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ASHLAND OIL, INC. v. GLEAVE

June 2, 1982

ASHLAND OIL, INC., Plaintiff,
v.
Ted William GLEAVE, 747 Kenmore Inc. and Joseph A. Mathews, Defendants



The opinion of the court was delivered by: ELFVIN

MEMORANDUM and ORDER

Plaintiff Ashland Oil, Inc. ("Ashland") has moved in this action to recover damages resulting from alleged violations of 28 U.S.C. § 1962 for a preliminary injunction restraining defendants Gleave, 747 Kenmore, Inc. (Gleave's business) and Mathews from disposing of or transferring their tangible assets or property without further order of this court priorly approving such disposition or transfer. Ashland insists that such restraint is necessary to prevent defendants from frustrating any judgment that may eventually be recovered against them in this action, through disposition of assets and secretion of the proceeds. Ashland maintains that such evasive conduct is to be feared and expected from defendants due to the dishonest and fraudulent character of the offenses with which Ashland charges them.

 Ashland contends that Gleave and Mathews engaged in a scheme whereby Gleave would enter a refinery owned by Ashland with gasoline tank trucks owned by 747 Kenmore, Inc., at which refinery Mathews worked as a dispatcher for Ashland. It is said that Mathews contrived on certain occasions to work the job of loading gasoline distributors' tank trucks and, on one or more of these occasions tampered with Ashland's loading meters so as to cause them to produce tickets showing individual loadings of about 1500 gallons to Gleave, whereas about 9,000 gallons were actually received by Gleave upon each loading. In this way it is said that Gleave and Mathews stole at least 375,000 gallons of gasoline from Ashland.

 At a hearing on Ashland's motion an agent of the Federal Bureau of Investigation who had participated in an investigation of these alleged activities testified that Mathews, when confronted with certain evidence generated by the investigation, confessed to having committed the alleged actions and implicated Gleave. The manager of Ashland's refinery also testified that Mathews had on another occasion admitted his misconduct and expressed regret therefor. Gleave and Mathews were called by Ashland to testify, but each indicated that he had been informed that he is the subject of a current criminal investigation and refused to testify as to his conduct on Fifth Amendment grounds.

 Insofar as a demonstration of probability of success on the merits is requisite to a grant of preliminary injunctive relief, plaintiff has established such. However, I have concluded that the relief sought by plaintiff is not available in this action, absent satisfaction of New York's requirements for issuance of an order of attachment. Additionally, plaintiff has not established all the requisites for preliminary injunctive relief even if such were available upon the accepted equitable terms thereof in this action.

 Rule 64 of the Federal Rules of Civil Procedure provides:

 
"At the commencement of and during the course of an action, all remedies providing for seizure of person or property for the purpose of securing satisfaction of the judgment ultimately to be entered in the action are available under the circumstances and in the manner provided by the law of the state in which the district court is held, existing at the time the remedy is sought, subject to the following qualifications: (1) any existing statute of the United States governs to the extent to which it is applicable; (2) the action in which any of the foregoing remedies is used shall be commenced and prosecuted or, if removed from a state court, shall be prosecuted after removal, pursuant to these rules. The remedies thus available include arrest, attachment, garnishment, replevin, sequestration, and other corresponding or equivalent remedies, however designated and regardless of whether by state procedure the remedy is ancillary to an action or must be obtained by an independent action."

 Under this provision, as under prior federal law, attachment of property for the purpose of securing satisfaction of the judgment to be obtained is subject to the law of the state in which the district court is held. See Granny Goose Foods, Inc. v. Teamsters, 415 U.S. 423, 437 n. 19, 94 S. Ct. 1113, 1123 n. 19, 39 L. Ed. 2d 435 (1974); Usdan v. Dunn Paper Company, 392 F. Supp. 953, 956 (E.D.N.Y.1975); 7 Moore's Federal Practice, PP 64.01, .02. It is plain that attachment is the relief sought by plaintiff notwithstanding its labelling as a preliminary injunction; moreover, were it not simply improperly labelled it would be no less necessary to treat plaintiff's motion as one for attachment because the preliminary injunction would be equivalent to an attachment order and thus subject to state law under rule 64's last sentence.

 New York's provisional remedy of attachment is available under the circumstances set forth in New York's Civil Practice Law and Rules ("CPLR") § 6201, which for purposes relevant to this discussion provides for issuance of an order of attachment in an action for a money judgment, when "3. The defendant, with intent to frustrate the enforcement of a judgment that might be rendered in plaintiff's favor, has assigned, disposed of, encumbered or secreted property, or removed it from the state or is about to do any of these acts." *fn1" Plaintiff has made no showing that acts within the scope of section 6201(3) have been committed or are contemplated by defendants.

 The cases are legion that hold that the provisional remedy of attachment is a particularly harsh remedy, and is a creature of statute in derogation of the common law and is thus to be strictly confined to its statutory authorization which is construed against the one seeking the attachment. E.g., Reading & Bates Corp. v. National Iranian Oil Corp., 478 F. Supp. 724 (S.D.N.Y.1979); Worldwide Carriers, Ltd. v. Aris Steamship Co., 312 F. Supp. 172 (S.D.N.Y.1970); Penoyar v. Kelsey, 150 N.Y. 77, 44 N.E. 788 (1896); Siegel v. Northern Boulevard & 80th St. Corp., 31 A.D.2d 182, 295 N.Y.S.2d 804 (1st Dept. 1968). Thus, where the grounds urged for attachment are those of section 6201(3), the plaintiff must show by affidavit or other written evidence (section 6212(a)) that the requisite fraudulent or bad faith conduct is occurring or about to occur, and courts will not lightly infer such motives from the mere fact that a defendant is transferring or disposing of properties or assets. See, e.g., Eaton Factors Co. v. Double Eagle Corp., 17 A.D.2d 135, 232 N.Y.S.2d 901, 903 (1st Dept. 1962); Brezenoff v. Vasquez, 107 Misc.2d 197, 433 N.Y.S.2d 553, 555 (N.Y.C.Civ.Ct.1980). Plaintiff points to no actual or pending transfers or dispositions of assets by either defendant, but merely asks that the danger of such occurring be presumed because of the underhandedness of the actions alleged and to a certain extent proven to have occurred. As the cited authorities and the discussion in note 1, supra, make clear, the law of New York will not permit such presumptions to be the basis for the provisional remedy of attachment.

 Plaintiff's lack of right to an attachment order under the law of this state clearly appearing, it remains to consider plaintiff's argument that 18 U.S.C. § 1964(a) provides an independent federal statutory basis for the requested relief, which under rule 64 would control in this case. Paragraphs (a), (b) and (c) of section 1964 provide:

 
"(a) The district courts of the United States shall have jurisdiction to prevent and restrain violations of section 1962 of this chapter (18 U.S.C. § 1962) by issuing appropriate orders, including, but not limited to: ordering any person to divest himself of any interest, direct or indirect, in any enterprise; imposing reasonable restrictions on the future activities or investments of any person, including, but not limited to, prohibiting any person from engaging in the same type of endeavor as the enterprise engaged in, the activities of which affect interstate or foreign commerce; or ordering dissolution or reorganization of any enterprise, making due provision for the rights of innocent persons.
 
"(b) The Attorney General may institute proceedings under this section. In any action brought by the United States under this section, the court shall proceed as soon as practicable to the hearing and determination thereof. Pending final determination thereof, the court may at any time enter such restraining orders or prohibitions, or take such other actions, including the acceptance of satisfactory performance bonds, as it shall deem proper.
 
"(c) Any person injured in his business or property by reason of a violation of section 1962 of this chapter (18 U.S.C. § 1962) may sue therefor in any appropriate United States district court and shall recover threefold the damages he sustains ...

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