Opinion
11-CV-2692 (SJF) (WDW)
08-17-2011
THEODORE R. HUGHES, ETHEL KAISER NICK PRIVITELLO, and ROBERT J. RIZZI, Plaintiffs, v. TOMMY CONSTANTINE (f/k/a Tommy Hormovitis), Defendant.
ORDER
FEUERSTEIN, J. I. Introduction
On June 3,2011, plaintiffs Theodore Hughes, Ethel Kaiser, Nick Privitello and Robert Rizzi ("plaintiffs") filed a complaint against Tommy Constantine ("defendant") alleging violation of Rule 1 Ob-5 of Section 20(A) of the Exchange Act ("Rule 10b-5"), "securities fraud," fraud, fraud in the inducement, conversion and unjust enrichment. Plaintiffs seek a preliminary injunction restraining defendant from "'transferring, encumbering, selling, conveying, diluting or otherwise negatively impacting his assets" without posting a bond and expedited discovery. See ECF No. 3. On June 8, 2011, the Court issued an order requiring defendant to submit any opposition to the motion by June 16, 2011. All evidence and arguments in support of the motion were also to be filed by June 16, 2011. On June 28, 2011, defendant appeared and sought an extension of time to respond to July 1, 2011 on consent, which was granted.
On July 5, 2011, based upon defendant's acknowledgment that plaintiffs had provided him with four hundred thousand dollars ($400,000.00) in order to purchase an ownership interest in Eufora L.L.C. which was not purchased, See Defendant's Declaration ¶¶ 32, 37-38,42, 51-57, 64, 67, the Court ordered defendant to deposit the sum of four hundred thousand dollars ($400,000.00) with the Clerk of the Court which he failed to do. See ECF Nos. 13,16. II. Discussion
Plaintiffs argue that they would suffer irreparable harm in the absence of a preliminary injunction because defendant is insolvent.
A district court does not have the authority to issue a preliminary injunction preventing parties "from disposing of their assets pending adjudication of [a plaintiff's] contract claim for money damages" which are not within the jurisdiction of the court. Grupo Mexicano de Desarrollo. S.A. v. Alliance Bond Fund, Inc.. 527 U.S. 308,333,119 S. Ct. 1961,144 L. Ed. 2d 319 (1999); see also Sec. & Exch.Comm'n v. Cavanaeh. 445 F.3d 105, 117-18 (2d Cir. 2006). This limitation extends to cases "where no lien or equitable interest is claimed." Grupo Mexicano. 527 U.S. at 310; see also United States ex rel. Rahman v. Oncology Associates. 198 F.3d 489 (4th Cir. 1999) (interpreting Grupo Mexicano to apply to claims for money damages in law).
Defendant is a resident of Arizona, compl. ¶ 11, Defendant's Declaration ¶ 2, and plaintiffs have not provided evidence that any of the assets over which they seek a preliminary injunction are within this Court's geographical jurisdiction. There is no evidence that plaintiffs have any specific claims to defendant's interest in AZ Avalon Partners, L.L.C., AZ Falcon Partners, L.L.C., Set Jet, L.L.C., Falcon 20 Partners, L.L.C. or Eufora L.L.C. A judgment in favor of plaintiffs would establish plaintiffs only as general creditors of defendant's personal assets. Therefore, pursuant to Grupo Mexicano. this Court lacks authority to issue a preliminary injunction to prevent defendant from encumbering or transferring his assets.
In a derivative action brought by plaintiffs, an Arizona Superior Court derivative action has found that plaintiffs do not have membership interests in Eufora L.L.C. See Memorandum in Support at 7-8.
Insofar as Plaintiffs also seek to enjoin defendant from "encumbering or transferring his equity interest in Eufora [L.L.C.]," compl. at 16, in order to satisfy any judgement for monetary damages, this type of injunction, known as a Mareva injunction, is also prohibited by Grupo Mexicano. See Cavanagh. 445 F.3d at 117, at n. 27 (the purpose of the injunction prohibited in Grupo Mexicano was "to ensure the effectiveness of an ultimate remedy"); see also Karaha Bodas Co., L.L.C. v. Perusahaan Pertambanpan MinvakDan Gas Bumi Negara, 500 F.3d 111, 117, at n. 8 (2d Cir. 2007) (Mareva injunctions prohibited by Grupo Mexicano). III. Conclusion
Absent authority to grant the relief sought by plaintiffs, it is unnecessary to review the plaintiffs' remaining arguments. For the foregoing reasons, the motion is denied.
Undra J. Fenerstein
United States District Judge
DATED: Central Islip, New York
August 17, 2011