Wei et al v. Rocky Point International LLC

Filing 24

ORDER signed by Judge J. P. Stadtmueller on 12/2/2016 DENYING 3 Plaintiff's Motion for Temporary Restraining Order and Preliminary Injunction. (cc: all counsel) (cb)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
SEAH CHEE WEI and TAN SUAH PIN,
Plaintiffs,
v.

Case No. 16-CV-1282-JPS

ROCKY POINT INTERNATIONAL LLC,
Defendant.

ORDER

In this action, Plaintiffs, Liquidators of Traxiar Drilling Partners II
Pte., Ltd. (“Traxair”), assert several causes of action arising from allegedly
fraudulent transfers of funds to Defendant Rocky Point International LLC
(“Rocky Point”). (Docket #1). On September 26, 2016, Plaintiffs filed an
expedited motion for temporary restraining order and preliminary injunction
which seeks to restrain Defendant from transferring the subject assets as well
as a home in the state of Wisconsin which was purportedly renovated using
a portion of those funds. (Docket #3). The Court set an expedited briefing
schedule for the motion. (Docket #18). The motion is now fully briefed and,
for the reasons stated below, it will be denied.
1.

BACKGROUND
The following facts, most of which are undisputed, are drawn from

the complaint and the parties’ submissions. In late 2013, Symphony Ventures
Pte. Ltd. (“Symphony”) entered into a loan agreement for $15 million with
Traxiar in order to finance the down payment on the Somnath, an oil rig
located in Qatar. Pursuant to the agreement, in December 2013, Symphony
advanced $6 million of the $15 million loan to a bank account owned by Dag
Dvergsten Pte., Ltd. (“DDPTE”). The transfer was not made directly to
Traxair because according to Mr. Dvergsten, a Norwegian businessman and

owner of DDPTE, Traxiar did not have its own bank account. Once it did
have an account, DDPTE was to transfer the $6 million to Traxiar’s account.
Plaintiffs allege that DDPTE did not follow through on its promise.
Instead, on December 27, 2013, DDPTE transferred $3.25 million of the $6
million to TY Global, LLC (“TY Global”), a company located in Houston,
Texas. Three days later, on December 30, 2013, TY Global transferred $2.25
million to AT Offshore, LLC (“AT Offshore”), another Houston company. On
January 2, 2014, AT Offshore transferred $2 million to Rocky Point, which is
located in Pewaukee, Wisconsin. All the transfers were by bank wire. Mr.
Dvergsten does not have an ownership interest in either TY Global or AT
Offshore but, at the time of the transfers, he is alleged to have owned and
controlled DDPTE and Rocky Point. Because it appears that Mr. Dvergsten
transferred Traxair’s funds through TY Global and AT Offshore into a
company which he controls, Plaintiffs believe that Dvergsten intended to
keep for himself the $2 million transferred to Rocky Point rather than transfer
it to Traxair.
According to Rocky Point, the $3.25 million transferred to TY Global
was for commissions and fees for brokerage services. The loan agreement
between Symphony and Traxair contemplated Traxair paying brokers for
their services in connection with the oil rig purchase. TY Global transferred
some of that payment to AT Offshore, which then sent $2 million to Rocky
Point. Rocky Point claims that it received the $2 million so that it could
reinvest it for TY Global’s benefit. Rocky Point allegedly used most of the
funds to renovate a lake house in Pewaukee, Wisconsin.
Eventually, Traxiar defaulted on its loan from Symphony because the
Somnath was not available for sale. Traxiar never purchased the Somnath
and never returned the $6 million. Plaintiffs, acting as liquidators for Traxair,
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have recovered funds so that the balance due from Traxiar is now just a little
more than $4.3 million.1
In this action, Plaintiffs seek to recover Rocky Point’s $2 million
pursuant to the Wisconsin Uniform Fraudulent Transfers Act (“WUFTA”),
which allows a creditor to recover transfers made either “[w]ith actual intent
to hinder, delay or defraud any creditor” or “[w]ithout receiving a
reasonably equivalent value in exchange for the transfer.” See Wis. Stat. §
242.04(1). Plaintiffs say that both circumstances occurred here, since, among
other things, there are no business relationships between TY Global, AT
Offshore, and Rocky Point that would provide a justification for the transfers.
Moreover, Plaintiffs assert, the allegedly secretive nature of the transactions
indicates that they were undertaken with the intent to defraud Traxair. In
addition to their WUFTA claims, Plaintiffs assert numerous related commonlaw causes of action, including unjust enrichment and conversion.
Plaintiffs originally filed this action in the U.S. District Court for the
Southern District of Texas, where TY Global and AT Offshore are located.
However, the district court there dismissed Rocky Point from that case for
want of personal jurisdiction. Plaintiffs then filed their complaint in this
court, and they now seek a preliminary injunction restraining $2 million of

1

Although not relevant to the disposition of the instant motion, Rocky
Point asserts that it is Symphony, the only remaining creditor of Traxair, that has
swindled Dag Dvergsten and his related entities, not the other way around.
Rocky Point contends that the Somnath was available for sale and that, despite
this, Symphony wrongfully accelerated payment of the loan agreement, thereby
forcing Traxair into liquidation. (Docket #22 at 9). In the process of liquidating
Traxair, Rocky Point alleges that Plaintiffs have recovered far more than they
were ever originally entitled to. Id. at 9–10. Thus, in Rocky Point’s view,
Symphony is using Traxair’s liquidation not to offset its losses but to make a
profit on the failed deal. See id.

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Rocky Point’s assets and the Wisconsin lake house during the pendency of
these proceedings.
2.

APPLICABLE LAW
Plaintiffs must establish each of the following elements to be entitled

to a preliminary injunction: (1) that they are likely to succeed on the merits;
(2) that they are likely to suffer irreparable harm in the absence of
preliminary relief; (3) that the balance of equities tips in their favor; and (4)
that an injunction is in the public interest. D.U. v. Rhoades, 825 F.3d 331, 335
(7th Cir. 2016). A preliminary injunction is “an extraordinary remedy and is
never awarded as of right.” Knox v. Shearing, 637 F. App’x 226, 228 (7th Cir.
2016). To meet their burden, Plaintiffs must make a “clear showing that [they
are] entitled to such relief.” Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 22
(2008). WUFTA permits courts to issue preliminary injunctions against
further disposition of the subject assets “[s]ubject to applicable principles of
equity and in accordance with applicable rules of civil procedure.” Wis. Stat.
§ 242.07(c)(1).
3.

ANALYSIS
Plaintiffs have not made the robust showing needed to secure a

preliminary injunction in this case. The Court need only discuss one of the
required elements—irreparable harm—to show why Plaintiffs’ motion must
be denied.
Plaintiffs have not established that they will suffer irreparable harm
if the injunctive relief they request is not granted. As the Supreme Court has
stated, “[t]he key word in this consideration is irreparable.... The possibility
that adequate compensatory or other corrective relief will be available at a
later date, in the ordinary course of litigation, weighs heavily against a claim
of irreparable harm.” Sampson v. Murray, 415 U.S. 61, 90 (1974) (quotation
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omitted). Where harm may be compensated by an award of money damages,
courts generally have refused to find that harm irreparable. See, e.g., Morton
v. Beyer, 822 F.2d 364, 371–72 (3d Cir. 1987); Foxboro Co. v. Arabian Am. Oil Co.,
805 F.2d 34, 36 (1st Cir. 1986). The availability of monetary damages,
however, “does not always mean that the remedy at law is ‘adequate.’”
Janvey v. Alguire, 647 F.3d 585, 599 (5th Cir. 2011).
The Seventh Circuit has stated that “[o]nly if [the plaintiff] will suffer
irreparable harm in the interim—that is, harm that cannot be prevented or
fully rectified by the final judgment after trial—can he get a preliminary
injunction. . . . The question is [] whether the plaintiff will be made whole if
he prevails on the merits and is awarded damages.” Roland Machinery Co. v.
Dresser Indus., Inc., 749 F.2d 380, 386 (7th Cir. 1984). This is a high burden.
The plaintiff must show not simply that money damages at judgment will be
“inadequate”—he must show that they will be “seriously deficient as a
remedy for the harm suffered.” Id. The plaintiff may meet this burden by
demonstrating that the defendant “may become insolvent before a final
judgment can be collected.” Id. The plaintiff could also proffer evidence
tending to show that “the defendant intends to dissipate his assets to make
a judgment awarding damages uncollectible.” Hughes Network Sys., Inc. v.
InterDigital Commc’ns Corp., 17 F.3d 691, 694 (4th Cir. 1994); Chemical Bank v.
Haseotes, 13 F.3d 569, 573 (2d Cir. 1994) (“[A]n injunction may issue to stop
a defendant from dissipating assets in an effort to frustrate a judgment.”)
Plaintiffs offer only speculation, not evidence, that Rocky Point will
dispose of the subject assets. Plaintiffs state that “Rocky Point, along with
DDPTE, TY Global[,] and AT Offshore, have already engaged in a series of
transactions designed to put the $3.25 million transferred out of Singapore
to the United States outside the reach of creditors.” (Docket #4 at 10). They
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believe that “Mr. Dvergsten has ties to Norway so funds can easily be wired”
to that country. Id. “Further,” according to Plaintiffs, “[Dvergsten] could
encumber or transfer the Lake House resulting in additional actions to
unwind, if possible, those transactions.” Id. Plaintiffs conclude that “[i]t is
highly likely that—without an injunction—the funds or proceeds from the
Lake House will be moved to one of Mr. Dvergsten’s numerous international
companies to further perpetuate the fraudulent scheme.” Id.
Plaintiffs’ conjecture is not enough to show that Rocky Point is likely
to transfer or encumber its assets. Allstate Settlement Corp. v. Doucette, Civil
Action No. H–15–1130, 2015 WL 2091767, at *2 (S.D. Tex. May 5, 2015)
(denying preliminary injunction where the plaintiff conclusorily asserted that
the defendant might dispose of the funds at issue). The record contains no
evidence that Rocky Point has tried to do this or that it intends to do so in the
future. See Capital Distributions Servs, Ltd. v. Ducor Exp. Airlines, Inc., 440 F.
Supp. 2d 195, 210 (E.D.N.Y. 2006) (record showed that the defendant had
tried to encumber his properties after being served and refused to answer
deposition questions about his assets). For instance, there is no indication that
Rocky Point attempted to transfer the subject assets when the prospect of this
litigation (or the Texas litigation) arose. See Rodriguez v. Montalvo, 371 F.
Supp. 2d 3, 4–5 (D. Mass. 2005) (likelihood of irreparable shown where
defendants had tried to convey the subject property when the threat of
litigation emerged). Indeed, Plaintiffs concede that Rocky Point has owned
the lake house for more than eleven years, (Docket #4 at 11), without giving
any reason to suspect that Rocky Point will change that course. Nor do
Plaintiffs assert that Rocky Point is insolvent or will become so during the
course of litigation, thereby depriving Plaintiffs of the ability to collect a
money judgment. Hughes, 17 F.3d at 696. The Supreme Court has emphasized
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that a plaintiff must do more than show a possibility that irreparable harm
may occur; he must “demonstrate that irreparable injury is likely in the
absence of an injunction.” Winter, 555 U.S. at 22 (emphasis in original).
Plaintiffs rely on possibility, not probability, and so their argument fails.
Much of Plaintiffs’ motion conflates irreparable harm with their belief
that they are sure to win on the merits. Plaintiffs argue that because the
entities in question have already engaged in a series of fraudulent
transactions—which at this point is an unproven allegation—it is probable
that they will do so again during the pendency of this case. Likelihood of
success on the merits and danger of irreparable harm are normally treated
as distinct elements required for the issuance of a preliminary injunction. See
Rust Env’t & Infrastructure, Inc. v. Teunissen, 131 F.3d 1210, 1213 (7th Cir.
1997). The Seventh Circuit has, in some instances, applied a sliding scale to
them, finding that a strong showing on one might compensate for the
weakness of the other. Hoosier Energy Rural Elec. Co-op., Inc. v. John Hancock
Life Inc. Co., 582 F.3d 721, 725 (7th Cir. 2009) (“[T]he more net harm an
injunction can prevent, the weaker the plaintiff’s claim on the merits can be
while still supporting some preliminary relief.”) And on the question of
likelihood of success, the Seventh Circuit instructs that a claim need “not
necessarily [be] a winning one,” but must be “strong enough to justify
exposing [the defendant] to financial risks until the district court can decide
the merits.” Id. at 726.
Plaintiffs’ showing on the merits, at least at this early stage, does not
make up for their failure to demonstrate irreparable harm. Both sides present
a substantial body of conflicting testimonial and documentary evidence on
the question of whether the transfers at issue represent the legitimate
payment of brokerage fees and reinvestment of those fees. Compare (Docket
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#4-1 ¶ 4) (affidavit of TY Global owner stating that Dvergsten ordered him
to prepare false invoices for brokerage services), with (Docket #22-2 and #223) (emails from TY Global owner to various parties concerning purchase of
the Somnath); (Docket #22-12) (email from TY Global owner explaining
breakdown of total brokerage payment between participating brokers).
Rocky Point believes this is so and points to the language of the loan
agreement itself, which permitted Traxair to use the funds to pay brokerage
fees. (Docket #22 at 6–7). Paying brokers to help in the purchase of the
Somnath may be a plausible, legitimate business reason for the transfers, as
would be TY Global’s decision to reinvest their fees through Rocky Point.
The reinvestment plan also explains why Rocky Point readily admits that it
does not own the $2 million but it merely investing it for TY Global. Id. at
7–8. This destabilizes Plaintiffs’ notion that these transfers were fraudulent.
Of course, Plaintiffs think the “brokerage fee” story is a ruse concocted by
Mr. Dvergsten, pointing to a number of “badges of fraud” that mark these
transactions as suspicious. See Wis. Stat. § 242.04(2).
Yet Plaintiffs’ belief in their claims cannot overcome the conflicting
evidence presented. Were the Court to accept Plaintiffs’ view, any plausible
fraudulent transfer allegations would support a preliminary injunction
restricting the funds at issue. Since preliminary injunctive relief is “an
extraordinary remedy,” Knox, 637 F. App’x at 228, this cannot be the rule. In
the end, only time and discovery will tell whether Plaintiffs’ theories are
correct. At this moment, however, Plaintiffs’ weak showing on their
likelihood of success, coupled with their complete failure to demonstrate that
irreparable harm will occur without an injunction, means that the Court
cannot grant them a preliminary injunction.

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4.

CONCLUSION
Plaintiffs have failed to establish the prerequisites necessary to obtain

a preliminary injunction. As a result, their motion must be denied. Abbott
Labs. v. Mead Johnson & Co., 971 F.2d 6, 11 (7th Cir. 1992) (if the plaintiff
cannot establish both likelihood of success and irreparable injury, “a court’s
inquiry is over and the injunction must be denied”).
Accordingly,
IT IS ORDERED that Plaintiffs’ motion for a temporary restraining
order and a preliminary injunction (Docket #3) be and the same is hereby
DENIED.
Dated at Milwaukee, Wisconsin, this 2nd day of December, 2016.
BY THE COURT:

s/ J. P. Stadtmueller
J.P. Stadtmueller
U.S. District Judge

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