Orlowski et al v. Bates et al

Filing 582

ORDER granting Larry Bates' Oral Motion for Sufficient Bond and denying 576 Motion in Response to Notice of Filing Amended Bond. Signed by Judge Jon Phipps McCalla on 2/4/2016. (McCalla, Jon)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TENNESSEE
WESTERN DIVISION
DAMIAN ORLOWSKI, et al.,
Plaintiffs, on behalf of
themselves and all others
similarly situated,
v.
LARRY BATES, et al.,
Defendants.

)
)
)
)
)
)
)
)
)
)

No. 2:11-cv-01396-JPM-cgc

ORDER GRANTING LARRY BATES’ ORAL MOTION FOR SUFFICIENT BOND AND
DENYING LARRY BATES’ MOTION IN RESPONSE TO PLAINTIFFS’ NOTICE OF
FILING AMENDED BOND ISSUED IN CONNECTION WITH COURT ORDERED
INJUNCTION AND PREJUDGMENT ATTACHMENT

Before the Court is Defendant Larry Bates’ oral motion
regarding the lack of sufficient bond, made during the motion
hearing on December 14, 2015.

(Min. Entry, ECF No. 552.)

The

Receiver responded to the oral motion on December 19, 2015.
(ECF No. 557.)
4, 2016.

Defendant Larry Bates filed a reply on January

(ECF No. 565.)

The Receiver filed a sur-reply, with

leave of Court, on January 27, 2016.

(ECF No. 579.)

On January 12, 2016, Plaintiffs filed a Notice of Filing
Amended Bond Reflecting Bond Issued in Connection with Court
Ordered Injunction and Prejudgment Attachment.

(ECF No. 570.)

On January 25, 2016, Larry Bates filed a Motion in Response to
Plaintiffs’ Notice of Filing Amended Bond Issued in Connection

with Court Ordered Injunction and Prejudgment Attachment.

(ECF

No. 576.)
For the following reasons, Defendant Larry Bates’ oral
motion for sufficient bond is GRANTED and Defendant Larry Bates’
Motion in Response to Plaintiffs’ Notice of Filing Amended Bond
Issued in Connection with Court Ordered Injunction and
Prejudgment Attachment is DENIED.
I.

BACKGROUND
On August 4, 2015, a grand jury returned a forty-four count

indictment as to Defendants Larry Bates, Charles Bates, and
Robert Bates (“the Indicted Defendants”).

(Indictment, United

States of America v. Bates, 2:15-cr-20192-SHL (W.D. Tenn.), ECF
No. 1.)

Following this indictment, Plaintiffs and Receiver John

Ryder in the instant case filed a joint emergency motion for
prejudgment attachment of the Indicted Defendants’ personal
property on August 6, 2015 (ECF No. 439), and a second joint
emergency motion for prejudgment attachment of the Indicted
Defendants’ real property on August 7, 2015 (ECF No. 442).

The

Court granted both motions (ECF Nos. 440, 443), and held a postattachment hearing on August 12, 2015 (Min. Entry, ECF No. 448).
The Court held a follow-up hearing on the prejudgment attachment
orders on September 2, 2015.

(Min. Entry, ECF No. 478.)

On October 20, 2015, the Court issued an order that, inter
alia, continued the prejudgment attachment of the Indicted
2

Defendants’ real and personal property.

(ECF No. 503.)

At that

time, the Court determined that “the Receiver and Plaintiffs’
previously executed bond of $100,000 in conjunction with the
Temporary Restraining Order is sufficient surety to protect
Defendants.”

(Id. at 28.)

On December 14, 2015, Defendant Larry Bates made an oral
motion for sufficient bond to be posted in connection with the
prejudgment attachment.

(Min. Entry, ECF No. 552.)

On December

19, 2015, the Receiver filed a Verified Response to Defendant
Larry Bates’ Oral Objection to Amount of the Prejudgment
Attachment Bond.

(ECF No. 557.)

reply brief on January 4, 2016.

Defendant Larry Bates filed a
(ECF No. 565.)

With leave of

Court, the Receiver filed a sur-reply on January 27, 2016.

(ECF

No. 579.)
On January 12, 2016, Plaintiffs notified the Court that
they had amended the bond issued in connection with the
preliminary injunction to encompass the prejudgment attachment.
(ECF No. 570.)

Defendant Larry Bates filed a Motion in Response

to Plaintiffs’ Notice on January 25, 2016, arguing that
Plaintiffs’ amendment “dilutes the value of the bond of each
undertaking.”
II.

(ECF No. 576.)

LEGAL STANDARD AND ANALYSIS
In order to obtain a prejudgment attachment, the movant is

required “to execute a bond with sufficient security, payable to
3

the defendant, and conditioned that the plaintiff will prosecute
the attachment with effect, or, in case of failure, pay the
defendant all costs . . . and . . . damages.”
§ 29-6-115.

Tenn. Code Ann.

Said bond should be posted to the Court to be

refunded or released when the bond’s condition is met.

“When

the property to be attached is real estate,” the amount of the
bond should be “sufficient to cover all such costs and damages
as same may be estimated by the issuing officer.”
Ann. § 29-6-116(4).

Tenn. Code

When the property to be attached is

personal property and “the claim is for unliquidated damages,
the penalty shall be equal to the value of the personal property
to be attached plus such sum as will be sufficient to cover such
costs and damages.”

Tenn. Code Ann. § 29-6-116(3).

Tennessee law provides that
[t]he attachment law shall be liberally
construed, and the plaintiff, before or during trial,
shall be permitted to amend any defect of form in the
. . . bond . . . ; and no attachment shall be
dismissed for any defect in, or want of, bond, if the
plaintiff, plaintiff’s agent, or attorney will
substitute a sufficient bond.
Tenn. Code Ann. § 29-6-124.

Additionally, “[s]uch an attachment

may be had in forma pauperis.”
583 (1877).

Wiley v. Bennett, 68 Tenn. 581,

This “allows poor persons the process of attachment

. . . in the prosecution of their rights by suit, upon making
the required affidavit, without giving security.”

4

Doty v. Fed.

Land Bank of Louisville, 114 S.W.2d 953, 955 (Tenn. 1938); see
also Hewell v. Cherry, 158 S.W.2d 370 (Tenn. Ct. App. 1941).
A.

Amount of the Bond

Since October 2015, when the Court determined that the
$100,000 bond posted in conjunction with the preliminary
injunction was sufficient bond for the prejudgment attachment,
the Court has continued the trial date in the instant matter to
avoid interfering with the Indicted Defendants’ Fifth Amendment
rights.

(See ECF No. 508.)

This continuance means that the

instant matter will not likely be resolved within the next
twelve months and that the attachment will remain in place
longer than initially anticipated.

Accordingly, the Court finds

it appropriate to revisit its earlier determination as to the
sufficiency of the attachment bond.
Pursuant to the Tennessee attachment statutes, the Court
finds that Plaintiffs and Receiver must post a bond equal to the
value of the Indicted Defendants’ personal property, plus such
sum as will be sufficient to cover costs and damages to the
Indicted Defendants’ both real and personal property.
Code Ann. §§ 29-6-116(3)-(4).

The Receiver submits an insurance

policy valuing the personal property at $900,000.
557-1.)

See Tenn.

(See ECF No.

He further contends that the auction value of the

personal property is approximately twenty to twenty-five percent
of the insured value, which results in a valuation of $180,000
5

to $225,000.

(ECF No. 557 ¶ 38.)

Defendant Larry Bates has not

submitted a different valuation, but asserts that the insurance
coverage itself is improper “surplus lines coverage.”

(ECF No.

565 ¶ 10.)
Despite Larry Bates’ assertion that the insurance coverage
is improper, the coverage itself has no bearing on the amount of
the attachment bond.

Moreover, the insured value appears to be

the best estimate for the value of the attached personal
property.

Thus, based on the information available, the Court

finds that the bond for the value of the attached personal
property should be $900,000.

The parties may undertake

independent appraisals to reach a more precise amount, and upon
submission of such appraisals to the Court, the Court may
consider modifying the bond amount.
Additionally, as explained in the Court’s order continuing
the prejudgment attachment, the Court finds that the Receiver
and Plaintiffs’ ongoing payments for the attached properties’
mortgages, insurance, taxes, and alarm services are sufficient
to cover all potential costs and damages relating to both the
real and personal property.

(See ECF No. 503 at 28.)

Accordingly, the Court permits the Receiver and Plaintiffs to
make these payments in lieu of an additional bond amount for
costs and damages.

6

B.

Effect of the $100,000 Preliminary Injunction Bond

The Receiver argues that any additional bond amount
required by the Court “should be limited to the difference
between the current bond and the value of the attached personal
property that is not associated with the real property as a
farm, and off-set by amounts already paid and to be paid by the
Receiver for the benefit of all parties.”

(ECF No. 557 ¶ 37.)

Defendant Larry Bates asserts that permitting the same bond to
apply to both the preliminary injunction and the prejudgment
attachment “dilutes the value of the bond of each undertaking.”
(ECF No. 576 ¶ 1.)
“[T]he amount of security given by an applicant for an
injunction is a matter for the discretion of the trial court,
which may in the exercise of that discretion even require no
security at all.”

USACO Coal Co. v. Carbomin Energy, Inc., 689

F.2d 94, 100 (6th Cir. 1982).

When the Court ordered Plaintiffs

to submit a $100,000 bond in connection with the preliminary
injunction, the Court recognized that it had “limited knowledge
of the financial picture of the receivership entities at [that]
time.”

(ECF No. 135 at 3.)

In the two-plus years since issuing

that order, the Court has received considerable evidence
regarding the financial state of the receivership entities.
(See, e.g., Ryder Report, ECF No. 426.)

7

As of July 13, 2015, IRN had no remaining assets and the
Receiver’s FAMC account had a balance of $35,355.16.
557 ¶ 9.)

(ECF No.

As of December 19, 2015, the Receiver’s FAMC account

had a balance of $12,057.88.

(Id. ¶ 22.)

While the Receiver

has initiated a separate action against Defendants Larry Bates,
Charles Bates, Robert Bates, Barbara Bates, and Kinsey Bates, on
behalf of the receivership entities, that action is unlikely to
be resolved in the next twelve months.

(See Ryder v. Bates,

2:15-cv-2526-JPM-cgc (W.D. Tenn.).)
Accordingly, considering the Court’s discretion to reduce
the amount of the preliminary injunction bond and the financial
state of the receivership entities, the Court finds that it is
appropriate to permit the Receiver and Plaintiffs to apply the
$100,000 bond to the preliminary injunction as well as the
attachment.

Thus, the Receiver and Plaintiffs need only post an

additional $800,000 bond, payable to the Indicted Defendants, 1 to
satisfy the bond requirement for attachment.
C.
Penalty Pursuant to Section 29-6-117(c) of the
Tennessee Code
Defendant Larry Bates argues that because the Receiver has
not submitted an itemized appraisal of all attached property,
the bond should be doubled pursuant to section 29-6-117 of the

1

The Court notes that “payable to the Indicted Defendants” does not mean that
the Indicted Defendants are entitled to receive a payment today for the value
of the bond. It means that, in the event that the statutory conditions are
satisfied in their favor, they may file a motion to release the bond.

8

Tennessee Code.

(ECF No. 565 ¶¶ 14, 15.)

The Receiver argues

that the bill of attachment is not deficient, referring to his
earlier verified motion for prejudgment attachment (ECF No.
359), Rhett Butler’s Report (ECF No. 426-5), and the substantial
proof provided in support of prejudgment attachment.

(ECF No.

579 at 3.)
The Court agrees with the Receiver.

In the Receiver and

Plaintiffs’ emergency motion for attachment of the Indicted
Defendants’ personal property, the Receiver and Plaintiffs
identify two large safes located on Larry Bates’ property and a
safe located in the basement of Charles Bates’ property.
No. 439 at 3.)

(ECF

They further identify industrial freezers, as

well as “vehicles, trailers, tools, boats, tractors, farm
equipment and other personal property,” and reference the
Receiver’s earlier verified motion for prejudgment attachment,
which specifically sets forth a description and the purchase
price of tangible property located at the Bates’ properties.
(Id. at 3-4.)

In the emergency motion for attachment of the

Indicted Defendants’ real property, the Receiver and Plaintiffs
specifically identify the addresses of the Indicted Defendants’
real property and briefly describe the buildings located on the
various properties.

(ECF No. 442 at 5.)

9

At the post-attachment hearing on August 12, 2015, the
Receiver and Plaintiffs introduced forty-three exhibits, 2 which
primarily consisted of photographs of the Bates’ real properties
and the tangible property located thereon as well as a flash
drive containing additional photographs and videos of the
properties.

(See Ex. List, ECF No. 457; see also ECF Nos. 450-

453, 455-456.)

In their brief in support of continuing the

prejudgment attachment, Plaintiffs further describe the real and
personal property subject to attachment, and submit an
additional twenty-nine exhibits, many of which are photographs
of items found on the properties.
No. 459-1 to 459-29.)

(ECF No. 459, see also ECF

The Receiver also submitted a broker’s

appraisal and property tax statements reflecting the appraised
value of the attached real property.

(ECF No. 483.)

In his

Verified Response to Defendant Larry Bates’ Oral Objection to
Amount of the Prejudgment Attachment Bond, the Receiver states
under oath that the insured value of the personal property is
$900,000 (ECF No. 557 ¶ 19; see also ECF No. 557-1) and that the
auction value of this property is approximately twenty to
twenty-five percent of the insured value (ECF No. 557 ¶¶ 25-27,
38).
Although Defendant Larry Bates is correct that the
description and valuation of the attached property were not
2

This number does not include the marked versions of several exhibits
that were submitted.

10

provided in a single document, the Court considers all of the
Receiver and Plaintiffs’ filings, together, to be the “bill . .
. praying for the writ of attachment.”

Accordingly, the

Receiver and Plaintiffs have satisfied the burden under
Tennessee Code § 29-6-117 and are not subject to a penalty
doubling the amount of the bond.
D.

Pauper’s Oath in Lieu of Bond

For the reasons set forth in this Order, the Receiver and
Plaintiffs must submit an additional bond of $800,000 to satisfy
the Tennessee attachment statutes.

Pursuant to Tennessee law,

however, it is permissible for the Receiver to submit a
“pauper’s oath” in lieu of posting bond.

Doty, 114 S.W.2d at

955.
The Receiver’s verified response indicates that IRN has no
remaining assets and that FAMC’s account currently has a balance
of $12,057.88.

(ECF No. 557 ¶¶ 9, 22.)

Additionally, the

Receiver stated that his costs of carrying the property located
at 3780 Winwood Farms Loop in Middleton, Tennessee, are
approximately $3,000 to $4,000 per month.

(Id. ¶ 22.)

The

Receiver also stated under oath that the Receivership Estate is
“not in a financial position to post additional bond and should
be permitted to proceed in forma pauperis.”

(Id. ¶ 40.)

Accordingly, the Court finds that the Receiver has properly
sworn to and submitted documents to support the assertion of a
11

pauper’s oath and need not post any additional bond to continue
his attachment of the real and personal property in this matter.
See Tenn. Code Ann. § 20-12-127; V.L. Nicholson Co. v. Transcon
Inv. And Financial Ltd., Inc., 595 S.W.2d 474, 480 (Tenn. 1980)
(finding that the pauper’s oath does not need to follow the
precise wording provided in the statute).

In order to continue

to jointly maintain the prejudgment attachment, Plaintiffs must
post an additional bond of $800,000 or submit an affidavit
demonstrating indigence.
III. CONCLUSION
For the foregoing reasons, Defendant Larry Bates’ oral
motion for sufficient bond is GRANTED.

Defendant Larry Bates’

Motion in Response to Plaintiffs’ Notice of Filing Amended Bond
Issued in Connection with Court Ordered Injunction and
Prejudgment Attachment is DENIED.
is accepted in lieu of bond.

The Receiver’s pauper’s oath

Plaintiffs shall post the

additional $800,000 bond or submit an affidavit to continue the
attachment in forma pauperis within ten (10) days of the entry
of this Order.
IT IS SO ORDERED, this 4th day of February, 2016.

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

12