Bunnett & Co., Inc. et al v. Dores
REPORT AND RECOMMENDATIONS that the District Court GRANT IN PART and DENY IN PART Plaintiffs 179 Amended Motion for Order to Show Cause; IT IS RECOMMENDED that the District Court FIND Frank Dores, Ray Gearheart, and Todd Gearheart in contempt of th is Courts 01/13/16 47 Temporary Restraining Order; IT IS RECOMMENDED that the District Court HOLD Frank Dores, Ray Gearheart, and Todd Gearheart jointly and severally liable for damages in the amount of $20,000.00 and Plaintiffs reasonable att orneys fees and costs; IT IS RECOMMENDED THAT all further relief requested be DENIED; IT IS RECOMMENDED that following the District Courts adoption of this Report and Recommendation, this case be REFERRED back to the undersigned for resolution on the issue of attorneys fees and costs. IT IS FINALLY RECOMMENED that the District Court GRANT the Joint 190 Motion to Dismiss Voluntarily with Prejudice and DISMISS WITH PREJUDICE Plaintiffs claims in the 190 Amended Motion for Order to Show Cause made against Wawasan and Gareth Cheong based on those parties settlement of those issues.Signed by Judge Andrew W. Austin. (klw)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
BUNNETT & CO., INC., et al.
REPORT AND RECOMMENDATION
OF THE UNITED STATES MAGISTRATE JUDGE
THE HONORABLE LEE YEAKEL
UNITED STATES DISTRICT JUDGE
Before the Court are Plaintiffs’ Amended Motion for Order to Show Cause (Dkt. No. 179),
Plaintiffs’ Brief in Support (Dkt. No. 205), Todd Gearheart’s Response (Dkt. No. 209), Ray
Gearheart’s Response (Dkt. No. 210), and Plaintiffs’ Reply (Dkt. No. 213); and Joint Motion to
Dismiss Voluntarily with Prejudice Movants’ Claims Against Respondent Wawasan (Dkt. No. 190).1
The District Court referred the above-motions to the undersigned Magistrate Judge for report and
recommendation pursuant to 28 U.S.C. § 636(b)(1)(A), FED. R. CIV. P. 72, and Rule 1(c) of
Appendix C of the Local Rules.
In this suit, Plaintiffs Bunnett & Co., Inc. (Bunnett) and Energy Feeds International, LLC
(EFI) accuse Frank Dores of breach of fiduciary duty and theft of trade secrets. The suit was
Plaintiffs and Respondents Wawasan and Gareth Cheong filed the Joint Motion to Dismiss
Voluntarily on the basis that they have reached a settlement agreement. As discussed at the
evidentiary hearing, the Court RECOMMENDS that the District Court GRANT the Joint Motion
to Dismiss Voluntarily with Prejudice (Dkt. No. 190). The Court further RECOMMENDS that the
District Court DENY Plaintiffs’ Amended Motion for Order to Show Cause with regard to alleged
contemnors Wawasan Agrolipids and Gareth Cheong.
originally filed in state court, and shortly thereafter was removed to federal court. Though not
directly relevant to the claims asserted here, a short description of the alleged dealings between
Bunnett and Dores provides helpful background to the issues before the Court.
Bunnett and EFI are in the business of distributing animal feed supplements for dairy cattle.
One of Bunnett and EFI’s main suppliers was Wawasan Agrolipids, Inc., a Malaysian company
owned by Gareth Cheong. Dores began working for EFI in November 2008, and eventually became
General Manager of both companies.
In his positions with EFI and Bunnett, Dores built
relationships with suppliers and customers, including Wawasan. In October 2015, Dores abruptly
resigned his positions, claiming that he was experiencing severe emotional distress that made it
impossible to continue performing his duties. He filed a workers’ compensation claim and filed for
disability benefits. However, at the same time, Dores incorporated a new entity that Plaintiffs assert
he intended to use to compete against Bunnett and EFI by using trade secrets Dores had
misappropriated from them—namely information on customers and suppliers, delivery capabilities,
shipping speed, stock of product, and prices.
As a result, Bunnett filed suit in state court, and on the same day requested a temporary
restraining order which the state court granted on November 24, 2015 (November TRO). The court
further set a preliminary injunction hearing for two weeks later. Shortly before that hearing was to
take place, however, Dores removed the case to federal court. After removal, Bunnett filed a motion
in this Court requesting a TRO, and the Court set it for a hearing on January 13, 2016. After the
hearing, the parties reached an agreement, and submitted an agreed TRO to Judge Yeakel. That TRO
was signed and entered on January 13, 2016 (January TRO). Dkt. No. 47. It reads, in relevant part:
IT IS ORDERED that Defendant Frank Dores and any persons in active concert or
participation with Dores who receive actual notice of this Order are commanded
forthwith to refrain from: . . . Directly or indirectly soliciting, either on behalf of
himself or any other person, employer, or entity, for the purpose of creating a
contractual or other business relationship any customer or supplier of Plaintiffs with
whom Dores had contact or for whom he performed services during his employment
Id. at 1. The January TRO further sets forth Dores’ required response were he to be contacted by a
former customer or supplier. Id. The January TRO was served on Gareth Cheong and Wawasan and
Ray Gearheart, a former independent contractor/sales person for Bunnett.2 Pl. Exh. 60. R. Gearheart
sent Todd Gearheart an email with the November TRO attached, to which T. Gearheart responded,
“And so it begins.” Pl. Exh. 50. On January 22, 2016, while the January TRO was in force, Bunnett
moved for a preliminary injunction. Dkt. No. 51. Three days later, Dores filed his Suggestion of
Bankruptcy, notifying the Court that he had filed a voluntary petition in the Eastern District of
California, thereby staying the case. Dkt. No. 52. The January TRO expired by its own terms on
February 1, 2016.
In September 2016, while the case was still under the automatic stay, Bunnett filed a motion
for Order to Show Cause (Dkt. No. 65) alleging that several non-parties had violated the TRO issued
by this Court. Dkt. No. 65. In this motion, Bunnett claimed that Wawasan, its Executive Director
Gareth Cheong, T. Gearheart and his company E&K Ag, R. Gearheart and his company Gearheart
Ag, and John Franklin all participated in a scheme in which Wawasan—with the help of the others
and several of Dores’s family members—sent two $20,000 payments to Dores in violation of the
TRO. At a status conference on the motion, the Court first ordered briefing to address jurisdictional
Two of the parties named in the present motion are father and son, Ray and Todd Gearheart.
The Court will differentiate between them by using their first initial along with their surname.
issues raised by several of the alleged contemnors. With the exception of Franklin, the Court found
that it had jurisdiction over the alleged contemnors. Dkt. Nos. 109 & 114. The Court then set a
schedule for discovery and a hearing on the merits of the motion. Shortly before the evidentiary
hearing, Dores’ bankruptcy suit was dismissed, thus lifting the automatic stay on this Court. Bunnett
then moved to amend its Motion for Order to Show Cause to add Dores as a Contemnor. The Court
granted this motion, and Dores was added as a party. His counsel sought leave to withdraw, which
was granted, and Dores has been representing himself since then.3 Finally, just days before the
hearing was set to begin, Bunnett, Wawasan, and Cheong reached an agreement on the motion, and
filed their joint motion to dismiss voluntarily. Dkt. No. 190.
The Evidentiary Hearing
The Court held a two-day evidentiary hearing on the Motion for Order to Show Cause on July
24-25, 2017. At this hearing the Court heard evidence on the issue of whether the two $20,000
payments made to Dores violated the January TRO. A number of witnesses testified via deposition.
Set forth below are the factual findings of this Court.
Dores had worked at EFI and Bunnett for about 7 years before leaving. When he left in
October 2015, Dores claimed that he was suffering from severe stress, and requested workers’
compensation forms. Pl. Exh. 18; Pl. Exh. 19 (R. Gearheart email stating that Dores’ attorney “had
him put in a claim on workmens [sic] comp to solidify his claim of stress” to which T. Gearheart
Dores did not file any post hearing briefing.
The Court sets out its findings and conclusions in narrative form. To the extent that any
finding of fact is more appropriately considered a conclusion of law, or vice verse, then such findings
or conclusions are deemed as such.
responded “Wow that is just wrong in so many ways”). Further, Cheong testified that at this same
time, Dores asked to be taken on as General Manager at Wawasan, at a salary of $20,000 per month.
Cheong Dep. 41:23–42:20. Cheong declined to hire him, stating that Wawasan did not have the
internal structure to accommodate such a position. Id. Documents also show that in October Dores
incorporated FM Ag Enterprises, Inc (FM Ag). Vol. 1 Tr. 97:11–98:20. Dores claimed that this was
a husband-wife venture and was incorporated for his wife’s real estate appraisal business. Id.
99:2–5. However, the corporate documents listed Dores as CEO with a salary of $120,000, while
his wife was Treasurer/Secretary and received no salary. Id. 98:13–14, 101:2–16. It further appears
that in at least one email at the time, he referred to FM Ag as “his” business. Id. 101:17–24,
102:7–24; Pl. Exh. 44. Moreover, FM Ag, on November 17, 2015 received a payment from
Wawasan, allegedly for a report drafted by Dores’ wife. Vol. 1 Tr. 107:1–3; Pl. Exh. 41. However,
each of the parties has admitted that no report was ever done. See Wei Su 11/1/16 Dep.
69:24–70:07; Cheong Dep. 92:09–22; cf. Vol 1 Tr. 107:9–15 (Dores stating that Wawasan sent the
payment to “keep [him] out of the business”).
Shortly before Dores left, Bunnett and Wawasan had a dispute that led to Wawasan stopping
shipments to Bunnett.5 RG Exhs. 9–11. This led to Bunnett having difficulty filling its customers’
orders. Also, a new Wawasan distributor appeared on the market at this time—Agrofin—which was
offering to distribute Wawasan products to United States purchasers, the business Bunnett had been
engaged in. Wei Su. 6/27/17 Dep. 23:16–19. At around the same time, R. Gearheart and another
independent contractor, John Franklin, who had been salesmen for Bunnett and EFI, also quit. Vol.
The facts of this dispute, though touched on at the hearing, are immaterial to the instant case,
and therefore will not be set forth here.
2 Tr. 84:14–22, 246:25–247:5. After leaving, both Franklin and R. Gearheart were introduced to
Wei Su and were taken on as independent sales agents for Agrofin. Vol. 2 Tr. 84:23–84:7; Pl. Exhs.
28 & 30. Wei Su first testified that she was introduced to Dores, R. Gearheart, and Franklin by
Cheong, and that they were to be working for Agrofin as independent sales agents. Wei Su 11/1/16
Dep. 38:21–39:09; Wei Su 6/27/17 Dep. 44:05-08; cf. Pl. Exh. 12 (showing R. Gearheart’s invoices
for $20,000 for services for Agrofin from December 2015 to June 2016).6 Emails between Wei Su
and several of Bunnett’s former customers show that during this period Dores introduced the
customers to Wei Su to supply their product needs.
Pl. Exhs. 33, 35, 38–40; see also Wei Su
6/27/17 Dep. 91:02–09. Though in her first deposition, Wei Su admitted that this was due to Dores
being taken on as a sales agent (Wei Su 11/1/16 Dep. 38:16–24), she later claimed that she did not
know why Dores was sending customers to Agrofin. Wei Su 6/27/17 Dep. 54:22-25, 91:16–92:06.
A number of emails between January and March 2016 cast additional light on Dores’
business activities during this period. On January 5, 2016, R. Gearheart—who at this time was a
sales agent for Agrofin—sent an email to KoreChem, Inc. representative Steven Schabel stating that
he, Franklin, and Dores were working together to distribute products. Pl. Exh. 54. Similarly, on
March 8-9, R. Gearheart and Cheong emailed each other about a plan to sell directly to dairies, in
which Cheong noted that he had spoken with Dores on the topic. Pl. Exh. 67; Cheong Dep.
36:16–37:16. And on March 28, R. Gearheart and Cheong discussed the same plan, and stated that
R. Gearheart should talk to Dores about it again. Pl. Exh. 71. When asked at the hearing about these
R. Gearheart and Franklin were sales agents for Agrofin, though Cheong clarified that
Wawasan paid them salaries as opposed to commissions. Cheong Dep. 43:25–44:17.
communications, R. Gearheart flatly denied discussing any business matters with Dores. Vol. 2 Tr.
106:14–107:24, 108:10–23, 146:6–147:5, 147:14–25.
Cheong testified that in December 2016, Dores contacted him to request monetary assistance,
and stated that he could not receive the money directly from Wawasan due to the lawsuit against
him. Cheong Dep. 174:21–24, 175:08–13, 181:23–182:10, 183:09–17; Vol. 2 Tr. 134:3–5; Pl. Exh.
57. Thus, Cheong, together with R. Gearheart, began planning a way to send Dores $40,000.
Cheong Dep. 159:16–19. The plan was for R. Gearheart to send checks to various of Dores’ family
members, and for these family members to pass the checks on to Dores. When R. Gearheart’s wife
refused to participate in the scheme, R. Gearheart then turned to his son, T. Gearheart, and asked him
to pass the money through his accounts instead. Vol. 2 Tr. 203:5–204:1; Pl. Exh. 57. The plan then
became that Wawasan would send $40,000 in January, divided into partial increments sent to Dores’
family members. Cheong Dep. 161:24–162:04; Pl. Exhs 56 & 57.7 The parties then decided that
a transfer of $40,000 at one time would attract too much attention. Pl. Exh. 62. They therefore
decided to send $20,000 in January, and $20,000 in March. Pl. Exhs. 11, 65, & 68. T. Gearheart
sent Wawasan an invoice from E&K Ag for $40,000 on January 15, 2016, to which Wawasan
provided a payment voucher for $20,000 on January 25, 2016. Pl. Exh. 64. Cheong then transferred
$20,000 to T. Gearheart’s personal account on January 26, 2016, and T. Gearheart sent a $15,000
check to Angel Hernandez, and a $5,000 check to Marcio Relva. Pl. Exh. 11. Then, on March 21,
2016, T. Gearheart sent an invoice to Wawasan for $20,000, “[b]eing payment for balance 50% of
invoice 8551 dated 15 January 2016 for services rendered.” Pl. Exh. 69. Wawasan sent the $20,000
There was apparently some confusion with this plan because Cheong originally believed
that T. Gearheart would make the payments out of E&K Ag’s pockets, and then request
reimbursement several months later. Cheong Dep. 161:10–22.
to T. Gearheart’s personal account and a payment voucher on March 28, 2016. Id.; Pl. Exh. 11.
Again, T. Gearheart distributed the payment in two checks for $10,000: one to JA Hernandez
Construction and another to Teresa Miranda. Pl. Exh. 11.
Given the divergent testimony and evidence, the Court addresses the credibility of the
witnesses separately. First, Dores was not credible.8 On the one hand, he claimed to be too sick to
engage in any business activities with Bunnett customers or suppliers. See, e.g., Pl’s Exh. 55 at 3
(stating, in Dores’ answer to an interrogatory that he never provided an alternate provider to a former
customer); Vol. 1 Tr. 79:25–80:3 (contending that he provided references for old customers, but
never “assisted” Agrofin). But on the other hand, in several emails during this time he discussed
prices for product, and introduced contacts to Agrofin. See, e.g., Pl. Exhs. 33, 35, 38–40; see also
Wei Su Dep. 6/27/17 91:02–09. Dores also claims a complete lack of memory regarding the entire
basis of this contempt action—Wawasan’s payments to him—that, frankly, is completely
unbelievable. See Tr. at 137–38.
Similarly, Dores’ comments regarding the incorporation of FM Ag are completely unworthy
of belief. Dores claims that the business was incorporated for his wife’s real estate appraisal
business. Vol 1 Tr. 99:2–5. But the corporate documents show that Dores was identified as the
CEO with a salary of $120,000, while his wife did not have a salary. The corporate name is
extremely similar to other businesses in the feed supplement industry (e.g., E&K Ag and Gearheart
This is not the first time that the undersigned has found Dores’ testimony to be problematic.
In a hearing on January 13, 2016, the Court noted that many of Dores’ statements looked “very much
like perjury,” and noted that it appeared Dores was “trying to commit a fraud on the Court.” Dkt.
No. 59 at 92.
Ag, the Gearhearts’ businesses), and there is nothing about the name that suggests it is a real estate
appraisal company. Moreover, Dores used the name FM Ag in an email to a potential feed
supplement customer. Id. 101:2–24, 102:22–24. FM Ag was also the recipient of a payment from
Wawasan in November of 2015. Id. 107:1–3. The FM Ag “invoice” to Wawasan supporting the
payment indicated it was for a research report, though the parties admitted that this was a sham, as
there was no research report ordered or completed. See Wei Su Dep. 11/1/16 69:24–70:07; Cheong
Dep. 92:09–22. Finally, in the bankruptcy case Dores filed to stay this litigation, the court dismissed
with prejudice Dores’ bankruptcy petition for bad faith after Dores failed to disclose in his schedule
of assets the two very same $20,000 payments that are at issue here. See Dkt. No. 150-2 at 28-29.
R. and T. Gearheart’s testimony similarly lacked credibility. For example, R. Gearheart
testified that he “never worked with Frank Dores at any time after he left [Bunnett].” Vol. 2 Tr.
104:07–11. Yet, in an email on January 5, 2016, sent to a representative at KoreChem, Inc., R.
Gearheart stated that he was working with both John Franklin and Dores in selling feed supplements.
Pl. Exh. 54. When confronted with this email at the hearing, R. Gearheart’s response was to contend
that he was lying in the email, not in his testimony. Vol. 2 Tr. 106:14–107:24, 108:10–23.
Similarly, R. Gearheart testified that Cheong had expressed concern that the payments would be seen
as a “pay-off” and that he knew Cheong wanted not to attract attention to the payments. Id.
13:11–18, 165:13–17. Notwithstanding the steps that were being taken to hide the payments, R.
Gearheart also testified that he never considered that the payments were in any way related to the
January TRO. Id. 165:18–24; see also id. 2 221:25–222:10 (stating that it never occurred to him that
Wawasan was paying Dores for services). T. Gearheart’s testimony was similarly inconsistent. First,
in his interrogatory answers—which he never amended—he completely denied knowledge of the
November TRO. See id. 21:12–22:15; Pl. Exh. 76. However, the evidence demonstrated that his
father sent him the November TRO in an email. Id. 22:6–24:4; Pl. Exh. 50. He also repeatedly
denied knowledge of the January TRO. Vol. 2 Tr. 18:1–4, 18:18–25, 25:5–11. Yet, his interrogatory
answer states that he was aware in January 2016 that Dores had an injunction against him. Id.
18:3–11. Moreover, in his deposition, T. Gearheart acknowledged that he knew the payments were
being made to Dores because “he had an injunction against him and he couldn’t work.” Id. 2
Gareth Cheong and Wei Su’s testimony is also filled with inconsistencies. In the most
obvious example, Wei Su provided two different answers to a nearly identical question asked of her
in both her June 2017 and November 2016 depositions. In the first, she admitted that Dores was
supposed to be paid as an independent sales agent (Wei Su 11/1/16 Dep. 38:16–24), but in her June
2017 deposition, when confronted with emails from Dores to former Bunnett customers, she claimed
that she did not know why Dores was contacting these companies on Agrofin’s behalf (Wei Su
6/27/17 Dep. 54:22-25) and flatly denied that he was a sales agent for Agrofin (Id. 91:16–92:06).
Cheong’s inconsistencies run along this same line. For example, he claimed that the payment in
November 2015 was made for the purpose of keeping Dores from going to work for Wawasan’s
competitors. Cheong Dep. 56:20–58:01, 58:22–59:02. However, just two months later, Cheong
contends that “the scenario ha[d] changed” and he was no longer concerned that Dores would go to
work for a competitor. Id. 195:21–196:04.
As a result of all of these inconsistencies, the Court finds that the testimony from Dores, R.
and T. Gearheart, Cheong and Wei Su was in large part not credible.
A court “possess[es] the inherent authority to enforce [its] own injunctive decrees.”
Travelhost, Inc. v. Blandford, 68 F.3d 958, 961 (5th Cir. 1995). “A party commits contempt when
he violates a definite and specific order of the court requiring him to perform or refrain from
performing a particular act or acts with knowledge of the court’s order.” Travelhost,68 F.3d at 958
(quoting Securities & Exchange Comm. v. First Fin. Grp. of Tex., 659 F.2d 660, 669 (5th Cir.
1981)). A court’s order “binds not only the parties subject thereto, but also non-parties who act with
the enjoined party.” Travelhost,68 F.3d at 958; see also Waffenschmidt v. MacKay, 763 F.2d 711,
726 (5th Cir. 1985) (“[A]ny party who knowingly aids, abets, or conspires with another to evade an
injunction or order of a court is also in contempt of that court.”).
A party moving for civil contempt must show “1) that a court order was in effect, 2) that the
order required certain conduct by the respondent, and 3) that the respondent failed to comply with
the court’s order.” Whitcraft v. Brown, 570 F.3d 268, 271 (5th Cir. 2009) (quoting Martin v. Trinity
Indus., Inc., 959 F.2d 45, 47 (5th Cir. 1992)). Moreover, the alleged contemnor must “receive actual
notice” of the order. FED. R. CIV. P. 65(d)(2); see also Waffenschmidt, 763 F.2d at 714. The moving
party bears the burden of proving contempt by clear and convincing evidence. Travelhost,68 F.3d
at 958 (citing Petroleos Mexicanos v. Crawford Ents., Inc., 826 F.2d 392, 401 (5th Cir. 1987)).
Clear and convincing evidence is “higher than the ‘preponderance of the evidence standard’ . . . but
not as high as ‘beyond a reasonable doubt.’” Travelhost,68 F.3d at 958 (citing United States v. Rizzo,
539 F.2d 458, 465 (5th Cir. 1976)). The Fifth Circuit has defined this standard in the contempt
context to mean:
that weight of proof which produces in the mind of the trier of fact a firm belief or
conviction as to the truth of the allegations sough to be established, evidence so clear,
direct and weighty and convincing as to enable the fact finder to come to a clear
conviction, without hesitancy, of the truth of the precise facts of the case.
Travelhost, 68 F.3d at 958 (quoting In re Medrano, 956 F.2d 101, 102 (5th Cir. 1992)).
To hold a non-party in civil contempt, the person must have actual notice of the court’s order.
FED. R. CIV. P. 65(d)(2). Both Dores and R. Gearheart were served with the January TRO, and
therefore received actual notice of it. See e.g., Pl.’s Exh. 60 (mail receipt to R. Gearheart). T.
Gearheart was not formally served with the January TRO, and therefore argues that he did not have
actual notice of it and cannot be held in contempt. He relies on Whitcraft in support of his argument.
Dkt. No. 209 at 21. In that case, the court found that there was no evidence that the alleged
contemnor, the mother of the defendant, was “aware of the specifics of the freeze order or knew that
the freeze order applied to assets which were not owned” by the defendant. Whitcraft, 570 F.3d at
273 n.6. Thus, the court held that she could not be held in contempt when she was not “aware of the
. . . specific terms of the order.” Id. at 273. T. Gearheart argues that he was not served with the
January TRO, nor was he aware of the specific terms of the order. Rather, he was merely aware that
“Dores had an injunction against him preventing him from working in the ‘ag industry.’” Vol. 2 Tr.
17:3–11. Throughout the hearing, T. Gearheart continued to assert that he “did not receive a copy
of the January TRO, [he] did not talk to [his] father about it, [he] did not know about it, and [he] was
not served with it.” Id. 18:15–17.
While “actual notice” is required to hold a person in contempt for violation of a court’s order,
“[p]laintiffs are not required to adduce direct evidence that [the contemnor] had actual notice of the
court’s orders,” because “[s]uch proof is often unavailable.” Waffenschmidt v. MacKay, 763 F.2d
711, 725 (5th Cir. 1985) (citation omitted). Though T. Gearheart did not receive a formal mailing
or “service” of the January TRO, there is nevertheless sufficient evidence showing, clearly and
convincingly, that he had knowledge of the Court’s order, what it required, and that he assisted Dores
in violating it. First, T. Gearheart admitted that he was aware that Dores was under an injunction
not to work in the agriculture industry. See Vol. 2 Tr. 17:3–11; see also Waffenschmidt, 763 F.2d
at 725 (looking to, among other things, the fact that “Johnson admitted that before he cashed the TNote, MacKay had told him that he was ‘under a lawsuit’”). He had received the November TRO
in an email sent by his father. Pl. Exh.50. Though he states that he never read the November TRO,
this is not credible, as he admits that he was aware that Dores was under an injunction requiring that
he refrain from working in the industry.
The conclusion that T. Gearheart was aware of the January TRO is further supported by his
many inconsistent sworn statements on this issue. First, in his interrogatory answers he denied
knowledge of both the November and January TROs, despite the fact that he later admitted to being
aware to some extent of the November TRO, and that his father emailed it to him . See Pl. Exh. 76
(Response Nos. 1 and 4). T. Gearheart contended that he never read the November TRO, yet,
without having read the email from his father, it is difficult to see how he could then, in January,
know that Dores was under an injunction. See also Vol. 2 Tr. 29:6–12 (admitting that he knew
Dores “was under an injunction”). Moreover, on cross examination, T. Gearheart testified that he
knew about the November TRO. See id. 18:7–9 (“The only TRO I knew about, that I got a copy that
Ray forwarded to me, was from November of 2015, which in turn I sent that to my employer.”); Pl.
Exh. 50 (showing an email chain between R. and T. Gearheart discussing the litigation and attaching
the November TRO). T. Gearheart’s equivocal testimony on this issue is evidence of his
untruthfulness regarding the state of his knowledge.
Perhaps the strongest evidence that T. Gearheart was aware of the TRO is the lengths to
which he went to shelter the fact that the payments he was facilitating were coming from Wawasan,
and going to Dores. In emails his father sent to him, his father made numerous statements making
it clear that they were actively working to transfer the money to Dores in a hidden, indirect manner.
In one exchange, R. Gearheart tells his son “The bad part of that Is [sic] Bunnetts lawers [sic] are
watching that company like hawks , you may want to send out 2-3 checks to different people that
will then loan Frank the money,” to which T. Gearheart replied: “Wow ok. I sure hope this doesn’t
come back somehow.” Pl. Exh. 57. In another, T. Gearheart noted, with reference to providing a
check, “This could bring undue attention that would require a considerable amount of explanation.”
Pl. Exh. 62. And when he sent the fake invoice for $40,000, he wrote “For your records in case this
was ever to blow up I would write on check ‘product research.” Id. Indeed, the very creation of the
fake invoice evidences T. Gearheart’s knowledge and intent. He admitted that he wrote and sent a
fake invoice to Cheong for $40,000 on January 15, 2016. See Pl. Exh. 61 (attaching an invoice and
asking “Does this work?”); Vol. 1 Tr. 205:19–206:14 (admitting that E&K Ag never participated in
a research study for Wawasan, and that the invoice numbering system was created solely for this
invoice); Cheong Dep. 192:16–193:2. He also admitted that Wawasan was sending him the
payments in order to conceal that they were the actual source of the funds:
Are you – are you disputing now your awareness that Gareth Cheong wanted
your help to conceal these payments?
That’s what I was told.
* * *
But, I mean, certainly you knew, based on what your —or it was your
understanding based on what your father told you that Gareth wanted your
help to conceal the payments, right? . . .
Vol. 2 Tr. 33:23–25; 34:12-17; see also Cheong Dep. 183:09–17. Together with the other evidence
already discussed, T. Gearheart’s knowing participation in sham transactions to hide the source of
the funds being delivered to Dores, provide clear and convincing evidence that he had notice of the
terms of the January TRO. See Waffenschmidt, 763 F.2d at 725–26 (“Proof of Johnson’s activities
in relation to his disposition of the funds, plus his demeanor at trial provided sufficient evidence of
his knowledge and intent to meet plaintiffs’ burden.”).
Violation of the January TRO
As noted earlier, to prove a contempt of a court order, the movant must show: (1) that there
a court order was in effect, (2) that the order required the enjoined party to refrain from specific
conduct; and (3) that the enjoined party failed to comply with the order. Whitcraft, 570 F.3d at 271.
Further, when someone other than the enjoined party is charged with contempt of an injunction, the
movant must show that the party had actual notice of the court’s order and worked in active concert
or participation with the enjoined party in violating the order. Waffenschmidt, 763 F.2d at 726. In
the following sections, the Court breaks these elements into their constituent parts and examines the
evidence as to each.
Court Order in Effect
First, there is no dispute that there was a court order in effect during the relevant time. The
TRO was in effect from January 13, 2016 to February 1, 2016. Thus, the first element is satisfied.
Conduct Enjoined by the January TRO
With regard to the conduct being enjoined by the TRO, the parties offer competing
constructions of the order to support their positions. While the Gearhearts offer a narrow
interpretation of the TRO, Bunnett argues that the Contemnors violated the clear terms of the TRO,
and, alternatively, that even if the exact terms of the TRO did not prohibit the exact conduct at issue,
the payments violated the “reasonably understood” terms of the order.
To arrive at their extremely narrow interpretation of the TRO, the Gearhearts separately
define each phrase of the document. First, R. Gearheart notes that the TRO only prohibited Dores
from soliciting “any customer or supplier” of Bunnett, and contends therefore that the TRO did not
prohibit him from soliciting former customers or suppliers. In support of this reading, R. Gearheart
supplies several cases in which the TRO specifically refers to former vendors. See Dkt. No. 210 at
22-23. From this he argues the TRO cannot apply to any relationship between Dores and Wawasan
because at the time of the TRO, Wawasan was not a supplier of Bunnett. He next notes that the TRO
prohibited Dores from soliciting customers or suppliers “for the purpose of creating a contractual
or other business relationship,” and argues that the phrase “other business relationship” should be
read to require something analogous to the creation of a business organization, such as a partnership,
limited liability company, or corporation. This, he argues, would allow simple business discussions
or plans so long as Dores did “not solicit to create the duty-bound relationships that arise from
partnerships, companies and corporations,” and thus would not apply to Wawasan’s employment of
Dores. Dkt. No. 210 at 27. Finally, both R. and T. Gearheart argue that the term “creating” in this
phrase should not be read to include “maintaining” or “performing” an existing relationship, so that
the TRO would only prohibit beginning a new relationship during the term of the TRO. Id. at 27-28;
Dkt. No. 209 at 28. Because Dores already had a relationship with Wawasan that began in
November 2015, under this construction the payments made in January and March would not be
This reading of the TRO is strained, to put it mildly. It is true, “the contempt power should
only be invoked where a specific aspect of the injunction has been clearly violated.” Piggly Wiggly
Clarksville, Inc.v. Mrs. Baird’s Bakeries, 177 F.3d 380, 383 (5th Cir. 1999). And an injunction
“must ‘state its terms specifically; and describe in reasonable detail . . . the act or acts restrained or
required.’” Hornbeck Offshore Servs., LLC v. Salazar, 713 F.3d 787, 792 (5th Cir. 2013). But,
“[t]hough a court order must be clear, a court ‘need not anticipate every action to be taken in
response to its order, nor spell out in detail the means in which its order must be effectuated,” and
“a district court is entitled to a degree of flexibility in vindicating its authority against actions that,
while not expressly prohibited, nonetheless violate the reasonably understood terms of the order.”
Id. (quoting Am. Airlines, Inc. v. Allied Pilots Ass’n, 228 F.3d 574, 578 (5th Cir. 2000)).
Here, it is clear that the TRO was intended to prohibit Dores from contact with any current
or former suppliers or customers of Bunnett and EFI for the purpose of assisting with distribution
or sale of product. R. Gearheart attempts to limit the TRO to only customers and suppliers who
were, at the time of the TRO, doing business with Bunnett or EFI. He argues that because Wawasan,
as of January 13, 2016, was not a current supplier of Bunnett or EFI, Dores was free to accept
payments from it. This reading ignores the existing circumstances when the TRO was agreed to.
To place the TRO in context, Bunnett and EFI sued Dores because they believed he had faked an
illness and taken sick leave, and then, while on leave, created a new corporation through which he
intended to purchase supplements from Wawasan and resell them himself to the very same entities
that Bunnett and EFI sold to when Dores was their general manager, cutting Bunnett and EFI out of
the transactions entirely. To suggest that Wawasan was not one of the “suppliers” to which the TRO
applied denies the reality of what the dispute was about. Moreover, the parties themselves clearly
believed the TRO encompassed Wawasan, as there is no other explanation for why it was served on
Cheong, and why the parties went through the elaborate machinations described above to hide a
payment from Wawasan to Dores. The argument that Wawasan was not a “supplier” of Bunnett
encompassed by the TRO is inconsistent with the language of the TRO, and is not in accord with the
facts of this case, or the understanding of the parties.
Similarly, the Gearhearts’ reading of the phrase “soliciting . . . for the purpose of creating a
contractual or other business relationship” is overly narrow. First, their attempt to limit “other
business relationship” as requiring that the discussions be about creating a new legal entity is
nonsensical. The plain language of the TRO, which uses the phrase “contractual or other business
relationship,” indicates that engaging in something less than a contractual relationship was
prohibited. Thus, Dores was not allowed to have any contact with parties with whom he had
previously worked in the purchase of feed supplement ingredients, or in the sale or distribution of
these products, if those conversations involved any sort of “business relationship” between Dores
and that party. This is further supported by the fact that the TRO included specific language Dores
was required to use to respond to any person in this category who contacted him.
Second, the narrow reading of “creating” does not fit with the other phrases of the TRO. T.
and R. Gearheart argue that the inclusion of the term “creating” in the phrase means the prohibition
only prevented Dores from forming a new relationship during the TRO term. Yet, the TRO also
specifically refers to”customer[s] or supplier[s] of Plaintiffs with whom Dores had contact or for
whom he performed services during his employment with Plaintiffs.” Thus, by its terms, the TRO
is plainly addressing contact with parties with whom Dores previously had a “business relationship,”
and did not solely prohibit him from starting a new relationship. “Creating” was needed because at
the time the TRO was entered, Dores had quit his position with Bunnett and EFI, and thus any future
relationship he might have with former customers or suppliers of Bunnett or EFI would be a newly
created business relationship between those parties and either Dores himself (through his new
corporation FM Ag), or some new employer of Dores (e.g., Agrofin). The clear meaning of the
order read as a whole in the context of the litigation and the pending motion for a temporary
restraining order, was to prohibit Dores from having contact with the customers or suppliers of
Bunnett and EFI with whom he had dealt while employed by Bunnett and EFI, for the purpose of
selling or distributing product—regardless of the customer or supplier’s current status with Bunnett.
Failure to Comply
As discussed previously, Bunnett and EFI contend that T. and R. Gearheart violated the
January TRO when they worked with Gareth Cheong and Wawasan to transfer $20,000 to Dores in
a hidden fashion on January 26, 2016, and again on March 28, 2016. This requires proof that they
either participated, or acted in active concert, with Dores in violating the TRO at the time it was in
place. Waffenschmidt, 763 F.2d at 726. Again, the Court will break these elements down, and
examine the evidence as to each.
Active Concert or Participation
The evidence clearly demonstrated that both Gearhearts were working in active concert with
Dores with regard to the payments from Wawasan. Dores requested the money from Wawasan and
supplied R. Gearheart with the names and addresses of the intermediaries he was to use to hide the
transfers. T. Gearheart then acted in concert with R. Gearheart and Dores to both receive the initial
payment from Wawasan, and then transfer the money to the intermediaries. T. Gearheart’s argument
that he was acting in concert with Wawasan and R. Gearheart, not Dores, is a red herring. T.
Gearheart acted in concert with R. Gearheart and Cheong, who in turn acted with Dores to evade the
terms of the TRO. The fact that T. Gearheart never had any direct communication with Dores is
irrelevant. The evidence clearly showed that he knew the ultimate beneficiary of his actions was
Dores. Moreover, T. Gearheart sent the payments to people he knew to be family members or
friends of Dores. As such, there is clear evidence that Dores and T. and R. Gearheart acted in
concert or participation in the actions at issue in this proceeding.
Violated the Terms
The evidence also shows that Dores, R. Gearheart, and T. Gearheart violated the terms of the
January TRO. First, it is important to note that none of the alleged contemnors dispute that
Wawasan sent Dores $40,000, and routed the money through T. Gearheart and several of Dores’
family members. The money was sent in two payments—one on January 26, 2016, and one on
March 28, 2016. Pl. Exh. 11. The parties all further acknowledge that each of the two payments was
broken up into smaller sums paid to Dores’ family members. This much is not in dispute.
What is disputed is why the $40,000 was paid to Dores. The contemnors allege that Cheong
and Wawasan made the payments as a charitable gesture to provide Dores some financial relief in
the wake of his pending bankruptcy and increasing litigation costs. T. and R. Gearheart were
therefore, according to the Contemnors, merely assisting a potential business partner, Wawasan, in
providing financial assistance to a former business associate, and that such a “gift” did not violate
the TRO. Bunnett and EFI, on the other hand, offer a different narrative. They argue that Wawasan
sent the payments to Dores for one of two reasons, either of which would violate the terms of the
TRO: (1) as a sort of non-compete or goodwill payment to retain his loyalty while he got himself
set up to replace Bunnett and EFI as Wawasan’s U.S. distributor; or (2) as payment for services
rendered in pointing former Bunnett customers to Agrofin, the new distributor Wawasan eventually
With regard to the Gearhearts’ claim that the payment was a gift, it is abundantly clear from
the evidence that the payment was not a charitable donation. First, R. Gearheart and T. Gearheart
both deny that they were friends with Dores. Vol. 1 Tr. 189:6–12; Vol. 2 Tr. 91:12–14. Dores
admits that the only gift he had received previously from Wawasan was a box of chocolates for
Christmas. Vol. 1 Tr. 123:16–18. Rather, the three were all business associates of Dores, and he
had little, if any, personal interactions with any of them outside this sphere. See Cheong Dep.
26:25–27:16, 30:12–33:14 (discussing the limited interactions with Dores in the nearly ten years they
had known each other). Moreover, when asked at a deposition about Wawasan’s previous charitable
giving habits, Cheong admitted that the payment to Dores was the largest donation Wawasan had
ever given. Id. 194:20–195:10. The next closest was a donation to a school in the amount of $7,500.
Id.9 Thus, the claim that the $40,000 paid to Dores was a gift is not believable. Cheong also
admitted that, due to the pending litigation, the transaction was structured so that the payments
would look “different” coming from T. Gearheart. Cheong Dep. 187:18–23. All of these facts taken
together make it clear that the payments were not made for charitable reasons.
The donation was for the sum of 30,000 ringgit. The current exchange rate for ringgit to
U.S. dollar is 4:1. Thus a 30,000 ringgit donation would (today) equal about US $7,500.
In their briefing, R. and T. Gearheart make the alternative argument that the mere payment
of funds to Dores cannot constitute contempt as neither of them did anything to aid or abet Dores
in soliciting a business relationship prohibited by the TRO. See Dkt No. 209 at 28; Dkt. No. 210 at
27-28. R. Gearheart compares this situation to that of the parties in Travelhost. In that case, the
Fifth Circuit found that the non-parties had not violated an injunction that prohibited the defendant
from continuing to run a publication. 68 F.3d at 965. The court noted that the complained of sale
of the publication was an arms-length transaction, and that the plaintiffs had failed to produce any
evidence that the defendant was working together with the non-parties to continue to publish. Id.
Likewise, R. Gearheart contends that Bunnett cannot prove that the parties violated the TRO simply
by showing that he and his son transferred money to Dores. However, it is clear from the evidence
that each of the contemnors participated in this transaction for the purpose of evading this Court’s
order. As noted above, the payments clearly were not made as a gift. The efforts to conceal the
payments also demonstrates a guilty knowledge that they were acting improperly.
Moreover, and to the point the Gearhearts raise, the evidence shows that Wawasan was
sending the payments to Dores in exchange for services he rendered in violation of the TRO. To
begin, the evidence points clearly to an attempt to evade the Court’s order. The parties all concede
that the tortured payment structure was used because Dores had informed them that he could not
receive the money directly. Cheong Dep. 182:01-03; Vol. 2 Tr. 34:12-17; Id. 134:3-5. The
backhand method of getting the money to Dores is by itself evidence that the contemnors were acting
to evade the court’s order. See Waffenschmidt, 763 F.2d at 724–25 (describing the contemnors’
handling of the T-Note and dissipation of the proceeds at issue as evidence of contempt). Further,
Dores was already trying to hide his continued relationship with Wawasan in the fall of 2015, as the
$20,000 Wawasan paid him in November was not paid directly to Dores, but instead through “his
wife’s” company, FM Ag, and was supported by a fake invoice for a “research study” that was never
performed, nor intended to be performed. See Wei Su Dep. 11/1/16 69:24–70:07; Cheong Dep.
Additionally, Wei Su’s and Cheong’s testimony regarding Dores’ role with Agrofin and
Wawasan in November further supports this inference. In her first deposition in November 2016,
Wei Su testified that Dores was intended to be an independent sales agent for Agrofin. Wei Su Dep.
11/1/16 38:16–24. Cheong had introduced Dores to Wei Su, along with the other independent sales
agents, R. Gearheart and John Franklin, none of whom she had met previously. Id. 38:21–39:09;
Wei Su Dep. 6/27/17 44:05-08. Wei Su later changed her testimony, stating that Dores had been
sending customers to Agrofin, but she did not know why he was doing it. Wei Su Dep. 6/27/17
54:14–25, 55:04–07, 59:18–20. When she was confronted with her prior testimony at the second
deposition, she claimed a lapse in memory, and could not answer for certain which was the correct
version of events. Id. 139:25–141:11. Much of Wei Su’s testimony is not credible, and this change
of her story and lapse of memory is another example. Cheong offered a slightly different reason for
the November payment. He claimed that the payment was intended as a sort of goodwill payment
to discourage Dores from going to work for any Wawasan competitors, but this is rebutted by the
fact that Dores began sending customers to Wawasan or Agrofin almost immediately after leaving
Bunnett and EFI. Compare Cheong Dep. 46:19-23 (testifying that the payment was made to keep
Dores from working for a competitor, and claiming no knowledge that Dores was providing referrals
to Agrofin) with id. 45:17-21 (admitting that Dores worked to promote Wawasan products in
November 2015). See also Wei Su Dep. 11/1/16 38:21–39:09 (testifying that Cheong introduced
Dores to Wei Su); Vol. 1 Tr. 107:24-108:4 (Dores testifying that he believed the payments were to
keep him from joining a competitor).
Of the three competing stories, the first one told by Wei Su is the one that is most supported
by the evidence. The record contains a number of emails from Wei Su to potential Wawasan
customers, on which Dores was copied, and which stated that Dores had given her the customers’
information. See, e.g., Pl. Exhs. 33, 35, 38–40; Wei Su Dep. 6/27/17 91:02–09. This clearly
supports Wei Su’s initial story that Dores was working at the time as an independent sales agent for
Agrofin. Though Dores argued, rather forcefully, that he did not “assist” any former customers, the
evidence clearly indicates otherwise. Cf. Vol. 1 Tr. 78:1–8 (“Not assisted. Referred.”). This
evidence shows that Dores was providing business referrals to Wawasan in November 2015, and was
paid $20,000 for that same month, which supports the inference that the $20,000 payments made in
January and March were also made to compensate Dores for his continued work as a sales agent for
Wawasan and Agrofin. See Am. Airlines, 228 F.3d at 583 (finding that communications sent prior
to the entry of the TRO were evidence supporting a finding that communications made after entry
of the TRO did not comply).
And there is evidence that Dores was continuing to assist former Bunnett customers in
January 2016. In an email from from R. Gearheart to KoreChem, Inc. in January, R. Gearheart states
that he, “Frank Dores and John Franklin” were interested in working with KoreChem. Pl. Exh. 54.
The email specifically notes that “[w]e have warehouses . . . for Palm product distribution” and asks
if “we should be working with Kore[Chem]?” Id. (emphasis added). When asked about this email
at the hearing, R. Gearheart first stated that he made a mistake with the verb tense in the email and
that he was not working with Dores at that time. Vol. 2 Tr. 106:22–107:11. However, he also
offered the competing story that he may have just been “trying to impress Mr. Schabel by telling him
something that wasn’t true.” Id. 107:20–24. Like much of the contemnors’ testimony, the Court
does not find this testimony credible. This email indicates that on January 5, Dores was working
with R. Gearheart and Franklin to continue in the feed business.
Similarly, there was another email exchange from March in which Cheong and R. Gearheart
discuss Dores’ advice on selling directly to dairies, indicating that Dores was still communicating
with Cheong regarding distribution of Wawasan supplements. Pl. Exh. 67; Cheong Dep. 37:05–16,
37:19–39:03. Added to this is the admission by Cheong that communications between the two
mainly occurred over the phone, as opposed to email. See Cheong Dep. 177:09–11. This provides
additional evidence that Dores continued to provide support to Wawasan during the early spring of
2016. Pl. Exh. 71 (R. Gearheart stating:“I know Frank has really supported this, but Im [sic] not sure
he sees the big picture.” ).
Of course, the TRO precluding Dores from working in the agricultural industry was not in
place on January 5 or in March. Rather, its term was from January 13 to February 1, 2016. The
record does not contain any direct evidence of actual sales made by Dores during this period. In fact,
there appear to be no communications for this time period from Dores; though, the Court knows that,
at the very least, he answered a phone call from R. Gearheart in order to give him the information
on where to send the payments. Vol. 2 Tr. 127:17–25.10 However, direct evidence of sales by Dores
Dores already has demonstrated a history of destroying evidence. Just days before Dores
left Bunnett, he updated the operating system of his work laptop, which had the effect of making it
impossible to see if he had deleted files or transferred files off the computer, and a forensic examiner
concluded that “all files created in the five years between the first use of the computer . . . and the
upgrade . . . must have been deleted from the laptop prior to the upgrade.” See Dkt. No. 22-2 at 23,
24. He also reset his work iPad to factory settings, wiping all of the user data off of that device.
Thus, the record’s lack of any direct communications between Dores and his former customers
is not required to find that the parties violated the TRO. Rather, the evidence must show that the
payments were made in compensation for Dores soliciting parties on behalf of Wawasan to create
a business relationship with them. These events in early January and March suggest exactly that.
In addition to the strong inference created by the two communications in January and March,
there are also a number of other facts which support the conclusion that Wawasan paid Dores for his
work as an independent sales agent. First is the fact that R. Gearheart was paid $20,000 monthly for
his work as a sales agent. Cheong Dep. 43:05–16; Pl. Exh. 12. The same $20,000 per month figure
is also the amount that Dores requested from Wawasan to become the General Manager. Cheong
Dep. 42:17–20. Though Cheong stated that he did not hire Dores, in November, January, and March,
Wawasan sent payments for that exact amount to Dores. See Cheong Dep.41:23–42:22. Similarly,
the parties were clearly trying to avoid discovery of the payments by sending them surreptitiously.
R. Gearheart testified that Cheong “was concerned that the payments from Wawasan to Frank Dores
would be construed as a pay-off.” Vol. 2 Tr. 134:11–14. He further expressed doubt that the
payment was made as a charitable donation. Id. 204:2–9 (“[T]here was always a little doubt of what
was—what was happening here or what was going on.”). Cheong additionally testified that he
originally intended to have T. Gearheart make the payments to Dores, and then reimburse him,
because he believed the payments might look less suspicious coming from T. Gearheart. Cheong
Dep. 187:20–23 (stating: “I mean, if—if Todd has donated to Frank and then he’s claiming back
from Wawasan, I think it looks—I think it—to me, it looks like a different perspective.”).
during the pendency of the TRO is as likely the result of Dores hiding evidence of those
communications, as it is because no such communications occurred.
Additionally, Cheong’s claim that the purpose of the November payment was different from
the purposes for those made in January and March was unpersuasive. In his deposition, he testified
that he paid Dores $20,000 in November because he was worried about Dores going to work for a
competitor, but also admitted that he no longer had that fear when he paid Dores the exact same
amount in January. Cheong Dep. 195:21–196:09. It is not credible that the payment in November
was made for work-related purposes, while the two $20,000 payments made two months later were
purely charitable. As noted above, it is clear that the payments were not made to simply help out a
friend, especially given the lukewarm, at best, relationship that Cheong and the Gearhearts had with
Dores. See Cheong Dep. 26:25–27:16, 30:12–33:14 (stating that he had met Dores’ wife and
daughters once at a conference and that Dores had met his wife, also on a company trip); Vol. 1 Tr.
189:6–12; Vol. 2 Tr. 91:12–14. It strains credulity that the November, January, and March payments
were for different purposes. The Court can infer from the evidence described above that Wawasan’s
$20,000 payments to Dores in January and March were intended as payments for services Dores had
provided to Wawasan. Viewing the evidentiary record as a whole, and taking into account the lack
of credibility of the respondents, the Court concludes that there is clear and convincing evidence that
Wawasan made the two transfers of $20,000 in compensation for Dores’ work to solicit Bunnett and
EFI customers and suppliers with whom Dores had contact while he worked for Bunnett and EFI,
for the purpose of creating a business relationship with them.
During the Pendency of the TRO
T. and R. Gearheart assert that they cannot be held in contempt for the March 28 payment
since it was well outside the scope of the January TRO. In response, Bunnett points to evidence
showing that the two payments were originally meant to be a single $40,000 payment to be paid in
January. See Pl. Exh. 64 at 2; Pl. Exh. 57. As already described, the emails indicate that Cheong
decided that such a large payment would be a red flag, and decided to separate the payments into two
$20,000 sums, to be divided into even smaller amounts sent to Dores’ family members before
ultimately reaching Dores. RG Exh. 19. Thus, though Bunnett and EFI are correct that Wawasan
originally intended to send the entire $40,000 during the pendency of the TRO—and even made this
decision while the TRO was in effect—the Court concludes that his not enough evidence on which
to find that the March payment violated the TRO. The Court therefore agrees that the March 28
payment did not violate the January TRO.11
On the other hand, the January 26 payment clearly violated the January TRO. The payment
was made during the January 13 to February 1, 2016 time period, and, as already found, was
compensation to Dores for work prohibited by the TRO. T. Gearheart makes a specious argument
that the plan to send the first $20,000 was already in place before the TRO was entered, and so that
payment cannot provide a basis for contempt. Regardless of when the decision to make the payment
was made, the transfer took place on January 26, which is clearly within the relevant time period.
See Pl. Exh. 65 (showing email between R. and T. Gearheart confirming the transfer); Pl. Ex. 11
(showing a $20,000 deposit and checks in the amounts of $15,000 and $5,000 on January 26, 2016).
What matters is not when decisions were made, but rather when affirmative acts were taken.
Further, though T. Gearheart had agreed to participate in the scheme prior to the entry of the TRO
(Pl. Exh. 57), there were more communications in furtherance of the scheme that took place after the
If the standard was “a preponderance of the evidence” the result might have been different.
The January invoice (“8551”) was for the full amount of $40,000. The invoice for March reads:
“Being payment for balance 50% of invoice 8551 dated 15 January 2016 for services rendered.”
Thus, the March payment is tied closely to the January payment, and the fake invoice for the full
$40,000 was sent during the time the TRO was in place.
TRO was in effect. In fact, the determination to send $20,000 rather than $40,000 occurred after
January 13. Pl. Exh. 62; RG Exh. 19 (email between T. Gearheart and Cheong on January 22
confirming that “payment will come in two tranches”). Similarly, the sham invoice (for $40,000)
that T. Gearheart provided was dated January 15, 2016 (Pl. Exh. 64 at 2), and Wawasan’s payment
voucher (for half of the above invoice) was dated January 25, 2016 (Pl. Exh. 64 at 3), all within the
TRO time frame. See also RG Exh. 20 (email between R. and T. Gearheart on January 14 regarding
the invoice). The transfers of funds from Wawasan to T. Gearheart, and from T. Gearheart to Dores’
family members, were all made during the term of the TRO, and this is sufficient to demonstrate that
the contemnors’ acts in violation of the TRO took place during the pendency of the TRO.
For the reasons set forth above, the Court finds by clear and convincing evidence that Dores
violated the January TRO when he accepted payment from Wawasan for his assistance to Agrofin
and Wawasan, and when he worked with the Gearhearts to funnel the money from Wawasan to his
family members, and the Court also finds that the Gearhearts acted in concert with Dores to facilitate
those payments, knowing they were prohibited by the TRO.12
“Judicial sanctions in civil contempt proceedings, may in a proper case, be employed for
either or both of two purposes: to coerce the defendant into compliance with the court’s order, and
to compensate the complainant for losses sustained.” American Airlines, Inc. v. Allied Pilots Ass’n,
T. and R. Gearheart—rather amazingly, given the evidence—argue that they acted in good
faith, and therefore should not be held in contempt. Good faith, however, is not a defense to civil
contempt. Waffenschmidt, 763 F.2d at 726. Moreover, the evidence strongly demonstrates that both
the Gearhearts acted with full knowledge of the circumstances, and not only did they not act in good
faith, it could be argued that acted with affirmative bad faith. This argument fails.
228 F.3d 574, 585 (5th Cir. 2000) (quoting United States v. United Mine Workers of America, 330
U.S. 258, 303–04 (1947)); see also Travelhost, 68 F.3d at 961–62. A court “has broad discretion
in the assessment of damages in a civil contempt proceeding.” American Airlines, 228 F.3d at 585
(quoting Long Island Rail Co. v. Bhd. of Rail. Trainmen, 298 F. Supp. 1347, 1347 (E.D.N.Y. 1969)).
“The purpose is to compensate for the damages sustained.” Id. Here, Bunnett asks for disgorgement
of the two $20,000 payments to Dores and for reasonable attorney’s fees and costs.
The Plaintiffs first ask for disgorgement of the two payments sent to Dores in January and
March 2016. T. and R. Gearheart argue that disgorgement is not the appropriate remedy in this case,
and contend that they cannot be ordered to disgorge the payments as they were not given this money.
Bunnett responds that disgorgement is permitted in civil contempt cases, and further that the
Gearharts can be held jointly and severally liable with Dores.
R. Gearheart first contends that disgorgement should never be an appropriate remedy in civil
contempt. Dkt. No. 210 at 42–44. In support, he points to S.E.C. v. Huffman, 996 F.2d 800, 802 (5th
Cir. 1993) for the principle that disgorgement is a remedy meant to prevent unjust enrichment of the
defendant. This, he argues, means that the remedy is inappropriate in civil contempt where the only
purpose is to either compensate the complainant or coerce the contemnor into compliance. Dkt. No.
210 at 42–43. However, courts have found that disgorgement is an appropriate remedy in civil
contempt cases. See, e.g., FTC v. Leshin, 618 F.3d 1221, 1237 (11th Cir. 2010) (“We afford the
district court wide discretion in fashioning an equitable remedy in civil contempt, which includes
ordering disgorgement . . . .”).13 Thus, the proper question is whether disgorgement is appropriate
in this case.
Here, the Court finds that disgorgement is an appropriate remedy. Courts have “broad
discretion” in fashioning an appropriate remedy for civil contempt. American Airlines, 228 F.3d
at 585. R. and T. Gearheart argue that they should not be required to disgorge the $20,000 because
they never received the money, but merely transferred it to Dores. However, parties that “join
together to evade a judgment, . . . become jointly and severally liable for the amount of damages
resulting from the contumacious conduct.” Am. Airlines, Inc. v. Allied Pilots Ass’n, 53 F. Supp. 2d
909, 942 (N.D. Tex. 1999) (quoting N.L.R.B. v. Laborers’ Int’l Union of N.A., AFL—CIO, 882 F.2d
949, 955 (5th Cir. 1999)). Because the Court has found that R. and T. Gearheart acted in concert
with Dores to violate the Court’s order, they may be held jointly and severally liable with him for
the damages, in this case $20,000.
Finally, Bunnett requests its reasonable attorney’s fees and costs. As this Court has found
that Dores and the Gearhearts should be held in contempt for violating the January TRO, the Court
may also award the movants’ reasonable attorney’s fees and costs. See Waffenschmidt, 763 F.2d
at726–27 (citing F.D. Rich Co., Inc. v. United States ex rel Industrial Lumber Co., Inc., 417 U.S.
116, 129 (1974)) (“Based on the evidence discussed in the previous sections, the court had ample
evidence to conclude that Currey and Johnson aided and abetted MacKay in violating the court’s
injunction. This vexatious conduct justified the award of attorney’s fees against them.”). As Bunnett
See also Bd. of Supervisors of the La. State Univ. v. Smack Apparel, 574 F. Supp. 2d 601,
606 (E.D. La. 2008); Buffalo Wings Factory, Inc. v. Mohd, 574 F. Supp. 2d 574, 581–82 (E.D. Va.
2008); Manhattan Inds., Inc. v. Sweater Bee by Banff, Ltd., 885 F.2d 1 (2d Cir. 1989).
has not submitted its request and documentation of its reasonable attorney’s fees and costs, the Court
RECOMMENDS that the District Court REFER determination of the matter to this Court
following adoption of the Report and Recommendation.14
This undersigned RECOMMENDS that the District Court GRANT IN PART and DENY
IN PART Plaintiffs’ Amended Motion for Order to Show Cause (Dkt. No. 179) . In particular, the
Court RECOMMENDS that the District Court FIND Frank Dores, Ray Gearheart, and Todd
Gearheart in contempt of this Court’s January 13, 2016 Temporary Restraining Order (Dkt. No. 47).
The undersigned FURTHER RECOMMENDS that the District Court HOLD Frank Dores, Ray
Gearheart, and Todd Gearheart jointly and severally liable for damages in the amount of $20,000.00
and Plaintiffs’ reasonable attorney’s fees and costs, and DENY all further relief requested.
The undersigned FURTHER RECOMMENDS that following the District Court’s adoption
of this Report and Recommendation, this case be REFERRED back to the undersigned for
resolution on the issue of attorney’s fees and costs. Finally, the undersigned RECOMMENDS that
the District Court GRANT the Joint Motion to Dismiss Voluntarily with Prejudice (Dkt. No. 190),
and DISMISS WITH PREJUDICE Plaintiffs’ claims in the Amended Motion for Order to Show
Cause (Dkt. No. 190) made against Wawasan and Gareth Cheong based on those parties’ settlement
of those issues.
Though nothing has changed since the Court ruled on this issue, in his briefing T. Gearheart
reasserted his argument that the Court does not have jurisdiction over him. For the reasons already
expressed in a previous ruling, the Court rejects this argument. See Dkt. No. 109, adopted by Dkt.
The parties may file objections to the Recommendations contained above. A party filing
objections must specifically identify those findings or recommendations to which objections are
being made. The District Court need not consider frivolous, conclusive, or general objections. See
Battle v. United States Parole Comm’n, 834 F.2d 419, 421 (5th Cir. 1987).
A party's failure to file written objections to the proposed findings and recommendations
contained in this Report within fourteen (14) days after the party is served with a copy of the Report
shall bar that party from de novo review by the District Court of the proposed findings and
recommendations in the Report and, except upon grounds of plain error, shall bar the party from
appellate review of unobjected-to proposed factual findings and legal conclusions accepted by the
District Court. See 28 U.S.C. § 636(b)(1)(C); Thomas v. Arn, 474 U.S. 140, 150–53, 106 S. Ct. 466,
472-74 (1985); Douglass v. United Servs. Auto. Ass’n, 79 F.3d 1415, 1428–29 (5th Cir. 1996) (en
SIGNED this 6th day of March, 2018.
ANDREW W. AUSTIN
UNITED STATES MAGISTRATE JUDGE
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