COVERTECH FABRICATING, INC. v. TVM BUILDING PRODUCTS, INC. et al

Filing 7

MEMORANDUM OPINION and ORDER - It is hereby Ordered that Plaintiff's Motion for Temporary Restraining Order and Preliminary Injunction (ECF No.3) is GRANTED IN PART and DENIED IN PART. A hearing for preliminary injunction is scheduled for November 8, 2017 at 9:30 a.m., and as more fully stated in said Memorandum Opinion and Order. Signed by Judge Kim R. Gibson on 10/26/2017. (krh)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
COVERTECH FABRICATING, INC.,

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Case No. 3:17-cv-196

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Plaintiffs,

JUDGE KIM R. GIBSON

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v.

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TVM BUILDING PRODUCTS, INC.; TVM
INDUSTRIES, INC.; TVM FOAM SYSTEMS, INC.;
TVM INSULATION, INC.; TVM SEALANTS,
INC.; TVM MANUFACTURING, INC.; TVM
HOLDINGS USA, INC.; TVM HOLDINGS, INC.;
TVM CANADA, INC.; MITEX INTERNATIONAL,
INC.; MITEX BUILDING PRODUCTS, LLC;
MITEX FOAM SYSTEMS, LLC; MITEX
MANUFACTURING, LLC; MITEX GROUP, INC.,
MICHAEL BOULDING, SEAN BOULDING, and
WILLIAM TROTTERS,

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Defendants.

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MEMORANDUM OPINION

I.

Introduction
Pending before the Court is Plaintiff Covertech Fabricating, Inc.'s Motion for Temporary

Restraining Order and Preliminary Injunction. (ECF No. 3.) The Court has reviewed Plaintiff's
Motion (ECF No. 3), Plaintiff's Brief in Support thereof (ECF No. 4), and Plaintiff's Verified
Complaint (ECF No. 1). Upon review of these submissions, the Court is persuaded that Plaintiff
has met the high standard for obtaining a temporary restraining order ("TRO"). The Court will,
therefore, enter a TRO-albeit without one of the conditions requested by Plaintiff-and set a
hearing for Plaintiff's request for a preliminary injunction. For the reasons that follow, Plaintiff's
Motion is GRANTED IN PART and DENIED IN PART.

II.

Plaintiff Has Met the Heavy Burden of Rule 65(b)(l) to Merit the Grant of an Ex Parle
TRO
Pursuant to Federal Rule of Civil Procedure 65(b)(l), a court may issue an ex parte TRO

where (1) "specific facts in an affidavit or verified complaint clearly show that immediate and
irreparable injury, loss, or damage will result to the movant before the adverse party can be heard
in opposition" and (2) "the movant's attorney certifies in writing any efforts made to give notice
and the reasons why it should not be required." Fed. R. Civ. P.65(b)(l). Plaintiff has satisfied
both of these requirements.
First, the facts, as set forth in the Verified Complaint (ECF No. 1), clearly show that
immediate irreparable harm will result to Plaintiff before the adverse party can be heard in
opposition. The Verified Complaint clearly demonstrates that Defendants are likely to transfer
assets as soon as they learn about the present lawsuit-an action Defendants have previously
taken when faced with the enforcement of this Court's judgment. Absent a TRO, Defendants
would be free to immediately begin dissipating assets and moving assets beyond the reach of
Plaintiff, potentially precluding Covertech from recovering millions of dollars owed to Covertech
from a prior, unsatisfied judgment from this Court.
Second, as set forth by an affidavit filed by Plaintiff's counsel (ECF No. 4-1), Covertech
has sought to provide Defendants with notice of the instant lawsuit and TRO Motion by various
means, including sending the relevant court filing to the last known counsel of Defendants via email and U.S. Mail and hiring a process server to attempt to effectuate service on each of the
named Defendants.

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Thus, upon reviewing the Verified Complaint, the exhibits thereto, and Plaintiff's Brief in
Support of its Motion for Temporary Restraining Order and Preliminary Injunction, the Court
finds that Plaintiff has satisfied both of the requirements of Rule 65(b)(l).

III.

Plaintiff Has Satisfied the Four-Part TRO Test
Beyond the requirements of Rule 65(b)(l) for issuing an ex parte TRO, a party seeking a

TRO must also establish (1) a likelihood of success on the merits, (2) that denial of injunctive relief
will result in irreparable harm, (3) that granting the temporary restraining order will not result in
irreparable harm to the defendants, and (4) that granting the TRO is in the public interest. See

Maldonado v. Houston, 157 F.3d 179, 184 (3d Cir. 1997). The requirements for a temporary
restraining order are the same as those for a preliminary injunction. Saluck v. Rosner, C.A. No. 985718, 2003 WL 559395, at *2 (E.D. Pa. Feb. 25, 2003). The Court finds that each of these four
elements is satisfied.
First, the Court agrees with the argument and reasoning of Plaintiff's Brief (see ECF No. 4
at 9-19) and finds that the facts of the Verified Complaint establish more than a reasonable
probability of success on the merits such that a TRO should issue. To establish a reasonable
probability of success on the merits such that a TRO should issue, a "plaintiff need only prove a
prima facie case, not a certainty that [it] will win." Highmark, Inc. v. UPMC Health Plan, Inc., 276
F.3d 160, 173 (3d Cir. 2001); see also Reilly v. City of Harrisburg, 858 F.3d 173, 179 (3d Cir. 2017)
("[The court does] not require at the preliminary stage a more-likely-than-not showing of success
on the merits because a likelihood of success on the merits does not mean more likely than not.")

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(internal quotation marks omitted). Plaintiff has met this burden with the allegations of the
Verified Complaint for its asserted causes of action. 1
Second, as discussed supra, the Court finds that the allegations of the Verified Complaint
demonstrate that injunctive relief is necessary to prevent immediate and irreparable harm to
Plaintiff. Namely, Plaintiff has, for the purposes of its Motion, sufficiently shown that, absent
immediate injunctive relief, Defendants are likely to dissipate and deplete their assets such that
Plaintiff is unable to collect on the judgment previously entered by this Court.2 Plaintiff has
alleged sufficiently that Defendants have previously performed evasive transfers to avoid the
collection of the judgment in this case and will likely once again engage in such evasive conduct
to dissipate assets and transfer them beyond the reach of Plaintiff such that Plaintiff's judgment
would go unsatisfied. See Gelfand v. Stone, 727 F. Supp. 98, 102 (S.D. N.Y. 1989) (stating that
injunctive relief is appropriate where the totality of circumstances indicate that the "past
predilection for deceptive and fraudulent practices is likely to continue."). Thus, the Court finds
that this significant threat of wrongful dissipation and transfer of assets to frustrate the collection
of Plaintiff's judgment is sufficient demonstration of a likelihood of irreparable harm if injunctive
relief is not granted.

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Moreover, even if Plaintiff failed to establish its likelihood of success on any of the nine counts of the Complaint,
Plaintiff need only demonstrate a likelihood of success on the merits of a single claim-not all nine of its claims-in
order to meet the requirements for the Court to grant a TRO. See CBM Ministries ofS. Cent. Pa., Inc. v. Pa. Dep 't
o/Transp., Civ. A. No. 1: I 5-cv-2147, 2015 WL 7755666, at *5 n.2 (M.D. Pa. Dec. 2, 2015) ("[Plaintiff] need only
demonstrate a reasonable likelihood of success on the merits of one claim."); Newlife Homecare Inc. v. Express
Scripts, Inc., No. 3:07-cv-76 I, 2007 WL 1314861, at *8-*9 (M.D. Pa. May 4, 2007) (granting preliminary injunction
based on Plaintiff demonstrating the likelihood of success on only some of the claims).
2
The Court notes that the present grant of a TRO is distinguishable from the situation in Grupo Mexicano de
Desarrollo, SA. v. Alliance bond Fund, Inc., 527 U.S. 308 (I 999) because, unlike in Grupo-in which the plaintiff
sought a pre-judgment asset freeze and the plaintiff had no lien or interest in the assets in question-the present case
features an existing judgment in which Plaintiff has a clear interest.

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Third, the Court finds that the balance of harms clearly and strongly weighs in favor of
Plaintiff. Defendants will not be harmed in any significant manner by the requested TRO.
Defendants are enjoined only from asset transfers outside the ordinary course of business.
Furthermore, if Defendants seek such a transfer, they may petition the Court to seek
authorization. In contrast, if the Court denies Plaintiff's Motion, they may likely never be able to
collect their two-year-old, multimillion-dollar judgment against Defendants.

See Berger v.

Weinstein, Civ. A. No. 98-5861, 2016 WL 1359459, at *8 (E.D. Pa. Apr. 6, 2016) ("The balance of the
harms weighs in favor of granting an injunction. It has been years since the judgment was entered
and Judgment Creditors have yet to see a dime. Despite [the defendant's] cries of poverty, the
injunction that the Court will enter is not so broad as to place her family in financial peril."). In
sum, Defendant's lawful and proper business and livelihood are scarcely harmed by the grant of
TRO, but Plaintiff could likely lose upwards of $5.4 million in the form of an unsatisfied
judgment.
Fourth, the grant of TRO in this case is clearly in the public interest. "The public has an
interest in the enforcement of judgments." State Farm Mut. Auto Ins. Co. v. Am. Rehab & Physical

Therapy, Inc., 376 F. App'x 182, 184 (3d Cir. 2010). "The public interest will be furthered if
judgment debtors are prohibited from frustrating the legal process, and judgment creditors are
protected from having to expend endless resources to collect on their judgments." Star Creations

Inv. Co. v. Alan Amron Dev., Inc., No. Civ. A. 95-4328, 1995 WL 495126, at *20 (E.D. Pa. Aug. 18,
1995). In the present case, Plaintiff made numerous efforts to collect on it judgment to no avail.
According to the well-pleaded allegations of the Verified Complaint, the Defendants have evaded
and will likely continue to evade Plaintiff's recovery efforts through improper transfers of assets

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to a complicated web of entities across the United States and Canada. The public interest certainly
does not condone such evasive and fraudulent activities. To the contrary, the public interest
strongly favors the enforcement of lawful judgments.
Therefore, the Court finds that all four elements are satisfied and necessitate the grant of
a TRO in favor of Plaintiff.

IV.

An Asset Freeze as to Transfers Outside the Ordinary Course of Business is an
Appropriate and Narrow Restriction
The Court's TRO shall freeze Defendants' assets except to allow for the operation of the

company /corporation Defendants in the ordinary course of business and the payment of bills and
ordinary living expenses by the individual Defendants.

This asset freeze is appropriate to

preserve the status quo and prevent the dissipation and diversion of assets. See SEC v. Forte, 598
F. Supp. 2d 689. 692 (E.D. Pa. 2009) (quoting SEC v. Infinity Grp. Co., 212 F.3d 180, 197 (3d Cir.
2000)); Johnson v. Couturier, 572 F.3d 1067, 1085 (9th Cir. 2009) ("Such an individual is presumably
more than capable of placing assets in his personal possession beyond the reach of a judgment.
Accordingly, [defendant's] own prior conduct establishes a likelihood that in the absence of an
asset freeze and accounting, Plaintiffs will not be able to recover the improperly diverted funds.").
This TRO prevents Defendants from funneling their assets through various entities to
avoid collection of judgment by Plaintiff, as the Verified Complaint alleges Defendants have done
previously.

V.

The Court Denies Plaintiff's Request for a Bi-Weekly Accounting at This Time
The Court denies Plaintiff's request for an order requiring Defendants to provide the

Court and Plaintiff with a bi-weekly accounting of expenses paid in the ordinary course of

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business or ordinary use to pay house expenses. This requirement would presumably require
Defendants to incur at least some expenditure of time and money. Moreover, given the expedited
nature of these proceedings, the pendency of the preliminary injunction hearing, and the Court's
subsequent decision regarding Plaintiff's request for a preliminary injunction, the Court does not
find an order requiring bi-weekly accounting in a TRO that may not exceed 14 days (unless
extended for an additional period up to a maximum of 14 days) to be practical. See Fed. R. Civ.
P. 65(b)(2).

However, the Court will entertain argument on this issue at the preliminary

injunction hearing and in regard to the Court's decision regarding a preliminary injunction.

VI.

Nominal Bond is Appropriate Security for this TRO
Defendants will suffer little, if any, damages if this TRO was entered wrongfully.

Defendants may still operate in the ordinary course of business. Furthermore, Defendants must
simply seek Court approval before making transfers of assets outside the ordinary course of
business. Thus, pursuant to Rule 65(c), the Court will require only a nominal bond of $100. See
Fed. R. Civ. P. 65(c); N. Pa. Legal Servs., Inc. v. Lackawanna Cnty., 513 F. Supp. 678, 685-86 (M.D. Pa.
1981) (requiring nominal bond of $100); Brookins v. Bonnell, 362 F. Supp. 379, 380-81 (E.D. Pa. 1973)
(requiring no bond).

VII.

Conclusion
The Court is satisfied that Defendants will likely seek to dissipate their assets in an effort

to perpetually avoid the satisfaction of Plaintiff's two-year-old, multimillion-dollar judgment
unless the Court enters a TRO.
With the exception of their request for bi-weekly accountings, Plaintiffs have established
all of the requirements of Rule 65 and the relevant case law. Consequently, with the exception of

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their request for bi-weekly accountings Plaintiff Covertech Fabricating, Inc.'s Motion for
Temporary Restraining Order and Preliminary Injunction (ECF No. 3) is GRANTED. Plaintiff's
request for bi-weekly accountings is currently DENIED, but may be raised at later proceedings.
A corresponding Order follows.

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IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF PENNSYLVANIA
COVERTECH FABRICATING, INC.,

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Case No. 3:17-cv-196

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Plaintiffs,

JUDGE KIM R. GIBSON

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TVM BUILDING PRODUCTS, INC.; TVM
INDUSTRIES, INC.; TVM FOAM SYSTEMS, INC.;
TVM INSULATION, INC.; TVM SEALANTS,
INC.; TVM MANUFACTURING, INC.; TVM
HOLDINGS USA, INC.; TVM HOLDINGS, INC.;
TVM CANADA, INC.; MITEX INTERNATIONAL,
INC.; MITEX BUILDING PRODUCTS, LLC;
MITEX FOAM SYSTEMS, LLC; MITEX
MANUFACTURING, LLC; MITEX GROUP, INC.,
MICHAEL BOULDING, SEAN BOULDING, and
WILLIAM TROTTERS,

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Defendants.

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ORDER

NOW, this 26th day of October 2017 at __
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___pr-·=m=·· upon consideration of
Plaintiff Covertech Fabricating, Inc.' s Motion for Temporary Restraining Order and Preliminary
Injunction (ECF No. 3) and for the reasons and findings set forth in the Memorandum Opinion
accompanying this Order, it is ORDERED that Plaintiff Covertech Fabricating, Inc.'s Motion for
Temporary Restraining Order and Preliminary Injunction (ECF No. 3) is GRANTED IN PART
and DENIED IN PART.
The Court finds that, pursuant to Federal Rule of Civil Procedure 65(b)(l), Plaintiff has
provided (1) specific facts in its Verified Complaint to show that immediate and irreparable harm
will result to Plaintiff before the adverse party can be heard in opposition and (2) a written

certification of the efforts made to give notice and the reasons why notice should not be required.
The Court also finds that Plaintiff has demonstrated (1) a prima Jacie case of success on the merits
of its claims asserted in its Verified Complaint, (2) that Plaintiff will suffer immediate irreparable
harm if a TRO is not entered, (3) that Defendants will suffer, little if any, harm if a TRO is entered,
and (4) that a TRO is in the public interest. Accordingly, the Court HEREBY ORDERS:
(1) Defendants-along with their officers, directors, principals, agents, representatives,
servants, employees, affiliates, successors, or assigns, and any person or entity acting
on their behalf, in concert with, or in participation with them-are TEMPORARILY

RESTRAINED from transferring, assigning, conveying, encumbering, pledging, or
otherwise disposing of any interest in real, personal, or intangible property, outside
the ordinary course of business or ordinary use to pay household or other living
expenses without approval of this Court.
(2) A hearing on Plaintiff's request for a preliminary injunction will be conducted on
November 8, 2017 at 9:30 a.m. in Courtroom A of the United States Courthouse, 319

Washington Street, Johnstown, PA 15901.
(3) Defendants shall file their opposition briefs, if any, no later than November 3, 2017 at
5:00 p.m.

(4) Plaintiff shall post bond of $100.
(5) Plaintiff shall serve Defendants with Plaintiff's Motion for Temporary Restraining
Order and Preliminary Injunction (ECF No. 3), Plaintiff's Brief in Support thereof (ECF
No. 4), Plaintiff's Verified Complaint (ECF No. 1), and this Memorandum Opinion on
or before October 30, 2017.

(6) This Order expires on November 8, 2017 at 11:59 p.m., unless before that time, the
Court, for good cause, extends it.

See Fed. R. Civ. P. 65(b)(2). Additionally, if

Defendants place $5,452,397 in escrow or otherwise post adequate security in favor of
Plaintiff and provides proof thereof to Plaintiff and the Court, this Order shall be
dissolved by order of court.

BY THE COURT:

KIM R. GIBSON
UNITED STATES DISTRICT JUDGE