McAlpin v. Lexington 76 Auto Truck

• Decision Date: 11 August 2000
• Docket Number: No. 99-5281,99-5281
• Citation: 229 F.3d 491
• Parties: (6th Cir. 2000) Dottie Renee McAlpin, Plaintiff-Appellant, v. Lexington 76 Auto Truck Stop, Inc., a Kentucky corporation; Marie Mills, as Administratrix of the Estate of Vance Mills; Beckham Garland; Appalachian Oil Corporation, a Kentucky corporation; G&M Oil Company, Inc., a Kentucky corporation; B&V Realty Corporation, Defendants-Appellees. Argued:
• Court: U.S. Court of Appeals — Sixth Circuit

Page 491

229 F.3d 491 (6th Cir. 2000)

Dottie Renee McAlpin, Plaintiff-Appellant, v. Lexington 76 Auto Truck Stop, Inc., a Kentucky corporation; Marie Mills, as Administratrix of the Estate of Vance Mills; Beckham Garland; Appalachian Oil Corporation, a Kentucky corporation; G&M Oil Company, Inc., a Kentucky corporation; B&V Realty Corporation, Defendants-Appellees.

No. 99-5281

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

Argued: August 11, 2000

Decided and Filed: October 3, 2000

Appeal from the United States District Court for the Eastern District of Kentucky at Pikeville. No. 97-00072--Joseph M. Hood, District Judge.

William C. Rambicure, Jeffrey John Kuebler, RAMBICURE, MILLER & PISACANO, Lexington, Kentucky, for Appellant.

Gary W. Napier, NAPIER & ASSOCIATES, London, Kentucky, for Appellees.

Before: KRUPANSKY, WELLFORD, and BOGGS, Circuit Judges.

BOGGS, J., delivered the opinion of the court, in which KRUPANSKY, J., joined.

WELLFORD, J. (pp. 505-06 ), delivered a separate concurring opinion.

OPINION

BOGGS, Circuit Judge.

Plaintiff-Appellant Dottie Renee McAlpin challenges on jurisdictional grounds two district court orders holding her in contempt of the court's prior orders and of the settlement agreement that the parties executed in an effort to terminate the litigation underlying this appeal. Only one small part of the settlement agreement was incorporated into the court's order dismissing the suit. Thus, the court had no jurisdiction with regard to most of the order appealed from. We therefore reverse and remand for consideration of an order within the court's jurisdiction.

I History of the Litigation

Plaintiff-Appellant Dottie Renee McAlpin brought the suit that gave rise to the settlement agreement at issue in this appeal in her capacity as administratrix of the estate of her late father, Robert T. Mock, and as an alleged shareholder of the primary defendant in this case, Appalachian Oil Company (AOC).¹ In her suit before the district court, McAlpin alleged that AOC, in a series of illegal transactions, defrauded Mock, and thereby his estate, of the value of the stock he allegedly held in the company. In her complaint, McAlpin asserted that the district court had federal question jurisdiction over her suit because AOC's unlawful actions constituted a pattern of racketeering under the civil RICO statute, 18 U.S.C. §§ 1961-1968. The state law claims over which McAlpin claimed the district court had supplemental jurisdiction were previously pled in 1983 and 1986 by McAlpin's predecessors-in-interest, Robert Mock and his wife, Dottie T. Mock, and were also pled by McAlpin herself in a state court action in 1988. The claims raised in the state court proceedings were not adjudicated on the merits, however, so McAlpin was not barred from re-pleading them ancillary to her federal RICO claim.²

McAlpin's father, Robert Mock, was an AOC employee who was discharged by the company in the early 1980's. According to McAlpin, Mock owned 25% of AOC's stock when he was discharged, and had an option to acquire an additional 24% of the company's outstanding shares, which option he allegedly attempted to exercise after he left the corporation. When Mock's efforts to exercise the option were rejected by the company on May 28, 1983, Mock filed suit in the Pulaski Circuit Court to enforce his rights against AOC and its directors. Although Mock prevailed on his claims for past wages, his breach of contract and other claims were dismissed without prejudice for lack of venue. Mock died in March 1986, and Dottie Mock, his widow and the administratrix of his estate, refiled his breach of contract claims against AOC in Knox County Circuit Court, but the case was dismissed in April 1995 for lack of prosecution. When Dottie Mock died on September 6, 1994, McAlpin was appointed administratrix of her father's estate, and her husband Tim McAlpin was later appointed co-administrator. With Tim's assistance McAlpin retained Douglas C. Brandon, one of the defendants in McAlpin's current legal malpractice suit in Fayette County, to represent the Mock Estate in its civil RICO suit against AOC in the district court. The Mock Estate was, and remains, insolvent. As McAlpin notes in her brief before this court, the Estate's only asset is Robert Mock's alleged 25% stock ownership in AOC and his alleged option to acquire an additional 24% of the company's outstanding shares.

Procedural History in the District Court

McAlpin filed suit against AOC in the district court on February 19, 1997. According to McAlpin, Brandon, who offered to take the case on a contingency basis and to advance the Estate's litigation costs, advised her: (1) that the Estate had the best chance of recovering against AOC in a shareholder derivative suit on behalf of, and for the benefit of, AOC; (2) that he would ask for a temporary restraining order and for the appointment of a receiver upon the filing of the federal court complaint; and (3) that AOC would ultimately be responsible for the payment of all fees, costs and expenses. As evidenced by the statements in her brief, McAlpin was well aware that Brandon's "litigation strategy" contemplated the "appointment of a receiver to take over the assets, records and operations of AOC" and to "uncover more recent actionable offenses with the limitations period." Appellant's Br. at 10. In short, McAlpin was well aware that, despite her statements to the district court that a receiver should be appointed simply to prevent AOC from destroying evidence or mismanaging assets,³ the Estate planned to use the receiver to seize and search AOC's records in an attempt to uncover evidence of actionable offenses that were not barred by RICO's four-year statute of limitations. To this end, Brandon filed an ex parte motion asking the district court to issue a temporary restraining order and to appoint Morris Gahafer, a forensic accountant, as AOC's receiver. The motion was supported by affidavits from McAlpin and from Gahafer, whom Brandon had solicited as a potential receiver prior to filing McAlpin's complaint.

Based on the supporting affidavits, the district court issued a temporary restraining order on February 19, 1997, enjoining AOC from destroying, altering and/or concealing documents and from disposing of corporate assets. The court also granted McAlpin's request to appoint Gahafer as receiver. At the time it issued the order appointing Gahafer, the district court believed, based on McAlpin's representations, that Gahafer's receiver's bond (secured by Ohio Casualty in the amount of $500,000) would serve as security pursuant to Federal Rule of Civil Procedure 65(c) for any costs or damages incurred by AOC were it subsequently determined that the company had been wrongfully enjoined or placed in receivership⁴. In its order, the district court directed United States Marshals to accompany Gahafer to AOC's headquarters to serve the TRO, which was to remain in effect pending an injunction hearing on March 4, 1997. On February 21, 1997, Gahafer, accompanied by federal marshals and armed private security guards, served the court's restraining order on AOC, searched the offices of AOC and its co-defendant G&M, and seized records from both companies' offices. According to AOC, after threatening AOC employees when the employees objected to the unannounced search, Gahafer and the marshals left AOC's premises in a van containing some 52 boxes of confidential corporate documents. At the injunction hearing on March 4, 1997, AOC objected to the adequacy of Gahafer's bond and to Gahafer's role in the litigation, expressing significant concerns regarding McAlpin's failure to post an injunction bond, the scope of Gahafer's power as receiver, and the manner in which Gahafer and the Marshals served the TRO and seized AOC's and G&M's corporate records. Gahafer responded to AOC's objections by submitting to the court his "First Interim Receivership Report"⁵ and by requesting an order approving his fees and expenses.

Upon realizing that, despite McAlpin's representations, Gahafer's bond was not a true injunction bond but served only to indemnify AOC for damages resulting from Gahafer's failure properly to account for funds that came into his possession as AOC's receiver, the district court on March 5, 1997, issued an order directing McAlpin to post a surety bond in the amount of $500,000 no later than 4.00 p.m. that day. The court also directed Gahafer to submit a proposed order clarifying his duties in the litigation. The district court extended the TRO until March 6, 1997, and ordered Gahafer to submit a balance sheet detailing AOC's assets and liabilities. At a hearing on March 6, 1997, the district court was informed that McAlpin had not posted the required surety bond as directed by the court's March 5 order,⁶ and that Gahafer had not prepared a balance sheet. In response to McAlpin's failure to post bond and to questions concerning Gahafer's duties and qualifications as receiver, Judge Hood issued an order dated March 10, 1997, in which he: (1) dissolved the Temporary Restraining Order; (2) denied McAlpin's motion for a preliminary injunction; (3) granted Gahafer's motion for approval and payment of costs; (4) directed McAlpin to pay Gahafer's fees and costs totaling $28,640.92 as of March 5, 1997, along with any additional fees or charges thereafter incurred; (5) dissolved the receivership and relieved Gahafer of any further responsibilities as receiver; (6) directed Gahafer's counsel to retain all copies of Gahafer's First Interim Report, and (7) ordered Gahafer not to disclose to anyone other than his attorney any information he obtained in his capacity as AOC's receiver.

On May 1, 1997, Gahafer moved the district court to alter or amend the March 10 order to provide that McAlpin would be held in contempt if she continued to withhold payment of his fees. McAlpin filed a response stating that the Estate was insolvent and...