United States District Court, D. Nevada
ORDER GRANTING IN PART AND DENYING IN PART MOTIONS
FOR RECONSIDERATION (ECF NO. 131/132, 133)
P. GORDON UNITED STATES DISTRICT JUDGE.
Francine Magliarditi and the entity defendants move for
reconsideration of my order granting a preliminary
injunction. ECF Nos. 131/132. These defendants argue I should
reconsider my rulings that alter ego is a separate cause of
action in the context of this case and that a limited
liability company is subject to alter ego analysis.
Alternatively, they request I certify to the Supreme Court of
Nevada whether alter ego applies to limited liability
companies, partnerships, and trusts. These defendants also
argue that a recent decision by the Supreme Court of Nevada
shows a creditor cannot execute against or attach assets in a
Dominic Magliarditi also moves for reconsideration. Dominic
joins in Francine's spendthrift trust argument. He also
argues Nevada law would preclude attachment or execution on
the life insurance policy in the DJM Irrevocable Trust.
Dominic further contends that the court erred by finding the
entity defendants are debtors under Nevada's Uniform
Fraudulent Transfer Act and by finding that a transfer
occurred. Finally, Dominic argues the court did not allow the
defendants the opportunity to present witnesses.
plaintiffs respond that the defendants largely recycle legal
and factual arguments already rejected by This court. As To
The spendthrift Trust argument, the plaintiffs argue the case
on which the defendants rely did not address alter ego.
Additionally, the plaintiffs argue that case's discussion
of fraudulent transfer suggests that the Supreme Court of
Nevada would apply alter ego principles to a spendthrift
trust. Finally, the plaintiffs argue the defendants had ample
opportunity to present evidence and argument and, in any
event, the court has discretion to enter a preliminary
injunction without holding an evidentiary hearing.
an express entry of final judgment, all orders of a district
court are 'subject to reopening at the discretion of the
district judge.'" W. Birkenfeld Trust v.
Bailey, 837 F.Supp. 1083, 1085 (E.D.Wash.1983) (quoting
Moses H. Cone Mem 7 Hosp. v. Mercury Const.
Corp., 460 U.S. 1, 12 (1983)); see also Fed. R.
Civ. P. 54(b). A district court "possesses the inherent
procedural power to reconsider, rescind, or modify an
interlocutory order for cause seen by it to be sufficient,
" so long as it has jurisdiction. City of L.A.,
Harbor Div. v. Santa Monica Baykeeper, 254 F.3d 882, 885
(9th Cir. 2001) (quotation and emphasis omitted).
"Reconsideration is appropriate if the district court
(1) is presented with newly discovered evidence, (2)
committed clear error or the initial decision was manifestly
unjust, or (3) if there is an intervening change in
controlling law." Sch. Dist. No. U, Multnomah Cnty,
Or. v. ACandS, Inc., 5 F.3d 1255, 1263 (9th Cir. 1993).
A district court also may reconsider its decision if
"other, highly unusual, circumstances" warrant it.
the defendants' arguments are a rehashing of prior
arguments, and I decline to reconsider my prior rulings with
the caveat that, as discussed below, I will certify questions
of law to the Supreme Court of Nevada. My rulings that the
plaintiff can state an alter ego claim; that the alter ego
doctrine applies to limited liability companies,
partnerships, and trusts; that an alter ego can be a
"debtor" under Nevada's Uniform Fraudulent
Transfer Act; and that fraudulent "transfers" may
occur between alter egos remain the law of the case until the
Supreme Court of Nevada answers the certified questions.
defendants have identified an intervening change in the law
with respect to spendthrift trusts. The same day I entered
the preliminary injunction order (ECF No. 109), the Supreme
Court of Nevada issued Klabacka v. Nelson, 394 P.3d
940 (Nev. 2017) (en banc). In Klabacka, the Supreme
Court of Nevada addressed self-settled spendthrift trusts
("SSSTs") in the context of a divorce proceeding.
394 P.3d at 942-44. Although Klabacka did not
address alter ego, the opinion casts doubt on my ruling that
the alter ego doctrine applies to spendthrift trusts, at
least in the context of someone other than the settlor being
the alter ego. See Nev. Rev. Stat. 163.418 (setting
forth clear and convincing standard to show settlor is alter
ego of a trustee of an irrevocable trust).
Klabacka, the Supreme Court of Nevada noted that
Nevada Revised Statutes Chapters 163 and 166 "evince a
clear intention to protect spendthrift trust assets against
court order." Id. at 949 (footnote omitted,
citing Nev. Rev. Stat. §§ 163.417(1)(c)(1),
166.120(2), and 166.120(3)). The Supreme Court of Nevada
ruled that the district court had erred by imposing the
equitable remedy of a constructive trust over spendthrift
trust assets. Id. at 953. In doing so, it stated
that (1) "the imposition of equitable remedies runs
afoul of the protections afforded by those spendthrift
provisions, " (2) "the self-settled spendthrift
provisions of NRS Chapter 166 reflect a considered
legislative policy choice, " and (3) "if exceptions
to the policy are to be made for equitable remedies, it is
for the Legislature to undertake that task."
Id. at 953 n.8; see also Id. at 948
("Breaching trust formalities of an otherwise validly
created [self-settled spendthrift trust] does not invalidate
[it]; rather, it creates liability upon the trustee(s) for
that breach. Indeed, if, after [a self-settled spendthrift
trust] is validly formed, the trust formalities are breached
by a trustee, the proper remedy is a civil suit against the
trustee-not an invalidation of the trust itself").
language suggests that imposition of the alter ego doctrine
against spendthrift trust assets may also be a matter for the
Legislature, not the courts. Klabacka nevertheless
identified -two instances in-which trust assets were not
protected: (1) where community property is placed in a
separate property SSST, the non-beneficiary spouse's
portion may be traced and distributed from the trust; and (2)
the statutory protections for spendthrift trusts "do not
apply if a court order is enforcing a judgment levied against
the trust by a creditor able to prove, by clear and
convincing evidence, " a fraudulent transfer.
Id. at 948, 949 n.5 (citing Nev. Rev. Stat §
previously ruled, there is sufficient evidence of fraudulent
transfers of Dominic's property into the trusts. Thus,
although Klabacka suggests the alter ego doctrine
does not apply to spendthrift trusts, the preliminary
injunction shall remain in place based on the evidence of
fraudulent transfers. However, I will certify to the Supreme
Court of Nevada the question of whether the alter ego
doctrine applies to spendthrift trusts.
defendants raise for the first time on reconsideration the
argument that the preliminary injunction should not apply to
the DJM Irrevocable Trust because life insurance policies are
exempt from execution under Nevada Revised Statutes §
21.090(1)(k). Section 21.090(1)(k) exempts from execution
"[a] 11 money, benefits, ...