17‐1507‐cv Arrowhead Capital Fin., Ltd. v. Seven Arts Entmʹt, Inc., et al.
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURTʹS LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION ʺSUMMARY ORDERʺ). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 29th day of June two thousand eighteen.
PRESENT: RICHARD C. WESLEY, DENNY CHIN, Circuit Judges, DENISE COTE, District Judge.*
‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐x
ARROWHEAD CAPITAL FINANCE, LTD., Plaintiff‐Appellee,
v. 17‐1507‐cv
SEVEN ARTS ENTERTAINMENT, INC. and SEVEN ARTS FILMED ENTERTAINMENT LOUISIANA LLC, Defendants‐Appellants.
‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐x
* Denise Cote, United States District Judge for the Southern District of New York, sitting by designation.
FOR PLAINTIFF‐APPELLEE: BARRY L. GOLDIN, ESQ., Allentown, Pennsylvania.
FOR DEFENDANTS‐APPELLANTS: RAYMOND J. MARKOVICH, ESQ., West Hollywood, California.
Appeal from the United States District Court for the Southern District of
New York (Failla, J.).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED that the judgment of the district court is AFFIRMED.
Defendants‐appellants Seven Arts Entertainment, Inc. (ʺSAEʺ) and Seven
Arts Filmed Entertainment Louisiana LLC (ʺSAFELAʺ) appeal from a judgment entered
June 5, 2018, in favor of plaintiff‐appellee Arrowhead Capital Finance, Ltd.
(ʺArrowheadʺ). On May 30, 2018, we remanded the case to the district court pursuant
to United States v. Jacobson, 15 F.3d 19, 22 (2d Cir. 1994), for further proceedings because
of the absence of an appealable judgment. On remand, the district court entered a
revised judgment. At Arrowheadʹs request, we reinstated the appeal.
The instant judgment follows a May 3, 2017 judgment and a September 16,
2016 opinion and order granting in part and denying in part Arrowheadʹs motion for
summary judgment, denying defendantsʹ cross‐motion for summary judgment, and
imposing sanctions on defendants and their counsel, as well as a May 2, 2017 opinion
and order denying Arrowheadʹs motion to strike SAEʹs answer and for the entry of a
default judgment, granting Arrowheadʹs motion to strike SAFELAʹs answer and for the 2
entry of a default judgment, and denying without prejudice Arrowheadʹs motion for
turnover, attachment, and restraint. We assume the partiesʹ familiarity with the
underlying facts, procedural history, and issues on appeal.
Defendants are film companies managed by Peter Hoffman. Over the last
several years, Hoffman has established or managed a number of enterprises utilizing
the words ʺSeven Artsʺ in their names. The first of these was Seven Arts Pictures, Inc.
(ʺSAPʺ). Later, Hoffman established or controlled Seven Arts Pictures PLC (ʺPLCʺ),
Seven Arts Filmed Entertainment Limited (ʺSAFEʺ), Seven Arts Pictures Louisiana LLC
(ʺSAPLAʺ), and SAFELA. Hoffman oversaw many transactions among these
enterprises, including several asset transfers and the redomicile of PLC through the
transfer of all assets from United Kingdom‐based PLC to SAE, a Nevada‐based
corporation. As a result, PLC and SAFE were left without any assets and insolvency
proceedings were initiated against them in the United Kingdom.
In December 2006, Hoffman entered into a loan agreement on behalf of
SAP, PLC, and SAFE with Arrowhead Consulting Group, LLC, for the sum of one
million dollars. The Seven Arts entities defaulted on this note and remain in default.
The note was later assigned to Arrowhead. After successful state court litigation,
Arrowhead obtained a final order and judgment holding SAP and SAFE jointly and
severally liable to Arrowhead for approximately $2.5 million. Arrowheadʹs claim
against PLC was to proceed separately. The judgment was upheld on appeal. See
Arrowhead Capital Fin., Ltd. v. Seven Arts Pictures PLC, 972 N.Y.S.2d 899 (1st Depʹt 2013).
Arrowhead, however, was unable to enforce the judgment because SAP had sold all its
assets to SAFE, which in turn sold them to SAE.
Subsequently, Arrowhead brought a second suit ‐‐ the instant case ‐‐
against SAE and SAFELA as successors in liability to SAP and SAFE. As the case
progressed through discovery, issues arose. The district court became increasingly
concerned with defendantsʹ lack of cooperation in discovery. Defendants continued to
block Arrowheadʹs attempts at discovery and failed to comply with the district courtʹs
discovery plan. The parties filed cross motions for summary judgment.
The district court denied Arrowheadʹs motion for summary judgment in
part and granted it in part, declining to conclude at that point that SAFELA was liable
on the note or judgment, concluding that Arrowhead was entitled to a declaration that
SAE is liable on the note to the same extent as SAFE. Additionally, after defendants
continued to fail to comply with discovery orders, the district court sanctioned
defendants, holding that they had waived any personal jurisdiction defense, and denied
their motion for summary judgment. Financial sanctions were also imposed and
Hoffman was found in contempt of court.1
1 Though defense counsel was also sanctioned, the sanctions were removed after the district court granted defendantsʹ motion for reconsideration in part. 4
As the remaining claims proceeded toward trial, defendantsʹ
obstructionism continued. Consequently, the district court granted Arrowheadʹs Rule
37 motion to strike SAFELAʹs answer and enter judgment in Arrowheadʹs favor. See
Fed. R. Civ. P. 37. The court also imposed additional financial sanctions on defendants.
Defendants appealed, but we determined that we lacked appellate jurisdiction and
remanded the case. The district court issued its revised judgment, and this renewed
appeal followed.
We review de novo a district courtʹs grant of summary judgment,
ʺconstruing the evidence in the light most favorable to the non‐moving party and
drawing all reasonable inferences in its favor.ʺ Mitchell v. City of New York, 841 F.3d 72,
77 (2d Cir. 2016) (internal quotation marks omitted). We review a district courtʹs
imposition of sanctions for abuse of discretion. SEC v. Razmilovic, 738 F.3d 14, 25 (2d
Cir. 2013) (ʺAn abuse of discretion may consist of an erroneous view of the law, a
clearly erroneous assessment of the facts, or a decision that cannot be located within the
range of permissible decisions.ʺ). We conclude that defendantsʹ appeal is without
merit.
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17‐1507‐cv Arrowhead Capital Fin., Ltd. v. Seven Arts Entmʹt, Inc., et al.
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURTʹS LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION ʺSUMMARY ORDERʺ). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 29th day of June two thousand eighteen.
PRESENT: RICHARD C. WESLEY, DENNY CHIN, Circuit Judges, DENISE COTE, District Judge.*
‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐x
ARROWHEAD CAPITAL FINANCE, LTD., Plaintiff‐Appellee,
v. 17‐1507‐cv
SEVEN ARTS ENTERTAINMENT, INC. and SEVEN ARTS FILMED ENTERTAINMENT LOUISIANA LLC, Defendants‐Appellants.
‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐x
* Denise Cote, United States District Judge for the Southern District of New York, sitting by designation.
FOR PLAINTIFF‐APPELLEE: BARRY L. GOLDIN, ESQ., Allentown, Pennsylvania.
FOR DEFENDANTS‐APPELLANTS: RAYMOND J. MARKOVICH, ESQ., West Hollywood, California.
Appeal from the United States District Court for the Southern District of
New York (Failla, J.).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED that the judgment of the district court is AFFIRMED.
Defendants‐appellants Seven Arts Entertainment, Inc. (ʺSAEʺ) and Seven
Arts Filmed Entertainment Louisiana LLC (ʺSAFELAʺ) appeal from a judgment entered
June 5, 2018, in favor of plaintiff‐appellee Arrowhead Capital Finance, Ltd.
(ʺArrowheadʺ). On May 30, 2018, we remanded the case to the district court pursuant
to United States v. Jacobson, 15 F.3d 19, 22 (2d Cir. 1994), for further proceedings because
of the absence of an appealable judgment. On remand, the district court entered a
revised judgment. At Arrowheadʹs request, we reinstated the appeal.
The instant judgment follows a May 3, 2017 judgment and a September 16,
2016 opinion and order granting in part and denying in part Arrowheadʹs motion for
summary judgment, denying defendantsʹ cross‐motion for summary judgment, and
imposing sanctions on defendants and their counsel, as well as a May 2, 2017 opinion
and order denying Arrowheadʹs motion to strike SAEʹs answer and for the entry of a
default judgment, granting Arrowheadʹs motion to strike SAFELAʹs answer and for the 2
entry of a default judgment, and denying without prejudice Arrowheadʹs motion for
turnover, attachment, and restraint. We assume the partiesʹ familiarity with the
underlying facts, procedural history, and issues on appeal.
Defendants are film companies managed by Peter Hoffman. Over the last
several years, Hoffman has established or managed a number of enterprises utilizing
the words ʺSeven Artsʺ in their names. The first of these was Seven Arts Pictures, Inc.
(ʺSAPʺ). Later, Hoffman established or controlled Seven Arts Pictures PLC (ʺPLCʺ),
Seven Arts Filmed Entertainment Limited (ʺSAFEʺ), Seven Arts Pictures Louisiana LLC
(ʺSAPLAʺ), and SAFELA. Hoffman oversaw many transactions among these
enterprises, including several asset transfers and the redomicile of PLC through the
transfer of all assets from United Kingdom‐based PLC to SAE, a Nevada‐based
corporation. As a result, PLC and SAFE were left without any assets and insolvency
proceedings were initiated against them in the United Kingdom.
In December 2006, Hoffman entered into a loan agreement on behalf of
SAP, PLC, and SAFE with Arrowhead Consulting Group, LLC, for the sum of one
million dollars. The Seven Arts entities defaulted on this note and remain in default.
The note was later assigned to Arrowhead. After successful state court litigation,
Arrowhead obtained a final order and judgment holding SAP and SAFE jointly and
severally liable to Arrowhead for approximately $2.5 million. Arrowheadʹs claim
against PLC was to proceed separately. The judgment was upheld on appeal. See
Arrowhead Capital Fin., Ltd. v. Seven Arts Pictures PLC, 972 N.Y.S.2d 899 (1st Depʹt 2013).
Arrowhead, however, was unable to enforce the judgment because SAP had sold all its
assets to SAFE, which in turn sold them to SAE.
Subsequently, Arrowhead brought a second suit ‐‐ the instant case ‐‐
against SAE and SAFELA as successors in liability to SAP and SAFE. As the case
progressed through discovery, issues arose. The district court became increasingly
concerned with defendantsʹ lack of cooperation in discovery. Defendants continued to
block Arrowheadʹs attempts at discovery and failed to comply with the district courtʹs
discovery plan. The parties filed cross motions for summary judgment.
The district court denied Arrowheadʹs motion for summary judgment in
part and granted it in part, declining to conclude at that point that SAFELA was liable
on the note or judgment, concluding that Arrowhead was entitled to a declaration that
SAE is liable on the note to the same extent as SAFE. Additionally, after defendants
continued to fail to comply with discovery orders, the district court sanctioned
defendants, holding that they had waived any personal jurisdiction defense, and denied
their motion for summary judgment. Financial sanctions were also imposed and
Hoffman was found in contempt of court.1
1 Though defense counsel was also sanctioned, the sanctions were removed after the district court granted defendantsʹ motion for reconsideration in part. 4
As the remaining claims proceeded toward trial, defendantsʹ
obstructionism continued. Consequently, the district court granted Arrowheadʹs Rule
37 motion to strike SAFELAʹs answer and enter judgment in Arrowheadʹs favor. See
Fed. R. Civ. P. 37. The court also imposed additional financial sanctions on defendants.
Defendants appealed, but we determined that we lacked appellate jurisdiction and
remanded the case. The district court issued its revised judgment, and this renewed
appeal followed.
We review de novo a district courtʹs grant of summary judgment,
ʺconstruing the evidence in the light most favorable to the non‐moving party and
drawing all reasonable inferences in its favor.ʺ Mitchell v. City of New York, 841 F.3d 72,
77 (2d Cir. 2016) (internal quotation marks omitted). We review a district courtʹs
imposition of sanctions for abuse of discretion. SEC v. Razmilovic, 738 F.3d 14, 25 (2d
Cir. 2013) (ʺAn abuse of discretion may consist of an erroneous view of the law, a
clearly erroneous assessment of the facts, or a decision that cannot be located within the
range of permissible decisions.ʺ). We conclude that defendantsʹ appeal is without
merit.
First, defendants suggest that claim preclusion, based on the underlying
state action, blocks Arrowhead from proceeding. Under New York law, however, a
judgment against one of several obligors who are jointly and severally liable does not
block a separate action against another obligor. N.Y. Gen. Oblig. § 15‐102; see also
Kirshtein v. Balio, 605 N.Y.S.2d 165 (3d Depʹt 1993). Additionally, at the time the state
suit was filed Arrowhead did not have claims against SAE and SAFELA because SAE
and SAFELA did not receive PLCʹs assets until after Arrowhead brought its initial
claims.
Defendants next contend that the district courtʹs ruling violates the
automatic stay applicable to PLC through its related bankruptcy proceeding. The
bankruptcy case, however, was closed, ending the automatic stay, on November 23,
2015, well before the district courtʹs order and opinion in September 2016. 11 U.S.C.
§ 362(c)(2)(A).
Additionally, defendants challenge the district courtʹs finding of a de facto
merger between SAE and PLC. This argument is without merit. Substantial evidence
supported the district courtʹs conclusion that Arrowhead sufficiently established the
requisite hallmarks of a de facto merger between SAE and PLC, and between SAE and
SAFE (e.g., a continuity of ownership, complete transfer of assets, subsequent
liquidation, and a continuity of management, assets, and business operations). Cargo
Partner AG v. Albatrans, Inc., 352 F.3d 41, 46‐7 (2d Cir. 2003). Even if the amended
complaint did not use the words ʺde facto merger,ʺ it sufficiently pled facts establishing
such a conclusion based on the transfer of assets from PLC to SAE.
Defendants also challenge the district courtʹs imposition of sanctions. The
district court, however, did not abuse its discretion in imposing sanctions. Hoffman
and the ʺSeven Artsʺ entities controlled by Hoffman repeatedly failed to comply with
their discovery obligations. Moreover, they have engaged in similar misconduct before
other tribunals. See Seven Arts Pictures PLC v. Jonesfilm, 311 F. Appʹx 962, 965 (9th Cir.
2009); Seven Arts Pictures, Inc. v. Jonesfilm, 512 F. Appʹx 419 (5th Cir. 2013); Seven Arts
Filmed Entmʹt Ltd. v. Jonesfilm, 538 F. Appʹx 444 (5th Cir. 2013); App. 1371 (violation of
arbitration order); Hoffman v. Salke, 2008 WL 2895966 (Cal. Ct. App. July 29, 2008)
(unpublished state court decision imposing sanctions). Here, defendants engaged in a
pattern of obstructionism that prevented Arrowhead from effectively litigating its
claims. The district courtʹs sanctions were not an abuse of discretion. See Fed. R. Civ. P.
37; Guggenheim Capital, LLC v. Birnbaum, 722 F.3d 444, 450‐51 (2d Cir. 2013).
Defendants argue that the June 5 judgment is not a proper final judgment
‐‐ noting that causes of action three through eight were dismissed without prejudice.
This is incorrect. The judgment provides that causes of action three through eight were
abandoned without prejudice only as to Arrowheadʹs claims for post‐judgment relief
and its claims against other persons or entities. The claims were deemed abandoned
with prejudice, at least implicitly, as to defendants.
We have considered all of the defendantsʹ remaining arguments and
conclude they are without merit. Accordingly, we AFFIRM the judgment of the district
court.
FOR THE COURT: Catherine OʹHagan Wolfe, Clerk 7