United States District Court, E.D. Texas, Sherman Division
DIAMOND CONSORTIUM, INC. d/b/a THE DIAMOND DOCTOR and DAVID BLANK, Plaintiffs,
BRIAN MANOOKIAN, CUMMINGS MANOOKIAN, PLC, and BRIAN CUMMINGS, Defendants.
OPINION AND ORDER REGARDING SANCTIONS
KIMBERLY C. PRIEST JOHNSON UNITED STATES MAGISTRATE JUDGE
before the Court is Plaintiffs' Emergency Motion for
Order to Show Cause (Potential Contempt of Court and
Sanctions) (the “Emergency Motion”) (Dkt. 269),
the motion having been referred to the undersigned pursuant
to 28 U.S.C. § 636 (see Dkt. 288). Having
considered the motion, as well as the responsive briefing
thereto, and the evidence adduced during the Show Cause
Hearing held on July 12, 2017, the Court is of the opinion
that Plaintiffs' Emergency Motion (Dkt. 269), as
supplemented by their additional briefings (Dkts. 306 and
310), should be GRANTED in part and DENIED in part.
FACTUAL AND PROCEDURAL BACKGROUND
filed their Emergency Motion on June 27, 2017, stating they
became aware of a Facebook advertisement sponsored by the
Diamond Integrity Standards Foundation (the
“DISF”), three (3) websites administered by the
DISF, the proactive publication of said websites to witnesses
and the press, and “robo-calls” targeting certain
customers of Plaintiff Diamond Consortium, Inc. d/b/a The
Diamond Doctor's (“Diamond Doctor”). Records
obtained by Plaintiffs from the Tennessee Secretary of State
show the DISF was incorporated by Defendant Brian Manookian
(“Manookian”) on May 4, 2017, and its registered
agent is Defendant Cummings Manookian (“Cummings
Manookian”). See Dkt. 271-2 (Sealed). It has
also been established that the DISF's business address is
the same as Cummings Manookian's address. See
Dkt. 307, July 12, 2017, Hearing Transcript (“Hrg.
Tr.”) at 115:16-24.
addition to asserting that the DISF is nothing more than an
“alter ego” or “shell entity”
controlled by Defendants (see Dkt. 310 at 1, 5),
Plaintiffs allege Defendants have proactively publicized the
DISF websites in an attempt to influence witnesses and
improperly prejudice the jury pool against Plaintiff David
Blank (“Blank”). See Dkt. 269.
issue is how the DISF obtained Diamond Doctor's
proprietary customer information-information which is
arguably subject to the Court's Protective Order
(see Dkt. 128). Diamond Doctor customer information,
including customer names, contact information, and detailed
purchase information, was published on the DISF websites and
was also used to send solicitation emails and
“robo-calls” to targeted Diamond Doctor
customers. In addition, the DISF, or someone acting on its
behalf, sent emails to the media and others, including
Plaintiff Blank himself, alerting them to the DISF websites.
primary issue before the Court, as articulated in
Plaintiffs' Emergency Motion and clarified and/or
amplified by the subsequent briefings, is whether the actions
and activities attributed to the DISF were, in fact,
orchestrated by Defendants to improperly influence witnesses
and/or prejudice potential jurors, and whether the Court
should impose sanctions for such actions.
current pleading requests relief “in addition to the
relief already requested” in their Emergency Motion,
“including the award of reasonable and necessary
attorney's fees.” See Dkt. 310 at 8.
However, the only relief specifically requested in the
Emergency Motion is that the Court conduct a show cause
hearing, which it has done. Plaintiffs did not specifically
request attorney's fees in the Emergency Motion but have
requested attorney's fees and expenses in their
subsequent pleadings. See Dkts. 306 and 310. Thus,
the Court will focus on the relief requested in
Plaintiffs' current pleading (see Dkt. 310).
ask the Court to impose sanctions against Defendants,
pursuant to Rule 37(b)(2)(A)(i), (ii), and (vii), as follows:
(a) finding that the actions of DISF are the actions of
Defendants for purposes of this lawsuit; (b) holding that
Defendants are prohibited from calling as witnesses any
former customers of Diamond Doctor; (c) holding that
Defendants are prohibited from offering a substantial truth
defense to Plaintiffs' defamation, libel and business
disparagement claims; (d) sanctioning Defendants for
Plaintiffs' costs and fees incurred in pursuing the
Emergency Motion and related discovery; and (e) Defendants be
fined for every day they fail to disclose how they obtained
the Diamond Doctor customer lists and which customers
received “ringless voicemails” or were otherwise
contacted by the DISF.
Dkt. 310 at 2.
also seek a finding that Defendant Manookian is in contempt
of court by failing to comply with the Court's July 13,
2017, and July 14, 2017, Orders (Dkts. 300 and 305).
THE DISF WEBSITES
The DD Victim Fund Website
about May 10, 2017, Plaintiffs became aware of a Facebook
advertisement sponsored by the DISF with a reference to the
DD Victim Fund Website, http://ddvictimfund.com/.
See Dkt. 269. According to Plaintiffs, the site
states the “Victim Fund” is administered by the
DISF. The site invites visitors to “claim your
award” and also provides a long list of Diamond Doctor
customer names, dates of purchase, purchase prices, and
detailed information about their diamonds. It then links to
a form for a “Pro Se Petition” against
Diamond Doctor. The site invites customers to submit a
“Declaration, ” so a representative of the
“Victim Fund” can contact them. Plaintiffs allege
the site contains links to the Cummings Manookian website:
assert that although the DD Victim Fund Website has been down
at times, it “reappears whenever strategically
advantageous to Defendants in this lawsuit.”
See Dkt 269 at 2.
The DD Sales Tax Fraud Website
to Plaintiffs, on June 19, 2017, Defendants' counsel,
Andres Correa (“Correa”), sent Plaintiffs'
counsel, Bruce Steckler (“Steckler”), an email
stating Defendants had uncovered that Diamond Doctor had not
paid sales taxes on certain in-state diamond sales.
Subsequently, Steckler was made aware of the DD Sales Tax
Fraud Website, www.ddtaxfraud.com. The site plays
the Chris Isaak song, “Baby Did a Bad, Bad Thing”
and displays an animated caricature of Plaintiff Blank behind
prison bars, holding diamonds in one hand and dollar bills in
the other. The website proclaims “IT'S TIME TO PUT
NOTORIOUS FRAUDSTER DAVID BLANK BEHIND BARS, ” and
alleges, “We now know that he was also perpetrating a
massive tax fraud on the State of Texas and the citizens of
Dallas.” The site lists partial names of Diamond
Doctor's customers, along with purported purchase
amounts, dates of purchase, and partial phone numbers.
See Dkt. 269 at 4. Plaintiffs allege someone
anonymously purchased the internet domain for the Sales Tax
Fraud Website on June 10, 2017. Id. Plaintiffs
further allege the Sales Tax Fraud Website is
“copyrighted” by the DISF. Id.
The Sue David Blank Website
8, 2017, Plaintiffs filed a supplement to their Emergency
Motion (the “Emergency Motion Supplement”) (Dkt.
284), stating they became aware of another “harassing
website.” Id. Although the name of the website
was redacted, the third website is believed be the “Sue
David Blank Website, ” also controlled by the DISF.
PUBLICATION OF THE DISF WEBSITES
allege that on or about May 22, 2017, Defendants (and/or the
DISF and/or someone acting on Defendants' behalf) engaged
in an “automated robo-calling” campaign with
recorded messages to Diamond Doctor customers, accusing
Plaintiffs of fraud and directing recipients to the DD Victim
Fund Website for purported compensation. Defendant Manookian
admits that the DISF used a process called “ring-less
voice mail” to leave messages for approximately one
hundred seventy-five (175) “specifically
identified” Diamond Doctor customers informing them
“they may have been victims of Diamond Doctor's
fraud” (see Dkt. 279-9 at 2).
also allege Defendants-or persons acting on their behalf-have
sent anonymous emails to selected individuals to ensure they
are aware of the Sales Tax Fraud Website. See Dkt.
269 at 5. Specifically, Plaintiffs allege such emails were
sent to Ronnie Mervis, a witness expected to testify at
trial, Rob Bates, a diamond industry reporter, and Kendra
Shapiro, an independent Dallas-area jeweler, alerting them to
the website. See id. Plaintiffs also allege that
since June 10, 2017, Manookian personally made calls to two
additional Diamond Doctor customers. Id. According
to Manookian, he contacted three Diamond Doctor customers as
part of his “investigation of evidence of fraud by
Diamond Doctor.” See Dkt. 279-9 at 3.
to Plaintiffs, they became aware of the “Sue David
Blank Website” when Plaintiff Blank received an email,
threatening a Federal raid and containing links to all three
DISF-controlled websites. Around the same time, Robert Bates,
the same jewelry industry reporter who had received an email
alerting him to the Sales Tax Fraud Website, received an
email from the DISF to “spread the word to defrauded
consumers” and containing links to the same three
DISF-controlled websites. Dkt. 284 at 2.
THE PARTIES' BRIEFINGS AND THE SHOW CAUSE
briefings related to the Emergency Motion have been
extensive, consisting of the following documents:
1. Plaintiffs' Sealed Appendix in support of the
Emergency Motion (Dkt. 271);
2. Defendants' Response to the Emergency Motion (Dkt.
279) with exhibits thereto;
3. Plaintiffs' Reply to Defendants' Response (Dkt.
4. Plaintiffs' Supplement in support of the Emergency
Motion (Dkt. 284); and
5. Plaintiffs' Sealed Appendix in support of their
Supplement (Dkt. 285).
the Show Cause Hearing on July 12, 2017, the Court determined
it needed additional briefing and discovery, and issued the
1. Plaintiffs were ordered to file a brief explaining in
further detail their requested relief and the rationale for
said relief by July 17, 2017, at 5:00 p.m. Defendants'
response, if any, was due by July 19, 2017, at 5:00 p.m.
2. Defendant Manookian was ordered to submit to Plaintiffs
the name of a DISF corporate representative whom Plaintiffs
could depose, as well as proposed deposition dates no later
than July 26, 2017, by July 17, 2017, at 5:00 p.m.
3. Defendant Manookian was ordered to submit to Plaintiffs
the names of the one hundred seventy-five (175) Diamond
Doctor customers who received “ring-less
voicemails” from the DISF, as well as the names of any
other Diamond Doctor customers who received similar
voicemails from the DISF or anyone acting on the DISF's
behalf or at the DISF's direction, by July 17, 2017, at
4. Finally, Defendant Manookian was ordered to submit to the
Court by July 17, 2017, at 5:00 p.m., for in camera
inspection, any and all documents related to his association
with the DISF. The Order specifically stated a non-exclusive
list of documents to include the following:
engagement/retainer agreement; copies of any payments
received; correspondence to, from, or in any way related to
the alleged client and/or client relationship; notes, emails,
or other documents in any way related to conversations,
communications, instructions, or advice sought or provided;
and any other form of information, in whatever format (e.g.
digital, hardcopy, etc) that bears on the identification of
the client and the legal advice allegedly sought or received
Dkts. 300 and 305.
following briefings were filed in response to the Court's
1. Plaintiffs' Brief in Support of Relief Requested
Regarding their Emergency Motion to Show Cause (Dkt. 306)
with exhibits thereto;
2. Defendants' Response to Plaintiffs' Brief in
Support of Relief Requested Regarding Their Emergency Motion
to Show Cause (Dkt. 308);
3. Plaintiffs' Notice of Defendants' Non-Compliance
with the Court's July 13, 2017 and July 14, 2017 Orders
and Supplemental Briefing Regarding Requested Remedies (Dkt.
310) with exhibits thereto;
4. Defendants' Response to Plaintiffs' Notice of
Non-Compliance with the Court's July 13, 2017 and July
14, 2017 Orders and Supplemental Briefing Regarding Requested
Remedies (Dkt. 313) with an exhibit thereto; and
5. Plaintiffs' Reply to Defendants' Response to
Plaintiffs' Notice of Non-Compliance with the Court's
July 13, 2017 and July 14, 2017 Orders and Supplemental
Briefing Regarding Requested Remedies (Dkt. 314) with
filed their brief as ordered on July 17, 2017 (Dkt. 306), and
Defendants timely filed a response on July 19, 2017 (Dkt.
308). In response to the Court's order for Manookian to
provide Plaintiffs the name of the DISF corporate
representative and the names of the one hundred seventy-five
(175) Diamond Doctor customers receiving robo-calls-or any
Diamond Doctor customers contacted by the DISF, Manookian, or
someone on their behalf-Chris Schwegmann, counsel for
Defendants, sent Plaintiffs an email on July 21, 2017,
informing them that Manookian no longer represents the DISF
and stating that:
1. the corporate representative of the DISF is Felipe Debase
[sic], and Manookian cannot, himself, compel any testimony
from Mr. DeMase;
2. [Manookian] does not havea list of the 175 names in his
possession, custody, or control. They may be obtained from
the DISF, which has already been subpoenaed in ...