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Hawkins v. Borsy

United States District Court, E.D. Virginia, Alexandria Division

February 8, 2018

WILLIAM HAWKINS, et al., Plaintiffs,
LASZLO BORSY, et al, Defendants.



         Before the Court is respondents' Joint Motion to Vacate for Lack of Subject Matter Jurisdiction [Dkt. No. 323]. For the reasons that follow, defendants' Motion will be granted.

         I. BACKGROUND

         Plaintiffs William Hawkins ("Hawkins"), Eric Keller ("Keller"), Thomas Zato ("Zato"), Kristof Gabor ("Gabor"), and Justin Panchley ("Panchley") (collectively, "plaintiffs") are currently attempting to enforce an eleven-year-old default judgment against corporate affiliates of one of the original defendants in this civil action. They assert a right to relief under both Fed.R.Civ.P. 65 civil contempt and Fed.R.Civ.P. 25 successor liability.[1]

         The defendants are Laszlo Borsy ("Borsy"); Mediaware Corporation ("Mediaware"); MediaTechnik Kft. ("MediaTechnik"); DMCC Kommunikacios Rt. ("DMCC"), which changed its name to DIGI Zrt. on January 31, 2007, and changed its name again to i-TV ("i-TV") on June 12, 2012; and Peterfia Kft. ("Peterfia"). The respondents are DIGI Communications N.V. ("DIGI Comms.") (formerly known as Cable Communications Systems, N.V., or "CCS"); RCS & RDS S.A. ("RCS/RDS"); RCS Management S.A. ("RCS"); DIGI Tavkozlesi es Szolgaltato Kft. ("DIGI Kft.") (formerly known as Egyesiilt Magyar Kabeltelevizio, or "EMKTV"); and Zoltan Teszari ("Teszari").

         A brief description of the background events is needed to appreciate the current posture of this litigation. Borsy first approached Hawkins in 2001 about investing in his company MediaTechnik. Mem. Op. [Dkt. No. 94] 7. Hawkins was interested in the investment and paid $330, 000 for 35% of MediaTechnik's stock and 33.33% of Peterfia's stock. Id. In 2003, Borsy approached Hawkins again, this time about a "roll up" deal in which MediaTechnik, Mediaware, Peterfia, and DMCC would become part of the same corporate family. Id. at 7-8. After negotiations, Hawkins and Borsy agreed that Hawkins would pay $1 million for a 49% stake in MediaTechnik, which would entitle him to a corresponding 49% stake in Mediaware, DMCC, and Peterfia. Id. at 8. Hawkins subsequently paid the $1 million. Id.

         Borsy diverted those funds, using them to purchase the remaining interest in DMCC, which made Borsy that company's sole owner. Id. Hawkins did not receive a 49% stake in DMCC or Peterfia as provided for in the agreement. Id. Borsy also forged Hawkins's signature on a document Borsy prepared that purported to give Hawkins's Mediaware voting rights to Borsy. Id. The remaining plaintiffs had been offered management positions in the combined companies in exchange for their services and were to be compensated with salaries ranging from $72, 000 to $250, 000 and equity in one or more of the companies. Id. at 9-11. None received any compensation from any of the defendants. Id.

         Thus began the tortured procedural history of this civil action. Plaintiffs filed a Complaint on October 31, 2005, alleging fraud, breach of contract, conversion, breach of fiduciary duties (against Borsy), and unjust enrichment and seeking an accounting of all transactions by or among defendants and a declaration establishing their ownership interests in the corporate defendants. Id. at 2. Borsy belatedly filed several documents on behalf of all defendants, but they * were written in Hungarian. Id. at 3. The Court struck those filings, giving defendants an opportunity to file translations, which they failed to do. Id. Accordingly, at plaintiffs' request, default was entered on March 13, 2006. Id.

         Defendants subsequently obtained counsel and filed a motion to set aside the default, which was granted. Id. After DMCC's and Peterfia's motions to dismiss were denied, their counsel withdrew, citing nonpayment of legal fees. Id. After defendants failed to obtain new counsel or participate in discovery requests, a new default was entered against them on June 15, 2006. Id. at 3-4. On September 15, 2006, following an ex parte hearing on damages at which no one appeared for any defendant, the magistrate judge issued a Report and Recommendation ("Report"), recommending that a default judgment be entered against defendants.

         On September 28, 2006, the Court received a letter from Borsy seeking a 30-day extension to file objections to the Report, which request was granted. Id. at 5. The next day, September 29, 2006, plaintiffs filed an Emergency Motion to Reconsider the order granting Borsy an extension. [Dkt. No. 109] Ex. 8, at 2. The Court did not revoke the extension of time but did impose an injunction on October 2, 2006 "to prevent the defendants from disposing or dissipating assets subject to this litigation or undertaking transactions affecting the property at issue without consent of the plaintiffs." Id.

         According to plaintiffs, just four days later, despite the injunction's command that Borsy refrain from "undertaking any transactions out of the ordinary course of business" involving the companies at the heart of the litigation, Borsy transferred most of his shares in DMCC to two different entities: Digital Media Communications and Technology Fund S.A. ("DMCT") and DIGI Kft. [Dkt. No. 109] 6; id Ex. 10. In December 2006, RCS/RDS formally registered as majority shareholder of DIGI Kft.

         Borsy ultimately filed his objections to the Report, which this Court overruled. Mem. Op. 17. Accordingly, judgment was entered on February 8, 2007 against all defendants jointly and severally as follows:

         Plaintiff Monetary Award Equity in Defendant Companies


$750, 000.00



$660, 000.00



$146, 763.11



$110, 678.64



$140, 131.95



$1, 807, 573.70


[Dkt. No. 97].

         On May 4, 2007, Keller contacted DIGI Kft.'s general counsel by email. [Dkt. No. 109] Ex. 13. He wrote:

         Dear Mr. Kosik,

I understand that you spoke with my colleague, Kris Gabor, last week concerning the DMCC [Le,, i-TV]/EMKTV [Le\, DIGI Kft.] transaction. We both appreciate your prompt reply to his call and your attention to this matter....
I represent a group of US-based shareholers in DMCC. Recently, as part of a larger judgment involving Laszlo Borsy and DMCC, as well as some other companies, Judge Brinkema in the United States Federal District Court for the Eastern District of Virginia awarded me and the other U.S. shareholders just over 56% of DMCC. However, we have recently learned that, apparently, after Judge Brinkema issued an injunction on October 2 blocking any sale of DMCC, it was sold to your company. I am attaching a copy of the October 2 Order as well as the February 6, 2007 Order[2] awarding us ownership of ...

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