Nippon Credit Bank, Ltd. v. Matthews

• Decision Date: 15 May 2002
• Docket Number: No. 98-8687.,No. 98-8639.,No. 00-15676.,98-8639.,98-8687.,00-15676.
• Citation: 291 F.3d 738
• Parties: THE NIPPON CREDIT BANK, LTD., Plaintiff-Appellee, v. Douglas G. MATTHEWS, Defendant-Crossclaim Defendant, Farm Depot, Inc. and Farm Depot of Davie, Inc., et al., Defendants, Matthews Family Investment Partnership, Ltd., Matthews Bros., Inc., et al., Defendants-Appellants, Cornerstone Management, Inc., Ultra-Vita Corporation, et al., Defendants-Cross-Claimants-Appellants. The Nippon Credit Bank, Ltd., Plaintiff-Appellee, v. Douglas G. Matthews, Farm Depot, Inc., et al., Defendants Matthews Family Investment Partnership, Ltd., Matthews Bros., Inc., et al., Defendants-Appellants.
• Court: U.S. Court of Appeals — Eleventh Circuit

291 F.3d 738

THE NIPPON CREDIT BANK, LTD., Plaintiff-Appellee, v. Douglas G. MATTHEWS, Defendant-Crossclaim Defendant, Farm Depot, Inc. and Farm Depot of Davie, Inc., et al., Defendants, Matthews Family Investment Partnership, Ltd., Matthews Bros., Inc., et al., Defendants-Appellants, Cornerstone Management, Inc., Ultra-Vita Corporation, et al., Defendants-Cross-Claimants-Appellants.

The Nippon Credit Bank, Ltd., Plaintiff-Appellee, v. Douglas G. Matthews, Farm Depot, Inc., et al., Defendants

Matthews Family Investment Partnership, Ltd., Matthews Bros., Inc., et al., Defendants-Appellants.

No. 98-8639.

No. 98-8687.

No. 00-15676.

United States Court of Appeals, Eleventh Circuit.

May 15, 2002.

COPYRIGHT MATERIAL OMITTED

Cary Ichter, Mark G. Trigg, Merrick D. Bernstein, Meadows, Ichter & Trigg, P.A., Gary M. Shapiro, Strelzik & Shapiro, P.A., Steven J. Strelzik, Strelzik & Shapiro, Stephen Michael Katz, Law Offices of Stephen Katz, Atlanta, GA, Mark L. Pomeranz, Law Offices of Pomerantz & Ladsman, North Miami, FL, for Appellants.

Darryl Scott Laddin, Arnall Golden Gregory, LLP, Thomas D. Bever, Chilivis, Cochran, Larkins & Bever, E. Kendrick Smith, Paul Gunter Williams, Smith, Gambrell & Russell, LLP, Atlanta, GA, Wayne Gary Nitti, Latham & Watkins, David E. Novitski, Thelen, Reid & Priest, LLP, Los Angeles, CA, for Appellee.

Appeals from the United States District Court for the Northern District of Georgia.

Before BIRCH, GODBOLD and COX, Circuit Judges.

PER CURIAM:

The Matthews Family Investment Partnership, Ltd. ("MFIP"), Matthews Brothers, Inc. ("MBI"), and Pacific Florida Holdings, Inc. ("PFH") (collectively, the "Corporate Defendants/Appellants") and Achievers Unlimited, Inc. of Nevada, Inc., Achievers Unlimited, Inc. of Delaware, Inc., Cornerstone Management, Inc., Reliance Distribution Corp., Ultra Vita Corp., and CMH Capital, Inc. (collectively, the "Achievers Defendants/Appellants") appeal the district court's order awarding partial summary judgment in favor of Nippon Credit Bank, Ltd. ("Nippon") in its action to collect on a judgment. The Corporate Defendants also appeal the district court's denial of their petitions for attorneys' fees and litigation expenses, and appeal the district court's order on remand in which the district court found that the Corporate Defendants' contacts satisfied the due process requirements for personal jurisdiction. We find that the record supports the district court's exercise of personal jurisdiction over the Corporate Defendants. We also find that the record supports the district court's grant of summary judgment to Nippon and denial of the Corporate Defendants' petitions for attorneys' fees and litigation expenses. Therefore, we AFFIRM.

I. BACKGROUND

MFIP is a family limited partnership formed under Florida law in May 1990 for the purpose of owning property, "receiving income therefrom, and operating and managing the Property in businesslike fashion with the intent of producing profits." R16-226, Ex. 1 at 10. At its formation, Douglas Gary Matthews and his brother, Stephen Matthews ["Stephen"], were named as general partners. MBI is a corporation formed under Florida law in October 1991 to act as the general partner of MFIP; upon the creation of MBI, Matthews and Stephen transferred their general partnership interests to MBI. PFH is a corporation formed under Florida law in 1993 for the purpose of holding title to real property. Two-thirds of the PFH stock is owned by International Markets, Ltd. ("IML"), an Ireland corporation of which Matthews owns 100 percent; one-third of the PFH stock is owned by MFIP.

In January 1995, PFH gave a note and mortgage to Elizabeth Connelly, the president of Achievers Unlimited International, Inc. ("AUI"), a nutritional supplements marketing company, in exchange for a loan for $1,500,000. R15-229, Ex. 17 at 8, 19-20, Ex. 2. Connelly made the loan to PFH at Matthews' request. R15-229, Ex. 17 at 20-21. In March 1995, Connelly hired Matthews as the "CEO," "PRESIDENT," and "CHAIRMAN OF THE BOARD" of AUI. Id. at 42, Ex. 11. Matthews, and other people he introduced to her, assisted her with investments. R15-229, Ex. 17 at 54-55, 57. Due to Matthews' use of "nominee" or "assignee" shareholders to receive corporate paperwork, Connelly believed that she had ownership interests in AUI and in other Matthews-related entities but later learned that she did not. Id. at 45-46, 90-91, Exs. 17, 18, 21, 25, 29, 31, 34, 39-40. When she realized that her initial loans were to entities controlled by Matthews, Connelly severed her relationships with him through a global "Settlement Agreement" dated 13 and 14 March 1996. R15-229-91-95.

The parties to the Settlement Agreement included Connelly, Gary Hangar, Matthews, Achievers Unlimited Inc. of Nevada, Cornerstone Management, Inc., Reliance Distribution Corp., CMH Capital, Achievers Unlimited Inc. of Delaware, RGH Enterprises, Inc., Ultra Vita Corporation, and AUI. R20-230, Ex. A at 1. Within the Agreement, Connelly assigned the note and mortgage to MFIP. Id. at Ex. 12-C at Replacement Renewal Promissory Note at 3 and Release of Collateral Assignment. Achievers released all claims to the note and mortgage. Id. at Ex. 26-G. MFIP subsequently assigned the note and mortgage to Achievers as collateral for two notes from AUI to Achievers in exchange for $10.00. Id. at 12-B.1 at Collateral Assignment of Note.

In May 1996, Nippon obtained an $8 million judgment, with attorneys' fees and costs, against Matthews in Intercredit Corporation v. Nippon Credit Bank, Ltd., No. 1:94-CV-2451-MHS (N.D.Ga.). Under a settlement agreement, Nippon agreed to accept $3 million from Matthews within two days of the execution of the settlement agreement, and a second $1 million payment before a date certain. When Matthews failed to make the $1 million payment, Nippon exercised a settlement agreement clause allowing it to enter a judgment against Matthews for $8 million.

In order to collect on this judgment, Nippon filed this action against Matthews, the Corporate Defendants, the Achievers Defendants and other parties.¹ Nippon alleged two causes of action: (1) that Matthews's abuse of the corporate form rendered each of the defendants liable under a "reverse alter ego" theory, R1-1-11-13,² and (2) that Matthews's fraudulent conveyances rendered each of the defendants liable. The district court issued a temporary restraining order and a preliminary injunction, freezing the assets of Matthews' alleged alter egos and restraining the defendants from making payments to Matthews or to his alleged alter egos.³ The Corporate Defendants were directed to deposit all of their liquid assets into the registry of the court. The district court indicated that the Corporate Defendants' attorneys' fees would be paid from the registry funds.

In August 1997, the parties stipulated to an order permitting PFH to sell a certain portion of its property, and depositing the proceeds into the registry of the district court. R10-150. Within the order authorizing the sale, the district court directed the Achievers Defendants and other parties to deliver a written release of their security interests "to enable PFH to deliver clear title to the Property to the purchaser" but specified that "liens and security interests of the Achievers Entities ... shall continue and extend ... to the Release Funds deposited into the registry of this Court." R10-150-2. The district court clarified that "Nippon does not waive any right to challenge the validity of ... any claim[] which may be asserted by ... the Achievers Entities ... to the Release Funds" and "[n]either the Achievers Entities nor MFIP waive any claims, offsets or defenses as between themselves concerning their respective claims or entitlement to the Release Funds." Id. at 3-4. It stated that it would resolve "[a]ny disputes concerning the Release Funds." Id. at 5.

From September 1997 until March 1998, the Corporate Defendants filed a number of applications seeking a total of $294,805.91 in attorneys' fees and litigation expenses from the funds deposited in the court's registry. In March 1998, the district court released $30,000 and acknowledged that the fees remained pending.

Nippon and the Achievers Defendants moved for partial summary judgment on the alter ego claims, and the Achievers Defendants and the Corporate Defendants moved for summary judgment on the fraudulent conveyance claims. Nippon and the Achievers Defendants also requested the proceeds from the sale of certain PFH land. The district court applied Georgia law, and granted summary judgment to Nippon on the alter ego claims against the Corporate Defendants finding "overwhelming evidence substantiating" Nippon's claim. R28-295-5. The district court denied the Achievers Defendants and Corporate Defendants' motions for summary judgment. Id. at 15, 17. The district court found that they failed to show the absence of a genuine issue of material fact on the fraudulent conveyance claims, and that the Corporate Defendants' motion on the alter ego claim was moot. The district court held that MFIP's receipt of $10.00 from the Achievers Defendants in exchange for the "collateral[] assign[ment]... [of] its rights under a $1.5 million promissory note ... and a mortgage and security interest for a parcel of property in Florida" "create[d] a strong inference of fraud" which was a "a question for the jury." Id. at 17-18. The district court also denied the Corporate Defendants' applications for attorneys' fees from the court's registry. Id. at 19-22. Regarding the attorneys' fees, the district court found that "the majority of motions filed and arguments advanced by defendants were frivolous," they were not entitled to reimbursement for "unreasonable incidental expenses," the requested fees should be reduced for their failure to comply with the court's direction that their time logs be organized "according to particular motions prepared," the money...