U.S. Energy Resources, LLC v. Halon Oil Brokers et al

Filing 24

AMENDED ORDER granting 3 MOTION for Preliminary Injunction. Signed by District Judge Denise Page Hood. (LSau)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

U.S. ENERGY RESOURCES, LLC,
Plaintiff,
Civil Action No. 11-CV-11185-DT
Honorable Denise Page Hood

v.
HALON OIL BROKERS, LLC, RANDY
WEGNER, SPIRE BRANDS, LLC,
RODNEY KAMINGA, FIFTH THIRD
FINANCIAL CORPORATION d/b/a
FIFTH THIRD BANK,
Defendants.
_____________________________________/

AMENDED ORDER GRANTING MOTION FOR PRELIMINARY INJUNCTION

I.

BACKGROUND
The Court entered an Order granting in part and denying in part Plaintiff U.S. Energy

Resources, LLC’s (“U.S. Energy”) Motion for Temporary Restraining Order on March 25, 2011.
A hearing date was set for April 11, 2011 on U.S. Energy’s Motion for Preliminary Injunction which
was adjourned at U.S. Energy’s request and rescheduled for April 26, 2011. No response was filed
to the Motion for Preliminary Injunction and no one appeared at the hearing to oppose the motion.
For the reasons set forth below and on the record, the Court grants the Motion for Preliminary
Injunction.
On March 23, 2011, U.S. Energy filed a Verified Complaint against Defendants Halon Oil
Brokers, LLC (“Halon Oil”), Randy Wegner (“Wegner”), Spire Brands, LLC (“Spire Brands”),
Rodney Kaminga (“Kaminga”) and Fifth Third Financial Corporation d/b/a Fifth Third Bank (“Fifth

Third”) alleging: 1) Fraud/Silent Fraud/Fraudulent Concealment Against All Defendants Except
Fifth Third (Count I); 2) Civil Conspiracy Against All Defendants Except Fifth Third (Count II);
3) Declaratory/Equitable Relief/Interpleader (Count III); Breach of Contract Against All Defendants
Except Fifth Third (Count IV); Promissory Estoppel Against All Defendants Except Fifth Third
(Count V); Unjust Enrichment Against All Defendants Except Fifth Third (Count VI); and, Common
Law and Statutory Conversion/Treble Damages Against All Defendants Except Fifth Third (Count
VII).
U.S. Energy is in the business of marketing and selling oil and other petroleum based
products with its principal place of business in Detroit, Michigan. (Comp., ¶ 1) In January 2011,
U.S. Energy was seeking a private label motor oil packaging service company. (Comp., ¶ 16) After
searching on the internet, U.S. Energy contacted Wegner, conducting business under the entity Spire
Brands, regarding providing the packaging services to U.S. Brand. (Comp., ¶¶ 14, 17) Wegner
made several visits to Detroit to meet with U.S. Energy representatives. (Comp., ¶ 18) Wegner
represented to U.S. Energy that he was an expert in packaging services and that he had several
contacts in the oil and petroleum products industry. (Comp., ¶¶ 19-21) Wegner coordinated
conference calls between U.S. Energy and Halon Oil’s representative, Christopher Woodworth to
obtain oil for U.S. Energy’s motor oil packaging business. (Comp., ¶¶ 21-25) U.S. Energy later
discovered that Woodworth was a fictitious name being used by Wegner’s business associate,
Kaminga. (Comp., ¶ 23)
After discussions between U.S. Energy, Wegner and Woodworth (Kaminga), an oral
agreement was entered into between U.S. Energy and Woodworth (Kaminga) for Halon Oil on
February 15, 2011. (Comp., ¶ 26) The agreement was that Halon Oil would supply to U.S. Energy

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with 35,000 gallons of various grades of motor oil and 1,000 gallons of transmission fluid for a total
of $102,660. (Comp, ¶ 26) An invoice no. 17365 was submitted to U.S. Energy for the purchase
of the motor oil and transmission fluid and U.S. Energy wired funds totaling $79,200 to a Fifth Third
bank account, which U.S. Energy believed was Halon Oil’s account. (Comp., ¶ 27) U.S. Energy
later discovered that Kaminga had opened the Fifth Third account prior to the wire transfer,
representing to Fifth Third that he was an authorized representative of Halon Oil. (Comp., ¶ 28)
Pursuant to invoice no. 17377, U.S. Energy wired another $23,460 to the Fifth Third account on
March 2, 2011. (Comp., ¶ 29) U.S. Energy also paid $6,813.36 for quart bottles and caps, an
additional $3,3890 for labels, all of which Wegner represented to U.S. Energy would be used to
package the 34,500 gallons of motor oil U.S. Energy purchased from Halon Oil. (Comp., ¶ 30)
After the second wire transfer on March 2, 2011, U.S. Energy contacted Wegner to inquire
as to the status and progress of Wegner’s packaging of the oil and was told by Wegner that he
received all the loads of oil from Halon Oil paid for by U.S. Energy. (Comp., ¶¶ 32-33) Wegner
provided U.S. Energy with copies of invoice and shipping documents for one load and also an
invoice indicating that Halon Oil purchased the oil from ExxonMobil Oil Corporation. (Comp., ¶¶
34-35) U.S. Energy later demanded copies of the invoices and shipping documents for the
remaining loads but Wegner avoided U.S. Energy’s telephone calls. (Comp., ¶ 36) U.S. Energy
made telephone calls to Halon Oil, ExxonMobil and to Schneider Transport, a shipping company,
only to be advised that the whole transaction did not occur and that the shipping documents were
fake. (Comp., ¶ 36) U.S. Energy representatives traveled to an address set forth on the Halon Oil
invoices received by U.S. Energy, only to find that the address and phone numbers were fictitious.
(Comp., ¶ 37) The address was a residence owned by Kaminga and not a commercial facility.

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(Comp., ¶ 38)

U.S. Energy informed the various local police authorities in Illinois, Indiana and Michigan
about the alleged fraud by Wegner and Kaminga, which prompted Fifth Third to place a hold on the
bank account opened by Kaminga. (Comp., ¶¶ 41, 43) U.S. Energy was informed by Fifth Third
that $44,000 had been withdrawn from the account but that $58,000 remained in the account.
(Comp., ¶ 43) U.S. Energy filed the instant suit on March 24, 2011 seeking to void the transaction,
a return of the money, a return of the bottles and other items given to Wegner, damages and costs.
(Comp., ¶¶ 67, 73, 84, 88, 95, 99) U.S. Energy seeks an order enjoining Fifth Third from
transferring the assets to any of the Defendants and to recall any checks or wire transfers Kaminga
caused Fifth Third to make from the account. (Comp., ¶ 77G. & H.)
The Court’s Temporary Restraining Order enjoined Halon Oil, Wegner, Spire Brands and
Kaminga from transferring, disposing, withdrawing, issuing checks, or otherwise dissipating the
assets located in a Fifth Third bank account. (3/24/2011 TRO, p. 9) The preliminary injunction
motion seeks to enjoin these Defendants from access to the account until this matter is resolved. The
Court allowed U.S. Energy to serve Kaminga, Halon Oil, Wegner and Spire Brands by certified
mail, return receipt requested, first class mail and email, which occurred on April 7, 2011.
(Certificate of Service, Doc. No. 12) U.S. Energy filed Certificates of Service which indicated that
the Summons were returned executed as to these Defendants. (Doc. Nos. 13, 14, 15, 16)
II.

ANALYSIS
A.

Preliminary Injunction Standard

Four factors must be balanced and considered before the Court may issue a preliminary

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injunction pursuant to Rule 65(a) of the Rules of Civil Procedures: 1) the likelihood of the plaintiff's
success on the merits; 2) whether plaintiff will suffer irreparable injury without the injunction; 3)
the harm to others which will occur if the injunction is granted; and 4) whether the injunction would
serve the public interest. In re Delorean Motor Co., 755 F.2d 1223, 1228 (6th Cir. 1985); In re
Eagle-Pitcher Industries, Inc., 963 F.2d 855, 858 (6th Cir. 1992); and N.A.A.C.P. v. City of
Mansfield, Ohio, 866 F.2d 162, 166 (6th Cir. 1989).
B.

First Factor-Likelihood of Success on the Merits

The Verified Complaint and the Verified Motion for Preliminary Injunction assert fraudulent
misrepresentations by Wegner and Kaminga which induced U.S. Energy to enter into an agreement
to purchase oil from Kaminga, pretending to be Woodworth. A verified complaint has the same
force and effect as an affidavit for purposes of a motion. Lavado v. Keohane, 992 F.2d 601, 605 (6th
Cir. 1993). U.S. Energy seeks rescission of the agreement based on fraudulent misrepresentations
and/or material breach of the agreement. In Michigan, to warrant the equitable relief of rescission,
the material breach must affect a substantial or essential part of the contract or involve a
misrepresentation that was made with intent to deceive or mislead. Omnincon of Michigan v.
Giannetti Investment Co., 221 Mich. App. 98, 102 (1995). Rescission annuls the contract ab initio
and restores the parties to their original positions. Lash v. Allstate Ins. Co., 210 Mich. App. 98, 102
(1995).
U.S. Energy has set forth sufficient facts in its Verified Complaint to show that Wegner and
Kaminga fraudulently misrepresented the essential substance of the agreement entered into with U.S.
Energy. U.S. Energy has sufficiently alleged and submitted evidence to specifically identify the
funds originating from U.S. Energy to Fifth Third as payment towards the agreement. The Court

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finds U.S. Energy will likely succeed on the merits of its case against these Defendants. However,
as to Fifth Third Bank, the only allegations against it is that it holds the funds at issue. There is no
substantive allegation against Fifth Third Bank to form a claim or cause of action against it.
C.

Second Factor/Irreparable Harm

Addressing the irreparable injury requirement, it is well settled that a plaintiff's harm is not
irreparable if it is fully compensable by money damages. Basicomputer Corp. v. Scott, 973 F.2d
507, 511 (6th Cir. 1992). However, an injury is not fully compensable by money damages if the
nature of the plaintiff's loss would make damages difficult to calculate. Id. at 511-512. The Supreme
Court addressed the issue of whether a district court has the authority to issue a preliminary
injunction under Rule 65 for the purposes of protecting assets in anticipation of the judgment of the
court. In Grupo Mexicano de Desarrolo, S.A. v. Alliance Bond Fund, Inc., 527 U.S. 308 (1999), the
Supreme Court held that the district court had no authority to issue a preliminary injunction
preventing a defendant from disposing of assets pending adjudication of a plaintiff’s claim for
monetary damages. Id. at 333. The Grupo Mexicano case involved a breach of contract claim for
money damages by unsecured creditors of a group of investors who purchased notes involving a toll
road construction. The Supreme Court recognized the case of the usual preliminary injunction
where a plaintiff seeks to enjoin, pending the outcome of the litigation, an “action” that a plaintiff
claims is unlawful. Id. at 314. The Supreme Court noted the difference between that injunctive
relief and a preliminary injunction to protect an anticipated judgment of the court. Id. at 315. The
Supreme Court stated that if a district court enters a preliminary injunction to protect assets in
anticipation of a judgment of the court, as opposed to enjoining an “act” by the defendant, the
defendant is harmed by the issuance of the unauthorized preliminary injunction. Id. at 315. An

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unsecured creditor has no rights at law or in equity in the property of the debtor prior to judgment.
Id. at 330. The only cases where an unsecured creditor can obtain preliminary injunctive relief to
prevent a defendant from disposing of assets pre-judgment include situations where statutes permit
the court to do so, such as in a bankruptcy action, or under the Securities Act, or under statutes
authorizing tax injunctions. Id. at 326-328. Traditionally, courts of equity have not interfered with
the debtor’s disposition of his/her property at the instance of a nonjudgment creditor. Id. at 329.
A creditor must first obtain a judgment because a debtor has a right to a jury trial on the legal claim.
Id. at 330. The Supreme Court noted that any prejudgment remedy may be sought under
Fed.R.Civ.P. 64 which authorizes use of prejudgment remedies available under State law. Id. at
330-331.
In Grupo Mexicano, the Supreme Court answered the narrower question of “whether, in an
action for money damages, a United States District Court has the power to issue a preliminary
injunction preventing the defendant from transferring assets in which no lien or equitable interest
is claimed.” Id. at 310. The Supreme Court reasoned that historically, a court of equity could not
issue such provisional relief in the context of an action for money damages. Id. at 320-21 (noting
the “general rule that a judgment establishing the debt was necessary before a court of equity would
interfere with the debtor's use of his property”). The Supreme Court struck down the injunction
issued by the lower court. Id. at 333. The Supreme Court, however, distinguished cases in which
a plaintiff seeks equitable relief. Id. at 324-25. See e.g., Deckert v. Independence Shares Corp., 311
U.S. 282, 290 (1940) (upholding a preliminary injunction that prevented a party from transferring
assets as “a reasonable measure to preserve the status quo pending final determination of the
questions raised by the bill” where the complaint stated claims for equitable relief (namely,

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rescission of contract and restitution)). The Supreme Court stated that Deckert was distinguishable
from Grupo Mexicano because, as the Supreme Court took pains to explain, “the bill stated a cause
[of action] for equitable relief.” The preliminary relief available in a suit seeking equitable relief
has nothing to do with the preliminary relief available to a creditor’s bill seeking equitable assistance
in the collection of a legal debt. Id. at 325 (quoting Deckert, 311 U.S. at 288).
U.S. Energy seeks relief both in money damages and equitable relief in the form rescission
of the transaction with Wegner and Kaminga (in the misrepresentation count, Count I of the
Complaint). (Comp., pp. 13-14, ¶¶ A.B.) Pursuant to Grupo Mexicano, this Court cannot issue the
injunction based on U.S. Energy’s claims for money damages. However, as to the equitable relief
sought by U.S. Energy, the Court is able to issue an injunction as to these assets to maintain the
status quo. Courts have held that in order to issue an order maintaining the status quo and freezing
certain assets, the court must have sufficient evidence to show a threat that an individual will
dissipate the assets. See United States v. Oncology Associates, P.C., 198 F.3d 489, 496 (4th Cir.
1999); Newby v. Enron Corporation, 188 F. Supp. 2d 684, 707-08 (S.D. Tex. 2002). The Court will
grant the preliminary injunction pending resolution of this case to maintain the status quo.
D.

Third and Fourth Factors/Harm to Others and Public Interest

Regarding the third and fourth factors, although the Defendants may be harmed in that they
will be unable to access the moneys held by Fifth Third Bank, given the alleged fraud in this case,
Defendants may not be entitled to the funds in the account. Other than Defendants, no one else will
be harmed from enjoining access to the funds. There is no public interest in accessing funds which
may have been obtained fraudulently.
E.

Weighing the Factors

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Weighing the four factors noted above, a preliminary injunction is issued in this matter
enjoining Halon Oil, Wegner, Spire Brands and Kaminga from accessing the assets in the Fifth Third
account and from dissipating any further assets connected to the transactions with U.S. Energy.
III.

CONCLUSION
For the reasons set forth above, Plaintiff’s Motion for Preliminary Injunction is granted.
IT IS HEREBY ORDERED that:
A.

Plaintiffs’ Motion for Preliminary Injunction (Doc. No. 3, filed 3/23/2011) is
GRANTED pursuant to Fed. R. Civ. P. 65(a).

B.

Defendants Halon Oil, Randy Wegner, Spire Brands, and Rodney Kaminga and their
agents are enjoined and prohibited from transferring, disposing, withdrawing, issuing
checks, or otherwise dissipating the assets located in a Fifth Third bank account,
ABA # 042000314, Account Name: Halon Oil Brokers LLC, Account No. (Blank),
which account was opened at a Fifth Third office in Wheaton, Illinois.

C.

Defendant Fifth Third Bank must not allow Defendants named above from accessing
said account.

D.

The security bond remains at $1,000.00.

SO ORDERED.
s/Denise Page Hood
Denise Page Hood
United States District Judge
Dated: May 25, 2011

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I hereby certify that a copy of the foregoing document was served upon counsel of record
on May 25, 2011, by electronic and/or ordinary mail.
s/LaShawn R. Saulsberry
Case Manager

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