SE Property Holdings, LLC v. Center et al

Filing 236

Order granting 222 MOTION for Order to Show Cause filed by SE Property Holdings, LLC. Show Cause Hearing set for 5/27/2020 10:00 AM in US Courthouse, Courtroom 4A, 155 St. Joseph Street, Mobile, AL 36602 before District Judge William H. Steele. Signed by District Judge William H. Steele on 4/13/20. (cmj)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
SE PROPERTY HOLDINGS, LLC,
Plaintiff,
v.
TAMMY T. CENTER, et al.,
Defendants.

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CIVIL ACTION 15-0033-WS-C

ORDER
This matter comes before the Court on Plaintiff’s Motion for an Order to Show Cause
(doc. 222). The Motion has been briefed and is now ripe.
This is a fraudulent transfer action brought by SE Property Holdings, LLC (“SEPH”),
against an array of defendants, including the Estate of Charles H. Trammell, Trammell’s wife
and daughters, and a pair of Trammell family-owned LLCs. One of those defendants is Amy
Brown, a daughter of Charles H. Trammell. Following a non-jury trial, this Court entered a Final
Judgment (doc. 206) on January 2, 2018, ordering, adjudging and decreeing “that all defendants
are liable to plaintiff on Counts I, II, and III for violations of the Alabama Uniform Fraudulent
Transfer Act.” (Doc. 206, PageID.7299.) As part and parcel of that Final Judgment, defendants
were expressly “enjoined from further disposition of … the shares of UPS stock transferred
into” the two LLC defendants, specifically Trammell Family Orange Beach Properties, LLC and
Trammell Family Lake Martin Properties, LLC. (Id.)
On its face, the Final Judgment reflected that it was being entered “[i]n accordance with
the Orders entered on August 8, 2017 (doc. 180), November 13, 2017 (doc. 197) and this date
(doc. 205).” (Id.) The August 8, 2017 Order set forth the terms and scope of the injunction, and
explicitly stated that the injunction’s purpose was “to preserve the status quo dating back to
when the fraudulent transfers occurred, in terms of available assets to satisfy any judgment that
may be entered in SEPH’s favor against Belinda Trammell and/or the Estate of Charles
Trammell in the state-court proceedings.” (Doc. 180, PageID.3893, 3899.) Furthermore, at

plaintiff’s request, the November 13, 2017 Order elaborated on the meaning of the word
“disposition” by clarifying that using the UPS stock as collateral for loans or debt service
payments would constitute a disposition in violation of the injunction. (Doc. 197, PageID.695657.) Indeed, the November 13 Order reinforced the fundamental principle that the objective of
the injunction was to preserve the status quo in terms of available assets to satisfy any state-court
judgment in SEPH’s favor, and opined that “[a]llowing defendants to encumber those assets
further [as collateral for debt service obligations] … would run directly contrary to that stated
objective.” (Id.)
In its Motion, SEPH maintains that defendant Amy Brown (one of the transferees of the
fraudulently transferred assets and a party bound by the subject injunction) has testified under
oath to violating the terms of the injunction. Specifically, in a deposition conducted on January
10, 2020 in related federal litigation, Brown admitted that she has been withdrawing funds for
personal use from a Loan Management Account (“LMA”) at Merrill Lynch. (See doc. 234-1,
PageID.7424-25.) The LMA is in the name of defendant Trammell Family Lake Martin
Properties, LLC, as to which Brown is Manager and part owner. The LMA is a line of credit
secured by fraudulently transferred shares of UPS stock that are directly covered by the
injunction. By accessing funds from a line of credit secured by UPS stock shares, Brown is
further encumbering those shares, which would appear on its face to be a direct violation of the
injunction entered by this Court.1
SEPH’s Motion also ascribes impropriety to defendant Brown’s husband, Patrick Lance
Brown, who is not a party to this action. Mr. Brown is a Senior Financial Advisor at Merrill
Lynch, and is the Account Advisor for defendant Trammell Family Lake Martin Properties,
LLC. According to SEPH, Mr. Brown is bound by the injunction by the terms of Rule
65(d)(2)(B)-(C), Fed.R.Civ.P., as both an officer/agent/servant of defendants and a person in
active concert or participation with defendants. Of course, Rule 65(d)(2) provides that an
injunction is binding only on persons in these categories “who receive actual notice of it by
1

In response to further questioning during the deposition, Brown explained, “I
thought our injunction was, you can’t sell the stock,” and for that reason, “I didn’t think I did
anything wrong. I didn’t sell the stock.” (Doc. 234-1, PageID.7427.) Brown conceded that she
“didn’t ask” anyone if it was okay for her to tap into the LMA in this manner, and that she had
been using the borrowed funds from that line of credit to pay college tuition, presumably for her
children. (Id.)

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personal service or otherwise.” Id. In SEPH’s view, Mr. Brown must have had actual notice of
the injunction in this case because (i) he is a named party in related federal litigation; (ii) as
Brown’s husband, he must have been aware of the injunction that resulted in a precipitous
decline in available funds to the family as Brown’s direct dissipation of UPS stock abruptly
halted; and (iii) he supervises the LMA Account at Merrill Lynch.
In light of these facts and circumstances, SEPH’s Motion seeks entry of an Order
requiring the Browns to show cause why they should not be held in civil contempt, and
scheduling a hearing for that purpose. As authority for the Motion, SEPH cites Reynolds v.
Roberts, 207 F.3d 1288 (11th Cir. 2000), wherein the Eleventh Circuit outlined just such a
procedure for enforcement of injunctions.2 SEPH also requests limited discovery in advance of
the hearing, namely, all documents and correspondence related to the injunction or Brown’s or
anyone in her family’s receipt of money from Trammell Lake Martin’s Merrill Lynch accounts
since August 8, 2017.
The Browns, by and through recently retained counsel, have filed a Response (doc. 231)
asserting that the Motion should be denied for three discrete reasons. First, the Browns posit that
SEPH has failed to meet its initial burden of showing noncompliance by Amy Brown with the
injunction. A necessary prerequisite to a show cause order and contempt hearing is a preliminary
showing by clear and convincing evidence of noncompliance. See Thomas v. Blue Cross and
Blue Shield Ass’n, 594 F.3d 814, 821 (11th Cir. 2010) (“On a contempt motion, the movant bears
the initial burden of proving, by clear and convincing evidence, the defendant’s noncompliance
with a court order.”) (citation omitted). SEPH has met this initial burden. The injunction was
pellucidly clear that Brown was enjoined from any disposition of the fraudulently transferred
UPS stock, yet she admitted borrowing money from Merrill Lynch using that stock as collateral.
In the Response, Brown insists that granting a lien on the UPS stock cannot be equated to a
“disposition,” but merely creates a “risk of disposition.” This proposed distinction is unavailing.
The Court’s Orders cited in the Final Judgment expressly stated that (i) the purpose of the

2

Per Reynolds, when a plaintiff believes a defendant has violated an injunction, the
plaintiff should file a motion for order to show cause. “If satisfied that the plaintiff’s motion
states a case of non-compliance, the court orders the defendant to show cause why he should not
be held in contempt and schedules a hearing for that purpose.” Reynolds, 207 F.3d at 1298. That
course of action is precisely what SEPH is proposing here.

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injunction was to preserve the status quo with respect to the fraudulently transferred assets, and
(ii) allowing defendants to encumber those assets for debt service payments would run directly
contrary to that objective. On this record, the Court readily concludes that SEPH has shown by
clear and convincing evidence that the underlying injunction was lawful; that it was clear,
definite and unambiguous; that Brown had the ability to comply; and that she failed to do so, and
indeed failed even to ask anyone if her LMA withdrawals were permissible under the terms of
the injunction. This showing suffices both to shift the burden to Brown to produce evidence
explaining her noncompliance and to trigger the need for a corresponding hearing.3
Second, the Browns assert that the Motion should be denied as to Patrick Lance Brown
because SEPH has not proven that he had actual notice of the injunction. As noted above, Rule
65(d)(2) renders an injunction binding on a non-party in Mr. Brown’s position only if he
received actual notice of it. This criticism is not particularly fair because, as the Browns are well
aware, SEPH was unable to take Mr. Brown’s deposition at the scheduled time to explore this
issue when the Browns’ then-counsel discovered a conflict during Amy Brown’s deposition,
suspended the depositions and withdrew from the representation. More importantly, SEPH has
come forward with extensive circumstantial evidence – none of which the Browns have rebutted
– raising a strong inference that Mr. Brown had such actual notice of the injunction.
Furthermore, neither Mr. Brown nor his counsel has made representations to the Court, via
affidavit or otherwise, denying that he had actual notice of the injunction at the relevant times.
Under the circumstances, the Court finds that the appropriate course of action is to set the matter
for a show cause hearing, at which time Mr. Brown may testify and the parties may otherwise
present evidence and argument as to the question of actual notice and any other factual or legal
issues pertinent to the question of civil contempt. Following the hearing, the Court will make the
necessary factual findings and legal conclusions. For now, it suffices to observe that there are no
valid grounds before the Court at this time for ruling as a matter of law that the injunction is not
binding on Mr. Brown.
3

A civil contempt movant must present “clear and convincing evidence that the
allegedly violated order was valid and lawful; the order was clear and unambiguous; and the
alleged violator had the ability to comply with the order. … Once this prima facie showing of a
violation is made, the burden then shifts to the alleged contemnor to produce evidence explaining
his noncompliance at a ‘show cause’ hearing.” F.T.C. v. Leshin, 618 F.3d 1221, 1232 (11th Cir.
2010) (internal citations and marks omitted).

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Third, the Browns oppose SEPH’s request for pre-hearing discovery relating to the
injunction or Merrill Lynch account transactions post-dating the injunction. The Browns
characterize SEPH’s request as an attempt to make an end run around this Court’s prior order
refusing to allow additional discovery broadening the scope of this litigation. This
characterization is inaccurate. Plaintiff has now made specific allegations that the Browns are in
violation of the Court’s injunction against disposition of fraudulently transferred assets, and
seeks to have them adjudged in contempt. The discovery request seeks only documents that are
directly relevant to these contempt proceedings. Because those materials may be helpful to the
Court in determining the nature and extent of any violations of the injunction, that aspect of the
Motion will likewise be granted.
For all of the foregoing reasons, Plaintiff’s Motion for an Order to Show Cause (doc.
222) is granted. It is ordered as follows:
1. This matter is set for a Show Cause Hearing on May 27, 2020 at 10:00 a.m. in
Courtroom 4A;
2. At such hearing, the Browns are ordered to show cause why they should not be
adjudged in civil contempt and sanctioned for violating the injunction entered in this
case via Orders dated August 8, 2017, November 13, 2017, and January 2, 2018, and
memorialized in the Final Judgment dated January 2, 2018; and
3. No later than one week prior to the hearing, the Browns must produce to SEPH copies
of all documents and correspondence in their custody and control relating to the
injunction or Amy Brown’s or anyone in her immediate family’s receipt of funds
from Trammell Lake Martin’s Merrill Lynch accounts since August 8, 2017.
DONE and ORDERED this 13th day of April, 2020.
s/ WILLIAM H. STEELE
UNITED STATES DISTRICT JUDGE

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