Providence v. Providence Watch Hosp.
| Decision Date | 13 August 2010 |
| Docket Number | C.A. No. PB 09-3687,C.A. No. PB 09-3688 |
| Parties | PROVIDENCE, SC. FREDERICK N. LEVINGER v. PROVIDENCE WATCH HOSPITAL, LLC ,FREDERICK N. LEVINGER v. SPEIDEL, LLC |
| Court | Rhode Island Superior Court |
SILVERSTEIN, J.Before the Court is a motion brought by Cerce Capital, LLC (Cerce) requesting that Jeffrey Massotti (Massotti) and Peter Cipolla (Cipolla) be held in contempt of the orders which appointed Allan Shine as the Temporary Receiver of Speidel, LLC (Speidel) on June 26, 2009 and Permanent Receiver on July 16, 2009. The Movant, Cerce, alleges that Massotti and Cipolla solicited Speidel customers, interfered with ongoing contracts, and took critical data and information; actions which Cerce argues are prohibited by the orders in the instant matter. Massotti and Cipolla object to Cerce's Motion to Adjudge in Contempt, arguing that there is no evidence that they took any property of Speidel after receiving notice of the receivership.
Speidel, founded in 1904, was originally operated as a jewelry chain manufacturer in Providence, Rhode Island. Speidel became a watch band distributor and was owned by Frederick N. Levinger. Speidel also owned Providence Watch Hospital, LLC (PWH), a watch repair and sales business with retail shops in Providence, Cranston and Wakefield. Allan M. Shine (the Receiver) was appointed by this Court as Temporary Receiver of Speidel and PWH on June 26, 2009 and Permanent Receiver on July 16, 2009 (collectively, the Orders). 1
On August 14, 2009, the Court approved an offer by Cerce to purchase all tangible and intangible personal property of Speidel. On September 3, Cerce filed a motion for temporary restraining order against Massotti and Cipolla. Massotti was the former President of Speidel2and Cipolla was former Vice President of Marketing. Cerce alleged that Massotti and Cipolla took confidential and proprietary information from Speidel which would provide them with a competitive advantage. When the receivership was filed, Speidel had an exclusive licensing agreement with Timex (Timex Agreement) which was not scheduled to terminate until December 31, 2013. Additionally, Speidel had a product line, "Speidel Express," which was sold by mass market retailers Wal-Mart and Kmart. Speidel products were also sold by mass market retailers Kohl's and Target. Cerce alleges that Massotti and Cipolla took Speidel property relating to these mass market retailers (collectively, the Big Four) including one computer, 3 certain corporate records, Big Four contact information, and folders relating to the Big Four. The Court issued a temporary restraining order against Massotti and Cipolla on September 3, 2009.
Cerce filed a motion to compel reimbursement and payment of all costs and expenses and included an allegation of contempt of court relating to the Orders. The Court heard testimony over several days and must now resolve whether Massotti and Cipolla should be found in civil contempt.
"The authority to find a party in civil contempt is among the inherent powers of our courts." Now Courier, LLC v. Better Carrier Corp., 965 A.2d 429, 434 (R.I. 2009) (citing Gardiner v. Gardiner, 821 A.2d 229, 232 (R.I. 2003)). The purpose of civil contempt is to "coerce the contemnor into compliance with the court order and to compensate the complaining party for losses sustained." Id, (quoting Biron v. Falardeau, 798 A.2d 379, 382 (R.I. 2002)). A finding of civil contempt, which is within the sound discretion of the trial justice and depends on the circumstances of each case, is based on clear and convincing evidence of a party's lack of substantial compliance with a court order. State v. Lead Industries, Ass'n, Inc., 951 A.2d 428, 464 (R.I. 2008) (citing Durfee v. Ocean State Steel, Inc., 636 A.2d 698, 704 (R.I. 1994)). The evidence must specifically demonstrate "(1) that the alleged contemnor had notice that he was within the order's ambit, (2) that the order was clear and unambiguous, (3) that the alleged contemnor had the ability to comply, and (4) that the order was indeed violated." U.S. v. Saccoccia, 433 F.3d 19, 27 (1st Cir. 2005) (internal citations and quotations omitted).
"A civil contempt proceeding is an appropriate vehicle to enforce compliance with court orders and decrees when attempting to preserve and enforce the rights of [the parties]." Nardone v. Ritacco, 936 A.2d 200, 207 (R.I. 2007) (). Cerce contends that the Court should find Massotti and Cipolla in contempt, arguing that they violated the Orders by interfering and taking the Debtor's assets and confidential information. Massotti and Cipolla claim that their conduct, when measured by the actual terms of the Orders, did not constitute a taking of Speidel's property or the property to which Speidel has a right of possession.
A court may make a finding of civil contempt in order to compel compliance with a court order or to compensate a party harmed by non-compliance of such order. Saccoccia, 433 F.3d at 27 (citing McComb v. Jacksonville Paper Co., 336 U.S. 187, 191 (1949)). As discussed supra, determining whether a party has violated an order of the court, so as to support a finding of civil contempt, depends on the circumstances of each case, specifically whether a party had notice of a clear and unambiguous order, and despite an ability to do so, did not comply with its terms. IdL; see also Project B.A.S.I.C. v. Kemp, 947 F.2d 11, 16 (1st Cir. 1991) () Therefore, the Court will first focus on the language of the Orders, and then on the conduct of Massotti and Cipolla
A
In order for the Court to find the parties Massotti and Cipolla in contempt, the Orders of the Court must be sufficiently clear. It is well-settled that to be enforceable by contemptproceedings the Orders must "be clear and certain and its terms should be sufficient to enable one reading [it] to learn therefrom what he may or may not do thereunder." Lead Industries, Ass'n, Inc., 951 A.2d at 465 (quoting Ventures Management Co. v. Geruso, 434 A.2d 252, 254 (R.I. 1981)). Further, the terms of the order must be "specific, clear and precise so that one need not resort to inference or implications to ascertain his duty or obligation thereunder." Id.. Accordingly, an enjoined party "should not be punished for disobedience of an order which is capable of a construction consistent with innocence." Ventures Management Co., 434 A.2d at 255 (quoting Sunbeam Corp. v. Ross-Simons, Inc., 86 R.I. 189, 194, 134 A.2d 160, 162-63 (R.I. 1957)).
The Order appointing the Temporary Receiver states that the "Receiver is authorized to take possession and charge of the property and assets of [Speidel], to collect the debts and property belonging to it and to preserve the same until further Order of this Court." (Ex. 1.) The Order appointing the Permanent Receiver uses similar language, stating that the Receiver "is authorized, empowered and directed to take possession and charge of [the] estate, assets, property and business of [Speidel]." (Ex. 2.) Under the Orders, the designated Receiver is also authorized "to conduct the business of [Speidel]" as he deems appropriate and advisable. Further, with the exact same language, the Orders restrain and enjoin "any creditor, stockholder, corporation, partnership or any other person" from "taking or attempting to take into possession any property in the possession of [Speidel] or of which [Speidel] has the right to possession." Moreover, the Orders prohibit "the cancellation at any time during the Receivership proceeding herein of any insurance policy, lease, or other contract with [Speidel], by any of such parties as aforesaid, other than the Receiver designated...."
A review of the relevant portions of the Orders at issue reveals no ambiguity. The terms are sufficiently "specific, clear, and precise" to put individuals on notice as to what conduct is both prohibited and required. See Lead Industries, Ass'n, Inc., 951 A.2d at 467. Under the express terms of both Orders, any person, other than the Receiver, is prohibited from taking or attempting to take the property of Speidel or the property to which Speidel has legal rights, clearly prohibiting the conversion of receivership estate assets. Further, the Orders clearly establish that only the Receiver is authorized to possess and control the assets of Speidel as well as cancel any of its contracts.
The evidence before the Court reveals that Massotti and Cipolla both received a copy of the Orders in the mail. As indicated supra, the Order appointing the Temporary Receiver was issued on June 26 and the Order appointing the Permanent Receiver was issued on July 16. (Exs. 1, 2.) However, beginning June 30 there were several email communications sent by Massotti and Cipolla attempting to enter into new distribution agreements to replace the current agreements held by Speidel. In email communications beginning on June 30, and continuing until July 15, Cipolla approached Continental Holdings Ltd. about entering into a new agreement with Choicelines to distribute the Amore & Baci collections, which were then distributed by Speidel. (Ex. 4.) The communications do not simply request a new business relationship, but state that the "current owner of Speidel has walked away from the company and has put it into Receivership here in Rhode Island." (Ex. 4.) According to testimony before the Court, counsel for the Receiver considered the Amore & Baci distribution agreement to be an asset of the receivership, and the Receiver never had any discussions in regard to terminating such agreement. (Tr. November 20, 2009 19:4-6, 19-23.)
Similarly, at the time of the receivership, Speidel had an...
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