Jo Ann Howard and Associates, P.C. et al v. Cassity et al

Filing 1216

MEMORANDUM AND ORDER: IT IS HEREBY ORDERED that Plaintiff SDR's Motion to Compel the Forever Entities' Responses to the SDR's First Set of Requests for Production [ECF No. 1207 ], is GRANTED in part. Within twenty (20) days, Foreve r Entities shall produce all financial records and documents, in accordance with, and as specified in, this Order. IT IS FURTHER ORDERED that the Motion to Withdraw [ECF No. 1191 ] filed by counsel for Forever Defendants, and Plaintiffs' Moti on to Enforce Court Order Requiring Payment of Fees [ECF No. 1173 ] shall be held in abeyance, to be considered by this Court after Forever Defendants produce the documents, as directed above, within twenty (20) days of this Order. Signed by District Judge E. Richard Webber on June 24, 2013. (BRP)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION

JO ANN HOWARD &
ASSOCIATES, P.C., et al.,
Plaintiffs,
vs.
J. DOUGLAS CASSITY, et al.,
Defendants.

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Case No. 4:09CV01252 ERW

MEMORANDUM AND ORDER

On June 10, 2013, this matter came before the Court for a motion hearing on “Plaintiffs’
Motion to Enforce Court Order Requiring Payment of Attorney Fees by Forever Defendants”
[ECF No. 1173], and on a “Motion to Withdraw as Counsel” filed by counsel for Forever
Defendants [ECF No. 1191]. The term “Forever Defendants” refers collectively to Defendants
Brentwood Heritage Properties, LLC; Forever Enterprises, Inc.; Forever Illinois, Inc.; Forever
Network, Inc.; Legacy International Imports, Inc.; Lincoln Memorial Services, Inc.; National
Heritage Enterprises, Inc.; National Prearranged Services Agency, Inc.; and Texas Forever, Inc.
Plaintiff Jo Ann Howard & Associates, P.C., has been appointed to serve as the Special
Deputy Receiver (“SDR”) of three companies, National Prearranged Services Agency, Inc.
(“NPS”); Lincoln Memorial Life Insurance Co.; and Memorial Service Life Insurance Co. In the
instant case, Plaintiff Jo Ann Howard & Associates, in its capacity as the SDR, has asserted,
against numerous defendants, claims such as violation of the RICO Act, 18 U.S.C. § 1962(d),
breach of fiduciary duty, and gross negligence. Other plaintiffs include national and individual

state life and health insurance guaranty associations.
In his Motion to Withdraw as Counsel, Firmin A. Puricelli requests leave to withdraw as
counsel for Forever Defendants, claiming that the modest retainer he received from his clients
when they engaged his services is now fully depleted, and that “Forever Defendants have
indicated that they are entirely without resources to pay any additional fee for [his] representation
or assets to utilize to arrange for such fee” [ECF No. 1191]. Mr. Puricelli further claims that he
has difficulty communicating with Forever Defendants and their officers, and that he is unable to
continue to represent them without clear lines of communication. He alleges that he has notified
his clients of his intention to withdraw, and of their need to hire new counsel.
In their Response to the Motion to Withdraw, Plaintiffs contend that allowing Forever
Defendants’ counsel to withdraw prior to their retention of new counsel would cause the entities
to proceed pro se, which the law does not allow [ECF No. 1194]. Plaintiffs also argue that if Mr.
Puricelli is allowed to withdraw before Forever Defendants secure replacement counsel, his
withdrawal would also likely result in the entities’ failure to respond to Plaintiffs’ recent
discovery requests directed to the defendants. Consequently, Plaintiffs request that the Court
condition any grant to Mr. Puricelli for leave to withdraw, upon Forever Defendants’ retention of
replacement counsel.
In their Motion to Enforce Court Order Requiring Payment of Attorney Fees by Forever
Defendants [ECF No. 1173], Plaintiffs seek the Court’s assistance in enforcing its Amended
Memorandum and Order, dated August 14, 2012 [ECF No. 1110], which ordered Forever
Defendants to pay to Plaintiffs, as costs and attorneys’ fees, the amount of $7,693.85. Plaintiffs

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allege that they have made repeated demands upon Forever Defendants, by written
correspondence and telephone conversations with Forever Defendants’ counsel, Mr. Puricelli, for
payment of the awarded costs and fees. Plaintiffs further allege that when Forever Defendants
failed to pay the fees, and made no promise to do so, they sent a final letter to Mr. Puricelli on
January 17, 2013, demanding payment by the close of business on February 18, 2013, and
announcing their intention to file a motion to enforce the Court’s order if full payment was not
tendered by that date. Plaintiffs claim that when they received no reply, they telephoned Mr.
Puricelli, who confirmed that Forever Defendants do not intend to pay Plaintiffs’ awarded fees.
On March 27, 2013, this Court issued an Order, directing Forever Defendants to show cause why
Plaintiffs’ Motion to Enforce Payment should not be granted and sanctions imposed [ECF No.
1181].
In their “Response to Order to Show Cause,” Forever Defendants claim they are
financially unable to pay the fees, and they suggest that the attorneys’ fees award be taxed as
costs following resolution of the case [ECF No. 1186]. In “Plaintiffs’ Reply to the Forever
Defendants’ Response to Order to Show Cause,” they request that the Forever Defendants be
ordered to submit financial documentation supporting their claimed lack of financial resources,
or, alternatively, that Plaintiffs be allowed to conduct discovery into the entities’ financial
condition [ECF No. 1187].
During the hearing, Plaintiffs requested, without objection by Defendants, to present
argument on another motion pending before the Court, “Plaintiff SDR’s Motion to Compel the
Forever Entities’ Responses to the SDR’s First Set of Requests for Production” [ECF No. 1207].
In this Motion, Plaintiff SDR moves under Federal Civil Procedure Rule 37(a), to compel
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Forever Defendants to respond to Plaintiffs’ request for documents, which sought, among other
things, financial statements, and documents relating to promissory notes, asset acquisitions, wire
transfers, entity ownership transfers, loans, and forbearance agreements [ECF No. 1207-1].
Plaintiff SDR certifies that it has made a good-faith attempt to resolve the dispute without Court
intervention, but that the parties agree that they have reached an impasse. Plaintiff SDR claims
that counsel for Forever Defendants has conveyed his clients’ assertions that they have “no
documents” related to these entities, and that “Texas took everything.” Plaintiff SDR further
claims that Brent Cassity and Doug Cassity, officers of Forever Defendants, both state that they
do not “have anything,” and there are no documents to be produced.
In this Motion to Compel, Plaintiff SDR states that, contrary to the officers’ assertions,
the SDR does not have possession of any Forever entity documents created after May 2008
(when the receivership was established), nor does the SDR have the Forever entities’ prereceivership documents that were stored on Defendant Forever Network’s servers. Plaintiff SDR
submitted documentary evidence indicating that a subset of the Forever Defendants, “Forever
Entities” (comprised of Brentwood Heritage Properties, LLC; Forever Enterprises, Inc.; Forever
Illinois, Inc.; Forever Network, Inc.; Legacy International Imports, Inc.; Lincoln Memorial
Services, Inc.; National Prearranged Services Agency, Inc.; and Texas Forever, Inc. d/b/a Forever
All Faiths), are or should be in possession of financial documents, that Forever Network servers
were taken from NPS’s St. Louis office prior to receivership, and that at least four of the Forever
Entities have engaged in post-receivership business transactions [ECF Nos. 1207-4 through
1207-15].

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After hearing argument, the Court directed Plaintiffs to submit, within seven (7) of the
hearing, a proposed order with a detailed list of the financial documents they desire Forever
Defendants to produce in support of the defendants’ claimed inability to pay. On June 17, 2013,
Plaintiffs filed “Plaintiffs’ Notice Regarding Proposed Order Granting Plaintiffs’ Motion to
Enforce Court Order Requiring Payment of Attorney Fees by Forever Defendants and
Compelling the Production of Financial Documents by the Forever Defendants [ECF No. 1213],
and “[Proposed] Order Granting Plaintiffs’ Motion to Enforce Court Order Requiring Payment of
Attorney Fees by Forever Defendants and Compelling the Production of Financial Documents by
the Forever Defendants [ECF No. 1213-2]. In their Notice, Plaintiffs state that counsel for
Forever Defendants disclosed during the hearing his clients’ intention to not retain replacement
counsel, and Plaintiffs request that the Court hold the defendant entities’ officers and directors
personally responsible for compliance with any Order issued.
After examining the record, hearing argument, and reviewing Plaintiffs’ proposed Order,
the Court will grant, in part, Plaintiffs’ Motion to Compel the Forever Entities’ Responses to the
SDR’s First Set of Requests for Production [ECF No. 1207]. The Court will not, at this time,
order all documents requested, because the Court believes it will be impractical for the Forever
entities to produce all documents within the time frame allowed. The Court will order Forever
Entities to produce, within twenty (20) days of this Order, the following documents:
1. Monthly, quarterly, and year-end financial statements of each Forever
Defendant and each of their subsidiaries for the period beginning January 2007,
and continuing through the present date;
2. Bank and investment account statements of each Forever Defendant and each of
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their subsidiaries for the period beginning January 2007, and continuing through
the present date;
3. Accounting ledgers (such as general ledgers), accounting journals, accounting
files, and other accounting records of each Forever Defendant and each of their
subsidiaries for the period beginning January 2007, and continuing through the
present date;
4. Financial or cash management plans, internal financial audits, and any other
analyses of the current or future financial condition of any Forever Defendant and
its subsidiaries;
5. Titles, property and other assessments, appraisals, purchase and sale
agreements, release agreements (including but not limited to the release agreement
between Forever Network, Inc. and Brian May), management agreements, and
other Documents related to any properties of any kind that are or have been owned
or leased by any Forever Defendant and any subsidiary of any of the Forever
Defendants from January 2007 to the present;
6. Loan agreements, subordination agreements, forbearance agreements,
promissory notes, and other Documents executed between January 2007 to the
present, relating to any loans issued to or from any of the Forever Defendants
and/or any subsidiary of any of the Forever Defendants; and
7. Purchase or sale agreements and any other Documents related to the purchase,
sale, or transfer of inventory or other assets to or from any Forever Defendant and
any Forever Defendants’ subsidiary, including but not limited to transfers of assets
to a third party or to a related party, from January 2007 to the present.
The term “document” is used in the broadest extent permitted by Federal Civil Procedure
Rule 34(a)(1), and includes without limitation: all writings, correspondence, records, reports,
memoranda, notes, contracts, agreements, statements, invoices, minutes, accounting and financial
books, working papers, data or information stored on a computer or any computer disk or service,
electronic communications, and other written, printed, stored, or recorded material or statements
of any kind.
Within twenty (20) days of this Order, each Forever Defendant shall submit to the Court

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and Plaintiffs a list of all properties and assets currently owned by that Forever Defendant,
including but not limited to commercial properties, residential properties, vehicles, inventory,
and office equipment. Furthermore, each Forever Defendant shall to submit to the Court and to
Plaintiffs, within twenty (20) days of this Order, an affidavit signed by an officer or director of
each respective Forever Defendant entity identifying any documents that were destroyed or are
no longer available, and shall also describe in the affidavit with specificity the circumstances
which have caused the documents to be unavailable.
Corporate officers hold corporate books in a representative capacity subject to the
corporate duty, and corporate officers are obligated to produce corporation documents within
their custody when called for by proper process. See Braswell v. United States, 487 U.S. 99,
106-10 (1988). It is axiomatic that an artificial entity can only act to produce its records through
its individual officers or agents.
A command to the corporation is in effect a command to those who are officially
responsible for the conduct of its affairs. If they, apprised of the writ directed to
the corporation, prevent compliance or fail to take appropriate action within their
power for the performance of the corporate duty, they, no less than the corporation
itself, are guilty of disobedience, and may be punished for contempt.
Wilson v. United States, 221 U.S. 361, 376 (1911). A cursory review of the Secretary of State
information submitted by Plaintiffs regarding the officers and directors of the Forever Defendants
reveals that the entities’ current and former officers and directors include individuals who are
already named party defendants in this matter, and thus subject to this Court’s jurisdiction.
District courts possess inherent powers “to manage [their] affairs so as to achieve the orderly and

expeditious disposition of cases.” Westcott Agri-Prods., Inc. v. Sterling State Bank, Inc., 682
F.3d 1091, 1095 (8th Cir. 2012). This Court has not only the power to compel the current and

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former corporate officers and directors of Forever Defendants to perform their custodial
obligations and produce, in accordance with this Order, the responsive financial documents that
they hold. or held, in their official capacity, but also the authority to hold in contempt those
corporate representatives who fail to perform as ordered. See Wilson, 221 U.S. at 385-86; Fed.
R. Civ. P. 26; Fed. R. Civ. P. 34.
The Court is sympathetic to Mr. Puricelli’s situation in this case, and is generally
reluctant to require lawyers to act as indentured servants for uncooperative clients who can or
will not pay for their services. However, the Court also recognizes that allowing Forever
Defendants’ counsel to withdraw at this time will result in those entities being without counsel,
unable to proceed pro se, and likely, failure by those entities to respond to Plaintiffs’ discovery
requests and to comply with the Court’s orders. Therefore, the Court will hold in abeyance its
ruling on counsel’s Motion to Withdraw as Counsel [ECF No. 1191], and its ruling on Plaintiffs’
Motion to Enforce Court Order Requiring Payment of Attorney Fees by Forever Defendants
[ECF No. 1173]. These motions will considered by the Court after Forever Defendants produce
the documents, as directed above, within twenty (20) days of this Order.
Accordingly,
IT IS HEREBY ORDERED that “Plaintiff SDR’s Motion to Compel the Forever
Entities’ Responses to the SDR’s First Set of Requests for Production” [ECF No. 1207], is
GRANTED in part. Within twenty (20) days, Forever Entities shall produce all financial
records and documents, in accordance with, and as specified in, this Order.
IT IS FURTHER ORDERED that the Motion to Withdraw [ECF No. 1191] filed by
counsel for Forever Defendants, and Plaintiffs’ Motion to Enforce Court Order Requiring
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Payment of Fees [ECF No. 1173] shall be held in abeyance, to be considered by this Court after
Forever Defendants produce the documents, as directed above, within twenty (20) days of this
Order.
Dated this

24th

day of June, 2013.

E. RICHARD WEBBER
SENIOR UNITED STATES DISTRICT JUDGE

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