Judge Holds Private, Board Directors in Contempt, Issues Fines

LAS VEGAS, Nev.—Nevada District Court Judge Kenneth C. Cory issued an order Wednesday in Consipio v. Private that found Private Media Group and four members of the Private Board of Directors in contempt of court “for 18 days of disobedience to the clear and unambiguous order of the court.” The order levies an overall fine of $360,000 against the parties, to be applied to the above four directors individually and also to Private as a corporate entity, with each ordered to pay $72,000, and also awards to the plaintiffs attorneys' fees incurred since Nov. 18, 2010.

However, the contempt order appears to be in direct conflict with an order issued one day earlier by the Supreme Court of Nevada granting a temporary stay of the lower court’s contempt proceedings against Berth Milton. Milton, who is claiming that the court does not have personal jurisdiction over him, is one of the four directors found to be personally liable by Judge Cory. Also, in March of this year, District Court Judge Elizabeth Gonzalez, the presiding judge in Consipio v Private, granted motions seeking the dismissal from the case of two other directors fined this week by Judge Cory, Bo Rodebrant and Peter Dixinger, after determining that the court did not have personal jurisdiction over them.

AVN contacted Judge Cory’s executive assistant for an explanation of the apparent conflict with the Supreme Court directive, and was told that the judge was unaware of the stay, which was sent to Judge Gonzalez by the Supreme Court upon issuance of the stay. (AVN was also told by the assistant that a judge other than the presiding judge always issues rulings in contempt proceedings, which is why it was issued by Judge Cory and not Judge Gonzalez.)

AVN asked which order trumps the other, and was told that, as expected, the Supreme Court stay is the controlling authority. When asked what would happen next, the judge’s assistant said that she would first need to notify Judge Cory, who was currently in trial, of the stay. She could not say what he would do with the information. She also requested AVN to send her a copy of the stay to show the judge, which was promptly done.

In the email containing the requested stay order, AVN also asked for a clarification regarding the fines levied against directors Rodebrant and Dixinger, who had previously been found to be outside the personal jurisdiction of the very same court. The judge’s assistant was not sure when she would be able to bring these questions to Judge Cory's attention, or whether an answer could be provided before the weekend. AVN also contacted an assistant for Judge Gonzalez, who had no information regarding Judge Cory's involvement or whether the stay issued by the Supreme Court had been forwarded to Judge Cory's office.

The order by Judge Cory also contains Findings of Fact and Conclusions of Law that purportedly support the contempt order. In part, the Finding of Fact section states, “Throughout the course of this lawsuit, [Private] has demonstrated a propensity for disregarding or resisting clear and unambiguous orders of this Court. Most egregiously, as set forth in the Court's June 20 Order, [Private] knowingly disobeyed the Court's October 21, 2010 Order, causing Consipio to be disenfranchised of its right to vote 3,950,000 [Private] shares at the 2010 annual shareholder meeting.”

According to Judge Cory's order, the failure by Private to comply with the Oct. 21 order resulted in the eventual invalidation of the results of the November 2010 shareholder election of the Private board of directors, the retention of control by CEO Berth Milton of the company, the time-consuming and expensive ordering of a new election, as well as the substantial and unnecessary attorneys fees and other costs that were subsequently incurred by the plaintiffs. According to Judge Cory, the abovementioned disobedience and resistance by Private to orders by the court was “willful and in open contempt of the lawful Order of the Court.”

Whether Judge Cory’s contempt order remains valid in whole or part in light of the Supreme Court stay remains to be seen. In any event, the high court, which earlier this month denied a motion by the plaintiffs seeking an emergency stay of the lower court’s appointment of Eric Johnson as receiver to oversee all of Private Media Group’s assets and subsidiaries, has agreed to address the underlying issues in the case—including the appointment by Judge Gonzalez of the receiver, the contested ownership of the Consipio shares and whether the court has personal jurisdiction over Berth Milton—during a hearing by the court following an expedited briefing schedule giving the parties 30 days from Sept. 16 in which to submit arguments.

According to that timeline, by about Oct. 15 the Supreme Court should have all the information it needs to render decisions on the outstanding issues contained in the four actions appearing on its docket that involve the various parties in Consipio v Private.

AVN contacted lawyers for the various parties for comment but had received no replies by post time. The attorney for Eric Johnson has told AVN that they do not discuss ongoing litigation or receivership matters with the media.

The Sept. 26 Nevada Supreme Court Grant of Temporary Stay can be accessed here.

The Sept. 27 Contempt Order by Judge Cory can be accessed here.