WARREN HILL, LLC v. NEPTUNE INVESTORS, LLC
2:20-cv-00452
E.D. Pa.Dec 15, 2020Background:
- Warren Hill obtained judgment against SFR Equities LLC in the underlying breach-of-contract action: $6,226,688.19 in damages plus a declaratory award of 16.623% of certain trust-certificate income (≈ $2,114,997.98); SFR appealed without posting a bond.
- Warren Hill alleges SFR made multiple post-complaint transfers to affiliated AHG entities to evade satisfaction of that judgment. Key transfers challenged: 45% of BSF (Mar. 28, 2018); 50% of CHGO (effective Aug. 3, 2019); diversion of BCM consulting fees (~$100,000); a purported $2,000,000 loan to BCM; forgiveness of $530,000 owed by HCF; and $720,000 in payments to parent Neptune.
- Expert accountant (Buchakjian) valued the six challenged transfers at ≈ $16.3 million and concluded SFR was insolvent as of Jan. 1, 2018 (assets ≈ $11.19M; liabilities ≈ $17.12M, including SFR’s obligation to Warren Hill).
- Court applied Florida’s Uniform Fraudulent Transfer Act (FUFTA) under the PUVTA choice-of-law rule because SFR and the transfers were located in Florida; FUFTA/Fraudulent-transfer tests (actual intent or lack of reasonably equivalent value + insolvency) govern.
- After an evidentiary hearing, the court found SFR did not receive reasonably equivalent value for the transfers, was insolvent as a result, and defendants participated in the fraudulent transfers.
- The court granted a preliminary injunction freezing defendants’ assets up to $8,523,630 (the likely value of the underlying judgment, declaratory award, and post-judgment interest) and required Warren Hill to post a bond of ≈ $170,000.
Issues:
| Issue | Warren Hill's Argument | Defendants' Argument | Held |
|---|---|---|---|
| Whether FUFTA claim (transfer voidable because no reasonably equivalent value and debtor insolvent) likely to succeed | Transfers lacked consideration; expert valuations show SFR received little or no value and became insolvent | Transfers were compensated (e.g., loan forgiveness, future capital commitments, below-market loans) and valuations overstated | Court: Warren Hill showed probability of success; transfers lacked reasonably equivalent value and SFR was insolvent as a result |
| Whether preliminary injunction is warranted (irreparable harm, balance, public interest) | Unsatisfiability of money judgment is irreparable; defendants likely to dissipate assets | Injunction would harm defendants' businesses; overbroad | Court: irreparable harm shown; balance favors creditor; public interest in preserving assets and enforcing judgments supports injunction |
| Choice of law and jurisdiction (which fraudulent-transfer law applies; court has PJ over transferees) | FUFTA (Florida law) applies; Pennsylvania court has personal jurisdiction over defendants with sufficient contacts | Defendants argued against application or jurisdiction (implicit) | Court: Florida FUFTA applies; court has personal jurisdiction over defendants |
| Scope of relief and bond (which defendants, amount to freeze, security) | Freeze assets sufficient to secure underlying judgment plus declaratory award and interest (~$8.52M); allow bond in lieu of freeze | Not all defendants received each transfer; injunction should be narrower | Court: All defendants enjoined jointly and severally (interrelated beneficiaries); freeze limited to $8,523,630; bond set at ≈ $170,000 |
Key Cases Cited
- Reilly v. City of Harrisburg, 858 F.3d 173 (3d Cir. 2017) (standard and factors for preliminary injunction in Third Circuit)
- Hoxworth v. Blinder, Robinson & Co., 903 F.2d 186 (3d Cir. 1990) (unsatisfiability of a money judgment can constitute irreparable harm; relating asset freeze to expected judgment)
- Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7 (2008) (Supreme Court’s framework for issuing injunctive relief and the need for equitable discretion)
- Elliott v. Kiesewetter, 98 F.3d 47 (3d Cir. 1996) (misconduct and asset dissipation can justify injunctive relief to protect creditor recovery)