Chesemore et al v. Alliance Holdings, Inc. et al

Filing 1031

ORDER granting 1023 Motion to Compel by Plaintiffs Carol Chesemore, Daniel Donkel, Thomas Gieck, Martin Robbins and Nannette Stoflet; Granting 1025 Motion to Compel by Defendants Alliance Holdings, Alliance Holdings, Inc and Employee Stock Owners hip Plan Inc. The movants' request for attorneys' fees and costs pursuant to Fed. R. Civ. P. 37(a)(5)(A) is granted. Movants shall submit their respective requests with all necessary supporting materials on or 2/17/2015; Fenkell may respond on or before 3/3/2015. Signed by District Judge William M. Conley on 2/3/2015. (voc)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN
CAROL CHESEMORE, DANIEL
DONKEL, THOMAS GIECK, MARTIN
ROBBINS, and NANETTE STOFLET, on
behalf of themselves, individually, and on
behalf of all others similarly situated,

Plaintiffs,

OPINION AND ORDER

v.
09-cv-413-wmc
ALLIANCE HOLDINGS, INC., DAVID B.
FENKELL, PAMELA KLUTE, JAMES
MASTRANGELO, STEPHEN W. PAGELOW,
JEFFREY A. SEEFELDT, TRACHTE
BUILDING SYSTEMS, INC. EMPLOYEE
STOCK OPTION PLAN, ALLIANCE HOLDINGS,
INC. EMPLOYEE STOCK OPTION PLAN,
A.H.I., INC., ALPHA INVESTMENT
CONSULTING GROUP, LLC, JOHN MICHAEL
MAIER, AH TRANSITION CORPORATION, and
KAREN FENKELL,
Defendants;
PAMELA KLUTE, JAMES MASTRANGELO,
and JEFFREY A. SEEFELDT,
Cross Claimants,
v.
ALLIANCE HOLDINGS, INC., and STEPHEN W.
PAGELOW,
Cross Defendants.

Before the court are two motions to compel -- one by plaintiffs and the other by
defendant Alliance Holdings Inc. and nominal defendant Alliance Holdings, Inc. ESOP -both seeking post-judgment discovery from defendant David B. Fenkell. (Dkt. ##1023,

1025.) For the reasons that follow, the court will grant both motions, ordering Fenkell to
respond to discovery requests and sit for a deposition, and will further award reasonable
attorneys’ fees and costs in bringing both motions.

BACKGROUND
This court previously entered judgment against defendant David Fenkell. As a
result of various settlements and assignment of claims with other co-defendants, the
Alliance ESOP is owed over $2 million and Alliance is owed $3.25 million as the holder
of the trustee defendants’ right to indemnification making both judgment creditors of
Fenkell.

(Judgment (dkt. #986); Am. Judgment (dkt. #999); Joint Mot. to Permit

Registration (dkt. #1006) 5-6.) While plaintiffs also assigned some of portions of the
judgment against Fenkell to Alliance, plaintiffs retained the judgment awarding them
attorneys’ fees in the amount of $1,854,008.50. (Id.) All of these debts are exclusive of
post-judgment interest that continues to run.
Recently, the court granted an unopposed join motion by Alliance and plaintiffs to
register the judgment for enforcement against Fenkell’s property in other districts
pursuant to 28 U.S.C. § 1963. (11/17/14 Order (dkt. #1017).) Defendant Fenkell has
yet to seek a stay of execution of the judgment in this court or in the Seventh Circuit
Court of Appeals, where several appeals are pending.

OPINION
In response to the motions to compel, Fenkell represents that he has agreed to:
(1) produce discovery responses to plaintiffs; and (2) sit for a deposition (presumably, also
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for plaintiffs’ benefit only). As for the Alliance defendants’ requests, however, Fenkell
would cast them both as “non-parties,” for whom no discovery is owed. (Fenkell’s Opp’n
(dkt. #1028) 3.)

Unfortunately, Federal Rule of Civil Procedure 69, which governs

execution of judgments, is not limited to parties: “In aid of the judgment or execution,
the judgment creditor or a successor in interest whose interest appears of record may
obtain discovery from any person -- including the judgment debtor -- as provided in these
rules and in the procedure of the state where the court is located.”

Fed. R. Civ. P.

69(a)(2). Wisconsin Statute § 806.18 also permits the assignment of judgments, while
Chapter 816 sets forth certain discovery mechanisms for executing on judgments similar
to Rule 69.
In an apparent attempt to avoid Rule 69 and § 806.418, Fenkell challenges the
legitimacy of plaintiffs’ assignment of their claim to Alliance. But the court need not find
that the assignment is permissible to decide the present motion, because part of the
court’s judgment orders Fenkell to restore to nominal defendant Alliance ESOP over $2
million, and as mentioned above, has joined defendant Alliance Holdings, Inc. in
bringing the motion to compel. Moreover, Alliance Holdings, Inc., as the administrator
of the Plan, also has a sound basis for seeking post-judgment discovery. As such, the
court rejects any objection to Alliance Holdings, Inc. and Alliance ESOP’s request for
discovery.
Fenkell also takes issue with some of the discovery requests as irrelevant and
beyond the scope of permissible discovery, and specifically challenges any requests for
discovery of his wife Karen Fenkell’s assets or assets held jointly. Again, the language of
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Rule 69(a)(2), which allows discovery from “any person,” largely answers this challenge
as well. Moreover, courts have recognized that discovery into a third-party’s assets is
allowed where the “relationship between the judgment debtor and the [third-party] is
sufficient to raise a reasonably doubt about the bona fides of the transfer of assets between
them.” Magnaleasing, Inc. v. Staten Island Mall, 76 F.R.D. 559, 561-62 (S.D.N.Y. 1977).
Not only are such situations common in the spousal context (see Alliance’s Reply (dkt.
#1029) 5 (citing numerous cases finding discovery of spouse’s assets appropriate)), but
are particularly so here, given Mr. Fenkell’s previous transfer of funds to his wife in an
attempt to move assets beyond the reach of plaintiffs. (11/17/14 Order (dkt. #1017) 3.)
Finally, Fenkell contends that Alliance is simply trying to get discovery here that
has been denied in a pending, related case in the Eastern District of Pennsylvania.
Fenkell’s characterization of discovery efforts in the other case appears to be at odds with
recent developments, as Alliance notes in its reply that the Eastern District of
Pennsylvania recently allowed subpoenas to be served on the Fenkells’ banks. (Alliance’s
Reply (dkt. #1029) 3 n.2.) Regardless, the discovery status in that ongoing case is of
little or no relevance to the post-judgment status of this lawsuit. Alliance and plaintiffs
have a right as judgment creditors to determine the location and extent of Fenkell’s
assets.

Whether or not this touches on matters at issue in the Eastern District of

Pennsylvania action does not change their independent right to post-judgment discovery
here.
Accordingly, the court will order Fenkell to:

(1) provide full and complete

responses to interrogatories and document requests on or before February 17, 2015, and
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(2) sit for a deposition concerning his assets and transfer of assets on or before March 17,
2015.
In addition to seeking an order compelling Fenkell to respond to discovery
requests and sit for a deposition, Alliance and plaintiffs also seek attorneys’ fees and costs
for having to bring this motion pursuant to Federal Rule of Civil Procedure 37(a)(5)(A).
That provision provides in pertinent part that:
If the motion is granted--or if the disclosure or requested
discovery is provided after the motion was filed--the court
must, after giving an opportunity to be heard, require the
party or deponent whose conduct necessitated the motion,
the party or attorney advising that conduct, or both to pay
the movant’s reasonable expenses incurred in making the
motion, including attorney’s fees. But the court must not
order this payment if:
...
(ii) the opposing party’s nondisclosure, response, or objection
was substantially justified[.]
Fed. R. Civ. P. 37(a)(5)(A)(ii).
In response to the movant’s request, Fenkell simply reiterates his argument that
his position is substantially justified because “[p]laintiffs have no economic interest in
the alleged judgment [and] the Alliance Defendants are not entitled to post-judgment
discovery.” (Fenkell’s Opp’n (dkt. #1028) 9.) For reasons outlined above, however,
Fenkell’s objections have no reasonable basis. See Pierce v. Underwood, 487 U.S. 552, 565
(1988). The Alliance defendants are judgment creditors in light of the court’s judgment
ordering Fenkell to restore over $2 million to the Alliance ESOP, regardless of the status
of any assignment. Also, regardless of any assignment plaintiffs made to Alliance as part

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of their settlement, plaintiffs retain an interest in the judgment awarding them attorneys’
fees of over $1.8 million. Accordingly, the court will award reasonable attorneys’ fees
and costs incurred by plaintiffs and defendants Alliance Holdings, Inc. and Alliance
Holdings, Inc. ESOP in bringing the present motions, to be paid by David Fenkell.
ORDER
IT IS ORDERED that:
1) plaintiffs’ motion to compel (dkt. #1023) and Alliance Holdings, Inc. and
Alliance Holdings, Inc. ESOP’s motion to compel (dkt. #1025) are both
GRANTED. Defendant David Fenkell is ordered to (1) provide full and
complete responses to interrogatories and document requests on or before
February 17, 2015, and (2) sit for a deposition concerning his assets and
transfer of assets on or before March 17, 2015; and
2) the movants’ requests for attorneys’ fees and costs pursuant to Fed. R. Civ. P.
37(a)(5)(A) is GRANTED. Movants shall submit their respective requests
with all necessary supporting materials on or before February 17, 2015; Fenkell
may respond on or before March 3, 2015.
Entered this 3rd day of February, 2015.
BY THE COURT:
/s/
__________________________________
WILLIAM M. CONLEY
District Judge

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