Absolute Activist Value Master Fund Limited et al v. Devine
Filing
675
OPINION AND ORDER denying 577 plaintiffs' Emergency Motion for a Stay of the Court's July 25, 2017 Order. See Opinion and Order for details. (AMB)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
FORT MYERS DIVISION
ABSOLUTE
ACTIVIST
VALUE
MASTER
FUND
LIMITED,
ABSOLUTE
EAST
WEST
FUND
LIMITED, ABSOLUTE EAST WEST
MASTER
FUND
LIMITED,
ABSOLUTE EUROPEAN CATALYST
FUND
LIMITED,
ABSOLUTE
GERMANY
FUND
LIMITED,
ABSOLUTE INDIA FUND LIMITED,
ABSOLUTE
OCTANE
FUND
LIMITED,
ABSOLUTE
OCTANE
MASTER FUND LIMITED, and
ABSOLUTE RETURN EUROPE FUND
LIMITED,
Plaintiffs,
v.
Case No:
2:15-cv-328-FtM-29MRM
SUSAN ELAINE DEVINE,
Defendant.
OPINION AND ORDER
This matter comes before the Court on plaintiffs' Emergency
Motion for a Stay of the Court's July 25, 2017 Order (Doc. #577)
filed on July 26, 2017.
Defendant filed a Response (Doc. #596)
on August 9, 2017.
On July 25, 2017, the Court entered an Order dissolving a
Temporary Restraining Order entered on July 1, 2015 that restrained
virtually all of the assets held by, or under the control of,
defendant
Susan
Devine.
(Doc.
#575.)
On
July
26,
2017,
plaintiffs filed a Notice of Interlocutory Appeal (Doc. #577) and
an Emergency Motion to Stay the Court’s July 25, 2017 Order (Doc.
#578).
In their Motion to Stay, plaintiffs request two things:
(1) a stay of the Court’s July 25, 2017 Order until defendant has
a chance to respond to their Motion to Stay and the Court rules
thereon; and (2) a stay of the Court’s July 25, 2017 Order pending
their appeal of the Court’s July 25, 2017 Order.
(Id.)
On July 26, 2017, this Court entered an Order denying a stay
pending this Court’s decision on Motion to Stay, but taking under
advisement the remainder of the motion.
(Doc. #582.)
On July 28,
2017, the Eleventh Circuit entered an Order temporarily staying
this Court’s July 25, 2017 Order dissolving the TRO pending their
(the
Eleventh
Circuit’s)
resolution
of
Appellants’
Emergency
Motion to Stay District Court Order Pending Appeal. (Doc. #590.)
Then, on October 3, 2017, the Eleventh Circuit entered an Order
clarifying that the dissolution of the TRO will be stayed pending
the District Court’s Order on the Motion to Stay and their (the
Eleventh
Circuit’s)
Court’s Order.
Order
following
issuance
of
the
District
(Absolute Activist Value Master v. Devine, No.
#17-13364 (11th Cir. Oct. 3, 2017)).
I.
A stay pending appeal under Federal Rule of Civil Procedure
62 is considered extraordinary relief for which the moving party
bears a heavy burden. Garcia–Mir v. Meese, 781 F.2d 1450, 1453
(11th
Cir.
1986).
In
determining
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whether
the
issuance
of
a stay is
warranted,
courts
consider
(1)
whether
the stay applicant has made a strong showing that it is likely to
succeed
on
irreparably
the
merits;
injured
(2)
absent
whether
a stay;
the
(3)
applicant
whether
will
be
issuance
of
the stay will substantially injure the other parties interested in
the proceeding; and (4) where the public interest lies.
Hilton
v. Braunskill, 481 U.S. 770, 776 (1987).
A. Likelihood of Success on Appeal
The plaintiffs assert various arguments as to why they are
likely to succeed on the appeal of the Order dissolving the TRO,
including:
(1)
the
Court
previously
stated
that
the
unjust
enrichment claim supported the TRO; (2) the Court erred in finding
the funds had been commingled, and if they had been commingled, it
was with bad funds; (3) plaintiffs were precluded from having a
hearing on the preliminary injunction due to Devine’s stipulation
to extend the TRO; (4) the discovery received from third-party
financial institutions establishes sufficient tracing to support
a constructive trust; (5) plaintiffs could have made a showing
that they are likely to succeed on their request for a constructive
trust had the Court indicated its prior analysis would change; and
(6) equitable and preliminary injunctive relief are available for
plaintiffs’
unjust
enrichment
claim.
(Doc.
#577,
pp.
3-9.)
Devine disagrees with each argument presented. (Doc. #596, pp. 416.)
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1. Change in Circumstances
Plaintiffs first briefly assert that there was no change in
circumstances
to
justify
the
dissolution
because
this
Court
previously held that the unjust enrichment claim also supported
the TRO.
(Doc. #577, pp. 3-4.)
The Court finds there was a sufficient change in circumstances
due to the dismissal of all of the claims arising under federal
law,
resulting
the
case
proceeding
based
off
jurisdiction with one Florida state law claim.
of
diversity
Further, in the
Order dissolving the TRO, it was explicitly acknowledged that the
Court
had
previously
described
a
Florida
claim
for
unjust
enrichment as equitable, although upon a closer analysis of the
case law on point, it is deemed an action at law under Florida
law.
(Doc. #575, p. 14 n.8.)
Therefore, the Court does not find
that plaintiffs have established a likelihood of success on appeal
on this basis.
2. Commingled Funds
Plaintiffs next assert that the Court incorrectly found that
the funds were commingled, thereby precluding the imposition of a
constructive trust.
(Doc. #577, pp. 4-5.)
Plaintiffs assert that
the cases relied upon by the Court involved mixing good funds with
bad funds, whereas here bad funds were mixed with bad funds. (Id.)
Plaintiffs fail to cite any case law on point to support this
assertion.
The Court finds that even if the funds were mixed with
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bad funds, they were still commingled resulting in the inability
to determine which funds actually came from the alleged illegal
activity and were derived from the plaintiffs.
Therefore, the
Court does not find that plaintiffs have established a likelihood
of success on appeal on this basis.
3. Stipulation of Extension
Plaintiffs
next
assert
that
it
was
Devine’s
strategic
decision to stipulate to the TRO, thereby foregoing her right to
a prompt hearing where tracing evidence could be examined. (Id. at
5.)
The Court disagrees.
Plaintiffs were not blindsided by the
Order that was issued by this Court dissolving the TRO.
Instead,
plaintiffs had ample opportunity to respond and assert their
arguments and evidence of tracing. (Docs. ##539, 553.)
They were
clearly aware that defendant was asserting that there was not
sufficient tracing to support the constructive trust and had the
ability to rebut this assertion.
Therefore, the Court does not
find that plaintiffs have established a likelihood of success on
appeal on this basis.
4. Tracing of Penny Stock Proceeds to Support Constructive
Trust
Plaintiffs assert that earlier this month they submitted to
Devine an expert report that demonstrates tracing of Penny Stock
Scheme proceeds to almost all of the bank accounts. (Doc. #577, p.
6.)
- 5 -
The Court notes that the expert report was filed with the
Court on July 28, 2017 (Doc. #588), after the Court had entered
its order dissolving the Temporary Restraining Order on July 25,
2017 (Doc. #575).
Even when this report is considered, plaintiffs
have not established a likelihood of success on the merits such
that a TRO based solely on a claim of unjust enrichment should be
continued.
5. Availability
Relief
of
Equitable
and
Preliminary
Injunctive
Plaintiffs argue that the Court erred in looking to Florida
law
in
determining
whether
preliminary
injunctive
relief
was
available for the state cause of action. (Doc. #577, pp. 6-7.)
As stated previously, Ferrero v. Associated Materials, Inc.
clearly holds that Rule 65 is procedural and, in determining
whether a federal court should issue an injunction, the four part
test set forth in Rule 65 is applied, even in diversity cases.
923 F.2d 1441, 1448-49 (11th Cir. 1991).
Even jumping straight
into a Rule 65 analysis, without consideration of whether the state
court would permit a preliminary injunction for the cause of
action, the Court finds that plaintiffs are not likely to succeed
on appeal because they cannot establish the first two prongs of
the preliminary injunction test.
The sole remaining cause of action is for unjust enrichment
under Florida law.
Florida law provides that unjust enrichment
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is an action at law. 1
Land Title Guarantee Co. v. Downs, No. 6:12-
cv-485-Orl-28GJK, 2012 WL 1326232, at *1 (M.D. Fla. Apr. 17, 2012)
(“Under Florida law, however, ‘counts for conversion and unjust
enrichment [are] both actions at law,’ at least when the property
alleged to have been converted and the benefit conferred unjustly
are money.” (alteration in original) (citation omitted)). (See
Doc. #575, p. 14.)
for
their
unjust
Plaintiffs have requested the following relief
enrichment
claim:
permanent
injunction,
accounting, disgorgement, and imposition of a constructive trust.
(Doc. #560, pp. 98-99.)
Regardless of how these types of relief
are classified, under Florida law, equitable relief is unavailable
because unjust enrichment is an action and law and what plaintiffs
are really requesting are money damages.
In the Order dissolving
the TRO, the Court cited Florida cases for the proposition that
preliminary injunctive relief is not available for state law claims
of Florida unjust enrichment like the one presented here because
said claims are actions at law for which, under Florida law,
monetary relief is adequate.
(Doc. #575, pp. 14-15.)
It follows
that because the claims are adequately compensated by monetary
1
This position has not been ruled upon by the Florida Supreme
Court. Although the Florida Supreme Court has the jurisdiction
to review questions certified to it by the Supreme Court of the
United States or the United States Court of Appeals, it does not
have jurisdiction to review questions certified by district
courts. FLA. CONST. art. V, § 3(b)(6); Parry v. Outback Steakhouse
of Fla., Inc., No. 8:06-CV-00804-T-17TBM, at *2 (M.D. Fla. Oct.
11, 2006).
- 7 -
relief that (1) plaintiffs are not likely to succeed in obtaining
the relief they seek and (2) there is an adequate remedy at law.
Plaintiffs cite to cases in their Motion to Stay for the
proposition that just because the relief requested may require one
party to pay money to another does not automatically result in the
relief being characterized as money damages.
9.)
The Court, however, does not find its Order dissolving the
TRO in conflict with any of these cases.
the
(Doc. #577, pp. 8-
cases
cited
deal
with
federal
First of all, most of
claims.
See
Bowen
v.
Massachusetts, 487 U.S. 879 (1988) (holding adjustment of federal
grant amount is not characterized as an award of damages); CIGNA
Corp. v. Amara, 563 U.S. 421, 439, 441-42 (2011) (holding order by
court requiring plan administrator to pay money owed under the
plan as equitable because of relationship being synonymous to that
of a trustee); FTC v. GEM Merch. Corp., 87 F.3d 466 (11th Cir.
1996)
(examining
equitable
remedies
under
the
Federal
Trade
Commission Act); Levi Strauss & Co. v. Sunrise Int’l Trading, Inc.,
51 F.3d 982 (11th Cir. 1995) (examining claims under the Lanham
Act).
Secondly, the only one that has state causes of action
looks to the law of the state in determining what relief is
available.
Mitsubishi Int’l Corp. v. Cardinal Textile Sales,
Inc., 14 F.3d 1507, 1518-20 (11th Cir. 1994) (looking to Georgia
law to see whether equitable relief is a viable remedy for a state
law cause of action).
Further, the cases that discuss that the
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payment of money can be classified as equitable relief each state
that under certain circumstances, when specific monies are sought
to be returned, the relief may properly be classified as equitable.
CIGNA Corp., 563 U.S. at 439; Levi Strauss & Co., 51 F.3d at 897;
Mitsubishi Int’l Corp., 14 F.3d at 1521.
The Court has explained
why this has not been established here.
It is clear that in Florida the imposition of a constructive
trust may be viable equitable relief for an unjust enrichment
claim.
Here, however, the evidence presented to the Court fails
to establish a likelihood of tracing sufficient to support this
remedy of a constructive trust.
did
not
hold
that
it
would
The Court clearly stated that it
be
impossible
for
plaintiffs
to
establish the tracing necessary to recover under this theory, just
that, at this time, two years into the litigation, plaintiffs had
not met the standard sufficient to show a substantial likelihood
of success on this claim sufficient to support the continuance of
the TRO. (Doc. #575, p. 18 n.10.)
Plaintiffs continue to assert that they are entitled to
preliminary injunctive relief pursuant to Federal Rule of Civil
Procedure 65 in order to preserve equitable relief.
However, this
equitable relief is not available under Florida law for plaintiffs’
unjust enrichment claim.
To hold otherwise would allow plaintiffs
to list remedies that are unavailable based on the state cause of
action asserted for the sole purpose of obtaining the preliminary
- 9 -
injunctive
relief
that
would
not
otherwise
be
available.
Therefore, the Court does not find that there is a substantial
likelihood that plaintiffs will succeed in having the TRO remain
intact to preserve the remedies sought.
The Court finds that plaintiffs are not likely to succeed in
having the TRO reinstated because they cannot establish the four
prerequisites to such preliminary relief for the sole remaining
state law unjust enrichment claim.
Accordingly, the Court finds
that plaintiffs are unlikely to succeed on their appeal.
In light
of plaintiffs’ unlikelihood of success on appeal, the Court finds
that the other factors do not support the issuance of a stay.
See
Garcia-Mir, 781 F.2d at 1453 (holding that likelihood of success
on appeal is the most important factor in considering whether or
not to issue a stay pending appeal).
Accordingly, plaintiffs’
motion for a stay pending appeal is denied.
Accordingly, it is hereby
ORDERED:
Plaintiffs' Emergency Motion for a Stay of the Court's July
25, 2017 Order (Doc. #577) is DENIED.
DONE and ORDERED at Fort Myers, Florida, this __17th__ day of
November, 2017.
Copies: Counsel of Record
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