SKF USA, Inc. v. Zarwasch and Heza Seals, L.L.C.

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State: Ohio

Court: Ohio Southern District Court

Docket No: 2013-Ohio-2543

Case Date: 06/20/2013

Plaintiff: SKF USA, Inc.

Defendant: Zarwasch and Heza Seals, L.L.C.

Preview:[Cite as SKF USA, Inc. v. Zarwasch and Heza Seals, L.L.C., 2013-Ohio-2543.]
Court of Appeals of Ohio
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
JOURNAL ENTRY AND OPINION
No.                                                                           99232
SKF USA, INC.
PLAINTIFF-APPELLEE
vs.
ZARWASCH AND HEZA SEALS, L.L.C.
DEFENDANT-APPELLANT
JUDGMENT:
AFFIRMED
Civil Appeal from the
Cuyahoga County Court of Common Pleas
Case No. JL-12-475738
BEFORE:   E.A. Gallagher, J., Jones, P.J., and Keough, J.
RELEASED AND JOURNALIZED:     June 20, 2013

ATTORNEYS FOR APPELLANT
Thomas C. Pavlik
Rochelle L. Paley
Novak Pavlik Deliberato, L.L.P.
Skylight Office Tower
1660 West 2nd Street, Suite 950
Cleveland, OH                     44113
ATTORNEYS FOR APPELLEE
Harry W. Greenfield
Theodore M. Dunn, Jr.
Buckley King L.P.A.
1400 Fifth Third Center
600 Superior Avenue, East
Cleveland, OH                     44114
Stephen J. Sundheim
Justin J. Williams
Pepper Hamilton L.L.P.
3000 Two Logan Square
Eighteenth and Arch Streets
Philadelphia, PA                  19103

EILEEN A. GALLAGHER, J.:
{¶1}    Appellant,  Helmut  Zarwasch-Weiss,  appeals  from  the  decision  of  the
Cuyahoga County Court of Common Pleas wherein the trial court found him in contempt
of court and determined that the assets of A-S Holdings, Inc., and Austro Seal, L.L.C.,
were part of a court-ordered receivership.    Finding no merit to the instant appeal, we
affirm the decision of the trial court.
{¶2}    In early 2012, the United States District Court for the Northern District of
Ohio entered judgment for SKF USA Inc.  (“SKF”), and against appellant and Heza
Seals,  L.L.C.                                                                               (“Heza”),  in  the  amount  of   $771,085.62.    Appellant  was  the  owner,
president and managing member of Heza.    During the proceedings before the district
court, the court found that the appellant and Heza misappropriated SKF’s trade secrets
and  spoliated  evidence  on  several  occasions.    SKF  transferred  the judgment to the
Cuyahoga County Court of Common Pleas.
{¶3}    After initial attempts to collect the debt were unsuccessful, SKF moved the
court to appoint a receiver over Heza’s assets.    The trial court conducted a hearing and
appointed Robert Greenwald as receiver.    The receiver order instructed Mr. Greenwald
to take immediate control, possession, management and charge of records of Heza’s
accounting, assets and property.    During that same time period, SKF also attempted to
garnish appellant’s wages from Heza.
{¶4}    In August 2012, Mr. Greenwald reported to Heza’s facilities to begin his

duties under the receivership order.    Mr. Greenwald testified that he knocked on the
front door numerous times with no response and then walked around to the back of the
building in which he entered through an open overhead door.    An employee retrieved
the appellant and Mr. Greenwald introduced himself, handed the appellant a copy of the
receiver order and followed appellant to the office.    Mr. Greenwald testified that he
explained to appellant that he was there to take peaceful possession of Heza pursuant to
the order.    Mr. Greenwald reported that appellant responded by stating “Heza Seal no
longer exists and had [Greenwald] done [his] homework [he] would have known that and
[he] would have known that there aren’t any assets left.”    Tr. 58.
{¶5}    Mr. Greenwald testified that appellant refused to provide any information
about Heza other than that it closed a while ago and the assets had been transferred to a
new company.    When he asked for proof of the closure and transfer, appellant told Mr.
Greenwald that the documents did not exist.    Appellant did offer Mr. Greenwald what
he called “the remaining assets” of Heza, which were on a pallet.    Appellant refused to
confirm whether the pallet contained items such as customer lists or intellectual property.
Additionally,  appellant  refused  to  answer  Mr.  Greenwald’s  questions  about  the
ownership of the machines and equipment that he saw were still operating.    After less
than one hour, appellant told Mr. Greenwald that the conversation was finished and told
him to leave.
{¶6}    Mr. Greenwald returned later that same day with police assistance.    Mr.
Greenwald informed the police of the receiver order and asked for their assistance in

conducting his duties.    Appellant showed the police officers documents regarding the
new company and the transfer of assets, documents that appellant had previously told
Mr. Greenwald did not exist.    The officers advised appellant to cooperate and handed
the  incorporation  papers  to  Mr.  Greenwald.    However,  before  he  could  review  the
documents,  appellant  took  them  back.    The  officers  did  not  get  involved  and  Mr.
Greenwald was only able to recover the material on the pallet  — partial accounting
records,  the  alleged  remaining  inventory,  books  and  records  including  some  of  the
financials and payroll records.
{¶7}    Mr.  Greenwald  testified  that  he  reviewed  the  records  and  found
discrepancies in the payroll records, including payments that directly benefitted appellant
and his wife.    Additionally, Mr. Greenwald uncovered a second bank account used by
Heza at Ohio Commerce Bank.    Mr. Greenwald learned that Heza processed $10,000 to
$40,000 per month in deposits and disbursements through this Ohio Commerce account,
including payments for payroll, suppliers, vendors and payments to appellant’s wife,
Adelaida  Zarwasch.     Without  Mr.  Greenwald’s  knowledge,  and  after  the  court’s
receivership order, appellant liquidated and closed the Ohio Commerce Bank account.
{¶8}    SKF conducted a deposition of appellant’s wife wherein SKF learned more
about the transfer of Heza’s assets.    Mrs. Zarwasch testified that Roland Zarwasch, the
appellant’s brother who lives in Austria, started a company called A-S Holding Co., Inc.,
that is owned by a trust.    Mrs. Zarwasch explained that she is the trust’s beneficiary and
Roland Zarwasch is the trustee.    Mrs. Zarwasch further stated that A-S Holding owns a

business called Austro Seal, L.L.C., which Roland asked her to run in May 2012 when
Austro Seal began its operations.    Mrs. Zarwasch agreed to run the company and used
her maiden name, Adelaida Segueda, on the papers for the new company and used a
friend’s address, not her own.
{¶9}    Through the receiver’s investigation and Mrs. Zarwasch’s deposition, SKF
learned that immediately after Heza stopped operating, Austro Seal began operating at
the same location.    Mrs. Zarwasch stated that Heza stopped operating and, with no
break or down time, the same employees, using the same equipment, began running
Austro Seal.    Mrs. Zarwasch also stated that during the transition, she called Heza’s
customers to tell them that Heza was closed and that she had a new business that could
provide the same services.
{¶10}    Austro  Seal  took  over  the  leases  and  possession  of  Heza’s  building,
machines, tools, furniture and equipment and, according to appellant, did not pay Heza
any money for the transfer.    Mrs. Zarwasch testified that Austro Seal used the same
phone number as Heza, that appellant retained the same cell phone number he used to
conduct Heza’s business and that Austro Seal used the same accounting software and
data as Heza.
{¶11}    SKF filed a motion to show cause why appellant should not be held in
contempt of court for violating the court’s receivership order.    On October 30, 2012, the
trial court held a hearing and heard testimony, at the conclusion of which it found
appellant in contempt and that the new companies’ assets should be in the receiver’s

control.    In making its finding, the court stated, “[The Court] ordered [the Receiver] to
take control.    The operation is in the same location, it’s got the same employees, it’s got
the same two of the family running it here.    And frankly, sir, you say you’re not running
the place, you’re there, it appears, which is — which indicates * * * I am going to find
you in contempt.”
{¶12}    Appellant appeals, raising the following assignments of error:
The trial court erred in finding Helmut Zarwasch in contempt of the court
order.
The trial court erred in finding that the assets of A-S Holding, Inc., and
Austro-Seal, Inc., are part of the receivership.
{¶13}    Initially,  we  note  that  appellant’s  brief  fails  to  conform with App.R.
16(A)(7), which requires the argument section of an appellant’s brief to contain  “the
contentions of the appellant with respect to each assignment of error presented for review
and the reasons in support of the contentions, with citations to the authorities, statutes,
and parts of the record on which appellant relies.”    App.R. 12(A)(2) allows a court to
disregard an assignment of error presented for review  “if the party raising it fails to
identify in the record the error on which the assignment of error is based or fails to argue
the assignment separately in the brief, as required under App.R. 16(A).”
{¶14}     In  the  present  case,  appellant  does  not  separately  argue  his  two
assignments of error.    His entire argument section addresses his first assignment of error
and why the court erred in finding appellant in contempt.    Appellant provides citations
to the record as well as legal authority in support of this first argument but fails to

address his second assignment of error.    Appellant makes brief mention about the assets
of A-S Holding, Inc., and Austro Seal, L.L.C., but does not include any citations to the
record  or  legal  authority  in  support  of  his  claim  of  error  regarding  those  two
corporations.    Thus,  pursuant  to  App.R.  12(A)(2)  and  App.R.  16(A),  we  disregard
appellant’s second assignment of error.
{¶15}    An appellate court reviews a trial court’s finding of contempt for an abuse
of discretion.    State ex rel. Celebrezze v. Gibbs,  60 Ohio St.3d  69,  573 N.E.2d  62
(1991).    An abuse of discretion constitutes more than an error of law or judgment, it
implies  that  the  court’s  attitude  was     unreasonable,  arbitrary  or  unconscionable.
Blakemore v. Blakemore, 5 Ohio St.3d 217, 450 N.E.2d 1140 (1983).
{¶16}    Contempt can be direct or indirect and civil or criminal.    Dobbins v.
Evans,  5th  Dist.  No.  2011CA00171,  2012-Ohio-898.    This  matter  clearly concerns
indirect contempt, which is defined as “behavior which occurs outside the presence of
the court and demonstrates a lack of respect for the court or its lawful orders.”    Sansom
v. Sansom, 10th Dist. No. 05AP-645, 2006-Ohio-3909.    Additionally, the parties agree
that this matter is civil in nature where any citation imposed is used to force compliance
with a court order or judgment.    Brown v. Executive 200, Inc., 64 Ohio St.2d 250, 254,
416 N.E.2d 610 (1980).
{¶17}    In civil contempt proceedings, the moving party demonstrates a prima
facie case of civil contempt when the movant proves both the existence of a court order
and the nonmoving party’s noncompliance with the terms of that order.    Wolf v. Wolf,

1st Dist. No. C-090587,  2010-Ohio-2762.    Trial courts apply a clear and convincing
evidence standard of proof in civil contempt proceedings.    Flowers v. Flowers,  10th
Dist. No. 10AP-1176, 2011-Ohio-5972; Dobbins.
{¶18}    In the present case, the trial court correctly held appellant in contempt of
court.    During the hearing, SKF presented evidence of the court’s receivership order as
well as testimonial evidence of appellant’s noncompliance with that order.    The trial
court’s  receiver  order  instructed  the  receiver  to  take  immediate  control,  possession,
management and charge of records of accounting, assets and property of Heza.    Mr.
Greenwald testified that appellant willfully evaded and refused to comply with the trial
court’s order by (1) refusing to permit him to perform his duties; (2) attempting to shift
Heza’s assets to other companies to facilitate appellant’s acts and avoid fulfillment of the
federal judgment order, and (3) hiding the existence of a Heza bank account until it could
be liquidated and closed.
{¶19}    Any one of the above-cited instances of appellant’s disobedience would
support a finding of civil contempt.    Nonetheless, SKF elicited testimonial evidence
supporting  each  of  the  three  charges  of  noncompliance.     Thus,  SKF  established
appellant’s noncompliance with the court’s receivership order by clear and convincing
evidence.    The trial court did not abuse its discretion in finding appellant in contempt.
Appellant’s first assignment of error is overruled.
{¶20}      The judgment of the trial court is affirmed.
It is ordered that appellee recover from appellant costs herein taxed.

The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate be sent to said lower court to carry this
judgment into execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of
the Rules of Appellate Procedure.
EILEEN A. GALLAGHER, JUDGE
LARRY A. JONES, SR., P.J., and
KATHLEEN ANN KEOUGH, J., CONCUR

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