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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