528 F. App'x 547
6th Cir.2013Background
- Ross Defendants operated a fraudulent real-estate enterprise through Tellico Landing and related entities to inflate property values and misappropriate investor funds.
- Tellico was alleged to be Ross’s alter ego; Plaintiff was a minority Tellico partner and claimed direct injury from the scheme.
- Discovery abuses occurred: Ross Defendants failed to comply with orders, produced a massive unhelpful document dump, and refused to provide basic records.
- District court sanctioned but did not initially enter default; after extensions and renewed motions, it ultimately entered default judgment against Ross Defendants.
- Damages were adjudicated in two phases: compensatory (RICO and state-law claims) and punitive, with compensatory trebled under RICO; Athena obtained related injunctions.
- Intervening defendant Athena challenged foreclosures; district court granted injunctions pending a receiver’s report to protect Plaintiff’s judgment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Was default judgment proper under Bank One factors? | Attrition in discovery showed willful misconduct; prejudice and warning supported default. | Substantial discovery efforts and possible excusable neglect meant no default. | No abuse; default judgment affirmed. |
| Was Ross 12(b)(7) standing motion timely? | RICO standing pleaded; default judgment did not bar merits-based challenges. | Standing is jurisdictional and raised too late after default. | RICO standing non-jurisdictional; 12(b)(7) untimeliness affirmed. |
| Did Plaintiff plead RICO standing adequately to support damages? | Plaintiff alleged direct injury independent of Tellico; alter ego theory supported standing. | Injury derived from Tellico losses, not direct injury to Tellico’s partner. | Plaintiff sufficiently pleaded direct injury; standing affirmed. |
| Were preliminary injunctions against Athena proper pending the Receiver’s report? | Transfers to Athena indicated collusion; injunction necessary to preserve assets. | Transfers and deed validity disputed; no irreparable harm shown against Athena. | No abuse of discretion; injunctions affirmed. |
Key Cases Cited
- Bank One of Cleveland, N.A. v. Abbe, 916 F.2d 1067 (6th Cir. 1990) (standard Bank One factors govern default judgment decision)
- United Coin Meter Co. v. Seaboard Coastline R.R., 705 F.2d 839 (6th Cir. 1983) (drastic nature of default judgment)
- Reg’l Refuse Sys. v. Inland Reclamation Co., 842 F.2d 150 (6th Cir. 1988) (considerations for sanctions in discovery disputes)
- Arbaugh v. Y&H Corp., 546 U.S. 500 (U.S. 2006) (jurisdictional vs non-jurisdictional requirements interpretation)
- Kontrick v. Ryan, 540 U.S. 443 (U.S. 2004) (definitions of jurisdictional limits)
- Holmes v. Sec. Investor Prot. Corp., 503 U.S. 258 (U.S. 1992) (proving proximate causation under RICO standing)
- Perry v. Am. Tobacco Co., Inc., 324 F.3d 845 (6th Cir. 2003) (direct injury requirement for RICO standing)
- In re Eagle-Picher Indus., Inc., 963 F.2d 855 (6th Cir. 1992) (preliminary injunction standards rely on less complete evidence)
- Six Clinics Holding Corp., II v. Cafcomp Sys., Inc., 119 F.3d 393 (6th Cir. 1997) (likelihood of success standard for injunctions)
- Certified Restoration Dry Cleaning Network, LLC v. Tenke Corp., 511 F.3d 535 (6th Cir. 2007) (readiness of likelihood of success in injunctive relief)
- USACO Coal Co. v. Carbomin Energy, Inc., 689 F.2d 94 (6th Cir. 1982) (receiver and asset preservation authority)
- Warren v. Mfrs. Nat’l Bank, 759 F.2d 542 (6th Cir. 1985) (indirect injury considerations in standing analyses)