Free Response to Order to Show Cause - District Court of Colorado - Colorado

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO

CIVIL ACTION NO. 01-CV-0275-JLK DOMINICK PAOLONI, et al., Plaintiffs, v. DONALD I. GOLDSTEIN, et al., Defendants, and NBSA, LLC, et al., Relief Defendants. ______________________________________________________________________________ LARRY K. GRIFFIS' RESPONSE TO ORDER TO SHOW CAUSE (Dkt. 861) ______________________________________________________________________________

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Larry K. Griffis, through his counsel Kevin Shea and Jon Bernhardt of Ballard Spahr Andrews & Ingersoll, LLP, responds as follows to the Court's Order to Show Cause dated January 17, 2007 (Dkt. 861). INTRODUCTION Larry Griffis has practiced law in metropolitan Detroit since his graduation from law school and admission to the bar in 1970. In his 36 years as a lawyer, Mr. Griffis has never been subject to any grievance, lawsuit, or contempt proceeding. In this action, the Court found Mr. Griffis' former client,1 Mark Wolok, in contempt of the Court's Preliminary Injunction entered March 2, 2001 because Mr. Wolok transferred one property (the "Florida Property") and permitted encumbrances to be placed on both the Florida Property and another property (the "Michigan Property"). Plaintiffs allege that Mr. Griffis is also in contempt because he was complicit in Mr. Wolok placing those encumbrances, and/or because Mr. Griffis allegedly aided and abetted Mr. Wolok's contempt. There appear to be two bases of Plaintiffs' claim: (1) That Mr. Griffis represented Mr. Wolok in this action when the Injunction was entered and, therefore, that Mr. Griffis had a legal duty to Plaintiffs to make sure that Mr. Wolok knew about the Injunction; that Mr. Griffis did not do so; and that Mr. Griffis' failure to advise Mr. Wolok of the existence of the Injunction caused or assisted Mr. Wolok to transfer the Florida Property and place encumbrances on the Michigan and Florida Properties, which may damage Plaintiffs in the future if they ever obtain a judgment against Mr. Wolok; and (2) That, on March 10, 2006, Mr. Griffis' law partner, Robert Bolton, drafted a mortgage on the Michigan Property.
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On January 17, 2007, the Court granted Mr. Griffis' motion to withdraw. (Dkt. 860.) 1

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Counsel submit that Mr. Griffis is not in contempt of this Court, nor did he aid or abet Mr. Wolok's contempt, for at least four reasons that are summarized in this Introduction and presented individually, along with their evidentiary support, in the body of this Response. First, Mr. Griffis is not in direct contempt because he did not violate any term of the Injunction. The Injunction prohibits transactions affecting property owned by Mr. Wolok. Mr. Griffis took no action related to the transfer of the Florida Property or the encumbrance of the Michigan and Florida Properties. In fact, Mr. Griffis had no knowledge of those transactions until after Plaintiffs threatened a contempt motion against Mr. Wolok in August 2006. Second, there was no contempt by Mr. Griffis in connection with Mr. Bolton's drafting of the March 10, 2006 mortgage. Mr. Griffis had no knowledge of this transaction. Mr. Bolton had no knowledge of this action or the Injunction. (Their law firm has approximately 95 lawyers.) Indeed, Mr. Bolton was representing the lender in that transaction, not Mr. Wolok. There was no communication between Mr. Griffis and Mr. Bolton on this issue until long after the fact. Moreover, that mortgage was discharged on August 15, 2006, and so it cannot affect Plaintiffs' ability to collect any possible future judgment against Mr. Wolok. Third, Mr. Griffis did not aid or abet Mr. Wolok for at least the following reasons: a. Since Mr. Griffis did not know about the transfer or encumbrances, he could not and did not assist Mr. Wolok in those transactions. b. Regardless of whether or not Mr. Griffis advised Mr. Wolok of the existence of the Injunction, the Court held in its December 15, 2006 Order against Mr. Wolok that Mr. Wolok knew of the Injunction before the first transaction on March 23, 2001. Consequently, even accepting as true Plaintiffs' allegation that Mr. Griffis did not advise Mr. Wolok of the existence of the 2

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Injunction, there is no causal relationship between Mr. Griffis and the transfer and encumbrances. c. Mr. Griffis did not aid or abet Mr. Wolok because, contrary to Plaintiffs' repeated contentions, Mr. Griffis did not represent Mr. Wolok in this action when the Court entered the Injunction. Mr. Griffis did not represent Mr. Wolok in this action until late April 2001, almost two months after the Court entered the Injunction. Any duty to advise Mr. Wolok regarding the Injunction did not arise until then. In March 2001 (when the Court entered the Injunction), Plaintiffs' counsel knew that Mr. Griffis did not represent Mr. Wolok in this action, but rather only in a different action in California. When Plaintiffs' counsel contacted Mr. Griffis in March 2001, Mr. Griffis stated that he did not represent Mr. Wolok in this action, but "may" be engaged to do so at some time in the future. Specifically, on March 16, 2001, two weeks after entry of the Injunction, Mr. Griffis sent Plaintiffs' counsel a letter. After advising Mr. Hutchings that he was not authorized to accept service of process for Mr. Wolok, Mr. Griffis asked: if you have any matters you wish to discuss with respect to the clients we may represent in this lawsuit, when served, please feel free to give me a call. (Emphasis added.) As will be described in more detail below, Plaintiffs' counsel missstated the content of the March 16, 2001 letter at the October 3, 2006 contempt hearing. Mr. Griffis does not dispute that Plaintiffs' counsel repeatedly faxed copies of his pleadings and this Court's TRO and Injunction to Mr. Griffis in February and early March 2001, and that Mr. Griffis had 3

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telephone conversations with Plaintiffs' counsel regarding the action. These communications between counsel, however, do not create an attorney-client relationship between Mr. Wolok and Mr. Griffis for this action. d. Mr. Griffis had no legal duty to Plaintiffs or their counsel, whether under the rules of professional conduct or otherwise. Mr. Griffis could not have breached a legal duty that does not exist.2 Fourth, a predicate for Mr. Griffis to aid and abet contempt by Mr. Wolok is that Mr. Wolok must himself have been in contempt. Although the Court has held Mr. Wolok in contempt, Mr. Griffis and his counsel respectfully suggest that the transfer and encumbrances of the Michigan and Florida Properties were not contempt for several reasons, including that the Injunction was not a valid Court Order as to Mr. Wolok or Mr. Griffis because the Court had not yet acquired personal jurisdiction over Mr. Wolok when it entered the Injunction, ex parte as to Mr. Wolok. Because Mr. Wolok's conduct was not contempt, Mr. Griffis could not have aided and abetted contempt. For all of these reasons, and others described below, the Court should discharge the Order to Show Cause against Mr. Griffis.

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As the Court observed at the December 12, 2006 hearing, Mr. Griffis did, of course, owe to his client, Mr. Wolok, legal and ethical duties once the attorney-client relationship was formed. 4

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FACTUAL BACKGROUND The following facts are shown in the Court's file and the accompanying exhibits3: A. Mr. Griffis' Representation of Mr. Wolok in the California Action. 1. Beginning in 2000, Mr. Griffis represented Mr. Wolok (and others) in connection with an action captioned Xelan, Inc., et al. v. Goldstein, et al., Case No. GIC758918, pending in San Diego County Superior Court in California. (Ex. 6, Griffis Aff., at ¶ 3.)

B.

Mr. Wolok's Ownership of the Michigan and Florida Properties Before This Action was Filed. 2. On February 4, 2000, Mr. Wolok acquired a property at 5395 Putnam, West Bloomfield, Michigan (the "Michigan Property"). (Ptf. Ex. F.) On the same day, Mr. Wolok quitclaimed the Michigan Property to himself and Paula Cetean, then a single woman, as joint tenants. (Ptf. Ex. G.) Also on February 4, 2000, Mr. Wolok granted a mortgage (the "Acquisition Mortgage") to secure a loan that he used to acquire the Michigan Property. (See Wolok Ex. K.) On September 9, 2000, Mr. Wolok and Ms. Cetean were married. (Ptf. Ex. H.) On September 18, 2000, Mr. Wolok and his wife, Ms. Cetean, acquired a property at 1550 Drexel Avenue, #1-5 in Miami Beach, Florida (the "Florida Property"). (Ptf. Ex. B.) On February 15, 2001, Mr. Wolok and Ms. Cetean quitclaimed the Michigan Property to Ms. Cetean alone. (Ptf. Ex. I.)

3. 4.

5.

3

To avoid multiplying the Court's file further, Mr. Griffis' counsel has taken the liberty of referring to exhibits submitted by Plaintiffs and Mr. Wolok in connection with the contempt proceedings against Mr. Wolok. At the Court's request, Mr. Griffis' counsel will provide copies of all exhibits referenced in this Response. Mr. Griffis uses the following conventions: "Ptf. Ex. __" refers to Plaintiffs' exhibits in the Wolok contempt proceeding; "Wolok Ex. __" refers to Mr. Wolok's exhibits in his Motion for Reconsideration and Reply on that Motion; "Ex." refers to exhibits submitted with this Brief; "Dkt" refers to entries on this Court's Docket in this case; and "Tr." and a corresponding date refers to transcripts of Court hearings. 5

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C.

Plaintiffs File This Lawsuit and Gratuitously Send Copies of Papers to Mr. Griffis. 6. On February 16, 2001, Plaintiffs filed this lawsuit. (Dkt. 1.) On the same date, Plaintiffs filed a motion for preliminary injunction prohibiting transfers or encumbrances of property owned by any defendant. (Dkt. 2 and 3.) Plaintiffs argued that the preliminary injunction was necessary to protect their rights to reach defendants' property in the event Plaintiffs prevailed on their underlying claims. (Id.) On February 20, 2001, Plaintiffs filed a motion for a temporary restraining order (the "TRO") prohibiting transfers or encumbrances of properties owned by any defendant. (Dkt. 8 and 9.) On February 21, 2001, the Court entered the requested TRO. (Dkt. 19.) Also on February 21, 2001, Plaintiffs' counsel, John Hutchings, faxed a copy of the TRO to Mr. Griffis. The cover letter stated that Mr. Hutchings had learned that Mr. Griffis represented Mr. Wolok's father in the Xelan action in California. (Ex. 6, Griffis Aff., at ¶ 6; Ex. 1, 2/21/01 Ltr from Hutchings to Griffis.) On February 21, 2001, Mr. Hutchings sent copies of all pleadings in this action, including the Complaint, TRO, and motion for preliminary injunction, to Mr. Wolok's address via Federal Express. The package was received at that address on February 22, 2001. (Dkt. 22, Hutchings Aff., at ¶¶ 5 and 5D.) On February 22, 2001, a process server visited Mr. Wolok at his office. At the December 12, 2006 hearing, the process server testified that Mr. Wolok told the process server that he had received a Federal Express package that morning. The process server did not serve process on Mr. Wolok at that time. (Dkt. 868, 12/12/06 Tr., at 7:2-9:23; Ptf. Ex. W, Wittenberg Aff.) On March 2, 2001, the Court held a hearing on Plaintiffs' motion for a preliminary injunction. No counsel appeared for Mr. Wolok at the hearing. Counsel appeared for three other defendants. The Court noted a concern regarding entering a preliminary injunction that would affect parties not yet served or appearing, and asked counsel for parties who did appear to attempt to agree on a stipulated injunction. (Dkt. 27 and 29.) The parties who appeared agreed on a stipulated form of injunction and, on the same date, March 2, 2001, the Court entered a preliminary injunction (the "Injunction"). (Dkt. 26.) In relevant part, the Injunction provides: ... Mark Wolok ..., their officers, agents, servants, employees, attorneys, and those persons in active concert or participation with them who receive actual notice of this Order by personal service or otherwise, and each of them are hereby restrained and enjoined from directly or indirectly transferring, selling, assigning, 6

7.

8. 9.

10.

11.

12.

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dissipating, concealing, encumbering, impairing, or otherwise disposing of in any manner funds, assets, or other property belonging to or in the possession, custody, or control of the Defendants wherever located. (Id., at ¶ 1.) 14. Also on March 2, 2001, although Mr. Griffis had not entered an appearance in this action, the Court Clerk mailed a copy of the Injunction to Mr. Griffis. (Id., at Cert. of Mailing.) Mr. Hutchings also faxed a copy to Mr. Griffis. (Ptf. Ex. R.) On March 8, 2001, Mr. Hutchings mailed a copy of the Injunction to Mr. Wolok at his business address. (Ptf. Ex. Q.) On the same date, Mr. Hutchings mailed and faxed another copy of the Injunction to Mr. Griffis. (Ptf. Ex. S.) On March 15, 2001, Mr. Hutchings sent a letter to Mr. Griffis. Mr. Hutchings asked Mr. Griffis to inform Mr. Hutchings whether Mr. Griffis would accept service of process for "your clients, Sanford Wolok and Mark Wolok" and other Defendants. (Ptf. Ex. T.) The next day, March 16, 2001, Mr. Griffis sent a letter to Mr. Hutchings. (Ptf Ex. U.) Plaintiffs represented to the Court that, in this letter, Mr. Griffis stated that he "will be representing or are [re]presenting Sanford Wolok, Mark Wolok and various other defendants in this matter." (Dkt. 841, 10/3/06 Tr., at 10:7-14; see also Dkt. 852, Motion for Order to Show Cause against Mr. Griffis, at ¶ 2.) Contrary to Plaintiffs' representation to the Court at the October 3, 2006 hearing, the March 16, 2001 letter from Mr. Griffis made clear that Mr. Griffis did not represent Mr. Wolok in this action at that time, but "may" (or may not) represent him in the future. The actual wording of that letter is crucial to understanding the facts as they existed as of March 16, 2001. Mr. Griffis stated that: With respect to ... Mark Wolok ... neither we nor Davis, Graham & Stubbs have been authorized to accept service on their behalf. Mr. Griffis then asked Mr. Hutchings to advise Mr. Griffis if Mr. Hutchings believed that service was obtained on Mr. Wolok and others. Mr. Griffis then stated that, if you have any matters you wish to discuss with respect to the clients we may represent in this lawsuit, when served, please feel free to give me a call .... (Ptf. Ex. U; see Ex. 6, Griffis Aff., at ¶¶ 9-10.) 19. On April 30, 2001, Mr. Griffis contacted Mr. Hutchings. At that time, Mr. Griffis advised Mr. Hutchings that Mr. Griffis represented Mr. Wolok and others in this action. Mr. Griffis and Mr. Hutchings discussed various issues, including service of process on Mr. Wolok, Mr. Wolok's response to the complaint, and possible 7

15.

16.

17.

18.

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language for a preliminary injunction to apply to Mr. Wolok. (Ex. 6, Griffis Aff., at ¶¶ 11-12; Ex. 4, 5/18/01 Ltr from Hutchings to Griffis4; see also Ex. 2, 5/8/01 Fax from Griffis to Hutchings with possible terms for preliminary injunction as to Mr. Wolok; Ex. 3, 5/9/01 Letter from Hutchings and Griffis regarding same.) 20. On May 18, 2001, Mr. Hutchings advised Mr. Griffis that Mr. Hutchings believed that Mr. Wolok had violated the Injunction, without providing any supporting detail. Between May 18, 2001 and the summer of 2006, Plaintiffs took no steps to follow up on the claim that Mr. Wolok had violated the Injunction in the Spring of 2001. (Ex. 6, Griffis Aff., at ¶ 13; Ex. 4, 5/18/01 Ltr from Hutchings to Griffis.) On June 1, 2001, Mr. Griffis entered an appearance for Mr. Wolok in this action by filing Mr. Wolok's answer. (Dkt. 76; see Ex. 6, Griffis Aff., at ¶ 14.)

21. D.

Post-Injunction Encumbrance of the Michigan and Florida Properties. 22. 23. On March 23, 2001, Ms. Cetean and Mr. Wolok quitclaimed the Florida Property to Ms. Cetean alone. (Ptf. Ex. D.) On April 12, 2001, Mr. Wolok and Ms. Cetean gave a mortgage on the Michigan Property to secure a $35,000 loan. (Ptf. Ex. J.) The funds from this loan were used to pay down the Acquisition Mortgage. (Wolok Ex. F, Cetean Aff., at ¶ 5.) This loan was repaid, and the mortgage was discharged on December 31, 2002. (Wolok Ex. J.) On March 9, 2004, Ms. Cetean gave a mortgage on the Michigan Property to secure a $25,000 loan. (Ptf. Ex. K.) The funds from this loan were used to pay down the Acquisition Mortgage. (Wolok Ex. F, Cetean Aff., at ¶ 5.) On December 10, 2004, Ms. Cetean gave a mortgage on the Michigan Property to secure a $40,000 loan. (Ptf. Ex. L.) The funds from this loan were used to pay down the Acquisition Mortgage. (Wolok Ex. F, Cetean Aff., at ¶ 5.) On January 27, 2006, Ms. Cetean gave a mortgage on the Florida Property to secure a $180,000 note. (Ptf. Ex. E.) On March 10, 2006, Ms. Cetean gave a mortgage on the Michigan Property to secure a $40,099 loan from Michael A. Leibowitz, also a client of Mr. Griffis' law firm. (Ptf. Ex. M.) The funds from this loan were used to pay down the Acquisition Mortgage. (Wolok Ex. F, Cetean Aff., at ¶ 5.) This loan was repaid,

24.

25.

26. 27.

4

Exhibit 4 is dated May 9, 2001, but that date appears to be in error. It was faxed to Mr. Griffis on May 18, 2001. The typist appears to have copied the date from an earlier letter from Mr. Hutchings to Mr. Griffis, which was dated and sent May 9, 2001. (Ex. 6, Griffis Aff., at ¶ 13.) 8

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and the mortgage was discharged on August 15, 2006. (Wolok Ex. I; Ex. 8, Leibowitz Aff., at ¶¶ 5-8; Ex. 7, Bolton Aff., at ¶ 8.) 28. The March 10, 2006 mortgage was drafted by Mr. Griffis' law partner, Mr. Bolton, at the request of Mr. Leibowitz. Mr. Bolton was acting as Mr. Leibowitz's counsel. At that time, neither Mr. Bolton nor Mr. Leibowitz had any knowledge of this action or the Injunction. Mr. Bolton included a signature line for Mr. Wolok in this mortgage, not because of any belief that Mr. Wolok had any interest in the Michigan Property, but because Mr. Bolton routinely includes a signature line for the spouse of the owner of property to be mortgaged to protect against the possibility that the spouse may have or later acquire an interest in the property. (Ex. 8, Leibowitz Aff., at ¶ 6; Ex. 7, Bolton Aff., at ¶¶ 4-7.) On August 15, 2006, the Acquisition Mortgage on the Michigan Property was foreclosed, and the Michigan Property was sold at a Sheriff's sale. (Wolok Ex. K.) Unless the Michigan Property is redeemed by February 22, 2007, the two remaining post-Injunction mortgages will also be extinguished. (Ex. 7, Bolton Aff., at ¶ 9; see also M.C.L. § 600.3200, et seq., specifically § 3236.)

29.

E.

Contempt Proceedings Against Mr. Wolok and Mr. Griffis. 30. On August 16, 2006, Mr. Hutchings sent a letter to Mr. Griffis stating that Mr. Hutchings believed that Mr. Wolok was in contempt of the Injunction for transferring the Florida Property and permitting encumbrances to be placed on the Florida and Michigan Properties. Mr. Hutchings identified this letter as falling under the meet and confer requirement of D.C.Colo.LCivR 7.1A. (Ptf. Ex. N.) The August 16, 2006 letter appears to be the first mention of contempt since Mr. Hutchings' May 18, 2001 letter in which he had originally told Mr. Griffis that Mr. Wolok had violated the Injunction. (See Ex. 6, Griffis Aff., at ¶¶ 13, 15.) Before Mr. Griffis received Mr. Hutchings' August 16, 2006 letter, Mr. Griffis had no knowledge of any assets owned or controlled by Mr. Wolok or of the transactions or encumbrances relating to the Michigan and Florida Properties that form the basis for the contempt allegations against Mr. Wolok and Mr. Griffis. (Ex. 6, Griffis Aff., at ¶ 15.) On Tuesday, August 29, 2006, Mr. Griffis spoke by telephone with Mr. Hutchings regarding the allegations in Mr. Hutchings' August 16, 2001 letter. In that conversation, Mr. Griffis told Mr. Hutchings that Mr. Griffis was still gathering materials from Mr. Wolok to respond to Mr. Hutchings' letter. (Ex. 6, Griffis Aff., at ¶ 16; see also Ex. 5, 9/1/06 Ltr from Griffis to Hutchings.) On Friday, September 1, 2006, without awaiting any further response from Mr. Griffis, Plaintiffs filed their Motion For Order to Show Cause to Mark Wolok. In the Rule 7.1A certification in that Motion, Plaintiffs did not inform the 9

31.

32.

33.

34.

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Court that Mr. Griffis had told Mr. Hutchings three days earlier that he would provide a response to the August 16, 2006 letter.5 (Dkt. 834.) 35. 36. 37. On September 12, 2006, the Court issued its Order to Show Cause to Mark Wolok, returnable October 3, 2006. (Dkt. 835.) On October 3, 2006 and December 12, 2006, the Court heard evidence and argument in the contempt proceedings against Mr. Wolok. On December 15, 2006, the Court entered an Order finding Mr. Wolok in contempt. The Court made factual findings that "Mark Wolok was served with the March 2, 2001 Preliminary Injunction," and that "Mark Wolok had knowledge of the March 2, 2001 Preliminary Injunction prior to March 23, 2001 [the date of the first post-Injunction transaction by Mr. Wolok] ... by virtue of prior service of the Preliminary Injunction upon him and his attorneys." The Court found that the transfer of the Florida Property to Ms. Cetean, and the post-Injunction mortgages placed on the Florida and Michigan Properties violated the Injunction. (Dkt. 846.)

5

Mr. Griffis and his counsel believe it is necessary to respond to the Court's statement in paragraph 7 of its December 15, 2006 Order holding Mr. Wolok in contempt (Dkt. 846), where the Court stated "the Court is appalled at the statement of Mark Wolok's counsel, Larry Griffis, as set forth in paragraph 13 of the Motion for Order to Show Cause when it says, `in accordance with D.C.Colo.L.Civ.R. 7.1A, on August 16, 2006, Plaintiffs' counsel sent Larry Griffis, counsel for Mark Wolok, the attached letter, Exhibit N, in an effort to resolve this matter without the Court's intervention. On August 29, 2006, Larry K. Griffis advised Plaintiffs' counsel that Mark Wolok was broke and the filing and pursuing of this matter would be a waste of Plaintiffs' time and money." The statement in Plaintiffs' Rule 7.1A certification is incomplete and misleading. First, Plaintiffs did not inform the Court that Mr. Griffis told Plaintiffs' counsel that Mr. Griffis was still in the process of gathering materials to respond to Plaintiffs' allegations, and thus the "meet and confer" process had not been completed. Second, Plaintiffs did not inform the Court that Mr. Griffis had outlined Mr. Wolok's financial circumstances, including that he was over $50,000 behind in child support payments, that he faced tax liens in excess of $75,000, and that he had a judgment against him for $1.1 million. As is common in litigation over money, Mr. Griffis attempted to persuade Mr. Hutchings that, if the purpose of pursuing civil contempt proceedings against Mr. Wolok was to obtain money for Plaintiffs and not merely a personal attack on Mr. Wolok, that proceeding would not accomplish its purpose because Mr. Wolok could not pay any sanction and, therefore, pursuing him would be a waste of Plaintiffs' and Mr. Hutchings' time and money. (Ex. 6, Griffis Aff., at ¶ 17 see also Ex. 5, 9/1/06 Ltr from Griffis to Hutchings.) In context, counsel submit that Mr. Griffis' statements regarding Mr. Wolok's financial condition were reasonable and appropriate advocacy on behalf of his client, Mr. Wolok. 10

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38. 39.

On January 11, 2007, Plaintiffs filed their Motion for Order to Show Cause against Mr. Griffis. (Dkt. 852.) On January 17, 2007, the Court issued an Order to Show Cause to Mr. Griffis to show cause, in writing, on or before February 2, 2007, why he should not be held in civil contempt for violation of the Injunction and for aiding and abetting Mr. Wolok's violation of the Injunction. (Dkt. 861.)

ARGUMENT A. Elements of Contempt. A party alleging contempt and seeking a civil remedy must prove by clear and convincing evidence (1) that a valid court order was in effect, (2) that the person to be charged with contempt had actual notice of the order, (3) that the order clearly and unambiguously put the person to be charged on notice of what he must do to comply, and (4) that the person to be charged acted in violation of the order. FTC v. Kuykendall, 371 F.3d 745, 756-57 & 760-61 (10th Cir. 2004); Reliance Ins. Co. v. Mast Constr. Co., 84 F.3d 372, 377 (10th Cir. 1996) (Reliance I). Any ambiguities or omissions in the order will be construed in favor of the person charged with contempt. Kuykendall, 371 F.3d at 761-62; Reliance I, 84 F.3d at 377; Grace v. Center for Auto Safety, 72 F.3d 1236, 1241 (6th Cir. 1996). "[T]he specificity requirements of [F.R.Civ.P.] Rule 65(d) are no mere technical requirements. The Rule was designed to prevent uncertainty and confusion on the part of those faced with injunctive orders, and to avoid the possible founding of a contempt citation on a decree too vague to be understood." Schmidt v. Lessard, 414 U.S. 473, 476 (1974). An injunction should not be construed so as to leave a party "open to the hazard of conducting business in the mistaken belief that its is not prohibited by the injunction and thus make him vulnerable to prosecution for contempt." Reliance Ins. Co. v. Mast Constr. Co., 159 F.3d 1311, 1316 (10th Cir. 1998) (Reliance II) (internal quotation omitted).

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Finally, the party alleging contempt must prove actual damages resulting from the alleged violation. Reliance I, 84 F.3d at 377. Proof of damages is by a preponderance standard. Reliance II, 159 F.3d at 1318; see also Kuykendall, 371 F.3d at 754. A nonparty may be liable for violating an injunction if the nonparty has actual notice of the injunction and is in active concert or participation with a party or his privy, or if the nonparty has actual notice of the injunction and aids or abets a party in violating the injunction. Reliance I, 84 F.3d at 377; Reliance II, 159 F.3d at 1319. To find a nonparty liable for aiding and abetting a party's contempt requires proof by clear and convincing evidence that (1) a party committed contempt, and (2) the nonparty knowingly assisted the party's violation. Levin v. Tiber Holding Corp., 277 F.3d 243, 250-51 (2nd Cir. 2002); United States v. Paccione, 964 F.2d 1269, 1274 (2nd Cir. 1992); see also Gemco Latinoamerica, Inc. v. Seiko Time Corp., 61 F.3d 94, 98 (1st Cir. 1995); United States v. Peoni, 100 F.2d 401, 402 (2nd Cir. 1938) (L. Hand, J.) (aiding and abetting under 18 U.S.C. § 2 requires a person to "associate himself with the venture, ... participate in it as in something he wishes to bring about, ... seek by his action to make it succeed"). B. Mr. Griffis Did Not Violate the 2001 Injunction. To find Mr. Griffis directly in contempt would require a finding by clear and convincing evidence that, "in active concert or participation with" Mr. Wolok, Mr. Griffis took an action that violated the Injunction. Reliance II, 159 F.3d at 1319; Kuykendall, 371 F.3d at 756-57. There is no basis for finding that he took any action that violated the Injunction, much less that he was "in active concert or participation" with Mr. Wolok in doing so.6
6

The arguments in section E, below, that there was no underlying contempt by Mr. Wolok, apply equally to Mr. Griffis. 12

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The Injunction prohibits defendants and persons acting in concert with them, including their attorneys, from doing various things with assets or property of the defendants. There is no allegation that Mr. Griffis did anything with any of Mr. Wolok's assets. The allegations are clear that Mr. Wolok and Ms. Cetean engaged in various transactions relating to the Florida Property and the Michigan Property. There is no allegation or proof that Mr. Griffis had anything to do with any of these transactions; indeed Mr. Griffis did not participate in any of these transactions, or even know of them until August 2006. (See Ex. 6, Griffis Aff., at ¶ 15.) The only action alleged against Mr. Griffis is that he allegedly failed to advise Mr. Wolok of the existence of the Injunction. Even if the allegation is true, that alleged action does not violate any term of the Injunction. In the following sections, Mr. Griffis will show that his alleged failure to advise Mr. Wolok of the existence of the Injunction also did not aid or abet any violation of the Injunction. Mr. Griffis' connection to the alleged violations of the Court's Injunction is substantially different from the type of conduct that has been found to be active concert in, or aiding and abetting of, a party's contempt. For example, in the Reliance cases, cited above, the respondent bank held the defendant's enjoined assets in various accounts. The bank and the defendant then actively engaged in a "complicated series of fund withdrawals and transfers" to move the defendant's funds out of the reach of the plaintiff. See Reliance I, 84 F.3d at 374-75 & 377. In contrast, Mr. Griffis had no knowledge of Mr. Wolok's assets, no knowledge of the transactions, and certainly no part in the transactions. Because Mr. Griffis did not actively participate in, or have knowledge of, the allegedly contemptuous transactions, he did not personally violate the Injunction and, therefore, is not directly in contempt. 13

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C.

Mr. Griffis is Not in Contempt Based on the March 10, 2006 Mortgage on the Michigan Property. Plaintiffs suggest that Mr. Griffis is responsible for the actions of his partner,

Mr. Bolton, who prepared the March 10, 2006 mortgage on the Michigan Property. Plaintiffs do not allege, and there is no proof, that Mr. Griffis had anything to do with that transaction or, even, that he was aware of it. To the contrary, Mr. Griffis had no knowledge of the March 10, 2006 mortgage until August 2006, when Plaintiffs first suggested that the mortgage was improper. Mr. Griffis and Mr. Bolton did not discuss the mortgage, this case, or the Injunction until after Plaintiffs complained about the mortgage in August 2006. Ex. 6, Griffis Aff., at ¶ 20.7 Therefore, Mr. Griffis is not in contempt because of Mr. Bolton's role in the March 10, 2006 mortgage. D. Mr. Griffis Did Not Knowingly Assist Mr. Wolok to Transfer the Florida Property or to Encumber the Michigan and Florida Properties. To have aided and abetted Mr. Wolok's contempt, Mr. Griffis must have knowingly assisted Mr. Wolok's violation of the Injunction.8 Levin, 277 F.3d at 250-51; Paccione, 964 F.2d at 1274. This requires Plaintiffs to prove that Mr. Griffis took an action by which he intended that the Injunction would be violated, and that Mr. Griffis' action caused damages to Plaintiffs. See Reliance I, 84 F.3d at 377; Peoni, 100 F.2d at 402.

7

Nor could Mr. Bolton be in contempt by reason of the March 10, 2006 mortgage. Mr. Bolton could not be in contempt unless he had actual knowledge of the Injunction before he prepared that mortgage. See Kuykendall, 371 F.3d at 756-57. The evidence is uncontroverted that Mr. Bolton had no knowledge of the this case or the Injunction until months later, when Plaintiffs first alleged that the March 10, 2006 mortgage was improper. (Ex. 7, Bolton Aff., at ¶ 7.) In addition, Mr. Wolok must have been in contempt. E.g., Levin, 277 F.3d at 250-51. As discussed in section E, below, Mr. Wolok was not in contempt. This is a further basis to find that Mr. Griffis did not aid and abet contempt. 14

8

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Plaintiffs' argument that Mr. Griffis aided and abetted Mr. Wolok to violate the Injunction is that: (1) Mr. Griffis knew about the Injunction; (2) Mr. Griffis had a legal or ethical duty to advise Mr. Wolok of the existence of the Injunction because Mr. Griffis was counsel for Mr. Wolok in this action; (3) Mr. Griffis intentionally refrained from advising Mr. Wolok of the existence of the Injunction with the intent of assisting Mr. Wolok to violate the Injunction by keeping Mr. Wolok in ignorance of the Injunction; and (4) Mr. Wolok was able to violate the Injunction because he did not know about it. First, Mr. Griffis did not knowingly assist the transactions affecting the Michigan and Florida Properties. To the contrary, he had no knowledge of those transactions contemporaneously. He first heard of them from Plaintiffs in August 2006, long after the fact. Second, Mr. Griffis did not assist Mr. Wolok to violate the Injunction by keeping Mr. Wolok ignorant of the Injunction. Plaintiffs have already pleaded and proved, and the Court has already found, that Mr. Wolok knew about the Injunction before any of the encumbrances on the Michigan or Florida Properties. Whether or not Mr. Griffis notified Mr. Wolok of the Injunction made no difference. His actions did not affect Plaintiffs. Therefore there is no proximate cause between Mr. Griffis' alleged inaction and any alleged damages sustained by Plaintiffs. Third, Plaintiffs' attempts to impose a legal or ethical duty on Mr. Griffis to advise Mr. Wolok about the Injunction fail as a matter of fact and law. When the Injunction was entered, and for several weeks after, Mr. Griffis had not yet undertaken to represent Mr. Wolok in this action -- and told Mr. Hutchings this fact in his March 16, 2001 letter. Thus, although Mr. Hutchings caused at least 3 copies of the Injunction to be sent to Mr. Griffis, that did not create an attorney-client relationship between Mr. Griffis and Mr. Wolok for this case. 15

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Moreover, even after Mr. Griffis undertook to represent Mr. Wolok in this action, that did not create a duty to Plaintiffs to advise Mr. Wolok regarding the Injunction. Plaintiffs' citations to the Michigan Rules of Professional Conduct are of no avail. The duties cited by Plaintiffs are duties of a lawyer to his client, and not duties of the lawyer to an opposing party. In any event, those Rules specifically cannot be the basis for civil liability. 1. Mr. Griffis Had No Knowledge of the Transactions About Which Plaintiffs Complain and He Did Not Actively Participate in Those Transactions.

Aiding and abetting requires knowing assistance. Mr. Wolok and Ms. Cetean transferred the Florida Property in March 2001, and Ms. Cetean placed encumbrances on the Florida and Michigan Properties between April 2001 and March 2006. Mr. Griffis could not have knowingly assisted Mr. Wolok and Ms. Cetean to transfer the Florida Property or encumber the Michigan or Florida Properties because Mr. Griffis was unaware of the fact of those transactions (and had no knowledge of Mr. Wolok's assets) until Plaintiffs' counsel contacted him in August 2006 to complain about the transactions. (Ex. 6, Griffis Aff., at ¶ 15.) Therefore, Mr. Griffis did not actively participate in these transactions. The factual distinctions between these facts and those that the Tenth Circuit has found to be aiding and abetting contempt in the Reliance cases, discussed in section B, above, apply equally here. 2. Mr. Wolok Knew About the Injunction Whether Or Not Mr. Griffis Told Him.

If Mr. Wolok already knew about the Injunction, then Mr. Griffis' alleged failure to advise Mr. Wolok of the Injunction (even if true) could not have rendered Mr. Wolok ignorant of a fact that Mr. Wolok knew independently. Thus, Mr. Griffis' alleged failure to advise Mr. Wolok could not have assisted Mr. Wolok in any action, including encumbering the Florida and Michigan Properties. 16

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Plaintiffs have argued and the Court has found that Mr. Wolok did have independent knowledge of the Injunction before any of the transfers or encumbrances that form the basis for this proceeding against Mr. Griffis. Plaintiffs detailed their transmission of the Injunction to Mr. Wolok and Mr. Griffis. Plaintiffs argued that the evidence proved "the fact that Mark Wolok had at the time actual knowledge of the entry of the preliminary injunction, both from direct service to his office in his name and through service to his attorneys, who are his agents." (Dkt. 841, 10/3/06 Tr., at 10:16-19 (emphasis added).) Mr. Wolok denied knowledge of the Injunction, including denying that Mr. Griffis told him of the Injunction.9 (Dkt. 841, 10/3/06 Tr., at 10:24-11:24.) Notwithstanding Mr. Wolok's denial, Plaintiffs argued that the Court should find that Mr. Wolok did, in fact, have knowledge of the Injunction. Plaintiffs cited to (1) the delivery by Federal Express to Mr. Wolok of a copy of the TRO and the motion for preliminary injunction, (2) the testimony of the process server that Mr. Wolok acknowledged receipt of these

9

We have been advised that Mr. Wolok does not waive the attorney-client privilege with respect to his communications with Mr. Griffis. Arguably, Mr. Wolok's testimony that Mr. Griffis did not advise Mr. Wolok of the Injunction waived the attorney-client privilege covering any communications between Mr. Griffis and Mr. Wolok regarding the Injunction. See Tasby v. United States, 504 F.2d 332, 336 (8th Cir. 1974) (waiver of privilege when client testifies that attorney never advised him on an issue); Hawkins v. Stables, 148 F.3d 379, 381-84 (4th Cir. 1998) (waiver of privilege when client testifies that particular subject never discussed with attorney). Also, Mr. Griffis may have an independent right to disclose privileged communications to defend himself. See Mich. R.P.C. 1.6(c)(5); Colo. R.P.C. 1.6(c). However, even if the privilege has been waived or otherwise does not prevent disclosure of attorney-client communications, Mr. Griffis has a separate ethical obligation to limit as much as possible the disclosure of attorney-client communications. See Mich. R.P.C. 1.6(c)(5) (disclosure limited to that which is necessary); Colo. R.P.C. 1.6.(c) (same); Restatement (Third) of the Law Governing Lawyers, § 64 (same). Because of the Court's findings regarding Mr. Wolok's knowledge of the Injunction, there is no need for Mr. Griffis to disclose attorney-client communications. 17

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documents, (3) the mailing of a copy of the Injunction directly to Mr. Wolok, and (4) the providing of copies of the Injunction to Mr. Griffis.10 (Dkt. 868, 12/12/06 Tr., at 30:23-33:9.) The Court found that Mr. Wolok's denial was not credible. The Court then found that "Mark Wolok was served with the March 2, 2001 Preliminary Injunction," and that "Mark Wolok had knowledge of the March 2, 2001 Preliminary Injunction prior to March 23, 2001 [the date of Mr. Wolok's first post-Injunction transaction] ... by virtue of prior service of the Preliminary Injunction upon him and his attorneys." (Dkt. 846.) Based on the Court's findings, Mr. Griffis' alleged failure to advise Mr. Wolok of the existence of the Injunction could not have assisted Mr. Wolok's encumbrance of the Florida and Michigan Properties.11 Therefore, Mr. Griffis did not aid or abet Mr. Wolok's alleged contempt. 3. Mr. Griffis Had No Duty to Plaintiffs to Advise Mr. Wolok of the Existence of the Injunction.

Plaintiffs argue in their Motion for Order to Show Cause that Mr. Griffis had a duty to Mr. Wolok under Michigan Rules of Professional Conduct 1.4 and 8.4 to advise

10

Plaintiffs have also asserted that Mr. Wolok is deemed to have knowledge of the Injunction because Mr. Griffis was his agent and Mr. Griffis had knowledge. Plaintiffs' argument presumes, incorrectly, that Mr. Griffis and Mr. Wolok had formed an attorneyclient relationship for this action. If they had formed an attorney-client relationship, then Mr. Griffis would be Mr. Wolok's agent, and Mr. Griffis' knowledge within the scope of that relationship would be attributed to Mr. Wolok. See Restatement (Third) of the Law Governing Lawyers, § 28. However, as the Restatement makes clear: "A client is not charged with a lawyer's knowledge concerning a transaction in which the lawyer does not represent the client." Id., Comment b (emphasis added). Plaintiffs' own statements acknowledge this. In their Surreply on Mr. Wolok's motion to reconsider (Dkt. 866, at 5), Plaintiffs state: "Plaintiffs established by clear and convincing evidence, as found by this Court, that regardless of Griffis' conduct, Wolok violated the Preliminary Injunction." (Emphasis added.) 18

11

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Mr. Wolok of the Injunction. Plaintiffs contend that Mr. Griffis' alleged breach of that duty to Mr. Wolok gives rise to liability to this Court and Plaintiffs for contempt. Plaintiffs' argument is incorrect for several reasons. First, violation of the Rules of Professional Conduct may give rise to attorney disciplinary proceedings, but cannot be the basis for civil liability. Second, Mr. Griffis' duties to keep a client informed are duties owed only to the client, and not to Plaintiffs. Third, because Mr. Griffis had not accepted representation of Mr. Wolok in this case and had not entered an appearance in this case, he had no duty to act as a conduit for information from Plaintiffs or the Court to Mr. Wolok. a. Violation of the Rules of Professional Conduct Cannot Form the Basis for Civil Liability.

The Michigan Supreme Court has substantially adopted the ABA Model Rules of Professional Conduct to codify a lawyer's ethical obligations. Mich. RPC 1.0, Comment. Michigan Rule of Professional Conduct 1.0(b) provides explicitly that violation of the Rules is not a basis for civil liability: Failure to comply with an obligation or prohibition imposed by a rule is a basis for invoking the disciplinary process. The rules do not, however, give rise to a cause of action for enforcement of a rule or for damages caused by failure to comply with an obligation or prohibition imposed by a rule. The Preamble that follows Michigan Rule of Professional Conduct 1.0 explains that an opposing party may not use an alleged violation of a rule as a basis for a civil claim: a violation of a rule does not give rise to a cause of action, nor does it create any presumption that a legal duty has been breached. The rules are designed to provide guidance to lawyers and to provide a structure for regulating conduct through disciplinary agencies. They are not designed to be a basis for civil liability. Furthermore, the purposes of the rules can be subverted when they are invoked by opposing parties as procedural weapons. The fact that a rule is a just basis for a lawyer's self-assessment, or for sanctioning a lawyer under the administration of a disciplinary authority, does not imply that an antagonist in a collateral proceeding or transaction has standing to seek enforcement of the rule. Accordingly, nothing in the rules should be 19

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deemed to augment any substantive legal duty of lawyers or the extradisciplinary consequences of violating such a duty.12 (Emphasis added.) The Court should, therefore, summarily reject Plaintiffs' attempt to bootstrap an alleged violation of the Michigan Rules of Professional Conduct into a basis for contempt. b. A Lawyer's Duty to His Client to Keep His Client Informed Does Not Create a Duty From the Lawyer to Opposing Parties.

Even if Plaintiffs were correct that the Rules of Professional Conduct provide a basis for civil liability, Plaintiffs misapply the rules. Plaintiffs rely on Michigan Rule of Professional Conduct 1.4, which (like Colorado Rule of Professional Conduct 1.4) provides that "A lawyer shall keep a client reasonably informed about the status of a matter ...." The lawyer's duty under Rule 1.4, however, is owed only to the client. The comment to the rule makes clear that the purpose of the rule is that "The client should have sufficient information to participate intelligently in decisions concerning the objective of the representation ...." Mich. RPC 1.4, Comment; see also Colo. RPC 1.4, Comment (same). The ABA Model Rule 1.4, from which the Michigan rule is taken, makes the same point: "Reasonable communication between the lawyer and the client is necessary for the client effectively to participate in the representation." The Court implicitly recognized that any duty of Mr. Griffis to keep Mr. Wolok informed was owed only to Mr. Wolok, and not to Plaintiffs, when it stated at the December 12, 2006 hearing "[i]f indeed Mr. Wolok's attorneys did not keep him advised, his remedy is against them and not the Court or the Court's Order." (Dkt. 868, 12/12/06 Tr., at 44:23-25.) There is no basis for Plaintiffs' contention that Rule 1.4 creates a duty from Mr. Griffis to Plaintiffs.
12

The Preamble to the Colorado Rules of Professional Conduct has a similar provision. 20

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c.

Until Mr. Griffis Undertook to Represent Mr. Wolok In This Case, Mr. Griffis Had No Duty to Act as a Conduit For Information from Plaintiffs to Mr. Wolok.

Plaintiffs' argument also has a faulty factual premise. Plaintiffs contend that Mr. Griffis represented Mr. Wolok in connection with this action at the time of the Injunction.13 Plaintiffs, however, know that this is not true. On March 16, 2001, Mr. Griffis sent Mr. Hutchings a letter that said that Mr. Griffis "may represent" Mr. Wolok in this action "when served." (Ptf. Ex. U.) "May represent" necessarily also includes the possibility of "may not represent," and certainly does not mean "now represent." Until Mr. Griffis and Mr. Wolok agreed that Mr. Griffis would represent Mr. Wolok in connection with this case, there was no attorney-client relationship for this case. Until Mr. Griffis and Mr. Wolok formed an attorney-client relationship for this action, other than duties of confidentiality regarding discussions of prospective representation, Mr. Griffis had no duties to Mr. Wolok relating to this action. See Mich RPC 1.0, Preamble ("Most of the duties flowing from the client-lawyer relationship attach only after the client has requested the lawyer to render legal services and the lawyer has agreed to do so."); Colo. RPC, Preamble (same).

13

Plaintiffs rely on Mr. Wolok's testimony at the October 3, 2006 hearing. That testimony is ambiguous, however, because the questions that elicited it were ambiguous. The following exchange took place on direct examination: Q. A. Q. A. Do you recall - well, in February of '01 you were represented by the firm of Jaffe Raitt, is that correct? I believe I was, yes, that date. And was Larry Griffis the attorney [re]presenting you at that time? I believe he was, yes.

(Dkt. 841, 10/3/06 Tr., at 7:16-21.) It is true that Mr. Griffis did represent Mr. Wolok in the California Xelan action in February 2001. However, Mr. Griffis did not represent Mr. Wolok in this action until late April 2001. Imprecise questioning obscured this significant point. 21

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Plaintiffs' argument that Mr. Griffis had an obligation to provide Mr. Wolok with information or advice before they had agreed to form an attorney-client relationship is simply wrong. Until Mr. Griffis and Mr. Wolok agreed to form an attorney-client relationship relating to this action, Mr. Griffis could not advise Mr. Wolok with respect to this matter without possibly creating an attorney-client relationship by inference. See Restatement (Third) of the Law Governing Lawyers, § 14 (attorney-client relationship may be formed if lawyer reasonably should know that a person is relying upon the lawyer and lawyer fails to deny fact of attorneyclient relationship). Thus, although Plaintiffs sent Mr. Griffis several copies of the Injunction, Mr. Griffis could not advise Mr. Wolok regarding the fact or consequences of the Injunction without risking creation of an attorney-client relationship for this action before Mr. Griffis and Mr. Wolok had agreed to form that relationship. E. Mr. Griffis Is Not Liable For Aiding and Abetting Contempt Because There Was No Underlying Contempt By Mr. Wolok. Because there can be no liability for aiding and abetting contempt unless there is an underlying contempt, there is no basis to find Mr. Griffis aided and abetted Mr. Wolok's contempt unless Mr. Wolok was in contempt himself. Mr. Griffis and his counsel are aware that the Court found Mr. Wolok in contempt, and has denied Mr. Wolok's motion to reconsider that finding. With all due respect, Mr. Griffis and his counsel submit that the Court erred. Mr. Griffis adopts the argument raised by Mr. Wolok in his response to the contempt motion (Dkt. 838), at the hearings on that motion on October 3 and December 12, 2006, and in his motion to reconsider (Dkt. 849) and reply on his motion to reconsider (Dkt. 863). As the Court has already heard, and rejected, those arguments, Mr. Griffis will only briefly summarize them and attempt to clarify a few points. In addition, Mr. Griffis raises one additional argument, not raised by Mr. Wolok: the Court's finding that Mr. Wolok was in 22

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contempt of the Court's March 2, 2001 Injunction is erroneous because that Injunction was not a valid court order as to Mr. Wolok because the Court had not yet acquired personal jurisdiction over Mr. Wolok when it entered the Injunction. 1. Arguments Raised By Mr. Wolok.

First, the Injunction does not apply to the Michigan Property because it is uncontested that Mr. Wolok quitclaimed all of his interest in the Michigan Property to Ms. Cetean on February 15, 2001, the day before this action was filed. Thus, on its face, the Injunction entered 15 days later would not apply to the Michigan Property. To construe the Injunction to apply to property no longer owned by Mr. Wolok, whether by an unproved fraudulent transfer theory or by holding that Mr. Wolok still held some undefined "beneficial" interest after the pre-lawsuit transfer, violates the requirement that an injunction be strictly construed against any contempt finding and to protect against the "hazard of conducting business in the mistaken belief that it is not prohibited." See Reliance II, 159 F.3d at 1316; Kuykendall, 371 F.3d at 761-62. Second, Plaintiffs cannot prove they suffered damages from Mr. Wolok's alleged violations of the Injunction. See Reliance I, 84 F.3d at 377. Under Florida Law, the Florida Property was held by Mr. Wolok and his wife, Ms. Cetean, as tenants by the entireties. See Beal Bank v. Almand & Assocs., 780 So.2d 45, 54 (Fla. 2001) (tenancy by entireties presumed when spouses acquire real estate together). Therefore, Plaintiffs could not attach the Florida Property to collect on a judgment against Mr. Wolok. Beal Bank, 780 So.2d at 53. With respect to the Michigan Property, two of the four mortgages about which Plaintiffs complain (the April 12, 2001 $35,000 mortgage and the March 10, 2006 $40,099 mortgage) were repaid and discharged before Plaintiffs began the contempt proceedings. (See 23

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Wolok Ex. I and J; Ex. 8, Leibowitz Aff., at ¶ 8; Ex. 7, Bolton Aff., at ¶ 8.) Moreover, all funds borrowed against the Michigan Property were used to pay down the pre-existing Acquisition Mortgage on that Property, thus benefiting Plaintiffs or anyone else trying to execute against that Property. (Wolok Ex. F, Cetean Aff., at ¶ 5.) Finally, the pre-existing Acquisition Mortgage was foreclosed and, on August 15, 2006, the Sheriff of Oakland County, Michigan sold the Michigan Property in that foreclosure. (Wolok Ex. K.) Because of the foreclosure of the preexisting Acquisition Mortgage, there will be nothing against which Plaintiffs could execute. 2. The Injunction Was Not Valid as to Mr. Wolok Because the Court Did Not Have Personal Jurisdiction Over Mr. Wolok.

Rule 65 does not expand the Court's jurisdiction. Citizens Concerned for Separation of Church and State v. Denver, 628 F.2d 1289, 1299 (10th Cir. 1980) ("rule 65 ... does not confer either subject matter or personal jurisdiction on the court"). Therefore, the Court must have an independent basis to exercise personal jurisdiction over the party against whom an injunction is sought. See Hitchman Coal & Coke Co. v. Mitchell, 245 U.S. 229, 234 & 261 (1916); see also 11A Wright, Miller & Kane, Federal Practice and Procedure, § 2941, at p. 35 (1995). The Court gains personal jurisdiction over a defendant through proper service of process on that defendant under Rule 4. See Omni Capital Int'l v. Rudolf Wolff & Co., 484 U.S. 97, 104 (1987) ("Before a federal court may exercise personal jurisdiction over a defendant, the procedural requirement of service of summons must be satisfied."); Mississippi Publishing Corp. v. Murphree, 326 U.S. 438, 444-45 (1946) ("service of summons is the procedure by which a court having venue and jurisdiction of the subject matter of the suit asserts jurisdiction over the person of the party served").

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Absent proper service of process, the Court does not have personal jurisdiction over a defendant, even if the defendant has notice of the action.14 See Adams v. AlliedSignal General Aviation Avionics, 74 F.3d 882, 885 (8th Cir. 1996) ("if [defendant] was improperly served, the district court lacked jurisdiction over that defendant whether or not it had actual notice of the lawsuit"); Printed Media Serv., Inc. v. Solna Web, Inc., 11 F.3d 838, 843 (8th Cir. 1993) ("If a defendant is improperly served, a federal court lacks jurisdiction over the defendant."); Myers v. Hartford, 2003 WL 22742250 at *3 (D. Conn. 2003) ("[d]efendant's mere knowledge of a lawsuit, by itself, is insufficient to confer personal jurisdiction over the defendant in the absence of valid service of process"; internal quotation omitted). With respect to an injunction, the Court may enter an injunction affecting defendants who have been served, but may not enter an injunction against defendants who have not been served. Hitchman Coal, 245 U.S. at 234 and 261. Hitchman Coal is directly on point. In that case, the plaintiff named several defendants. Plaintiff served some defendants but did not serve others. The court entered preliminary and permanent injunctions against all defendants, including those who were not served. The Supreme Court upheld the injunction, in substantial part, against the served defendants, but stated that the injunction was error as to the unserved
14

Once the Court acquires personal jurisdiction over a party, under Rule 65(d), that jurisdiction permits it to enter orders that bind certain non-parties who are sufficiently related to the party over whom the Court has jurisdiction, subject to notice requirements as to those non-parties. Thus, Rule 65(d) provides that an injunction is binding (1) on the party, as well as (2) on persons in privity with the party (specifically, "officer, agents, servants, employees, and attorneys"), and (3) on "those persons in active concert or participation with them who receive actual notice of the order by personal service or otherwise." Because Rule 65(d) does not, and cannot, expand the Court's jurisdiction, the "actual notice" provision does not, and cannot, substitute for the pre-requisite that the Court acquire personal jurisdiction over a defendant before the Court may enter orders binding on that defendant. 25

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defendants. "As against the answering defendants, plaintiff's right to an injunction is clear; as to the others named as defendants, but not served with process, the decree is erroneous ...." Hitchman Coal, 245 U.S. at 234. Here, Plaintiffs sued several defendants. Before the March 2, 2001 injunction hearing, Plaintiffs served some defendants. Plaintiffs do not contend that they obtained service of process on Mr. Wolok before that hearing. Some defendants appeared through counsel at the March 2, 2001 hearing. Mr. Wolok did not.15 The Court, at that hearing, voiced concern regarding an injunction against the parties not present, and asked the parties who were present to attempt to reach agreement on a stipulated injunction.16 Counsel for defendants who appeared met with Plaintiffs' counsel, and Plaintiffs agreed to modify their proposed injunction as to those defendants. The Court then entered the Injunction. Although Mr. Wolok had not been served, Plaintiffs included him in the scope of the Injunction tendered to the Court for signature.

15

A lawyer from Davis Graham & Stubbs, who ultimately did appear in this case for Mr. Wolok, sat in the gallery during the hearing, but did not enter an appearance for Mr. Wolok at the hearing. The Court stated: I'm not prepared to take all of the draconian measures that have been asked for in the Motion [for preliminary injunction], certainly at this stage, or to do so without having these other parties served and have an opportunity to appear. So let's take a break for about 15 minutes, and during that time, I ask counsel to talk to one another and see if there's not a possibility of coming out with a modified stipulated injunction, Preliminary Injunction that can be heard on the merits at a later time when all the parties have been served and have an opportunity to appear. (Dkt. 29, at 3:19-4:5; emphasis added.) 26

16

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Under Hitchman Coal, the Injunction was "erroneous" as to Mr. Wolok because he had not been served.17 Therefore, the Injunction was not a valid order as to Mr. Wolok and he should not be held in contempt for violating it. Because there is no underlying contempt by Mr. Wolok, Mr. Griffis cannot be held in contempt for aiding and abetting Mr. Wolok. CONCLUSION The Order to Show Cause should be discharged. DATED: February 2, 2007.

Respectfully submitted, BALLARD SPAHR ANDREWS & INGERSOLL, LLP By_s/ Kevin Shea____________ Kevin Shea [email protected] Jon Bernhardt [email protected] 1225 17th Street, Suite 2300 Denver, CO 80202 (303) 292-2400 ATTORNEYS FOR LARRY K. GRIFFIS

17

The proper procedure for Plaintiffs to have followed if they wanted the Court to enter a preliminary injunction that bound Mr. Wolok would have been to apply to the Court to modify the existing Injunction or enter a new preliminary injunction after Mr. Wolok was served. When Mr. Griffis undertook to represent Mr. Wolok in this action, Mr. Griffis contacted Plaintiffs' counsel and offered, on behalf of Mr. Wolok, to enter into an agreed-upon preliminary injunction as to Mr. Wolok. (Ex. 6, Griffis Aff., at ¶¶ 11-13.) Plaintiffs never followed through and obtained a preliminary injunction as to Mr. Wolok after the Court gained personal jurisdiction over Mr. Wolok. 27

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CERTIFICATE OF SERVICE I hereby certify that on February 2, 2007, I electronically filed the foregoing LARRY K. GRIFFIS' RESPONSE TO ORDER TO SHOW CAUSE with the Clerk of Court using the CM/ECF system which will send notification of such filing to the following e-mail addresses: [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected]

and I served a copy via U.S. Mail, first-class postage prepaid, to: Thomas B. Quinn White & Steele 950 17th Street, 21st Floor Denver, CO 80202-2804 Akerman Senterfitt 350 East Las Olas Boulevard, Suite 1600 Ft. Lauderdale, FL 33301 Robert S. Harrison Matthew D. Klakulak Robert Harrison & Assoc., PLC 240 East Merrill Street Birmingham, MI 48009 Gary Hoskie Professional Consultants & Managers, Inc. 1706 Surfside Dr. Hutchinson Island, FL 34949 Isadore Cohen 1920 East Hallandale, Blvd, Suite 626 Hallandale, FL 33009 Mark Wolok Surety Marketing Source LLC 4190 Telegraph Rd, #2500 Bloomfield Hills, MI 48302-2079

s/ Robin J. Myers

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Exhibits 1. 2. 3. 4. 5. 6. 7. 8. Letter from J. Hutchings to L. Griffis, dated February 21, 2001. Fax from L. Griffis to J. Hutchings, dated May 8, 2001. Letter from J. Hutchings to L. Griffis, dated May 9, 2001. Letter from J. Hutchings to L. Griffis, dated May 9 (sic; should be 18), 2001. Letter from L. Griffis to J. Hutchings, dated September 1, 2006. Affidavit of Larry K. Griffis. Affidavit of Robert S. Bolton. Affidavit of Michael A. Leibowitz

29
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