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

Filing 866

ORDER granting in part and denying in part 855 Motion for an Order That David Fenkell's Alliance ESOP Account May Be Used To Satisfy The Award Against Him In The Court's Remedies Decision re 790 Order on Motion to Supplement. Signed by District Judge William M. Conley on 1/28/2014. (lak)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN
CAROL CHESEMORE, DANIEL DONKLE,
THOMAS GIECK, MARTIN ROBBINS and
NANNETTE 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., A.H.I., INC.,
AH TRANSITION CORP., DAVID B. FENKELL,
PAMELA KLUTE, JAMES MASTRANGELO,
JEFFREY A. SEEFELDT and KAREN FENKELL,
Defendants,
and
TRACHTE BUILDING SYSTEMS, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
and ALLIANCE HOLDINGS, INC.
EMPLOYEE STOCK OWNERSHIP PLAN,
Nominal Defendants.

Plaintiffs move for an order that “David Fenkell’s Alliance ESOP account be used
to satisfy the award against him in the court’s remedies decision.”

(Dkt. #855). In

doing so, plaintiffs invoke a seemingly straightforward exception to ERISA’s protection
from alienation of employee pension plan benefits for “any offset of a participant’s
benefits provided under [the] plan against an amount that the participant is ordered to
pay to the plan if the order or requirement arises . . . under a civil judgment.” 29 U.S.C. §
1056(d)(4). Defendant David B. Fenkell essentially concedes that the court’s remedy

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decision requires that he pay $7,803,543 to the Alliance ESOP on a joint and several basis
to the other Alliance defendants.

Nevertheless, Fenkell posits two reasons why his

participant benefits are not subject to alienation in the manner that plaintiffs request, at
least not at this time. (Dkt. #863.) As the court finds neither reason precludes the
application of Fenkell’s Alliance ESOP account to satisfy his obligations in this case,
plaintiffs’ motion will be granted in part as set forth below.
Defendant Fenkell’s principal argument is that any order to offset must arise under
a final civil judgment, which has not yet been entered. That is easily addressed. As Mr.
Fenkell is well aware, the court has already noted that there is little reason not to enter
partial summary judgment against all defendants, save Mrs. Fenkell, who continues to
dispute the last factual issue before this court: whether she can be required to return
funds misappropriated by her husband and provided to her without consideration.
Indeed, the court recently asked the parties to brief whether partial summary judgment is
appropriate at this point.

The court only decided to delay entry of partial summary

judgment because the case is so close to complete resolution either by agreement or court
trial set for March 10, 2014. Still, this is no reason for the court not to act now under its
equitable powers to preliminarily enjoin nominal defendant Alliance ESOP from disposing
of Fenkell’s benefits under its Plan, thus thwarting the satisfaction of a final judgment out
of Fenkell’s interest in that ESOP.
Defendant also disputes the form that any interim equitable remedy may take,
contending that the offset of his participant benefits in the Alliance ESOP could only be

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accomplished through a writ of attachment pursuant to Chapter 811 of the Wisconsin
Statutes. Since the court’s authority to enjoin the taking of assets has nothing to do with
the issuance of a writ of attachment under Wisconsin law, but rather pursuant to Fed. R.
Civ. P. 65, there appears no basis for Fenkell’s contention. Indeed, this case is well past
the stage where a pre-judgment writ of attachment is necessary given that Fenkell’s legal
rights have already been fully adjudicated.

Plus, Chapter 811 only applies to the

attachment of property located in Wisconsin, and the assets of the Alliance ESOP do not
to the court’s knowledge even reside in this state.
Plaintiffs argue at the opposite extreme, urging the court to enter what would
amount to a permanent injunction, requiring the immediate disgorgement of Fenkell’s
pension benefits by the Alliance ESOP. This remedy is also flawed in that it not only
contemplates entry of a final judgment, but execution of that judgment before defendant
Fenkell has been given an opportunity to post a bond on appeal or to pay the judgment
out of other funds, either of which may be preferable given the potential tax consequences
on Fenkell of satisfying any judgment against him out of his ESOP benefits.
Having adjudicated to a certainty plaintiffs’ right to offset Fenkell’s benefits to pay
the Plan pursuant to final judgment, and considering the possibility, however remote, that
Fenkell may direct the Alliance ESOP (or the Plan might independently choose) to release
those funds to himself or others in a manner that will frustrate ultimate satisfaction of a
judgment in the manner contemplated by § 1056(d)(4), the court agrees that the Alliance
ESOP should be preliminarily enjoined from transferring any of David Fenkell’s benefits

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provided under its Plan in order to maintain the status quo pending anticipation of entry
of a final judgment and order of execution authorizing the application of Fenkell’s
participant benefits to satisfy the judgment against him in the amount of $7,803,543.

ORDER
IT IS ORDERED THAT:
1) plaintiffs’ motion for an order that David Fenkell’s Alliance ESOP account be used
to satisfy the order against him in the court’s remedies decision (dkt. #855) is
GRANTED IN PART AND DENIED IN PART as set forth above; and
2) nominal defendant Alliance Holdings, Inc. Employee Stock Ownership Plan is
preliminary enjoined from releasing any benefits belonging to David Fenkell in the
amount of $7,803,543.
Entered this 28th day of January, 2014.
BY THE COURT:
/s/
WILLIAM M. CONLEY
District Judge

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