Hekking et al v. Hekking et al

Filing 94

MEMORANDUM AND ORDER adopting (in part) the Magistrate Judge's 50 Report and Recommendations with respect to the following: the default against Craig Hekking is reinstated; he is ordered to provide a complete and full accounting in connection with the discharge of his fiduciary duties as personal representative of the Estate and as trustee of the Trust ON OR BEFORE 12:00 P.M. EDT JULY 10, 2015; he is enjoined from acting as the personal representative of the Estate and as trustee of the Trust, as well as from taking any further action with respect to property that belongs to the Estate, the Trust, the Cego Foundation, or the Winter Group; he is ordered to execute all documents necessary to remove himself as personal representative o f the Estate and as trustee of the Trust. -- Defendant Craig Hekking's 51 Motion for Extension of Time to Complete Discovery is DENIED. -- Defendant Craig Hekking's 53 Motion to Dismiss & Motion for Joinder is DENIED. -- Defendant Mol ly Hekking's 54 Motion to Dismiss is DENIED. -- Defendant Craig Hekking's 55 Motion to Compel Initial Disclosures from all Plaintiffs is DENIED. -- So Ordered by Judge Mary M. Lisi on 6/11/2015. (The Court will schedule a hearing on July 16, 2015 at 11:00 a.m. to ensure compliance with the Court's orders.) (Duhamel, John)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
DARREN MALLOY HEKKING & SHAUN EGAN
HEKKING, on behalf of himself and
on behalf of C.H. and B.H.,
Plaintiffs,
v.

C.A. No. 14-295-ML

CRAIG ANTONY HEKKING &
MOLLY DURANT HEKKING,
Defendants.
MEMORANDUM AND ORDER
This

case

involves

a

bitter

family

dispute

over

a

considerable inheritance. The eldest of three brothers, Craig
Antony Hekking (“Craig H.”), was appointed as executor of their
late father’s and stepmother’s estates (the “Estate”) and as the
trustee of a separate trust established by the stepmother (the
“Trust”). The plaintiffs, Darren Malloy Hekking (“Darren H.”) and
Shaun

Egan

children’s

Hekking
behalf

(“Shaun

H.”),
with

(together

both
Darren

on

his

and

own

and

his

Shaun

H.,

the

“Plaintiffs”), have alleged that Craig H., with the assistance of
his wife, Molly Durant Hekking (“Molly H.,” together with Craig
H., the

“Defendants”),

has

converted

the

multi-million-dollar

Estate—which was to be shared equally by his brothers and a
portion of which was intended to benefit Craig’s and Shaun’s
children—to his own benefit.
The

matters

before

the

Court
1

are

(1)

Craig

Hekking’s

objection (Dkt. No. 58) to the November 25, 2014 Report and
Recommendation (“R&R”) (Dkt. No. 50), in which Magistrate Judge
Sullivan recommends that the previously imposed default against
Craig H. be reinstated and that he be enjoined from serving as
personal representative of the Estate and trustee of the Trust;
(2) Craig H.’s motion for extension of time to complete discovery
(Dkt. No. 51); (3) Craig H.’s motion to dismiss for lack of
jurisdiction or, in the alternative, for joinder (Dkt. No. 53);
(4) Craig H.’s motion to compel Rule 26(a) initial disclosures
from

all

Plaintiffs;

and

(5)

Molly

H.’s

motion

to

join

indispensable parties and to dismiss for lack of subject matter
jurisdiction (Dkt. No. 54).
I.

First Default Imposed and Vacated

Default

against

the

Defendants

was

first

entered

on

a

procedural basis only: they had failed to file a timely answer or
other response to the June 27, 2014 complaint (the “Complaint”).
Only

after

the

Plaintiffs

sought

an

entry

of

default

and

a

preliminary injunction against the Defendants to preclude them
from disposing or concealing property of the Estate, did the
Defendants enter the litigation by seeking to vacate the default.
The Defendants, who initially had engaged counsel to represent
them jointly, asserted that they had never been served with the
summons and Complaint (Dkt. No. 15-1). In support, they submitted
2

a sworn affidavit by Craig H., in which he asserted that he and
his wife had not been at their residence on the day that service
had purportedly been effected and that they had been unaware of
the lawsuit until they received Plaintiffs’ related motions in
the mail (Dkt. No. 15-2).
On September 17, 2014, following an evidentiary hearing in
which Craig H.’s version of the events was conclusively disproved
by

a

meticulous

service

processor

and

a

highly

qualified

handwriting expert, this Court issued a lengthy Memorandum and
Order (Dkt.

No.

28).

Although

the

Court determined

that the

default in this case had been willful, there was no evidence that
established that the Defendants’ delay had been done to gain an
advantage or that the Plaintiffs had been unduly prejudiced that
early in the litigation. Accordingly, the Court decided to vacate
the default, but only with an express caveat: in the event it
were to become apparent that the Defendants were using delay to
gain

a

litigation

or

practical

advantage,

the

Court

would

reconsider its ruling and reinstate the Default. Memorandum and
Order at 18 (Dkt. No. 28). In light of Craig H.’s blatantly
perjurious conduct at the evidentiary hearing, the Court also
required the Defendants to reimburse the Plaintiffs for counsel
fees and other expenses in the amount of $30,777.93, such sums to

3

be paid from the Defendants’1 personal assets, not the Estate.
October 2, 2014 Order (Dkt. No. 34).
II.

Discovery Proceedings and Court Orders

In the interim, following a pretrial conference on August
15,

2014,

in

which

all

parties

were

represented,

the

Court

granted the Plaintiffs’ request for expedited discovery. Text
Order 08/15/14. On September 25, 2014, Magistrate Judge Sullivan
issued

an

order

produce, by

(Dkt.

September

No.

32)2

27, 2014,

requiring
a

list of

the

Defendants

various

to

discovery

materials, including copies of their personal tax returns and
bank statements from domestic and international accounts. All
other materials requested in discovery were to be produced by
October 5, 2014. The Plaintiffs were directed to advise the Court
by October 7, 2014 whether the Defendants had complied with the
Magistrate Judge’s order.
On September 29, 2014, just prior to a scheduled hearing
related to the Plaintiffs’ motion for a preliminary injunction

1

The Defendants, by letter dated September 25, 2014, advised
the Court that they would not be filing any formal response or
opposition to the Plaintiffs’ Application for Fees and Costs and
that they deferred to the Court with respect to the matter.
2

The order was prompted by the Plaintiffs’ motion to compel
production of previously expedited discovery and for sanctions
(Dkt. No. 25) and the Defendants’ motion for enlargement of time to
Plaintiffs’ first request for the production of documents (Dkt. No.
22).
4

(Dkt.

No.

11),

the

parties

submitted

a

consent

order

(the

“Consent Order”) (Dkt. No. 33), pursuant to which the Defendants
both agreed to refrain from using or converting any of the Estate
property. Under the terms of the Consent Order, the Defendants
were permitted to use up to $9,000 per month for living expenses,
provided that such sums originated from a source other than the
Estate

and

that

the

Defendants

submitted

monthly

operating

statements showing their expenses from the preceding month.

In

addition, the Defendants (both of whom signed the Consent Order)
agreed to identify all Estate property and Craig H. agreed to
execute all necessary documents to release funds in a known bank
account in Hamburg, Germany, for the benefit of the Plaintiffs.
On October 7, 2014, the Plaintiffs submitted a status report
(Dkt. No. 36) detailing how the Defendants had failed to comply
with most aspects of the September 29, 2014 Consent Order. The
Plaintiffs

also

investigation

described

and

third

how,

party

through

their

subpoenas,

own

they

had

independent
discovered

extensive banking information that the Defendants were obligated,
but had failed, to provide.
On

November

3,

2014,

the

Plaintiffs

filed

a

further

memorandum in which they advised the Court of the Defendants’
continuing violation of prior Court orders (Dkt. No. 41). Again,
the Plaintiffs set forth in great detail how the Defendants had
5

continued

to

dissipate

Estate

property.

Specifically,

the

Plaintiffs noted that, based on the Plaintiffs’ own discovery,
the Defendants had spent or withdrawn $195,000 since commencement
of

the

litigation

in

July

2014

and

had

spent

or

withdrawn

$406,000 from the same bank since February 2014, when Craig H.
was informed that the Plaintiffs were investigating his actions
as personal representative of the Estate. The Plaintiffs also
pointed

out

that

they

had

yet

to

be

reimbursed

$30,777

in

attorney’s fees and costs, payment of which had been due by
October 10, 2014.
On November 12, 2014, Magistrate Judge Sullivan conducted a
hearing

on

Plaintiffs’

motion

for

expedited

discovery

and

sanctions (Dkt. No. 25). Both Defendants were present and newly
engaged counsel for Craig H. (who, just prior to the second day
of his deposition, had begun to invoke his rights under the Fifth
Amendment) advised the Court that Craig H. would agree to being
removed as administrator/executor of the Estate. Transcript of
11/12/14 hearing at 10:2-14.
On November 25, 2014, the Magistrate Judge issued an R&R in
which she recommended, inter alia, that this Court reinstate the
default against Craig H.; that he be enjoined from acting as a
personal representative of the Estate or trustee of the Trust;
and

that

he

be

directed

to

execute
6

all

documents

to

remove

himself from those positions (Dkt. No. 50).
Shortly after issuance of the R&R, the Defendants, now both
represented by separate counsel, filed a flurry of motions:
1.

Craig H.’s motion to reopen discovery and set certain
deadlines (Dkt. No. 51);

2.

Craig H.’s motion to dismiss for lack of jurisdiction,
based on the “probate exception”(Dkt. No. 52);

3.

Craig H.’s motion to dismiss for failure to name his
own four children as plaintiffs and to include various
groups, trusts, and foundations in which Estate funds
are or were kept (Dkt. No. 53);

4.

Craig H.’s motion to compel Rule 26(a) disclosures and
for sanctions (Dkt. No. 55);

5.

Molly H.’s motion to join indispensable parties and to
dismiss for lack of jurisdiction (related to Craig’s
two children with Molly H., who reside in Rhode Island,
and his two children from a prior marriage, who reside
in Connecticut)(Dkt. No. 54).

In addition, Craig H. filed an objection (Dkt. No. 58) to
the November 25, 2014 R&R (Dkt. No. 50), to which the Plaintiffs
filed a detailed response (Dkt. No. 72). Notably, Craig did not
address his complete failure to comply with various Court orders
or with the Consent Order. Instead, he maintained that imposition
7

of default would be inappropriate and unjust because his children
were

not

included

as

plaintiffs;

he

and

his

wife

were

not

effectively represented; the Court had failed to hold a Rule 16
hearing;

and

the

Defendants

had

failed

to

make

Rule

26

disclosures. As such, any substantive objections to the R&R were
waived. See e.g., Santiago v. Canon U.S.A., Inc., 138 F.3d 1, 4
(1st

Cir.1998)(argument

not

raised

in

an

objection

to

a

magistrate judge's report and recommendation is waived).
On March 17, 2015, following (1) a further hearing on the
Plaintiffs’ motion to compel Court ordered expedited discovery
(Dkt. No. 25) and on Molly H.’s motion for a protective order
related to written deposition questions (Dkt. No. 76), and (2) a
lengthy evidentiary hearing on January 26, 2015, at which Molly
H. was questioned at length, the Magistrate Judge issued a second
R&R (Dkt. No. 85). In finding that much of Molly H.’s failure to
comply with Court orders was due to inability, the Magistrate
Judge declined to recommend default or any lesser sanctions.
Plaintiffs

objected

to

this

R&R,

maintaining

that

Molly

H.

willfully violated court orders and perjured herself. (Dkt. No.
90).
On April 30, 2015, this Court conducted a hearing3 on Craig

3

Of the Defendants, only Molly H. was present. Both Defendants
were represented by their respective counsel.
8

and Molly H.’s assorted motions, Craig H.’s objection to the
November 25, 2014 R&R, in which the Magistrate Judge recommended
his default, and the Plaintiffs’ objection to the March 17, 2015
R&R, in which the Magistrate Judge declined to impose a similar
sanction on Molly H. At the conclusion of the hearing, the Court
denied

Craig

H.’s

motion

to

dismiss

based

on

the

probate

exception (Dkt. No. 52), and it adopted the March 17, 2015 R&R
with respect to Molly H. The Court took the remaining motions
(Dkt. Nos. 51, 53, 54, 55) and Craig H.’s objection (Dkt. No. 58)
to the November 25, 2014 R&R (Dkt. No. 50) under advisement.
III. Defendants’ Motions to Dismiss for Failure to Join
Indispensable Parties(Dkt. Nos. 53, 54)
Both Defendants contend that Craig H.’s four minor children
(two with Molly H., who reside with the Defendants in Rhode
Island, and two from a prior marriage, who reside with their
mother in Connecticut) are necessary and indispensable parties
who should have been included in this litigation as plaintiffs.4
However, inclusion of Craig and Molly H.’s children as plaintiffs
is not feasible because they are non-diverse to the Defendants.
(Similarly,

inclusion

of

Craig

H.’s

children

from

a

former

4

In addition, Craig H. suggests that the Plaintiffs failed to
include various entities in which Estate assets were held. However,
that point is merely alluded to and the gravamen of both
Defendants’ motions is that Craig H.’s children must be included in
this litigation, but that such inclusion would break diversity.
9

marriage as defendants is not feasible because they are nondiverse to Plaintiff Darren H. In addition, Molly H. asserts that
this Court is without personal jurisdiction over the children who
reside in Connecticut). At the April 30, 2015 hearing, counsel
for Craig H. took the position that Craig H.’s minor children
should sue their parents5

because the children’s interests were

not

litigation.

represented

in

this

He

agreed

that

such

an

inclusion would break diversity, but asserted that this Court
would retain jurisdiction with respect to the sanctions entered
against Craig H.
Molly

H.’s

counsel

suggested

that

Craig

H.’s

children’s

interests were unrepresented, in part, because their position was
not identical to their cousins, Shaun H.’s children, with respect
to

certain

monies

intended

for

educational

benefits.6

Specifically, the parties appear to be in disagreement as to
whether the benefits of the educational trust (which held more
than $1 million in assets but, at this time, appears to have been

5

With respect to Craig H.’s two minor children from a previous
marriage, the suggestion is that they should sue their father and
his current wife.
6

The Court notes that this argument was offered, for the first
time, at the April 30, 2015 hearing and was diametrically opposed
to Molly H.’s prior position that Craig H.’s children “are
identically situated to Shaun Hekking’s children.”
Molly H.’s
motion to dismiss for failure to join indispensable parties at 5
(Dkt. No. 54).
10

completed depleted) should be divided per stirpes or per capita.
As

was

established

at

the

hearing,

however,

Plaintiffs

are

willing to concede that the distribution of those assets (should
they ever be recovered) should occur on an equal basis for all
children.
The mandatory joinder of parties is governed by Rule 19 of
the Federal Rules of Civil Procedure. The aim of Rule 19 is “to
protect the interests of parties who are not yet involved in
ongoing litigation.” Jiminez v. Rodriguez-Pagan, 597 F.3d 18, 25
(1st Cir. 2010). When feasible, Rule 19 (a) provides for joinder
of required parties, Fed. R. Civ. P. 19(a); however, when joinder
of

a

required

party

is

not

feasible

and

that

party

is

indispensable, Rule 19(b) provides for dismissal of suits. Fed.
R. Civ. P. 19(a), (b). Bacardi Intern. Ltd. v. V. Suarez & Co.,
Inc., 719 F.3d 1, 9 (1st Cir. 2013).
To

determine

whether

the

interests

of

that

party

are

critical to the litigation, the Court must engage in a two-part
analysis.

Id.

First,

whether

a

party

is

“necessary”7

to

the

action is determined by considering the criteria set out in Rule
7

“Necessary” in this context is “used as a term of art and
signifies desirability rather than actual necessity.”Jiminez v.
Rodriguez-Pagan, 597 F.3d at 25 n.3. “Parties are not truly
necessary in the vernacular sense of the word ‘unless and until
they satisfy the terms of Rule 19(b).’” Id. (quoting Confederated
Tribes of Chehalis Indian Reservation v. Lujan, 928 F.2d 1496, 1501
n. 1 (9th Cir.1991)).
11

19(a). A party must be joined if feasible if (A) in that person's
absence, the court cannot accord complete relief among existing
parties; or (B) that person claims an interest relating to the
subject of the action and is so situated that disposing of the
action in the person's absence may: (i) as a practical matter
impair or impede the person's ability to protect the interest; or
(ii) leave an existing party subject to a substantial risk of
incurring double, multiple, or otherwise inconsistent obligations
because of the interest. Fed. R. Civ. P. 19(a).
Secondly, if the party is deemed “necessary,” but joinder
would deprive the court of subject-matter jurisdiction, the Court
must determine whether, applying the criteria set forth in Rule
19(b), the party is “indispensable.” Jiminez v. Rodriguez-Pagan,
597 F.3d at 25. Those factors include “(1) to what extent a
judgment rendered in the person's absence might be prejudicial to
the person or those already parties; (2) the extent to which, by
protective provisions in the judgment, by the shaping of relief,
or other measures, the prejudice can be lessened or avoided; (3)
whether a

judgment

rendered

in

the

person's

absence

will

be

adequate; (4) whether the plaintiff will have an adequate remedy
if the action is dismissed for nonjoinder.” B. Fernandez & HNOS,
Inc. v. Kellogg USA, Inc., 516 F.3d 18, 23 (1st Cir.2008). The
factors are not exclusive and “a court may take into account
12

other considerations in determining whether or not to proceed
without the absentee as long as they are relevant to the question
of whether to proceed in “‘equity and good conscience.’” Id. at
23 (quoting In re Cambridge Biotech Corp., 186 F.3d 1356, 1369
(Fed.Cir.1999)).
The First Circuit has explained that the Rule “calls for
courts to make pragmatic, practical judgments that are heavily
influenced by the facts of each case.” Bacardi Intern. Ltd. v. V.
Suarez & Co., Inc., 719 F.3d at 9 (citing Picciotto v. Cont'l
Cas. Co., 512 F.3d 9, 22 n. 19 (1st Cir.2008)); In re Olympic
Mills Corp., 477 F.3d 1, 9 (1st Cir. 2007)(quoting Travelers
Indem. Co. v. Dingwell, 884 F.2d 629, 635 (1st Cir.1989) (quoting
Advisory Committee Notes)).
Neither

Molly

nor

Craig

H.

have

explained

why,

in

the

absence of Craig H.’s children from this litigation, this Court
could not grant complete relief as to the existing parties. The
Plaintiffs seek to recover monetary damages from the Defendants
for Estate assets which, the Plaintiffs allege, the Defendants
have converted and used for their own benefit. The portion of the
Estate related to the six grandchildren in this family is the
Cego Foundation, a trust which was established for the benefit of
their education. As it appears, the assets of that $1 million
trust,

held

by

the

Winter

Group,
13

have

now

been

entirely

dissipated. However, even if the Plaintiffs were able to recover
some or all of those assets, there is nothing to indicate that
they

seek

to

exclude

the

non-party

children

from

the

distribution. Rather, the Plaintiffs claim only a share of those
funds on behalf of the beneficiaries included in this litigation,
as provided for in the trust documents. If, as the Defendants
assert, there is a dispute as to the exact allocation of those
trust funds,8 the Court would be able to fashion an appropriate
remedy if or when any of those funds are recovered. There is
nothing to suggest that, if such recovery were to occur, the
Defendants’ interests in the matter would diverge from that of
the non-party children. Moreover, the Plaintiffs have already
indicated a willingness to waive their rights to a more favorable
allocation for Shaun’s children.
As to the inclusion of Craig H.’s children as plaintiffs in
this litigation, the Defendants have not established how the
resolution of this case in their children’s absence would impede
the

children’s

ability

to

protect

their

interests.

The

Plaintiffs’ claims are limited to seeking damages from the two
8

The parties appear to disagree whether the educational funds
are to be allocated per capita, giving each grandchild one sixth of
the assets, or per stirpes, giving Craig H.’s four children a share
in half of the assets and Shaun’s children a share in the other
half. Given that the account was undisputedly drained and
liquidated by Craig H., that disagreement is of little consequence
at this time.
14

named Defendants, not their children.

Neither Craig nor Molly H.

have previously sought to add the children in this litigation in
order to protect their rights, nor have the Defendants claimed,
on their children’s behalf, an interest in the Estate. Instead,
the Defendants now suggest that the children are required to be
joined, in an undisguised attempt to break diversity, deprive
this Court of subject-matter jurisdiction, and to have the case
dismissed, none of which would further those children’s interests
in recovering any assets of the educational trust. As to the
additional entities—which Craig H. now asserts are required to be
joined in this litigation—it is unclear, and Craig H. fails to
establish, what those entities’ interests may be and how their
inclusion in this case might protect such interests. What is
clear is that if those entities were to be joined, it would be
nearly impossible for the Plaintiffs to find a forum where all
parties would be subject to the tribunal’s jurisdiction.
With regard to an existing party’s “substantial risk of
incurring

double,

obligations,”
suggestions.

the
Molly

multiple,

or

Defendants
H.

asserts

otherwise

inconsistent

equally

hypothetical

offer
that

if

the

educational

trust

assets are divided 50-50 between Shaun and Craig H.’s children,
the non-party beneficiaries could later claim two thirds of those

15

assets, leaving the parties as well as the trust entities9 with
inconsistent obligations.
As the Plaintiffs have pointed out in their memorandum,
there

is

obligations”

a

significant
and

distinction

“inconsistent

between

“inconsistent

adjudications or

results.” The

First Circuit explained in Delgado v. Plaza Las Americas, Inc.,
139 F.3d 1 (1st Cir.1998) (per curiam), that “‘[i]nconsistent
obligations' are not...the same as inconsistent adjudications or
results,” because “[i]nconsistent obligations occur when a party
is unable to comply with one court's order without breaching
another court's order concerning the same incident.” Id. at 3.
“[I]nconsistent adjudications or results occur when a party wins
on a claim in one forum and loses on another claim from the same
incident in another forum. Id. See Bacardi Intern. Ltd. v. V.
Suarez & Co., Inc., 719 F.3d at 12. Accordingly, “a risk that a
defendant who has successfully defended against a party may be
found liable to another party in a subsequent action arising from
the same incident—i.e., a risk of inconsistent adjudications or
results—does not necessitate joinder of all of the parties into
one action pursuant to Fed. R. Civ. P. 19(a).” Delgado v. Plaza

9

Because Rule 19 only addresses “existing parties” in this
respect, any “inconsistent obligations” of the Cego Trust and/or
the Winter Group is of no concern in this determination.
16

Las Americas, Inc., 139 F.3d at 4.
In

sum,

the

Court

concludes

that

neither

Craig

H.’s

children, nor any of the entities (whose limited role in these
proceedings appears to involve holding assets which have now been
depleted) are required to join in this litigation. Even if the
Court were to determine that Craig H.’s children should be joined
in this litigation, at least two of them (arguably identically
positioned

as

the

other

two)

are

Plaintiffs

because

they

reside

in

not
the

feasible
same

to

state

join
as

as
the

Defendants and their addition would destroy complete diversity of
citizenship. The matter is less clear with respect to Craig H.’s
children who reside in Connecticut and any of the other entities,
which,

Craig

H.

argues,

are

necessary

to

this

litigation.

Although this Court concludes that none of those parties are
required to be joined, it is noted that there has been no attempt
by those parties to enter this litigation.
Having presided over this case since its inception, and
after considering the parties’ asserted positions in light of the
factors set forth in Rule 19(b), the Court concludes that “in
equity and good conscience, the action should proceed among the
existing parties.” Fed. R. Civ. P. 19(b). As already noted, the
Defendants fail to establish how an adjudication of this case in
the absence of Craig H.’s children as plaintiffs will prejudice
17

either the existing parties or the children themselves. To the
extent that there should be any prejudice, the Court can fashion
a

remedy

to

educational

ensure
trust

an

adequate

assets

be

judgment.

recovered,

Should
the

any

of

the

Defendants

can

certainly pursue their children’s interest, particularly since
those interests will be aligned with their own: to maximize their
children’s recovery of those assets.
Moreover, if this case were to be dismissed for non-joinder,
it is more than uncertain whether there would be an adequate
remedy for either the Plaintiffs or for Craig H.’s four children,
whose interests the Defendants purport to represent in their
motions. The Defendants suggest that the Plaintiffs could re-open
Florida probate proceedings or bring suit in Rhode Island state
court. However, it is not established that either court could
provide a complete adjudication of Plaintiffs’ claims in this
matter, nor is it likely that either court would have personal
jurisdiction
Defendants

over

seek

to

all
join

the
in

existing
this

parties

litigation.

or

those

For

all

the
those

reasons, the Defendants’ motions to dismiss this case for failure
to join indispensable parties are DENIED.
IV.

Reinstatement of Default against Craig H.
On September 17, 2014, this Court, expressing grave concerns

about the established willfulness of Craig H.’s default, and
18

notwithstanding his blatantly perjurious testimony, set aside the
default

entered

against

the

Defendants.

The

Defendants

were

advised, however, that if it were proven that they had used
delaying tactics to gain a litigation or practical advantage, the
Court would reconsider its ruling and reinstate the default. As
set forth in great detail in the November 25, 2014 R&R, and
unchallenged by Craig H. in his objection to the R&R, the facts
make abundantly clear that reinstatement of the default, although
an extreme sanction, is entirely appropriate at this time.
While there is considerable doubt as to the truthworthiness
of

Molly H.’s explanations as to her failure to comply with

various court orders, the Magistrate Judge made a credibility
determination and deemed Molly H.’s conduct materially different
from that of her husband. There can be no doubt, however, as to
Craig H.’s conduct in attempting to delay this litigation and
obfuscate the facts in this case. It is undisputed that the
Defendants continued to dissipate the Estate assets after this
Court entered an expedited discovery order and that Craig H.
provided incomplete, false, and deceptive responses in the course
of discovery. Despite repeated promises by Craig H. to provide
tax

returns,

financial

documents,

and

other

pertinent

information, nothing was ever produced. After initially agreeing
to be deposed and participating in one day of deposition, Craig
19

H.

then

invoked

incrimination

and

his

Fifth

refused

Amendment
to

answer

right
any

against
more

self-

questions.

Meanwhile, the Plaintiffs continued, at great effort and expense,
to discover how Craig H. had systematically drained the assets of
the Estate, while spending vast amounts at a local casino and on
luxury vacations.
Over

the

course

of

this

litigation,

Craig

H.

has

deliberately violated a number of explicit Court orders, all of
which has resulted in much misinformation and delay in the case,
leading to considerable prejudice and expense for the Plaintiffs.
As set forth in painstaking detail in the November 25, 2014 R&R,
Craig

H.

discovery

violated
by

the

failing

August

to

15,

provide

2014

genuine

Order

for

expedited

information

and

by

providing false, incomplete, and misleading information. At the
same time, Craig H. continued to drain various Estate accounts,
including the Winter Group account, which was established for the
education of his and his brother’s children. Likewise, Craig H.
violated the September 25, 2014 Discovery Order by refusing to
produce financial documents which, based on the discovery efforts
by Plaintiffs, would have disclosed the withdrawals of large sums
from various accounts, the existence of which Craig H. had kept
hidden. Neither Defendant appeared at an October 14, 2014 hearing
before the Magistrate Judge, although both had been ordered to be
20

present.

This

Court’s

October

2,

2014

Order

for

payment

of

$30,777 in sanctions by October 10, 2014 was not complied with
until January 2015, at which time Molly H. paid $22,500; the rest
remains unpaid. Finally, Craig H. has refused to comply with the
terms of the September 29, 2014 Consent Order by failing to
execute documents that would allow the Plaintiffs to recover
funds from the Hamburg account, and by failing to produce other
financial

information.

Given

that

neither

Defendant

has

been

gainfully employed since Craig H.’s father and stepmother died,
it is unclear from which source they are drawing the $9,000 per
month for expenditures permitted under the Order. From discovery
conducted by the Plaintiffs, it also appears that the Defendants
continue to spend money on non-essential items, e.g. trunk shows
at

luxury

hotels,

without

noting

such

expenditures

on

the

required monthly operating statements.
In sum, Craig H.’s conduct since this Court vacated the
default against the Defendants in September 2014 makes abundantly
clear that his continuous violations of Court orders were done
willfully, in bad faith, and with the intent to delay this case
indefinitely

and

to

frustrate

the

Plaintiffs’

attempts

to

discover the extent of Craig H.’s raiding of Estate assets and
his hiding the whereabouts of any remaining funds. For those
reasons,

the

Court

accepts

the
21

November

25,

2014

R&R

and

reinstates the default against Craig H. By entering this default,
the question of liability in Counts I - IV is resolved in favor
of

the

Plaintiffs;

with

respect

to

Counts

V

and

VI,

it

is

resolved in favor of the Plaintiffs as to Craig H.
VI. Craig H.’s Discovery Motions (Dkt. Nos. 51 and 55)
In light of this Court’s determination that default against
Craig H. is to be reinstated, no lengthy discussion regarding
Craig H.’s discovery motions is required. It is evident from the
record that these motions were only filed to further obstruct
discovery and to delay this litigation. Contrary to Craig H.’s
assertion, a Rule 16 conference (which is not mandatory under
Rule 16 of the Federal Rules of Civil Procedure) took place on
August 15, 2014. It is undisputed that Craig H. has offered
little, if any, material and/or truthful discovery information in
these proceedings and that the Plaintiffs have been forced to
engage in extensive non-party discovery to find documentation
that

Craig

H.

already

had

in

his

possession

but

refused

to

provide. It is also undisputed that the Plaintiffs have promptly
produced all such discovery materials to the Defendants as they
received them. Moreover, the reinstatement of default against
Craig H.
through

establishes
VI

of

the

his

liability

Complaint,

with

limiting

respect
any

to

Counts I

discovery

to

a

determination of damages. Accordingly, both motions (Dkt. Nos. 51
22

and 55) are DENIED.
To summarize the Court’s decision,
A.

the

R&R

is

adopted

with

respect

to

the

following

recommendations only10:
1.

the default against Craig H. is reinstated;

2.

Craig H. is herewith ordered to provide a complete
and

full

discharge

accounting
of

his

in

connection

fiduciary

duties

with

as

the

personal

representative of the Estate and as trustee of the
Trust on or before 12:00 p.m. EDT July 10, 2015;
3.

Craig H. is enjoined from acting as the personal
representative of the Estate and as trustee of the
Trust, as well as from taking any further action
with

respect

to

property

that

belongs

to

the

Estate, the Trust, the Cego Foundation, or the
Winter Group;
4.

Craig

H.

is

necessary

ordered

to

to

remove

execute
himself

all

documents

as

personal

representative of the Estate and as trustee of the
Trust.
B.

the

Defendants’

motions

to

dismiss

this

case

for

10

The Court declines to adopt the Magistrate Judge’s
recommendations re: partial final judgment, issuance of an order to
show cause, and the imposition of additional sanctions.
23

failure to join indispensable parties (Dkt. Nos. 53,
54) are DENIED.
C.

Craig H.’s motions for extension of time to complete
discovery

(Dkt.

No.

51)

and

to

compel

Rule

26(a)

initial disclosures from all Plaintiffs (Dkt. No. 55)
are DENIED.
In order to ensure compliance with this Court’s orders, the
Court will schedule a hearing on July 16, 2015 at 11:00 a.m., to
be attended by both Defendants and counsel for all parties, in
which Craig H., in the presence of the Court and all counsel,
shall

execute

all

necessary

personal representative

of

documents

the

Estate

to

remove

and as

himself

trustee

of

as
the

Trust. The Court puts Craig H. on notice that failure to comply
with the Court’s orders in this matter constitutes contempt of
Court and will result in further sanctions.

SO ORDERED.
/s/ Mary M. Lisi
Mary M. Lisi
United States District Judge
June 11, 2015

24