BEFORE THE GEORGIA STATE BAR In re: Samuel F

Transcription

BEFORE THE GEORGIA STATE BAR
In re: Samuel F. Hatcher, Esq.
General Counsel
Synovus Bank
1111 Bay Avenue, Suite 500
Columbus, Georgia 31901
(706) 649-2311
Docket # ________________________
Respondent
SWORN COMPLAINT AND NOTICE OF VIOLATION OF
GEORGIA BAR RULES OF PROFESSIONA RESPONSIBILITY
COMMITTED BY SAMUEL F. HATCHER, ESQ.
TO:
Ms. Carmen Rojas Rafter, Esq.
Senior Grievance Counsel
Office of General Counsel
State Bar of Georgia
104 Marietta Street, NW, Suite 100
Atlanta, GA 30303
Fax: (404) 527-8744
1. I am required as an attorney to notify whatever authorities are appropriate of reliable
information that another attorney has committed a violation of the Rules of Professional
Conduct, in this case of the Georgia Rules of Professional Conduct.
2. I am an attorney in good standing licensed to practice law in the Commonwealth of
Virginia and a member of the Virginia State Bar.
3. The VIRGINIA RULES OF PROFESSIONAL CONDUCT require of me:
RULE 8.3 Reporting Misconduct
(a) A lawyer having reliable information that another lawyer has committed
a violation of the Rules of Professional Conduct that raises a substantial
question as to that lawyer’s honesty, trustworthiness or fitness to practice
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law shall inform the appropriate professional authority.
4. Presumably, part of the reason that attorneys are required to file such information is
that most of the public, including clients, will be unaware of the details of the Rules of
Professional Conduct and may not understand when a violation or possible violation has
occurred. Since attorneys must become familiar with the Rules, but the vast majority of society
is unfamiliar with them, the Bar requires attorneys to notify the appropriate authority.
5. This Complaint and Notice is submitted now to fulfill the purpose of that rule.
6. This matter does not appear to be appropriate for the Consumer Assistance Program.
Details of Apparent Violations
7. Samuel F. Hatcher, Esq. is an attorney formerly in private practice in Atlanta,
Georgia, and licensed as an attorney in the State of Georgia.
8. Pursuant to Rule 1.13, Samuel Hatcher represents Synovus Bank as its General
Counsel in an actual attorney – client relationship governed by the Georgia Rules of Professional
Conduct, see https://www.synovus.com/?id=1448, as well as Synovus Financial Corporation.
Thus, pursuant to Rule 1.13, Hatcher actually represents Synovus Bank as an attorney’s client,
not only as an employer.
9. As General Counsel of Synovus Bank, Hatcher supervises, directs, manages, and/or
controls all litigation activities on behalf of Synovus Bank. Presumably an international
litigation event would attract special attention and would be undertaken at his personal direction
and approval.
10. On information and belief, Synovus Bank is comparatively small in relation to many
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national and regional banks, and Samuel Hatcher is directly involved in all these matters. If other
Georgia attorneys are working on these matters under Hatcher, the Bar should determine that.
11. In violation of Rule 1.7, Samuel F. Hatcher, Esq., through agents hired, instructed,
authorized, and under his instruction and command, is simultaneously representing as legal
clients legally adverse parties who have a sharp conflict of interest:
a)
Synovus Bank, as creditor of William B. Johnson
b)
William B. Johnson as debtor to Synovus Bank
c)
All other creditors of William B. Johnson who are legally adverse to
Synovus Bank, as “Receiver” having a duty to all creditors equally.
by purporting to act as “Receiver” for William B. Johnson – what would be a U.S. Trustee
appointed by the U.S. Bankrtupcy Court – at the same time as representing Synovus Bank.
12. Samuel Hatcher hired a “Receiver” for William B. Johnson – a U.S. citizen – in the
Bahamas, to supervise the U.S. transactions of a U.S. citizen with U.S. banks from Nassau.
13. The “Receiver” hired by Samuel Hatcher is Paul (Andy) Gomez of Grant Thornton.
14. As a U.S. citizen, William B. Johnson is under the jurisdiction of the U.S. Bankruptcy
Courts, not the courts of the Bahamas or a Receiver appointed in the Bahamas.
15. It is axiomatic that a “Receiver” has a duty to all creditors equally.
16. Yet “Receiver” Paul Gomez openly proclaims that he represents Synovus Bank.
17. A U.S. Trustee is often an attorney who is or has been in private practice. However, a
U.S. Trustee cannot serve simultaneously as the attorney for one of the creditors in a case and
also the “Receiver” (Trustee) for the estate of the debtor in that same case at the same time.
18. Yet, here, Samuel Hatcher has hired his own “Receiver” in the Bahamas – to evade
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the laws of the United States – who is simultaneously representing Synovus Bank to collect a
debt for Synovus Bank and also purporting to act as “Receiver” (Trustee) for the entire estate,
representing all of Johnson’s creditors equally.
19. This directly affects other creditors whom Gomez is treating unequally in fact.
20. The “Receiver” hired by Samuel Hatcher in the Bahamas (an official at Grant
Thornton Bahamas) cannot ethically represent Synovus Bank as only one creditor of William B.
Johnson while also having a duty to all of Johnson’s creditors equally as Receiver / Trustee.
21. Meanwhile, in violation of Rule 3.1 and Rule 4.4, a totally unnecessary armed
invasion without valid purpose occurred in Settlement Harbour and the Orchid Bay resort on
Great Guana Cay, in the Abacos island group, in the Bahamas, on December 12, 2013, by agents
hired, authorized, supervised, instructed and under the command of Samuel F. Hatcher, Esq.
22. These actions served no legitimate or valid lawful purpose, but served only to harass
and disrupt and needlessly increase costs in violation of Rules 3.1 and 4.4.
23. In contrast to more cost-effective measures, such as garnishing a bank account or
scheduling a judicial sale at auction of some of the housing lots, the actions taken at Hatcher’s
direction and instruction served to run up billable hours of attorneys in the U.S. and the Bahamas
to needlessly increase the costs of litigation against his client Synovus Bank and its shareholders
and for those forced to respond to defend against such unnecessary actions of harassment.
24. Contrary to any valid purpose for collecting a debt – such as merely garnishing a bank
account or simply selling real estate lots at judicial sale to recover a debt – and serving no
purpose other than to harass and disrupt, Samuel F. Hatcher, Esq., through agents hired,
instructed, authorized, and under his instruction and command, sent armed guards into
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Settlement Harbour and took over the Orchid Bay Marina office, throwing managers Jimmy
Albury and Melonie Albury out of their home, and seizing control of the on-going business,
during the Christmas holiday season typically important for tourism.
25. Pursuant to Rule 5.1, Hatcher may not use agents or subordinates to violate the
Georgia Rules of Professional Conduct nor cause a violation under his supervision.
26. Pursuant to Rule 5.1, Hatcher may not passively allow a violation under his
supervision of the Georgia Rules of Professional Conduct, but must take care to ensure that those
under his supervision comply with the Rules.
27. Pursuant to Rule 5.1, Hatcher may not violate the Georgia Rules of Professional
Conduct through agents under his supervision, direction, management and/or control.
28. Synovus Bank obtained a court judgment on October 5, 2011, in the State Court of
Fulton County for the State of Georgia, Civil Action 10EV009357F, against -a)
William B. Johnson, individually
b)
W.B. Johnson Investment Company
c)
Monarch Flight, LLC (a William B Johnson company)
in the amount of $5,748,539.15, plus interest of $119,970.78, plus additional interest accruing at
6% per year dating from October 4, 2011, plus late charges of $9,638.00, contractual loan fees of
$114,970.78, and attorneys fees of $74,723.51. See Exhibit A, attached.
29. Thus, Synovus Bank was awarded a court judgment in the amount of $ 6,067,842.22
plus interest accruing at 6% on the principal sum from October 4, 2011.
30. Synovus Bank is severely adverse and in legal conflict with William B. Johnson,
individual, W.B. Johnson Investment Company, and other entities associated with, owned by, or
5
operated by William B. Johnson.
31. Thus, it is unethical and prohibited under the Georgia Rules of Professional
Responsibility for Samuel Hatcher to represent both Synovus Bank (creditor to William B.
Johnson and his companies) and William B. Johnson and his companies (debtor to Synovus
Bank) simultaneously on the same matter, purporting to act as or hire a “Receiver” for him.
32. Yet, incredibly, Samuel F. Hatcher, Esq., is also purporting to represent William B.
Johnson, the W.B. Johnson Investment Company, and any and all entities of William B. Johnson
33. It is important to understand the hierarchy: The courts of the Bahamas feel honor
bound under ‘comity’ to enforce court orders from the United States ‘domesticated’ in the
Bahamas courts – but may lack a clear understanding and appreciation for the limits and
precise meaning of those U.S. court order, being unfamiliar with these considerations.
34. Samuel Hatcher engaged in the Bahamas Paul Gomez of the accounting firm Grant
Thornton in Nassau to collect the court judgment in the amount of $ 6,067,842.22 plus interest
from any assets owned by William B. Johnson, the W.B. Johnson Investment Company, or any
other entities associated with William B. Johnson within the Bahamas.
35. Yet Samuel Hatcher also engaged in the Bahamas Paul Gomez of Grant Thornton in
Nassau to act as “Receiver” of the assets and estate of William B. Johnson, the W.B. Johnson
Investment Company, and any and all entities associated with William B. Johnson.
36. Paul Gomez and also all of Grant Thornton publicly admits that they are acting as
“Receiver” on behalf of William B. Johnson and his companies, and are allegedly pursuing the
interests of Johnson and his companies in the process.
37. Paul Gomez of the accounting firm of Grant Thornton in Nassau, the Bahamas,
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publicly states that he is acting on behalf of “our client” Synovus Bank.
38. Paul Gomez of the accounting firm of Grant Thornton in Nassau, the Bahamas,
publicly states that he is acting as “Receiver” of the assets and estate of William B. Johnson, the
W.B. Johnson Investment Company, and any entities associated with William B. Johnson.
39. Of course, the United States Bankruptcy Court has jurisdiction over any receivership
and the right to appoint a receiver (trustee).
40. William B. Johnson is a United States citizen.
41. The W.B. Johnson Investment Company is an entity organized within the United
States of America and is a legal person with citizenship in the United States of America.
42. All the other William B. Johnson entities are also organized within the United States
of America and is a legal person with citizenship in the United States of America.
43. As a result, Georgia attorney Samuel F. Hatcher knows that the United States
Bankruptcy Court has jurisdiction over any receivership or reorganization of William B. Johnson,
the W.B. Investment Company, and any other Johnson-related entity.
44. Thus, in violation of Rule 3.1, Samuel Hatcher has sought to deliberately evade,
corrupt, and pervert the proper functioning and jurisdiction of the U.S. Bankruptcy Court by
exporting the case to the Bahamas, for a United States citizen’s bankruptcy estate to be
administered in the Bahamas instead of in Georgia.
45. This could be the most stunning example of “judge shopping” yet seen.
46. The reason that the armed guards took over Orchid Bay’s offices on December 12,
2013, with agents hired, supervised, authorized, instructed, and under the command of Samuel F.
Hatcher, Esq., is that they believe they are conducting a full-blown bankruptcy style receivership
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of the assets and liabilities of William B. Johnson and all of his companies.
47. In other words, Samuel Hatcher has engaged Paul Gomez of Grant Thornton in the
Bahamas to function in the place of a lawfully constituted U.S. Trustee of the U.S. Bankruptcy
Court under the laws of the United States.
48. This matters because the handling of these matters is different under the process being
pursued by Paul Gomez as a purported “Receiver” than the result would be under the U.S.
Bankruptcy Laws of the United States of America and the rules of the U.S. Bankruptcy Court,
with regard to William B. Johnson, a U.S. citizen, and William B. Johnson’s companies
organized and located wholly within the United States of America.
49. Therefore, agents hired by Samuel F. Hatcher, Esq., cannot simultaneously act as debt
collectors for Synovus Bank and as Receiver for the bankruptcy estate of William B. Johnson and
Johnson’s related companies.
50. Having set up this conflict of interest as General Counsel of Synovus Bank, Hatcher
has violated Rule 1.7 directly and/or indirectly through Rule 5.1.
51. Having set up this conflict of interest as General Counsel of Synovus Bank, Hatcher
and his agents involved in the conflict must recuse themselves, because they cannot now
represent either Synovus Bank or William B. Johnson or Johnson’s companies.
52. As stated, Paul Gomez of Grant Thornton was appointed “Receiver” for William B.
Johnson and the W.B. Johnson Investment Company and other Johnson entities.
53. Grant Thornton sent some of its staff to physically occupy Orchid Bay.
54. Heading the Grant Thornton occupation team was Derek Sweeting.
55. Derek Sweeting personally told me, Jonathon Moseley, face to face, that he was
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acting on behalf of “our client” Synovus Bank.
56. Simultaneously, Derek Sweeting has not acted to collect the debt owed to Synovus
Bank, such as by garnishing a bank account or selling assets, but has instead acted on behalf of
William B. Johnson and Johnson’s companies to conduct a comprehensive audit and review of
all of the financial history of Orchid Bay on behalf of William B. Johnson in the form of a
bankruptcy proceeding, and to take over the management of Orchid Bay.
57. In violation of Rules 3.1 and 4.4, these actions under Hatcher’s direction have
frightened the residents of Orchid Bay, caused rumors in this small-town environment, including
rumors of outrageous stories about the management of Orchid Bay such as them being arrested
and taken away in handcuffs for drug dealing (totally false), interfered with vacation rentals over
the Christmas holidays by homeowners of Orchid Bay (whose home ownership is completely
free and independent of Orchid Bay), severely damaged the viability of Orchid Bay as a tourist
destination because word spreads quickly among the boating community (and false rumors
spread faster than accurate information).
58. In violation of Rules 3.1 and 4.4, these actions under Hatcher’s direction have
knowingly and intentionally defamed and inflicted emotional distress upon Jimmy Albury and
Melonie Albury and others for no valid, lawful purpose. This is knowing and intentional,
because Synovus Bank’s agents arrived way back in May 2013 – as they publicly admit – and
were rebuffed when they tried to apply court orders from a U.S. court in the independent country
of the Bahamas. Having failed at that point to domesticate Synovus Bank’s claim in the courts of
the Bahamas, the same agents of Synovus Bank had to leave. Their incompetence at trying to
apply U.S. court orders in a foreign country motivated their legal malice now at this time.
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59. Therefore, in retaliation for being embarrassed in May 2013, Samuel Hatcher has had
from May 2013 through December 2013 to be fully aware that his actions and those of his agents
would knowingly and intentionally cause defamation, harm, and emotional distress.
60. Samuel Hatcher’s assertion of a purpose other than to harass and disrupt necessarily
and strongly depends upon Samuel Hatcher’s attempt to unlawfully represent both the estate of
William B. Johnson and Johnson’s companies and also simultaneously seeking to collect
millions of dollars from Johnson and his companies on behalf of Synovus Bank.
Applicable Rules Governing This Case
61. The GEORGIA RULES OF PROFESSIONAL CONDUCT require of Mr. Samuel F.
Hatcher, Esq:
RULE 5.1 RESPONSIBILITIES OF PARTNERS, MANAGERS AND
SUPERVISORY LAWYERS
a. A law firm partner as defined in Rule 1.0 (l), and a lawyer who individually or
together with other lawyers possesses comparable managerial authority in a law
firm, shall make reasonable efforts to ensure that the firm has in effect measures
giving reasonable assurance that all lawyers in the firm conform to the Georgia
Rules of Professional Conduct.
b. A lawyer having direct supervisory authority over another lawyer shall make
reasonable efforts to ensure that the other lawyer conforms to the Georgia Rules
of Professional Conduct.
c. A lawyer shall be responsible for another lawyer's violation of the Georgia Rules
of Professional Conduct if:
1. the lawyer orders or, with knowledge of the specific conduct, ratifies the
conduct involved; or
2. the lawyer is a partner or has comparable maganerial authority in the law
firm in which the other lawyer practices or has direct supervisory authority
over the other lawyer, and knows of the conduct at a time when its
consequences can be avoided or mitigated but fails to take reasonable
remedial action.
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The maximum penalty for a violation of this Rule is disbarment.
RULE 1.13 ORGANIZATION AS CLIENT
a.
A lawyer employed or retained by an organization represents the
organization acting through its duly authorized constituents.
RULE 1.7 CONFLICT OF INTEREST: GENERAL RULE
a. A lawyer shall not represent or continue to represent a client if there is a significant
risk that the lawyer's own interests or the lawyer's duties to another client, a former
client, or a third person will materially and adversely affect the representation of the
client, except as permitted in (b).
b. If client informed consent is permissible a lawyer may represent a client
notwithstanding a significant risk of material and adverse effect if each affected client
or former client gives informed consent, confirmed in writing, to the representation
after:
1. consultation with the lawyer, pursuant to Rule 1.0(c);
2. having received in writing reasonable and adequate information about the
material risks of and reasonable available alternatives to the representation,
and
3. having been given the opportunity to consult with independent counsel.
c. Client informed consent is not permissible if the representation:
1. is prohibited by law or these Rules;
2. includes the assertion of a claim by one client against another client
represented by the lawyer in the same or substantially related proceeding; or
3. involves circumstances rendering it reasonably unlikely that the lawyer will be
able to provide adequate representation to one or more of the affected clients.
The maximum penalty for a violation of this Rule is disbarment.
RULE 3.1 MERITORIOUS CLAIMS AND CONTENTIONS
In the representation of a client, a lawyer shall not:
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a. file a suit, assert a position, conduct a defense, delay a trial, or take other action on
behalf of the client when the lawyer knows or when it is obvious that such action
would serve merely to harass or maliciously injure another;
b. knowingly advance a claim or defense that is unwarranted under existing law,
except that the lawyer may advance such claim or defense if it can be supported
by good faith argument for an extension, modification or reversal of existing law.
The maximum penalty for a violation of this Rule is a public reprimand.
RULE 4.4 RESPECT FOR RIGHTS OF THIRD PERSONS
In representing a client, a lawyer shall not use means that have no substantial
purpose other than to embarrass, delay, or burden a third person, or use methods
of obtaining evidence that violate the legal rights of such a person.
The maximum penalty for a violation of this Rule is a public reprimand.
RULE 8.4 MISCONDUCT
a.
It shall be a violation of the Georgia Rules of Professional Conduct for a
lawyer to:
…
4. engage in professional conduct involving dishonesty, fraud, deceit or
misrepresentation;
Factual History and Explanation of Parties and Persons
62. William B. Johnson was at one time Chief Executive Officer of Ritz Carlton hotels.
63. Jimmy Albury and his wife Melonie Albury are citizens of the Bahamas residing on
Man O’War Cay in the Abaco island group of the Bahama Islands.
64. More than 25 years ago, Jimmy Albury created the idea for a gated community and
marina on the Southern end of Great Guana Cay, neighboring Man O’War Cay, to be called
Orchid Bay.
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65. Jimmy Albury and William B. Johnson went into partnership 50% / 50% to create
Orchid Bay. Having been previously in many businesses, Jimmy Albury invested heavily.
66. William B. Johnson then transferred the assets of Orchid Bay without Jimmy
Albury’s permission to a shell company, Great Guana (Abaco) Development Company.
67. Jimmy Albury has filed for imposition of a “constructive trust” on half the shares.
68. William B. Johnson controlled all of the money from Atlanta, Georgia. It is my
understanding that vastly more money was sent from Orchid Bay’s operations under Albury’s
management to William B. Johnson then ever came back for investment or expenses.
69. Jimmy Albury has managed Orchid Bay for its entire existence.
70. However, as confirmed to me, Jonathon Moseley, by suppliers on Great Guana Cay,
invoices had to go to Atlanta, Georgia, for payment.
71. As a result, the operations of the development and marina suffered greatly for years.
72. William B. Johnson reportedly lost millions of dollars in the stock market crash
starting in 2008, according to one account losing $60 million, in highly-risky stock market
investments on Wall Street such as speculation in derivatives, swaps and options.
73. As late as September 2011, according to findings of fact recited by a U.S. District
Judge in a court order in Amegy Bank National Association v.Monarch Flight II, LLC , attached
as Exhibit F, William B. Johnson was attempting to borrow $200 million more in the U.S.A. to
“complete” Orchid Bay – which is already complete. That Judge Lee H. Rosenthal also recited
that Johnson claimed that a $5 million farm in Tennessee was worth $75 million for the purpose
of seeking a loan against it. Judge Rosenthal recited that Johnson had pledged the same
collateral to two different banks for two unrelated loans and then sold the collateral by swearing
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in an affidavit that the shares of stock had not been pledged or encumbered in any way.
74. After the 2008 Wall Street crash, tourism in the Bahamas crashed severely also.
75. After the 2008 Wall Street crash, Jimmy Albury and staff kept the marina and
development running for years without being paid, and without paying debts owed to the
Bahamas Electric Corporation for power (very expensive here), the Bahamas Telephone
Company, and a couple dozen suppliers and vendors who went unpaid.
76. As a result, Jimmy Albury and other employees became creditors of Orchid Bay and
accumulated debts owed to them reportedly approaching a million dollars, among all.
77. As a result, there were many creditors of Orchid Bay, not just Synovus Bank.
78. However, the “Receiver” hired by Samuel Hatcher has ignored those creditors. In
conflict with U.S. Bankruptcy Laws requiring all creditors to be involved, Samuel Hatcher’s
appointed “Receiver” for Johnson is picking and choosing which creditors to assist.
79. In fact, in the armed take-over, Grant Thornton never showed any legal authority or
documentation or court order to anyone.
80. The Home Owners’ Association for Orchid Bay has still not received any legal
confirmation or court order of Grant Thornton’s supposed authority to take over Orchid Bay with
armed guards.
81. This is a problem because U.S. Bankruptcy law would require PUBLIC NOTICE to
any and all with a claim or debt owed to them to be notified and allowed to participate and be
heard. The opportunity for all creditors and those with a claim to come forward and be fully and
fairly and equally considered is a central requirement and objective of U.S. Bankruptcy law.
82. Thus, the secrecy and mystery with which Hatcher’s agents are operating in the
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Bahamas, other than the vaguest statements to reporters – only when pressed – and the refusal to
show or disclose legal documents or court orders to those directly affected, directly undermines
the purpose and spirit of U.S. Bankruptcy Laws, by “judge shopping” in the Bahamas.
83. Great Guana (Abaco) Development Company owned the assets and business of
Orchid Bay, although under a legal cloud because Orchid Bay was transferred without authority
of William B. Johnson’s partner Jimmy Albury from a prior company to Great Guana (Abaco)
Development Company.
84. According to William B. Johnson’s press releases, Orchid Bay is owned by “W.B.
Johnson International, LLC.” That is, the shares of Great Guana (Abaco) Development
Company are owned by “W.B. Johnson International, LLC.”
85. However, Synovus Bank has a judgment against “The W.B. Johnson Investment
Company” not “W.B. Johnson International, LLC.”
86. Thus, Synovus Bank has no claim against Great Guana (Abaco) Development
Company owned by “W.B. Johnson International, LLC” or Orchid Bay.
87. Synovus Bank and other banks loaned money to William B. Johnson.
88. On information and belief, none of the money loaned by Synovus Bank ever went to
the Bahamas or Orchid Bay, but instead financed William B. Johnson’s lifestyle, risky stock
market “gambling,” and a financial house of cards.
89. In approximately the Spring of 2011, Royal Bank of Canada, Bahamas branch, began
foreclosure proceedings against the assets of Orchid Bay for nonpayment of loans wholly within
the country of the Bahamas.
90. In contrast to the Synovus Bank loan, the money borrowed from Royal Bank of
15
Canada actually went into Orchid Bay inside the Bahamas for its operation and development.
91. Unlike Synovus Bank’s loan, the Royal Bank of Canada’s loan inside the Bahamas
was actually secured by the actual assets of Orchid Bay. Synovus Bank’s loan was not.
92. Jimmy Albury worked feverishly to preserve Orchid Bay, by searching for investors.
93. I know this, because I personally helped Jimmy Albury strategize ways to find loans
or investors and I personally wrote a draft business plan for Albury to use to find investors.
94. Some potential investors required as a condition of a possible investment that some
creditors be defrauded and left unpaid. Jimmy Albury refused to cooperate with such plans,
believing that all creditors should be paid, equally and fairly.
95. Simultaneously with Derek Sweeting taking over direct control of Orchid Bay for
Synovus Bank, Lou Sweeting launched a construction business headquartered in the residential
house next door to us. There are already too many construction companies and too few projects
for them here in the area – unless Derek Sweeting plans to make a sweetheart deal with Lou
Sweeting to build “spec houses” on the housing lots ripped from Orchid Bay by Grant Thornton.
96. Lou Sweeting had previously attempted to take over Orchid Bay when it was
foreclosed upon by the Royal Bank of Canada (Bahamas branch) but his proposed purchase
would not have treated all creditors equally to honor all of the debts owed by Orchid Bay.
97. Jimmy Albury’s son Christopher Albury is a realtor in the Bahamas representing
Sotheby’s international realtors. Christopher attempted to sell lots to raise the money to pay back
the loan to Royal Bank of Canada.
98. Finally, by about January 2013, Jimmy Albury put together a group of investors to
buy Orchid Bay out of foreclosure from the Royal Bank of Canada (Bahamas branch).
16
Case 4:11-cv-03218 Document 143-2 Filed in TXSD on 02/27/13 Page 1 of 6
State Couft of Fulton County
x*xEFILEDT<*x
LexisNexis Transaction ID: 40199698
Date: Oct 5 2011 1:5BPM
Mark Harper, Clerk
IN THE STA'TE COURT OF FTILTON COUN'TY
STATB OF CEOI{GTA
SYI.JOVUS IIANK,
)
)
Plaintifll
)
Civil Action
l"ilc No. I 0llv009357lr
)
INVI]STM I]N"I COMI'ANY,
MONARCII FLIG}T|, Lf-C, AND WILLIAM B
JOI{NSON,
W. B. JOI'INSON
)
)
)
)
)
)
Delbnclants.
)
.IUDGMENl'
PlaintilT Svnovus llank, successor by nrcrgcr to Bank of Norlh Gcorgia ("Plaintilf",¡,
having properly filed the Affìdavit of lrrarrk Rocdl (the "lìoedl AfTclavit") in the above matter in
conrpliance rvith the Consent Order to Slay La',vsuit (the "Conscnt Ordcq") entercd by this Court
on Seplember 1,2010, and thc Rocdl Allidavit.showing that Defbnclants W.B, Johnson
Investnrcnt Company, Monarch Flight, I-l-C, antl William
t],
Johnson (collectively the
"Defendants") are in default undcr the tcrrns of the Clonsent Order and the parlies' Settlement
and Modilìcation Agreernenl dated Seplember 1,2010, and the Dctbndants having becn duly
servcd with a copy of'the Roedl Allìdavit, a hearing having been hclcl pursilanl to nt¡ticc' on
Oc(ober 5, 2ûl
l, and tlrc Court having clclcrrnirred
Consent Order and the urrdcrlying ilgrcemenl as
thal a dclhult cxisted undcr ten¡rs ol' thc
olthe fìling of the l{oedl AfTdavit,
I1'IS HIIRIIBY ORDERED, ADJUDCED, and DECREED thatjuclgrncnt
be and hcreby
is entered in lhvor of PIainlifl and Plaintit'f have and rccovcr lrom thc Defendants, jointly and
scverally,
lhc principal anrount of
$5,748,539,15, plus accrusd ancl unpaid intcrcst of
$l14,970.78 as olOctober 4, 201l, u,ith ldditional intercst accruing at the contractual rate ol'six
psrçcnt (6%l per annunt (currenlly b94197 pcr dicnr) tiom Octobcr 4, 20¡1, 2011, until all
EXHIBIT
ATL 1 8,251.
1'Í
1vl 9-6-1
1
â J_-Ø
outstanding principal is paid; plus lnte chargcs of $9,638.00; plus contractual loan fbes in the
amount $l14,970,78; plus heretof'ore t¡nreimbursed contractual attorneys' f'ees, incurrccl through
August 31,
l, 201l, in fhe anlount ol
$74,723.51.
IT lS HEREBY ORDERED, ADJUDGED, and DECRIED that any stay imposed by the
Consent Order is lifted.
IT IS FURTI'IER ORDERED, ADJUDGED, and DECR-EEÐ that this is a lìnal Judgnrcnt
against Defendants and the Court rnakes rhe express delennination that thcre is no just reason fbr
delay. Judgment against the Defendanls, joirrtly and severally, shall be entered instanter with
further oppo rtunity
lo
r
SO ORDERED
D
c
fe ndan
this
t
sJpõe heard.
t\
V
aay
of October,
2tl l.
lilltuu1,
Susan B, Forsling
Judge, Fulton County State Court
fNo
'THIS THE
Day ol
State Court of Fulton
ATL 18,25r,1
1
1v1 9-6-i
I
2
2{)
t/
ounty,Ceorgia
no
PREPARED BY:
/s/ R. Kyle Wooels
R. Kyle Woods
Ceorgia Bar No. 775?35
Charles ll. Crawford lll
Gcorgia Bar No. 153073
Greenberg ?raurig, LLP
'Ihe Forum
329û Northside Parkway
Suire 400
Atlanta, Georgia 30327
[email protected]
[email protected]
(678) 551-?l 00'l'clephone
ATL 1 8,251,1 I 1v1 9-6-1
1
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State Court of Fulton County
xxr,EFILEDxxx
LexisNexis Transaction ID: 40215959
Date: Oct 6 2011 11:074M
Mark Harper, Clerk
IN THE STATE COURT OF FULTON COUNTY
STATE OF GEORGIA
SYNOVUS BANK,
)
)
)
)
Plaintiff,
v
)
)
)
)
)
)
)
W.B. JOHNSON INVESTMENT COMPANY,
MONARCH FLIGHT, LLC, AND WILLIAM B
JOHNSON,
Defendants
Civil Action
File No. 10EV009357F
AMENDED JUDGMENT'
Plaintiff Synovus Bank, successor by merger to Bank of North Georgia ("Plaintiff'),
having properly filed the Affidavit of Frank Roedl (the "Roedl Affidavit") in the above matter in
compliance with the Consent Order to Stay Lawsuit (the "Consent Order") entered by this Court
on September 1, 2010, and the Roedl Affidavit showing that Defendants W.B. Johnson
Investment Company, Monarch Flight, LLC, and William
B.
Johnson (collectively the
"Defendants") are in default under the terms of the Consent Order and the parties' Settlement
l,
and Modification Agreement dated September
served
2010, and the Defendants having been duly
with a copy of the Roedl Affidavit, a hearing having been held pursuant to notice on
October 5, 2011, and the Court having determined that a default existed under terms of the
Consent Order and the underlying agreement as of the filing of the Roedl Affidavit,
IT IS HEREBY ORDERED, ADruDGED, and DECREED that judgment be and hereby
is entered in favor of Plaintiff and Plaintiff have and recover from the Defendants, jointly and
severally, the principal amount of $5,748,539.I5, plus accrued, unpaid interest of $60,477.78 as
of October 4,2011, with additional interest accruing atthe contractual rate of sixpercent (6%)
t
This Amended Judgment is entered to correct scrivener's errors, as to the amount of accrued, unpaid prejudgment interest awarded in the Judgment originally entered on October 5,2011 .
ATL 1 8,294,067v1 1 0-ç1
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per annum (currently 5944.97 per diem) from October 4,2011, until all outstanding principal is
paid; plus late charges of $9,638.00; plus contractual loan fees in the amount 5114,970.78; plus
heretofore unreimbursed contractual attorneys' fees, incurred through August 31, 2011, in the
amount
of
$74,723.51.
IT IS ffiREBY ORDERED, ADJUDGED, and DECREED that any stay imposed by the
Consent Order is lifted.
IT IS FURTHER ORDERED, ADJUDGED, and DECREED that this is a final Judgment
against Defendants and the Court makes the express determination that there is no just reason for
delay. Judgment against the Defendants, jointly and severally, shall be entered instanter with no
further opportunity for Defendants to be heard. This Amended Judgment shall be entered nunc
pro tunc to the Court's entry of the original judgment in the above-styled action.
SO ORDERED this 5th day of October, 2011.
.úu¿'n/
tl
Júwt"7
Susan B. Forsling
Judge, Fulton County State Court
ATL 1 8,294,067v1 1 0-f1
1
2
PREPARED BY:
/s/ R. Kvle Woods
R. Kyle Woods
Georgia Bar No. 775735
Charles H. Crawford III
Georgia Bar No. 153073
Greenberg Traurig, LLP
The Forum
3290 Northside Parkway
Suite 400
Atlanta, Georgia 30327
[email protected]
[email protected]
(67 8)
5
53 -21 00 Telephone
ATL 1 8,294,067v1
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KWWSZZZWULEXQHFRPQHZVGHFRUFKLGED\VPDQDJHUIHDUHGORVLQJHYHU\W The Nassau Guardian
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WEATHER The Abacos
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Attorney defends clients in Orchid Bay dispute
ALISON LOWE
Guardian Business Editor
[email protected]
Published: Dec 18, 2013
The attorney for an Abaco couple who saw the
development they were involved with subject to a
takeover by a team led by Grant Thornton Bahamas,
confirmed yesterday that the couple plans to seek to
have this takeover overturned in the courts, with
applications to be made to this effect in short order.
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Roy Sweeting, partner with law firm Glinton
Sweeting and O’Brien, and representative for James and Melonie Albury, told Guardian Business that “a
lot of incorrect statements” have been made in relation to his clients.
In particular, he said that Melonie Albury’s company, Albury’s Property Management, “has nothing at all
to do with” the overall management of the 203-acre Orchid Bay property, but simply “does some
maintenance on private homes and rents golf carts” within the development.
Today's Front Page
Sweeting stated that Melonie Albury’s husband, James ‘Jimmy’ Albury, is the receiver for the Guana Cay
Abaco Development Company.
On December 12, Grant Thornton Managing Partner Paul Gomez took control of the Orchid Bay Resort
and Marina.
Court documents obtained by this newspaper show the Supreme Court has appointed Gomez the receiver
for the William B. Johnson Investment Company and William B. Johnson entities, which own the
outstanding and issued shares in Guana Cay Abaco Development Company.
Gomez is now attempting to account for all of the assets in the company with a view to sell them to raise
funds necessary to pay off a debt owed to his client, Synovus.
US bank, Synovus, is the primary creditor of the companies for which Gomez has now been appointed
receiver, whose principal is American businessman William B. Johnson.
The property contains a number of houses which are offered as rental properties, and residents have
expressed concern that the takeover will interfere with their ability to rent out their properties over
Christmas.
A secondary legal action is also underway which alleges that James Albury, acting as property manager for
Orchid Bay, caused some of its assets to be sold at significantly below their true market value.
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http://www.thenassauguardian.com/index.php?option=com_content&view=article&id=43... 12/29/2013
Amegy National Bank v. Monarch Flight II, LLC et al
Doc. 77
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
AMEGY BANK NATIONAL ASSOCIATION,§
§
Plaintiff,
§
§
v.
§
§
MONARCH FLIGHT II, LLC, et al.,
§
§
Defendants.
§
CIVIL ACTION NO. H-11-3218
MEMORANDUM AND ORDER
This dispute arises out of a $15 million loan made by the plaintiff, Amegy Bank National
Association. Amegy sued Monarch Flight II, LLC (“Monarch”), the borrower, and William B.
Johnson, the guarantor, after Monarch defaulted. Amegy also sued John T. Bobo, an attorney who
represented Monarch and Johnson in connection with the Amegy loan; Bobo’s law firm, Bobo,
Hunt, White & Nance; Host Hotels & Resorts L.P., an entity in which Johnson owned partnership
units that were pledged as collateral for the loan; and Host Hotels & Resorts, Inc., a corporation
whose shares Johnson would receive if he chose to redeem his partnership units in Host Hotels &
Resorts L.P. Amegy alleged the right to recover the outstanding principal and interest, as well as
attorneys’ fees. Amegy applied for a preliminary injunction, seeking to freeze assets owned by
Johnson to ensure that sufficient assets will be available to satisfy a judgment. After an evidentiary
hearing on the application for a preliminary injunction, this court denied the motion for a
preliminary injunction. Amegy has moved for reconsideration. (Docket Entry No. 40). Johnson
has filed a response. (Docket Entry No. 54). This court concludes that Amegy has made the showing
Dockets.Justia.com
needed for reconsideration and, based on the record1 and the applicable law, grants the motion for
a preliminary injunction.2 The reasons for this ruling are explained below.
I.
Background
Johnson is the sole owner and managing member of Monarch. In 2008, Monarch borrowed
$15 million from Amegy. The loan was documented by a May 1 promissory note executed by
Johnson as managing member of Monarch. Monarch was required to make monthly interest
payments from July 1, 2008 until May 1, 2011, when all outstanding principal and accrued interest
became due. (Docket Entry 1-1, at 1). The $15 million was to be used to finance the purchase,
repair, and upgrade of a Gulfstream Aerospace GIII Jet; to finance the development of Orchid Bay,
a real estate development project in the Bahamas; and “for any other Borrower or Guarantor
purpose.” (Id., at 6).
Amegy also entered into a guarantee agreement with Johnson and two security agreements,
one with Johnson and one with Monarch. In the guarantee agreement, Johnson agreed to assume
Monarch’s obligations under the note if Monarch defaulted. (Docket Entry No. 1-2). The two
security agreements pledged collateral to secure Amegy’s loan.
The first security
agreement—between Amegy and Monarch—granted Amegy a security interest in the GIII Jet.
(Docket Entry No. 1-4). The second security agreement—between Johnson and Amegy—granted
Amegy a security interest in 825,457 Host Hotels & Resorts, L.P. partnership units that Johnson
1
The evidentiary record has been supplemented since the preliminary injunction hearing. As supplemented,
the record now includes a property list provided by Johnson to Amegy that lists three properties along with the
outstanding loans associated with each property, (Docket Entry No. 40-3); a lis pendens notice recorded for one of the
three properties on Johnson’s list, (Docket Entry No 40-1); and county tax records listing the value of Waterfall Farms,
another property on the list, as $4,865,500, (Docket Entry No. 40-2).
2
Amegy has also filed a motion for expedited consideration of the motion for reconsideration. (Docket Entry
No. 41). This motion is denied as moot.
2
personally owned and in any shares of Host Hotels & Resorts, Inc. that Johnson would own as a
result of redeeming the partnership units. (Docket Entry No. 1-3). In this agreement, Johnson
represented and warranted that he owned the partnership units “free and clear of any lien, security
interest, pledge, claim, or other encumbrance . . . or any right or option on the part of a third person
to purchase or otherwise acquire” them. (Id., at 3). Amegy filed UCC-1 financing statements to
perfect its security interests in the aircraft and partnership units. (Docket Entry No. 1-6; Docket
Entry No. 1-7). It is unclear whether the filing of a UCC-1 financing statement was sufficient, by
itself, to perfect Amegy’s security interest in the partnership units.
On April 24, 2008—one week before signing the second security agreement—Johnson sent
Amegy a letter that stated, in relevant part:
I have attached the Host Hotels & Resorts, L.P. written confirmation
dated January 15, 2008 showing 825,457 partnership units. These
particular units can be converted to stock at any time and sold. I
prefer to keep them as partnership units at the present time . . . . I
will agree that when I dispose of this particular portion of my Host
Hotels & Resorts, L.P. units, I will be happy to pay down 50% of the
balance of the $15 million dollar loan that I will have with you.
(Docket Entry No. 1-10, at 2). The agreement granting Amegy a security interest in the partnership
units did not specify that Johnson could dispose of the units if he paid 50% of the balance of the
loan. Instead, the agreement stated that Johnson would not “sell, assign, convey, pledge or
otherwise dispose” of the units and shares without Amegy’s “prior written consent.” (Docket Entry
No. 1-3, at 4).
Johnson had previously entered into an agreement with SunTrust Bank relating to the same
partnership units pledged to Amegy. In October 2006, Johnson obtained an $8 million loan from
SunTrust and signed a promissory note and an agreement not to encumber assets. Under the latter
3
agreement, Johnson agreed not to “transfer, create, incur, assume or suffer to exist any pledge,
mortgage, trust, lien, security interest, assignment or other preferential arrangement, charge or
encumbrance . . . upon or with respect to” the 825,457 Host Hotels partnership units. (Inj. Hr’g,
Pl.’s Ex. 16C). Johnson renewed the SunTrust loan several times, for different amounts. In May
2010, Johnson signed an agreement with SunTrust in which he represented that the October 2006
agreement not to encumber the Host Hotel partnership units “remains in full force and effect and no
default exists thereunder” and promised to “submit to SunTrust to apply against the loan . . . all
proceeds received from either the sale or transfer” of the partnership units. (Id., Pl.’s Ex. 16A). In
May 2008, when Amegy made the $15 million loan to Monarch, Johnson did not disclose to Amegy
the existence of the SunTrust agreement not to encumber the partnership units. Amegy learned
about this agreement when SunTrust sued Johnson in June 2011 after he defaulted on the SunTrust
promissory note. SunTrust sued to recover the unpaid interest and principal, which at that time were
$9,062,360.93. (Id.).
On December 31, 2009—after Monarch made some late interest payments on the Amegy
loan and after Amegy requested a 50% prepayment of the principal under section 6(b) of the
promissory note—Bobo sent Amegy a letter confirming that Johnson had 825,457 partnership units
in Host Hotels, that the units were pledged to Amegy, and that they had a value of $9,666,101.44.
(Docket Entry No. 1-8, at 1). Five days later, Johnson sent Host Hotels a notice exercising his right
to redeem the partnership units. In the notice, Johnson stated as follows:
the undersigned (a) has marketable and unencumbered title to such
Units, free and clear of the rights of or interests of any other person
or entity, (b) has the full right, power and authority to redeem and
surrender such Units as provided herein and (c) has obtained the
consent or approval of all persons or entities, if any, having the right
to consult or approve such redemption and surrender.
4
(Docket Entry No. 1-9, at 2).
Johnson’s financial records indicate that he sold 843,199 units in Host Hotels for
$9,516,052.12 on January 26, 2010.3 (Inj. Hr’g, Pl.’s Ex. 20). By September 2010, Johnson had
used most of the loan proceeds on personal and business expenses and had used most of the
partnership sale proceeds to benefit and improve real property he owned that was not pledged to
secure the Amegy loan. (Id., Ex. 22). Johnson did not inform Amegy that he was selling his
partnership units. Nor did he pay 50% of the loan balance, as stated in the April 24, 2008 letter to
Amegy.4
Under the Amegy promissory note, Monarch was required to make monthly interest
payments by the first day of each month from July 1, 2008 to May 1, 2011. The note defined “Event
of Default” to include Monarch’s failure “to pay this Note or any installment of this Note (whether
principal or interest) when due.” (Docket Entry No. 1-1, at 3). Monarch made its first late interest
payment in October 2008. It continued to make interest payments—some late and some on
time—until January 21, 2011, when it paid the monthly interest for November 2010. The November
2010 interest payment was the last Monarch made to Amegy under the promissory note. Monarch
did not pay the outstanding principal and accrued interest when the note matured on May 1, 2011.
Amegy attempted to foreclose on the collateral securing its loan: the aircraft and the hotel
partnership units. Amegy was unable to foreclose on the partnership units because Johnson had sold
them in January 2010.
On September 2, 2011—three days after Amegy brought this
3
The record does not explain the discrepancy between the number of units Johnson redeemed and the number
of units Johnson sold.
4
According to Amegy, it did not learn that Johnson disposed of his units until August 2011, when Amegy
contacted Host Hotels to obtain information about foreclosing on the units. (Docket Entry No. 1, at 18–19).
5
action—Monarch filed for Chapter 11 bankruptcy. (Docket Entry No. 7-1). Because the aircraft
became property of the bankruptcy estate, the Bankruptcy Code’s automatic stay provision
prevented Amegy from foreclosing on the aircraft.
At the injunction hearing, Johnson testified that he currently owns—either individually,
together with his wife, or through his various business entities—several significant assets. These
include the Waterfall Farms in Shelbyville, Tennessee, and Orchid Bay, a real estate development
in the Bahamas. Johnson testified that his wife and he own the Tennessee horse farm. According
to Johnson, the farm was appraised at approximately $130 to $140 million. Johnson testified that
he believes the appraisal was too high and estimated that the current value of the farm is between
$75 and $125 million dollars. Johnson testified that he plans to “give all that”—the farm and the
horses—to the veterinary school at the University of Tennessee “at a point in time,” but no legal
commitment with the university currently exists. Deutsche Bank has a lien on the farm for $7
million. The 2011 county tax records for the farm value it at approximately $4.86 million, far less
than the estimate Johnson provided.
Johnson testified that the value of the real estate development in the Bahamas is several
hundred million dollars. The Royal Bank of Canada has a $1 million lien on the property. Johnson
owns 100% of a domestic corporation that owns 100% of a Bahamas corporation that owns Orchid
Bay. Johnson testified that he is currently trying to borrow $200 million—not the far lower amount
this court erroneously understood Johnson was seeking—to complete the development. Johnson did
not specify what assets will be pledged as security for the loan he is working to obtain. The record
showed that there are only 17 to 18 undeveloped lots remaining in phase 1, which are worth
approximately $47 million when they sell, which is unlikely to occur in the next few years, given
6
the market conditions. The remaining salable land is part of phase 2, which cannot be developed
until Johnson obtains the additional financing and builds an inland canal and other infrastructure.
No units will be sold for many years.
The record shows that Johnson is currently in default on loans not secured by his real
property. These include the $15 million loan from Amegy, a $8.95 million loan from SunTrust, and
a $5 million loan from Synovus Bank.
On August 30, 2011, Amegy filed this action to recover the outstanding principal and
accrued interest due under the promissory note. Amegy’s complaint asserts five causes of action
against Johnson: breach of contract; conversion; fraud; money had and received; and conspiracy.5
(Docket Entry No. 1, at 20–23). In addition to damages, Amegy seeks three equitable remedies:
restitution; an accounting “for all benefits derived by Johnson . . . by virtue of [his] wrongful
conduct”; and the “[i]mposition of a constructive trust upon all money, property, assets, or other
benefits, and upon all property . . . acquired with the money derived by Johnson . . . pursuant to the
$15 million loan from Amegy, and from money Johnson wrongfully retained when he converted and
sold the partnership units.” (Id., at 26). After filing its complaint, Amegy applied for a preliminary
injunction, (Docket Entry No. 4), and filed a supplement to that application, (Docket Entry No. 7).
Amegy asks this court to freeze three types of assets: (1) all of Johnson’s assets; (2) all assets that,
according to Amegy, are subject to a constructive trust; and (3) “all assets belonging to or in the
possession of . . . Johnson or subject to his control having a current total value, net of any lien or
encumbrances, of $16,000,000.” (Docket Entry No. 7, at 7). Amegy argues that without an
injunction, it “will be injured because Johnson will have insufficient assets remaining to satisfy a
5
Amegy’s first amended complaint, filed on October 11, 2011, adds causes of action for theft and fraudulent
transfers. (Docket Entry No. 33, at 35–36).
7
money judgment” on its claims. (Id., at 4). Amegy contends that “Johnson has already . . .
transferred assets in which Amegy had a security interest”—the partnership units—“in order to place
the [units] beyond Amegy’s reach.” (Id., at 3–4). At the injunction hearing, Johnson responded that
Amegy has an adequate remedy at law in the form of money damages, because Johnson and the
various business entities he controls own assets worth well in excess of $15 million.
II.
Analysis
Amegy asks this court to reconsider its prior ruling denying the motion for a preliminary
injunction. That ruling was primarily based on the erroneous belief that Johnson testified at the
injunction hearing that he was planning to borrow $28 million dollars to complete the Orchid Bay
development. The motion for reconsideration correctly points out that the correct amount is $200
million. Based on the clarified and expanded record, this court concludes that Amegy has shown
irreparable harm, which is the only issue the parties disputed in the preliminary injunction hearing,
and grants Amegy’s motion for reconsideration.
The Federal Rules of Civil Procedure do not specifically provide for motions for
reconsideration. Shepherd v. Int’l Paper Co., 372 F.3d 326, 328 (5th Cir. 2004); see also St. Paul
Mercury Ins. Co. v. Fair Grounds Corp., 123 F.3d 336, 339 (5th Cir. 1997). Reconsideration
motions are generally analyzed under the standards for a motion to alter or amend judgment under
Rule 59(e) or a motion for relief from a judgment or order under Rule 60(b). Hamilton Plaintiffs
v. Williams Plaintiffs, 147 F.3d 367, 371 n.10 (5th Cir. 1998). Rule 59(e) governs when the
reconsideration motion is filed within 28 days of the challenged order or when the motion seeks
reconsideration of an interlocutory order. Steadfast Ins. Co. v. SMX 98, Inc., No. H–06–2736, 2009
WL 3190452, at *4–5 (S.D. Tex. Sept. 28, 2009) (drawing the line at 10 days instead of 28 days
8
because the case was decided before the amendments to Rule 59 took effect on December 1, 2009).
Rule 59(e) applies, because this court has not entered judgment.
A motion to alter or amend under Rule 59(e) “‘must clearly establish either a manifest error
of law or fact or must present newly discovered evidence’ and ‘cannot be used to raise arguments
which could, and should, have been made before the judgment issued.’” Rosenzweig v. Azurix
Corp., 332 F.3d 854, 863–64 (5th Cir. 2003) (quoting Simon v. United States, 891 F.2d 1154, 1159
(5th Cir. 1990)). The Fifth Circuit warns that reconsideration under Rule 59(e) is an extraordinary
remedy that courts should use sparingly. Templet v. HydroChem Inc., 367 F.3d 473, 479 (5th Cir.
2004).
To obtain a preliminary injunction, Amegy must show: (1) a substantial likelihood of success
on the merits; (2) a substantial threat that it will suffer irreparable harm if the injunction is not
granted; (3) that the threatened injury outweighs any damage the injunction might cause the
defendant; and (4) that the injunction will not disserve the public interest. Nichols v. Alcatel USA,
Inc., 532 F.3d 364, 372 (5th Cir. 2008). “A preliminary injunction is an ‘extraordinary remedy’ and
should only be granted if the plaintiffs have clearly carried the burden of persuasion on all four
requirements.” Planned Parenthood of Houston & S.E. Tex. v. Sanchez, 403 F.3d 324, 329 (5th Cir.
2005) (internal quotation marks and citation omitted).
Johnson stipulated for the purpose of the injunction hearing that Amegy will likely succeed
on the merits of its claims, including its claim that Johnson is liable for all amounts due under the
promissory note as a guarantor of that note. The parties assumed, for the injunction hearing only,
that Amegy had met its burden of showing a substantial likelihood of success on the merits. The
parties disputed only whether Amegy could show that it will suffer irreparable harm if this court
9
does not issue an injunction freezing the assets it identified. The only issue is irreparable harm. To
the extent this court based its prior opinion on a finding that Amegy had not sufficiently shown a
special trust or fiduciary relationship, or fraud, to justify a constructive trust, that was erroneous.
The parties stipulated that Amegy had shown the necessary likelihood of success on the merits and
that the only issue was irreparable harm.
The record as supplemented and without this court’s erroneous belief that Johnson was
seeking to borrow far less than $200 million shows that Amegy will suffer irreparable harm unless
injunctive relief is granted. Showing irreparable harm is “[p]erhaps the single most important
prerequisite for the issuance of a preliminary injunction.” 11A CHARLES A. WRIGHT, ARTHUR R.
MILLER & MARY KAY KANE, FEDERAL PRACTICE AND PROCEDURE § 2948.1, at 139 (2D ED. 1995).
“In general, a harm is irreparable where there is no adequate remedy at law, such as monetary
damages.” Janvey v. Alguire, 647 F.3d 585, 600 (5th Cir. 2011). “Where the harm suffered by the
moving party may be compensated by an award of money damages at judgment, courts generally
have refused to find that harm irreparable.” Hughes Network Sys., Inc. v. InterDigital Commc’ns
Corp., 17 F.3d 691, 694 (4th Cir. 1994). “However, the mere fact that economic damages may be
available does not always mean that a remedy at law is ‘adequate.’” Janvey, 647 F.3d at 600. Even
when, as here, the ultimate relief sought is money damages, “extraordinary circumstances”—such
as evidence showing that the defendant is likely to become insolvent before final judgment or that
the defendant intends to dissipate his assets to make a judgment awarding damages
uncollectible—“may give rise to the irreparable harm required for a preliminary injunction.”
Hughes Network, 17 F.3d at 694; see also Pashaian v. Eccelston Props., Ltd., 88 F.3d 77, 86–87 (2d
Cir. 1996). The Supreme Court has emphasized that “plaintiffs seeking preliminary relief [must]
10
demonstrate that irreparable injury is likely in the absence of an injunction.” Winter v. Natural Res.
Def. Council, Inc., 555 U.S. 7, 22 (2008). “Issuing a preliminary injunction based only on a
possibility of irreparable harm is inconsistent with [the] characterization of injunctive relief as an
extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled
to such relief.” Id.
On the current record, Amegy has shown that it is likely that Johnson will lack sufficient
assets at the end of the litigation to satisfy a final judgment awarding damages. Johnson testified
that he owns 100% of Waterfall Farms, a 1050-acre farm in Tennessee where he conducts a horsebreeding operation. Johnson estimated that the current value of the property is between $75 and
$125 million and that there is a $7 million lien on the farm securing a Deutsche Bank loan. Amegy
objected to Johnson’s testimony about the value of the property and has presented evidence in the
form of the tax records showing that the property is worth far less than Johnson’s estimate. The
record shows that Johnson’s equity in this asset is less than the value of the outstanding bank loans
that are currently due and that Johnson is responsible for. And if Johnson further encumbers this
property and other property by $200 million—the amount he is trying to borrow to complete the real
estate development in the Bahamas—Johnson’s equity in the assets shown in the record (not just
Waterfall Farms) will be less than needed to satisfy a money judgment for Amegy.
On the basis of the expanded record, Amegy’s motion for injunctive relief is granted.
Amegy has shown a reasonable likelihood that, at the end of the litigation, Johnson’s equity in his
assets will be far less than the amount Amegy seeks to recover under the promissory note.
Johnson argues that this court cannot issue an injunction freezing assets because Amegy has
not shown a sufficient nexus between the assets sought to be frozen and its equitable claims.
11
(Docket Entry No. 29, at 3–4). See In re Fredeman Litigation, 843 F.2d 821, 827 (5th Cir. 1988)
(stating that an injunction “limited to the property in dispute or its direct, traceable proceeds, is far
different from [an] all-inclusive” injunction freezing all of the defendant’s assets). Amegy has
shown how Johnson used the $9.5 million in proceeds from the sale of the partnership units. The
evidence shows that Johnson used the money to improve and benefit the following real properties:
(1) his home at 1035 Spyglass Lane in Naples, Florida; (2) property he owns or co-owns with his
wife at 355 River Bend Road in Shelbyville, Tennessee; (3) Waterfall Farms; (4) the Orchid Bay
development in the Bahamas; (5) property he co-owns in Shelbyville, Tennessee known as Airport
Business Park; and (6) property he owns or co-owns known as 100 West Paces Ferry Road NW in
Atlanta, Georgia. Johnson’s bank records further indicate that he used part of the $9.5 million to
pay down loans on some or all of these properties. For example, Johnson paid approximately $2
million to Deutsche Bank and North American Savings Bank, which have loans on Johnson’s home
in Florida, the 100 West Paces Ferry Road property, and Waterfall Farms.
Amegy has shown that it is entitled to a preliminary injunction freezing the real properties
that Johnson has improved or benefitted using the proceeds of the partnership units sale. The
injunction will prevent Johnson from transferring, selling, or further encumbering them.6
III.
Conclusion
6
After Amegy moved for a preliminary injunction, Johnson filed a motion to dismiss the complaint and compel
arbitration. (Docket Entry No. 21). The motion argued that Amegy and Johnson entered into an agreement to arbitrate
any dispute related to the $15 million Amegy loan. Amegy has not responded to the motion. Under Fifth Circuit
precedent, a district court may issue injunctive relief to protect the status quo pending resolution of a motion to compel
arbitration. Janvey, 647 F.3d at 595.
12
Amegy’s motion for reconsideration is granted. Johnson is prohibited from transferring,
selling, or further encumbering the real properties he has improved or benefitted using the proceeds
of the partnership units sale. A preliminary injunction order is separately entered.
SIGNED on December 7, 2011, at Houston, Texas.
______________________________________
Lee H. Rosenthal
United States District Judge
13