Vital Pharm. v. Owoc (In re Vital Pharm.)

1

In re: Vital Pharmaceutical, Debtor.

Vital Pharmaceuticals, Inc., et al., Plaintiffs, v. John H. Owoc, et al., Defendants.

No. 23-01051-PDR

United States Bankruptcy Court, S.D. Florida, Fort Lauderdale Division

April 25, 2023

Chapter 11

ORDER GRANTING PLAINTIFFS' EMERGENCY MOTION FOR CONTEMPT

Peter D. Russin, Judge THIS MATTER came before the Court on April 12, 2023, at 11:00 a.m., on the Plaintiffs' Emergency Motion for Contempt,^[1] which seeks to hold Defendant John H. Owoc in contempt for commenting on an Instagram post about the Plaintiffs' products; and the Plaintiffs' ore tenus motion to require Mr. Owoc to remove his comment from Instagram.

The Owocs stipulated to an agreed order requiring them to "post" content requested by the Plaintiffs to-and to refrain "from posting any content or making any posts of any kind to or from"-the @bangenergy.ceo Instagram account. After posting content requested by the Plaintiffs Mr. Owoc commented (among other things) that he had been forced by threat to post the Plaintiffs' requested content. Because Mr. Owoc's comment, which is patently false, was a message published in an online forum, he violated the agreed order's prohibition against "making posts of any kind" from the @bangenergy.ceo Instagram account and therefore is in contempt of court.

I. Findings of Fact

The Plaintiffs, the Debtors in this chapter 11 case, produce performance energy drinks. Their leading product is Bang energy drink, which (based on retail sales and market share data) is one of the top selling energy drinks in the United States. To market their products, the Plaintiffs have employed a strong and consistent social media presence using the following Twitter, Instagram, and TikTok accounts (referred to by the parties as the "CEO Accounts"):

• @BangEnergyCEO ("CEO Twitter Account");

• @bangenergy.ceo ("CEO Instagram Account"); and

• @bangenergy.ceo ("CEO TikTok Account").

The CEO Instagram Account, which is displayed on the Bang energy drink label, is a verified account with more than one million followers.

Defendants, John H. Owoc (the Plaintiffs' former Chief Executive Officer and Chief Science Officer) and Meg Owoc (the Plaintiffs' former Senior Vice President of Marketing), had access to and used the CEO Accounts. But, on March 9, 2023, the Plaintiffs fired the Owocs and demanded they return all company property. Since being fired, the Owocs have continued to use the CEO Accounts, which the Plaintiffs claim are property of the estate.

Plaintiffs filed this adversary proceeding (1) seeking a declaration that the CEO Accounts are property of the estate and (2) demanding turnover of the accounts.^[2]In the meantime, the Plaintiffs sought a temporary injunction that would prohibit the Owocs from using-and require them to turn over to the Plaintiffs control of-the CEO Accounts because the Plaintiffs feared the Owocs might post content that could harm (intentionally or not) the Plaintiffs' business, which they are attempting to sell in this chapter 11 case.^[3] To resolve the request for injunctive relief, the Plaintiffs and Owocs filed an agreed stipulation with the Court.^[4] Under the stipulation, which was signed by the parties' counsel, the parties agreed (among other things) that:

• The Owocs "are prohibited from posting any content or making any posts of any kind to or from the CEO Accounts" for forty-five days after an order approving the joint stipulation;^[5]

• Within nine hours of a request from the Plaintiffs, the Owocs would "post" to the CEO Accounts any content about the Plaintiffs' products that the Plaintiffs requested (so long as the requested post does not reference the Owocs);^[6] and

• In the event one party alleges the other violated the stipulation, twenty-four hours' notice would be sufficient for a hearing to address the alleged violation.^[7]

On March 16, 2023, the Court approved the parties' stipulation (the "March 16 Order").^[8]

On April 6, 2023, the Plaintiffs requested the Owocs post content to the CEO Accounts.^[9] Although required to do so within nine hours, the Owocs failed to post the requested content until April 10-four days later. Roughly a half hour after posting the requested content, Mr. Owoc ranted about the post in a series of comments-from the CEO Instagram Account-in which he claimed that:

• his social media account had been hijacked; • he had been "forced by threat" to post the requested content;

• being forced to post the content was a "major fraud on the public"; and

• various professionals involved in this chapter 11 case were committing racketeering violations.^[10]

The rant ends with Mr. Owoc insisting that the "FLORIDA BANKRUPTCY COMMUNITY MUST BE BROUGHT TO JUSTICE!"^[11] In response to a comment by a social media user, Mr. Owoc commented-again from the CEO Instagram Account-that "[t]he bankruptcy community corruption here in South Florida is real."^[12]

In their contempt motion, the Plaintiffs ask the Court to hold Mr. Owoc in contempt for violating the Court's March 16 Order; order the Owocs to turn over the passwords to the CEO Accounts; declare that the Plaintiffs own the CEO Accounts; and allow the Plaintiffs to change the CEO Accounts' passwords.^[13] At the April 12 hearing on their contempt motion, the Plaintiffs also asked the Court to order Mr. Owoc to take down his Instagram rant.

In response, Mr. Owoc testified at the April 12 hearing why he believed his Instagram rant did not violate the Court's March 16 Order. For starters, Mr. Owoc challenged the validity of the March 16 Order. According to Mr. Owoc, his prior counsel entered the joint stipulation without his permission: Mr. Owoc testified he never saw the joint stipulation before it was filed and that he never gave his prior counsel permission to sign it. Mr. Owoc, a self-proclaimed social media expert, further contended there is a difference between a "post" and a "comment," and in Mr. Owoc's view, the March 16 Order only prohibits him from "posting" content to the CEO Accounts-not "commenting" on posts. In short, Mr. Owoc claims that the March 16 Order is not valid and that, even if it was, he did not violate it because his comment is not a "post."^[14]

At the conclusion of the April 12 contempt hearing, the Plaintiffs asked to file a supplemental brief addressing Mr. Owoc's proposed definitions of "post" and "content." The Plaintiffs attached to their supplemental brief copies of various pages from Instagram's website showing that Instagram repeatedly uses the term "content" to include "comments."^[15] So does Facebook, according to exhibits attached to the Plaintiffs' supplemental brief.^[16] Plaintiffs also offered screenshots of Instagram's interface showing that to "comment" on an Instagram post, a user must click a "post" button. Mr. Owoc objects to the Court's consideration of this information because it was offered after the close of the evidence.^[17]

II. Conclusions of Law

This Court undoubtedly has the power to hold Mr. Owoc in contempt. "Civil contempt power is inherent in bankruptcy courts since all courts have authority to enforce compliance with their lawful orders."^[18] Moreover, Bankruptcy Code § 105 gives this Court statutory civil contempt power.^[19]

For the Court to hold Mr. Owoc in contempt, the Plaintiffs must first establish by clear and convincing evidence that Mr. Owoc violated this Court's March 16 Order.^[20] To meet that burden, the Plaintiffs must show that (1) the March 16 Order is valid; (2) the March 16 Order is clear and unambiguous; and (3) Mr. Owoc had the ability to comply with the order.^[21] The Plaintiffs have met that burden.

A. The March 16 Order is valid.

It is worth noting that the March 16 Order, which simply approves the joint stipulation between the Plaintiffs and Defendants, was entered at the request of the Plaintiffs and the Owocs.^[22] Even so, Mr. Owoc claims the March 16 Order is invalid because he claims he never saw the stipulation before it was signed or authorized his counsel to enter into it.

As a factual matter, the Court does not find Mr. Owoc's testimony credible. At the April 12 contempt hearing, Mr. Owoc testified he saw the March 16 Order days after it was entered.^[23] Yet, Mr. Owoc conceded that, once he saw the March 16 Order, he took no action to set it aside.^[24] In fact, not only did Mr. Owoc fail to take any action to set aside the March 16 Order, he actually complied with it-even if belatedly-by providing the passwords to two of the CEO Accounts and posting the Plaintiffs' requested content.^[25] The first time Mr. Owoc raised the alleged invalidity of the March 16 Order was only after the Plaintiffs sought to hold him in contempt.

Even if Mr. Owoc had not authorized his counsel to enter the joint stipulation, the March 16 Order would still be valid. The United States Supreme Court has held in a variety of contexts that "clients must be accountable for the acts and omissions of their attorneys."^[26]

The Supreme Court explained three decades ago in Pioneer Investment Services Co. v. Brunswick Associates, LP, that the rule is necessary to give effect to our system of representative litigation:

Petitioner voluntarily chose this attorney as his representative in the action, and he cannot now avoid the consequences of the acts or omissions of this freely selected agent. Any other notion would be wholly inconsistent with our system of representative litigation, in which each party is deemed bound by the acts of his lawyer-agent....^[27]

Because the rule enunciated in Pioneer applies with equal force here, the March 16 Order is valid even if Mr. Owoc had not authorized his counsel to enter the stipulation.

B. The March 16 Order is clear and unambiguous.

The Court's March 16 Order...