Glanz v. Mendelson

COURT OF APPEALS OF VIRGINIA

Present: Chief Judge Fitzpatrick, Judges Coleman and Annunziata
Argued by teleconference

DANIEL J. GLANZ
OPINION BY
v. Record No. 0143-00-4 JUDGE ROSEMARIE ANNUNZIATA
DECEMBER 19, 2000
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

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

1
Specifically, we do not address under what circumstances
and to what extent a trial court may limit an attorney's

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 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

representation of his or her client, nor do we address Glanz's
allegations concerning the remedies imposed by the trial court.

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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

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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

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.

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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

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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.

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

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 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

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

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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

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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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,

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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,

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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

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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

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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,

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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."

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 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.

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