Opinion
No. 03 CIV. 1168 (DLC).
March 29, 2005
Gregory Antollino, New York, NY, for Plaintiff.
David Dorfman, New York, New York, for Defendant.
OPINION AND ORDER
In 1999, a judgment of $403,000 was entered against the defendant, David A. Dorfman ("Dorfman"), who is an attorney. Dorfman has taken a series of steps to evade payment of the amount he owes the plaintiff, Ricky Baker ("Baker"). This Opinion addresses Baker's recent efforts to collect the money defendant owes under a Stipulation and Order of May 1, 2003 ("May 2003 Stipulation").
On June 2, 2004, Baker filed a motion for summary judgment pursuant to Fed.R.Civ.P. 56 seeking enforcement of the May 2003 Stipulation. On June 7, the motion was referred to Magistrate Judge Kevin N. Fox for preparation of a Report and Recommendation (the "Report") pursuant to 28 U.S.C. § 636(b). The Report was issued on January 3, 2005. For the reasons stated below, the Report is adopted.
Background
To place this motion in context, it is helpful to summarize the tortured history of this litigation. In April 1993, Baker went to Cabrini Hospital in Manhattan to be tested for HIV. His blood sample was sent to the Department of Health of the City of New York ("DOH"). Baker was notified he was HIV-positive and was treated for HIV for approximately nine months, until he was called back to the hospital for further testing. In January 1994, Baker was informed that the DOH had confused his blood specimen during the testing process, and that his second test revealed that he was in fact HIV-negative. Baker immediately hired Dorfman to bring a negligence lawsuit against the City of New York. Dorfman failed to file Baker's claim in a timely fashion. Consequently, the Supreme Court of the County of New York dismissed Baker's claim against the City. Malpractice Action
The dismissal was affirmed by the Appellate Division.
Dorfman's failure to comply with the applicable statute of limitations period was the basis for Baker's legal malpractice suit, which was filed on October 9, 1997. In an Opinion of September 17, 1998, Baker's motion for partial summary judgment was granted, establishing Dorfman's liability for legal malpractice. Baker v. Dorfman, No. 97 Civ. 7512 (DLC), 1998 WL 642762, at *1 (S.D.N.Y. Sept. 17, 1998). A jury trial was held in November 1998, and the jury found that Dorfman had also committed fraud through patent falsehoods and misrepresentations designed to portray himself as an experienced litigator. Baker v. Dorfman, No. 97 Civ. 7512 (DLC), 1999 WL 191531, at *7 (S.D.N.Y. Apr. 6, 1999). Judgment was entered on November 30, 1998, awarding Baker $385,000 in damages. The Court amended the amount on April 5, 1999 to include $11,178.05 in legal expenses and $7,312.50 in prejudgment interest. The final judgment totaled over $403,000. Dorfman appealed, and the judgment was affirmed.
Litigation Over PLLC
Three days after the amended judgment was entered, Dorfman established a new entity, David A. Dorfman, P.L.L.C. (" PLLC"). On September 1, 1999, Baker brought an action against the PLLC in an effort to collect the judgment. During 1999, Dorfman paid a total of no more than $2,280.21 toward the judgment. Baker v. Dorfman, No. 99 Civ. 9385 (DLC), 2000 WL 1010285, at *1 (S.D.N.Y. July 21, 2000). Baker sought relief from the Court because he was incapable of executing the judgment against the PLLC, and all of Dorfman's business assets were now flowing through accounts under the PLLC's name.
In an Opinion of July 21, 2000, Baker's motion for summary judgment to allow him to enforce the judgment against either Dorfman or the PLLC was granted. Id. at *6. The Opinion found that the PLLC was a successor in interest to Dorfman. Id. It observed that the facts strongly supported the inference that the PLLC was formed "as a fraudulent attempt" to escape Dorfman's obligations to Baker. Id. As described in the Opinion, Dorfman's annual income in 1999 was $50,000. As of February 2000, he was earning $72,000 annually. He was paying employees aggregate pay of $150,000 to $200,000 and accounting fees of $13,000 per year. Id. at *3. The Opinion granted Baker a 75% interest in the PLLC, and appointed plaintiff's attorney the receiver of the PLLC. Id. at *7. The Second Circuit Court of Appeals affirmed this Order, although it remanded for reconsideration an issue of attorney-client privilege. See Baker v. Dorfman, No. 99 Civ. 9385 (DLC), 2001 WL 55437 (S.D.N.Y. Jan. 23, 2001).
2001 Contempt Proceeding and Bankruptcy
On June 1, 2001, Baker filed a contempt motion, which was brought before Magistrate Judge Fox. At the hearing, Baker agreed to give Dorfman one more chance to comply with the judgment. After Dorfman defaulted on more payments, a second contempt hearing was scheduled for July 15, 2001. On the day of the hearing, Dorfman informed the court that both he and the PLLC had filed for bankruptcy protection the day before.
The bankruptcy court immediately ordered the parties into mediation. The process was time-consuming and costly for both sides. On April 29, 2002, the parties came to an agreement that was endorsed by the bankruptcy court (the "Bankruptcy Stipulation"). The Bankruptcy Stipulation had a detailed schedule of payments that hinged on Dorfman's income.
Dorfman defaulted on the Bankruptcy Stipulation in both May and June 2002. Instead of issuing the required bi-weekly payments of $310.62, he made three payments of $276. In both instances, Baker's attorney sent letters to Dorfman restating his obligations under the Bankruptcy Stipulation. As of December 2002, the Bankruptcy Stipulation required Dorfman to increase his monthly payments to $1,310.44. In January 2003, defendant defaulted by paying only $621.24.
$621.24 was the specified monthly amount for the first seven months after the Bankruptcy Stipulation.
In March 2003, Baker filed a motion for summary judgment to require Dorfman to make the payments required under the Bankruptcy Stipulation. Baker also requested a schedule for payment of the amount Dorfman was in arrears. On May 1, 2003, the parties consented to a Stipulation and Order ("May 2003 Stipulation") whereby Dorfman agreed 1) to make the $1,310.44 monthly payment required under the Bankruptcy Stipulation ("Primary Payments"), 2) starting in June 2003, to submit four monthly payments of $1,000 ("Arrears Payments"), for a total of $4,000, representing the approximate amount he was in arrears, and 3) from October 2003 through May 2004, to pay an extra $1,000 per month ("Supplemental Payments") in addition to the Primary Payment. Baker was also permitted to collect an additional $12,000 from Dorfman in exchange for Baker's agreement not to pursue a reinstatement of the underlying legal malpractice judgment.
2004 Enforcement Action
On June 2, 2004, Baker filed a motion for summary judgment pursuant to Rule 56, Fed.R.Civ.P., seeking enforcement of the May 2003 Stipulation. As noted, the motion was referred to Magistrate Judge Fox. Judge Fox converted the summary judgment motion into a motion for enforcement of the May 2003 Stipulation pursuant to the contempt power of the Court.
In his memorandum of law, Baker claimed that Dorfman had defaulted on May 2003 Stipulation since June 2003 by failing to pay Dorfman the agreed Arrears Payments and, later, the Supplemental Payments. Moreover, since August 2003, Dorfman had submitted only bi-weekly payments of $310.62 instead of the required Primary Payment of $1,310.44. Dorfman submitted a June 22, 2004 affidavit in opposition to the motion requesting a return to mediation. He argued that his income from June 2003 to June 2004 had decreased by more than one quarter, but he provided no documentation, or even specification, of his income for this period. He also claimed to have incurred medical expenses from a November 2002 assault, although he did not list the amount of these expenses or include documentation of them. Nor did Dorfman dispute that he had not paid Baker according to the terms of the May 2003 Stipulation.
The Magistrate's Report considered, inter alia, Dorfman's reported income in 2001 and 2002, reflected in tax returns that Baker had provided to the Court. Dorfman's tax returns reflected income of $86,963 for 2001 and $84,738 for 2002. His gross receipts amounted to $420,525 in 2001 and $443,364 in 2002. As Baker pointed out in his memorandum of law, the tax returns showed that Dorfman had also contributed $4,566 to charitable organizations in those years. They also contained some eyebrow-raising expenditures; for example, $13,821 was allocated on Schedule C of Dorfman's 2002 business tax form to "taxis local fares." Judge Fox recommended that Dorfman be ordered to make all future payments required by the May 2003 Stipulation and to make monthly arrears payments of $1,000.
On January 17, 2005, Dorfman made a timely objection to the Report. The objection requests further mediation to revisit the amount owed. Dorfman represents that he can no longer pay according to the schedule established by the May 2003 Stipulation. Dorfman submitted a W-2 statement for 2004 reflecting wages of $48,655.62, a decrease in income from $83,941 in 2002. Since August 2003, Dorfman has sent bi-weekly checks of $310.62 to Baker, an amount that Dorfman claims is ten percent of his salary. He contends that this amount is sufficient despite the requirement under the Bankruptcy Stipulation, which was reiterated in the May 2003 Stipulation, that he pay Dorfman $1,310.44 per month.
Neither party has submitted documentation of Dorfman's 2003 income.
Discussion
In reviewing the Report, a district court "may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge." 28 U.S.C. § 636(b)(1)(c). The portion of a Magistrate Judge's report to which objections are made is reviewed de novo. United States v. Male Juvenile, 121 F.3d 34, 38 (2d Cir. 1997).
Dorfman has not challenged the legal analysis contained in Judge Fox's Report. Rather, in his objection, he essentially takes issue with Judge Fox's factual determinations. Dorfman does not deny that, as detailed above, he has continually defaulted on his payments to Baker, but he maintains that he is unable to pay the amount he owes under the May 2003 Stipulation. He provided absolutely no documentation of his current income in opposition to Baker's June 2, 2004 motion, not even a 2003 federal income tax return. Dorfman did not even attempt to specify his income in the three-page affidavit he submitted as opposition to the motion, but instead vaguely averred to the fact that his income "ha[d] been reduced by more than one quarter." As the party seeking to extricate himself from the requirements of the May 2003 Stipulation, which he undisputedly had failed to meet at the time Baker filed his motion and continues to evade now, Dorfman had the burden of submitting proof that he was unable to pay the specified amounts. A vague, unsubstantiated statement does not meet that burden.
Dorfman submitted a 2004 W-2 form with his January 17 objection to the Report, but the submission provides too little information and comes too late. The W-2 form reports only personal income, not income from Dorfman's law practice. Moreover, the W-2 is essentially self-generated, as Dorfman is self-employed. The Court will consider further submissions on Dorfman's part before it holds him in contempt, if, as seems increasingly likely, it is petitioned to do so, but the W-2 form does not suffice to excuse Dorfman from his payment obligations at this time. Because Judge Fox's Report correctly applied the relevant law, it is accepted and adopted. In accordance with the recommendations contained therein, it is hereby
ORDERED that Baker provide to Dorfman, by ten days from the date of this Order, a statement of the difference between the sum of all payments made to Baker by Dorfman in satisfaction of the Order and the sum of all payments previously due to Baker under the Order, as well as a calculation of interest computed on each overdue amount at an annual rate of 8% (collectively, "Arrears").
IT IS FURTHER ORDERED that Dorfman submit to the Court, within five days of service of the above-noted statement, any objection to the amount of Arrears stated herein.
IT IS FURTHER ORDERED that Dorfman tender to Baker, on the first day of each month following entry of this Order, all payments required during that month by the May 2003 Stipulation.
IT IS FURTHER ORDERED that Dorfman tender to Baker an additional monthly payment of $1,000, which should be applied toward the Arrears, and which is due on the first day of each month following entry of this Order, until such time as all Arrears have been discharged.
IT IS FURTHER ORDERED that, should Dorfman fail to comply with the Order entered today, Baker may promptly apply to the Court for an order to show cause why Dorfman should not be held in contempt.
SO ORDERED.