United States District Court, D. Maryland, Southern Division
DAVID SCHWARTZ, et al. Plaintiffs and Counter-Defendants
RENT-A-WRECK OF AMERICA, et al. Defendants and Counter-Claimants.
J. MESSITTE UNITED STATES DISTRICT JUDGE.
lawsuit had its beginnings in this Court more than eleven
(11) years ago when David Schwartz, on behalf of himself and
Rent a Wreck, Inc. (collectively "Schwartz'"),
sued J.J.F. Management Services, Inc. ("JJFMS"),
Bundy American, LLC ("Bundy"), and Rent-A-Wreck of
America, Inc. ("RAWA", together, the
"Defendants'') for breach of contract and
specific performance. The essential allegation of the suit
was that JJFMS and Defendants were not honoring a
Rent-A-Wreck franchise agreement Schwartz held for the
Greater Los Angeles area. After years of discovery,
counterclaims, trials, appeals, remands, and hearings, final
judgment was entered in favor of Schwartz upholding his
franchise, but post-judgment and execution problems remained.
Some of the post-judgment issues led to a finding of contempt
against Defendants RAWA and Bundy American, LLC for
violations of this Court's Orders. On June 29, 2017, the
Court entered judgment in the contempt proceeding in favor of
Schwartz and against Defendants in the amount of $83, 620.80.
Defendants took no appeal from the Court's contempt
very shortly thereafter, on July 24, 2017, Defendants filed a
bankruptcy proceeding in the Delaware Bankruptcy Court
seeking, among other things, to have the franchise agreement
with Schwartz discharged. The filing of the bankruptcy
proceedings occasioned an automatic stay of Schwartz's
collection efforts. But, on February 13, 2018, the Delaware
Bankruptcy Court dismissed the proceedings as essentially
spurious, and Schwartz immediately renewed his search for
RAWA assets to execute upon.
April 17, 2018, having located two bank accounts in the name
of RAWA at Wells Fargo Bank in Baltimore, Maryland. Schwartz
filed a Motion for Writs of Garnishment against the accounts.
ECF No. 583. Wells Fargo, as Garnishee, confessed assets of
Defendant RAWA in an amount that would fully satisfy the
amount of Schwartz's claim. ECF No. 592.
2. 2018, JJFMS reappeared, filing a Motion to Intervene in
the garnishment proceeding as claimant to the bank accounts
Schwartz was attempting to garnish. ECF No. 593. The Court
issued an Order ruling that the Motion to Intervene would be
treated as a Motion by a Third Party pursuant to Maryland
Rule 2-643(e). ECF No. 597.
9. 2018, a hearing was held on the Third Party claim of JJFMS
to the garnished bank accounts.
following reasons, JJFMS's claim of as Third Party to the
garnished amount of the bank accounts is DENIED.
Wells Fargo Bank shall release funds in the bank accounts to
Schwartz in the amount of $83, 620.80 forthwith.
Rent-A-Wreck concept consists of a nationwide franchise
business that specializes in the rental of used automobiles.
The concept was a brainchild of David Schwartz. For more than
11 years, RAWA has been embroiled in litigation with Schwartz
who, when he sold the national franchise operation to a
predecessor in interest of JJFMS, reserved a Rent-A-Wreck
franchise for himself covering the Greater Los Angeles area.
For at least the past several years, RAWA, along with a No.
of other private companies, has been solely owned by JJFMS.
The principal operative of JJFMS is John J. Fitzgerald, Jr.,
who also serves as Director and Chairman of the Board of
Directors at RAWA. While the history of this litigation is
fraught with conflict, what has been finally and definitively
established is that Schwartz is the owner of the Rent-A-Wreck
franchise for the Greater Los Angeles area.
hearing on September 30, 2016, the Court found RAWA in
contempt of court for multiple violations of this Court's
orders (to be mentioned presently). ECF No. 548. At a second
hearing held on February 27, 2017, the Court quantified the
damages Schwartz sustained as a result of RAWA's
contemptuous actions. ECF No. 570. On June 29, 2017, the
Court issued a Memorandum Opinion and Order memorializing its
finding of contempt against RAWA. ECF No. 580. A Final Order
of Judgment in the contempt hearing was entered in favor of
Schwartz and against RAWA in the amount of $83, 620.80.
than a month later, on July 24, 2017, RAWA filed for Chapter
11 Bankruptcy in the United States Bankruptcy Court for the
District of Delaware. ECF No. 594-1 at 11. The immediate
effect of the filing, of course, was to stay any action on
the part of Schwartz to collect on his judgment.
bankruptcy proceeding, on September 1, 2017, RAWA asked the
Bankruptcy Judge to reject seven franchise agreements,
including Schwartz's. However, in a strongly worded
Opinion, dated February 13, 2018, Bankruptcy Judge Laurie
Selber Silverstein held that RAWA's bankruptcy filing was
entirely bogus-it was in no way justifiable and had not been
filed in good faith. Specifically, Judge Silverstein found
that RAWA was not in financial distress at the time of its
filing and that the bankruptcy was "just another chapter
in the attempt to terminate Mr. Schwartz's
franchise." ECF No. 594-1 at 36. Defendants'
declaration of bankruptcy, rather than being a bona fide
financial transaction, was described by Judge Silverstein as
"fall[ing] on the dark side of the spectrum ranging from
the acceptable to the patently abusive." Id.
immediately following dismissal of the bankruptcy case, on or
around March 6, 2018. JJFMS, the parent company of RAWA, in
connection with loans it had purportedly made to RAWA in
2006, entered into Deposit Account Control Agreements (DACA)
with respect to RAWA's bank accounts at Wells Fargo Bank.
These agreements were based on a Promissory Note dated March
31, 2006, purportedly executed 12 years before the security
agreements were executed. The supposed Promissory Note was in
the amount of $2, 476, 696.47, and bore a maturity date of
March 31, 2011, more than seven years before the DACAs were
created. The Notes had never been paid, never declared in
default, nor indeed is there any evidence that any monies
were actually transferred to RAWA.
the dismissal of RAWA's spurious bankruptcy filing, the
automatic stay that had been in place was lifted. Promptly
thereafter, having located certain RAWA assets, Schwartz
filed his application for Writs of Garnishment with respect
to the RAWA accounts at Wells Fargo Bank. ECF No. 583. On
April 18, 2018, the Court issued the Writs. ECF No. 585.
Within 15 days, JJFMS resurfaced, and filed a Motion ...