Absolute Activist Value Master Fund Limited v. Devine
2:15-cv-00328
M.D. Fla.Jul 25, 2017Background
- Plaintiffs (Cayman Islands funds) sued Susan Devine alleging she and her ex-husband concealed proceeds of a fraudulent “penny stock” scheme; initial complaint included federal and Florida RICO counts plus unjust enrichment and constructive trust claims.
- Court entered an ex parte TRO (July 1, 2015) broadly freezing Devine’s worldwide assets and ordering asset-identification production; assets identified included some held for her children.
- After motions and interventions by third parties, the Court dismissed the federal and several state claims on a motion to dismiss (Feb. 8, 2017), leaving only a Florida unjust enrichment claim; plaintiffs elected to proceed only on that claim and filed a Second Amended Complaint.
- Devine moved to dissolve the TRO given the dismissal of the federal claims; the Court treated the change in claims as a changed circumstance warranting reconsideration of the TRO.
- The Court held that although federal procedure governs preliminary injunctions in diversity cases, state law determines whether injunctive relief is available for the substantive claim; under Florida law unjust enrichment is an action at law and generally does not support pre-judgment asset freezes except to protect the specific res of a trust.
- The Court found plaintiffs had not plausibly traced the penny-stock proceeds to specific, identifiable assets (funds had been commingled and spent on real estate, cash transactions, etc.), so plaintiffs were unlikely to establish entitlement to a constructive trust; therefore the TRO was dissolved.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the TRO can remain after federal and other claims were dismissed | TRO remains valid to preserve assets tied to unjust enrichment and constructive trust allegations | Dismissal of federal claims removes basis for TRO; unjust enrichment alone cannot support worldwide asset freeze | TRO dissolved — dismissal of federal claims is a changed circumstance; unjust enrichment alone does not support TRO under Florida law |
| Whether federal procedure or state law controls availability of preliminary relief | Federal Rule 65 governs procedure; injunction previously valid | State law limits remedies; Florida law controls availability of injunctive relief for state causes of action | Federal procedure governs mechanics, but Florida substantive law determines whether injunction is available for unjust enrichment |
| Whether unjust enrichment supports preliminary injunctive relief (or only money damages) | Unjust enrichment is equitable in nature and plaintiffs seek constructive trust, so injunction is appropriate | Unjust enrichment is an action at law in Florida; money damages are adequate and injunctions preserving funds are improper absent a traceable res | Held that unjust enrichment is an action at law under Florida law and does not, by itself, support a pre-judgment asset freeze; only a traceable res/constructive trust could justify it |
| Whether plaintiffs traced funds sufficiently to impose a constructive trust and justify worldwide restraint | Plaintiffs point to transfers and other facts they contend link assets to the penny‑stock proceeds and rely on out‑of‑state authorities | Funds were repeatedly commingled, invested in real estate, and moved by cash transactions making tracing unlikely; Florida requires specific, identifiable res | Court found tracing inadequate and unlikely to succeed; constructive trust remedy not supported on present record |
Key Cases Cited
- Sampson v. Murray, 415 U.S. 61 (procedural standard: TRO extended beyond Rule 65 treated as preliminary injunction)
- Ferrero v. Associated Materials, Inc., 923 F.2d 1441 (11th Cir.) (federal procedure governs preliminary injunctions in diversity cases)
- M.I. Indus. USA Inc. v. Attorneys’ Title Ins. Fund, Inc., 6 So. 3d 627 (Fla. 4th DCA) (unjust enrichment is action at law; injunction dissolving asset freeze where money damages suffice)
- Stand Up for Animals, Inc. v. Monroe County, 69 So. 3d 1011 (Fla. 3d DCA) (constructive trust requires specifically identifiable res; injunction improper where funds commingled)
- Weinstein v. Aisenberg, 758 So. 2d 705 (Fla. 4th DCA) (preliminary injunction to preserve funds improper where claim seeks money damages)
- Pianeta Miami, Inc. v. Lieberman, 949 So. 2d 215 (Fla. 3d DCA) (general rule: injunction cannot be used to restrain use of unrestricted assets to secure money judgment)