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Allen Corporation of America, Inc. v. Zayas

United States District Court, D. Maryland

December 4, 2014



THEODORE D. CHUANG District Judge.

This matter is before the Court on a Motion for Writ of Attachment Before Judgment and Temporary Restraining Order, ECF No. 5, filed by Plaintiff Allen Corporation of America, Inc. ("Allen"). The Court has reviewed the Motion and supporting materials and held an ex pare hearing on December 2, 2014. For the following reasons, the Motion is GRANTED.


The following facts are taken from affidavits submitted by Allen in support of its Motion. Fed.R.Civ.P. 65(b)(1). Allen is a professional services company based in Virginia. Affidavit of Timothy S. Schirnkus ¶¶ 4-5, ECF No. 5-1. Defendant Reginald Zayas ("Zayas") was hired as Controller at Allen's Virginia headquarters in 2005. Id. ¶ 5. En his role, Zayas "was afforded great trust by Allen" and had access to its bank accounts and financial information until he was terminated in October 2014 as part of a larger downsizing effort. Id. ¶¶ 5-6. A review of Allen's accounts after Zayas's termination revealed that Zayas had stolen more than $2.5 million from Allen beginning in March 2012. Specifically, Zayas authorized and effected transfers from Allen's hank account to the Capital One Bank accounts of: (1) Defendant RSP Professional Group, L.L.C. LRSP") totaling $2.404.865 during the period between March 30. 2012 through August 27, 2014; (2) Defendant Niambi D. Stewart ("Stewart") totaling $74.250 during the period between March 14. 2013 through August 14. 2014: and (3) non-party Tiffany J. Nance ("Nance") totaling $28.650 during the period between January 30. 2013 through August 21, 2014. Id. ¶¶ 9, 11, 13, 16. These payments were never authorized by Allen. and RSP. Stewart, and Nance were never vendors to Allen. Id. ¶¶ 10. 12. 14-15. In fact. RSP is Zayas's own limited liability company, see Affidavit of Timothy B. Hyland, Exs. B-C, ECF No. 5-2. Stewart is known to he a friend of Zayas who often visited him at Allen. Schimkus Aff. ¶ 12. and Nance is the mother of Zayas's child, to whom he owed child support.[1] Hyland Aff. ¶ 3(E) & Ex. E.

Allen tiled suit alleging breach of duty of loyalty and fiduciary duty (Count 1) and fraud (Count II) against Zayas, and violation of Virginia Business Conspiracy Law (Count III), civil conspiracy (Count IV). unjust enrichment (Count V). and constructive trust (Count VI) against Zayas, RSP, and Stewart (collectively. "Defendants"). Compl. ¶¶ 23-55. In the present Motion. Allen requests that the Court issue a writ of attachment before judgment and temporary restraining order ("TRO") without notice to freeze Defendants' Capital One Rank accounts and to bar them from selling, disposing of, or transferring any assets. Mem. TRO Mot. at 13.


I. Legal Standard

A TRO "is intended to preserve the status quo only until a preliminary injunction hearing can he held." Hoechst Digfoil Co. v. Nan Ya Plastics Corp., 174 F.3d 411, 422 (4th Cir. 1999). Under Federal Rule of Civil Procedure 65, the court may issue a TRO without notice to the adverse party or its attorney only if "specific facts in an affidavit or a verified complaint clearly show that immediate and irreparable injury, loss, or damage will result to the movant before the adverse party can be heard in opposition" and the movant's attorney certifies in writing why efforts to give notice should not be required. Fed.R.Civ.P. 65(b)(1). Generally, the substantive standard for granting a TRO is the same as for a preliminary injunction. See, e.g, Maages Auditorium v. Prince George's Cmy, Md., 4 F.Supp. 3d 752, 760 n.1 (D. Md. 2014). Thus, to obtain a temporary restraining order or a preliminary injunction, the plaintiff must establish that (1) it is likely to succeed on the merits; (2) it is likely to suffer irreparable harm in the absence of preliminary relief; (3) the balance of equities tips in its favor; and (4) an injunction is in the public interest. Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 20 (2008).

II. Authority to Attach Assets

Allen seeks a TRO obtain prejudgment attachment of Defendants' bank accounts at Capital One Bank and to enjoin Defendants from dissipating their assets. Federal Rule of Civil Procedure 64 provides that "every remedy is available that, under the law of the state where the court is located, provides for seizing a person or property to secure satisfaction of the potential judgment, " including attachment. Fed.R.Civ.P. 64(a)-(b). Maryland law provides for prejudgment attachment under certain conditions, including where a debtor is a corporation with no resident agent in Maryland and the action involves claims to property in Maryland. Md. Code Ann., Cts. & Jud. Proc. § 3.-303(b)(2) (West 2014). RSP is a Delaware limited liability company that had reported a registered agent in Maryland, but that "forfeited" its status in 2005, Hyland Aff. ¶ 3(D) & Ex. D, meaning that it no longer has a valid "legal existence" in Maryland, see Maryland State Department of Assessments & Taxation. What Does It Mean That My Business Entity is "Not in Good Standing." or "Forfeited " 1 (2012), available at http://www.dat.state. Therefore, it currently has no valid resident agent. Thus, RSP is subject to prejudgment attachment under § 3-303(b)(2).

With regard to all three Defendants, the same statute also provides that a court may order attachment before judgment where the debtor "fraudulently contracted the debt or incurred the obligation which is the subject of the pending action." Md. Code Ann., Cts. & Jud. Proc. § 3-303(e)(2). Generally, attachment under § 3-303(e) is limited to actions based on a contract for liquidated damages. Id. § 3-304(b). However, in Levitt v. State of Md. Deposit Ins. Fund Corp., 505 A.2d 140 (Md. Ct. Spec. App. 1986), the Court of Special Appeals of Maryland made an exception, explaining that although "neither equity nor fundamental fairness will allow the prejudgment attachment of an alleged debtor's assets merely because a complaint asserts that the debtor has perpetuated a fraud, " there are "extraordinary situations not covered by Cts. & Jud. Proc. Art. § 3-303 in which precisely that kind of precautionary action is not only desirable, but necessary." Id. at 146. The court therefore held that "when fraud is alleged and the facts as pleaded indicate a substantial likelihood of fraud, as well as the probability that the defendants will, before judgment, dispose of assets fraudulently acquired, a court has jurisdiction to enjoin the defendants' dissipation of assets." Id. at 147.

In Teferi v. Dupont Plaza Associates, 551 A.2d 477 (Md. Ct. Spec. App. 1989). where an employer hotel alleged that its former employee had embezzled funds while serving as the hotel's controller, the Court of Special Appeals held that, under Levitt, the trial court had jurisdiction to enjoin the defendant from dissipating his assets. Id. at 481-83. See also United States ex rel. Rahman v. Oncology Assocs., 198 F.3d 489, 499-501 (4th Cir. 1999) (citing Levitt and Teferi with approval to explain that the district court had authority under Maryland law, as incorporated by Federal Rule of Civil Procedure 64, to enter a preliminary injunction freezing the defendants' assets in a fraud case). As discussed in greater detail in the next section, in this case, Allen likewise alleges fraud, the facts indicate a substantial likelihood of fraud, and there is a probability Defendants will dissipate the assets. Thus, this case meets the requirement of Levitt. and this Court may order an attachment before judgment and enjoin Defendants from dissipating their assets.

III. Temporary Restraining Order

Having received and reviewed the affidavits and attorney statement[2] required by Federal Rule of Civil Procedure 65(b)(1). the Court concludes, provisionally and pending input from Defendants at a future preliminary injunction hearing, that the requirements for a TRO have been satisfied and that Allen has sufficiently shown that Defendants are likely ...

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