MEMORANDUM & ORDER RE: REPORT & RECOMMENDATION

RICHARD D. BENNETT, District Judge.

The Court has before it Magistrate Judge Sullivan's Report and Recommendation [ECF No. 818], Defendant's Objections to Magistratie [sic] Judge's Report and Recommendation [ECF No. 821], and the materials submitted by the parties relating thereto. The Court finds that a hearing is unnecessary. For the reasons that follow, the Report & Recommendation is ADOPTED and the Defendants, SCH Enterprises, LLC and Mark T. Pappas, shall make the assignments, transfers, and cash payments to the Plaintiff, Victor Stanley, Inc., as ordered.

BACKGROUND

Inasmuch as the parties are fully familiar with the pertinent background, it suffices to state that currently, the status of this litigation is that Plaintiff, Victor Stanley, Inc. ("VSI") is seeking to collect on its judgment and on sanctions that have been awarded.1 This effort has been ongoing since the first sanctions were awarded in November 2010, final judgment in favor of VSI in November 2011, and further sanctions awarded during the collections process. See, e.g., ECF Nos. 721, 747 (summarizing the various judgments and failures to comply by the Defendants2).

More recently, in August 2017, Judge Garbis held "that the evidence clearly and convincingly establishes that Defendants failed to comply with their obligation to pay VSI. . . . [and t]hey most certainly did not take all reasonable steps within their power to ensure at least partial compliance." ECF No. 747 at 14. The Court found Defendants in contempt, ordered certain specific steps to be taken to purge the nonpayment contempt, and allowed VSI the opportunity to request that further specific actions be required. Id. at 14-17. Judge Garbis then ordered, ECF No. 750, counsel to file statements of compliance, which resulted in a hearing on October 2, 2017, during which Defendant Pappas testified. Judge Garbis found that Defendants had substantially complied with the Court's Order, but VSI requested that Defendant Pappas be ordered to address the shortfall "by making payments from his considerable income, liquidation of other assets, and recovery of the various fraudulent transfers he made to his wife." ECF No. 758 at 1. The matter was referred to Magistrate Judge Sullivan for a Report and Recommendation. Id. at 2. Judge Sullivan provided the requested Report and Recommendation [ECF No. 818] to this Court on July 3, 2018, which this Court now ADOPTS.

In February 2018, Plaintiff's Motion for Temporary Restraining Order and Preliminary Injunction [ECF No. 792] and an emergency Motion for Immediate Hearing [ECF No. 793] was filed by Plaintiff. VSI requested that the Court enjoin Pappas from "collecting, depositing or cashing any accounts receivable payments for SCH Enterprises, LLC ("SCH") until further order of the Court." ECF No. 792 at 1. Judge Garbis granted the motion for a hearing, ECF No. 795, held a hearing on February 23, 2018, and granted a Temporary Injunction [ECF No. 802] to be in effect until the Court ruled on Plaintiff's Motion. Shortly thereafter, on February 27, 2018, a Consent Order [ECF No. 808] was entered granting VSI's Motion to Substitute Party [ECF No. 762], substituting SCH in place of Defendant Creative Pipe, Inc. as a defendant and judgment-debtor for all purposes. An Amended Judgment [ECF No. 809] was issued on the same date in favor of VSI against Defendants Pappas and SCH. This Court then entered a Supplemental Procedural Order [ECF No. 810], asking Magistrate Judge Sullivan3 to also:

ECF No. 810 at 1-2.

Magistrate Judge Sullivan held the hearing on April 4, 2018.4 Defendant Pappas did not appear. A Report and Recommendation [ECF No. 818] was provided to this Court on July 3, 2018, to which Defendants timely filed Objections [ECF No. 821]. VSI filed a response [ECF No. 824] to Defendants' objections, and the matter is ripe for review.

Magistrate Judge Sullivan recommended that this Court grant VSI's requests in full, as follows:

ECF No. 818 at 14-15.

Defendants make a general objection and three specific objections. ECF No. 821. Defendants generally object to Magistrate Judge Sullivan's granting VSI everything requested as being overstepping and punitive and without factual support. Id. at 1-2. Specifically, Defendants object to the requirement to (1) transfer intellectual property, (2) transfer accounts receivable and assign assets, and (3) the immediate payment of $100,000.

STANDARD OF REVIEW

When reviewing a magistrate judge's Report and Recommendation, a district court "may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge." 28 U.S.C. § 636(b)(1)(C). The Court reviews de novo any portions of the Report and Recommendation to which a specific objection is made, id., but may adopt, without explanation, any of the magistrate judge's recommendations to which no objections are filed. Solis v. Malkani, 638 F.3d 269, 274 (4th Cir. 2011) (citing Camby v. Davis, 718 F.2d 198, 200 (4th Cir. 1983)). Where objections consist of general and conclusory objections that are not directed to a specific error, the court reviews for clear error. See Orpiano v. Johnson, 687 F.2d 44, 47 (4th Cir. 1982); Brown v. Comm'r of Soc. Sec., 969 F.Supp.2d 433, 437 (W.D. Va. 2013).

DISCUSSION

I. General Objection

First, Defendants make a general objection that Judge Sullivan based his recommendations on a predisposed assessment that Pappas lacks credibility. Since Pappas chose not to appear, it was reasonable for Judge Sullivan to rely on past assessments of his credibility or lack thereof. Judge Sullivan's report was based on this Court's finding that Defendants were in contempt and required to take actions to purge the contempt. It is apparent that Judge Sullivan did not clearly err, but considered the evidence and proposals presented by Defendants' counsel as well as the evidence and witness testimony presented by Plaintiff and provided a reasoned decision to the parties and this Court.

II. Intellectual Property

Defendants' first specific objection is to the recommendation that Defendants' intellectual property assets be turned over to VSI. Defendants contend that this presents valuation issues, will not produce liquid proceeds, and will destroy SCH's ability to operate. The valuation issues can be resolved by agreement of the parties or, if agreement is not possible, by referral back to Judge Sullivan for a valuation as recommended. ECF No. 818 at 11. There is no need for the proceeds to be liquid to satisfy a payment towards the shortfall on the sanctions award. There is also no need for such a remedy to destroy SCH's ability to operate. The assignment to VSI can include a license back to SCH providing the ability to use the intellectual property, and such license can be taken into account in the valuation thereof.

Defendants add that such a remedy has never been required in the past, so should not be considered now. However, "any intellectual property owned by, or controlled by, Pappas and/or entities that he owns or controls" was specifically listed as an option for Judge Sullivan to consider. ECF No. 810 at 1-2. Therefore, this Court adopts this recommendation.

III. Assets and Accounts Receivable

Defendants also object to the recommendation that SCH's assets and accounts receivable be assigned to VSI. Defendants contend that the ultimate valuation will be far in excess of the remaining amount payable under the sanctions award and could result in putting SCH out of business. Defendants also point to their substantial compliance with this Court's prior Order to assign assets as if that provides some sort of pass on complying with the requirement to make up the shortfall still remaining. This Court requires compliance with all its Orders. In this instance, there remains a shortfall in the payment of the sanctions award (ECF No. 722) of about $800,000, and the recommendations are intended to satisfy that shortfall only. Further, Defendants' own Exhibit 6 provided at the hearing before Judge Sullivan, values accounts receivable at about $216,000, which would not satisfy the shortfall even if they were 100% collectible. Defendants also contend that the physical assets have functional value but little liquidation value, so there appears little danger of VSI collecting more than the amount remaining due on the sanctions award.

Defendants argue that assigning all accounts receivable, bank accounts, inventory, and physical assets will likely result in putting SCH out of business. This is a situation created by Defendants, who do not propose a viable alternative to this recommended action. As at February 26, 2018, Defendants stated their present ability to make monthly payments of $10,000 (ECF No. 805 at 2), but they have not done so. VSI asserts that Defendants have never made a single, voluntary payment toward the Sanctions Order, and Defendants do not counter that assertion. Simply ignoring the liability is not an option. Therefore, this Court adopts this recommendation.

IV. Immediate $100,000 Payment

Defendants object to the requirement for an immediate payment of $100,000 by Pappas against the sanctions award. Defendants then contend that a payment collected by VSI from SCH through its independent collection efforts satisfies the requirement. It does not. The burden is on Pappas to demonstrate his inability to pay, United States v. Rylander, 460 U.S. 752, 757 (1983), but he has not met that burden. Only one of Defendants' exhibits related to Pappas' finances — Exhibit 13, which was a list of his monthly expenses that appears to be incomplete. Pappas has not provided any documentation to show that he is incapable of making this payment on the Sanctions Award. Therefore, this Court adopts this recommendation.

CONCLUSION

For the foregoing reasons:

SO ORDERED.