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Atlas Trading Conglomerate Inc v. At&T Inc.

United States District Court, N.D. Texas, Dallas Division

February 28, 2018

ATLAS TRADING CONGLOMERATE INC. f/k/a DOLLAR PHONE ACCESS, INC., Plaintiff,
v.
AT&T INC., et. al, Defendants. SOUTHWESTERN BELL TELEPHONE COMPANY, et al., Plaintiffs,
v.
ATLAS TRADING CONGLOMERATE INC. f/k/a DOLLAR PHONE ACCESS, INC., Defendant.

          MEMORANDUM OPINION AND ORDER

          ED KINKEADE UNITED STATES DISTRICT JUDGE.

         On February 7, 2018 the Court held a contempt hearing as recommended by Judge Stickney in his Findings, Conclusions and Recommendations entered August 9, 2017. See Mag. J. F. & R. (Doc. No. 328). After hearing from the parties and individuals ordered to appear and carefully considering the law, the Court finds Atlas and its officers and representatives have demonstrated a pattern of violating the Court's orders. Thus, the Court (1) holds Atlas Trading Conglomerate, Inc. (“Atlas”), Edward N. Gewirtz, Aaron Schulman, Moses Greenfield, Christopher Zambito, Asher Gluck, Rachel Klein, and Jennifer Del Cielo in contempt and finds these individuals joint and severally liable for $100, 000, but this fine shall be suspended until further order of the Court; (2) GRANTS the motions to withdraw as to Neil Ende, Susan Colman, John Price, Gwen Bhella, and Rob Bogdanowicz; (3) REVOKES Edward N. Gewirtz's admission pro hac vice to the Northern District Court of Texas; (4) and ORDERS Atlas to acquire local counsel no later than March 9, 2018, as stated in the hearing and in accordance with Local Rule 83.10.

         I. Background

         This case arose from a dispute between Atlas and a group of local telephone companies, BellSouth Telecommunications LLC, Illinois Bell Telephone Company, Indiana Bell Telephone Company Inc., Michigan Bell Telephone Company, Nevada Bell Telephone Company, Pacific Bell Telephone Company, Southwestern Bell Telephone Company, the Ohio Bell Telephone Company, the Southern New England Telephone Company, Wisconsin Bell Inc., AT&T Inc., and AT&T Services Inc. (collectively “AT&T ILECs”). Atlas, a prepaid calling card service, used AT&T ILECs' services to help connect long distance calls using Direct Inward Dialing (“DID”), which incurred originating switched access charges. Atlas failed to pay these monthly switched access charges to AT&T ILECs. Atlas and AT&T ILECs entered a settlement agreement to repay the charges, but Atlas failed to pay under the terms of the settlement agreement. This lawsuit resulted from that failure to comply with the settlement agreement. On October 5, 2016, this Court entered an opinion on AT&T ILECs' motion for summary judgment finding Atlas breached the enforceable settlement agreement and AT&T ILECs was entitled to $885, 108.17, which continues to accrue interest pursuant to the settlement agreement. Atlas Trading Conglomerate Inc. v. AT&T Inc., Civ. Action No. 3:15-CV-0404-K, 2016 WL 5870857, *6 (N.D. Tex. Oct. 5, 2016) (Kinkeade, J.)The Court also granted a permanent injunction against Atlas for future payments under the terms of the confidential settlement agreement. Id. at *7.

         Atlas has repeatedly failed to comply with the Court's injunction. In December 2016, AT&T ILECs filed a motion for contempt for failure to pay bills in an attempt to get Atlas to pay the seven bills AT&T ILECs sent Atlas pursuant to the Court's injunction. Even after receiving notice of the unpaid bills by way of AT&T ILECs' motion for contempt, Atlas still did not pay the bills as required by the Court's order. After the hearing on the motion for contempt, Judge Stickney found Atlas “‘clearly violated' the permanent injunction” and held Atlas in contempt. See Mag. J. F. & R. at 10 (Doc. No. 328). Pursuant to Judge Stickney's recommendation, this Court ordered Atlas and its corporate officers and representatives to appear for a hearing to determine if they too should be held personally liable for Atlas' violation of the Court's order.

         As ordered by the Court, all counsel who had entered an appearance before the Court for Atlas attended the hearing, including Edward N. Gewirtz, John Price, Gwen Bhella, Rob Bogdanowicz, Neil Ende, and Susan Colman. Current and past corporate representatives of Atlas also attended the hearing as ordered, including Aaron Schulman, Moses Greenfield, Christopher Zambito, Asher Gluck, Rachel Klein, and Jennifer Del Cielo. Each individual had the opportunity to defend themselves as to the contempt.

         II. Motion for Contempt

         Federal courts have the power to punish for contempt to protect the court's authority and ensure justice is carried out. Hornbeck Offshore Servs. L.L.C. v. Salazar, 713 F.3d 787, 792 (5th Cir. 2013). Due process requires that the individual charged with contempt receive adequate notice of the charge so that the individual will “have a reasonable opportunity to meet [the contempt charge] by way of defense or explanation, have the right to be represented by counsel, and have a chance to testify and call other witnesses.” Waste Mgmt. of Wash., Inc. v. Kattler, 776 F.3d 336, 339-40 (5th Cir. 2015).

         A party may be held in civil contempt when it is established by clear and convincing evidence “(1) that a court order was in effect, (2) that the order required certain conduct by the respondent, and (3) that the respondent failed to comply with the court's order.” Lyn-Lea Travel Corp. v. Amer. Airlines, Inc., 283 F.3d 282, 291 (5th Cir. 2002). A party has established something by clear and convincing evidence when it “produces in the mind of the trier of fact a firm belief…so clear, direct and weighty and convincing as to enable the fact finder to come to a clear conviction without hesitancy, of the truth of precise facts of the case.” Shafer v. Army & Air Force Exch. Serv., 376 F.3d 386, 396 (5th Cir. 2004). To be held in contempt for violating an injunction, the individual must have received actual notice of the injunction and be (1) a party, (2) a party's officers, agents, servants, employees, or attorneys; or (3) “other persons who are in active concert or participation with” a party or a party's agents. Fed.R.Civ.P. 65(d)(2); see Whitcraft v. Brown, 570 F.3d 268, 272 (5th Cir. 2009). The individual charged with contempt need not have acted or failed to act willfully so long as the individual “actually failed to comply with the court's order.” Am. Airlines, Inc. v. Army & Air Force Exch. Serv., 376 F.3d 574, 581 (5th Cir. 2000). “Good faith is irrelevant as a defense to a civil contempt order.” Waffenshmidt v. MacKay, 763 F.3d 711, 726 (5th Cir. 1985).

         This Court properly finds by clear and convincing evidence that Atlas and its officers are in contempt for violating the Court's injunction. In Atlas Trading Conglomerate Inc. v. AT&T Inc., the Court entered a judgment against Atlas for $885, 108.17 plus court costs and attorneys' fees and entered a permanent injunction against Atlas requiring Atlas “to make future payments under the confidential settlement agreement.” Atlas Trading, 2016 WL 5870857 at *7. After the injunction was in place, AT&T ILECs sent multiple bills to Atlas. Atlas did not pay any of these bills as the injunction required. Atlas has attempted to argue it did not receive these bills despite the bills being mailed to the same address that received over 150 bills from AT&T ILECs before the injunction was entered. Alternatively, Atlas argued it was not required to pay for the use of the DIDs as ordered by the Court because Atlas had transferred the DIDs to Dollar Phone Services, a separate entity under the same corporate parent, in exchange for forgiveness of debt. Judge Stickney found Atlas failed to overcome the presumption that Atlas received these bills in the mail. See FCR 8-9. This Court similarly finds Atlas' argument without merit and unpersuasive. By failing to pay the monthly bills as required by the Court's injunction, Atlas clearly violated the Court's order. Thus, the Court holds Atlas in contempt for violating a court order. See Lyn-Lea Travel Corp., 283 F.3d at 291.

         Atlas' corporate officers, agents, and lead counsel Edward Gewirtz are also held in contempt for violating the Court's injunction. A corporation's officers and representatives can be held in contempt for “failure to cause their corporation…to comply with a court's order.” Am. Airlines, Inc. v. Allied Pilots Ass'n, 53 F.Supp.2d 909, 941 (N.D. Tex. 1999); see Fed. R. Civ. Pro. 65(d)(2). The following are corporate officers and representatives of Atlas: Moses Greenfield, president of Atlas' corporate parent; Aaron Schulman, formerly a consultant and current Chief Restructuring Officer; Christopher Zambito, former Vice President of Atlas; Asher Gluck, President of Atlas when it was known as Dollar Phone Access; Rachel Klein, former secretary for Atlas; and Jennifer Del Cielo, former secretary for Atlas. Atlas and its officers violated the court's injunction by failing to make required monthly payments to AT&T ILECs as required under the order. See Atlas Trading, 2016 WL 5870857 at *7. Atlas' officers and agents had actual notice of the injunction. Thus, the Court holds Atlas and its officers in contempt, including, Aaron Schulman, Moses Greenfield, Christopher Zambito, Asher Gluck, Rachel Klein, Jennifer Del Cielo, and Edward Gewirtz. See Am. Airlines, Inc., 53 F.Supp.2d at 941; see also Lyn-Lea Travel Corp., 283 F.3d at 291.

         When parties “join together to evade a judgment, they become jointly and severally liable for the amount of damages resulting from the contumacious conduct.” N.L.R.B. v. Laborers' Int'l Union of N. Am. AFL-CIO, 882 F.2d 949, 955 (5th Cir. 1989). The purpose of civil contempt is “(1) to coerce compliance with a court order or (2) to compensate a party for losses sustained as a result of the contemnor's actions.” Lyn-Lea Travel Corp., 283 F.3d at 290-91. Imposing a fine is civil contempt when the fine is remedial in nature and paid to the complainant. 485 U.S. 624, 632. The Court holds Atlas and its officers and agents in civil contempt because the fine shall be paid to the complainant, AT&T ILECs, only if Atlas continues to ignore the Court's injunction and fails to make the required payments to AT&T ILECs. See id. (The Supreme Court found a fine paid to the court can also be remedial when the party held in contempt can avoid paying the fine by performing as required by the court's order). Having found Atlas, its officers, its representatives, and its lead counsel in civil contempt, the Court holds Atlas, Aaron Schulman, Moses Greenfield, Christopher Zambito, Asher Gluck, Rachel Klein, Jennifer Del Cielo, and Edward Gewirtz jointly and severally liable for $100, 000 to be paid upon further order of the Court if Atlas fails to comply with the Court's injunction. See Id. Having found Edward Gewirtz in contempt, the Court also REVOKES Edward Gewirtz's admission pro hac vice.

         III. Motions to Withdraw

         During the course of the hearing five attorneys representing Atlas entered motions to withdraw as counsel, including local counsel John Price. Because John Price has moved to North Carolina, he can no longer act as local counsel in compliance with Local Rule 83.10. Neil Ende and Susan Colman informed the Court their relationship with Atlas ended in March of 2016. After careful consideration, the Court GRANTS ...


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