Commodity Futures Trading Commission v. Wilkinson et al
Filing
40
MEMORANDUM Opinion and Order signed by the Honorable Virginia M. Kendall on 11/30/2016.Mailed notice(lk, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
United States Commodity
Futures Trading Commission
)
)
)
)
)
)
)
)
)
)
Plaintiff,
v.
Alvin Guy Wilkinson, Chicago
Index Partners, L.P. and Wilkinson
Financial Opportunity Fund, L.P.
Defendants,
No. 16 C 6734
Judge Virginia M. Kendall
MEMORANDUM OPINION AND ORDER
On June 28, 2016, the Commodity Futures Trading Commission (“CFTC”) filed a
complaint seeking injunctive relief, disgorgement, restitution, and civil penalties from Defendant
Alvin Guy Wilkinson and two commodity pools that he controlled, which the CFTC alleged
defrauded at least 30 individuals out of $6.9 million. (Dkt. 1.) On July 21, 2016, this Court
entered a preliminary injunction, which among other things, imposed an asset freeze, prohibiting
any person that received actual notice of the Order to “Permit Defendants and or other persons to
withdraw, remove, assign, transfer, pledge, encumber, disburse, dissipate, convert, sell or
otherwise dispose of Defendant(s)’ assets, except as directed by further order of the Court.”
(Dkt. 17 at 7.) The preliminary injunction noted that there was “good cause to believe immediate
and irreparable harm to the Court’s ability to grant effective final relief to the” Defendants’
victims because Wilkinson’s recent conduct, which included transferring his interest in his home
(the “Sharon Property”) to his wife in October 2015 without consideration, indicated that there
was a risk that he would dissipate assets. (Dkt. 17 at 5.) Since that time, the Court defaulted
Wilkinson and the related commodity pools and a motion for default judgment as to all
defendants is currently pending before the Court. (See Dkt. Nos. 24, 29.)
1
Under consideration are two motions filed by Alexandra Wilkinson, the Defendant’s
wife. Mrs. Wilkinson, who is in the midst of divorce proceedings with the Defendant, wishes to
intervene in the instant suit pursuant to Federal Rule of Civil Procedure 24 for the purpose of
seeking relief from the preliminary injunction in order to finalize her divorce. (Dkt. 26.) In her
motion, Mrs. Wilkinson asserts that the asset freeze entered by this Court as part of the
preliminary injunction “arguably precludes entry of the . . . divorce decree” because it prevents
the withdrawal, removal, assignment, or transfer of the Defendant’s assets, some of which are
apparently marital assets. (Id. ¶ 24.) Mrs. Wilkinson apparently seeks modification of the
preliminary injunction to, inter alia, declare that she is the sole owner of: (1) the Sharon
Property; (2) two vehicles jointly owned by Mrs. Wilkinson and Mr. Wilkinson; and (3) all
tangible personal property located at the Sharon Property. 1 (Id. ¶¶ 22-23.) The CFTC opposes
Mrs. Wilkinson’s motion, arguing that intervention is unnecessary and unwarranted. (Dkt. 30.)
For the reasons set forth below, Mrs. Wilkinson’s motion to intervene is denied, as is her request
to modify the preliminary injunction.
I.
Intervention as of Right under Rule 24(a)
A party seeking to intervene as of right must satisfy four requirements: (1) the motion to
intervene must be timely; (2) the party seeking to intervene must claim an interest related to the
subject matter of the action; (3) the party seeking to intervene must be so situated that the
disposition of this action threatens to impair or impede the party’s ability to protect that interest;
and (4) the existing parties must not be adequate representatives of the movant’s interest. Fed. R.
Civ. P. 24(a)(2); see also Ligas ex rel. Foster v. Maram, 478 F.3d 771, 773 (7th Cir. 2007). The
1
All other relief sought by Mrs. Wilkinson, including her requests for child support, alimony, reimbursement for
taxes paid and advances, and her claim to her IRA, do not appear to implicate the Court’s preliminary injunction and
will not be addressed. (See also Dkt. 30 at 5.)
2
party seeking intervention bears the burden of establishing each of these elements. United States
v. BDO Seidman, 337 F.3d 802, 808 (7th Cir. 2003).
The timeliness requirement is a flexible one and is determined by considering the totality
of the circumstances, leaving much to the sound discretion of the Court. See Shea v. Angulo, 19
F.3d 343, 348-49 (7th Cir. 1994). A prospective intervenor should file “as soon as ... [it] knows
or has reason to know that [its] interests might be adversely affected by the outcome of the
litigation he must move promptly to intervene.” Sokaogon Chippewa Community v. Babbitt, 214
F.3d 941, 949 (7th Cir. 2000) (quotation omitted). Although the parties have failed to address
this element in detail, Mrs. Wilkinson filed her divorce action on June 17, 2016, before the
CFTC instituted the instant suit against Mr. Wilkinson. (Dkt. 26 ¶ 3.) There is no doubt that
Mrs. Wilkinson knew about the CFTC’s suit: she has been deposed by a CFTC attorney and
according to the briefing, had other contacts with CFTC counsel. (See, e.g., id. ¶ 12.) Yet
despite this knowledge of the pending suit, Mrs. Wilkinson failed to file her motion to intervene
until the day before the Court entered an order of default against Mr. Wilkinson and she did
nothing while the Court originally considered the CFTC’s motion for a preliminary injunction.
While the Court will not find that her motion was untimely, her motion to intervene could have
and should have been filed much sooner.
When evaluating whether the party seeking to intervene has an interest related to the
subject matter of the action, the Seventh Circuit has held that the moving party must have a
“direct, significant and legally protectable” interest. Reich v. ABC/York–Estes Corp., 64 F.3d
316, 323 (7th Cir.1995). Although Rule 24 does not define “interest,” a mere “economic
interest” (i.e. being a creditor of one of the parties) is insufficient. Flying J, Inc. v. Van Hollen,
578 F.3d 569, 571 (7th Cir. 2009). Additionally, in order to have an interest related to the
3
subject matter of the action, the movant must “be someone whom the law on which his claim is
founded was intended to protect.” Id. at 572. Here, although Mrs. Wilkinson’s property interests
are potentially affected by the asset freeze, her claims are unrelated to the commodities fraud
allegations that comprise the CFTC’s complaint. See Thompson v. United States, 268 F.R.D.
319, 322 (N.D. Ill. 2010) (finding that party seeking intervention did not have sufficient interest
in the suit to merit intervention because it had “no stake in the underlying legal issues or the
subject matter of the dispute between [the Defendant] and the government. On the contrary, its
interest is a purely practical, economic one—namely, to protect its ability to collect its debt.
Simply put, an interest of this kind does not satisfy Rule 24(a).”); SEC v. Benger, No. 09 C 0676,
2010 WL 724416, at *2 (N.D. Ill. Feb. 23, 2010) (finding that wife seeking divorce had
insufficient interest in frozen assets to intervene in SEC fraud action against her husband because
she did not make showing that the frozen assets were lawfully derived or even demonstrate
conclusively that the frozen assets were marital assets); SEC v. Univ. Lab Techs., Inc., No. 0780838-CIV, 2009 WL 723243, at *3 (S.D. Fla. Mar. 18, 2009) (denying soon-to-be ex-wife’s
motion to intervene because “she is an individual completely outside the realm of this securities
fraud action who is attempting to inject a personal claim totally unrelated to the SEC’s
enforcement proceedings at bar”).2
An intervenor must also show that disposition of the underlying action may impair the
intervenor’s ability to protect its interest in the litigation. Reich, 64 F.3d at 321. “Impairment
exists when the decision of a legal question . . . would, as a practical matter, foreclose the rights
of the proposed intervenor in a subsequent proceeding.” Shea, 19 F.3d at 347 (citation omitted).
Here, Mrs. Wilkinson has not made such a showing. In fact, she admits that even if her motion
2
To the extent Mrs. Wilkinson seeks to intervene based on the fact that she was defrauded by her husband, the
Seventh Circuit prohibits intervention on that basis. See Flying J. Inc., 578 F.3d at 579.
4
to intervene is denied, if the district court considers her plea for relief, that consideration would
be a sufficient alternative remedy to protect her interests. (See Dkt. 31 at 5) (indicating that she
has no objection to denial of her motion to intervene if the “Court is prepared to consider the
relief requested in the Motion regarding the Preliminary Injunction without granting formal
intervention”).
Consistent with her position and as detailed below, the Court will consider her motion for
relief from the preliminary injunction without her status as an intervening party, as she has failed
to satisfy the second and third prongs of the Rule 24(a)(2) test. To the extent there is an
additional proceeding, such as an enforcement proceeding brought by the CFTC to satisfy a
judgment against the Defendants, that proceeding would be a more appropriate venue for Mrs.
Wilkinson’s intervention. See CFTC v. Heritage Capital Advisory Servs., Ltd., 736 F.2d 384,
387 (7th Cir. 1984) (affirming denial of motion to intervene because alternative forums, which
included claims submitted to the receiver and the district court’s review of any denials thereof
would not impair rights of party seeking to intervene); CFTC v. Chilcott Portfolio Mgmt., Inc.,
725 F.2d 584, 587 (10th Cir. 1984) (same); SEC v. Marshall, No. 1:13-CV-3032-TCB, 2013 WL
12067459, at *2 (N.D. Ga. Nov. 15, 2013) (denying ex-wife’s motion to intervene in SEC action
because her ability to protect her interest was not impaired by the asset freeze).
Finally, parties seeking to intervene must show that the existing parties to the action do
not adequately represent their interests. See Fed. R. Civ. P. 24(a)(2). Because Mrs. Wilkinson
has not satisfied her burden regarding the second and third prongs of Rule 24(a)(2), the Court
need not address the fourth prong in depth. That being said, while the CFTC may adequately
represent Mrs. Wilkinson in her capacity as a defrauded investor, that is not the basis upon which
she filed her motion to intervene.
5
II.
Permissive Intervention under Rule 24(b)
Mrs. Wilkinson alternatively seeks permissive intervention pursuant to Fed. R. Civ.
P. 24(b). Even when intervention as of right is not available, courts have the ability to exercise
their considerable discretion to allow permissive intervention under Rule 24(b). See Sokaogon
Chippewa Cmty., 214 F.3d at 949. Permissive intervention is allowed only when the movant
“has a claim or defense that shares with the main action a common question of law or fact.” Fed.
R. Civ. P. 24(b)(1)(B). The Court declines to invoke its considerable discretion to permit Mrs.
Wilkinson to intervene pursuant to Fed. R. Civ. P. 24(b). As discussed above, Mrs. Wilkinson’s
claims relate to certain property at issue in her divorce action and are too distinct from the
CFTC’s allegations of fraud to conclude that they share common questions of law or fact with
the underlying commodities fraud suit. Even if the Court found that they shared a common
question of fact, Mrs. Wilkinson’s request is still deficient as the issues she raised are collateral
or extrinsic to the CFTC’s fraud suit. See, e.g., City of Rockford v. Sec’y of Hous. & Urban Dev.,
69 F.R.D. 363, 366 (N.D. Ill. 1975) (“A request for permissive intervention . . . . may be denied
if the intervenor raises collateral or extrinsic issues, even though the petition presents a common
question of law or fact.”).
Courts also consider whether permissive intervention would “unduly delay or prejudice
the adjudication of the original parties’ rights.” Fed. R. Civ. P. 24(b)(3); see also Vollmer v.
Publishers Clearing House, 248 F.3d 698, 707 (7th Cir. 2001). Mrs. Wilkinson’s intervention in
the instant matter would necessarily unduly delay and prejudice the adjudication of the CFTC’s
suit, as liability has already been determined, an unopposed motion for default judgment is
pending, and Mrs. Wilkinson does not challenge any of the CFTC’s substantive allegations. See
Parklane Hosiery Co. v. Shore, 439 U.S. 322, 332 n.17 (1979) (observing that “additional
6
issues” and “additional parties” would complicate prosecution of SEC enforcement actions).
Furthermore, intervention is unnecessary and does not serve the interests of judicial economy, as
the “fairest and most efficient method of handling the matter” is to address Mrs. Wilkinson’s
substantive claims for relief without granting her motion to intervene. See SEC v. Homa, 17 F.
App’x 441, 447 (7th Cir. 2001) (affirming denial of creditor’s motion to intervene in SEC fraud
suit because, inter alia, “the fairest and most efficient method of handling the case was to have
[the movant] bring its claims before the Receiver.”).
III.
Motion to Modify the Preliminary Injunction
Even though Mrs. Wilkinson’s motion to intervene is denied, the Court may still evaluate
her motion to modify the preliminary injunction, something she and the CFTC have both
suggested. See, e.g., CFTC v. Battoo, 66 F. Supp. 3d 1095, 1096 (N.D. Ill. 2014), aff’d sub nom.
CFTC v. Battoo, 790 F.3d 748 (7th Cir. 2015) (considering but denying motion to modify
preliminary injunction after previously denying motion to intervene). “[A] district judge has
discretion to revise a preliminary remedy if persuaded that change had benefits for the parties
and the public interest.” Battoo, 790 F.3d at 751.
“A motion to dissolve or modify a preliminary injunction is ordinarily subject to the same
analysis as the original injunction. . . . The purpose of a motion to modify . . . an injunction is to
demonstrate that changed circumstances make the continuation of the order inequitable.” CFTC
v. Garofalo, No. 10 C 2417, 2010 WL 11245430, at *3 (N.D. Ill. Dec. 21, 2010) (citations
omitted). And the purpose of an asset freeze is “to preserve the status quo by preventing
dissipation and diversion of assets.” SEC v. Infinity Grp. Co., 212 F.3d 180, 197 (3d Cir. 2000).
Here, although the Court sympathizes with Mrs. Wilkinson’s desire to finalize her
divorce action, the Court declines to modify the preliminary injunction or provide Mrs.
7
Wilkinson with any of the declaratory relief she requests. Mr. Wilkinson has been found by this
Court to have defrauded investors out of several million dollars. The purpose of the asset freeze
is to ensure that those investors, which include Mrs. Wilkinson and her father, receive as much
of the ill-gotten gains as possible. By declaring that the Sharon property, personal property
inside the Sharon Property, and two vehicles co-owned by the Defendant to be the sole assets of
Mrs. Wilkinson, this Court would be putting those assets at risk.3 See Battoo, 790 F.3d at 751
(finding no abuse of discretion in district court declining to modify preliminary injunction in
commodities fraud case because “releasing the assets would lead to distribution, a step that the
judge thought premature”).
Additionally, Mrs. Wilkinson has not made any accounting of the personal property in
the Sharon Property to either the CFTC or this Court, nor has she made any showing that the
personal property, vehicles, or the Sharon property itself were not purchased with the fruits of
her husband’s fraud. See SEC v. Patel, No. CIV. 10-4937 JNE FLN, 2011 WL 1260177, at *2
(D. Minn. Mar. 11, 2011), report and recommendation adopted, No. CIV. 10-4937 JNE FLN,
2011 WL 1260157 (D. Minn. Apr. 5, 2011) (recommending modification of asset freeze to
release funds in wife’s 401k after she demonstrated, with evidence, that certain funds were solely
hers and not the product of the fraud).
3
In her reply brief, Mrs. Wilkinson offers to “stipulate that any orders of this Court and the Connecticut Superior
Court in the divorce action would be “without prejudice” to the rights of these other parties in this regard.” (Dkt. 31
at 2.) This proposed remedy is rejected as it would not prevent the dissipation of assets by Mrs. Wilkinson and it
would further complicate the process of recovering assets for the investors defrauded by the Defendants.
8
CONCLUSION
For the reasons stated herein, Mrs. Wilkinson’s motion to intervene and for relief from
the preliminary injunction are denied.
________________________________________
Virginia M. Kendall
United States District Court Judge
Northern District of Illinois
Date: 11/30/2016
9
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?