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Andrews v. Holloway

March 12, 2009

JOHN ANDREWS, ET AL., PLAINTIFFS,
v.
GREGORY HOLLOWAY, A/K/A GREG HOLLOWAY, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Simandle, District Judge

OPINION

The Court is presented with a motion by Judgment Plaintiffs' ("Plaintiffs") to hold Judgment Defendant Gregory Holloway ("Defendant") in contempt of Court pursuant to Rule 37(b), Fed. R. Civ. P. [Docket Item 538]. For almost twelve years, Defendant has successfully avoided paying a judgment owed to Plaintiffs by obstructing Plaintiffs' efforts to obtain, through discovery, information about his financial affairs. Defendant's conduct culminated in this Court's final discovery order of March 5, 2008, in which the Court gave him a final mandate to provide the financial information he has long obscured, permitting the Plaintiffs to obtain his further deposition testimony upon a long list of relevant topics. The Court finds, for the reasons described below, that Defendant's deliberately evasive and untruthful answers in response to the Court-ordered questioning were contemptuous of this Court's Order and warrant his incarceration for civil contempt until that contempt is purged.

I. BACKGROUND

These proceedings have a long and inglorious history, consuming much time, energy, and expense on the part of the parties and necessitating court intervention for the mundane (where particular depositions should be conducted) as well as the trivial (when depositions should end in the evening).

Andrews v. Holloway, No. 95-1047, 1996 WL 495148, at *4 (D.N.J. Aug. 27, 1996) [hereinafter Holloway II].

The present action, long in its post-judgment phase, has now passed its fourteenth birthday. It has been over twelve years since the Court lamented the Herculean efforts expended in this litigation, and as of this date it remains, for all practical purposes, unresolved. Plaintiffs are twenty-seven individuals who invested millions of dollars in a limited partnership, Continental Rare Coin Fund I, Ltd. ("CRCF I"), in response to a 1988 prospectus issued by Defendant, who was the sole shareholder of CRCF I and served as the firm's investment advisor. In 1995, after learning that the partnership had no value, Plaintiffs brought suit against Defendant, along with several others entangled with CRCF I, including his wife, Laura Andre, and his parents.*fn1 Plaintiffs asserted claims under the Racketeering Influenced Corrupt Organization Act ("RICO"), 18 U.S.C. § 1962, as well as common law claims of fraud. On June 20, 1997, as part of a settlement, Defendant agreed to an entry of judgment against him, in the amount of $6,097,015.00 [Docket Item 371].

To date, Defendant has paid no part of this judgment, which now amounts to over nine million dollars. (Pls. Joint Certification ("Joint Cert.") ¶¶ 1-2.) In fact, he testified that when he agreed to the entry of this judgment he did not intend to pay any of it. (Pls. Ex. B, June 13, 2008 Dep. at 27.) Apparently to that end, he has maintained throughout his post-judgment depositions that he is unemployed, and has no income, assets, bank accounts, or credit cards in his name. (Pls. Ex. L, May 28, 2008 Dep. at 7, 14, 25-26, 31, 53-55.) Instead, he claims that he has been and continues to be supported by his wife and his parents, Lee and Carlayne Holloway. (Pls. Ex. N, June 22, 2008 Dep. at 35.) It is Plaintiffs' theory that Defendant has fraudulently transferred or concealed assets with the help of his wife and parents and that their assets are, in fact, Defendant's assets, and that he has maintained a lavish lifestyle in Palm Beach, Florida and Ocean City, New Jersey that cannot be explained through his elliptical testimony.

Plaintiffs' efforts to procure payment from Defendant have resulted in many Court orders over the years, due in large part to Defendant's and his family's*fn2 resistance to post-judgment discovery. Defendant has repeatedly made clear that he would not appear for depositions without a specific Court order. As early as September, 2003, this Court found that Defendant "was unresponsive [during depositions] to most questions about his financial dealings with [his wife] Ms. Andre" for he "continually refused to answer questions about Ms. Andre's wealth or claimed that he did not know or was unable to remember anything pertinent about Ms. Andre's financial dealings."*fn3 Andrews v. Holloway, No. 95-1047, 2003 U.S. Dist. LEXIS 16961, at *16 (D.N.J. Sept. 29, 2003) [hereinafter Holloway III]. On this basis, the Court permitted broad questioning of Ms. Andre, but still unable to obtain the necessary information from her, Plaintiffs continued to seek answers from Defendant.

A series of discovery disputes and delay by Defendant led to this Court's most recent, and final, discovery order.*fn4 On December 27, 2007, after Defendant unilaterally cancelled a scheduled deposition, Plaintiffs filed a motion for Writ of Capias Ad Satisaciendum and asked the Court to order Defendant's arrest and incarceration until he provided full and complete testimony as to the true nature and extent of his assets. Rather than grant Plaintiffs' motion, the Court provided Defendant with a final opportunity to avoid custody and entered the Order in question. This Court's Order of March 5, 2008, required Defendant to appear "to be deposed under oath for an undetermined period of time to allow the Judgment Plaintiffs' attorneys to conduct the deposition of the Judgment Defendant concerning all of the assets, individuals and entities that are set forth on Schedule 'A' which is attached hereto and ma[d]e a part hereof."*fn5

The Court specifically ordered Defendant to "provide testimony concerning the income and assets of his wife, Laura Andre and his mother, Carlayne Holloway" and further to "produce all books, records and documents that the Judgment Plaintiffs shall request of him." This Order mandated his obligation to give truthful and complete answers to all relevant questions within the seventy subjects defined in Schedule A, and to produce all documents relevant to those subjects that Plaintiffs request.

Defendant appeared for four days of depositions, on May 28, 2008, May 29, 2008, June 12, 2008, and June 13, 2008. He did not appear on May 27, 2008, the first scheduled day of depositions. During his depositions he gave answers to many questions, except for those he claimed were duplicative, but many of his answers were that he did not know or could not remember the information requested from him. He further produced just two documents, his 1998 and 1999 joint tax returns, claiming he doesn't have any additional requested documents, though they may exist. Further, though parties agreed to continue depositions on June 18, 2008, Defendant refused to attend.

In response to Defendant's conduct during post-judgment discovery, Plaintiffs brought the present motion to hold Defendant in contempt.*fn6 On February 25, 2009, the Court convened the hearing upon its order to show cause why Mr. Holloway should not be held in contempt of Court,*fn7 heard argument, and reserved decision.

III. DISCUSSION

A. Contempt

Disobedience of a court order compelling a deponent to appear at a deposition and answer relevant questions is indeed a serious matter. Rule 37(b)(1), Fed. R. Civ. P., makes this crystal-clear, providing:

If the court where the discovery is taken orders a deponent to be sworn or to answer a question and the deponent fails to obey, the failure may be treated as contempt of court.

Civil contempt is a means by which the Court may, if necessary, ensure that its discovery orders are obeyed. Fed. R. Civ. P. 37(b)(1) & (b)(2)(A)(vii). "It vindicate[s] the District Court's authority over a recalcitrant litigant." Hutto v. Finney, 436 U.S. 678, 691 (1978). "[C]ivil contempt may be employed to coerce the defendant into compliance with the court's order and to compensate for losses sustained by the disobedience."*fn8 McDonald's Corp. v. Victory Investments, 727 F.2d 82, 87 (3d Cir. 1984).

The Court will not lightly hold a party in contempt, especially where, as here, the consequence may be civil commitment. A plaintiff seeking a contempt order must show by clear and convincing evidence: (1) that a valid court order existed; (2) that defendant had knowledge of the order; and (3) that defendant disobeyed the order. Roe v. Operation Rescue, 919 F.2d 857, 871 (3d Cir. 1990). Further, a "court should not hold a party in contempt: 'where there is ground to doubt the wrongfulness of the respondent's conduct.'" A & H Sportswear Co., Inc. v. Victoria's Secret Stores, Inc., 134 F. Supp. 2d 668, 670 (E.D. Pa. 2001) (quoting Littlejohn v. Bic Corp., 851 F.2d 673, 683-84 (3d Cir. 1988)). Any ambiguities in the order will be resolved in favor of the party charged with contempt. Harris v. City of Philadelphia, 47 F.3d 1311, 1326 (3d Cir. 1995). There is no dispute that the Court's March 5, 2008 Order was valid, nor is there doubt that Defendant had knowledge of that order. Defendant has identified no ambiguities in that Order. Thus, the sole issue is whether Defendant, who did appear for depositions and answer questions, disobeyed the March 5th Order. Plaintiffs provide the Court myriad of examples of Defendant's misconduct during the Court-ordered depositions, arguing that he was unresponsive by providing incredible answers to questions, declaring he cannot remember or does not know basic information about his wife and his own financial history, and insisting that he has none of the documents requested of him. In essence, Plaintiffs argue that Defendant should be held in contempt because he is intentionally evasive, and thus is non-responsive to the Court's Order that he provide testimony under oath.

The question then becomes whether a party who attends a deposition and answers questions as mandated by a court order can be held in contempt of that order if his answers are misleading and evasive. The Court finds that he can and, in fact, that he must. The purpose of a deposition is to enable a party to obtain truthful and complete information about relevant topics. Truthfulness is demanded through the requirement that the deponent testify under oath or affirmation, Rule 30(b)(5)(A)(iv), Fed. R. Civ. P., and completeness is required through the provisions of Rule 37(a)(4), Fed. R. Civ. P., that "an evasive or incomplete disclosure, answer, or response must be treated as a failure to disclose, answer or respond."

In light of the purpose of depositions, "a response containing misrepresentations . . . is as good as no response at all." Manville Sales Corp. v. Paramount Sys. Inc., No. 86-4157, 1988 U.S. Dist. LEXIS 14225, at *7-8 (E.D. Pa. Dec. 16, 1988) (quoting Fautek v. Montgomery Ward & Co., Inc., 96 F.R.D. 141, 154 n.5 (N.D. Ill. 1982)) (holding that untruthful responses to written interrogatories warrant sanction under Rule 37(d), Fed. R. Civ. P., for failure to serve answers to interrogatories); see Fed. R. Civ. P. 27(a)(4) ("For purposes of [a motion for an order compelling disclosure or discovery], an evasive or incomplete disclosure, answer, or response must be treated as a failure to disclose, answer, or respond.") Thus, the Court concludes that a witness who gives untruthful answers at a deposition ordered by the Court, he may be held in contempt of that order for he is being, in effect, unresponsive. Nat'l Grange Mut. Ins. Co. V. Sharp Equip. Co., No. 01-0628, 2002 U.S. Dist. LEXIS 4096, at *17-22 (E.D. Pa. Mar. 1, 2002) (finding evasive and untruthful answers to questions plaintiff was ordered to answer justified finding of contempt under Rule 37(b)(2) and dismissal of action); see Black Horse Lane Ass'n v. Dow Chem. Corp., 228 F.3d 275, 299-305 (3d Cir. 2000).

The Court finds support in the Third Circuit's opinion in Black Horse, in which the appeals court held that "when a witness is designated by a corporate party to speak on its behalf pursuant to Rule 30(b)(6)[, Fed. R. Civ. P.], 'producing an unprepared witness is tantamount to a failure to appear' that is sanctionable under Rule 37(d)." 228 F.3d at 304. The Third Circuit went on to find that the Rule 30(b)(6) witness at issue was so "uncooperative" and "unhelpful" that his testimony was tantamount to failing to appear, where he claimed to know nothing about, or have no recollection of, conduct of his own corporation and agreements he signed. Id. at 304-05. Similarly, appearing for a deposition but providing false or misleading answers is uncooperative and unhelpful and may be tantamount to a failure to appear at a court-ordered deposition. See id. at 304-05.

Having concluded that the giving of false or evasive answers in response to court-ordered questioning constitutes contempt, the Court must now determine whether there is clear and convincing evidence that Defendant's responses to deposition questioning were knowingly false or intentionally unresponsive such that he violated the Court's March 5th Order to appear at depositions and answer questions on a wide range of financial subjects. The Court finds, and will address at length below, that there is clear and convincing evidence that Defendant is being deliberately unresponsive and misleading as to his source of financial support, his lack of knowledge as to his wife's finances and employment, his claim that he has never done business with a Carl Norton, and his insistence that he has absolutely no knowledge of any relevant financial documents beyond the joint tax returns for 1998 and 1999. The Court further finds Defendant in contempt for unilaterally, and without seeking a modification of the Court Order, ending depositions after June 13, 2008.*fn9

1. Testimony as to Source of Financial Support

The Court's March 5, 2008 Order requires Defendant testify not only about his own assets, but also the income and assets of his wife, Laura Andre, and his mother, Carlayne Holloway, and consequently to provide truthful testimony as to his source of financial support. It is difficult to piece together Defendant's testimony on who was supporting him when -- in part because Defendant claims not to remember these important facts in his own life. Nevertheless, it is possible to create a broad time-line. Defendant says that he has not had any money since 1994. (Joint Cert. ¶ 44.) Until his marriage to Ms. Andre in 1999, he claims his parents, and in particular his mother, supported him. (Pls. Ex. N, June 12, 2008 Dep. at 34-35.) Since marriage, he claims his wife has supported him, except possibly for some unknown period of time when he was in California. (Id.) According to Defendant, from the "early to mid '90s through to 2000," Defendant's mother lent Ms. Andre one million dollars. (Pls. Ex. L, May 28, 2008 Dep. at 109-10.) He reveals no details of this supposed loan, such as the terms of repayment, the note documenting the loan, or its receipt or expenditure of proceeds.

Until several years ago his mother occasionally lent more money to Ms. Andre and Defendant, but he doesn't "remember when it started and stopped." (Id. at 23.) Ms. Andre has never worked full time and Defendant does not know if she's ever been unemployed. (Id. at 112.) As far as Defendant knows, she has worked continually from 2000 to the present. (Id. at 24.) She is currently a self-employed botanist making approximately $60,000 to $80,000 a year, along with some unknown rental income. (Id. at 15.) In addition to taking care of all the bills and supporting their four children, ages four, six, eighteen, and twenty,*fn10 Ms. Andre has paid back "quite a bit" of the one million dollar loan from her mother-in-law. (Id. at 18-19, 26, 113.) Defendant explained: "All I know is everything is [] taken care of and I don't pay any attention to it." (Id.) He frankly pretended to be unaware of how this was even possible, feigning ignorance of a million-dollar transaction between his own partly-employed wife and his own retired mother.

Defendant says he remains unemployed because he is the primary care-giver for his two youngest children. (Id. at 26.) It is unclear why he did not work before the birth of his six year-old. When asked, he responded: "Because I can't give you a good answer. I don't know." (Id.)

Defendant's testimony as to his means of financial support is contradicted by sworn statements from both his parents and his wife, as well as his own statement. From November, 1996 until August, 1998, Defendant's parents (who were co-defendants in this lawsuit) wrote a series of letters to this Court and the Third Circuit declaring their financial distress. (Pls. Ex. O.) In December, 1996, they wrote: "Our financial picture, never good, is now very precarious, bordering on disastrous." (Id.) According to his parents, "If the [C]court refuses to move our case to Alexandria, we will be force[d] to accept a judgment, allow our home to be foreclosed and seek bankruptcy to save our furnishings." (Id.) In March, 1997, they wrote:

Carlayne Holloway is substitute teaching nearly every day, but there is no certainty how long or how often work is available. At age 72, she is under great stress from her work. Lee Holloway has applied for several jobs, but at 76 is so far unsuccessful. Of course, we are both under great stress from this false and unjustified suit. Our financial advisor or supposed financial advisor has control of the last big amount of money we ever had. Although he promises the $237,000 plus interest will be returned by 4/30/97, he has also promised since 10/96 to obtain a personal loan to help us with our monthly bills, Visa debt & back taxes; & promises to call back, but never does. (Id.) That same month, his parents wrote to the Third Circuit complaining of this Court's denial of their application to proceed in forma pauperis in light of their "poverty." (Id.) As late as August, 1998, they wrote to this Court explaining they had "no liquid assets and [were] financially unable to borrow." (Id.) All this occurred right in the middle of the period in which (according to Defendant) Defendant's mother was supposedly lending Laura Andre one million dollars.*fn11 (Pls. Ex. L, May 28, 2008 Dep. at 109-10.) His parents could not have supplied a loan of one million dollars, nor of any meaningful sum, during that period of time. Furthermore, neither Defendant ...


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