GLANZ v. MENDELSON


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GLANZ

v.

MENDELSON


DECEMBER 19, 2000

Record No. 0143-00-4

Present: Chief Judge Fitzpatrick, Judges
Coleman and Annunziata

Argued by teleconference

DANIEL J. GLANZ

v.

RICHARD S. MENDELSON, SPECIAL RECEIVER

FOR INTERLASE LIMITED PARTNERSHIP, AND

COSTER FAMILY LIMITED PARTNERSHIP

FROM THE CIRCUIT COURT OF ARLINGTON COUNTY

Benjamin N. A. Kendrick, Judge


OPINION BY JUDGE ROSEMARIE ANNUNZIATA

Daniel J. Glanz, pro se.

John W. Toothman (David H. White; Toothman
& White, P.C., on brief), for appellee Richard S.
Mendelson, Special Receiver for Interlase Limited Partnership.

Michael P. Logan (Grad, Logan & Klewans,
P.C.), for appellee Coster Family Limited Partnership.

Daniel J. Glanz appeals from the decision of
the Circuit Court of Arlington County, holding him in civil
contempt for violating that court’s orders. The civil contempt
charge was brought by Richard S. Mendelson, Special Receiver for
Interlase Limited Partnership. The contempt citation against
Glanz was based upon his legal representation of Lucre
Investments, Ltd., the alleged general partner of Interlase
Limited Partnership, which was the subject of the receivership.
On appeal, Glanz contends: (1) the Special Receiver was bound by
the allegations made in the bill of particulars; (2) the trial
court did not find any specific actions by Glanz that violated
the orders of the court; (3) an attorney, acting on behalf of an
entity, cannot be held in contempt for opposing in good faith the
appointment of a Special Receiver to that entity; (4) an attorney
cannot be held in contempt for filing a "suggestion of
bankruptcy," advising a court that an entity subject to a
state court receivership has sought the protection of the federal
bankruptcy courts; (5) an attorney cannot be held in contempt for
the actions of a client, when those actions are taken without the
involvement of the attorney; (6) the Special Receiver was
required to prove damages arising from Glanz’s alleged
contemptuous conduct; and (7) the court erred in ordering Glanz
to turn over attorney-client communications as a remedy for
Glanz’s alleged contemptuous conduct. Glanz’s contentions may be
distilled into three primary questions. First, was the evidence
sufficient to support the alleged violations of the court’s
orders? Second, does representation of a client in good faith
insulate the attorney from a finding of contempt when that
representation is purportedly in violation of a court order?
Third, was the remedy proper? Because we find the evidence failed
to support the court’s finding of

contempt and reverse on that ground, we do not
reach the remaining issues raised in the case.
[1]

FACTS

In 1996, Kenneth R. Fox, M.D., filed a divorce
action against his wife, Wendy Fox, in the Circuit Court for the
County of Arlington. The final decree, entered on April 9, 1997,
granted a divorce to Mrs. Fox, awarded her a lump sum equitable
distribution award of $1,450,000, and awarded child support in
the amount of $7,000 per month. In the final divorce decree, the
court found that various entities were "shams" created
by Dr. Fox to conceal his assets. The Interlase Limited
Partnership, a Georgia limited partnership, was among the
entities specifically identified as a "sham" and
declared to be the "alter ego" of Dr. Fox.
Subsequently, in the course of the ensuing receivership and
contempt proceedings against Interlase and others, the court also
found that Lucre Investments, Ltd., the alleged corporate general
partner of Interlase, was "another sham entity employed by
Kenneth R. Fox" to hide and divert his assets.

The events that caused the court to appoint a
Special Receiver for Interlase arose from Interlase’s ownership
of certain patents developed by Dr. Fox and his former partner,
Dr. Arthur Coster. Interlase was receiving royalties from the
licensing of these patents to a company called Spectranetics
Corporation. On September 8, 1998, Dr. Coster, acting as the
general partner of the Coster Family Limited Partnership, filed a
petition to have a Special Receiver appointed to take control of
the assets of Interlase, naming as partners in the Interlase
Limited Partnership the Coster Family Partnership (49% limited
partner), the Kenneth R. Fox Family Trust (49% limited partner),
and The Consulting Group, Inc. (2% general partner). Coster
alleged that Dr. Fox was diverting the assets of Interlase
outside the United States and was applying them to his own
personal use.

The court set a hearing on the petition for
appointment of the Special Receiver for September 14, 1998. At
some point between September 8 and 14, 1998, Glanz was contacted
by Kenneth Fox, who claimed to be acting on behalf of Lucre
Investments, Ltd. Fox asked Glanz to represent Lucre, the alleged
general partner of Interlase, in the receivership proceedings.

On September 14, 1998, Glanz filed two
pleadings in the case: (1) a notice of removal of the petition
for appointment of a Special Receiver to federal court, and (2) a
special appearance with a plea in bar to the jurisdiction of the
Circuit Court of Arlington County. The latter pleading was not
heard until December 18, 1998. On the same day that Glanz filed
his pleadings in the United States District Court and Arlington
circuit court, the hearing to appoint the Special Receiver was
held by the circuit court. The circuit court granted Coster’s
petition and entered an order appointing Richard Mendelson as
Special Receiver for Interlase. Glanz was not present during the
proceeding.
[2]

On September 18, 1998, the federal court heard
the petition for removal and remanded the case to the Arlington
circuit court. On September 24, 1998, Glanz filed a motion to
vacate the circuit court’s order appointing the Special Receiver.
However, the motion was never set for hearing.

Glanz’s plea in bar contesting the jurisdiction
of the Arlington circuit court to appoint a Special Receiver for
Interlase was heard on December 18, 1998 and was denied by the
court, which concurrently affirmed the appointment of the Special
Receiver. On that date, the court found that Lucre was
"another sham entity employed by Kenneth R. Fox" and
that "Lucre has no legitimate right or claim to control
Interlase nor to interfere with the Special Receiver." The
court further enjoined Lucre and its agents "from claiming
to be the corporate general partner of Interlase and from taking
or purporting to take any actions on behalf of
Interlase . . . ."

On July 2, 1999, at the request of the Special
Receiver, the Arlington circuit court entered an order directing
Glanz to show cause why he should not be held in contempt of
court. Glanz moved for a bill of particulars, which the Special
Receiver filed. On August 11, 1999, the court found Glanz in
contempt. Glanz’s motion for the court to reconsider its finding
was heard on October 1, 1999 and was orally denied. On December
22, 1999, the court entered a written order denying Glanz’s
motion for reconsideration and finding Glanz in contempt of the
court’s September 14 and December 18, 1998 orders. The court
ordered Glanz to pay over to the Special Receiver any fees he had
been paid by Interlase, Lucre or Dr. Fox, and ordered Glanz to
turn over to the Special Receiver all records of his
communications with Dr. Fox. It is from this order that Glanz
appeals.

ANALYSIS

"Where the court’s authority to punish for
contempt is exercised by a judgment rendered, its finding is
presumed correct and will not be reversed unless plainly wrong or
without evidence to support it." Brown v. Commonwealth,
26 Va. App. 758, 762, 497 S.E.2d 147, 149 (1998). When reviewing
the sufficiency of the evidence supporting this contempt finding,
we view the evidence in the light most favorable to the Special
Receiver. See Baugh v. Commonwealth, 14 Va. App.
368, 374, 417 S.E.2d 891, 895 (1992).

The orders that comprise the basis for the
court’s finding of contempt were entered on September 14, 1998
and December 18, 1998, respectively. "As a general rule,
‘before a person may be held in contempt for violating a court
order, the order must be in definite terms as to the duties
thereby imposed upon him and the command must be expressed rather
than implied.’" Winn v. Winn, 218 Va. 8, 10, 235
S.E.2d 307, 309 (1977) (quoting Wood v. Goodson, 203
S.W.2d 213, 217 (Ark. 1972)). In the September 14, 1998 order,
the court: (1) appointed Mendelson as Special Receiver; (2)
ordered the Special Receiver to: (a) notify all interested
parties of his appointment; (b) identify and collect all assets
of Interlase; (c) determine claims to assets of Interlase; and
(d) file a report with the court; (3) ordered George Myers, an
attorney who had represented Interlase in certain patent matters,
to turn over to the Special Receiver all documents pertaining to
Interlase; and (4) "ordered that Kenneth R. Fox and the
general partner of Interlase Limited Partnership shall forthwith
deliver to the Special Receiver all assets of Interlase Limited
Partnership within their possession or control." Glanz was
not identified among the individuals or entities made subject to
the directives of the September 14, 1998 order.
[3] Because the September 14, 1998 order is not directed
toward Lucre or Glanz, the order does not support a finding that
Glanz acted in contempt of its dictate.

The December 18, 1998 order enjoined Lucre and
its agents from "claiming to be the corporate general
partner of Interlase and from taking or purporting to take any
actions on behalf of Interlase." Specifically, the court:
(1) denied the pleas in bar filed by Lucre and Interlase; (2)
ordered that the appointment of the Special Receiver was still in
effect; (3) denied the motion to vacate filed by Glanz; (4)
ordered that the alleged transfer of assets from Interlase to
White Star Holdings, Ltd., was void
[4]; (5) ordered Lucre
to turn over to the Special Receiver any Interlase assets under
Lucre’s control; and (6) "ordered that Lucre Investments
Ltd., and its officers, managers, directors, and agents are
hereby enjoined from claiming to be the corporate general partner
of Interlase and from taking or purporting to take any actions on
behalf of Interlase."

We hold that the court’s finding that Glanz
acted in contempt of the December 18, 1998 order is not supported
by the evidence. For the purpose of this analysis we must first
construe the term "actions" as employed in the court
order.
[5] Because the December 18, 1998
order stemmed from the appointment of the Special Receiver, and
was based on the alleged violations of the order as set forth in
the pleadings, we find that the term "actions"
encompasses any conduct undertaken by Glanz on behalf of Lucre
and Interlase that interfered with the Special Receiver. See
U.S. v. McAndrew, 480 F. Supp. 1189, 1194 (1979)
("[T]he court should consider the entire background behind
the order including the conduct that the order was meant to
enjoin or secure [and] the interests that it was trying to
protect . . . in determining whether the order is
sufficiently specific . . . .").
[6]

Applying this definition to the term
"actions," we find that the evidence fails to support
the conclusion that Glanz’s conduct violated the December 18
order.
[7] The Special Receiver alleged that Glanz violated the
court’s orders by filing a petition to remove the receivership
proceedings to federal court, by filing a plea in bar to the
jurisdiction of the court on September 14, 1998, and by
scheduling a hearing on the plea in bar. The conduct identified
as contemptuous of the December 18 order occurred prior to the
appointment of the Special Receiver, and prior to the December 18
order. Accordingly, the conduct may not serve as a basis of the
contempt finding against Glanz.

The Special Receiver further alleged that by
filing a notice of appeal of the December 18, 1998 order, Glanz
was in violation of the December 18 order. We disagree. First, we
find it anomalous to hold a party in contempt for challenging on
appeal the propriety and legality of the very order which may
serve as the basis for subsequently finding the party in
contempt. See Local 333B, United Marine Division v.
Commonwealth
, 193 Va. 773, 783, 71 S.E.2d 159, 165 (1952)
(because a party may be held in contempt for violating a court
order, "’[t]he proper method of challenging the correctness
of an adverse ruling is by an appeal and not by
disobedience’" (quoting Robertson v. Commonwealth,
181 Va. 520, 538, 25 S.E.2d 352, 359 (1943))). Even assuming
Glanz could properly be held in contempt for appealing such an
order, the record establishes that by doing so, Glanz did not
violate the court’s December 18, 1998 order. Although he filed a
notice of intent to file the appeal, no petition was filed. The
filing of the notice, alone, did not constitute an action that
impeded the Special Receiver. Accordingly, we find the evidence
does not establish that Glanz acted in violation of the court’s
order on this ground.

We next find that the evidence fails to support
the Special Receiver’s allegation that Glanz "participated
in what was misrepresented to the bankruptcy court to be a
‘voluntary’ Chapter 7 petition on behalf of Interlase, in the US
Bankruptcy Court for the Norther[n] District of Georgia. . .
." Although Glanz admitted that Lucre had caused Interlase
to go into bankruptcy, Glanz repeatedly denied having personally
participated in the filing of the petition for bankruptcy on
behalf of Interlase, and the Special Receiver produced no
evidence that Glanz had done so. Indeed, the record shows that
another attorney, acting for Lucre, but acting independently of
Glanz, filed the petition. See Ex parte Chambers,
898 S.W.2d 257, 261 (Tex. 1995) ("There must be evidence in
the record that the corporate agent charged with contempt was
somehow personally connected with defying the authority of the
court or disobeying its lawful decrees."). The only evidence
of Glanz’s relationship to the bankruptcy action was his filing a
suggestion of bankruptcy in the Arlington circuit court, with a
copy sent to counsel for the Special Receiver. However, the
filing of the suggestion of bankruptcy itself did not effectively
further the bankruptcy action or interfere with the duties of the
Special Receiver. The suggestion of bankruptcy, when filed in the
Arlington circuit court proceedings, was not the vehicle that
stayed the court’s proceedings against Fox or Interlase. To the
extent a bankruptcy proceeding may stay a state court
receivership, that result followed automatically from the filing
of the petition for bankruptcy. See 11 U.S.C.
? 362(a). Glanz’s act of filing the suggestion of
bankruptcy did no more than place the Special Receiver on notice
of the bankruptcy petition, and, therefore, had no impact on the
proceedings in the Arlington circuit court and did not constitute
an "action" in violation of the court’s December 18
order.

The Special Receiver also alleged that Glanz
took several out-of-court actions that interfered with the duties
of the Special Receiver. First, the Special Receiver alleged that
Fox and Glanz invented Lucre and that this "invention"
violated the court’s orders. However, the Special Receiver
presented no evidence that Glanz had any role in the creation of
Lucre. Furthermore, Lucre was created prior to the December 18
order. Therefore, this allegation could not comprise the basis
for the contempt finding even were there evidence presented that
Glanz had participated in the company’s creation.

The Special Receiver’s allegation that Glanz
"participated in events . . . wherein Mr. Fox . . . induced
a Mr. Gorin to issue press releases and other information
designed to undermine the value of the underlying patent license
held by Spectranetics" was likewise not supported by the
evidence. Indeed, there was no evidence that Glanz had any
knowledge of the releases prior to their publication.

The Special Receiver next alleged that
"[a]s part of Fox’s effort to extort a settlement from
Spectranetics and the Special Receiver, Mr. Glanz sent a letter
dated February 25, 1999, to counsel for the Special
Receiver." It is uncontroverted that Glanz sent a letter to
counsel for the Special Receiver on February 25. We find,
however, that the essential allegations to support a contempt
citation remain unproved. The letter Glanz sent stated the
following:

RE: Interlase Limited Partnership. . . . There
are developments that may seriously impact the market for the
devices Spectranetics sells which may significantly devalue the
assets your client and others claim. Actions should be taken now
to avoid these significant losses and my client wishes to be
helpful in that regard. . . .

cc: Interlase

Glanz was only prohibited from representing or
acting on behalf of Lucre and Interlase. The record does not make
clear on whose behalf Glanz sent the letter, but even if we
assume Glanz sent the letter on behalf of Lucre or Interlase, the
February 25 letter does not violate the December 18 order,
because it did not impede the Special Receiver in fulfilling his
duties. The letter merely provided the Special Receiver with
purported information concerning a licensee of Interlase and
offered assistance to Interlase in
"avoid[ing] . . . significant
losses."

The Special Receiver’s final allegation that
"[s]ince July 2, Mr. Glanz has sent various letters
attempting to threaten or intimidate the Special Receiver, and
its counsel, and to hinder their ability to carry out the orders
of this Court" is also without evidence to support it. Glanz
sent four letters to counsel for the Special Receiver in July
1999. In the first letter, sent on July 5, Glanz demanded that
John Toothman, counsel for the Special Receiver, withdraw the
contempt claim. Glanz adamantly denied filing the bankruptcy
petition and stated that he filed the suggestion of bankruptcy
"as a courtesy to the parties and to the Court." Glanz
went on to state that "[m]y client filed a bankruptcy
petition . . . . I have no right, power, or authority to reverse
that decision." Glanz concluded the letter by saying,
"[y]our complaint against me is nothing more than a threat
to use the criminal contempt power of the Arlington Circuit Court
to achieve what you have not achieved through civil process. That
is a direct violation of the Virginia State Bar and I demand that
you immediately withdraw your complaint against me."

The letter constitutes nothing more that an
attempt by Glanz to defend himself against a contempt
charge made by the Special Receiver. The letter refers only to
Glanz and does not constitute an action by Glanz on behalf of
Interlase or Lucre, the specific conduct prohibited by the
court’s December 18 order.

The remaining three letters identified by the
Special Receiver in his bill of particulars are similar in their
related purpose. The first, dated July 19, 1999, stated that
Glanz had received a copy of the Special Receiver’s motion to
transfer the bankruptcy action to Virginia and was therewith
returning that copy to counsel for the Special Receiver because
Glanz did "not represent Interlase in the bankruptcy case or
in White Star Holdings Ltd. v. Spectranetics . . . ."
The second letter, dated July 26, 1999, stated: "Your client
has sent a motion directly to me. As you know, I am enjoined from
taking any action on behalf of Interlase or from even holding out
that I represent Interlase. . . . I am forwarding the papers to
the Trustee appointed in Georgia and to Counsel for the Debtor in
Georgia to take such action as they may deem appropriate."
Finally, the third letter, dated July 27, 1999, stated: "I
have received the enclosed Interlase’s memorandum regarding
pending discovery motions. Please be advised that Interlase is in
chapter 7 bankruptcy and the appropriate persons to be served are
the Trustee and the counsel for the debtor. I do not represent
Interlase, nor have I ever represented Interlase, in the above
captioned bankruptcy case or in White Star Holdings Ltd. v.
Spectranetics
. . . . I am, therefore, returning your
document to you."

These letters fail to evidence conduct in
violation of the December 18 order. To the contrary, Glanz
responded precisely as an attorney who had been enjoined from
representing an entity would be expected to respond. Glanz denied
representing Interlase and returned the documents. Such response
does not constitute action on behalf of Interlase or Lucre that
impeded the Special Receiver in his duties.

In sum, for the reasons stated in the foregoing
analysis, we reverse the civil contempt citation.

Reversed.

FOOTNOTES:

[1] Specifically, we do not address
under what circumstances and to what extent a trial court may
limit an attorney’s representation of his or her client, nor do
we address Glanz’s allegations concerning the remedies imposed by
the trial court.

[2] Glanz alleged in his September
24, 1998 motion to vacate that he had received notice that the
September 14 hearing would be held at 10:00 a.m., but that the
Special Receiver was actually appointed earlier on the morning of
September 14.

[3] The order did not identify by
name the general partner of Interlase. However, because the only
information the court had on the matter at the time it entered
this order was the petition for appointment of the Special
Receiver by Coster, in which Coster alleged that Interlase’s
general partner was The Consulting Group Ltd., we conclude that
The Consulting Group was the "general partner"
referenced in the order. In any event, no evidence supports a
conclusion that the general partner the court intended to bind
was Lucre, Glanz’s client at the time the September order was
issued.

[4] White Star is an entity that
claimed that Interlase had transferred all of its assets,
including the patents and the rights to the license agreements
with Spectranetics, to White Star on September 11, 1998. The
Special Receiver alleged at the December 18, 1998 hearing, and
the trial court found, that this transfer was fraudulent and thus
void.

[5] We note that "[i]f the
actions of the alleged contemnor do not violate a clearly defined
duty imposed upon him or her by a court’s decree, the alleged
contemnor’s actions do not constitute contempt." Wilson
v. Collins
, 27 Va. App. 411, 424, 499 S.E.2d 560, 566 (1998).
On that ground, the contempt finding against Glanz could be
reversed because the term "actions" is arguably unclear
and open to various constructions. However, Glanz failed to raise
this question on appeal. Accordingly, we decline to reverse on
this basis and proceed with the sufficiency analysis raised by
Glanz’s asserted claims.

[6] The construction of the term we
adopt is buttressed by the allegations made by the Special
Receiver in the bill of particulars, all of which involve either
in-court or out-of-court conduct which the Special Receiver
claimed interfered with his duties.

[7] The court stated in its December 22, 1999 order that
its finding was based on the allegations set forth in the Special
Receiver’s bill of particulars. Therefore, we confine our
analysis of the evidence in light of and in relation to the
allegations there set forth.

 

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