Securities and Exchange Commission v. Alternate Energy Holdings, Inc et al

Filing 264

MEMORANDUM DECISION AND ORDER denying 258 Plaintiff's Renewed Request to Freeze Approximately $2 Million; granting 259 Plaintiff's Request for Judicial Notice. Signed by Judge Ronald E. Bush. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (cjm)

UNITED STATES DISTRICT COURT
DISTRICT OF IDAHO

SECURITIES AND EXCHANGE COMMISSION,
Plaintiff,

Case No.: 10-CV-00621-EJL-REB
MEMORANDUM DECISION AND
ORDER RE:

vs.
ALTERNATE ENERGY HOLDINGS, INC.,
DONALD L. GILLISPIE, and JENNIFER
RANSOM,
Defendants,

PLAINTIFF SECURITIES AND
EXCHANGE COMMISSION’S
RENEWED REQUEST TO FREEZE
APPROXIMATELY $2 MILLION
(Docket No. 258)

and
BOSCO FINANCIAL, LLC, and ENERGY
EXECUTIVE CONSULTING, LLC, and BLACK
& LOBELLO, LLC,

PLAINTIFF SECURITIES AND
EXCHANGE COMMISSION’S
REQUEST FOR JUDICIAL NOTICE
(IN SUPPORT OF RENEWED
REQUEST TO FREEZE
APPROXIMATELY $2 MILLION)

Relief Defendants.
(Docket No. 259)

Currently pending before the Court are Plaintiff Securities and Exchange Commission’s
(1) Renewed Request to Freeze Approximately $2 Million (Docket No. 258), and (2) Request for
Judicial Notice (Docket No. 259). Having carefully considered the record and otherwise being
fully advised, the Court enters the following Order:
I. BACKGROUND
In June 2012, Defendant Alternate Energy Holdings, Inc. (“AEHI”) and Hamilton
Guaranty Capital, LLC (“Hamilton”) entered into a Financial Service Agreement (the “Financial
Service Agreement”) that required approximately $2 million (the “Advance Payment”) to be
deposited by AEHI into an escrow account controlled by Black & LoBello, LLC (“Black &
MEMORANDUM DECISION AND ORDER - 1

LoBello”), a Las Vegas, Nevada law firm. Shortly after the Advance Payment was deposited
with Black & LoBello, a dispute arose between AEHI and Hamilton concerning the terms of the
Financial Service Agreement and the party that was entitled to receive the Advance Payment. In
August 2012, after receiving conflicting demands for the Advance Payment, Black & LoBello
filed a Complaint for Interpleader against AEHI and Hamilton in Nevada state court. In
September 2012, the Nevada state court ordered that (1) the Advance Payment be placed in a
blocked account that cannot be accessed without further order of the court, and (2) that the
matter be resolved by mandatory binding arbitration pursuant to the terms of the Financial
Service Agreement.
On November 1, 2012, Plaintiff, the Securities and Exchange Commission (the
“Commission”), filed a Motion for Order to Show Cause and Order Freezing $2 Million Held by
Black & LoBello, LLC (“Motion to Freeze”), arguing that, in direct contravention to this Court’s
February 14, 2011 Order on Order to Show Cause,1 Defendant Donald Gillispie secretly
transferred the $2 million Advance Payment to Black & LoBello’s escrow account. See Mot. to
Freeze (Docket No. 219). As a result, the Commission moved for an order (1) directing AEHI

1

In relevant part, U.S. District Judge Edward J. Lodge’s February 14, 2011 Order on
Order to Show Cause states:
Defendant AEHI agrees that it shall, within thirty (30) days of this Order, and every
thirty (30) days thereafter unless ordered otherwise by this Court, provide to the
Commission a complete and accurate accounting of all its expenditures that equal or
exceed $2,500.00.00 (the “Monthly Accounting”). The expenditures covered by the
Monthly Accounting shall include, but not be limited to, transactions that have the
effect of transferring, assigning, selling, hypothecating, changing, wasting,
dissipating, converting, concealing, encumbering, or otherwise disposing of, in any
manner, funds, assets, securities, claims, or other property wherever located and for
any purpose . . . .
See 2/14/11 Order at ¶ 6, pp. 3-4 (Docket No. 56).
MEMORANDUM DECISION AND ORDER - 2

and Gillispie to show cause why they should not be held in contempt of the Court’s February 14,
2011 Order, and (2) freezing the $2 million held in Black & LoBello’s escrow account, “thereby
preserving the funds from waste and dissipation until further order of this Court.” See id., p. 1.
On March 13, 2013, the undersigned denied the Commission’s request to freeze the atissue $2 million Advance Payment, but nonetheless imposed certain conditions moving forward,
speaking to the $2 million’s eventual distribution.2 Specifically, the March 13, 2013
Memorandum Decision and Order stated in relevant part:
As to this Court’s authority to freeze the $2 million Advance Payment that is already
the subject of an interpleader action in another court, the undersigned questions his
inherent jurisdiction to grant the relief the Commission now seeks – even if inclined
to do so. In other words, it has not been shown (and the undersigned is likewise not
convinced) that this Court can order either (1) the Nevada state court to follow this
Court’s direction concerning the distribution of the interpleaded funds, or (2) Black
& LoBello not to disburse those amounts to a party found to be entitled to the same
following an arbitration award or order of the court.
Therefore, to address the Commission’s concerns, while still keeping intact all
relevant parties’ interests in the Advance Payment while the Nevada state court
proceeding runs its separate course, this Court orders that, once either an informal
agreement between AEHI and Hamilton is reached, an arbitration award is issued,
or a court order is entered regarding the $2 million Advance Payment’s
apportionment (whichever occurs first, even if preceding a court order disposing of
the interpleader action or confirming any arbitration award), (1) Gillispie and AEHI
immediately inform this Court of the status relating thereto (through a formal filing
in this action, served upon all parties to this action), and (2) any and all funds
reverting back to AEHI be frozen until either AEHI, Gillispie, and/or the
Commission moves to set aside this Order freezing those funds. Until then, AEHI
and Gillispie may not expend such funds.
See 3/13/13 MDO, pp. 19-20 (Docket No. 241).

2

The undersigned decided the Motion to Freeze through a Memorandum Decision and
Order, not a Report and Recommendation for Judge Lodge’s consideration, as implied by Black
& LoBello in opposition to the Commission’s renewed request to freeze the $2 million Advance
Payment.
MEMORANDUM DECISION AND ORDER - 3

On July 17, 2013, the Commission asked again for an order from this Court freezing the
$2 million Advance Payment, arguing that (1) AEHI and Hamilton stipulated to the payment of
arbitration expenses ($10,800) using funds taken from the $2 million Advance Payment, and (2)
did so without notifying the Commission or this Court pursuant to the March 13, 2013
Memorandum Decision and Order. See Renewed Mot. to Freeze (Docket No. 258).3 Black &
LoBello, Gillispie, and AEHI oppose the Commission’s renewed Motion to Freeze. See Jones
Aff. (Docket No. 260); Black & LoBello’s Opp. to Renewed Mot. to Freeze (Docket No. 261);
Roth Aff. (Docket No. 262); and AEHI’s Joinder (Docket No. 263).
II. DISCUSSION
As a threshold matter, the Commission takes issue with the use of the Advance Payment
to reimburse $10,800 in arbitration expenses, offering the fact of such payment as a basis to
freeze the Advance Payment in its entirety. However, and notwithstanding the potential merits
of any such objection, from the Court’s perspective nothing has changed with respect to its
ability to grant the relief the Commission now seeks. That is, any concern the undersigned had
as to his underlying jurisdiction to consider and grant the Commission’s first Motion to Freeze is
not solved by the second, renewed Motion to Freeze’s mere outline of events concerning the
Advance Payment and arbitration between AEHI and Hamilton. Simply put, the undersigned
remains unconvinced that this Court can order the Nevada state court to follow a directive from
this Court as to the handling of the Advance Payment – including Black & LoBello’s

3

The Commission also requests that this Court take judicial notice of the referenced
stipulation entered into between AEHI and Hamilton in the Nevada state court action. See Req.
for Jud. Not. (Docket No. 259). There is no opposition to this request; indeed, Black & LoBello
attaches the stipulation to the Affidavit of Rory R. Jones in opposition to the Commission’s
renewed Motion to Freeze. See Jones Aff. (Docket No. 260). Therefore, the undersigned grants
the Commission’s Request for Judicial Notice.
MEMORANDUM DECISION AND ORDER - 4

disbursement of funds from the Advance Payment pursuant to an order from that Nevada state
court. See supra (citing reasons for denying Commission’s first Motion to Freeze). The
Commission offers no compelling legal justification for doing so within its second Motion to
Freeze.4
Additionally, while it is true that neither AEHI nor Black & LoBello notified this Court
or the Commission of the Advance Payment’s use for arbitration expenses before the
Commission’s second Motion to Freeze, such a lack of notice must be considered in the context
of the complete record, in particular:
•

The “Notice of Entry of Stipulation and Order Regarding Payment of
Arbitrator,” though executed by Hamilton and AEHI attorneys on July 5,
2013 and signed by Judge Allf on July 8, 2013, was not formally filed until
July 12, 2013. See Not. of Entry of Stip., attached as Ex. B to Jones Aff.
(Docket No. 260). Moreover, the “Notice of Entry of Stipulation and Order
Regarding Payment of Arbitrator” contains a stipulated provision, requiring
the parties to “submit notice of payment to the Idaho Court in connection
with the case entitled Securities and Exchange Commission v. Alternate
Energy Holdings, Inc., et al. Case No.: 10-CV-00621-EJL-REB pending in
the Federal District Court of Idaho.” See id.

•

On July 16, 2013, Black & LoBello’s Jacob Houmand, emailed Rory Jones,
directing Mr. Jones to file with this Court the “Notice of Entry of Stipulation
and Order Regarding Payment of Arbitrator.” See 7/16/13 email from
Houmand to Jones, attached as Ex. A to Jones Aff. (Docket No. 260).

That the Commission filed the second Motion to Freeze before Mr. Jones could actually carry
out the directive from Black & Lobello does not warrant a change from this Court’s March 13,
2013 Memorandum Decision and Order. Black & Lobello and/or Mr. Jones could have been
quicker, to be sure; however, it just cannot be unequivocally said, as the Commission does in its

4

The undersigned notes the Commission’s objection to the March 13, 2013
Memorandum Decision and Order dealing with the Commission’s first Motion to Freeze. See
Obj. to MDO/RR (Docket No. 243) Those objections are before Judge Lodge for his
consideration.
MEMORANDUM DECISION AND ORDER - 5

briefing, that “AEHI has, once again, violated an important order from this Court.” See
Renewed Mot. to Freeze, p. 2 (Docket No. 258). To the contrary, the record reveals that the
ordered notice was imminent, only to be superseded by the Commission’s intervening second
Motion to Freeze.5
With all this in mind, even though the Commission’s second Motion to Freeze was
properly filed in light of the facts known at the time of its filing, an examination of the complete
record demonstrates that the Commission’s arguments are overstated. The Commission’s second
Motion to Freeze is denied.
III. ORDER
Based on the foregoing, IT IS HEREBY ORDERED THAT:
1.

Plaintiff Securities and Exchange Commission’s Renewed Request to Freeze

Approximately $2 Million (Docket No. 258) is DENIED; and
2.

Plaintiff Securities and Exchange Commission’s Request for Judicial Notice

(Docket No. 259) is GRANTED.
DATED: November 4, 2013

Honorable Ronald E. Bush
U. S. Magistrate Judge

5

It likely does not need mention, but the Court will nonetheless emphasize here that the
ruling on this pending Motion is limited to the particular facts presented here and should not be
construed to suggest a reluctance on the part of the Court to require compliance with the terms of
its prior Orders should other facts demonstrate the appropriateness of doing so.
MEMORANDUM DECISION AND ORDER - 6