Brendel v. Meyrowitz et al

Filing 85

MEMORANDUM OPINION AND ORDER granting in part and denying in part 68 Motion for Judgment filed by Greg Brendel; granting 69 Motion to Intervene filed by Sarah Pappas for the purpose of determining her rights in the funds held in the state cou rt registry; denying 79 request for judicial notice filed by Greg Brendel; and denying 83 Motion to Vacate filed by Scott Meyrowitz and SSB International, LLC. The court enters a Rule 54(b) final judgment confirming the Arbitration Award and awarding Greg Brendel the sum of $1,018,254.22 against defendants Scott Meyrowitz and SSB International, LLC, jointly and severally. (Ordered by Judge Sidney A Fitzwater on 3/30/2017) (Judge Sidney A Fitzwater)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
GREG BRENDEL,
Plaintiff,
VS.
SCOTT MEYROWITZ, et al.,
Defendants.

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§ Civil Action No. 3:15-CV-1928-D
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MEMORANDUM OPINION
AND ORDER
In this removed action arising from an investment in precious stones, the instant
motions require the court to decide whether a party may intervene to assert her interest as a
judgment creditor in another lawsuit in funds that were paid into the state court registry in
this case, and whether to confirm or vacate an arbitration award. It must also decide whether
to take judicial notice of an arbitration award or state court injunction. For the reasons
explained, the court grants a limited intervention; takes judicial notice of the existence of a
state court injunction; grants in part and denies in part the motion to confirm the arbitration
award, enter final judgment, and release funds; and denies the motion to vacate the
arbitration award.
I
Because this case is the subject of two prior memorandum opinions and orders, see
Brendel v. Meyrowitz, 2016 WL 1721312, at *1 (N.D. Tex. Apr. 29, 2016) (Fitzwater, J.)
(“Brendel II”); Brendel v. Meyrowitz, 2016 WL 302282, at *1 (N.D. Tex. Jan. 25, 2016)

(Fitzwater, J.), the court will recount only the background facts and procedural history that
are pertinent to this decision.
Plaintiff Greg Brendel (“Brendel”) sued Scott Meyrowitz (“Scott”), Mary Meyrowitz
(“Mary”), and SSB International, LLC (“SSB”) in connection with an investment in precious
stones.1 Brendel alleges that he entered into an agreement with Scott under which, in
exchange for the sum of $250,000, Brendel was to receive 50% of the profits, after full
reimbursement of his $250,000 payment, from proceeds received from the sale of certain
precious stones. Brendel asserts that he wired the sum of $250,000 to Scott’s account at
Wells Fargo Bank, held in the name of SSB, but, instead of using the funds as agreed, Scott
converted them to his personal use and refused to return the $250,000 payment or deliver the
precious stones.
Brendel originally brought suit in Texas state court, but it was removed based on
diversity of citizenship. Before the case was removed, the state court ordered that $250,000
be taken from an account controlled by Scott and Mary and deposited into the court registry,
to remain there until entry of final judgment. The state court’s order remains in effect until
this court modifies or abrogates it, which it has not done, or until a final judgment is entered.
See Brendel II, 2016 WL 1721312, at *4.
After the case was removed, this court granted Scott and SSB’s motion to compel
arbitration. Brendel’s evidence at the ensuing arbitration included defendants’ financial

1

Brendel also sued Charles Schwab Bank and Wells Fargo Bank, but he has
voluntarily dismissed them as defendants.
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records. Brendel won an arbitration award of $1,018,254.22 (the “Arbitration Award”).
Brendel moves to confirm the Arbitration Award, enter judgment in his favor, and release
to him the funds held in the state court registry. Brendel also asks the court to take judicial
notice of the Arbitration Award and the state court injunction. Scott and SSB move to vacate
the Arbitration Award.
Aside from Brendel’s claims against Scott and SSB, which were arbitrated, he also
alleges claims against Mary that were not subject to arbitration, and remain pending in this
lawsuit.
A few days after Brendel moved to confirm the Arbitration Award, Sarah Pappas
(“Pappas”) moved to intervene in this case as a defendant and intervenor-counterplaintiff.
Pappas alleges that she was a victim of a similar scheme to the one that Brendel alleges in
this case, and she claims an interest in the funds that were paid into the state court registry.
Pappas maintains that she is entitled to some or all of the registry funds because she has an
Arizona state court default judgment against Scott, Mary, and SSB; the registry funds are
traceable to an unrepaid loan from Pappas to Scott, Mary, and SSB; and she has obtained a
writ of execution that was levied on the registry funds. Brendel opposes the motion to
intervene.
Aside from Pappas’ motion to intervene, Brendel also asks the court to take judicial
notice of the Arbitration Award and the state court injunction; Brendel moves the court to
confirm the Arbitration Award, enter final judgment, and release funds to him; and Scott and
SSB move the court to vacate the Arbitration Award.
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II
Brendel requests that the court take judicial notice of the state court injunction and the
Arbitration Award. The other parties have not responded to this request.
“The court may judicially notice a fact that is not subject to reasonable dispute
because it . . . can be accurately and readily determined from sources whose accuracy cannot
reasonably be questioned.” Fed. R. Evid. 201. A judicial act in state court falls within the
category of sources “whose accuracy cannot reasonably be questioned,” and may be
judicially noticed. See Colonial Leasing Co. of New Eng. v. Logistics Control Grp. Int’l, 762
F.2d 454, 459 (5th Cir. 1985); 21B Charles Alan Wright & Kenneth W. Graham, Federal
Practice and Procedure § 5106.4, at 240 (2d ed. 2005 and Supp. 2016).
Accordingly, the court takes judicial notice of the state court injunction, but only for
its existence, not for the correctness of any facts found. See Gray ex rel. Rudd v. Beverly
Enters.-Miss., Inc., 390 F.3d 400, 407 n.7 (5th Cir. 2004) (“Although we cannot take judicial
notice of findings of fact of other courts, the fact that a judicial action was taken is
indisputable and is therefore amenable to judicial notice.”). The court declines, however, to
take judicial notice of the Arbitration Award at this time. Brendel cites no authority to
support judicial notice in these circumstances, and he does not explain the reason for his
request. The court therefore limits its decision to the question whether to confirm the
Arbitration Award, as set out below.

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III
The court now turns to Pappas’ motion to intervene. Pappas moves to intervene as
of right, or, alternatively, to intervene permissively.
A
A party is entitled to an intervention as of right under Rule 24(a)(2) if (1) the motion
to intervene is timely, (2) the interest asserted by the potential intervenor is related to the
action, (3) the interest may be impaired or impeded by the action, and (4) the interest is not
adequately represented by the existing parties. See, e.g., In re Lease Oil Antitrust Litig., 570
F.3d 244, 247 (5th Cir. 2009); Sierra Club v. Espy, 18 F.3d 1202, 1204-05 (5th Cir. 1994)
(citing New Orleans Pub. Serv., Inc. v. United Gas Pipe Line Co., 732 F.2d 452, 463 (5th
Cir. 1984) (en banc) (“NOPSI”)).
B
The first element—timeliness—is determined by examining (1) the length of time
between the potential intervenor’s learning that its interest is no longer protected by the
existing parties and its motion to intervene, (2) the extent of prejudice to the existing parties
from allowing late intervention, (3) the extent of prejudice to the potential intervenor if the
motion is denied, and (4) any unusual circumstances. See, e.g., Lease Oil Antitrust Litig.,
570 F.3d at 247-48.
1
Pappas contends that her motion to intervene is timely because she obtained the
Arizona default judgment on August 16, 2016, promptly sought counsel in Dallas, and
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moved to intervene in this case on October 31, 2016. And she maintains that her intervention
would not prejudice the existing parties because her only interest is in the registry funds, not
the claims in the case, and therefore that her invention will not delay the progress of matters
such as discovery.
Brendel responds that the putative intervention is untimely because it will unduly
prejudice the original parties. He contends that the intervention will lead to collateral
proceedings to challenge the jurisdiction of the default judgment, resolve choice of law
issues, and explore the merits of the Pappas claim. And he posits that this case is very nearly
completed, because the only remaining decision is whether to confirm the Arbitration Award.
Pappas replies that her intervention is timely under the standard. She contends that
collateral proceedings will be brief or unnecessary, because her Arizona default judgment
is presumed valid, and no evidence has been offered against it. And she posits that her only
likely involvement with the claims in the case relates to whether Brendel can establish a
constructive trust over the registry funds. Finally, she contends that Brendel’s claims against
Mary remain to be determined, indicating that resolution of this case is not imminent.
2
The court concludes that Pappas’ motion to intervene is timely. Brendel’s arguments
primarily relate to the second timeliness factor: the extent of prejudice to the existing parties
from allowing intervention at this stage. But even assuming that Brendel is correct that
Pappas’ intervention will lead to collateral disputes about the validity of the default
judgment, a foreign judgment that appears valid on its face is presumed valid in Texas. See
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Mitchim v. Mitchim, 518 S.W.2d 362, 364 (Tex. 1975). And if Pappas can show the requisite
interest in the property before the court, then the court has a responsibility to adjudicate the
issue of priority on the merits, notwithstanding the prejudice to Brendel from delay. See,
e.g., Peterson v. Islamic Republic of Iran, 290 F.R.D. 54, 59 (S.D.N.Y. 2013) (holding that
intervention was timely despite disruption of existing plaintiffs’ priority agreement). In an
analogous case, the Fifth Circuit held that intervention to assert a tax lien on the res before
the court was timely when it came one year into the suit, and after the close of discovery.
See Diaz v. S. Drilling Corp., 427 F.2d 1118, 1125 (5th Cir. 1970).
Since few legally significant events have occurred in the
separate part of the case in which the Government is involved,
and since many courts have allowed intervention in meritorious
cases after trial, after judgment, and even after settlement, we
cannot find that the time of the application caused prejudice to
[the existing party’s] rights of a magnitude sufficient to justify
overturning the trial court’s decision.
Id. at 1126 (citations omitted). The Fifth Circuit has also held that intervention to assert a
subrogation interest in funds paid into the court registry was timely even after judgment. See
McDonald v. E.J. Lavino Co., 430 F.2d 1065, 1071-73 (5th Cir. 1970). And other courts
have approved intervention at advanced stages of a dispute but prior to judgment. See
Karsner v. Lothian, 532 F.3d 876, 886-87 (D.C. Cir. 2008) (holding that motion to intervene
in arbitration confirmation was timely); Peterson, 290 F.R.D. at 58-59 (holding that
judgment creditors’ motion to intervene three days prior to summary judgment decision was
timely). Accordingly, the court concludes that Pappas’ motion is timely.

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C
The second element for assessing a motion to intervene as of right considers whether
the interest asserted by Pappas is related to this lawsuit.
1
Pappas contends that her interest in the registry funds is sufficiently related to justify
intervention as of right. She asserts an interest, first, as a judgment creditor of defendants.
See Diaz, 427 F.2d at 1124. And she maintains, second, that the registry funds are traceable
to her specific payment to defendants. Cf. Gaines v. Dixie Carriers, Inc., 434 F.2d 52, 54
(5th Cir. 1970) (granting intervention for attorney to assert interest in legal fees portion of
settlement funds).
Brendel responds that Pappas has no direct, substantial, and legally protectable
interest in this litigation, as required for intervention as of right. See NOPSI, 732 F.2d at 463.
He contends that Pappas can only show an economic interest in a general pool of funds, not
a legitimate substantive right to these particular funds, as Rule 24(a)(2)requires. See id. at
470. As an example, Brendel cites Doe v. Ejercito de Liberacion Nacional, 2012 WL
10713165, at *2-3 (S.D. Fla. Aug. 2, 2012), in which the court denied intervention because
the movant (a judgment creditor of a foreign terrorist group) could only show a general
economic interest in recovering from the defendant. And Brendel argues that, if Pappas’
logic were accepted, any creditor of the defendants could intervene in this litigation, which
cannot be a correct result.
Brendel also contends, based on a reading of the record in this case and the arbitration,
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that the registry funds are not traceable to Pappas. And he questions the bona fides of
Pappas’ claim, maintaining that some of defendants’ creditors are complicit in defendants’
illegitimate transactions.
Pappas replies that she has obtained a writ of execution that has been levied on the
registry funds. She posits that these steps give her a judicial lien on the registry funds,
establishing the requisite property interest to intervene, and that she is entitled to recover
unless Brendel can establish a constructive trust on the registry funds.2
2
The court concludes that Pappas has an interest related to this action, as required for
intervention as of right. Accepting at face value Pappas’ representation that a writ of
execution has been levied on the registry funds, she has a legally protectable interest in the
property that is the subject of this case. See Diaz, 427 F.2d at 1124. In the context of a Rule
24(a)(2) motion, the judicial lien that Pappas asserts here is analogous to the tax lien that the
Fifth Circuit held to be a sufficient interest in Diaz. See id. (“[T]he Government in this case
is asserting a tax lien, clearly a legally cognizable interest in property, which it seeks to
attach to a res that is before the court. Interests in property are the most elementary type of
right that Rule 24(a) is designed to protect.”). Moreover, the decision of the district court in
Peterson, which this court recognizes as persuasive authority on this point, suggests that

2

Pappas represents that the writ of execution was levied on the registry funds on
November 21, 2016, the same day that Brendel’s response brief on the motion to intervene
was due.
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Pappas’ interest is sufficient to intervene.

In Peterson the district court approved

intervention by judgment creditors who had obtained a writ of execution and sought to assert
a competing claim against frozen Iranian assets that were the subject of the litigation. See
Peterson, 290 F.R.D. at 59.
The authorities that Brendel cites are distinguishable. The Fifth Circuit denied
intervention in NOPSI because the would-be intervenors only had an economic interest in
the case: they sought to avoid increased utility costs by asserting another party’s contract
right. See NOPSI, 732 F.2d at 470. The would-be intervenors therefore had no “basis for
a legally protectable interest or for possession of the substantive legal right—enforcement
of the contract—which they seek to assert by intervention[.]” Id. In the instant case, by
contrast, Pappas has asserted a legally protectable property right in the res before the court.
Brendel’s other authority, Ejercito de Liberacion Nacional, is distinguishable on a similar
basis. In that case the district court denied intervention by a judgment creditor who sought
to recover from the defendants, but there was no res before the court, as is the case here, nor
had the would-be intervenor obtained a judicial lien that created a property interest. See
Ejercito de Liberacion Nacional, 2012 WL 10713165, at *2-3.
Finally, because Pappas has established her interest in this litigation based on a
judicial lien, the court need not decide at this time whether the registry funds are traceable
to her.

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D
The third factor the court assesses is whether Pappas’ interest may be impaired or
impeded by the action.
1
Pappas contends that the action will impair her interest because Brendel seeks to
recover the registry funds, which Pappas maintains are her best chance to collect on her own
judgment. Brendel responds that, although an intervention would undoubtedly aid Pappas,
it will potentially shunt him into the same position that Pappas now occupies—a judgment
creditor who has difficulty collecting. He maintains that his extraordinary efforts to secure
the registry funds in the first place, including paying a $20,000 bond, should entitle him to
recover.
2
That court concludes that Pappas’ interest in the registry funds may be impaired if
Brendel prevails in this lawsuit. See Gaines, 434 F.2d at 54. Although Brendel correctly
observes that the registry funds were only preserved through his diligence, this does not
negate the potential for the lawsuit to impair whatever interest Pappas can establish in them.
E
The court evaluates under the fourth element whether Pappas’ interest is adequately
represented by the existing parties.
1
Pappas contends that no party represents her interest; rather, her interests are adverse
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to those of the other parties because Brendel has a competing claim to the registry funds, and
“[d]efendants, as judgment debtors, presumably have no interest in assisting their creditors’
collections against them.” Pappas Br. 8. Brendel responds that his interest is only adverse
to Pappas to the extent that defendants have a finite pool of assets; their rights are not
transactionally related.
2
The court concludes that Pappas’ interest is not adequately represented by the existing
parties, because they are adverse to her. See Gaines, 434 F.2d at 54. Brendel is pursuing a
competing claim to the registry funds, and defendants are the parties against whom Pappas
seeks to recover.
F
The court concludes that Pappas meets all of the Rule 24(a)(2) criteria for intervention
as of right. Because her motion, briefing, and proposed complaint in intervention indicate
that she seeks only to assert her interest in the registry funds as a judgment creditor, the court
grants a limited intervention for the purpose of determining Pappas’ rights in the funds held
in the state court registry. See, e.g., McDonald, 430 F.2d at 1071-73 (granting limited
intervention to assert subrogation interest in funds held in court registry). The court
otherwise denies the motion.
IV
The court now turns to Brendel’s motion to confirm the Arbitration Award, enter final
judgment, and release funds to plaintiff, Pappas’ objection to confirmation, and Scott and
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SSB’s motion to vacate the Arbitration Award.
A
Review of an arbitration award is “exceedingly deferential.” Weber v. Merrill Lynch
Pierce Fenner & Smith, Inc., 455 F.Supp.2d 545, 548 (N.D. Tex. 2006) (Fitzwater, J.) (citing
Brabham v. A.G. Edwards & Sons Inc., 376 F.3d 377, 380 (5th Cir. 2004)). When the
Federal Arbitration Act applies, as here, the court will set aside an arbitration award “‘only
in very unusual circumstances.’” Fountoulakis v. Stonhard, Inc., 2003 WL 21075931, at *4
(N.D. Tex. May 9, 2003) (Fitzwater, J.) (quoting Williams v. CIGNA Fin. Advisors Inc., 197
F.3d 752, 757 (5th Cir. 1999)). Courts “must” confirm the arbitration award unless there is
a ground for correction, modification, or vacatur under 9 U.S.C. §§ 10(a) or 11. See
Citigroup Global Mkts., Inc. v. Bacon, 562 F.3d 349, 358 (5th Cir. 2009) (holding there are
no longer nonstatutory grounds for vacating arbitration awards). Section 10(a), which
prescribes the grounds for vacating an arbitration award, “does not provide for vacatur of an
arbitration award based on the merits of a party’s claim,” and thus the court “do[es] not have
authority to conduct a review of an arbitrator’s decision on the merits.” Householder Grp.
v. Caughran, 354 Fed. Appx. 848, 851 (5th Cir. 2009) (per curiam) (citing Kergosien v.
Ocean Energy, Inc., 390 F.3d 346, 357 (5th Cir. 2004), overruled on other grounds by
Bacon, 562 F.3d 349)). “‘The court may not vacate the [arbitrator’s] award based on mere
errors in interpretation or application of the law, or mistakes in factfinding.’” Weber, 455
F.Supp.2d at 549 (quoting Mantle v. Upper Deck Co., 956 F. Supp. 719, 726 (N.D. Tex.
1997) (Fitzwater, J.)). “The court must resolve any doubts or uncertainties in favor of
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upholding the award.” Id. (citing Brabham, 376 F.3d at 385 n.9). “By consenting to
arbitration, parties exchange ‘the procedures and opportunity for review of the courtroom for
the simplicity, informality, and expedition of arbitration.’” Mantle, 956 F.Supp. at 726
(quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628
(1985)).

“The question the court asks is ‘whether the arbitration proceedings were

fundamentally unfair.’” Weber, 455 F.Supp.2d at 549 (quoting Forsythe Int’l, S.A. v. Gibbs
Oil Co. of Tex., 915 F.2d 1017, 1020 (5th Cir. 1990)).
B
Brendel moves to confirm the Arbitration Award, for judgment, and for release of the
registry funds. Pappas objects to Brendel’s motion to the extent he seeks release of the
registry funds or entry of a judgment that adjudicates the respective rights of Pappas and
Brendel to the funds. Scott and SSB move to vacate the Arbitration Award, contending that
Brendel unlawfully obtained some of his arbitration evidence by accessing defendants’
financial records without their authorization.3 They maintain that, by considering this
evidence, the arbitrator manifestly disregarded Florida law, and the Arbitration Award should
be vacated on that basis. Defendants acknowledge that “manifest disregard of the law” is no
longer recognized as a ground for vacatur in the Fifth Circuit, see Bacon, 562 F.3d at 358,
but they nevertheless urge the court to consider their argument on public policy grounds.

3

They rely on Fla. Stat. Ann. §§ 655.0322(6), 655.059(2)(b).
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C
The court concludes that the Arbitration Award must be confirmed, and that Brendel
is entitled to judgment confirming the Arbitration Award. Scott and SSB have not shown
that the arbitrator improperly relied on their financial records, at least for the reason that they
agreed to admit the records in question as a joint exhibit at arbitration. And in any event,
Scott and SSB do not contend that consideration of the records corresponds to any
recognized ground for vacatur of the Arbitration Award. See id. Brendel is therefore entitled
to judgment against Scott and SSB confirming the Arbitration Award and awarding judgment
in his favor in the amount of the Arbitration Award. See id.
Brendel has not yet shown, however, that he is entitled to recover the funds held in
the state court registry. His request to release the registry funds is therefore denied without
prejudice. Brendel and Pappas are directed to confer and submit a joint scheduling proposal
for adjudicating priority of their claims to the registry funds. This does not revive any
deadlines in the court’s December 6, 2016 scheduling order regarding Brendel’s claims
against Mary, all of which have now expired.
*

*

*

Accordingly, the court grants Pappas’ motion to intervene for the purpose of
determining her rights in the funds held in the state court registry; grants in part and denies
in part Brendel’s request for judicial notice; grants in part and denies in part Brendel’s
motion to confirm the Arbitration Award, enter final judgment, and release funds; and denies
Scott and SSB’s motion to vacate the Arbitration Award. The court is entering a Rule 54(b)
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final judgment today confirming the Arbitration Award and awarding Brendel the sum of
$1,018,254.22 from Scott and SSB.
SO ORDERED.
March 30, 2017.

_________________________________
SIDNEY A. FITZWATER
UNITED STATES DISTRICT JUDGE

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