Hershewe v. Givens et al

Filing 157

OPINION AND ORDER directing that: (1) plf Hershewe's 17 MOTION for Preliminary Injunction is DENIED; (2) plf Hershewe's 17 motion for attachment of Eagle Investments' bank account--Midsouth account number 100088686--is GRANTED; (3) plf Hershewe's 17 motion for seizure of assets is DENIED, as further set out in order. Signed by Honorable Judge Myron H. Thompson on 9/29/15. (Attachments: # 1 civil appeals checklist)(djy, )

IN THE DISTRICT COURT OF THE UNITED STATES FOR THE
MIDDLE DISTRICT OF ALABAMA, SOUTHERN DIVISION

EDWARD HERSHEWE,

)
)
)
)
)
)
)
)
)

Plaintiff,
v.
KEITH GIVENS, et al.,
Defendants.

CIVIL ACTION NO.
1:14cv655-MHT
(WO)

OPINION AND ORDER
Plaintiff
against

a

Edward

number

of

Hershewe

brings

defendants

this

asserting

action

state-law

claims of fraud, breach of fiduciary duty, piercing the
corporate veil, and corporate dissolution as well as a
federal-law
Influenced

claim
and

of

Corrupt

U.S.C. § 1961 et seq.

a

violation

of

Organizations

the
Act

Racketeer
(RICO),

18

The defendants are Keith Givens

(K. Givens), John Givens (J. Givens), Chase Givens (C.
Givens),

Eagle

Investments,

LLP,

Eagle

Investments

Group, LLP, VLO Management, LLC, and Jacoby & Meyers,
LLC.

The court has federal-question jurisdiction over

the federal claim pursuant to under 28 U.S.C. § 1331
and supplemental jurisdiction over the state-law claims
pursuant to 28 U.S.C. § 1367.
The case is now before this court on the Hershewe’s
motion

for

preliminary

and

attachment

a

seizure.

injunction

and

motion

for

The

will

grant

the

court

motion for attachment and will deny the motions for
seizure and a preliminary injunction.

I. BACKGROUND
This case arises out of a joint venture between
Hershewe,

a

lawyer

from

Missouri,

and

K.

Givens,

a

lawyer from Alabama.1

1. Unlike a motion to dismiss, the court must weigh
the facts in a motion for preliminary injunction.
Therefore, the background description in this opinion
differs from that of the opinion on the motions to
dismiss.
2

Several years ago, Hershewe and K. Givens began
discussions

for

a

joint

venture.

The

idea

was

to

establish a nationwide set of physical and virtual law
offices across the country under the auspices of Jacoby
& Meyers, a law firm where K. Givens worked and had an
ownership interest.

In order to roll out this business

plan, Hershewe and K. Givens sought out a company that
marketed

do-it-yourself

venture,

or

Lexis-Nexis
software

to

purchase.

about

and

legal

using

even

At
some

drafted

understanding with them.

forms
first,
of

its

several

to

join

they

the

engaged

pre-existing
memoranda

of

However, Lexis-Nexis dropped

out of the deal, leaving the remaining parties to look
for either another partner or for an acquisition.
Hershewe and K. Givens finalized an agreement for a
joint venture in 2012.

The nature of this agreement is

at the heart of the dispute.

Both parties agree that

Hershewe agreed to pay $ 3.5 million and that part of
the $ 3.5 million would be used to pay for an 80 %
3

equity stake in USLegal, a company that could provide
the pre-made legal forms central to the joint venture.
Additionally, Jacoby & Meyers agreed to contribute its
brand and expertise.

As part of the agreement to form

VLO, Hershewe obtained a 46.25 % interest in VLO; Keith
Givens, 20%; Chase Givens, 15 %; John Givens, 15 %; and
two other investors, 1.875 % each.

Every member of the

LLC except for Hershewe was a lawyer at the same law
firm.

K. Givens and Hershewe were co-managers of VLO,

while K. Givens, along with C. Givens, controlled the
bank account.

The dispute is whether a portion of

Hershewe’s investment was a capital contribution to be
used on behalf of VLO or a direct payment to K. Givens
as a buy-in to VLO.
Soon after the formation, Hershewe transferred the
first $ 1.5 million of the $ 3.5 million investment to
VLO.

On

the

same

day,

K.

Givens

transferred

$

1

million out of VLO’s bank account to a bank account of

4

Investments2

Eagle

(MidSouth

Bank

account

number

10088686), a company owned by K. Givens, J. Givens, and
C.

Givens.

transferred

Eagle
over

Investments

$ 930,000

as

a

shortly
loan

thereafter

payment

on

a

credit line it had taken out for operating expenses.
Several other transactions occurred in the following
months from the VLO account, including expenditures of
nearly

$ 40,000

on

registration

and

legal

fees

for

Jacoby & Meyers, several thousand dollars for repairs
to “the Grand,” a property owned by K. Givens, and over
$ 150,000

in

furniture

for

Eagle

Investments’

properties.
In July 2012, Hershewe was scheduled to transfer
the remaining $ 2 million to VLO in order to purchase
the stake in USLegal.

A month beforehand, K. Givens

2. Eagle Investments, LLP (Eagle I) ceased to be a
company in 2013-2014. Hershewe alleges that Eagle
Investments Group, LLP (Eagle II), also registered by
K. Givens, is its successor.
The court will refer to
them collectively as Eagle Investments.
5

came to Hershewe, warning that USLegal was running out
of

money

and

needed

more

to

support

the

business.

Hershewe agreed to co-sign a bank loan for $ 1 million
for VLO so that VLO could help USLegal with its cash
flow.

The

parties

dispute

whether

this

$ 1 million was for USLegal’s cash-flow problems or
whether it actually was used as part of the purchase
price for USLegal because K. Givens had spent the money
intended for that purpose for his own benefit.

They

also dispute whether K. Givens and others have since
doctored VLO’s taxes to cover up the alleged fraud.
Hershewe brought this lawsuit and originally moved
for a temporary restraining order as well as seizure
and attachment.

The court denied the motion for a

temporary restraining order and asked for additional
clarification

of

the

purposes

of

the

motion

for

preliminary injunction and the motion for prejudgment
seizure or attachment.

These motions are now before

the court.
6

III. DISCUSSION
Hershewe moves for a preliminary injunction under
Federal

Rule

alternative,

of

Civil

Procedure

requests

65

and,

prejudgment

in

seizure

the
and

prejudgment attachment under Rule 64.

A.
To
must

warrant

a

demonstrate

Preliminary Injunction
preliminary
(1)

a

injunction

substantial

a

plaintiff

likelihood

of

success on the merits; (2) that irreparable injury will
result unless the injunction is issued; (3) that the
threatened

injury

outweighs

whatever

damage

the

proposed injunction may cause the opposing party; and
(4)

that

interest.

granting

the

injunction

is

in

the

public

Delta Air Lines, Inc. v. Air Line Pilots

Ass’n, Intern., 238 F.3d 1300, 1308 n.18 (11th Cir.
2001).

Because the court does not find a substantial

7

likelihood of success on the merits, the court denies
the preliminary injunction.
The central factual dispute in this case is the
nature

of

the

contract

that

entered when forming VLO.

Hershewe

and

K.

Givens

Hershewe alleges that he

agreed to contribute $ 3.5 million to VLO, with $ 1.5
million of the total as a capital contribution, and
that K. Givens fraudulently used this money for his own
purposes.

K. Givens disagrees, contending that the

$ 1.5 million was a payment for Jacoby & Meyers’s brand
name and personnel and that he could use the $ 1.5
million for his own benefit.
The facts of this case are truly puzzling.

Both

sides agree that there was an agreement regarding $ 3.5
million, but that no one documented any part of the
contract in writing.
million
stating

was
that

an

Hershewe argues that the $ 1.5

investment.
the

$ 1.5

He

presents

million

was

one
a

email

capital

contribution meant to come back to him--i.e., that it
8

was start-up capital to be used for VLO and eventually
repaid

to

him

by

VLO.

However,

this

email

was

regarding a memorandum of understanding that was never
signed,

and

the

memorandum

was

based

on

an

earlier

proposed deal with Lexis-Nexis that fell through.3
the

other

hand,

K.

Givens

testified

that

the

On

$ 1.5

million was a direct payment to him for contributing
$ 10 million in non-cash assets to VLO and could be
used for his personal benefit.

He claims he could have

bought a house with the money or given it to charity
even

though

the

money

went

into

VLO’s

bank

account

rather than his personal bank account.
The court finds that the evidence is in equipoise.
It is certainly plausible that K. Givens fraudulently
induced Hershewe into investing in VLO with the purpose

3.
Hershewe maintains that he would have been
taking the place of Lexis-Nexis in this deal and that
is why the email referenced the old memorandum.
However, even if this is true, it does not mean that K.
Givens agreed to this condition or that it was part of
the final contract.
9

of

using

the

money

for

his

personal

benefit.

The

direct transfer to VLO’s account bolsters this theory.
However, given that Hershewe made a $ 3.5 million deal
without a written contract, it is also plausible he
paid K. Givens $ 1.5 million to use how he saw fit in
exchange for non-cash assets.

K. Givens may have had

the obligation to spend as much money as necessary to
complete

his

part

of

the

oral

contract--that

is,

transfer assets, turn over intellectual property, open
new offices, etc.--but the $ 1.5 million might not have
been

earmarked

for

these

specific

tasks

but

rather

meant as a general payment that K. Givens could use as
he saw fit.

The court cannot grant preliminary relief

where there is no written contract and a reasonable
reading of the evidence suggests that Hershewe simply
made a bad business deal.

Given that each theory is

equally plausible, Hershewe has not met his burden to
prove

a

substantial

likelihood

10

of

success

on

the

merits.

The court denies the motion for a preliminary

injunction.

B.
In

the

Hershewe

Attachment and Seizure

alternative

moves

for

to

a

preliminary

prejudgment

injunction,

attachment

of

$ 1.5

million and seizure of furniture bought with VLO funds
under Federal Rule of Civil Procedure 64.
When addressing a motion for a writ of attachment
or seizure, Federal Rule of Civil Procedure 64 directs
courts to look to state substantive and procedural law.
Both attachment and seizure are
Rule of Civil Procedure 64.

governed by Alabama

Universal Safety Response,

Inc. v. Gov’t Technical Serv., LLC, 767 F. Supp. 2d
1252, 1253 (M.D. Ala. 2011) (Thompson, J.).

This rule

requires an affidavit containing a description of the
property,

the

plaintiff’s

title

or

right

to

the

property, how the defendant has unlawfully detained the
property,

and

the

risk

that
11

the

property

will

be

concealed, transferred, or damaged.

Ala. R. Civ. Proc.

64.
Where the court has already had a hearing on the
issue, as in this case, the plaintiff also has the
burden of showing “good cause.”

Id.

“Implicit in good

cause for prejudgment seizure would be some showing of
risk

of

injury

prejudgment”

or

loss

attachment

of

or

the

collateral

seizure.

J.H.

without
Wright

&

Assoc., Inc. v. Engerson, 2000 WL 1848135, at *3 (S.D.
Ala.

2000)

omitted).

(Vollmer,
Put

J.)

(internal

differently,

to

show

quotation
good

marks

cause,

a

plaintiff can claim an injury, such as the inability to
conduct

business

defendants,
spend,

or

conceal,

without

can

the

argue

transfer,

assets

that
or

12

the

dispose

taken

by

defendants
of

all

of

the
will
the

assets--that

is,

make

collecting

on

a

judgment

difficult or impossible--before the end of the case.4

i.

Attachment

The defendants argue that Hershewe did not properly
allege
attach,

a

title

as

is

or

right

required

to

under

the

money

Alabama

he

Rule

seeks
of

to

Civil

4. A plaintiff moving for an attachment must meet
additional statutory requirements.
Universal Safety,
767 F. Supp. 2d at 1253 (M.D. Ala. 2011) (Thompson, J.)
(quoting Ex Parte Boykin, 568 So. 2d 1243, 1244 (Ala.
Civ. App. 1990)). Specifically, a plaintiff must swear
to the amount he is due, certifying that he meets one
of the categories in Alabama law where an attachment
may be used, and that the purpose of the suit is not
“vexing or harassing the defendant.”
1975 Ala. Code
§ 6-6-44. Because “Rule 64 provisions were promulgated
to assure that the constitutional guarantees of due
process are not violated[,] . . . these rules are to be
strictly complied with.” Ex Parte Boykin, 568 So.2d at
1244; see also Universal Safety, 767 F. Supp. 2d at
1254 (dismissing attachment claim where the defendant
did not fulfill the statutory oath requirements).
Although the defendants originally argued that Hershewe
did not include the oath that he was not vexing or
harassing the defendants, he has rectified this with a
supplemental affidavit (doc. no. 85-1).
The court
finds that Hershewe meets the statutory requirements.
13

Procedure 34.

They cite Norman v. Occupational Safety

Ass'n of Alabama Workmen's Comp. Fund, 811 So. 2d 492
(Ala. 2001), for the proposition that a court cannot
order

an

attachment

where

there

is

no

evidence

an

ownership interest ever existed.
Norman, however, is distinguishable from this case.
In Norman, an investment fund hired a separate company
to manage the fund and named the president of that
company as the administrator of the fund.

Id. at 493.

The administrator from this separate management company
then advised the fund to transfer some of its workerscompensation insurance contracts to a third business,
which he and his company happened to merge with less
than a month later.

Id. at 493-94.

The investment

fund then moved to seize5 the proceeds of the merger,

5.
The plaintiff in Norman moved for seizure
rather than an attachment.
Because the requirements
are the same under Alabama Rule of Civil Procedure 64
for both attachment and seizure, the analysis in Norman
(continued...)
14

even though the fund did not have legal title or stock
in the management company or the business with which
the management company merged.
breach

of

fiduciary

duty

Despite the potential
on

the

part

of

the

administrator, the court rejected the Rule 64 motion
because the fund never had any legal interest in the
stock of either the management company or the third
business with which the management company merged.

Id.

at 502; see also Ala. R. Civ. P. 64(b)(1)(B).
Unlike Norman, Hershewe has a clear claim of right
to the money that he invested in VLO.

He originally

owned the money and then claims that he was defrauded
into transferring it to K. Givens and his sons.

In

contrast with the investment fund that was claiming
control

over

an

asset

in

which

it

never

had

any

interest (the stocks of two companies of which it had

would be applicable
attachment.

in

an

15

analogous

case

regarding

not bought stock in), Hershewe is asserting a right to
money that was his and--he claims--was wrongfully taken
from him.6
The court also finds that Hershewe has shown good
cause to believe the defendants will dispose of the
money in Eagle Investments’ bank account.

K. Givens

transferred $ 1 million to Eagle Investments the day
Hershewe transferred money to VLO, and $ 930,000 of
that

was

spent

within

several

days.

Another

approximately $ 65,000 has since been used.

Given this

pattern, Hershewe has alleged good cause that the money
in the Eagle Investments bank account will be spent.
Because Hershewe meets the statutory and procedural
requirements
attachment

under
of

Eagle

Alabama

law,

Investments’

the

motion

bank

account

for
is

6. The defendants also argue that the money in the
bank account is not capable of identification.
This
standard, however, is applicable in the context of a
seizure of property rather than for attachment.
Cf.
Universal Safety, 767 F. Supp. 2d at 1254.
16

granted, provided that Eagle can petition the court to
use the money for ordinary business expenses.
the

court

refuses

to

defendants

without

freeze

any

general

additional

However,

assets

of

specificity

Hershewe’s claim of right to these assets.

as

the
to

Not only

would this violate Alabama Rule 64, but also, as a
practical

matter,

the

court

cannot

freeze

assets

without knowing which specific bank accounts or money
Hershewe believes should be frozen.

ii. Seizure
Hershewe
office

next

supplies,

moves

for

furniture,

prejudgment
and

seizure

other

of

property

identified in his pleadings (doc. no. 138-3).7

7.
Hershewe originally requested seizure of both
the bank account as well as the furniture, but seems to
have abandoned that argument in his supplemental
pleadings on the issue.
See Doc. No. 85-1 at 5
(requesting seizure of furniture, but only mentioning
attachment of money); doc. no. 138-3 (identifying
offense expenses as the object of seizure).
17

The court denies the motion for lack of good cause.
In

contrast

to

the

demonstrated

risk

that

the

defendants would spend the money in Eagle Investments’
bank account, there is no comparable imminent risk that
the defendants are going to sell or dispose of the
furniture identified in Hershewe’s exhibits.

As such,

Hershewe

required

under

has

Alabama

failed
Rule

to
of

show
Civil

good

cause

Procedure

as
64.

To

the

extent that the furniture is evidence of fraud, the
defendants already have been cautioned by the court not
to destroy or conceal it.
***
Accordingly, it is ORDERED that:
(1) Plaintiff

Edward

Hershewe’s

motion

for

a

preliminary injunction (doc. no. 17) is denied.
(2) Plaintiff Hershewe’s motion for attachment of
Eagle

Investments’

bank

account--Midsouth

number 100088686--(doc. no. 17) is granted;

18

account

(3) Plaintiff

Hershewe’s

motion

for

seizure

of

assets (doc. no. 17) is denied.
DONE, this the 29th day of September, 2015.
/s/ Myron H. Thompson___
UNITED STATES DISTRICT JUDGE

19