New Falls Corporation v. Soni Holdings, LLC, 2:19-cv-00449

Background

Plaintiff New Falls acquired a defaulted promissory note and sued for fraudulent conveyance after Soni Holdings transferred a Newark rental property (the "Newark Property") to 632 MLK BLVD JR LLC while indebted.
The Court entered a TRO and then a preliminary injunction prohibiting selling, transferring, mortgaging, liening, encumbering, or otherwise disposing of the Newark Property and later ordered the Soni Defendants to pay past and future taxes on the property.
Judge Feuerstein previously found the Soni Defendants in contempt for allowing a tax lien and ordered them to cure unpaid taxes and pay future taxes; the Soni Defendants paid down that obligation but later allowed substantial unpaid taxes to accrue again.
Plaintiff moved again for contempt after unpaid taxes (tens of thousands of dollars) accumulated; the Second Circuit later disposed of the Soni Defendants’ appeals, affirming the injunction.
District Court (Gonzalez, J.) found the Soni Defendants in contempt for the second violation, limited the contempt finding to four defendants closely tied to the property, ordered payment of past taxes and continued obligation to pay future taxes, and awarded attorneys’ fees (Plaintiff to submit proof).

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Did defendants violate the injunction by allowing tax liens/arrears?	Soni allowed tax liens and unpaid taxes, breaching injunction and Feuerstein's order.	Contend financial hardship and procedural defenses; some defendants claim limited control.	Yes; injunction clear and defendants admitted owing taxes; contempt established.
Were defendants reasonably diligent or unable to pay?	No — payments were reactive and came only after motion; no proof of inability to pay.	Pandemic rental loss and financial distress made payment impossible.	No diligence shown; bare assertions insufficient to prove inability to pay.
Did the pending appeal deprive the district court of contempt power?	Appeal does not suspend compliance obligations.	Appeal to Second Circuit meant injunction should be stayed.	Filing an appeal does not excuse noncompliance; contempt power remained and Second Circuit affirmed.
Was a contempt hearing required?	Not necessary because no material facts are disputed.	Requested factual opportunity to be heard.	No hearing required where facts undisputed and parties didn't seek one.
Who among the defendants may be held in contempt?	Sought contempt against all Soni Defendants.	Some defendants lack control over the LLC that owns the property.	Contempt limited to 632 MLK BLVD JR LLC, Kunal Soni, Soni Holdings, and Anjali Soni.
Appropriate remedy (coercive vs compensatory)?	Seek coercive relief and attorneys' fees for briefing motion.	Argue against punitive measures absent willfulness.	Court awarded attorneys' fees (Plaintiff to submit proof) and ordered payment of past and future taxes.

Key Cases Cited

Taggart v. Lorenzen, 139 S. Ct. 1795 (2019) (civil contempt used to coerce compliance and compensate victims under equitable principles)
CBS Broadcasting Inc. v. FilmOn.com, Inc., 814 F.3d 91 (2d Cir. 2016) (elements for contempt: clear order, clear and convincing proof of violation, lack of diligent effort to comply)
Next Invs., LLC v. Bank of China, 12 F.4th 119 (2d Cir. 2021) (contempt standards apply under federal contempt statute and Rule 70)
Shillitani v. United States, 384 U.S. 364 (1966) (courts must use least possible power adequate when selecting contempt sanctions)
Gucci Am., Inc. v. Li, 768 F.3d 122 (2d Cir. 2014) (prospective daily fines permissible; sanctions that punish only past noncompliance are improper)
Paramedics Electromedicina Comercial, Ltda. v. GE Med. Sys. Info. Techs., Inc., 369 F.3d 645 (2d Cir. 2004) (parties must obey injunction pending appeal)
Massaro v. Palladino, 19 F.4th 197 (2d Cir. 2021) (district court loses contempt power only if appellate court vacates injunction)
E.E.O.C. v. Local 638, 81 F.3d 1162 (2d Cir. 1996) (delay in compliance and reactive conduct can show lack of reasonable diligence)