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Hany Malek v. Michael M. Koshak

November 22, 2011


(Los Angeles County Super. Ct. No. LC083095) APPEAL from an order of the Superior Court of the County of Los Angeles, Michael A. Latin, Judge.

The opinion of the court was delivered by: Mosk, J.




The trial court found defendant and appellant Hany Malek (Malek) guilty on 10 charges of indirect contempt. In addition to imposing jail time and fines, as well as ordering him to pay attorney fees, the trial court ordered Malek to pay $1.7 million in restitution to a receivership based on what the trial court considered its inherent power to control the proceedings before it and enforce its prior orders. Malek appeals from the restitution order,*fn1 arguing, inter alia, that the entry of that order without prior notice or a meaningful opportunity to be heard violated his due process rights. On our own motion, we raised the preliminary issue of whether the restitution order is appealable.

We hold the restitution order is appealable as a final, collateral order requiring the immediate payment of money. We further hold that the trial court violated Malek's due process rights when it entered the restitution order without prior notice or a meaningful opportunity to be heard. We therefore reverse the restitution order.


In 2005, plaintiff and respondent Michael Koshak (Koshak) formed a business venture with Malek that operated through a medical corporation, Choice Providers Medical Group, also known as Noble Community Medical Associates, Inc. of Los Angeles (Choice Providers). In 2008, Koshak sued Malek asserting 12 causes of action and alleging generally that Malek "developed a sophisticated scheme over an extended period of time using at least 18 different bank accounts with 5 federal tax identification numbers under at least 12 different names to accomplish, [and] then disguised and hid this massive fraud from [Koshak]." United Managed Health Care Center (United), a corporation in which Malek held a substantial interest, cross-complained against Koshak and Choice Providers alleging that Koshak was attempting to force Malek out of Choice Providers business "so that [Koshak] would be able to steal the medical practice which [United and Malek had] supported through a difficult start-up period, just as [Choice Providers] turned a corner and [became] self-sustaining."

In December 2008, with the acquiescence of Malek and Koshak, the trial court entered an order appointing David Pasternak as receiver (the receiver) to take possession, custody, and control over Choice Providers. In December 2009, the receiver filed an ex parte application for the issuance of an amended order to show cause re contempt against Malek.*fn3 The proposed amended order to show cause listed 29 different acts that allegedly violated the trial court's receivership order. In the ex parte application, the receiver requested, "in addition to any fines or imprisonment imposed upon [Malek], that he be ordered to pay the Receiver's reasonable attorneys' fees incurred in bringing this contempt proceeding." Neither the ex parte application nor the proposed order made any reference to a request for an order requiring Malek to pay any other monies--much less $1.7 million in restitution that the trial court later ordered.

Following a three-week bench trial, the trial court found Malek guilty of 10 of the 29 contempt charges alleged in the amended order to show cause. At the subsequent sentencing hearing, the trial court sentenced Malek on the 10 contempt convictions to five days in jail for each conviction, for a total of 50 days, and fined Malek $1,000 for each conviction, for a total fine of $10,000--i.e., the maximum amount of jail time and fines the trial court could impose under Code of Civil Procedure section 1218, subdivision (a),*fn4 the section under which the receiver brought the contempt charges. The trial court also ordered Malek to pay the receiver's attorney fees incurred in pursuing the contempt proceedings.

At the close of the sentencing hearing, the receiver requested that the trial court "consider any other available sanctions or punishments" to cause Malek to return the money he diverted from the receivership. Referring to its purported "independent authority to make sure that its orders are enforced," the trial court responded that it would "make a separate order . . . that [Malek] reimburse the receivership." The trial court then ordered as follows: "The court does however order that you pay or that you pay into the receiver estate the following sums: $650,000 which represents the amount the receiver showed was diverted from--into Care Point, in other words, that contract that you had with Care Point where you sold the receivables, plus interest in the amount of $84,767.12. [¶] $364,900--$364,948 plus $31,644.80 in interest according to the schedule that was introduced in the hearing by Mr. Lobuglio. [¶] And in addition, $580,281.67 was the amount shown to have been diverted by your own exhibits, plus interest in the amount of $64,517.34. [¶] The court orders that each of those sums be paid into the receivership estate. I'm not ordering that all that money doesn't belong to you. I'm simply ordering that you pay it into the receivership estate so that the receivership will have control of the money and they make disbursements back to you as that money is owed back to you. [¶] So some of it may come back, all of it may come back, that's going to be up to the receiver. That's what the receiver is there for. [¶] That money is due to the receiver on or before May 27, 2010." The trial court added, "In the event the money is not paid, we will hold an ability to pay hearing on the 28th [of May] . . . ." The trial court's restitution order was reflected in a minute order dated April 30, 2010. Malek filed a timely notice of appeal from the restitution order.


A. Appealability

Malek asserts in his statement of appealability that the restitution order is appealable because it requires him to pay money to the receivership. The receiver does not contest Malek's position regarding appealability, but because the issue implicates our jurisdiction, we review the issue ...

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