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TransFirst Group Inc. v. Magliarditi

United States District Court, D. Nevada

March 28, 2017

TRANSFIRST GROUP, INC. f/k/a TransFirst Holdings, Inc., et al., Plaintiffs,
v.
DOMINIC J. MAGLIARDITI; FRANCINE MAGLIARDITI, in her individual capacity, and as trustee of FRM TRUST, DJM IRREVOCABLE TRUST and the FANE TRUST; ATM ENTERPRISES, LLC; DII CAPITAL, INC.; DFM HOLDINGS, LTD.; DFM HOLDINGS, LP; DII PROPERTIES LLC; and SPARTAN PAYMENT SOLUTIONS, LLC, Defendants.

          TEMPORARY RESTRAINING ORDER

          ANDREW P. GORDON, UNITED STATES DISTRICT JUDGE

         Before the court is the plaintiffs' oral motion for a temporary restraining order, made at the March 27, 2017 hearing in this matter. For the reasons herein explained, and for the reasons given on the record during that hearing, Plaintiffs' motion is granted with respect to defendants Dominic J. Magliarditi; Francine Magliarditi sued in her individual capacity and in her capacity as trustee for FRM Trust, DJM Irrevocable Trust, and Fane Trust; DII Capital, Inc.; ATM Enterprises, LLC; and Spartan Payment Solutions, LLC; DFM Holdings, Ltd.; and DFM Holdings, LP.

         The plaintiffs' Motion for Preliminary Injunction (ECF No. 6) is set for hearing on April 10, 2017 beginning at 9:00 a.m.

         I. Factual and Procedural Background

         The plaintiffs are TransFirst Group, Inc. f/k/a TransFirst Holdings, Inc. (“TransFirst”), a Delaware corporation with its principal place of business in Hauppauge, New York; and two Delaware limited liability companies: TransFirst Third Party Sales, LLC and Payment Resources International, LLC, whose sole member is TransFirst. Plaintiffs have a judgment in the amount of $4, 486, 725 against defendant Dominic J. Magliarditi. The judgment was obtained in a separate lawsuit brought by the plaintiffs against Mr. Magliarditi and others in 2006. See TransFirst Holdings, Inc., et al. v. Dominic J. Magliarditi, et al., Case No. 3:06-CV-2303-C, in the United States District Court for the Northern District of Texas (the “2006 Action”).[1] Following a three-week bench trial in 2009, the Honorable Jorge A. Solis adjudged Mr. Magliarditi and other entities liable for mail and wire fraud in violation of the Racketeer Influenced and Corrupt Organizations Act (“RICO”) and found that Mr. Magliarditi had lied under oath in sworn interrogatory responses and affidavits. On August 30, 2011, Judge Solis entered a final judgment and, after several amendments, on April 22, 2013 he entered the Third Amended Final Judgment (the “Judgment”) against Mr. Magliarditi and the other entities and in favor of Plaintiffs in the amount of $4, 486, 725. In June 2014, the United States Court of Appeals for the Fifth Circuit affirmed the Judgment. TransFirst Holdings Inc. v. Magliarditi, 574 F. App'x 345 (5th Cir. 2014).

         Between entry of the Judgment, and continuing until the present, the plaintiffs have sought to uncover Mr. Magliarditi's assets and to enforce the Judgment in various jurisdictions. Among other things, a postjudgment discovery dispute between the plaintiffs and Mr. Magliarditi was referred to Magistrate Judge Paul D. Stickney in Texas who, on August 6, 2015, overruled Mr. Magliarditi's objections to postjudgment discovery requests, sanctioned him, and ordered him to travel to Texas at his own expense to testify in a postjudgment deposition in the court's Chambers in Dallas, which took place on September 16, 2015. Further, on June 29, 2016, after numerous failed attempts to depose Mrs. Magliarditi in Texas and in California, the plaintiffs deposed her in Nevada, where she provided testimony that Mr. Magliarditi continues to exercise sole control over assets in various closely held companies and trusts. That testimony is inconsistent with Mr. Magliarditi's prior testimony that he was no longer affiliated with the companies and trusts and that his wife had exclusive control over those entities, leaving him with no funds to pay the Judgment. That litigation is ongoing, as evidenced by recent docket entries in 2016 and 2017.

         On June 30, 2016, one day after deposing Francine Magliarditi, the plaintiffs filed this lawsuit against Mr. Magliarditi and several defendants who were not parties to the 2006 Action, alleging that Mr. Magliarditi fraudulently transferred assets to these new defendants in an ongoing effort to defraud the plaintiffs and prevent them from collecting on the Judgment. The new defendants include Francine Magliarditi, sued in her individual capacity and as trustee of FRM Trust, DJM Irrevocable Trust, and Fane Trust (the “Trust Defendants”); ATM Enterprises LLC; DII Capital, Inc.; DFM Holdings, Ltd.; DFM Holdings, LP; DII Properties LLC; and Spartan Payment Solutions, LLC (the “Shell Company Defendants”).

         In the plaintiffs' First Amended Complaint the plaintiffs allege that Mr. Magliarditi has paid only $62 toward the Judgment. The plaintiffs allege that Mr. Magliarditi and Mrs. Magliarditi, “are working together to defraud Plaintiffs and prevent them from collecting on the Judgment by hiding and transferring assets through the use of a labyrinth of layered shell companies and trusts [which are] shams, existing for no reason other than to hide assets, defraud Transfirst, and otherwise act as the alter ego of [Mr. Magliarditi].” ECF No. 11 at 2. Seeking to unwind the alleged fraudulent transfers and to hold Mrs. Magliarditi, the Trust Defendants, and the Shell Company Defendants liable for the Judgment entered in the 2006 Action, the plaintiffs assert the following causes of action: (1) fraudulent transfers under the Texas Uniform Fraudulent Transfer Act (“TUFTA”), Tex. Bus. & Com. Code §§ 24.006(b) and 24.005(a); (2) unjust enrichment; and (3) alter ego, alleging that Mrs. Magliarditi, the Trust Defendants, and the Shell Company Defendants “are alter-egos of [Mr. Magliarditi] and, therefore, they should be held jointly and severally liable with [him] on the Judgment.” Id. at 2-3. The plaintiffs seek compensatory damages, restitution, punitive and exemplary damages, attorney's fees, injunctive relief, appointment of a receiver, and any other relief to which they are entitled. Id. at 30-31.

         On July 8, 2016, the plaintiffs filed their sealed request for an ex parte temporary restraining order while this case was still pending in Texas. E C F N o. 6. The plaintiffs sought to enjoin the defendants from directly or indirectly: (1) transferring, concealing, withdrawing, or otherwise disposing of any assets, property, or funds that they control or possess; (2) opening or closing accounts; (3) opening or accessing safe deposit boxes or rental storage units; and (4) opening or creating any new entities or trusts without prior approval of the court. The plaintiffs asserted that their application for a temporary restraining order must be pursued ex parte; otherwise, Mr. Magliarditi “will simply move his money to undisclosed accounts, as he has previously done over the past several years.” Id.

         District Judge Sam Lindsay found that the plaintiffs had established a prima facie case for the court's exercise of personal jurisdiction over Mr. Magliarditi, the Trust Defendants, ATM Enterprises, LLC; DII Capital, Inc.; DII Properties LLC; and Spartan Payment Solutions, LLC (hereinafter, the “Enjoined Defendants”). ECF No. 32. At the time Judge Lind say ruled on the motion for temporary restraining order, the question of w hether the court had personal jurisdiction over the remaining defendants was under consideration.

         Judge Lindsay granted the ex parte application for temporary restraining order. ECF No. 33. He also ruled that he lacked personal jurisdiction over Mrs. Magliarditi in her individual capacity, DFM Holdings, Ltd. and DFM Holdings, LP, and thus he transferred the case to the District of Nevada. ECF No. 36. I was not aware a motion for preliminary injunction was pending until Mrs. Magliarditi filed an emergency motion to dissolve the temporary restraining order. ECF No. 48. I promptly set that motion for hearing. ECF No. 50. As I explained at the March 27, 2017, I cannot extend the TRO entered by Judge Lindsay because that TRO expired. Fed.R.Civ.P. 65(b)(2). However, I reinstate the TRO because I agree with Judge Lindsay's ruling that the plaintiffs have demonstrated a TRO is warranted.

         II. Standard for Ex Parte TRO and Preliminary Injunction

         To obtain a temporary restraining order, a plaintiff must demonstrate: (1) a likelihood of success on the merits, (2) a likelihood of irreparable harm, (3) the balance of hardships favors the plaintiff, and (4) an injunction is in the public interest. Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 20 (2008). Alternatively, the plaintiff must demonstrate (1) serious questions on the merits, (2) a likelihood of irreparable harm, (3) the balance of hardships tips sharply in the plaintiff's favor, and (4) an injunction is in the public interest. Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1135 (9th Cir. 2011). The purpose of a TRO is to “preserv[e] the status quo and prevent[] irreparable harm just so long as is necessary to hold a hearing, and no longer.” Granny Goose Foods, Inc. v. Brotherhood of Teamsters & Auto Truck Drivers, 415 U.S. 423, 439 (1974).

         Under Rule 65(b)(1) of the Federal Rules of Civil Procedure, the court may issue a TRO without notice to the adverse party or its attorney only ...


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