes his prima facie case, the burden shifts to the contemnor
who may defend by coming forward with evidence showing that he is
presently unable to comply with the court’s order. United States v. Rylander,
460 U.S. 752, 757, 103 S.Ct. 1548, 75 L.Ed.2d 521 (1983) (‘[w]here compliance
is impossible, neither the moving party nor the court has any reason to
proceed with the civil contempt action. It is
{¶ 54} settled, however, that in raising this defense, the defendant has a
burden of production.’). To meet this production burden in this circuit ‘a
defendant must show categorically and in detail why he or she is unable to
comply with the court’s order.’ Rolex Watch U.S.A., Inc. v. Crowley, 74 F.3d
716, 720 (6th Cir. 1996) (quotation omitted). When evaluating a defendant’s
failure to comply with a court order, we also consider whether the defendant
‘took all reasonable steps within [his] power to comply with the court’s order.’
Peppers, 873 F.2d at 969.
{¶ 55} “ * * *
{¶ 56} “Many decades ago, in a case where a corporate officer who failed
to comply with a subpoena duces tecum was held in contempt, the Supreme
Court stated:
17
{¶ 57} ‘A command to the corporation is in effect a command to those
who are officially responsible for the conduct of its affairs. If they, apprised
of the [order] directed to the corporation, prevent compliance or fail to take
appropriate action within their power for the performance of the corporate
duty, they, no less than the corporation itself, are guilty of disobedience, and
may be punished for contempt.’ Wilson v. United States, 221 U.S. 361, 376,
31 S.Ct. 538, 55 L.Ed. 771 (1911) * * * .”
{¶ 58} At any event, “Ohio law is clear that the protection against
compulsory self-incrimination does not extend to prohibit civil litigation
where the possibility of prosecution exists, nor does it require staying a
related civil case until a criminal appeal is resolved.” Ohio Bar Liab. Ins. Co.
v. Silverman, Franklin App. No. 05AP-923, 2006-Ohio-3016, ¶12, citing
State ex rel. Verhovec v. Mascio, 81 Ohio St.3d 334, 1998-Ohio-431, 692
N.E.2d 282 and Urban v. State Med. Bd., Franklin App. No. 03AP-426,
2004-Ohio-104 (Emphasis added). See, also, Commonwealth Land Title Ins.
Co. v. Davis (1989), 67 Ohio App.3d 521, 579 N.E.2d 503.
{¶ 59} The trial court correctly observed that by entering into a
settlement agreement with appellees, she acknowledged liability on appellees’
claims, and became bound by the trial court’s order. Considering that Hanan
had not been either indicted in a criminal matter, or called to testify against
18
herself in one, the trial court did not abuse its discretion in finding her in
contempt for refusing to comply with its previous orders. In re Original
Grand Jury Investigation (Kaiser), Mercer App. No. 10-02-20,
2003-Ohio-1670, ¶15.
{¶ 60} For the foregoing reasons, appellants’ assignments of error are
overruled.
{¶ 61} The trial court’s order is affirmed.
It is ordered that appellees recover from appellants costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate be sent to said court to carry this
judgment into execution.
A certified copy of this entry shall constitute the mandate pursuant to
Rule 27 of the Rules of Appellate Procedure.
_______________________________
KENNETH A. ROCCO, JUDGE
MELODY J. STEWART, P.J., CONCURS
FRANK D. CELEBREZZE, JR., J., CONCURS
(SEE ATTACHED CONCURRING OPINION)
FRANK D. CELEBREZZE, JR., J., CONCURRING:
19
{¶ 62} I concur with the majority, but write separately to stress the
inapplicability of the Fifth Amendment right against self-incrimination as it
relates to corporate records.
{¶ 63} Here, the whereabouts of money belonging to Tri-Monex is a
business record of the corporation and is not subject to Fifth Amendment
privilege. Also, questions about Tri-Monex’s corporate structure and
business dealings are not subject to Fifth Amendment privilege because the
corporation does not enjoy such a right. Wilson v. United States (1911), 221
U.S. 361, 31 S.Ct. 538, 55 L.Ed. 771, at the syllabus. “‘Since the Fifth
Amendment right is a personal right, an individual may not claim such
privilege on behalf of a collective entity or organization of which he may be a
part. Neither a partnership, a corporation, nor any other collective entity is
shielded by the Fifth Amendment from the compelled production of an
organization’s records.’” Quinlan v. Ohio Dept. of Commerce, Div. of
Consumer Fin. (1996), 112 Ohio App.3d 113, 122, 678 N.E.2d 225, quoting
Cincinnati v. Bawtenheimer (1992), 63 Ohio St.3d 260, 264, 586 N.E.2d 1065,
fn. 2.
{¶ 64} Appellees asked, “what is the business of Tri-Monex, Inc.,” a
question that is purely related to the corporation and not personal under any
proper reading of Fifth Amendment law governing corporate and private
20
privileges. Appellees also asked for certain documents, whether Tri-Monex
held any bank accounts, and where money was deposited that was given to
Tri-Monex. These are also questions relating to the corporation and not the
individual. Appellants must provide these corporate records because they
are not personal in nature.