Adrian Tisino v. Danilo Becerra ( 2012 )

Case: 11-40834 Document: 00511877472 Page: 1 Date Filed: 06/05/2012
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
June 5, 2012
No. 11-40834 Lyle W. Cayce
Clerk
ADRIAN TISINO; MICHAEL ALANIZ; JESUS ALVARADO; EDDIE
ALMENDARIZ; JAMES BARTON; ET AL.,
Plaintiffs–Appellees
v.
R & R CONSULTING AND COORDINATING GROUP, L.L.C.; LEGAL
MANAGEMENT, L.L.C.; ROBERT PAUL ROSS, II, Individually; ROBERT
PAUL ROSS, II, Trustee of the Ross Living Trust Number Three,
Defendants–Appellants
Appeals from the United States District Court
for the Southern District of Texas
USDC No. 3:10-cv-244
Before KING, HIGGINBOTHAM, and HAYNES, Circuit Judges.
PER CURIAM:*
Defendants–Appellants R&R Consulting and Coordinating Group, L.L.C.
(“R&R”), Legal Management, L.L.C. (“Legal Management”), and Robert Paul
Ross II, individually and as trustee of the Ross Living Trust Number Three
(“Ross II”), appeal the district court’s entry of a preliminary injunction in favor
of Plaintiffs–Appellees Adrian Tisino, Michael Alaniz, and others (“Appellees”).
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
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No. 11-40834
This appeal relates directly to paragraph 2 of the preliminary injunction, which
freezes certain assets derived from settlement proceeds obtained in an earlier
lawsuit brought on Appellees’ behalf by the law firm of Moreno, Becerra and
Casillas (“MBC”) against British Petroleum (the “BP Litigation”). In granting
injunctive relief, the district court found that a portion of the BP Litigation
settlement proceeds were improperly paid to disbarred attorney Paul Ross
(“Ross”), now deceased, who had illegally solicited Appellees on MBC’s behalf.
As discussed herein, we find that the district court did not abuse its discretion
and therefore affirm the preliminary injunction.
Appellants first contend that the district court erred in granting a
preliminary injunction that “freeze[s] . . . all assets of Appellants without
limitation as to the source of the assets,” as they did not receive adequate notice
that such relief was sought or would be granted. We disagree. As an initial
matter, Appellants mischaracterize the nature of the injunctive relief granted
in paragraph 2. The injunction does not, as Appellants contend, extend to assets
unrelated to the BP Litigation. The district court’s findings of fact—which
Appellants do not challenge on appeal—explicitly state that all of the assets at
issue in the preliminary injunction are in fact derived from the BP Litigation
settlement proceeds. The district court found that MBC paid Ross approximately
$4,900,000 to $7,000,000 out of the BP Litigation settlement proceeds, that these
funds were paid into Ross’s Edward Jones accounts, and that Ross subsequently
“transferred some of the fees improperly paid to him by MBC to accounts held
in the name of R&R, Legal Management and the Trust.” The court then
concluded that “all funds and/or investment securities presently held in any and
all accounts in the names of Ross, the Trust, R&R and Legal Management are
derived, directly or indirectly, from the $4,900,000.00+ payments from MBC to
Ross.” Consistent with these factual findings, paragraph 2 of the preliminary
injunction enjoins Ross II “from taking any action or inaction that will have the
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No. 11-40834
effect of or permit a transfer, conveyance, or removal of any funds, amounts,
value, investments, held by the Ross Number Three Living Trust, Edward Jones,
Legal Management, LLC, R & R Consulting and Coordinating Group,” absent
a court order. As such, the injunctive relief relates directly to those assets
derived from MBC’s original payment to Ross out of the BP Litigation settlement
proceeds and subsequently transferred, at least in part, by Ross into the
accounts of R&R, Legal Management, and the Trust. Paragraph 2 of the
preliminary injunction is therefore not a general freeze “without limitation as
to the source of the asset,” but rather a freeze of assets specifically related to the
instant lawsuit.
We further conclude that Appellants received sufficient notice of this
injunctive relief, as required by Federal Rule of Civil Procedure 65(a)(1).1 Such
notice is provided through paragraph 86 of the Appellees’ operative complaint,
which asserts a breach of fiduciary duty claim and requests “imposition of a
constructive trust over all of their BP settlement proceeds in the actual and/or
constructive possession of any of the defendants . . . .” Under Texas law, a
constructive trust is a flexible equitable remedy applied where one party “holds
funds which in equity and good conscience should be possessed by another.”
Meadows v. Bierschwale, 516 S.W.2d 125, 131 (Tex. 1974). As an order that
“purport[s] to control [a party’s] behavior over an extended period of time,” a
constructive trust is itself a type of preliminary injunction. Parker v. Ryan, 960
F.2d 543, 545 (5th Cir. 1992). This court and others have upheld broad
1
We have recognized that “Rule 65(a) does not specify the particular type of notice
required in order properly to bring defendants in an injunction proceeding before the trial
court,” Plaquemines Parish Sch. Bd. v. United States, 415 F.2d 817, 824 (5th Cir. 1969), and
that “[t]he form of notice is a matter for the trial court’s discretion.” In re Lease Oil Antitrust
Litig. (No. II), 200 F.3d 317, 319 (5th Cir. 2000); see also Marshall Durbin Farms, Inc. v. Nat’l
Farmers Org., 446 F.2d 353, 356 (5th Cir. 1971) (“[T]he requirements of a fair hearing include
notice of the claims of the opposing party and an opportunity to meet them.” (citation and
internal quotation marks omitted)).
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preliminary injunctions based upon a party’s request for entry of a constructive
trust. See, e.g., Fed. Sav. & Loan Ins. Corp. v. Dixon, 835 F.2d 554, 561 (5th Cir.
1987) (“In suing for a constructive trust, an accounting, and restitution of funds
milked . . . in violation of fiduciary duties, [plaintiff] is pursuing equitable
remedies. Thus, . . . an asset freeze by preliminary injunction is an appropriate
method to assure the meaningful, final equitable relief sought.”); USACO Coal
Co. v. Carbonmin Energy, Inc., 689 F.2d 94, 96-98 (6th Cir. 1982). Appellees’
request for imposition of a constructive trust should therefore have put
Appellants on notice that Appellees sought to freeze any and all of Appellants’
assets that were related to the underlying litigation.
The circumstances here are entirely unlike those in Marshall Durbin
Farms, Inc. v. National Farmers Organization, 446 F.2d 353, 356 (5th Cir. 1971),
upon which Appellants rely. There, we found inadequate notice after the district
court scheduled a preliminary injunction hearing just days after the plaintiffs
requested such relief. In light of the extensive record and the limited time in
which to prepare, we found that the plaintiffs had “thrust the defendants into
an impossible position insofar as both preparing and presenting an effective
response to the motion for preliminary injunction,” and reversed the injunction.
Id. at 355-58. Here, in contrast, the district court held the preliminary injunction
hearing fifteen days after the Appellees filed their motion for entry of a
temporary restraining order and preliminary injunction. The hearing also came
nearly two months after the Appellees requested imposition of a constructive
trust in their amended complaint, and ten months after the lawsuit was first
filed. Unlike the defendants in Marshall Durbin, Appellants here received
sufficient notice of the requested injunctive relief.
We also reject Appellants’ contention that the district court’s preliminary
injunction violates general equitable principles by freezing assets unrelated to
the BP Litigation settlement proceeds. See In re Fredeman Litig., 843 F.2d 821,
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824 (5th Cir. 1988). As explained above, the preliminary injunction does not in
fact include unrelated assets, but rather extends only to assets specifically at
issue in this litigation. Even if the preliminary injunction could have been more
precise with respect to the exact assets at issue, such inaccuracy would not
require reversal. Under Texas law, a court is not required to exercise
mathematical precision when deciding which assets should be covered by a
constructive trust. See, e.g., Gatlin v. GXG, Inc., No. 05-93-01852-CV, 1994 WL
137233, at *8 (Tex. App.—Dallas 1994); Baucum v. Texam Oil Corp., 423 S.W.2d
434, 439 (Tex. Civ. App. 1968). Rather, the burden is upon the party opposing an
injunction to prove that certain assets are unrelated to the underlying litigation
and should therefore be excluded from a constructive trust. See Gatlin, 1994 WL
137233, at *8. As Appellants failed to meet their burden, the district court was
within its discretion to grant broad injunctive relief.
Finally, we hold that the district court properly concluded that “[t]he
irreparable harm which is likely to be suffered by the [Appellees] unless the
Court enters a preliminary injunction substantially outweighs any harm that
may be occasioned to [Appellants] if the preliminary injunction is entered.” The
district court found that “Ross II has sought to divert, deplete and/or dissipate
substantial portions of the funds and/or investment securities created out of the”
BP Litigation settlement funds paid to Ross, and “[u]nless immediately
restrained from doing so, Ross II will continue to divert, deplete and/or dissipate
the funds and/or investment securities paid to Ross by MBC and/or place those
funds and/or investment securities beyond the reach of Ross’ creditors, including
the Plaintiffs.” Appellants did not object to these findings of fact before the
district court and do not challenge them on appeal. The significant risk that BP
Litigation settlement funds would be dissipated and placed beyond Appellees’
reach constitutes a threat of substantial irreparable injury.
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Balanced against this undisputed threatened injury is Appellants’ claim
that they will be unable to use frozen assets to pay attorney’s fees or taxes.
Paragraph 2 of the preliminary injunction permits Appellants to withdraw funds
upon “notice provided to [the district court] and a signed order by [the district
court] granting such disposition and/or transfer.” It is up to the district court in
the first instance to decide whether and to what extent funds can be withdrawn
from the frozen assets for any purpose, including to pay attorney’s fees and
taxes. Appellants’ concerns are at this point speculative. We decline to address
them.
For the foregoing reasons, the district court’s preliminary injunction is
AFFIRMED.
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