Dumanian v. Schwartz

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

GREGORY DUMANIAN, et al., )

)

Plaintiffs, )

)

vs. ) Case No. 19 C 6771

)

MARK SCHWARTZ, et al., )

)

Defendants. )

MEMORANDUM OPINION AND ORDER

MATTHEW F. KENNELLY, District Judge:

Plaintiffs Gregory Dumanian, Randa Dumanian, and Adon Dumanian have asked

the Court to sanction defendants Mark Schwartz, Yajia Schwartz, Tax Lien Law Group,

LLC, and Sulion, LLC for violating the preliminary injunction order entered by the

previously assigned judge and, as to Mark Schwartz, for making misrepresentations

regarding his ownership of stock in Mesh Suture, Inc.

Specifically, plaintiffs contend that Mark Schwarz violated the preliminary

injunction order by: (1) "issuing unauthorized, harassing correspondence to Mesh

Suture's manufacturer's parent company executives at Corza Medical"; (2) slandering

Mesh Suture's surgical device in a Facebook group comprising hernia surgeons; (3)

making certain court filings in a lawsuit against him in Maryland state court; and (4)

sending certain correspondence to a Maryland county sheriff in connection with the

sheriff's sale of Mesh Suture shares. See dkt. no. 383 at 1.

The alleged misrepresentations by Schwartz involve statements before the

predecessor judge in this case, Judge John Lee, during a 2022 preliminary injunction

hearing that he (Schwartz) was, at the time, an owner of a majority stake in Mesh

Suture. Schwartz later made statements in connection with the Maryland litigation (and

perhaps elsewhere) that he had transferred his Mesh Suture shares to his wife, Yajia

Schwartz in 2020, two years before the preliminary injunction hearing.

In their request for relief, plaintiffs ask the Court to "hold Schwartz in civil

contempt, strike Schwartz's and the [other defendants'] Answers and Defenses, enter

judgment against them, and award Plaintiffs their attorneys' fees related to this Motion."

Pls.' Mot. for Sanctions at 27.

1. Alleged violations of preliminary injunction order

The first issue for the Court to address is exactly what "order(s)" plaintiffs

contend Mark Schwartz violated. Their motion refers to Judge Lee's preliminary

injunction opinion (dkt. 233), the preliminary injunction itself (dkt. 234), and an earlier

minute entry (dkt. 129). The minute entry, however, simply memorializes a

representation made to the Court by Schwartz, as follows:

During the hearing, counsel for Defendant Mark Schwartz represented to the

Court that Mr. Schwartz agrees to the following, until further order of the Court:

(1) he will not take any action to interfere or impede the launch of Mesh Suture

product in Europe and any other countries in which the product's sale and use

has been authorized. . . .

Dkt. 129. This minute entry was made in connection with an initial hearing on the

motion for preliminary injunction, and there is a good argument that the preliminary

injunction amounts to a "further order of the Court" that supersedes the minute entry.

But that aside, the minute entry itself is not worded as a court order: as indicated, it

simply memorializes a representation made by Schwartz's counsel. For these reasons,

the Court sets aside the minute entry as a basis for imposing sanctions.

Second, the preliminary injunction opinion is a description of Judge Lee's

reasons for granting a preliminary injunction. It is not itself an order; the order is the

preliminary injunction entered the same day. Federal Rule of Civil Procedure 65(d)

requires an order granting an injunction to, among other things, "state its terms

specifically[,] and describe in reasonable detail—and not by referring to the complaint or

other document—the act or acts restrained or required." Fed. R. Civ. P. 65(d)(1)(B)-(C).

Judge Lee's injunction did that, as the Court will discuss in a moment. Supposed

prohibitions found only in the accompanying opinion are not appropriately considered as

a part of the injunction under Rule 65(d). See Marseilles Hydro Power, LLC v.

Marseilles Land & Water Co., 299 F.3d 643, 646 (7th Cir. 2002) ("Rule 65(d) requires

that the injunction be self-contained; its terms may not be filled out by reference to

another document."). See also, e.g., Patriot Homes, Inc. v. Forest River Housing, Inc.,

512 F.3d 412, 414-15 (7th Cir. 2008) (quoting PMD, Inc. v. Sherwin-Williams Co., 141

F.3d 610, 619 (7th Cir. 1998), for the proposition that an injunction must "be precise and

self-contained, so that a person subject to it who reads it and nothing else has a

sufficiently clear and exact knowledge of the duties it imposes on him that if he violates

it he be adjudged guilty of criminal contempt." (emphasis added)).

The Court therefore turns to the preliminary injunction order itself. The relevant

part states:

4. Defendant Mark Schwartz shall not:

a. take any action in direct or indirect reliance upon the purported

Board Minutes dated September 5, 2019, including but not limited to any

Board of Directors (“Board”) action whatsoever on behalf of Mesh Suture,

Inc. (the “Company”), until the conclusion of this litigation or further order

of this Court. Examples of enjoined conduct include: general supervision

of Company business; appointment of officers; issuance of Company

stock; execution of any contract, transaction, or business venture on

behalf of the Company; any act delegated to the Company’s Board by the

Company Bylaws, ECF No. 125-27; and any transaction involving the

building at D83 Calle C, Costa De Oro, Dorado, Puerto Rico, 00646.

b. take any action directly or indirectly in reliance upon his purported

authority as the Company’s CEO pursuant to the Employment Agreement

dated January 1, 2019, ECF No. 125-9, until the conclusion of this

litigation or further order of this Court. Examples of enjoined conduct

include: general supervision of Company business; supervision and

control over Company finances; execution of any contract, transaction, or

business venture on behalf of the Company; hiring, firing, or other

employment decisions; appointment of directors to the Board; any

representation to any person or entity that he is the Company’s CEO; any

act delegated to the Company’s Board by the Company Bylaws, and any

transaction involving the building at D83 Calle C, Costa De Oro, Dorado,

Puerto Rico, 00646.

Dkt. 234 at 2-3.

Most of the alleged misdeeds cited by plaintiffs in support of their motion involve

written statements made by Schwartz in other litigation. The Court notes, initially, that if

Schwartz made a misrepresentation in another lawsuit, the proper place to seek

imposition of a sanction for the misrepresentation itself is in that lawsuit, not this one.

As it relates to the present motion for sanctions, the question is whether the alleged

representations by Schwartz ran afoul of Judge Lee's preliminary injunction is some

way.

As quoted above, the injunction prohibits Schwartz from "tak[ing] any action" in

reliance upon certain Board of Directors minutes or his purported authority as CEO, and

it provides a list of "[e]xamples of enjoined conduct." Schwartz argues that he cannot

be found in contempt of the order for statements made in other litigation, which he

contends do not constitute "action" or "conduct."

A district court may make a finding of civil contempt only if it finds by clear and

convincing evidence that the alleged contemnor "has violated the express and

unequivocal command" of a court order. In re Resource Tech. Corp., 624 F.3d 376, 387

(7th Cir. 2010). See also, e.g., Ohr ex rel. NLRB v. Latino Exp., Inc., 776 F.3d 469, 474

(7th Cir. 2015) (party seeking contempt must establish that contemnor violated "an

unambiguous command" in a court order); Lightspeed Media Corp. v. Smith, 761 F.3d

699, 711 (7th Cir. 2014) (same).

The question here is whether a prohibition against "action" and "conduct" applies

to statements that the enjoined party made to another court. The text of the injunction

suggests otherwise. The order's "[e]xamples of enjoined conduct" all involve doing

things, not saying things. The line between conduct and speech, sometimes an issue in

First Amendment disputes, is not always an easy one to draw, but here we are dealing

with the terms of a written order and thus can apply principles commonly used in

interpreting written instruments. In particular, the doctrine of ejusdem generis applies to

the construction of arguably ambiguous terms in injunctions just as it does to statutes:

When a court considers a list of specific terms that is then followed by a more

general term, such as § 1.J of the injunction, the canon of ejusdem generis

applies to resolve ambiguities in meaning. Under that canon, when general

words follow the enumeration of particular classes, the general words should be

construed as applying only to things of the same general class as those

enumerated.

FTC v. Garden of Life, Inc., 516 F. App'x 852, 858 (11th Cir. 2013) (internal quotation

marks and citation omitted). The same is true for other written instruments, like

contracts:

Ejusdem generis provides guidance on how to interpret language where meaning

is not plain. This Latin phrase confines the scope of a general term to the nature

of the preceding class or thing, unless a contrary intent is clearly shown. Since

the canon is intended only as an aid to ascertaining the intent of the drafters

when uncertainty or ambiguity exists, it applies only when it is not possible to

determine the meaning of the words unless one focuses on the context.

Tourdot v. Rockford Health Plans, Inc., 439 F.3d 351, 353–54 (7th Cir. 2006) (internal

citation omitted).

In this case, these principles apply. The injunction's list of examples of prohibited

"action" all involve matters that one would commonly view as conduct, not speech:

hiring and firing employees, entering into contracts, supervising business activities, and

so on. The Court is not persuaded, at least for purposes of a contempt determination,

that the preliminary injunction "unambiguously" or "unequivocally" reaches written or

oral assertions by Schwartz that are not part of what is commonly understood as

"conduct" and not simply speech.

Most of the claimed violations of the preliminary injunction order arising from

filings and statements by Schwartz in litigation brought by EagleBank in Maryland

litigation and a Sheriff's sale of assets that followed that litigation. See Pls.' Mot. for

Sanctions at 7-8. As just indicated, the Court is not persuaded that the preliminary

injunction's bar against "tak[ing] any action[ ]" and "conduct" is appropriately read as

implicating the contents of written submissions that Schwartz made in defending against

a civil suit or trying to head off the Sheriff's sale of Mesh Suture stock that resulted from

that suit. The Court therefore overrules plaintiffs' contention that the defendants should

be sanctioned—based on claimed violations of the preliminary injunction—for

statements in filings they made in the Maryland litigation and to try to stop the sale. See

Dkt. 383-12, 383-13 (summary of alleged violations of preliminary injunction in

connection with Maryland litigation).

Plaintiffs also contend that certain emails that Schwartz sent to Mesh Suture's

product manufacturer, Corza Medical, run afoul of the preliminary injunction's

prohibitions. But again, sending an email does not, in the Court's view, amount to a

violation of the injunction's bar against "action[s] on behalf of Mesh Suture." In the

emails, Schwartz purported to act not on behalf of the company itself, but as "a director

of Mesh Suture and represent[ative of] its majority shareholder." See Pls.' Mot. for

Sanctions at 4. The same is true of the allegedly defamatory Facebook post; Schwartz

penned it "[a]s the former CEO of Mesh Suture." See id. at 6. To be clear, the Court is

not suggesting that it was appropriate for Schwartz to make any of these statements;

rather, the Court simply finds that plaintiffs have not clearly shown that they ran afoul of

any clear or unambiguous prohibition in the preliminary injunction order.1

2. Statements regarding ownership of Mesh Suture stock

In the Maryland litigation, which involved a claim by EagleBank against Mark

Schwartz, Tax Lien Law Group, and Axis Investment Holdings Trust to collect on a

promissory note and guaranty, EagleBank obtained a judgment against Schwartz for

$3.5 million. The Maryland court then entered, in May 2023, a "charging order" against

Mark Schwartz, essentially imposing a lien on any interests he held, including in his

1 The Court takes no position on whether plaintiffs could successfully obtain a revision

of the preliminary injunction that would impose clear prohibitions against positions taken

by Schwartz in separate litigation and against otherwise representing that he is the CEO

or a director of Mesh Suture.

With regard to the Maryland litigation, the Court also notes—as plaintiffs' counsel

conceded at the hearing on the present motion—that Schwartz's opponents there were

fully able to point out, in response to his filings, that he had lost the preliminary

injunction in the present case and was precluded from "taking action" on Mesh Suture's

behalf. Indeed, Schwartz did not prevail in the Maryland litigation; he lost and is

appealing.

interest in Mesh Suture. See Pls.' Mot. for Sanctions, Ex. 4. In April 2024, the

Maryland court granted a motion by EagleBank to sell Schwartz's interest in Mesh

Suture. See id., Ex. 5. The sale was scheduled for a date in December 2024.

On December 6, 2024, a few days before the scheduled sale of the Mesh Suture

stock, an email from the email address of Schwartz's wife, Yajia Schwartz, was sent to

various persons threatening legal action against Dumanian, EagleBank, Mesh Suture,

and others participating in the sale. The email stated that

[n]either my husband nor his Trust own or hold any stock in Mesh Suture, Inc.

and have not since January 17, 2020. On that date, my husband's trust

irrevocably transferred all of its interests to me, as the Sole Trustee of the Yajia

Hu Schwartz Revocable Trust.

Id., Ex. 6 at 1. The email further stated that this transfer "is fully documented in the

corporate books and has been filed with the Puerto Rico Secretary of State, establishing

my trust's uninterrupted majority ownership interest since January 2020." Id.

Plaintiffs contend that this email, ostensibly from Yajia Schwartz, was actually

authored, or at least directed, by Schwartz. But no matter: two days later, on

December 8, 2024, Schwartz himself filed an emergency motion before the Maryland

court asking to stay the sale, and in that motion he adopted the same version of events

described in Yajia Schwartz's December 6 email. See id., Ex. 7. Among other things,

Schwartz's motion stated that

[t]he shares purported to be sold are not owned by Mark Schwartz, Esq., his

Trust [sic]. On January 17, 2020, all relevant shares were irrevocably transferred

to Yajia Hu Schwartz, as the sole trustee of the Yajia Hu Schwartz Revocable

Trust ("YHS Trust"). . . . This transfer was lawfully executed, duly recorded in

corporate books, and filed with the Puerto Rico Secretary of State. . . . Since

January 2020, neither Mark Schwartz nor his Trust holds any interest in these

shares. . . .

Id. at 2.

Plaintiffs contend that Schwartz's express disavowal of any ownership of Mesh

Suture stock going back January 2020 directly contradicts at least the following

testimony he gave during the preliminary injunction hearing before Judge Lee on March

19, 2022:

Q; And this is in the March 2019 time frame, when you and Greg [Dumanian]

were contemplating putting money into the A-2 found to fund the company's

operations; is that correct?

A: It wasn't even contemplating. We had done – we had put money into the

operating account to bridge the company already.

. . .

Q: At that point in time, you already owned a lot of stock in Mesh Suture,

correct?

A: I did. Greg and I are the majority owners of the company, and I'm the

largest shareholder.

Pl.'s Mot. for Sanctions, Ex. 10 at 295, 296 (emphasis added). Significantly, plaintiffs

argue, Schwartz's preliminary injunction hearing testimony is worded in the present

tense, indicating that he was saying that as of March 2022, he was the largest

shareholder of Mesh Suture. If so, that would contradict Schwartz's later claim that he

had transferred his shares to Yajia Schwartz over two years earlier, in January 2020.

The Court notes that the claimed transfer is supported by purportedly contemporaneous

documentation. See Dkt. 403 (copy of purported transfer documentation).

At the hearing on the present motion, the Court asked counsel for plaintiffs which

statement by Schwartz they contend was false—his testimony before Judge Lee

indicating that, as of March 2022, he was Mesh Suture's largest shareholder, or his

statement to the Maryland court that he had transferred his Mesh Suture shares to Yajia

Schwartz's trust in January 2020. Counsel responded that they contend the testimony

before Judge Lee was false.

This aspect of plaintiffs' motion for sanctions gives rise to two significant

problems. The first is that the law is clear that a person may not be held in civil

contempt simply for giving false testimony. See In re Michael, 326 U.S. 224, 227-28

(1945); Jones v. Lincoln Elec. Co., 188 F.3d 709, 739 (7th Cir. 1999). Rather, for

contempt to lie, "there must be added to the essential elements of perjury . . . the further

element of obstruction to the court in the performance of its duty." Ex parte Hudgings,

249 U.S. 337, 383 (1919); Jones, 188 F.3d at 739. Without this, "the proper recourse

against a witness who testifies falsely at trial is a subsequent prosecution for perjury."

Jones, 188 F.3d at 740.

The unavailability of contempt as a sanction does not necessarily end this aspect

of plaintiffs' motion; they also rely on a court's inherent authority to manage judicial

proceedings and regulate the conduct of those appearing before it. See, e.g., Goodyear

Tire & Rubber Co. v. Haeger, 581 U.S. 101, 107 (2017); Chambers v. NASCO, Inc., 501

U.S. 32, 44-45 (1991). A sanction under a court's inherent authority must be

compensatory, not punitive. See Goodyear Tire, 581 U.S. at 108. One permissible

sanction in this regard is to require reimbursement of the opposing litigant's attorney's

fees and costs occasioned by the misconduct. See Goodyear Tire, 581 U.S. at 107;

Chambers, 501 U.S. at 45. And dismissal of claims or (as applied here) entry of default

are likewise permissible sanctions under a court's inherent authority where a party has

abused the judicial process by seeking (or opposing) relief based on information the

party knows is false. See, e.g., Ramirez v. T&H Lemont, Inc., 845 F.3d 772, 776 (7th

Cir. 2016). This requires "a finding that the culpable party willfully abused the judicial

process or otherwise conducted the litigation in bad faith." Id.

But this required predicate gets us to the second problem posed by Dumanian's

motion to the extent it relates to claimed false testimony before Judge Lee: the

interface with the criminal charges against Schwartz pending before another judge of

this court. See United States v. Schwartz, Case No. 22 CR 635 (N.D. Ill.). Though the

superseding indictment in that case does not charge Schwartz with perjury or any

related offense relating to his claimed false testimony about stock ownership during the

preliminary injunction hearing, it does charge him with perjury for other testimony during

that same hearing. See United States v. Schwartz, No. 22 CR 635, dkt. 59, Count 7.

And more generally, there is a significant amount of overlap between the underlying

claims in the present civil case and the fraud and perjury charges in the pending

criminal case. That is why, at an earlier date, the Court stayed discovery and other

ongoing proceedings in the present case pending a disposition of the criminal case at

the district court level (that case is now set for trial in January 2026).

The Court held an in-person hearing on the present motion. It was not an

evidentiary hearing; the Court heard argument, not testimony. Schwartz, who is an

attorney, represented himself. He did address the contention regarding false testimony,

denying that he had made any misstatements and appearing to suggest that the

testimony in question before Judge Lee was focused on control of the voting rights for

the stock, which he says he retained, even after the purported transfer of the stock to

his wife, via a "voting pledge agreement." Dkt. 404 (Apr. 4, 2025 transcript) at 27, 28-

29. He said, "So I don't own the shares. I have the right to control them." Schwartz

stated that any claimed inaccuracy in his testimony before Judge Lee was "immaterial

[and] out of context. | don't think we were discussing this issue at that hearing." /d. at

33.

More generally, however, Schwartz argued in his response to the motion for

sanctions that requiring him to defend himself on the merits of the perjury allegation

would cause him to "face[s] a no-win choice: (a) expose his criminal defense strategy in

the civil forum, or (b) risk default or contempt by remaining silent." Defs.' Resp. to Mot.

for Sanctions at 2.

Given the potential overlap with the criminal case and the Fifth Amendment

implications of mounting a defense on the merits of plaintiffs’ perjury claim, the Court

concludes that the appropriate course with regard to this aspect of plaintiffs' motion for

sanctions is to terminate it without prejudice to renewal after the criminal case is

concluded at the district court level.

Conclusion

For the reasons stated above, plaintiffs' motion for sanctions [dkt. 383] is denied

as it relates to alleged misconduct other than claimed false statements regarding Mark

Schwartz's stock ownership and terminated without prejudice to renewal as it relates to

those claimed false statements. Defendants’ motion to strike or dismiss the motion for

sanctions [dkt. 386] is denied. Defendants’ motion for ruling [dkt. 406] is denied as

moot. A joint status report regarding the criminal case against defendant Mark Schwartz

is to be filed on February 2, 2026. A telephonic status hearing is set for February 9,

2026 at 8:50 AM, using call-in number 650-479-3207, access code 2305-915-8729.

Date: August 17, 2025

United States District Judge

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