Court Holds Defendants In Contempt For Failure To Segregate Funds

In a Decision and Order dated July 29, 2022, in Lotte Hotel New York Palace, LLC v. Anthony J. DiGuiseppe, P.C., 2022 N.Y. Slip Op. 32606(U), Justice Andrea Masley held defendants in contempt regarding their failure to place certain funds in a segregated account. The Court further awarded plaintiff sanctions against the defendants in the amount of plaintiff's costs and reasonable attorney's fees incurred in prosecuting the action. The Court explained:

The court finds defendants in contempt for their evasive behavior, untruthfulness, and wanton disregard for this court's orders. As confirmed by DiGuiseppe's own admission and documentary evidence, plaintiff's funds were only “segregated” in the sense that they were transferred out of DiGuiseppe's control into Africa's banking system where they are now frozen. DiGuiseppe had the knowledge and information about the procurement funds throughout these proceedings. Defendants' conduct is appalling. Therefore, defendants are to be held in civil contempt. The court directs defendants to pay a fine in the amount of $500 a day until defendants comply with this court's order placing the funds into a segregated account which shall begin on July 22, 2022

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Defendants wasted two years of the Court's and plaintiff's time with their deceptive conduct concerning the whereabouts of plaintiff's procurement funds. For the numerous reasons outlined above, the Court awards sanctions against the defendants in the amount of plaintiff's costs and reasonable attorney's fees incurred in prosecuting this action after the complaint was filed.

The attorneys at Schlam Stone & Dolan frequently litigate issues regarding sanctions. Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning such disputes.