Orlowski et al v. Bates et al

Filing 503

ORDER granting 459 Motion to Continue the Prejudgment Attachment; denying 474 Motion for Relief from Attachment; finding as moot 476 Motion for Order to Show Cause; denying 477 Motion for Negative Inference; denying 497 Motion to Nullify Prejudgment Attachment and Motion for Sanctions. Signed by Judge Jon Phipps McCalla on 10/20/2015. (McCalla, Jon)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF TENNESSEE
WESTERN DIVISION

DAMIAN ORLOWSKI, et al.,

)
)
)
)
)
)
)
)
)
)
)
)

Plaintiffs on behalf of
themselves and others
similarly situated,

v.
LARRY BATES, et al.,
Defendants.

Case No. 2:11-cv-01396

________________________________________________________________
ORDER GRANTING PLAINTIFFS’ MOTION TO CONTINUE THE PREJUDGMENT
ATTACHMENT AND PRESERVE THE STATUS QUO; ORDER DENYING DEFENDANTS
ROBERT AND CHARLES BATES’ MOTION FOR RELIEF FROM ATTACHMENT;
ORDER DENYING PLAINTIFFS’ MOTION FOR NEGATIVE INFERENCE TO
ATTACH TO ALL DECLARATIONS OF THE FIFTH AMENDMENT MADE IN THESE
PROCEEDINGS; ORDER DENYING DEFENDANTS LARRY AND BARBARA BATES’
MOTION TO NULLIFY PREJUDGMENT ATTACHMENT AND MOTION FOR
SANCTIONS
________________________________________________________________
Before

the

Court

are

Plaintiffs’

Brief

in

Support

of

Continuing the Prejudgment Attachment and Preserving the Status
Quo (“Motion to Continue the Prejudgment Attachment and Preserve
the Status Quo”) 1 (ECF No. 459), filed August 25, 2015, and
Defendants

Robert

and

Charles

Bates’

Motion

for

Relief

from

Attachment, for the Return of Defendants’ Personal Property and
1

Plaintiffs classified this document as a motion in the electronic filing
system, but entitled it “Plaintiffs’ Brief in Support of Continuing the
Prejudgment Attachment and Preserving the Status Quo.” For clarification,
the Court restyles Plaintiffs’ Brief “Motion to Continue the Prejudgment
Attachment and Preserve the Status Quo.”

1

Information Seized by the Plaintiffs and/or Receiver, and for
Suppression of Evidence Seized in Violation of Attorney-Client
Privilege (“Motion for Relief from Attachment”) 2 (ECF No. 474),
filed September 1, 2015.
Also before the Court are Plaintiffs’ Motion for Negative
Inference to Attach to All Declarations of the Fifth Amendment
Made

in

these

Proceedings

(ECF

No.

477),

filed

September

1,

2015, and Defendants Larry and Barbara Bates’ Motion to Nullify
Prejudgment Attachment and Motion for Sanctions (ECF No. 497),
filed October 2, 2015.
For the reasons stated below, the Court GRANTS Plaintiffs’
Motion to Continue the Prejudgment Attachment and Preserve the
Status Quo; DENIES Defendants Charles and Robert Bates’ Motion
for

Relief

from

Attachment;

DENIES

Plaintiffs’

Motion

for

Negative Inference to Attach to All Declarations of the Fifth
Amendment Made in These Proceedings; and DENIES Defendants Larry
and Barbara Bates’ Motion to Nullify Prejudgment Attachment and
Motion for Sanctions.
I.

BACKGROUND
This case involves allegations of a complex, large-scale

scheme to defraud hundreds of people over the course of many
years.

(See 3d Am. Compl., ECF No. 375.)

2

Defendant Larry Bates

The Court resolved the portion of this motion relating to Defendants’
attorney-client privilege at the hearing on September 2, 2015. Accordingly,
the Court does not re-address that issue in this Order.

2

was the CEO and “Chief Economist” of Defendant First American
Monetary Consultants, Inc. (“FAMC”) as well as CEO and President
of

Defendant

¶ 6.)

Information

Defendant

Radio

Charles

Network,

Bates

Inc.

served

(“IRN”).
Executive

as

(Id.
Vice

President and News Director for IRN (id. ¶ 10) and held himself
out as an “Economist” of FAMC (id. ¶ 23).

Defendant Barbara

Bates served as Vice President of Administration for FAMC and
was a 50% shareholder in FAMC.

(Id. ¶ 9.)

Defendant Robert

Bates served as “Senior Monetary Consultant” for FAMC.

(Id.

¶ 11.)
Through

mechanisms

including

“radio,

television,

books,

newsletters, toll free numbers, email, direct mail, and personal
solicitation

at

churches

and

conferences

across

the

nation,”

Defendants advertised to and solicited money from individuals
“for the alleged and believed purpose of purchasing gold, silver
and precious metals through Defendants.”

(Id. ¶ 25.)

“These

purchases of precious metals [were] advertised by Defendants as
a ‘safe’ purchase to protect and harness wealth during, what
Defendants

characterize[d]

as,

a

period

of

world

chaos

and

uncertainty, based on Christian beliefs and political upheaval.”
(Id. ¶ 26.)

Defendants received orders for precious metals from

more than 500 customers.

(Id. ¶ 148.)

Plaintiffs allege that

these sales were made as part of a scheme devised by Larry
Bates,

Robert

Bates,

Charles

Bates,
3

Barbara

Bates,

Cindy

Standley,

Kinsey

Brown

defraud customers.

Bates,

and

others,

and

designed

to

(See id. ¶ 46.)

Plaintiffs initially filed this case on December 28, 2011.
(See Compl., ECF No. 1.)

Plaintiffs filed their First Amended

Complaint on August 13, 2012 (ECF No. 53), their Second Amended
Complaint

on

March

14,

2014

(ECF

No.

224),

and

their

Third

for

class

Amended Complaint on October 20, 2014 (ECF No. 375).
On

December

certification.

17,

2013,

Plaintiffs

(ECF No. 182.)

moved

The Court held a hearing on the

motion for class certification on April 29, 2014. (ECF No. 285.)
The Court granted Plaintiffs’ motion for class certification on
April

30,

2014

(ECF

No.

289),

and

issued

an

amended

order

certifying the class later that same day (ECF No. 290).
On

August

4,

2015,

a

federal

grand

jury

issued

an

indictment against Defendants Larry Bates, Charles Bates, and
Robert Bates (“the indicted Defendants”).
Bates,

No.

2:15-cr-20192-SHL,

indictment,

Plaintiffs

motion

temporary

for

and

ECF

the

prejudgment

No.

(See United States v.

Receiver

1.)

Following

filed

attachment

of

an
the

this

emergency
indicted

Defendants’ personal property on August 6, 2015, alleging that
they believed that “in the face of the indictment, the Indicted
Defendants . . . will remove themselves and/or assets directly
or indirectly traceable to funds received by FAMC from customers
from the jurisdiction of the Court, or sell, transfer, dissipate
4

or

otherwise

seek

[to]

defeat

the

Plaintiffs

and

the

Receivership Estate to assets that were purchased with funds of
or traceable to the Receivership Entities.”
3.)

(ECF No. 439 at 2-

The Court granted this motion that same day.

440.)
motion

Plaintiffs
for

and

temporary

the

Receiver

prejudgment

then

filed

attachment

(ECF No.

an

of

emergency

the

indicted

Defendants’ real property on August 7, 2015 (ECF No. 442), which
the Court granted that same day (ECF No. 443).
The

Court

held

a

telephonic

status

conference

emergency prejudgment attachment on August 10, 2015.
445.)
at

on

the

(ECF No.

On August 12, 2015, the Court held a post-order hearing,

which

Plaintiffs

and

the

Receiver

presented

evidence regarding the need for attachment.
Plaintiffs

and

the

Receiver

noted

preliminary

At this hearing,

difficulties

securing

Defendant Robert Bates’ boat, a safe deposit box held at Plain
Commerce

Bank,

properties.

and

the

alarm

codes

for

Defendants’

real

The Court entered an Order Requiring Robert Bates

to Turn Over His Boat to the Receiver (ECF No. 460), an Order
Requiring Plains Commerce Bank to Tender All Funds and Contents
of Any Safe Deposit Box Held By Any of the Defendants Over to
the Receiver (ECF No. 461), and an Order Requiring All Alarm
Management

Companies

with

Contracts

with

Any

Defendant

for

Property Owned or Controlled by the Defendants to Communicate

5

Only with the Receiver and Cease All Communications with Any
Defendant or Other Account Holder (ECF No. 462).
Defendant Larry Bates filed a Motion for Appointment of
Counsel and Motion to Stay on August 12, 2015 (ECF No. 447), and
Defendant Barbara Bates filed a parallel motion on August 13,
2015

(ECF

No.

454).

Plaintiffs

motions on August 24, 2015.

filed

(ECF No. 458.)

both motions on August 26, 2015.
August

31,

2015,

Notice of Appeal.

Defendants

a

response

to

these

The Court denied

(ECF Nos. 463, 464.)

Barbara

and

Larry

Bates

On

filed

a

(ECF No. 471.)

On August 25, 2015, Plaintiffs filed a Motion to Continue
the Prejudgment Attachment and Preserve the Status Quo.
No. 459.)

(ECF

On September 1, 2015, Defendants Robert and Charles

Bates filed a Motion for Relief from Attachment, for the Return
of Defendants’ Personal Property and Information Seized by the
Plaintiffs

and/or

Receiver,

Seized

in

Violation

474.)

Also on September 1, 2015, Plaintiffs filed a Motion for

of

and

for

Suppression

Attorney-Client

of

Privilege.

Evidence
(ECF

No.

Negative Inference to Attach to All Declarations of the Fifth
Amendment Made in These Proceedings.
The

Court

attachment

on

held

a

hearing

September

2,

on

2015,

attachment should be maintained.

(ECF No. 477.)
the
to

temporary
address

(ECF No. 478.)

prejudgment
whether

the

Prior to this

hearing, Defendants Robert and Charles Bates filed a motion to
6

quash

their

subpoenas.

(ECF

No.

468.)

Plaintiffs

response in opposition on September 1, 2015.
the

September

2,

2015,

hearing,

the

Court

filed

(ECF No. 477.)
denied

a
At

Defendants

Robert and Charles Bates’ motion to quash and took the remaining
motions under advisement.
Following

the

(ECF No. 478.)

hearing

on

September

2,

2015,

the

Court

ordered briefing on the issue of whether Defendants Barbara and
Larry Bates’ appeal divests this Court of jurisdiction in this
case.

(ECF No. 480.)

their

briefing

on

Defendants Barbara and Larry Bates filed

September

9,

2015

(ECF

No.

484),

and

Plaintiffs filed their briefing on that same day (ECF No. 485).
On September 29, 2015, the Court notified the Receiver and
Plaintiffs that they had not fully complied with the technical
requirements set forth in Tenn. Code Ann. § 29-6-113.
494.)

(ECF No.

The Receiver and Plaintiffs filed the affidavit of John

Ryder in Support of Prejudgment Attachment on October 1, 2015.
(ECF No. 495.)

On October 2, 2015, Defendants Larry and Barbara

Bates

Response

filed

a

in

Opposition

and

Motion

to

Nullify

Prejudgment Attachment Orders for Non-Compliance with Tenn. Code
Ann. § 29-6-113 and Non-Compliance with Tenn. Code Ann. § 29-6115

Requiring

Defendants

and

Sufficient
Motion

Bond
for

of

Plaintiffs

Sanctions

Payable

(“Motion

Prejudgment Attachment and Motion for Sanctions”).

7

to

to

the

Nullify
(ECF No.

497.)

The Receiver and Plaintiffs filed a Joint Response in

Opposition on October 14, 2015.
On

October

15,

2015,

(ECF No. 500.)

the

Receiver

and

Plaintiffs

filed

supplemental evidence in support of continuing the pre-judgment
attachment.
II.

(ECF No. 501.)

LEGAL STANDARD
A.

Prejudgment Attachment

Rule 64 of the Federal Rules of Civil Procedure provides
that

“throughout

an

action,

every

remedy

is

available

that,

under the law of the state where the court is located, provides
for seizing a person or property to secure satisfaction of the
potential judgment.”
law

provides

for

Fed. R. Civ. P. 64(a).
the

issuance

of

a

In Tennessee, the

prejudgment

attachment when certain criteria are met.

writ

of

In order to attach

property under Tennessee law, a plaintiff must state under oath
“the nature and amount of the debt or demand, and that it is a
just claim; or if the action is for a tort, that the damages
sued for are justly due the plaintiff”; and a plaintiff must
demonstrate that one or more of the causes enumerated in Tenn.
Code Ann. § 29-6-101 exists.

Tenn. Code Ann. § 29-6-113.

grounds relevant to the instant case include:
(2) Where the debtor or defendant is about to
remove, or has removed, the debtor’s or defendant’s
person or property from the state;

8

The

(3) Where the debtor or defendant has removed, or
is removing, the debtor’s or defendant’s person out of
the county privately;
(4) Where the debtors or defendants concealed is
so that the ordinary process of law cannot be served
upon the debtor or defendant;
(5) Where the debtor or defendant absconds, or
absconded concealing the debtor’s or defendant’s
person or property;
(6)
Where
the
debtor
or
defendant
has
fraudulently disposed of, or is about fraudulently to
dispose of, the property[.]
Tenn. Code Ann. § 29-6-101.

Strict construction is afforded to

the attachment statutes insofar as the enumerated causes for
which

attachment

may

issue.

A.G.

Campbell

&

Co.

v.

Chem.

Separations Corp. (In re Chem. Separations Corp.), 29 B.R. 240,
243 (Bankr. E.D. Tenn. 1983); see also Willshire v. Frees, 201
S.W.2d 675, 677-78 (Tenn. 1947).
properly

obtained,

however,

Once jurisdiction has been

“the

liberally construed as to the remedy.”
B.

attachment

statutes

are

Id.

Negative Inference Based on Assertion of Privilege

The Fifth Amendment provides that “[n]o person shall be . .
.

compelled

himself.”

in

any

criminal

case

to

be

a

witness

against

U.S. Const. amend. V.

The fifth amendment privilege not only protects the
individual against being involuntarily called as a
witness against himself in a criminal prosecution but
also privileges him not to answer questions put to him
in any other proceeding, civil or criminal, formal or
informal, where the answers might incriminate him in
future criminal proceedings.
Donovan v. Fitzsimmons, 718 F.2d 161, 164-65 (6th Cir. 1983).

9

“[T]he Fifth Amendment does not forbid adverse inferences
against parties to civil actions when they refuse to testify in
response to probative evidence offered against them . . . .”
Baxter v. Palmigiano, 425 U.S. 308, 318 (1976).

This holding,

however, “is not a blanket rule that allows adverse inferences
to

be

drawn

incrimination

from

invocations

under

all

of

the

circumstances

privilege
in

the

against

civil

self-

context.”

Doe ex rel. Rudy-Glanzer v. Glanzer, 232 F.3d 1258, 1264 (9th
Cir. 2000).
A trial court must carefully balance the interests of
the
party
claiming
protection
against
selfincrimination and the adversary’s entitlement to
equitable
treatment.
Because
the
privilege
is
constitutionally based, the detriment to the party
asserting it should be no more than is necessary to
prevent unfair and unnecessary prejudice to the other
side.
SEC v. Graystone Nash, Inc., 25 F.3d 187, 192 (3d Cir. 1994).
III. ANALYSIS
A.

Threshold Question of Jurisdiction

The Court first addresses the threshold question of whether
it has jurisdiction in this matter, pending the adjudication of
Defendants Barbara and Larry Bates’ appeal of the Court’s orders
denying Defendants’ motions to appoint counsel and motions to
stay.
On

August

31,

2015,

Defendants

Barbara

and

Larry

Bates

filed a notice of appeal regarding four of this Court’s orders

10

(ECF Nos. 440, 443, 463, 464).

(ECF No. 471.)

Following a

status conference in this case, the Court ordered briefing on
whether the notice of appeal divests this Court of jurisdiction
pending the Sixth Circuit’s review of this matter.

On September

9, 2015, Defendants Barbara and Larry Bates filed a brief on
this

issue.

(ECF

No.

484.)

Also

on

September

Plaintiffs filed their brief on this issue.

9,

2015,

(ECF No. 485.)

Defendants Charles and Robert Bates did not submit any briefing
on this issue.
As a general rule, an appeal divests the district court of
power to modify its judgment or take other action affecting the
cause

without

permission

from

the

court

of

appeals,

except

insofar as a statute or rule expressly reserves the district
court’s jurisdiction in aid of appeal.

See Marrese v. Am. Acad.

of Orthopaedic Surgeons, 470 U.S. 373, 379 (1985) (citing Griggs
v. Provident Consumer Disc. Co., 459 U.S. 56, 58-60 (1982) (per
curiam)).

If,

however,

the

appeal

is

from

an

interlocutory

order, the district court retains jurisdiction to act on matters
not involved in the appeal unless an order is entered staying
the

remainder

Cincinnati,

of

970

the
F.2d

proceedings.
1523,

See

1328-29,

Marrese, 470 U.S. at 378-79).

6th

Weaver
Cir.

v.
1992

Univ.

of

(citing

Moreover, when the notice of

appeal is a nullity, “it is as if no notice of appeal were filed
at all.”

Griggs, 459 U.S. at 61.
11

To this end, “the Court of

Appeals lacks jurisdiction to act,” and the appeal therefore
never divests the district court of jurisdiction.

See id.

Courts of appeals have jurisdiction over appeals from final
decisions of the district court, as well as over appeals from
certain interlocutory orders.
decision

under

section

28 U.S.C. §§ 1291, 1292.

1291

includes

orders

A final

that

“finally

determine claims of right separable from, and collateral to,
rights asserted in the action, too important to be denied review
and

too

independent

appellate

of

consideration

adjudicated.”

the
be

cause

deferred

itself
until

to
the

require
whole

that

case

is

Cohen v. Beneficial Indus. Loan Corp., 337 U.S.

541, 546 (1949).

Additionally, under section 1292, courts of

appeals have jurisdiction of appeals from (1) “[i]nterlocutory
orders of the district courts . . . granting, continuing, [and]
modifying

.

appointing

.

injunctions”;

receivers,

receiverships”;
determining

.

and

the

or
(3)

rights

admiralty cases.”

(2)

“[i]nterlocutory

refusing

orders

“[i]nterlocutory
and

liabilities

to

wind

decrees

of

the

orders

.

up
.

parties

.
to

28 U.S.C. § 1292.

In the instant case, a court of appeals would not have
jurisdiction

over

an

order

granting

a

writ

of

prejudgment

attachment or an order denying the appointment of counsel and
denying

an

decisions,

associated
nor

are

stay.

they

Said

appealable
12

orders

are

interlocutory

not

final

orders

as

enumerated in section 1292.

With respect to the orders granting

prejudgment attachment, an attachment is not equivalent to an
injunction.

See Charlesbank Equity Fund II v. Blinds To Go,

Inc., 370 F.3d 151, 156-57 (1st Cir. 2004); FTC v. H.N. Singer,
Inc., 668 F.2d 1107, 1112 (9th Cir. 1982) (noting that an asset
freeze that did not meet the requirements of attachment under
state law “is not an attachment,” but is an injunction).
an

order

granting

an

injunction

may

be

immediately

While

appealed

under section 1292, an order granting an attachment under state
law falls outside the scope the interlocutory appeals statute.
Additionally,
collateral

order

an

order

granting

immediately

attachment

appealable

under

is

not

Cohen.

a
See

Hitachi Zosen Clearing, Inc. v. Tek-Matik, Inc., 846 F.2d 27, 29
(6th Cir. 1988) (“agree[ing] with the other courts of appeals,
and

conclud[ing]

[prejudgment

that

security

an

order

device]

is

granting
not

a

motion

immediately

for

a

appealable

under Cohen”).
With respect to the orders denying appointment of counsel
and the associated motions to stay, the Sixth Circuit has held
that it does not have jurisdiction over immediate appeals of
orders denying appointment of counsel.

Henry v. City of Detroit

Manpower Dep’t, 763 F.2d 757, 764 (6th Cir. 1985).
Barbara
“until

and

Larry

Bates

such

time

as

requested

counsel

is
13

a

stay

appointed

of
to

the

Defendants
proceedings

represent

the

Defendant and counsel enters an appearance in this case.”
No.

447

at

fundamentally
counsel.

1-2;

ECF

No.

associated

454

with

at

the

2.)

motion

This
for

(ECF

request

is

appointment

of

Just as the denial of appointment of counsel is not an

immediately

appealable

order,

the

denial

of

the

associated

motion to stay is also not immediately appealable.
Because the Sixth Circuit does not have jurisdiction over
Defendants Barbara and Larry Bates’ appeal, this Court is not
divested of jurisdiction in this matter.

Accordingly, the Court

may consider the instant motions.
B.

Negative
Inference
Amendment

Plaintiffs
inferences

from

argue

that

Larry,

Based

the

Barbara,

On

Court

Assertion

should

Robert,

and

of

draw

Fifth

negative

Charles

Bates’

assertion of the Fifth Amendment protections at the attachment
proceedings.

(ECF No. 477 at 7-8.)

While the Court is permitted to draw negative inferences
from a witness’s Fifth Amendment assertion in a civil case, the
Court declines to do so in the instant matter.

The Court must

carefully weigh Defendants’ interests against self-incrimination
with

Plaintiffs’

treatment.

and

the

Receiver’s

entitlement

See Graystone Nash, 25 F.3d at 192.

to

equitable
Defendants

Larry, Robert, and Charles Bates were recently indicted by a
federal grand jury.

(See United States v. Bates, No. 2:15-cr-

14

20192-SHL, ECF No. 1.)
of

and

interest

Receiver

and

As a result, there is a heightened risk

against

self-incrimination.

Plaintiffs

have

had

Moreover,
opportunity

ample

the
to

investigate Defendants’ homes and discover evidence to support
their

case

for

prejudgment

attachment.

Weighing

Defendants’

interests with the needs of the Receiver and Plaintiffs, the
Court finds that it would be unfair to penalize Defendants for
their

Fifth

Amendment

proceedings.

assertions

during

the

attachment

Accordingly, the Court DENIES Plaintiffs’ Motion

for Negative Inference.
C.

Maintenance of Prejudgment Attachment

With respect to each Defendant, Larry Bates, Robert Bates,
and

Charles

likely

Bates,

engaged

in

there
a

is

practice

considerable
of

evidence

concealing

and

that

they

fraudulently

converted company property for their personal benefit.

This

finding is further supported by the grand jury’s return of an
Indictment

against

these

three

determination of probable cause.

Defendants,

indicating

a

While not determinative, the

Court is cognizant of these circumstances as it considers the
evidence for attachment as to each Defendant.
1. Larry Bates
The

Receiver

and

Plaintiffs

present

significant

evidence

demonstrating that Defendant Larry Bates has removed from the
state or fraudulently concealed property and has left the state,
15

in violation of Tenn. Code Ann. § 29-6-101.

At the hearings on

August 12, 2015 (“August 12 hearing”), and September 2, 2015
(“September 2 hearing”), the Receiver and Plaintiffs presented
evidence that personal items have been removed from the Larry
Bates home.

Evidence was also presented of the presence of

numerous firearms in the home.

Additionally, the Receiver and

Plaintiffs observed that, although there was evidence that Larry
Bates had purchased several vehicles in 2009 and 2010, only one
of

these

vehicles

could

be

located.

When

the

Receiver

and

Plaintiffs went to Larry Bates’ home to execute the emergency
attachment, Larry Bates arrived at the home in a rental vehicle.
The Receiver and Plaintiffs argue that these actions indicate
that these vehicles were likely sold or otherwise concealed.
The

Receiver,

John

Ryder,

also

testified

that

when

he

visited the property eighteen months earlier, he had observed
three freezers filled with hundreds of packages of ground meat.
The photographs taken at the property following the emergency
attachment, however, showed only a handful of packages of meat
in

the

freezers.

In

his

FAMC

literature,

Larry

Bates

had

recommended storing precious coins in PVC tubes, inserting these
tubes in ground meat, and freezing it.

Given the very material

change in the quantity of the meat, the improbability that a
family

of

two

could

have

consumed

that

much

ground

beef

in

eighteen months, and the fact that approximately six thousand
16

Swiss francs known to be purchased by Larry Bates could not be
located, Mr. Ryder testified that he believed it was probable
that that Larry Bates had concealed coins in the meat.
Additionally,

the

Receiver

and

Plaintiffs

found

FAMC

corporate records at Larry Bates’ home, despite Larry Bates’
prior

representations

documents.

that

he

had

turned

over

all

corporate

Despite Larry Bates’ testimony that all coins had

been turned over to the Receiver, the Receiver and Plaintiffs
discovered an empty coin container outside the guest home on
Larry Bates’ property and a small box of silver eagle coins,
along with various other coins, inside an FAMC coin bag in Larry
Bates’ home office.

The Receiver and Plaintiffs also presented

documents written by Larry Bates wherein he repeatedly discussed
provisions

and

funds

being

on

the

way.

The

Receiver

and

Plaintiffs produced a gas station receipt showing that Larry
Bates has left the county and has crossed state lines since his
indictment.
Following

the

September

2

hearing,

the

Receiver

Plaintiff submitted the declaration of John Pikramenos.

and
Mr.

Pikramenos was retained by the Receiver to manage Larry Bates’
Winwood Farms property after the attachment.
ECF No. 501-1.)

(Pikramenos Decl.,

Mr. Pikramenos stated under oath that he found

additional weapons in Larry Bates’ home office, as well as “a
box

containing

33

Double

Eagle
17

Mini

14K

gold

coins.”

(Pikramenos Decl. ¶¶ 6, 7.)

He noted that, “[i]n addition, the

box contained, what appeared to be, empty sleeves or envelopes
for larger size coins.”

(Pikramenos Decl. ¶ 7.)

In response, Defendant Larry Bates argues that “none of the
eight
Ryder

grounds
and

continue

to

for

attachment

plaintiffs’
advance

defraud the Court.”

are

applicable”

attorneys

their

false

and

and

receiver’s

narrative

(ECF No. 497 ¶¶ 2, 3.)

in

an

that

“John

attorneys
attempt

to

Larry Bates further

challenges the truthfulness of several of the assertions in Mr.
Ryder’s affidavit.

(Id. ¶¶ 3-14.)

Although Mr. Bates disputes the substance of Mr. Ryder’s
affidavit, he does not challenge the evidence presented at the
August 12 and September 2 hearings.
Code Ann. § 29-6-113 is modest.

The requirement of Tenn.
The plaintiff’s agent must

merely make a written statement under oath, stating “the nature
and amount of the debt or demand, and that it is a just claim;
or if the action is for a tort, that the damages sued for are
justly due the plaintiff; and, also, that one(1) or more of the
causes enumerated in § 29-6-101 exists.”
6-113.

Tenn. Code Ann. § 29-

Despite Larry Bates’ assertions that the affidavit is

false, the affidavit does satisfy the requirements of Tenn. Code
Ann. § 29-6-113.

See Phipps v. Burnett, 33 S.W. 925, 926 (Tenn.

1896) (finding sufficient an affidavit alleging that defendant
fraudulently disposed of, or was about to fraudulently dispose
18

of

property

“to

the

best

of

[the

affiant’s]

knowledge

and

belief”).
Moreover,

the

uncontroverted

evidence

presented

at

the

hearings shows that Larry Bates had property such as corporate
documents

and

testimony

that

Receiver.

precious

The

said

coins

in

property

evidence

his

had

further

possession,

been

shows

turned

that

despite
over

property

his

to

the

such

as

vehicles and other precious coins known to be owned by Larry
Bates could not be located on any of his real properties.

The

evidence

had

that

a

significant

quantity

of

meat,

which

previously been stored in the freezers on Larry Bates’ property,
was

no

longer

drawers,

an

present,

empty

combined

jewelry

box,

with
and

the

evidence

paintings

that

of

empty

had

been

removed from the walls, supports an inference that Larry Bates
had

moved

or

was

in

the

process

of

moving

his

person

and

property out of state, had concealed or was about to conceal
property,

or

had

fraudulently

disposed

or

was

about

to

Receiver

and

fraudulently dispose of property.
Considering
Plaintiffs

have

all

the

evidence

presented

together,

sufficient

the

evidence

to

maintain

attachment under grounds two, four, five, and six of Tenn. Code
Ann.

§ 29-6-101.

Accordingly,

the

Court

GRANTS

Plaintiffs’

Motion to Continue the Prejudgment Attachment and Preserve the
Status Quo (ECF No. 459) as to Larry Bates.
19

2. Robert Bates
With respect to Robert Bates, the Receiver and Plaintiffs
inspected the property rented by him in Collierville, Tennessee,
as well as the property owned by him in Counce, Tennessee.

At

the rental property, the Receiver and Plaintiffs found boxes of
company

documents

in

the

garage.

At

Robert

Bates’

Counce

property, the Receiver and Plaintiffs found two bulldozers known
to have been purchased with company assets.

They also found an

invoice from Sportsman’s Boat Storage and a letter dated May 12,
2015, signed by Robert Bates to an individual at Sportsman’s
Boat Storage, which indicated that payments had been made after
the Court’s injunction was in place. 3
At the August 12 hearing, Attorney Joe Barton testified
that his firm had represented Robert Bates in a separate action.
Mr.

Barton

testified

that

his

firm

had

enforce a judgment against Robert Bates.

procured

a

lien

to

On July 9, 2015, Mr.

Barton seized a number of items from Robert Bates, including
eight weapons and a Ford F150, which he later returned to Robert
Bates.

On that date, Mr. Barton also observed, but did not

3

At the August 12 hearing and in briefing, the Receiver and Plaintiffs refer
to the failure of Robert Bates to turn over his boat in relation to the
prejudgment attachment. At the September 2 hearing, however, Robert Bates’
counsel provided the Receiver and Plaintiffs with contact information for and
the location of the boat. Nothing additional has been submitted regarding
the boat. It therefore appears that that property has now been located and
attached. Plaintiffs’ Motion for Contempt and Sanctions as to Robert Bates
(ECF No. 476) is therefore denied as moot.

20

seize,

an

item

labeled

“Bob’s

Box

–

Do

Not

Touch,”

which

contained precious coins and freeze-dried food.
Additionally,
located

at

either

Robert

Bates’

property.

personal

The

record

vehicle

reflects

was
that

not
Larry

Bates, after transferring funds from FAMC to a brokerage account
and then to a personal bank account at Bancorp South, had given
Robert Bates $15,000.00 on June 20, 2009, to purchase a vehicle.
At

the

September

2

hearing,

Joi

Vongphrachanh,

a

friend

of

Robert Bates’ wife, Kinsey Bates, testified that she had had
lunch with Kinsey Bates and Barbara Bates on August 6, 2015, the
day

that

the

Vongphrachanh

grand

jury

testified

returned

that

while

its

they

Indictment.
were

Ms.

waiting

to

be

served, Kinsey Bates stepped out to take a phone call and came
back to the table in tears.
Ms. Vongphrachanh
could meet.

to

Later that day, Kinsey Bates called

apologize

for

crying

and

asked

if

they

When they met, Kinsey Bates asked Ms. Vongphrachanh

if Kinsey Bates could leave her vehicle, a silver Mercedes SUV,
with Ms. Vongphrachanh for a few days.

Ms. Vongphrachanh did

not have room in her garage, but informed Kinsey Bates that she
could leave the vehicle at Ms. Vongphrachanh’s son’s father’s
home

in

Byhalia,

Mississippi.

Kinsey

Bates,

accompanied

by

Robert Bates who was driving a black truck, subsequently dropped
off her vehicle in Byhalia, Mississippi.
Kinsey

Bates

returned

to

pick

up

21

the

On August 16, 2015,

vehicle

and

was

again

accompanied with Robert Bates in the same black truck.

The

Receiver and Plaintiffs assert that since the attachment, Robert
Bates has been driving a red Chevrolet Cruze registered to Hertz
Rental Car.

(ECF No. 459 at 7 n.5.)

Defendant
Plaintiffs’

Robert

proof

Bates

argues

that

the

the

August

12,

2015,

from

Receiver

and

hearing

was

inconclusive, and that re-adoption does not make it conclusive.
(ECF No. 474 at 8.)

Robert Bates further argues that the two

bulldozers located on his Counce, Tennessee property belong to
FAMC or Larry Bates and have been located on that property for
an extended period of time.

(Id.)

Additionally, Robert Bates

argues that the vehicles owned by Robert Bates and Kinsey Bates
were in service at the time of the seizure and the Receiver had
previously stated that he did not want them.

(Id.)

Defendant Robert Bates misunderstands the purpose of the
August

12,

2015,

hearing.

The

Court

granted

the

emergency

motions for writ of prejudgment attachment because it found such
action was warranted by the Indictment.
August

12,

Plaintiffs
merits

of

2015,
an

hearing

opportunity

the

attachment

was
to

to

provide

present
and

The purpose of the

to

the

provide

opportunity to argue against the attachment.

and

regarding

the

Defendants

evidence

Receiver

an

The Receiver and

Plaintiffs represented that the evidence submitted at the August
12, 2015, hearing was incomplete because they had not had time
22

to perform a complete inventory and inspection of each property.
Accordingly, the Court set a second hearing on the prejudgment
attachment for September 2, 2015.

At that hearing, the Receiver

and Plaintiffs presented additional evidence for maintaining the
prejudgment attachment and readopted the evidence presented at
the August hearing.

Specifically, the Receiver and Plaintiffs

presented the testimony of Ms. Vongphrachanh, which demonstrated
that,

immediately

following

the

Indictment,

Robert

Bates

had

assisted Kinsey Bates in concealing her vehicle out of state.
Additionally, although the Receiver indicated that he was
not

interested

in

Robert

Bates’

vehicle,

the

fact

that

the

Receiver and Plaintiffs were unable to locate the vehicle and
Robert Bates was observed to be driving a rental car, while Ms.
Vongphrachanh observed Robert Bates accompanying Kinsey Bates in
his

personal

vehicle,

is

concerning

to

the

Court.

This

evidence, coupled with the uncontroverted evidence that Robert
Bates assisted Kinsey Bates in concealing her vehicle out of
state and the evidence of Robert Bates’ fraudulent conduct in
the operation of FAMC, evinces that Robert Bates removed his
person and property out of the state, concealed, or absconded
concealing his property.
152

(1852)

(“To

abscond,

See Bennett v. Avant, 34 Tenn. 152,
in

a

legal

sense,

means

to

hide,

conceal, or absent oneself clandestinely, with the intent to
avoid

legal

process.”).

This
23

is

sufficient

to

demonstrate

grounds two, four, five, and six of Tenn. Code Ann. § 29-6-101.
Accordingly, the Court GRANTS Plaintiffs’ Motion to Continue the
Prejudgment Attachment and Preserve the Status Quo (ECF No. 459)
as to Robert Bates.

The Court DENIES Defendant Robert Bates’

Motion for Relief from Attachment (ECF No. 474).
3. Charles Bates
With respect to Charles Bates, the Receiver and Plaintiffs
present evidence that Charles Bates’ home contained bullets of
several different calibers, a rifle scope, and four holsters,
but only one weapon.

The Receiver and Plaintiffs argue that

this indicates that Charles Bates had removed the weapons which
fit

the

various

bullets.

The

Receiver

and

Plaintiffs

also

present evidence that a set of safe keys were found on the
property, but no safe, and a set of keys fitting a keypad safe,
although

no

keypad

safe

was

located

on

the

property.

The

Receiver and Plaintiffs note that a box for an iPad, but no
iPad, was located on the property.
and

Plaintiffs

observed

dangling

Additionally, the Receiver
electronic

wires

from

the

corner of the home, but no cameras or electronic surveillance
system was found inside the home.

In the garage, the Receiver

and Plaintiffs found an empty area where a deep freezer had
previously been located, but no deep freezer was located on the
property.

Moreover, the Receiver and Plaintiffs noted that no

precious metals were found on the property, although Charles
24

Bates

had

assets

previously

were

in

testified

precious

Charles Bates’ property.
the

evidence

that

metals.

one-third

No

of

vehicles

were

his

total

found

on

The Receiver and Plaintiffs argue that

demonstrates

that

Charles

Bates

has

acted

to

conceal or dispose of weapons, surveillance equipment, safes, a
deep freezer, electronics, precious metals, and other assets.
At the September 2 hearing, the Receiver and Plaintiffs
also

presented

the

testimony

of

Phillip

Hollingsworth,

a

locksmith, who testified about the two sets of safe keys found
in

Charles

Bates’

home.

In

response

to

defense

counsel’s

questions regarding possible alternative uses for these keys,
Mr. Hollingsworth testified that while the first key technically
could be used for a credenza, the hardware was not built for
that purpose, it would not be secure, and its use with the
furniture would be damaging to the furniture.

With respect to

the second set of keys, Mr. Hollingsworth testified that the
keychain

held

associated

two

with

different

First

Alert

associated with Sentry safes.

tubular
safes

keys,
and

the

one

of

which

is

other

which

is

Mr. Hollingsworth explained that

tubular locks are not commonly used for commercial locks, but
that a cam lock could be used for a control box or other small
storage door container.
In his legal memorandum, Charles Bates addresses each of
these in turn.

This document, however, was not submitted under
25

oath.

Accordingly, the Court cannot consider Charles Bates’

arguments as evidence.

See Wilson v. Allstate Ins. Co., 785

F.2d 311, at *2 (6th Cir. 1986) (“it is well-settled that a
party will not be permitted to use the fifth amendment as both a
sword

and

a

shield”).

Instead,

the

Court

finds

that

the

Receiver and Plaintiffs have shown that several items discovered
in Charles Bates’ home were missing a necessary counterpart.
For example, there were bullets, but no guns in which they fit.
There were safe keys, but no safe or other lock in which they
fit.

Moreover, the record reflects that a significant portion

of Charles Bates’ assets were held in precious metals, but no
precious

metals

were

found

on

the

property.

Viewing

this

evidence as a whole, as well as the evidence that Charles Bates
has previously engaged in fraudulent behavior, the Court finds
that Plaintiffs have demonstrated that grounds four, five, and
six of the Tennessee attachment statute have been met as to
Charles Bates.
Accordingly,

the

Court

GRANTS

Plaintiffs’

Motion

to

Continue the Prejudgment Attachment and Preserve the Status Quo
(ECF No. 459) as to Charles Bates.

The Court DENIES Defendant

Charles Bates’ Motion for Relief from Attachment (ECF No. 474).
D.

Requirements of Affidavit and Bond

In Defendants Larry and Barbara Bates’ Response to Joint
Notice

of

Filing

of

Affidavit
26

in

Support

of

Prejudgment

Attachment and Motion to Nullify Prejudgment Attachment Orders
for

Non-Compliance

with

Tenn.

Code

Ann.

§

29-6-113

and

Non-

Compliance with Tenn. Code Ann. § 29-6-115 Requiring Sufficient
Bond

of

Plaintiffs

Payable

to

the

Defendants

and

Motion

for

Sanctions, Larry Bates argues that the Court’s earlier orders
granting

writs

of

prejudgment

attachment

should

be

nullified

because the Receiver and Plaintiffs failed to timely submit an
affidavit or execute a bond in conjunction with their motions
for prejudgment attachment.
sanctions

against

the

(ECF No. 497.)

Receiver

and

Larry Bates seeks

Plaintiffs,

and

their

respective attorneys, for their “egregious and tortious conduct
. . . in [the] act of perjury and suborning perjury.”

(Id. at

8.)
With respect to the requirement of Tenn. Code Ann. § 29-6113, Mr. Ryder testified under oath at the August 12, 2015,
hearing regarding the prejudgment attachment.
that

this

was

sufficient

to

satisfy

the

requirement on Tenn. Code Ann. § 29-6-113.

The Court finds
sworn

testimony

On October 1, 2015,

the Receiver and Plaintiffs filed Mr. Ryder’s signed affidavit,
which cured any technical defect in writing and brought them
into

full

compliance

with

Tenn.

Code

Ann.

§

29-6-101.

Accordingly, all requirements for attachment have been met, and
attachment is appropriate.

27

With respect to the requirement of Tenn. Code Ann. § 29-6115, the statute provides that in order to obtain prejudgment
attachment, the plaintiff or his agent shall execute a bond with
sufficient

security.

Tenn.

Code

Ann.

§

29-6-116

guidance on the amount of the bond to be required.
provides

that

“[w]hen

the

property

to

be

provides

This section

attached

is

real

estate, the issuing officer shall only require a bond in penalty
sufficient to cover all such costs and damages as same may be
estimated by the issuing officer.”

Tenn. Code Ann. § 29-6-116.

Rather than require the Receiver and Plaintiffs to execute a
bond payable to Defendants, who have failed to make mortgage
payments, insurance payments, and payments to the alarm company,
and

to

pay

taxes,

the

Court

has

required

Plaintiffs to cover these costs directly.

the

Receiver

and

The personal property

subject to the attachment is found in improvements located on
the

real

property

or

is

intimately

associated

with

use

and

function of the real property as a farm; therefore, a separate
attachment for the equipment and other movable property is not
required.
executed

Nevertheless, the Receiver and Plaintiffs’ previously
bond

of

$100,000

in

conjunction

with

the

Temporary

Restraining Order is sufficient surety to protect Defendants.
Accordingly,

the

Receiver

and

Plaintiffs

have

fully

with the requirements of Tenn. Code Ann. § 29-6-115.

28

complied

With respect to Larry and Barbara Bates’ assertion that Mr.
Ryder committed perjury and that his counsel and Plaintiffs’
counsel

suborned

perjury,

Larry

and

Barbara

evidence aside from their own statements.

Bates

submit

no

Accordingly, there is

insufficient evidence to find that Mr. Ryder or counsel engaged
in bad faith conduct, willful disobedience, egregious conduct,
or to find any other basis for the imposition of sanctions.
For
Motion

these
to

reasons,

Nullify

Defendants

Prejudgment

Larry

Attachment

and

Barbara

Orders

Bates’

for

Non-

Compliance with Tenn. Code Ann. § 29-6-113 and Non-Compliance
with Tenn. Code Ann. § 29-6-115 Requiring Sufficient Bond of
Plaintiffs Payable to the Defendants and Motion for Sanctions
are DENIED.
IV.

CONCLUSION
For these reasons, the Court GRANTS Plaintiffs’ Motion to

Continue the Prejudgment Attachment and Preserve the Status Quo
and

DENIES

Relief

from

Plaintiffs’

Defendants

Charles

Attachment.
Motion

for

and

Robert

Additionally,

Negative

Inference

Bates’
the
to

Motion

Court
Attach

for

DENIES
to

All

Declarations of the Fifth Amendment Made in These Proceedings.
The Court DENIES Defendants Larry and Barbara Bates’ Motion to
Nullify Prejudgment Attachment and Motion for Sanctions.

29

It is so ORDERED, this the 20th day of October, 2015.

/s/ Jon P. McCalla
JON P. McCALLA
U.S. DISTRICT COURT JUDGE

30