In re GGW Brands, LLC
| Decision Date | 04 August 2014 |
| Docket Number | CV14-6108-FMO,Case No.: 2:13-bk-15130-SK |
| Court | United States Bankruptcy Courts. Ninth Circuit. U.S. Bankruptcy Court — Central District of California |
| Parties | In re: GGW Brands, LLC GGW Marketing, LLC Debtor(s). |
After the Supreme Court's decision in Stern v. Marshall, 131 S. Ct. 2594 (2011), and Executive Benefits Insurance Agency v. Arkison, 134 S. Ct. 2165 (2014), it is unclear whether this Court has the constitutional authority to issue an arrest warrant for civil contempt. Because the Court believes that the facts of this case justify issuing arrest warrants as a coercive sanction for civil contempt, the Court hereby recommends that the District Court for the Central District of California withdraw the reference, pursuant to 28 U.S.C. § 157(d), for the limited purpose of considering issuance of arrest warrants for civil contempt against Joseph Francis and Perfect Science Labs, LLC.
Attached please find the Court's report and recommendation to the District Court for withdrawal of reference and for determination of possible incarceration for civil contempt.
/s/_________
GGW Brands, LLC, GGW Direct, LLC, GGW Events, LLC, and GGW Magazine, LLC (collectively, the Original GGW Debtors) filed chapter 11 cases on 2/27/13.1 BK Docket #1.2 On 3/21/13, Wynn Las Vegas, LLC d/b/a Wynn Las Vegas filed a motion to appoint a chapter 11 trustee (Trustee Motion). BK Docket #28. The Court granted the Trustee Motion and on 4/12/13, appointed R. Todd Neilson as the chapter 11 trustee (Trustee) in the Original GGW Debtors' cases. BK Docket #82.
On 5/9/13, the Trustee filed a motion to: 1) revoke the cancellation of GGW Marketing, LLC; 2) file a bankruptcy petition on behalf of GGW Marketing, LLC; and 3) file an adversary proceeding to recover certain trademarks vital to the Girls Gone Wild business, which the Trustee alleged had been fraudulently transferred by GGW Marketing, LLC to various entities controlled by Joseph Francis (Francis) (Revocation Motion). BK Docket #120. On 5/20/13, the Court entered an order granting the Revocation Motion (Revocation Order). BK Docket #153.3 On 5/22/13, GGW Marketing, LLC filed a chapter 11 petition. In re GGW Marketing, LLC, 13-23452-SK.4 The Debtors' cases are being jointly administered. BK Docket #172.
On 4/23/13, the Trustee filed a "Complaint for Injunction and Damages" (Complaint) against Francis. AP Docket #1. In the Complaint, the Trustee alleged that after he was appointed as the Trustee of the Original GGW Debtors, Francis attempted to exercise control over the Original GGW Debtors' property and employees (Employees) by: 1) making violent threats to and attempting to fire the Employees; 2) being verbally abusive to the Employees; and 3) having the Employees perform personal services for him. Complaint ¶¶ 13, 15. In the Complaint, the Trustee sought damages for Francis's violation of the automaticstay and an injunction against Francis's interference with the Original GGW Debtors' operations. Id. ¶¶ 17-29.
Also on 4/23/13, the Trustee filed an "Emergency Motion for . . . Temporary Restraining Order . . . Against Joseph R. Francis" (TRO Motion). AP Docket #3. In the TRO Motion, the Trustee sought to enjoin Francis from doing the following: 1) "communicating with the [Original GGW] Debtors' [EJmployees . . . or attempting to exercise influence or control over any [EJmployees rendering services to the [Original GGW] Debtors," 2) "coming within 100 feet of the [Original GGW] Debtors' offices or its [EJmployees;" and 3) "interfering with the Trustee's control of the [Original GGW] Debtors' assets." Id. ¶ 1. The next day, the Court held a hearing and granted the TRO Motion. On 4/25/13, the Court issued a "Temporary Restraining Order and Order to Show Cause Why a Preliminary Injunction Should not Issue Against Joseph R. Francis" (TRO). AP Docket #16. The TRO prohibited Francis and his agents, servants, employees, attorneys, and those persons in concert or participation with him from:
• Communicating with [the Original GGW Debtors'] [E]mployees (including those employees of [Perfect Science Labs, LLC (PSL)] who are leased by [the Original GGW Debtors]) [including] calling, e-mailing, texting, faxing, or otherwise contacting, engaging with, or attempting to exercise influence or control over any [E]mployees rendering services to [the Original GGW Debtors].
• Coming within 100 feet of [the Original GGW Debtors'] offices (located at 10940 Wilshire Boulevard, Los Angeles, California 90024) or its [E]mployees (including those employees of [PSL] who are leased by [the Original GGW Debtors]).
• Interfering with the Trustee's control of [the Original GGW Debtors'] assets (including any servers or computers that have [the Original GGW Debtors'] electronically stored information).
• Threatening or harassing [E]mployees of [the Original GGW Debtors] or Argyle Online, LLC (including those employees of [PSL] who are leased by [the Original GGW Debtors] or by Argyle Online, LLC).
Id. at 4.5
The TRO ordered Francis to show cause why a preliminary injunction should not issue (First OSC), and set a hearing on 5/8/13 (First OSC Hearing). Id. at 4-5.6
On 4/30/13, the Trustee filed an "Emergency Ex Parte Application to Enforce and, to the Extent Necessary, Clarify and Expand Temporary Restraining Order by Specifically Naming Additional Parties" (Ex Parte). AP Docket #25. In the Ex Parte, the Trustee argued that Francis both personally, and through others, violated the TRO. Id. at 3. Specifically, the Trustee alleged that Francis's driver, acting at Francis's request, had picked up a Cadillac Escalade belonging to GGW Events, LLC from a repair shop, signed a release, and drove it to Francis's residence. Id. When Francis's driver was instructed to return the car to the Debtors, he refused and threatened the Trustee's counsel. Id.
The Trustee stated that Abbey Wilson (Wilson), Francis's girlfriend, would be installed as the new manager of PSL. Id. According to the Trustee, Wilson directed Equity Office Properties (EOP), the "lessor of office space to [PSL],"7 located at 10940 Wilshire Boulevard, Los Angeles, California 90024 (Premises), to change access cards for the door to the suite occupied by the Trustee and the Original GGW Debtors and to terminate parking for the Trustee's and Original GGW Debtors' personnel. Id. at 3-4. Wilson then terminated several PSL, Argyle Online, LLC (Argyle Online), and Argyle Media employees. Id. at 4. Based on these assertions, the Trustee requested that the TRO be amended to: 1) explicitly name PSL, Argyle Online, and Wilson as additional persons (Additional Parties or Additional Persons); and 2) require PSL, Argyle Online, and Wilson to show cause why they should not be held in contempt. Id. at 5.
On 5/1/13, the Trustee, Francis, Wilson, PSL, and Argyle Online filed a "Stipulation Resolving Emergency Ex Parte Application to Enforce and, to the Extent Necessary, Clarify and Expand Temporary Restraining Order by Specifically Naming Additional Parties" (Stipulation). AP Docket #30. Wilson—both individually and as the manager of PSL and Argyle Online—and Francis initialed each page and signed the Stipulation. Id. at 7-8.
In the Stipulation, Francis, Wilson, PSL, and Argyle Online agreed not to:
. . .
7. [] Francis and the Additional Persons shall promptly communicate to Landlord[8] the terms of this Stipulation and any order approving it. Landlord may take actions in good faith in reliance upon this Stipulation and any order approving it without liability to [] Francis and/or the Additional Persons. The Trustee may make payments directly to Landlord and Landlord shall not thereby have privity of contract or estate with the Trustee or the [Original GGW] Debtors, this payment arrangement being made solely for the convenience of the Trustee and Landlord . . . .
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