Case 1:14-cv-02468-MHC Document 58 Filed 01/26/16 Page 1 of 13

IN T H E UNITED STATES DISTRICT COURT

F O R T H E NORTHERN DISTRICT OF G E O R G I A
ATLANTA DIVISION

S E C U R I T I E S AND E X C H A N G E
COMMISSION,
C I V I L ACTION F I L E

Plaintiff,

NO. l:14-CV-2468-MHC

V.

THOMAS J . L A W L E R and
F R E E D O M FOUNDATION USA
L L C dba F R E E D O M C L U B USA,
Defendants,
DIVINE SPIRIT L L C ,
ORDER PROCESSING L L C ,
PROSPERITY SOLUTIONS L L C ,
and V I O L E T BLESSINGS L L C ,
Relief Defendants.

ORDER
In accordance with this Court's Orders of December 9, 2015 [Doc. 54], and
January 4, 2016 [Doc. 56], this Court conducted a hearing on January 26, 2016, to
provide Defendant Thomas Lawler with one final opportunity to demonstrate why
he should not be required to comply with this Court's previous Orders. Once
again, Mr. Lawler failed to appear. Mr. Lawler was advised that "[failure to

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appear at the hearing will subject Lawler to a finding that he remains in civil
contempt ofthe Court's Orders, and to additional sanctions, including
incarceration." Order of Jan. 4, 2016, at 1-2; Order of Dec. 9, 2015, at 4.
Once again, this Court will set forth the chronology of events which has led
it to issuing this Order.
I.

P R O C E D U R A L HISTORY
On July 31, 2014, Plaintiff Securities and Exchange Commission (the

"Commission") filed its Complaint alleging that Defendants Thomas J. Lawler

("Lawler") and Freedom Foundation USA dba Freedom Club USA (collectively,
"Defendants") violated Sections 5(a), 5(c), and 17(a) ofthe Securities Act of 1933,
15 U.S.C. 77e(a), 77e(c), and 77q(a) ("Securities Act"), Section 10(b) ofthe
Securities Exchange Act of 1934, 15 U.S.C. 78j(b) ("Exchange Act"), and
Exchange Act Rule lOb-5, 17 C.F.R. 240.10b-5. Compl. [Doc. 1] T| 4. After
conducting a telephone conference hearing that same day at which Lawler was a
participant. Transcript of Telephone Conference Proceedings Before Judge
Totenberg, July 31, 2014 [Doc. 23], the Court found that there was good cause to
believe that, unless restrained by the Court, Defendants would dissipate, conceal,
or transfer assets which could be the subject of a future order directing
disgorgement or the payment of civil monetary penalties. Order of July 31, 2014
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[Doc. 6]. Consequently, the Court entered a temporary restraining order, order
freezing assets and for an accounting, order prohibiting destruction of documents,
and order expediting discovery. I d Among the directives of the temporary
restraining order were the following:
II.
I T IS F U R T H E R ORDERED that each defendant and each relief
defendant shall submit in writing to this Court and Plaintiff
Commission, on or before Tuesday, August Sth at Noon, the
following identifying information:
(A) all names by which every person with authority to
exercise control of the defendants is known, all business and
residence addresses, postal box numbers, telephone numbers,
and facsimile numbers, e-mail addresses and the nationality of
such persons; and
(B) each account with any financial institution or brokerage
firm maintained in either defendant's or any relief defendant's
names or held for either defendant's or any relief defendant's
direct or indirect beneficial interest from January 1, 2004
through the present.
*****
VIII.
I T IS F U R T H E R ORDERED that each defendant prepare and
present to this Court and to the Commission a swom accounting of all
funds received by that defendant pursuant to the scheme described in
the Commission's Complaint and of the disposition and use of said
proceeds. This accounting shall include, but not be limited to, the
names and address of each investor (for entities contracting with
investors), the amount invested, the total amount received from
investors, the date each such investment was made and a listing of all
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expenditures showing the amount and to whom paid and the date of
payment. The accountings shall be submitted to this Court and served
upon the Commission within 20 davs from the date of entry of this
Order, unless the Court modifies this provision at the scheduled TRO
hearing.^
I d at 5, 10 (emphases in original). The Court also ordered that each defendant and
relief defendant, including Lawler, appear before the Court on August 8, 2014, to
show cause why a preliminary injunction should not be granted extending the asset
freeze until a final adjudication on the merits may be had. I d at 9-10.
On August 8, 2014, the Court conducted a hearing on the SEC's request for
a preliminary injunction and continued asset freeze. Transcript of Courtroom
Proceedings Before Judge Totenberg, Aug. 8, 2014 [Doc. 24]. Lawler did not
appear but the Court contacted him by telephone from the courtroom, although it is
unclear how long he remained on the line. I d at 4-11, 60. After finding the
Commission had established a prima facie case that Defendants violated the
Securities Act, the Exchange Act, and Exchange Act Rule lOb-5, the Court entered
a preliminary injunction and continued the asset freeze against Defendants. Order
of August 11, 2014 [Doc. 18]. Among the directives ofthe preliminary injunction
order was that, no later than August 25, 2014, Lawler "comply fully with
paragraph[] I I . . . ofthis Court's Order of July 31, 2014." I d at 9. In addition, it
^ The provision was never modified.
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was further ordered that Lawler "no later than September 2, 2014, repatriate all
assets transferred overseas, and shall provide the [Commission] with notice ofthe
efforts taken to effect such repatriation. Defendants . . . shall deposit the entirety
ofany repatriated sums into the registry ofthe Court where they will remain
pending further Order ofthis Court." I d at 10. The docket shows that Lawler has
failed to comply with the Court's Orders of July 31, 2014, or August 8, 2014.
The Commission has also issued a notice for Lawler's deposition and a
subpoena requiring him to bring the information that the Court previously ordered
to be produced in the swom accounting. [Doc. 45.] Lawler failed to appear at his
scheduled deposition and has yet to produce the information ordered by the Court.
On July 7, 2015, the Commission filed a Motion for Clerk's Entry of Default
against Lawler. [Doc. 47.] The Clerk entered his default on July 8, 2015.
On July 14, 2015, the Commission filed a "Motion for an Order to Show
Cause Why Defendant Thomas J. Lawler Should Not Be Held in Contempt For
Failing to Comply With This Court's Previous Orders." [Doc. 48.] It stated that it
"needs the information from a swom accounting before it can move to bring this
action to a close." [Doc. 48-1 at 4.] On September 2, 2015, this Court issued an
Order directing Lawler to appear in this Court on September 21, 2015 and show
cause, if any there be, as to why this Court should not issue an order holding him in

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civil contempt for violating this Court's previous orders. [Doc. 49.] Lawler was
served not only through the Clerk's office but also through a process server
engaged by the Commission, who effectuated service on Lawler's wife. [Doc. 50.]
On September 21, 2015, the Court held a contempt hearing, and Lawler
failed to appear. [Doc. 51.] The Court found Lawler in willful contempt ofthis
Court's Orders ofJuly 31, 2014, and August 8, 2014. [Doc. 52.] The Court
thereby ordered Lawler to comply with the following actions no later than five
o'clock p.m. on Monday, September 28, 2015:
1.

Defendant Lawyer shall submit in writing to this Court and the

Commission the following information:
(A)

A l l names by which every person with authority to exercise

control ofthe defendants or the relief defendants is known, all
business and residence addresses, postal box numbers,
telephone numbers, and facsimile numbers, e-mail addresses
and the nationality of such persons; and

(B)

Each account with any financial institution or brokerage firm

maintained in defendant's or any relief defendant's names or
held for either defendant's or any relief defendant's direct or

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indirect beneficial interest from January 1, 2004 through the

present.
Defendant Lawler shall prepare and present to this Court and to the
Commission a swom written accounting of all frinds received by him
or any other defendant or relief defendant pursuant to the scheme
described in the Commission's Complaint and ofthe disposition and
use of said proceeds. This accounting shall include, but not be limited
to, the names and address of each investor (for entities contracting
with investors), the amount invested, the total amount received from
investors, the date each such investment was made and a listing of all
expenditures showing the amount and to whom paid and the date of
payment.
Defendant Lawler shall repafriate all assetsfransferredoverseas,
provide the Commission with notice of the efforts taken to effect such
repatriation, and deposit the entirety of any repatriated sums into the
registry ofthe Court where they will remain pending further Order of
this Court.
Defendant Lawler shall appear and sit for a deposition to be
conducted by counsel for the Commission.
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I d Further, the Court stated that, if Lawler failed to comply with this Order by
five o'clock p.m. on Monday, September 28, 2015, he should pay a fine of one
thousand ($1,000) dollars per day beginning on Tuesday, September 29, 2015,
until he purged himself of his contempt. I d Then, if Lawler had not fully
complied with this Order by Monday, October 5, 2015, the daily fme should
increase to two thousand ($2,000) dollars per day. I d Finally, the Court stated, if
Lawler had not fully complied with the Court's Order by October 13, 2015, upon
motion supported by swom statement or affidavit presented by the Commission, it
intended to incarcerate Lawler until he purges himself of his contempt and
compliance is complete. I d
On November 20, 2015, the Commission filed a Motion to Compel
Defendant Lawler's Compliance through Incarceration [Doc. 53] and Declaration
of Pat Huddleston [Doc. 53-1], stating that Lawyer had not complied with the
Court's September 21, 2015, Order. On December 9, 2015, the Court issued an
Order directing Lawler to appear on January 6, 2016 for a hearing. [Doc. 54.] In
addition to the regular service of its Order by the Clerk's Office, the Court also
directed the United States Marshals Service to attempt to personally serve Lawler.
Because ofthe difficulty in personally serving Lawler, the Court continued the
hearing until Tuesday, January 26, 2016, to facilitate additional personal service
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attempts. [Doc. 56.] Lawler continued to evade personal service.^ Lawler failed
to appear at the January 26, 2016, hearing.
II.

L E G A L STANDARD
Courts have the inherent power to enforce compliance with their lawful

orders through civil contempt. ShiHitani v. United States, 384 U.S. 364, 370
(1966); Citronelle-Mobile Gathering. Inc. v. Watkins, 943 F.2d 1297, 1301 ( l l t h
Cir. 1991). A party "in a civil contempt proceeding must estabhsh by clear and
convincing evidence that the alleged contemnor violated the court's earlier order."
Tltiited

States v. Roberts, 858 F.2d 698, 700 ( l l t h Cir. 1988) (citation omitted).

Once this prima facie showing of a violation is made, the burden then shifts to the
alleged contemnor "to produce evidence explaining his noncompliance."
Citronelle-Mobile Gathering. Inc., 943 F.2d at 1301; see also Mercer v. Mitchell,
908 F.2d 763, 768 ( l l t h Cir. 1990).

2 David Elmadolar ofthe United States Marshals Service appeared at the hearing to
indicate that personal service ofthis Court's December 9, 2015, Order was
attempted upon Lawler at his residence but no one answered the door. The deputy
marshal left his business card with instructions for Lawler to contact him but no
contact was made by Lawler. Lawler's neighbor indicated that Lawler has been
observed walking in the neighborhood and that he presently resided at the address
on file with the Clerk's office. Elmadolar attempted personal service ofthe
Court's January 4, 2016, order on two separate occasions at Lawler's residence
but, once again, was unable to effectuate service due to Lawler's attempts to evade
contact.
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III.

ANALYSIS
The September 21, 2015, Order is clear and unambiguous as to its

requirements. It ordered Lawler to: (1) comply with its directives by September
28, 2015; (2) pay $1000 per day beginning September 29, 2015; (3) pay $2000 per
day beginning October 5, 2015. The Commission has provided clear and
convincing evidence that Lawler has violated and continues to violate the
September 21, 2015, Order, as well as the Court's Orders of July 31, 2014, and
August 8, 2014. Lawler has failed to produce the documents and information the
Court ordered him to produce, failed to appear for his deposition, and has not
attempted to communicate with the Commission about efforts to comply. Lawler
has not paid any ofthe fmes imposed by this Court. He has failed to respond to the
Commission's pleadings, and failed, despite Orders from this Court, to appear at
the hearings conducted on September 21, 2015, and January 26, 2016. Thus, the
Commission has made a prima facie showing that Lawler has violated the
September 21, 2015, Order.
Accordingly, the burden has shifted to Lawler to produce evidence
explaining his noncompliance. See Citronelle-Mobile Gathering, Inc., 943 F.2d at
1301. As referenced above, Lawler has failed to attempt to satisfy this burden in

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any way whatsoever. Therefore, the Court finds he remains in contempt ofthe
Court's prior Orders.
Once a court finds a party in contempt of an order, the court may utiHze its
civil contempt power to impose sanctions on the contemnor. See Mercer, 908 F.2d
at 768. Sanctions imposed may be compensatory or coercive, but cannot be used
to impose a punishment on a contemnor. See Sec. & Exch. Comm'n v. Pension
Fund of Am., No. 10-10464, 2010 WL 3582429, at *5 ( l l t h Cir. Sept. 15, 2010)
(vacating sanctions against a contemnor for failing to attend a show cause hearing
because the sanctions were criminal in nature). Examples of proper civil sanctions
include: (1) a coercive daily fine, (2) coercive incarceration, and/or (3) an award of
attorneys' fees and costs to compensate the complaining party for the expenses
incurred as a result ofthe contemptuous conduct. See Citronelle-Mobile
Gathering, Inc., 943 F.2d at 1304-05; see also In re Dinnan, 625 F.2d 1146 (5th
Cir. 1980)^ (upholding Middle District ofGeorgia contempt order where the
contemnor was ordered to pay $100 per day fine for thirty days and then be
incarcerated until he continued to testify).

3 In Bonner v. Citv of Pritchard, 661 F.2d 1206, 1209 ( l l t h Cir. 1981), the
Eleventh Circuit adopted as binding precedent all decisions ofthe former Fifth
Circuit issued before October 1, 1981.
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This Court has attempted a coercive daily fme to no avail. Lawler continues
to ignore each and every Order entered by this Court. Consequently, unless Lawler
takes action to comply with this Court's Order of September 21, 2015, this Court
will have no further altemative than to order Lawler's incarceration until he
complies with that Order.
IV.

CONCLUSION
Accordingly, for the foregoing reasons, I T IS H E R E B Y ORDERED that

the Securities and Exchange Commission's Motion to Compel Defendant Lawler's

Compliance through Incarceration [Doc. 53] is GRANTED.
I T IS F U R T H E R ORDERED that Defendant Thomas J. Lawler is in
CONTEMPT OF THIS COURT.
IT IS F U R T H E R ORDERED that if Defendant Thomas J. Lawler fails to
comply with this Court's Order of September 21, 2015, the Court COMMANDS
Lawler to appear on Febmary 9, 2016, at 10:00 A.M. in Courtroom 1905 ofthe
Richard B. Russell Federal Building and United States Courthouse, 75 Ted Tumer
Drive, S.W., Atlanta, Georgia, 30303, to be incarcerated until he purges himself of
civil contempt. I f Lawler fails to appear before the Court on February 9, 2016, at
10:00 A.M., the Court will issue a bench warrant for his arrest.

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I T IS FURTHER ORDERED that Defendant Lawler may contact the

Court at any time before February 9, 2016, to schedule a hearing upon reasonable
notice to Plaintiffs to show that he has comphed with the September 21, 2015,
Order and this Order.
I T IS SO ORDERED this 26th day of January, 2016.

MARK H. COHEN
United States District Judge

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