Elliott v. Kiesewetter
| Decision Date | 16 October 1996 |
| Docket Number | No. 95-3104,No. 95-3105,95-3105,Nos. 95-3104,95-3104,s. 95-3104 |
| Citation | 98 F.3d 47 |
| Parties | Constance K. ELLIOTT; Patricia J. Kiesewetter; Linton A. Elliott; Charles L. Elliott, individually and/or as a Minor, by Constance K. Elliott, his Parent and Guardian; Jonathan B. Elliott, a Minor, by Constance K. Elliott, the Parent and Guardian, v. William B. KIESEWETTER, Jr. William B. Kiesewetter, Jr. and Jayne H. Kiesewetter, * AppellantsConstance K. ELLIOTT; Patricia J. Kiesewetter; Linton A. Elliott; Charles L. Elliott; Jonathan B. Elliott, Minors, by Constance K. Elliott, their Parent and Guardian, v. William B. KIESEWETTER, Jr. Jayne H. Kiesewetter William B. Kiesewetter, Jr. and Jayne H. Kiesewetter, Appellants |
| Court | U.S. Court of Appeals — Third Circuit |
Kenneth M. Argentieri (argued), Nicholas P. Vari Kirkpatrick & Lockhart, Pittsburgh, PA, for Appellant, William B. Kiesewetter, Jr.
Jan C. Swensen (argued), Jayne H. Kiesewetter, Swensen, Perer & Johnson, Pittsburgh, PA, for Appellant, Jayne H. Kiesewetter.
Ronald L. Hicks, Jr. (argued), Meyer, Unkovic & Scott, Pittsburgh, PA, for Appellees.
Before: MANSMANN, ALITO and LEWIS, Circuit Judges.
This appeal involves a challenge to the district court's asset freeze order arising out of certain litigation pending in the district court between members of the Kiesewetter family. The asset freeze order bound Appellant William B. Kiesewetter, Jr. and his wife, Appellant Jayne H. Kiesewetter (collectively, the "Kiesewetters").
We hold that the district court did not err in entering the asset freeze order without holding a hearing, and that it made adequate factual findings with respect to its freezing of William B. Kiesewetter, Jr.'s assets. In addition, we will hold that the freeze order properly enjoined Jayne Kiesewetter from transferring or otherwise disposing of the assets she owned with William B. Kiesewetter, Jr.
We also hold that the district court properly determined that the Appellees, Constance K. Elliott, Patricia J. Kiesewetter, Linton A. Elliott, Charles L. Elliott, and Jonathan B. Elliott (collectively, the "Beneficiaries"), would suffer irreparable harm without the protection of an asset freeze and that the hardship to the Kiesewetters did not prevent entry of the order. We will reverse the district court's waiver of the Rule 65 bond requirement because it did not make any findings as to the Beneficiaries' financial ability (or inability) to post the bond. Finally, we will reject the Kiesewetters' arguments that the asset freeze order was too broad and that it violated their due process rights.
The parties to this appeal and the underlying litigation are all members of the same family. The Beneficiaries brought two actions against William B. Kiesewetter, Jr. The first action was a demand for an accounting of their family's assets and is premised on various claims against Mr. Kiesewetter, alleging breach of fiduciary duties, fraud, unjust enrichment and violations of the Uniform Gifts to Minors Act ("UGMA") (hereinafter the "Accounting Action"). A year after filing the Accounting Action, the Beneficiaries filed a second lawsuit alleging that Mr. Kiesewetter and his second wife, Appellant Jayne H. Kiesewetter, fraudulently conveyed Kiesewetter family assets from William B. Kiesewetter, Jr.'s name into the joint or individual name of Jayne H. Kiesewetter (hereinafter the "Fraudulent Conveyance Action") in order to protect the assets from a judgment in the Accounting Action. 1
The litigation between the Kiesewetter family members began shortly after the death in October 1992 of Grace J. Kiesewetter, the wife of the late Dr. William B. Kiesewetter ("Dr. Kiesewetter"). Dr. Kiesewetter had passed away years earlier. Constance K. Elliott, Patricia J. Kiesewetter and William B. Kiesewetter, Jr. are the daughters and son of Dr. and Mrs. Kiesewetter. Linton, Charles and Jonathan Elliott are the sons of Appellee Constance Elliott and the only grandchildren of Dr. and Mrs. Kiesewetter.
The primary dispute between the Kiesewetter family members stems from the manner in which certain family assets, properties and accounts were handled and managed. The Beneficiaries allege that, prior to their deaths, Dr. and Mrs. Kiesewetter placed substantially all of their assets into the names of the Beneficiaries and William B. Kiesewetter, Jr. to avoid or lessen the estate tax liability upon their respective deaths. William B. Kiesewetter, Jr., a licensed attorney with a masters degree in taxation, was Dr. and Mrs. Kiesewetter's natural choice as the person to manage these assets. The Beneficiaries allege that Mr. Kiesewetter agreed to manage the assets on behalf of himself and the Beneficiaries. 2 According to the Beneficiaries, they discovered after Grace J. Kiesewetter's death that Mr. Kiesewetter had acquired their property rights in the family assets without their knowledge or consent.
In the Accounting Action, the Beneficiaries alleged that Mr. Kiesewetter's mismanagement and other fraudulent conduct resulted in the dissipation of the family assets that had been placed in their names and that Mr. Kiesewetter was liable to them for the value of their collective interests in those assets. The Beneficiaries sought an accounting of the family's financial affairs and of the UGMA accounts established for Linton A. Elliott, Charles L. Elliott and Jonathan B. Elliott. The Beneficiaries demanded over $5 million in compensatory damages plus punitive damages and other equitable relief.
On December 5, 1994, a jury returned a verdict by special interrogatories in the Accounting Action in which it determined, inter alia, that Mr. Kiesewetter had breached various fiduciary duties that he owed to the Beneficiaries. Evidence at trial revealed that the Beneficiaries had held property interests in numerous Kiesewetter family assets. These assets included life insurance proceeds, pension proceeds, property sale proceeds, trust funds, bonds, and various bank accounts.
At trial, the Beneficiaries established that their collective interests in these family assets had a total principal value of over $3.4 million. The evidence established that the Beneficiaries' interests in these assets were placed into accounts held only in Mr. Kiesewetter's name, and that Mr. Kiesewetter reported in excess of $1 million in interest and dividend income from these assets. In addition, the Beneficiaries introduced evidence suggesting that they may have an interest in other assets Mr. Kiesewetter acquired using a portion of their interests in the family assets.
On December 30, 1994, Mr. Kiesewetter moved for a new trial or alternatively for judgment notwithstanding the verdict. None of the bases for his motion pertained to the sufficiency of the trial evidence regarding the Beneficiaries' interests in the family assets or the principal value of those interests. In addition, Mr. Kiesewetter did not challenge the jury's findings of liability on the basis that the evidence was insufficient.
On December 13, 1994, the Beneficiaries moved the district court, pursuant to its inherent equitable powers and Rule 65, to freeze all of the Kiesewetter family assets held in the name of or on behalf of Mr. Kiesewetter, including those assets subject to the Fraudulent Conveyance Action. (A. 91-112). In support of their motion, the Beneficiaries relied on facts adduced at trial and the jury's verdict. In the motion, the Beneficiaries stated that the purpose of the freeze order was "to preserve the assets and properties in the possession, custody or control of [Mr. Kiesewetter] that will be necessary to satisfy the judgment and other equitable remedies ultimately to be entered in [the Accounting Action] in order to make [the Beneficiaries] whole." (A. 99). Attached to the Beneficiaries' motion was a proposed asset freeze order, in which the Beneficiaries proposed a freeze on all assets held in the name of or on behalf of Mr. Kiesewetter, except for monthly payments of up to $2,000 for ordinary living expenses, including attorneys' fees. (A. 95-97).
After Mr. Kiesewetter and Jayne H. Kiesewetter filed separate responses 3 in opposition to the Beneficiaries' request for an asset freeze, the district court held two telephone conferences with counsel to discuss the freeze order request. At the first conference, the district court advised counsel that, unless Mr. Kiesewetter voluntarily posted a bond in an amount sufficient to satisfy a judgment against him in the Accounting Action, it would enter an order granting the Beneficiaries' freeze order request. The district court then scheduled a second telephone conference, at which Mr. Kiesewetter was to advise the court whether he would voluntarily post a bond.
Prior to the second conference, the Beneficiaries submitted to the district court and all counsel a summary of the Beneficiaries' damages for purposes of determining the bond amount (S.A. 1-4). The summary, based upon the evidence at trial and the jury's punitive damage award, indicated that the Beneficiaries' total damages, with interest and capital appreciation, equalled in excess of $6 million. Neither Mr. Kiesewetter nor Jayne H. Kiesewetter submitted any materials to the district court prior to the second conference.
At the second conference, Mr. Kiesewetter's counsel stated that Mr. Kiesewetter was financially unable and personally unwilling to post a bond for several million dollars. The district court then ruled that it would impose a freeze on all assets held in the name or on behalf of Mr. Kiesewetter for a period of 30 days, during which time it would require Mr. Kiesewetter to post a bond of $4 million. The court also ruled that, if Mr. Kiesewetter did not file the requisite bond within 30 days, the asset freeze...
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