Hekking ex rel. Himself ex rel. C.H. v. Hekking

• Court: U.S. District Court — District of Rhode Island
• Writing for the Court: Mary M. Lisi Senior United States District Judge
• Decision Date: 01 June 2016
• Docket Number: C.A. No. 14-295-ML
• Citation: Hekking v. Hekking, C.A. No. 14-295-ML (D. R.I. Jun 01, 2016)
• Parties: DARREN MALLOY HEKKING & SHAUN EGAN HEKKING, on behalf of himself and on behalf of C.H. and B.H., Plaintiffs, v. CRAIG ANTONY HEKKING & MOLLY DURANT HEKKING, Defendants.

DARREN MALLOY HEKKING & SHAUN EGAN HEKKING,on behalf of himself and on behalf of C.H. and B.H., Plaintiffs, v. CRAIG ANTONY HEKKING & MOLLY DURANT HEKKING, Defendants.

C.A. No. 14-295-ML

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF RHODE ISLAND

June 1, 2016

DECISION AND ORDER

The plaintiffs in this longstanding inheritance dispute, Darren Malloy Hekking ("Darren")¹ and his brother Shaun Egan Hekking ("Shaun", bringing claims on his own behalf and that of his two minor children and, together with Darren, the "Plaintiffs"), have alleged that their older brother, Craig Antony Hekking ("Craig"), has systematically depleted and converted their late father's (Laurie Vonderwind Hekking, "Laurie") and stepmother's (Renate Danhardt Hekking, "Renate") estate (the "Estate"), which was to be equally shared by the three brothers. By the terms of Laurie's and Renate's wills, Craig was appointed as the executor of the Estate; he also functioned as the trustee of the Cego Foundation (the"Foundation"), a separate trust² established by Laurie for the benefit of Craig's four and Shaun's two children to assist in their education. The Plaintiffs have further alleged that Craig's wife, Molly Durant Hekking ("Molly," together with Craig, the "Defendants"), has assisted her husband in his schemes and that she, too, has converted Estate property rightfully belonging to the Plaintiffs. After a contentious discovery period that was frequently drawn out by Craig's delaying tactics and outright refusals to provide necessary information, the case culminated in a seven-day bench trial. The case is now ready for a decision.

I. Procedural History³

This case began on June 27, 2014, four years after the deaths⁴ of Laurie and Renate, when Shaun and Darren brought a seven-count complaint (the "Complaint") against Craig and Molly(Dkt. No. 1). The first two claims against Craig allege breach of fiduciary duty as personal representative (Count I) and as trustee (Count II) under Florida state law, Fla. Stat. §§ 733.609 and 736.0706 et. seq. Two further claims assert breach of fiduciary duty (Count III) and fraud (Count IV) under Common Law. Claims of conversion (Count V) and civil theft (Count VI) are leveled against both Craig and Molly. Finally, the Complaint includes a claim of aiding and abetting as to Molly (Count VII).

In essence, the Plaintiffs allege that their older brother Craig — who was appointed as executor of the Estate and functioned as the trustee of the Foundation after the death of their father and his wife — concealed, misrepresented, and misappropriated assets that rightfully belonged to all three brothers or that were intended to benefit Craig's four and Shaun's two minor children. With respect to Molly, the Plaintiffs allege that she knew of her husband's fraudulent conduct and that she provided him with substantial assistance by concealing property Craig had converted from the Estate and Foundation.

The Plaintiffs sought compensatory damages of no less than $2 million, punitive damages, an injunction against Craig to enjoin him from acting as personal representative or trustee, a complete accounting of the Estate and Foundation assets, as well as attorneys' fees and costs.

After receiving no response to their Complaint, the Plaintiffs filed a motion for entry of default (Dkt. No. 6) on July 25, 2014. Shortly thereafter, the Plaintiffs sought an order to expedite discovery and disclosure of the Estate and Foundation assets, alleging that Craig had concealed the existence of the Trust and other valuables in order to misappropriate them. (Dkt. No. 12). That request having been granted by the Court, the Defendants were required, inter alia, to provide complete financial statements; to allow the Plaintiffs access to records and documents; and to authorize the Plaintiffs to obtain documents from third parties concerning the Estate assets (Dkt. No. 12-1).

Default against the Defendants was entered on August 15, 2014 (Dkt. No. 18). The Defendants, however, promptly sought to remove the default, asserting — notwithstanding the affidavits of service filed with the Court, which had both been signed by Craig — that they had never been served with the Complaint (Dkt. No. 14). In support of their motion to remove the default, the Defendants also submitted a sworn affidavit executed and signed by Craig, in which he reiterated that denial.

To resolve the apparent discrepancy and to determine the Defendants' motion to set aside the default, the Court conducted an evidentiary hearing on September 4, 2014. Craig took the standand, under oath, categorically denied that he had ever been served, insisting that he and his family had been out of town on the date when the Plaintiffs maintained service was effected. Molly elected not to attend the hearing. On their part, the Plaintiffs offered (1) detailed and highly credible testimony by Constable James Sylvester of how he had personally served Craig, and (2) the well-supported conclusion by Document Examiner Jeffrey Luber that the signatures on the affidavits of service belonged to Craig.

In light of the unrefuted evidence presented by the Plaintiffs, the Court concluded that Craig's representations, both in his testimony before the Court and in two sworn affidavits, were blatantly untruthful and perjurious. Memorandum and Order at 15 (Dkt. No. 28). Nevertheless, because there appeared to be no real legal prejudice to the Plaintiffs so early in the litigation, the case was allowed to proceed. As the Court noted, there was no evidence at that time that the Defendants had tried to gain an advantage by delaying the retention of counsel and their failure to provide a responsive pleading. However, the Court expressed its misgivings about the willfulness of the default and the apparent lack of good faith displayed by Craig. Accordingly, the Plaintiffs were advised that if it were to be determined that the delays orchestrated by Defendants were shownto have resulted in a litigation or practical advantage, the Court would reinstate the default. In addition, the Court required Craig to pay counsel fees and other costs incurred by the Plaintiffs in connection with the removal of the default. Id. at 18. On October 2, 2014, the Court ordered the payment of $30,777 in counsel fees to the Plaintiffs by October 10, 2014, cautioning that no Estate or Trust funds were to be used therefor (Dkt. No. 34)⁵.

In the interim, upon the Plaintiffs' motion to compel discovery and for sanctions (Dkt. No. 25), Magistrate Judge Sullivan issued a detailed order (Dkt. No. 32) on September 25, 2014, in which she required the Defendants to provide certain discovery materials. On September 29, 2014, the parties submitted a consent order that allowed the Defendants — who had not been gainfully employed for some time — to use up to $9,000/month for their living expenses. To show that such sums did not come from the Estate or Trust assets, the Defendants agreed to submit monthly financial statements. (Dkt. No. 33).

Subsequently, the Plaintiffs submitted two reports (Dkt. Nos. 36, 41) advising the Court that the Defendants continued toviolate Court orders; failed to comply with discovery requests; and continued to dissipate Estate property. The Plaintiffs, who were forced to obtain discovery documents through third parties, discovered that the Defendants had withdrawn more than $400,000 since Craig had learned that his brothers had begun an investigation into his activities, and that the Defendants had spent or withdrawn $195,000 from the Estate during the four months since the litigation began. In addition, the $30,777 in counsel fees awarded to the Defendants was nearly a month overdue at that time.

On November 12, 2014, Craig advised the Court that he agreed to be removed as trustee/executor. At that time, the Defendants were separately represented by newly engaged counsel, and Craig had begun to invoke his rights under the Fifth Amendment in the course of his deposition. In two detailed and well-supported R&R's (Dkt. Nos. 50, 85), the Magistrate Judge recommended, inter alia, that the default be reinstated against Craig, but not as to Molly. With respect to the latter, the Magistrate Judge based her recommendation on the finding that much of Molly's failure to comply with Court orders was due to inability. R&R at 28 (Dkt. No. 85). The Magistrate Judge noted, however, that the findings in her R&R did not relate to the merits of Plaintiffs' claims against Molly and that "some of [Molly's] glaring ignorance ofher own affairs is hard to swallow." Id. at 5.

In the interim, the Defendants filed a number of motions designed to put a stop to the litigation (Dkt. Nos. 51, 52, 53, 54, 55), including two motions to dismiss the Complaint, in which the Defendants suggested that their children should be included as plaintiffs because their interests were not represented (Dkt. Nos. 53, 54). Craig also objected to the R&R recommending his default; but he waived any substantive arguments by failing to address his noncompliance with Court orders or with the September 29, 2014 consent order. (Dkt. No. 58).

Following an April 30, 2015 hearing on the Defendants' various motions and their objections to the two R&R's issued by the Magistrate Judge, the Court accepted the Magistrate Judge's recommendation that the default not be reinstated against Molly. The Court noted that the recommendation was based on a credibility determination made by the Magistrate Judge after she observed Molly testify, reviewed the transcripts of Molly's deposition testimony, and considered Molly's efforts to comply with Court orders. The Court also denied Craig's motion to dismiss the case based on the so-called "probate exception" (Dkt. No. 52). The Defendants' remaining motions and Craig's objection to the R&R recommending reinstatement of the default against him were taken under consideration.

On June 11, 2015, this Court issued a Memorandum and Order in which it denied...