McGirr et al v. Rehme et al
Filing
10
ORDER GRANTING TEMPORARY RESTRAINING ORDER; Setting a Telephonic Status Conference on 4/29/2016 at 11:00 A.M. and the Preliminary Injunction Hearing will be (set for 5/26/2016 11:00 AM in Courtroom 5 - Columbus before Robert H. Cleland.). Signed by Robert H. Cleland on 4/22/16. (lgw)
UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION
CONNIE MCGIRR, et al.,
Plaintiffs,
v.
Case No. 16-464
THOMAS F. REHME, et al.,
Defendants.
/
ORDER GRANTING IN PART MOTION FOR A TEMPORARY RESTRAINING
ORDER AND SETTING A PRELIMINARY INJUNCTION HEARING
Plaintiffs filed their Complaint (Dkt. # 1) on April 12, 2016, and Defendants have
yet to be served. On April 15, 2016, Plaintiffs filed a “Motion for a Temporary
Restraining Order and Motion for Preliminary Injunction.” (Dkt. # 4.) The Motion was
served on Defendants via regular United States mail the same day. Defendants have
responded in opposition. (Dkt. ## 7, 9.) For the following reasons, the court will grant in
part the motion for a temporary restraining order.
This case involves a previously settled mass tort action concerning the diet drug
“fen-phen” and some of the plaintiffs in that case who instituted an action in Kentucky
state court against their attorney, now Defendant, Stanley Chesley. They allege that he
wrongfully retained money they were due from the settlement. That action resulted in a
large judgment against Chesley, Mildred Abbott et al. v. Stanley M. Chesley, et al., No.
05-CI-00436 (Ky. Cir. Ct. August 1, 2014), which Plaintiffs say they have had little if any
luck in collecting. Plaintiffs now bring this action against Chesley, his law firm, Waite,
Schneider, Bayless, & Chesley, Co., LPA (“WSBC”), and Thomas Rehme, an employee
of WSBC and trustee of funds involved in the wind-up of WSBC, alleging that they have
fraudulently transferred funds to shield Chesley from the judgment against him.
When evaluating a motion for a temporary restraining order (“TRO”), a district
court must strictly adhere to the requirements of Federal Rule of Civil Procedure 65.
Leslie v. Penn C. R. Co., 410 F.2d 750, 751 (6th Cir. 1969) (quoting Austin v. Altman,
332 F.2d 273, 275 (2d Cir. 1964)). Rule 65 states in relevant part that:
A temporary restraining order may be granted without written or oral notice
to the adverse party or that party’s attorney only if (1) it clearly appears
from specific facts shown by affidavit or by the verified complaint that
immediate and irreparable injury, loss, or damages will result to the
applicant before the adverse party or that party’s attorney can be heard in
opposition, and (2) the applicant’s attorney certifies to the court in writing
the efforts, if any, which have been made to give the notice and the
reasons supporting the claim that notice should not be required.
Fed. R. Civ. P. 65(b). When evaluating whether to grant a TRO, the court must consider
“(1) whether the movant has a strong likelihood of success on the merits, (2) whether
the movant would suffer irreparable injury absent a [TRO], (3) whether granting the
[TRO] would cause substantial harm to others, and (4) whether the public interest would
be served by granting the [TRO].” N.E. Ohio Coal. for the Homeless v. Blackwell, 467
F.3d 999, 1009 (6th Cir. 2006) (citations omitted). These factors are “interrelated
considerations that must be balanced together,” not independent prerequisites. Id.
(quoting Mich. Coal. of Radioactive Material Users, Inc. v. Griepentrog, 945 F.2d 150,
153 (6th Cir. 1991)). “For example, the probability of success that must be
demonstrated is inversely proportional to the amount of irreparable injury the movants
will suffer absent the [TRO].” Id. (citing Griepentrog, 945 F.2d at 153).
The stated reason for the request that the court act immediately is, primarily, to
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restrain the disbursement of attorneys’ fees from a class action lawsuit, Williams v.
Duke Energy, No. 08-46 (S.D. Ohio October 21, 2015) (Sargus, J.). That matter was
scheduled for a hearing April 19, 2016, and Judge Sargus approved the payment of
attorneys’ fees to the Defendant law firm WSBC. Id. at Dkt. # 266. The payor of the
attorneys’ fees in Williams, Duke Energy International, Inc., has represented that no
payment of fees will be made until April 26, 2016, id., but it appears that payment may
be made shortly thereafter.
Before Judge Sargus approved the attorneys’ fees, Plaintiffs in this case filed a
motion in Williams to be substituted as the real party in interest as to the payment of the
attorneys’ fees based on various state-court orders that, Plaintiffs argue, entitle them to
execute on any fee income due to WSBC. See id. at Dkt. # 264. Along with granting
attorneys’ fees to WSBC, Judge Sargus acted to sever the above-described motion to
substitute and transfer it to this court for resolution as a companion to the instant
litigation. Id. at Dkt. # 266.
Plaintiffs allege that the firm and Defendants Stanley Chesley and Thomas
Rehme are involved in a scheme to fraudulently transfer and conceal assets in order to
evade Chesley’s judgment creditors. Plaintiffs argue that to prevent the attorneys’ fees
from being permanently diverted to their detriment, the court should require Defendants
to place those funds on deposit with the court pending the outcome of this case.
Considering the four factors that govern the decision to grant a TRO and the
impending concern of the payment of attorneys’ fees from the Williams case, the court
concludes that a TRO is appropriate to restrain the funds that will be paid to WSBC at
least until the court can hear fully from all parties to the matter. As to success on the
merits, Defendants primarily argue that federal courts lack jurisdiction to enforce the
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judgments of state courts. (See Dkt. ## 7, 9, Pg. ID 137-40, 217-222.) Defendants,
however, misread the Complaint. This action is not one to register and enforce the
Kentucky judgment. It is a separate cause of action alleging fraudulent transfer of funds
to which Plaintiffs are entitled. While related, the two are not the same and the cases
Defendants cite, e.g. Euro-Am. Coal Trading, Inc. v. James Taylor Mining, Inc., 431 F.
Supp. 2d 705 (E.D. Ky. 2006), are inapposite where Plaintiffs do not seek to enforce the
judgment, but instead are suing based on allegedly fraudulent transfers made by
Defendants. Plaintiffs, on the other hand, point to a number of transfers purportedly
related to the wind-up of WSBC, that could, it seems at this point, be viewed as being
made for the benefit of Chesley and in an effort to render Chesley insolvent and
judgment proof. (See Dkt. # 4, Pg. ID 57-59.) While, Defendants also raise significant
questions about whether abstention would be appropriate in this case due to the parallel
state proceedings, and whether diversity jurisdiction exists because of other judgment
creditors who could join in this action, the court concludes, at this early stage in the
litigation, that this factor slightly favors Plaintiffs.
Even more persuasive is Plaintiffs’ argument as to irreparable harm, the second
factor in the analysis. The concealment or dissipation of assets constitutes irreparable
harm. NCR Corp. v. Feltz, No. 91-4011, 91-4033 and 91-4058, 1993 WL 11876, at *2
(6th Cir. Jan. 21, 1993); Huntington Nat. Bank v. Guishard, Wilburn & Shorts, LLC, No.
2:12-CV-1035, 2012 WL 5902916, at *9 (N.D. Ohio Nov. 26, 2012). Given the alleged
past practice of Defendants in making these types of fraudulent conveyances, and the
threat that Defendants will similarly handle the attorneys’ fee award from Williams,
Plaintiffs have established that they may suffer irreparable harm if a temporary
restraining order is not issued. The factor heavily favors Plaintiffs.
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Considering the harm to others, in his brief, Chesley references sums owed to
the IRS, an IRS lien, and ongoing IRS audit, all of which he argues would be affected by
the grant of a TRO. (Dkt. # 7, Pg. ID 144-45.) The court is not convinced that a
(hopefully) brief restraint of the attorneys’ fee award from Williams will significantly
impact Chesley’s tax liability. In the event this concern becomes imminent and more
concrete before the court holds a preliminary injunction hearing, the court stands ready
to entertain an emergency motion on that matter. As to WSBC and Rehme, those
Defendants do not address this factor in their brief. The court finds that little harm would
come to others if the attorneys’ fees are temporarily held on deposit with the court
pending the outcome of a soon-to-be-held preliminary injunction hearing.
Lastly, the court finds that, to the extent this factor is implicated, the public
interest would be served by deterring others from engaging in the fraudulent transfer of
funds. See Concheck v. Barcroft, No. 2:10-cv-656, 2010 WL 4117480, at *3 (S.D. Ohio
Oct. 18, 2010).
Accordingly, IT IS ORDERED that Plaintiff’s “Motion for a Temporary Restraining
Order and Motion for Preliminary Injunction” (Dkt. # 4) is GRANTED IN PART,
specifically with respect to Plaintiffs’ request for a temporary restraining order requiring
Defendant WSBC to place all attorneys’ fees to be granted in Williams on deposit with
the court. The request for a temporary restraining order is DENIED IN PART as to the
other general restraints on Defendants financial activities. The request for a Preliminary
Injunction remains pending.
IT IS FURTHER ORDERED that Defendant WSBC must, forthwith upon receipt,
place on deposit with the court via wire transfer any and all fees received in connection
with Williams v. Duke Energy, No. 08-46 (S.D. Ohio Oct. 21, 2015) (Sargus, J.).
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Defendant WSBC is ORDERED to contact the court’s financial clerk, Mike Socha, at
(614) 719-3063 to arrange the transfer of funds. The funds will remain on deposit in an
interest bearing account until the court dissolves this order at the preliminary injunction
hearing or otherwise.
IT IS FURTHER ORDERED that natural Defendants, Thomas Rehme and
Stanley Chesley, must assist in any way needed to facilitate the ordered transfer of
funds to the court, and do nothing to interfere in any way with such transfer.
IT IS FURTHER ORDERED that Plaintiffs must give security in the form of a
bond in the amount of $20,000.00 (twenty thousand dollars). The court determines that
this is sufficient to ensure the payment of possible costs and damages sustained if it is
determined that Defendants have been wrongfully restrained. Plaintiffs, also, must
contact Mike Socha, at (614) 719-3063 in order to arrange the deposit of the security.
IT IS FURTHER ORDERED the counsel for all parties appear for a telephonic
status conference on April 29, 2016 at 11:00 a.m. to discuss and seek agreement on
the logistics (timing, complexity, etc.) of a preliminary injunction hearing. (The court will
initiate the call)
The court anticipates conducting a hearing on the motion for preliminary
injunction on May 26, 2016 at 11:00 a.m., Courtroom 5 at the United States District
Court, 85 Marconi Blvd, Columbus, Ohio, 43215.
All natural party defendants are ORDERED to appear personally at the hearing,
as are all corporate entity party representatives with fully dispositive settlement
authority. The court anticipates that the parties will, without any further specific guidance
or involvement of the court, discuss means and methods of settlement before and on
the hearing date. The principal purpose of requiring personal attendance is to facilitate
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the opportunity for discussion and the ability to record any agreement(s) reached.
s/Robert H. Cleland
ROBERT H. CLELAND
UNITED STATES DISTRICT JUDGE
Dated: April 22, 2016
I hereby certify that a copy of the foregoing document was mailed to counsel of record
on this date, April 22, 2016, by electronic and/or ordinary mail.
s/Lisa Wagner
Case Manager and Deputy Clerk
(313) 234-5522
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