Amtrust Bank et al v. Lewis et al

Filing 263

ORDER that judgment creditors' 249 Motion for Contempt is Denied and that judgment creditors' 250 Motion to Modify Injunction is Denied. Signed by Judge James C. Mahan on 7/6/2017. (Copies have been distributed pursuant to the NEF - SLD)

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1 2 3 4 UNITED STATES DISTRICT COURT 5 DISTRICT OF NEVADA 6 *** 7 8 FDIC as Receiver for AMTRUST BANK, f/k/a Ohio Savings Bank, a federal savings bank, et al., 9 ORDER Plaintiff(s), 10 11 Case No. 2:10-CV-439 JCM (VCF) v. REX H. LEWIS, et al., 12 Defendant(s). 13 14 Presently before the court is a motion for contempt filed by plaintiffs Iota Cinnamon, LLC, 15 Iota Coral, LLC, Iota Red, LLC, Iota Royal, LLC, and Iota Violet, LLC (collectively, as “judgment 16 creditors”). (ECF No. 249). Defendant Rex Lewis (“judgment debtor” or “Lewis”) filed a 17 response (ECF No. 252), to which judgment creditors replied (ECF No. 254). 18 Also before the court is judgment creditors’ motion to modify injunction. (ECF No. 250). 19 Judgment debtor filed a response (ECF No. 253), to which judgment creditors replied (ECF No. 20 255). 21 I. Facts 22 The facts of the instant case are familiar to the court and the parties. This dispute arose out 23 of five commercial loan agreements guaranteed by judgment debtor. Each loan was secured by 24 one or more deeds of trust on the relevant properties. After Nevada’s real estate market crashed 25 in 2008, the borrowers defaulted on the loans and the banks foreclosed on the properties. 26 Substantial debts remained after the foreclosure sales. (ECF No. 174). 27 Judgment creditors filed a deficiency judgment action against judgment debtor as guarantor 28 of the loans. (ECF No. 1). Judgment creditors moved for summary judgment, and judgment debtor James C. Mahan U.S. District Judge 1 did not oppose the motion. The court granted summary judgment and entered judgment against 2 judgment debtor and his various companies, jointly and severally, for $66,089,661.52. (ECF Nos. 3 41, 59). On July 3, 2014, the court entered an order enjoining judgment debtor from transferring 4 5 assets he currently owns which are worth $5,000.00 or more. (ECF No. 65). 6 On August 27, 2015, Lewis filed a notice of appeal. (ECF No. 182). On May 30, 2017, 7 the Ninth Circuit affirmed the court’s order enjoining judgment debtor from transferring assets he 8 currently owns which are worth $5,000.00 or more (ECF No. 65). (ECF Nos. 256, 258). In the instant motions, judgment creditors renew their previous motions for contempt and 9 10 to modify the injunction.1 (ECF Nos. 249, 250). 11 II. Legal Standards 12 A. Contempt 13 It is well established that “courts have inherent power to enforce compliance with their 14 lawful orders through civil contempt.” Shillitani v. United States, 384 U.S. 364, 370 (1966). 15 Additionally, “[a] court has wide latitude in determining whether there has been contemptuous 16 defiance of its order.” Gifford v. Heckler, 741 F.2d 263, 265 (9th Cir. 1984) (citing Neebars, Inc. 17 v. Long Bar Grinding, Inc., 438 F.2d 47, 48 (9th Cir. 1971)). 18 “Civil contempt . . . consists of a party’s disobedience to a specific and definite court order 19 by failure to take all reasonable steps within the party’s power to comply.” In re Dual-Deck Video 20 Cassette Recorder Antitrust Litig., 10 F.3d 693, 695 (9th Cir. 1993). However, “a person should 21 not be held in contempt if his action[s] appear[] to be based on a good faith and reasonable 22 interpretation of the court’s order.” Id. (quoting Vertex Distrib., Inc. v. Falcon Foam Plastics, 23 Inc., 689 F.2d 885, 889 (9th Cir. 1982)). Further, “[s]ubstantial compliance with the court order 24 is a defense to civil contempt, and is not vitiated by a few technical violations where every 25 reasonable effort has been made to comply.” In re Dual-Deck, 10 F.3d at 695. 26 ... 27 28 James C. Mahan U.S. District Judge Both motions were refiled before the Ninth Circuit decision disregarding the court’s previous orders stating when to refile the motions. 1 -2- 1 B. Modify Injunction 2 A district court has “wide discretion” when deciding whether to modify an injunction based 3 on changes in factual or legal circumstances. System Federation No. 91 v. Wright, 364 U.S. 642, 4 647 (1961); see also A&M Records, Inc. v. Napster, Inc., 284 F.3d 1091, 1098 (9th Cir. 2002). 5 When deciding whether to modify an injunction, the court must strike a balance “between the 6 policies of res judicata and the right of the court to apply modified measures to changed 7 circumstances.” Wright, 364 U.S. at 648. 8 III. 9 Discussion A. Contempt 10 In the immediate motion, judgment creditors argue that defendant Lewis is in contempt 11 because he has transferred funds in excess of $5,000.00 violating the court’s order. (ECF No. 249 12 at 5–10). In particular, judgment creditors allege that defendant Lewis owns and controls a Wells 13 Fargo checking account ending in 0404 (“0404 account”) and has been transferring funds in excess 14 of $5,000.00 from the 0404 account. (ECF No. 249 at 5–8). 15 In response, judgment debtor contends that he has fully complied with the court’s order 16 and has not transferred any funds exceeding $5,000.00. (ECF No. 252 at 4–9). In particular, 17 judgment debtor asserts that he does not own nor does he have control over the 0404 account; the 18 0404 account is his wife’s, Catherine Lewis’ (“Mrs. Lewis”), account. (ECF No. 252 at 5–7). 19 To succeed on a motion for contempt, the moving party “must demonstrate that the alleged 20 contemnor violated the court’s order by clear and convincing evidence, not merely a 21 preponderance of the evidence.” In re Dual-Deck, 10 F.3d at 695 (citing Vertex Distrib., Inc., 689 22 F.2d at 889). 23 24 Here, judgment creditors fails to demonstrate that judgment debtor has violated the court’s order (ECF No. 65) by clear and convincing evidence. 25 The transfers from the 0404 account do not appear to be made by judgment debtor. For 26 example, judgment debtor’s wife, Mrs. Lewis, made the transfer of $40,000.00 from the 0404 27 account on April 26, 2015, as demonstrated through her name and signature on the check. (ECF 28 Nos. 249-5, 249-6). Additionally, the other two transfers judgment creditors refer to do not appear James C. Mahan U.S. District Judge -3- 1 to have any connection to judgment debtor. (ECF No. 249 at 8, 9); (see also ECF Nos. 249-6, 249- 2 8). Therefore, judgment creditors fail to demonstrate that judgment debtor, himself, has actually 3 transferred any asset worth more than $5,000.00. (See ECF No. 65). 4 Further, the court is unconvinced that judgment debtor owns or has any control over the 5 0404 account. Judgment debtor’s name rarely appears on any documents relating to the 0404 6 account. Based on the documents provided, Mrs. Lewis appears to own the 0404 account and 7 control all transactions related to the 0404 account. (See ECF No. 249). Since Mrs. Lewis has 8 never been a party to this case, nor is she enjoined by the court’s order, judgment creditors fail to 9 demonstrate that judgment debtor, himself, violated the court’s order. 10 Accordingly, the court will deny judgment creditors’ motion for contempt (ECF No. 249). 11 B. Modify Injunction 12 Additionally, judgment creditors argue that the court’s order enjoining judgment debtor 13 from transferring assets (ECF No. 65) should be expanded to include Mrs. Lewis, judgment 14 debtor’s wife. In particular, judgment creditors allege that Mrs. Lewis “knowingly assisted 15 [judgment debtor] in attempting to by-pass” the court’s order. (ECF No. 250 at 11). 16 In response, judgment debtor contends that judgment creditors fail to show changed 17 circumstances because the accusations against Mrs. Lewis are false and Mrs. Lewis has never been 18 a party to this case. (ECF No. 253 at 10, 13). 19 “[A] party seeking modification or dissolution of an injunction bears the burden of 20 establishing that a significant change in facts or law warrants revision or dissolution of the 21 injunction.” Sharp v. Weston, 233 F.3d 1166, 1170 (9th Cir. 2000). 22 Here, judgment creditors fail to meet their burden. Judgment creditors attempt to establish 23 a substantial change in facts by attacking Mrs. Lewis’ character and making theoretical 24 conclusions as to why Mrs. Lewis made certain transactions. (See ECF No. 250 at 10). However, 25 the allegations do not convince the court to expand the order. 26 In addition, Mrs. Lewis has never been a party in the present case and there is no indication 27 that Mrs. Lewis is responsible for the deficiency judgment. Moreover, judgment creditors did not 28 James C. Mahan U.S. District Judge -4- 1 adequately demonstrate that Mrs. Lewis is hindering judgment creditors from collecting on the 2 judgment deficiency. Therefore, the court will deny judgment creditors’ motion to modify injunction (ECF No. 3 4 250). 5 IV. Conclusion 6 Accordingly, 7 IT IS HEREBY ORDERED, ADJUDGED, and DECREED that judgment creditors’ 8 9 10 11 motion for contempt (ECF No. 249) be, and the same hereby is, DENIED. IT IS FURTHER ORDERED that judgment creditors’ motion to modify injunction (ECF No. 250) be, and the same hereby is, DENIED. DATED July 6, 2017. 12 13 __________________________________________ UNITED STATES DISTRICT JUDGE 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 James C. Mahan U.S. District Judge -5-

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