Powell et al v. Crypto Traders Management, LLC et al
MEMORANDUM DECISION AND ORDER. Defendants Motion to Set Aside Writs of Attachment (Dkt. 69 ) is DENIED. Defendant Shawn Cuttings Claim of Exemption (Dkt. 67 ) is DENIED. Defendant Janine Cuttings Claim of Exemption (Dkt. 68 ) is DENIED. Plaintiffs Motion Contesting Claims of Exemption by Shawn Cutting and Janine Cutting (Dkt. 72 ) is GRANTED. Defendants Motion for Expedited Omnibus Hearing (Dkt. 70 ) and Second Motion for Expedited Omnibus Hearing (Dkt. 78 ) are DENIED. Plaintiffs request for sanctions under 28 U.S.C. § 1927 is DENIED. Third Party Kyle Cuttings Claim of Exemption (Dkt. 85) is DENIED. Signed by Judge B. Lynn Winmill. (alw)
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO
DAVID POWELL, et al.,
Case No. 2:20-cv-00352-BLW
MANAGEMENT, LLC, et al.,
Before the Court are Defendants’ Motion to Set Aside Writs of Attachment
(Dkt. 69); Defendant Shawn Cutting’s Claim of Exemption (Dkt. 67); Defendant
Janine Cutting’s Claim of Exemption (Dkt. 68); Plaintiffs’ Motion Contesting
Claims of Exemption by Shawn Cutting and Janine Cutting (Dkt. 72); and Kyle
Cutting’s affidavit asserting ownership of a vehicle subject to the writ of
attachment. (Dkt. 85). Plaintiffs have also requested sanctions against Defendants
and an award of attorneys’ fees under 28 U.S.C. § 1927. The motions are fully
briefed and at issue. The Court has determined that oral argument will not
significantly aid the decisional process and therefore will deny Defendants’ request
MEMORANDUM DECISION AND ORDER - 1
for a hearing on these motions.
On February 4, 2021 this Court granted Plaintiffs’ application for a prejudgment writ of attachment. (Dkt. 40). On March 15, 2021, this Court issued a
Writ of Attachment (Dkt. 51) directing Bonner County Sheriff’s Office to attach
certain property owned by Defendants, including a 2018 Jeep Grand Cherokee, a
2012 Ford F350 Truck, and a 2012 Volkswagon Jetta.
On March 9, 2021 the Court issued a temporary restraining order in United
States Securities and Exchange Commission v. Cutting, et al. based on findings
that the SEC established a prima facie case that Cutting defrauded investors and a
reasonable likelihood of future violations of the antifraud provisions of the
Securities Act of 1933 and the Securities Exchange Act of 1934. The TRO
provided several forms of relief, including freezing up to $13.8 million of
Defendants’ and Relief Defendants’ assets and prohibiting any transfer,
encumbrance or distribution of assets without seeking leave from the order.1 On
March 16, 2021, Defendants joined the SEC in a motion for a Stipulated
Preliminary Injunction, Asset Freeze, and Order Granting Other Relief, which
Although Defendants and Plaintiffs have each asserted that the other party violated the
TRO, that question is not properly before the Court and will not be addressed at this time.
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extended the relief granted in the TRO until a final disposition of that action or
further Court order. The Court entered the Stipulated Order on March 17, 2021.
After the Bonner County Sheriff’s Office impounded the Defendants’
vehicles on May 6, 2021, Janine Cutting filed a claim of exemption for the Jeep
and Shawn Cutting filed a claim of exemption for the Truck. Plaintiffs filed a
motion contesting the exemptions pursuant to Idaho Code §§ 11-605(3) and 11607. The Cuttings’ son filed a declaration asserting ownership of the Jetta on July
9, 2021. Defendants have also filed a motion to set aside the writ of attachment, or
in the alternative reduce the amount of the attachment. In response to these filings,
Plaintiffs now contend that Defendants have acted recklessly and in bad faith by
filing multiple motions seeking to revisit legal analysis and decisions previously
issued by this court regarding the writ of attachment.
Defendants’ Motion to Set Aside Writs of Attachment
Defendant’s seek an order setting aside the writs of attachment because the
Asset Freeze issued in United States Securities and Exchange Commission v.
Cutting, et al. provides sufficient protection for Plaintiffs. In the alternative,
Defendants ask the Court to limit the writs of attachment to a lesser amount.
1. Motion to Set Aside Writs of Attachment
A writ of attachment may only be discharged or amended if it was
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“improperly or irregularly issued[.]” I.C. §§ 8-534 & 8-536. This is the only
ground for dissolving a writ of attachment. First Tr. & Sav. Bank v. Randall, 57
Idaho 126, 126 (1936).
Here, Defendants have not alleged that the writ was “improperly or
irregularly issued” in this case, nor have they cited any legal authority that the
Court may discharge or amend the writ issued in this case on any other grounds.
Further, the stipulation between Defendants and another party entered in a separate
action does not vacate the Court’s orders in this case and is not dispositive of the
motion to set aside the writs of attachment. The Plaintiffs did not agree to the
stipulation and the Court is not persuaded that it terminates their right to pursue
attachment in this case. Accordingly, the motion to set aside the writs of
attachment is denied.
2. Motion to Reduce Writs of Attachment
Defendants also ask the Court to reduce the total amount of the writs of
attachment. Defendants assert that 80% of the funds invested by Plaintiffs were
used to purchase ProCoin. They ask the Court to reduce the attachment to
$144,625.26, or 20% of the Plaintiffs’ demand, because Plaintiffs refused to accept
the ProCoin in lieu of attaching Defendants’ property. Defendants had the
opportunity to show cause why the writ of attachment should not issue and present
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evidence contesting the value of the debt owed to Plaintiffs. The Court found that
Plaintiffs established a reasonable probability that they would prevail on their
claim that Defendants were indebted to them upon a contract for money and that
the debt is not secured. As such, the Court found that Plaintiffs are entitled to
attach property of the Defendants up to a value of $723,126.29 as security for the
satisfaction of any judgment that may be recovered in this action. The Court is not
persuaded at this time that the writ of attachment should be reduced. Defendants
have not established that the debt owed to Plaintiffs is partially secured, or that the
attachment must be reduced as a result of Plaintiffs refusal to accept the ProCoin
offered by Defendants. Idaho Law entitles Plaintiffs to attach, and recover, the full
amount Defendants owe upon the contract. Accordingly, the Court will not reduce
the writ of attachment.
Plaintiffs’ Motion Contesting Claims of Exemption
Since the Court has concluded that the writ of attachment will not be
discharged or adjusted, the Court must resolve the Cuttings’ claims of exemption
from attachment and the claim of ownership by the Cuttings’ son, which the Court
will construe as a claim of exemption by a third party pursuant to Idaho Code §§ 8527, 11-203.
MEMORANDUM DECISION AND ORDER - 5
1. Shawn and Janine Cuttings’ Claims of Exemption
Under Idaho law, certain property is exempt from attachment. See § 11603 et seq. Relevant to this case, the exemption statute provides that an individual
may claim an exemption for “implements, professional books, business equipment
and tools of the trade [not exceeding ten thousand dollars ($ 10,000) in aggregate
value] . . . and . . . one (1) motor vehicle to the extent of a value not exceeding ten
thousand dollars ($ 10,000).” I.C. § 11-605(3). However, certain types of claims
are enforceable against exempt property, including “claims for obtaining money or
property by false pretenses.” I.C. § 11-607.
Here, the Cuttings are not entitled to claim the Jeep and the Truck as exempt
property. Under Idaho law, only individuals are entitled to claim an exemption of
certain property. An individual is “a natural person and not an artificial person
such as a corporation, partnership, or other entity created by law.” I.C. § 11-601(1).
The Plaintiffs previously established that the Jeep and the Truck are titled and
registered to the Lake View Trust. (Dkt. 15-3 at 3). Since the Cuttings do not own
the vehicles, they are not entitled to claim an exemption for the vehicles. They also
cannot claim exemptions as trustees of the Lake View Trust because the trust is not
an individual. Accordingly, the Court will deny the exemptions for both the Jeep
and the Truck.
MEMORANDUM DECISION AND ORDER - 6
2. Kyle Cuttings’ Claim of Ownership of the Jetta
Next, the Court will turn to Kyle Cutting’s claim of ownership, which will
be construed as a claim of exemption by a third party pursuant to Idaho Code §§ 8527 and 11-203. Although the Plaintiffs have not yet responded to this claim, the
Court finds that further briefing is not needed because there is sufficient evidence
in the record to rule on the exemption at this time.
A third party may assert a claim of ownership of attached property by filing
“a written claim setting forth the grounds upon which he claims the property.” I.C.
§ 11-203. Here, the property at issue is a vehicle. Under Idaho law, a party has “no
cognizable ownership interest in a vehicle where no certificate of title [has] yet
been issued in that party’s name.” In re Woods, 386 B.R. 758, 762 (Bankr. D.
Idaho 2008); I.C. § 49-503.2 It is the issuance of a new certificate of title, not
delivery of the old certificate to a transferee, that grants an enforceable interest in a
vehicle. In re Woods, 386 B.R. at 762.
Idaho Code § 49–503 was formerly codified as Idaho Code § 49–404. The language of
the two sections is substantially the same, and Idaho courts construing Idaho Code § 49–503 rely
on Idaho Code § 49–404 authority. See, e.g., Northland Ins. Co. v. Boise's Best Autos & Repairs,
132 Idaho 228, 233 (1997), rev'd in part on other grounds, 131 Idaho 432 (1998). Idaho courts
interpreting Idaho's motor vehicles statutes have consistently stated that a person acquires no
right or interest in a vehicle until a certificate of title is issued to him or her. See Lopez v. Langer,
114 Idaho 873, 877 (1988); Simplot v. Owens, 119 Idaho 271, 274 (1990); Northland Ins., 132
Idaho at 232–233; Latham Motors, Inc. v. Phillips, 123 Idaho 689, 693–694 (1992); Slayton v.
Zapp, 108 Idaho 244, 246 (1985).
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Here, Kyle’s declaration explains that he finished paying for the Jetta in
December 2020 and the title was signed over to him at that time. As of the date of
his declaration, the State of Idaho had not yet issued a certificate of title for the
Jetta in Kyle’s name. Therefore, pursuant to Idaho law, Kyle has not yet acquired
an ownership interest in the Jetta and the Lake View Trust remains the owner of
the vehicle. Accordingly, Kyle’s third-party claim of exemption for the Jetta is
denied and the Jetta is still subject to attachment by the Plaintiffs in this action.
Plaintiffs’ 28 U.S.C. § 1927 Request
Plaintiffs request that the Court impose sanctions against Defendants.
Specifically, they seek an award of attorney fees which they incurred in responding
to the Motion to Set Aside Writs of Attachment. They contend that such an award
is justified because the Defendants have acted recklessly and in bad faith in filing
multiple motions without offering legal authority and making false accusations
28 U.S.C. § 1927 permits a district court to impose costs, expenses and
attorneys’ fees reasonably incurred as a result of an attorney’s conduct that
“multiplies the proceedings in any case unreasonably and vexatiously.” To impose
sanctions under § 1927, the court must find that counsel acted recklessly or in bad
faith. See United States v. Blodgett, 709 F.2d 608, 610 (9th Cir. 1983). “Bad faith
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is present when an attorney knowingly or recklessly raises a frivolous argument, or
argues a meritorious claim for the purpose of harassing an opponent.” West Coast
Theater Corp. v. City of Portland, 897 F.2d 1519, 1528 (9th Cir. 1990). Imposing
sanctions, whether under § 1927 or under the court’s inherent powers, is an
“extraordinary remedy” that must be exercised with extreme caution. See In re
Keegan Mgmt. Co., Securities Litigation, 78 F.3d 431, 437 (9th Cir. 1996).
Here, Defendants’ conduct does not rise to the level of recklessness or bad
faith. Although Defendants have filed three motions seeking relief from the writ of
attachment issued in this case, it appears that these motions were filed in response
to developments in the ongoing litigation Defendants face and changes in their
financial circumstances. The Court has no reason to conclude that Defendants and
their counsel have acted without a sincere belief they are entitled to the requested
relief. The Court is troubled by the Defendants’ failure to provide legal authority or
analysis in support of their motions. However, it is unwilling to award fees to
Plaintiffs or impose other sanctions at this time.
IT IS ORDERED that:
Defendants’ Motion to Set Aside Writs of Attachment (Dkt. 69) is
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Defendant Shawn Cutting’s Claim of Exemption (Dkt. 67) is DENIED.
Defendant Janine Cutting’s Claim of Exemption (Dkt. 68) is DENIED.
Plaintiffs’ Motion Contesting Claims of Exemption by Shawn Cutting and
Janine Cutting (Dkt. 72) is GRANTED.
Defendant’s Motion for Expedited Omnibus Hearing (Dkt. 70) and Second
Motion for Expedited Omnibus Hearing (Dkt. 78) are DENIED.
Plaintiff’s request for sanctions under 28 U.S.C. § 1927 is DENIED.
Third Party Kyle Cutting’s Claim of Exemption (Dkt. 85) is DENIED.
DATED: July 13, 2021
B. Lynn Winmill
U.S. District Court Judge
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