Arbor Farms, LLC v. Geostar Corp.
305 Mich. App. 374
| Mich. Ct. App. | 2014Background
- Defendant GeoStar Corp., owner of Michigan assets, is subject to a postjudgment collection action to enforce a foreign judgment in Michigan courts.
- Plaintiffs obtained a Kentucky federal judgment against defendant for over $65 million related to a Ponzi scheme run through defendant's Michigan subsidiaries.
- A May 17, 2012 restraining order froze assets and required preservation and an accounting of Michigan records.
- The trial court denied defendant’s motions challenging personal jurisdiction, but held defendant in contempt for failing to inventory assets and maintain a privilege log.
- A February 2013 order appointed a receiver over Michigan assets to preserve records and prepare an inventory, and contempt was affirmed on appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the court had jurisdiction over defendant’s property in Michigan | Plaintiffs: property in Michigan suffices for enforcement | Geostar: personal jurisdiction over debtor required | Jurisdiction over property suffices; no personal jurisdiction over debtor needed |
| Whether the contempt order was supported by facts | Plaintiff contends willful noncompliance with orders | Geostar argues lack of a valid order or impossibility to comply | Contempt supported; orders final and enforceable; noncompliance shown |
| Whether appointing a receiver was proper | Receiver needed to preserve assets and complete inventory | Receiver overstep and interferes with other proceedings | Appointing a receiver was a proper exercise of equitable and statutory power |
| Whether personal jurisdiction over defendant was required in this enforcement action | Property presence suffices for enforcement | Personal jurisdiction required for discovery and injunctive relief | Personal jurisdiction not required where defendant owns Michigan property, under enforcement rules |
Key Cases Cited
- Electrolines, Inc. v. Prudential Assurance Co., 260 Mich. App. 144 (2003) (enforces foreign judgments; enforcement jurisdiction broader than ordinary actions)
- Shaffer v. Heitner, 433 U.S. 186 (1977) (establishes general approach to jurisdiction when debtor has property in another state)
- Reed v. Reed, 265 Mich. App. 131 (2005) (receivership authority and equitable powers in enforcement cases)
- Ypsilanti Fire Marshal v. Kircher, 273 Mich. App. 496 (2007) (discusses receivership and court powers to preserve assets in enforcement context)
- Kirby v. Mich. High School Athletic Ass’n, 459 Mich. 23 (1998) (whether impossibility excuses contempt; inventory and privilege considerations)