Free Reply to Response to Motion - District Court of Colorado - Colorado

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IN UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Action No. 01-cv-0275-JLK DOMINICK PAOLONI, et. al., Plaintiffs, -vsDONALD I. GOLDSTEIN, et. al. Defendants, and NBSA, LLC, et. al. Relief Defendants.

REPLY MEMORANDUM TO PLAINTIFFS' RESPONSE TO DEFENDANT MARK WOLOK'S MOTION FOR RECONSIDERATION, OR FOR WHOLE OR PARTIAL RELIEF FROM JUDGMENT, AND FOR STAY OF EXECUTION OF THE INCARCERATION PORTION OF THIS COURTS DECEMBER 15, 2006 ORDER FINDING MARK WOLOK IN CONTEMPT OF COURT

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TABLE OF CONTENTS I. II. INTRODUCTION REPLY ARGUMENT A. ..............................................................................................1 ..............................................................................................2

CIVIL CONTEMPT IS REMEDIAL AND IS NOT PUNISHMENT AND IMPOSSIBILITY OF PERFORMANCE IS A RELEVANT CONSIDERATION AT ANY TIME ..............................................................................................2 PLAINTIFFS' ARGUMENT DISREGARDS EVIDENCE OF COMPLIANCE AND THE ALLEGED HARM CAUSE BY SUCH NON-COMPLIANCE ..........4 1. 2. THE PUTNAM PROPERTY ......................................................................5 THE PUTNAM PROPERTY THE PUTNAM PROPERTY ......................7 A. PLAINTIFFS HAVE FAILED TO SET FORTH ANY BASIS TO DEMONSTRATE WHY THE FLORIDA PROPERTY IS NOT EXEMPT FROM EXECUTION AND THEREBY DEMONSTRATE THAT THE PURPORTED TRANSFER AND SUBSEQUENT ENCUMBRANCES OF THE FLORIDA PROPERTY CAUSED DAMAGES TO PLAINTIFFS..................7 THE PLAINTIFFS RECENTLY FILED MOTION TO HOLD PRIOR COUNSEL IN CONTEMPT RAISES ISSUES AS TO THE UNDERLYING FINDINGS OF ACTUAL NOTICE..........11 THE CONTEMPT ORDER MAY BE APPEALED IN THE CIRCUMSTANCES OF THIS CASE...........................................13

B.

B.

C.

III.

CONCLUSION AND RELIEF REQUESTED .................................................................16

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INDEX OF AUTHORITIES Cases Albro v. Allen, 434 Mich. 271; 454 N.W.2d 85 (1990) .................................................................. 7 Bailey v. Smith, 89 Fla. 303, 103 So. 833 (1925) ......................................................................... 10 Beal Bank v. Almand & Assocs., 780 So. 2d 45 (Fla. 2001)..................................................... 9, 10 Gompers v. Bucks Stove & Range Co., 221 U.S. 418 (1911) ......................................................... 2 In re Daniels, Shilo, 309 B.R. 54; 2004 Bankr. LEXIS 419 (M.D. FL. Br., 2004)........................ 9 In re Marriage of Allen, 724 P.2d 651 (Colo.1986) ..................................................................... 10 In re Nevitt, 117 F. 448 (CA8 1902)............................................................................................... 2 Int'l Union v. Bagwell, 512 U.S. 821 (1994) ............................................................................... 12 Kolakowski v. Cyman, 285 Mich. 585; 281 NW 332 (1938).......................................................... 7 Lyons v. Jefferson Bank & Trust, 793 F. Supp. 981 (D.Colo. 1992) ............................................ 10 Morgan v. Barry, 596 F. Supp. 897 (D.D.C. 1984)........................................................................ 3 North Ottawa Community Hosp. v. Kieft, 457 Mich 394; 578 N.W. 2d 267 (1998) ...................... 6 O'Connor v. Midwest Pipe Fabrications, Inc., 972 F.2d 1204 (10th Cir. 1992) ............................ 8 Page v. Clark, 592 P.2d 792 (1979).............................................................................................. 10 Paoloni v. Goldstein, 331 F. Supp 2d 1310 (D. Colo. 2004).................................................... 9, 10 Passalino v. Protective Group Sec., Inc., 886 So. 2d 295 (Fla. 4th DCA. 2004)......................... 10 Reliance Ins. Co. v. Mast Constr. Co., 159 F. 3d. 1311 (10th Cir. 1998).................................. 8, 12 Rossman v. Hutchinson, 289 Mich. 577; 286 NW 835 (1939) ....................................................... 7 Sanford v. Bertrau, 204 Mich. 244; 169 NW 880 (1918)............................................................... 7 United States v. Rylander, 460 U.S. 752 (1983)............................................................................. 3 United States v. St. Germain, 363 F. Supp. 2d 1293 (D. Colo. 2005) ............................................ 9

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Washington-Baltimore Newspaper v. Washington Post, 200 U.S. App. D.C. 165, 626 F.2d 1029 (D.C. Cir.1980) ........................................................................................................................... 3 Statutes MCL 557.21................................................................................................................................ 5, 6 MSA 26.165.................................................................................................................................... 6 28 U.S.C. 1927................................................................................................................................ 1 Rules Fed. R. Civ. Pro. 6......................................................................................................................... 13 FRE 803 .......................................................................................................................................... 6 FRE 902 .......................................................................................................................................... 6

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I.

INTRODUCTION

This Court has found Mark Wolok ("Wolok") in Civil Contempt of Court, and on December 15, 2006, entered an Order ("Contempt Order") which requires Wolok to purge that contempt by paying certain funds into the Court to cure the damage alleged to have been caused to Plaintiffs by Wolok's contemptuous actions in violation of the Court's March 2, 2001 Preliminary Injunction ("Preliminary Injunction"). The questions posed by Wolok's present Motion and this Reply are: 1) What is the actual harm to Plaintiffs? and 2) What action is necessary to purge that contempt? In other words, what actions are required by Wolok to restore the status quo to the state in which it existed on March 2, 2001 - the date that this Court entered its injunctive order? This Court determined that restoration of the status quo requires Wolok to pay into the Court the amount of the encumbrances because Wolok and/or his wife, Paula Cetean ("Cetean") placed on two properties after the entry of this Court's Injunctive Order, an amount that this Court has determined to be the sum of $262,499.00.1 However, as pointed out by Wolok in his initial Motion, this amount represents a substantial deviation from Plaintiff's alleged actual potential damages because this amount includes, 1) encumbrances that have been discharged from the Putnam Property, 2) property that at the time of issuance of this Court's Injunctive Order was exempt from execution by Plaintiffs, and 3) fails to account for the actual property rights Wolok possessed at the time of entry of this Court's Injunctive Order. As such, Wolok contends that the Contempt Order entered by this Court goes beyond restoring Plaintiffs to the position they occupied immediately prior to the entry of the March 2, 2001 Preliminary Injunction but rather,

This amount was determined by adding up the various encumbrances' placed upon properties located in Michigan and Florida, referred to in this brief as the "Putnam" and "Florida" property respectively. An additional $10,000.00 in costs and fees were awarded under 28 U.S.C. 1927. However, Plaintiffs' have conceded that such costs and fees are not properly awarded against Mr. Wolok. 1

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places Plaintiffs in a position far better than they occupied on the date of the entry of that Order. For these reasons, Wolok contends that the Court should revise its Contempt Order, as set forth in Wolok's initial Motion, and below. II. REPLY ARGUMENT

A. Civil Contempt is Remedial and is not Punishment and Impossibility of Performance is a Relevant Consideration at any Time The civil contempt sanction is designed "to coerce the defendant to do the thing required by the order for the benefit of the complainant," rather than "to vindicate the authority of the law." Int'l Union v. Bagwell, 512 U.S. 821, 845 (1994) (Ginsberg J., concurring) (internal citation omitted) The sanction operates coercively because it applies continuously until the defendant performs the discrete, "affirmative act" required by the court's order, for example, production of a document or presentation of testimony. Id. The civil contemnor thus "'carries the keys of his prison in his own pocket'": At any moment, "he can end the sentence and discharge himself . . . by doing what he had previously refused to do." Id., quoting, In re Nevitt, 117 F. 448, 461 (CA8 1902). On the contrary, "[t]he criminal contempt sanction, by contrast, is "punitive, [imposed] to vindicate the authority of the court." Int'l Union, supra, citing Gompers v. Bucks Stove & Range Co., 221 U.S. 418, 441 (1911). Unlike the civil contemnor, who has refused to perform some discrete, affirmative act commanded by the court, Gompers explains, the criminal contemnor has "done that which he has been commanded not to do." Id, citing Gompers, 221 U.S. at 442. The criminal contemnor's disobedience is past, a "completed act," Id, citing Gompers, 221 U.S. at 443, a deed no sanction can undo. Id. Accordingly, the criminal contempt sanction operates not to coerce a future act from the defendant for the benefit of the complainant, but to uphold the dignity of the law, by punishing the contemnor's disobedience. Id, citing Gompers at 442-443. 2

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Because the criminal contempt sanction is determinate and unconditional, the Court said in Gompers, "the defendant is furnished no key, and he cannot shorten the term by promising not to repeat the offense." Id, 221 U.S. at 442. An adjudication of contempt is a drastic remedy. Therefore, a heavy burden of proof is placed upon the movant. The movant in a civil contempt proceeding must demonstrate by "clear and convincing evidence" that the court's order has been violated. Morgan v. Barry, 596 F. Supp. 897, 898-899 (D.D.C. 1984); citing, Washington-Baltimore Newspaper v. Washington Post, 200 U.S. App. D.C. 165, 626 F.2d 1029 (D.C. Cir.1980). Civil contempt does not exist to punish the contemnor or to vindicate the Court's integrity. It exists as a "remedial sanction used to obtain compliance with a court order or to compensate for damage sustained as a result of noncompliance." Id, citing, N.L.R.B. v. Blevins Popcorn, Co., 212 U.S. App. D.C. 289, 659 F.2d 1173, 1184 (D.C.Cir.1981) (emphasis added). This Court, in fashioning its Contempt Order recognized the distinction between civil and criminal contempt by 1) basing the amount of the dollars required to be paid into the Court upon Plaintiffs' damages and providing Wolok with an opportunity to purge that contempt by compliance. (See Docket 846, Order, pgs. 5-6). While Plaintiffs argue in their response that this Court should disregard arguments regarding impossibility of performance, Wolok disagrees. This is because a "civil contemnor may be incarcerated until he either complies with the court's order or adduces evidence as to his present inability to comply with that order." See United States v. Rylander, 460 U.S. 752, 761, (1983) (emphasis added). Thus, a court always has the authority to determine whether a party found in civil contempt has the ability to comply with the order of the court. If a party has no present ability to comply, then imposition of a civil contempt sanction which includes incarceration is nothing more than punishment in debtors prison, a remedy long ago abandoned.

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B. Plaintiffs' Argument Disregards Evidence of Compliance and the Alleged Harm Caused by such Non-Compliance. In Plaintiffs' Response, it asks this Court to disregard Wolok's evidence of compliance with the Court's Injunctive Order; asserting that Wolok has either waived an opportunity to demonstrate compliance by demonstrating that the encumbrances complained about have been discharged or that the calculations used by the Court fail to account for the title to property prior to the alleged acts found to be contemptuous. Wolok asserts however that this Court should undertake such a review to ensure that the Contempt Order remains civil, not criminal, such that the contempt is remedial to the state of affairs as they existed on March 2, 2001 ­ the date that this Court entered its injunctive order. The initial starting point of that analysis must, of course, begin with the Injunctive Order Wolok is alleged to have violated. To this end, the Injunctive Order entered by the Court states as follows: Mark Wolok, ..., [his] officers, agents, servants, employees, attorneys, and those persons in active concert or participation with Defendants who receive actual notice of the Order by personal service, or otherwise, and each of them are hereby restrained and enjoined from directly or indirectly transferring, selling, assigning, 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, .... (See Ex. A Preliminary Injunction).2 The purpose of the Injunctive Order was to prevent Wolok from dissipating his assets. In other words, it was intended to maintain the status quo as to those properties and assets owned by Wolok on the date of entry of the Order. Thus the first question must be: What assets did Wolok own on the date of the Order? The second question must then be: How were Plaintiffs, if

The Exhibits numbers referred to are the Exhibits attached to Wolok's initial Motion. New Exhibits will be labeled sequentially. 4

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at all, damaged by Wolok's post-injunctive order actions? Lastly, the final question must be: How was the status quo restored to March 2, 2001? 1. The Putnam Property The record in this case is clear that on the date of the injunctive order, Wolok was not the owner of the Putnam Property. Rather, Paula Cetean, his wife, was the owner of the Putnam Property by virtue of a deed executed on February 15, 2001 by Wolok and Cetean, and then recorded with the Oakland County Register of Deeds on February 16, 2001. (See Ex. B, Quit Claim Deed for 5395 Putnam executed 2/15/01). This date precedes both the TRO and the Injunctive Order. Thus, this transfer cannot form the basis of an alleged violation of that Order. At the time of the entry of the injunctive order, Cetean, not Wolok was the sole owner of the Putnam Property. Under Michigan law, a "wife is not liable for the debt, if any, of her husband. MCL § 557.21 (1). Plaintiffs have not argued that Wolok has misstated Michigan law on this point or pointed to evidence that would dispute Cetean's lawful ownership of the property prior to entry of this Court's Injunctive Order. Therefore, neither the transfer nor the subsequent encumbrances placed on the Putnam Property could have violated this Court's Injunctive Order as assets or other property belonging to or in the possession, custody, or control of the Defendants..." since the property was not property belonging to Wolok,
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but rather, it was Cetean's property. Any

interest held by Wolok in the Putnam Property was conveyed prior to the entry of the Court's

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Ms. Cetean is not a party to this action. Her ownership interest in the Putnam property has not been challenged by the Plaintiff, and there is no claim that she has any direct liability to Plaintiffs' for the purported actions of her husband. Moreover, there is no evidence that Ms. Cetean was served with the Injunctive Order in this case or that she had actual notice of its restrictions. Simply put, her actions in encumbering the property are not the subject of this proceeding. 5

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Injunctive Order. Under Michigan law a wife may own property separate from her husband and "a wife is not liable for the debts and obligations of her husband." See, North Ottawa Community Hosp. v. Kieft, 457 Mich 394, 399; 578 N.W. 2d 267 (1998).4 Furthermore, even if Wolok held an interest in the Putnam Property that this Court found to have been encumbered in violation of the Court's Injunctive Order, Wolok has demonstrated that as to certain encumbrances, the purported violations have been purged by the discharge of those encumbrances. (See, Ex. D2, Letter from counsel for Barrington's Financial Ltd. indicating balance owing on the Putnam Property and Discharge of Mortgage).5 In addition, the Putnam Property has been foreclosed upon by the initial lender and upon the expiration of the redemption period, these sanctions will be discharged. Lastly, and as argued in Wolok's initial Motion, prior to the transfer from Wolok and Cetean to Cetean only, the Putnam Property was either owned as joint tenants with rights of survivorship or as tenants by the entireties. In the event that the property was deemed entireties property, then

"If a woman acquires real or personal property before marriage or becomes entitled to or acquires, after marriage, real or personal property through gift, grant, inheritance, devise, or other manner, that property is and shall remain the property of the woman and be a part of the woman's estate. She may contract with respect to the property, sell, transfer, mortgage, convey, devise, or bequeath the property in the same manner and with the same effect as if she were unmarried. The property shall not be liable for the debts, obligations, or engagements of any other person, including the woman's husband, except as provided in this act." North Ottawa Comm. Hosp., supra, citing, MCL 557.21(1); MSA 26.165(1)(1) (emphasis added). Plaintiffs have objected to the admission of these documents as hearsay. To alleviate this issue, attached hereto as Ex.'s I and J are certified copies of the Mortgage Discharge from the Oakland County Register of Deeds relative to the March 10, 2006 mortgage and the April 12, 2001 mortgage, respectively. Ex. K is a certified copy of the Sheriff's deed. As certified copies of documents affecting an interest in property, there admission represents a hearsay exception under FRE 803 (14) [Records of documents affecting an interest in property] and 15 [Statements in documents affecting an interest in property]. They are also self-authenticating pursuant to FRE 902(4). Moreover, as averred by Ms. Cetean, the funds were used to pay down the initial mortgage. 6
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the property is exempt from the claims of Plaintiff (See, 1 Cameron, Michigan Real Property Law (2d ed), § 9.16, p. 315, citing Rossman v. Hutchinson, 289 Mich. 577; 286 NW 835 (1939); Kolakowski v. Cyman, 285 Mich. 585; 281 NW 332 (1938); Sanford v. Bertrau, 204 Mich. 244; 169 NW 880 (1918). If the property was deemed owned as joint tenants with rights of survivorship, then the only interest that Wolok had in the Putnam Property was the right to transfer his interest in the joint life estate, which would have no effect upon the contingent remainders. Albro v. Allen, 434 Mich. 271, 287; 454 N.W.2d 85 (1990). Therefore, any damage caused to Plaintiff by the encumbrances on the Putnam Property could consist only of the value of Wolok's interest in a life estate in that Property, which is subject to Cetean's right to own and possess the whole of that Property. While that interest has not been valued, it certainly is something less than ½ of the amount of the outstanding encumbrances. As set forth in Wolok's initial Motion, that amount does not exceed $28,700.00.6 Accordingly, Wolok concedes that the Court's Contempt Order should be revised, as set forth herein and in his initial Motion. 2. The Florida Property A. Plaintiffs Have Failed to Set Forth Any Basis to Demonstrate why the Florida Property is not Exempt from Execution and thereby Demonstrate that the Purported Transfer and Subsequent Encumbrances of the Florida Property Caused Damages to Plaintiffs On the date that this Court entered its injunctive order, Wolok owned, as a tenant by the entireties, with his wife, the Florida property. Plaintiffs do not appear to contest that fact. Subsequent to the entry of the Injunctive Order, Wolok transferred his interest to Cetean only.

While Plaintiffs have asserted that the Barrington pay-off letter attached as Ex. D-2 should not be considered, it represents the actual amount of the outstanding encumbrances and its authenticity has not been challenged. It is also supported by Ex.'s I and J, as well as Ex. L, which is an August 31, 2006 pay-off letter issued by Barrington. 7

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This Court has found that Wolok's transfer to his wife violated the Injunctive Order.7 The Court also found that such an action was contemptuous. Wolok does not ask this Court to revisit the question of whether the transfer violated the terms of the Court's Injunctive Order; rather, Wolok asks the Court to determine whether such transfer caused damage to Plaintiffs. Specifically, Wolok asks this Court to ensure that its Contempt Order is truly a remedial order (i.e., civil contempt) rather than one of punishment (i.e., criminal contempt).8 This is because civil contempt may only be used "to compensate the contemnor's adversary for injuries resulting from the contemnor's noncompliance" with a court order. Reliance Ins. Co. v. Mast Constr. Co., 159 F. 3d. 1311, 1318 (10th Cir. 1998), citing, O'Connor v. Midwest Pipe Fabrications, Inc., 972 F.2d 1204, 1211 (10th Cir. 1992) (quotations omitted). Wolok asserts that if the requirements of the Court's Contempt Order places Plaintiffs in a "better" position than they occupied on the date of the Injunctive Order, then the Contempt Order is not remedial, but rather is one of punishment. Plaintiffs have not disputed the fact that under Florida law, the Florida property was, on March 2, 2001, owned by Wolok and Cetean as tenants by the entireties. On the date this Court entered its Injunctive Order and today, Plaintiffs are potential judgment creditors only of Wolok. Cetean was not and is not a potential judgment debtor to Plaintiffs. Thus, as of the date of this Court's Injunctive Order, Plaintiffs only had a potential claim to the property of Wolok, which

It has previously been asserted, and again confirmed herein, that Cetean is willing to re-convey title in the Florida Property back to the marital estate and thus restore title to the status quo as it existed on March 2, 2001. As stated in International Union, supra at 827-828, "whether a contempt is civil or criminal turns on the "character and purpose" of the sanction involved. Thus, a contempt sanction is considered civil if it "is remedial, and for the benefit of the complainant. But if it is for criminal contempt the sentence is punitive, to vindicate the authority of the court." 8
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was not exempt from execution. Under Florida law, the Florida property was property exempt from execution as it was owned as tenants by the entireties. Property held by husband and wife as tenants by the entireties belongs to neither spouse individually, but each spouse is seized of the whole. Beal Bank v. Almand & Assocs., 780 So. 2d 45, 53 (Fla. 2001). When property is held as a tenancy by the entireties, only the creditors of both the husband and wife, jointly, may attach the tenancy by the entireties property; the property is not divisible on behalf of one spouse alone, and it cannot be reached to satisfy the obligation of only one spouse. Beal Bank, 780 So. 2d at 53. (Emphasis added) Where only one spouse incurs debt, ownership of property by a married couple as tenants by the entirety effectively stops creditors from reaching that asset. In re Daniels, Shilo, 309 B.R. 54, 56; 2004 Bankr. LEXIS 419 (M.D. FL. Br., 2004). On the date of the injunctive order, the Florida property was owned as tenants by the entireties. Therefore, it was exempt from execution by Plaintiffs, even in the face of an adverse judgment against Wolok. Hence, any encumbrances to the Florida Property could not have caused harm to Plaintiffs, as they are only potential judgment creditors of Wolok. The Court's Injunctive Order, therefore, as it relates to the Florida property, is not remedial because it puts Plaintiffs in a significantly better position than they occupied on the date that the Court entered its Injunctive Order. Plaintiffs supplemental brief argues that notwithstanding the fact that the Florida property was owned as tenants by the entireties, that they have a claim for constructive trust and therefore, they argue that they have a right to reach the Florida Property. A "constructive trust is an equitable device used to compel one who unfairly holds a property interest to convey that interest to another to whom it justly belongs." United States v. St. Germain, 363 F. Supp. 2d 1293, 12971298 (D. Colo. 2005); citing, Paoloni v. Goldstein, 331 F. Supp 2d 1310, 1313 (D. Colo. 2004),

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citing Lyons v. Jefferson Bank & Trust, 793 F. Supp. 981, 985 (D.Colo. 1992), rev'd. in part on other grounds 994 F.2d 716 (10th Cir. 1993); In re Marriage of Allen, 724 P.2d 651, 656-57 (Colo.1986). "When property has been acquired in such circumstances that the holder of legal title may not in good conscience retain the beneficial interest, equity converts him into a trustee." Id, citing, Page v. Clark, 197 Colo. 306, 315, 592 P.2d 792, 798 (1979). As this Court has previously recognized, "the beneficiary of a constructive trust may obtain, through tracing, not merely what was lost but also other property or profits traceable to that lost property. Paoloni, supra at 1313, citing, Lyons, 793 F. Supp. at 985. While it is recognized that property held as a "constructive trustee" is subject to tracing, there is no evidence in this case that Wolok acquired his interest in the Florida property with "trust funds." 9 More importantly, under Florida law, when a married couple holds property as a tenants by the entirety, each spouse is said to hold it "per tout," meaning that each spouse holds the "whole or the entirety, and not a share, moiety, or divisible part." Bailey v. Smith, 89 Fla. 303, 103 So. 833, 834 (1925). Rather, each spouse is seized of the whole and thus while creditors of both the husband and wife, jointly, may attach the tenancy by the entireties property, the property is not divisible on behalf of one spouse alone. As a result, it cannot be reached to satisfy the

obligation of only one spouse. See, e.g., Beal Bank, 780 So. 2d at 53. Likewise, under Florida law, the proceeds from the sale or rental of a tenancy by the entirety property is also held as a tenancy by the entirety and is owned in total by both the husband and the wife. Passalino v. Protective Group Sec., Inc., 886 So. 2d 295, 297 (Fla. 4th DCA. 2004). Therefore, the proceeds,

As argued in Wolok's initial Motion, even if the Plaintiffs' were somehow able to reach Wolok's interest in the property and have it executed upon, Plaintiffs' would only be able to reach the Wolok's interest in the property, not Cetean's, as she is not a party to this action and no claim is made that she acquired her interest in the property via "trust funds." 10

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like the property itself, are exempt from execution. Even if a constructive trust were imposed for the benefit of Plaintiffs on the property, Florida law protects both it and the proceeds from any disposition from execution by Plaintiffs. As such, the violation of the Injunctive Order did not cause "harm" to Plaintiffs. In conclusion, Wolok submits that the Court's Contempt Order, which requires Wolok to restore the difference in equity in the Florida property, is not remedial in these circumstances, as it is not based upon actual harm to Plaintiffs. B. The Plaintiffs recently filed Motion to Hold Prior Counsel in Contempt Raises Issues as to the Underlying Findings of Actual Notice.

In the Contempt Order the Court found that Wolok had actual knowledge of the Courts Injunctive Order, stating: The Court thus finds that Mark Wolok had knowledge of the March 2, 2001, Preliminary Injunction prior to March 23, 2001, which is the date Mark Wolok transferred by quit claim deed the property at 1550 Drexel Avenue, No. 105, Miami Beach, Florida, 33139 (the "Florida Property") to his wife (Exhibit D). The Court finds that Mark Wolok had such knowledge by virtue of prior service of the Preliminary Injunction upon him and his attorneys. (See, Docket No. 846, Contempt Order, ¶ 4). Contrary to the Court's findings, however, Plaintiffs filed a Motion to hold Wolok's predecessor counsel (Larry Griffis) in contempt of Court. (See Docket No. 852). Significantly, the basis for seeking to hold Mr. Griffis in contempt is the claim that Mr. Griffis: 1) knew of the March 2, 2001 Injunctive Order (Id at ¶ 3-6); 2) had been retained to represent Wolok and had a legal duty to inform him of the Order (Id at ¶ 2, 7, 11, 14); 3) intentionally failed to inform Mr. Wolok of the Injunction (Id at ¶ 9, 10, & 12); and 4) based upon this failure to inform Wolok of the Injunctive Order, Wolok encumbered the Florida and Putnam property. (Id, at ¶ 12). The Plaintiffs' present position in the Griffis contempt proceeding is fundamentally inconsistent with this Court's Contempt Order. In the initial hearing below, Mr. Wolok testified

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that his attorney, Mr. Griffis, never informed him about the contempt order. (See Docket No. 852, ¶ 7 and Exhibit E thereto). This fact appears to be born out as according to Plaintiffs' counsel, Mr. Griffis allegedly admitted to him that he had intentionally not informed Wolok of the Injunctive Order at least until shortly before he filed and Answer. (Id, at ¶ 9). Furthermore, it is Plaintiffs' position that because Wolok was not informed of the Injunctive Order, he transferred/encumbered the properties in violation thereof. These positions are plainly inconsistent with one another and further, it is submitted, are inconsistent with the Contempt Order. To prevail on a claim of civil contempt, a plaintiff must prove, by clear and convincing evidence: (1) a valid court order existed; (2) the defendant had knowledge of the order; and (3) the defendant disobeyed the order. Reliance Ins. Co. v. Mast Constr. Co., 159 F.3d 1311, 1315 (10th Cir. 1998). Thus, Plaintiffs cannot simultaneously allege that Wolok, with knowledge of the Court's Injunctive Order, disobeyed it on the one hand, and yet on the other, claim that Wolok did so only because he did not know about that Order as a result of the intentional actions of Mr. Griffis. Either Wolok knew of the Injunctive Order or he did not. If Wolok had knowledge of the Injunctive Order and willfully ignored it, then it is irrelevant whether Wolok was informed of the Injunctive Order by Mr. Griffis because he would have had actual knowledge of the Order and disobeyed it. On the other hand, if the Plaintiffs are correct - that Wolok's attorney intentionally failed to inform Wolok of the Injunctive Order because he did not want Wolok bound by it, then Wolok could not have committed an act of civil contempt because he did not have knowledge of the Injunctive Order. (See Reliance Ins. Co., supra). It is submitted that the Plaintiffs' positions are simply inconsistent with one another. Wolok suggests that under these circumstances, the Court's Contempt Order should be vacated and a hearing held to

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determine which of these competing factual scenarios represents the truth and to determine what sanction, if any, and against whom, is appropriate. C. There have been Extraordinary Circumstances permitting the untimely filing of the Rule 59 Motion and for Consideration of this Motion Under Rule 60 Plaintiffs argue that there is no substantial and compelling reason to consider this Motion under Rule 59(e) or Rule 60 by arguing that the time for filing a Rule 59(e) Motion expired prior to the filing of Wolok's Motion and that there is no reason to consider this Motion under Rule 60. Wolok concedes that this Motion, if considered a Rule 59(e) Motion, is untimely by 1 day. However, there are unique circumstances involved here which affect Wolok's substantive rights. First, this Court entered its Contempt Order on Friday, December 15, 2006. Under Fed. R. Civ. Pro. 6(a), the day of the act is not counted in computing time as under Rule 59(e) the time to act is less than 11 days. Additionally, under R. 6(a), intermediate Saturdays, Sundays and legal holidays, including Christmas and New Year's Day, are also not counted in computing time under Rule 59(e). Moreover Section V (G)(5) of the District's ECF procedures provides that the three day rule for service by mail contained in Fed. R. Civ. Pro 6(e) applies to the computation of time when a document is filed electronically. Based upon these various rules, the 10 day period under Rule 59(e) is actually 13 days, as computed pursuant to Rule 6(a). Thus, Wolok computes the time differently than Plaintiffs. Wolok computes the 13-day period (10 days + 3 days for mailing) as follows: Date December 15, 16, 17, 2006 December 18-22, 2006 Description Entry of Order + Sat. and Sun. Monday ­ Friday Days Counted 0 ­ per Rule 6(a) 5 ­ Days 10

Per Administrative Order 2006-12, the Clerk and the Court were closed on December 21, 2006 due to weather. Counsel believes that the Court was also closed on December 22, 2006. 13

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December 23-24, 2006 December 25, 2006 December 26-29, 2006 December 30-31, 2006 January 1, 2007 January 2-5, 2007 January 6-7, 2007 January 8, 2007 Total

Saturday and Sunday Christmas Day Tuesday-Friday Saturday and Sunday New Years Day Tuesday ­ Friday Saturday and Sunday Date of Filing of Motion

0 ­ Per Rule 6(a) 0 ­ Per Rule 6 (a) 4 - Days 11 0 days per Rule 6(a) 0 days per Rule 6(a) 4 days 0 days per Rule 6(a) 1 day 14 days

Thus, under Wolok's calculations, his Rule 59(e) Motion was filed one day late. Further complicating this matter is the fact that on January 2, 2007 Wolok's primary counsel, Davis Graham & Stubbs LLP, filed a Motion to Withdraw (See, Docket No. 847). This Order was granted by the Court on January 3, 2007. (See, Docket No. 848). According to the initial Motion (Docket No. 849, ¶ 5), neither Wolok nor his Michigan Counsel was aware that Wolok's counsel would withdraw and this fact prevented the timely filing of the Rule 59(e) Motion. Subsequent to the filing of that Motion, Wolok's other attorney, Larry Griffis of Jaffe, Raitte withdrew based upon a potential conflict of interest as a result of a Motion for Order to Show Cause why he too should not be held in contempt for allegedly aiding and abetting Wolok's purported contempt. As it relates to Mr. Wolok, these are certainly unusual circumstances justifying the Court considering Wolok's Motion under Rule 59(e) or alternatively addressing this matter under Rule

11

Per Administrative Order 2006-13, the Court and the Clerks office were closed due to weather on December 29, 2006. 14

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60. Furthermore, because the ultimate question in this case is what actions are necessary to deem Wolok's contempt purged, Wolok suggests that the arguments raised are properly considered to address the issue of whether Wolok's contempt has been purged by demonstrating that the encumbrances on the Putnam Property have, in part been discharged, and by demonstrating errors in the manner of computing "harm" caused to Plaintiffs as a result of the encumbrances. Finally, the arguments raised in § II(B)(2)(b) of this Reply Brief present arguments which could not have been previously addressed until after that Motion was filed. For these reasons, Wolok submits that this Court can and should determine whether Wolok has purged his purported contempt by demonstrating that the Florida transfer did not cause harm to Plaintiffs. III. CONCLUSION AND RELIEF REQUESTED

For the reasons stated in Wolok's initial Motion and this Reply, the Defendant Mark Wolok respectfully asks that this Honorable Court grant his Motion to Reconsideration and/or Relief from Judgment and: 1. Vacate the Court's December 15, 2006 Contempt Order in its entirety; or, 2. Hold that the transfer and encumbrance of the Florida property did not cause harm to Plaintiffs and that the Putnam property encumbrances were not contemptuous as they did not cause harm to Plaintiffs; or, 3. find that the Florida transfer did not cause harm to Plaintiffs and reduce the amount necessary to restore the Putnam property to the amount of the current encumbrances; and, 4. allow Defendant Wolok to purge any contempt by making a down payment to the registry of the court and monthly payments on the balance until paid.

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Respectfully Submitted, Dated: January 23, 2007 s/ Allan S. Rubin Allan S. Rubin Draper & Rubin, P.L.C. 29800 Telegraph Road Southfield, Michigan 48034 (248) 358-9400 ­ Phone (248) 358-9729 ­ Fax [email protected] Attorney for Defendant Mark Wolok CERTIFICATE OF SERVICE I hereby certify that on January 23, 2007, I electronically filed the foregoing document with the Clerk of the 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]

and I hereby certify that I have mailed same to the following non CM/ECF participants by depositing same in the United States mail via first class mail with postage pre-paid and addressed to the following: Thomas B. Quinn White & Steele 950 17th Street, 21st Floor Denver, CO 80202 Akerman Senterfitt 350 E. Las Olas Blvd., Suite 1600 Ft. Lauderdale, FL 33301 Robert S. Harrison Matthew D. Klakulak Robert Harrison & Associates, PLC 240 E. Merrill St. Birmingham, MI 48009 Gary Hoskie Professional Consultants & Managers, Inc. 1706 Surfside Drive Hutchinson Island, FL 34949 Isadore Cohen 1920 E. Hallandale Blvd., Suite 626 Hallandale, FL 33009 Larry K. Griffis Jaffe, Raitt, Heuer & Weiss, PC 27777 Franklin Rd., Suite 2500 Southfield, MI 48034 s/ Allan S. Rubin____________ An Employee of Draper & Rubin, P.L.C. 16