Superior Court of Massachusetts, Suffolk, Business Litigation Session
ABCD Holdings, LLC et al.
Patrick J. Hannon et al No. 134358
June 27, 2016
MEMORANDUM AND ORDER DENYING PLAINTIFFS' MOTIONS
FOR PRELIMINARY INJUNCTION AND TO ATTACH REAL ESTATE
Kenneth W. Salinger, Justice
allege that Patrick J. Hannon owes them $1 million or more
under various legal theories. They assert claims against him
sounding in contract, and in tort, and under G.L.c. 93A.
Plaintiffs seek a preliminary injunction that would bar
Hannon from dissipating any of his income or assets except
for ordinary living or business expenses, and that would bar
the eleven reach-and-apply defendants from dissipating or
paying to Hannon any income or assets belonging to Hannon,
except for payments of salary. They also seek to attach real
estate owned by Sofia Gagua, Hannon's spouse, on the
theory that this property " constitute[s] the proceeds
of a fraudulent transfer." Plaintiffs rely on the
allegations of their verified complaint as the sole factual
basis for these motions.
Court concludes that Plaintiffs have not proved they are
entitled to the preliminary relief they have requested, even
though Plaintiffs have shown that they are likely to succeed
in proving that Hannon is liable for at least part of the
damages claimed by Plaintiffs. It will therefore deny both
Likelihood of Success on the Merits
seems likely that plaintiff ABCD Holdings, LLC, will be able
to enforce its rights under Hannon's personal guaranty of
half of a $219, 759 loan made by Bright Horizon Finance, LLC,
to Ware Real Estate, LLC, and ABC& D Recycling, Inc. Although
the loan was made by Bright Horizon, that entity subsequently
assigned its rights under the note and under Hannon's
guaranty to ABCD Holdings.
time of that transaction Bright Horizon was owned by Attorney
George A. McLaughlin, who was also Hannon's personal
lawyer and who now owns or controls Plaintiffs as well.
Although Hannon insists that McLaughlin's dual role in
this loan transaction makes the note and guaranty
unenforceable, another Superior Court judge has already held
that this transaction was a proper arm's length deal,
that Hannon had independent legal representation in
connection with the deal, and that Attorney McLaughlin was
entitled to enforce warrants signed by Hannon that allowed
McLaughlin to buy a controlling interest in Ware and ABC& D
Recycling if Ware and Hannon defaulted on their repayment
obligations. Given that finding, it seems likely that ABCD
Holdings will succeed in proving that the related note and
Hannon's personal guaranty are also enforceable.
then under the terms of his personal guaranty Hannon is
likely to be found liable to ABCD Holdings for (1) $109,
879.50 of the amounts owed but not paid by Ware Real Estate
under its note, plus (2) reasonable attorneys fees and costs
incurred as a result of Ware's breach of the note, plus
(3) all amounts that Hannon received from Ware Real Estate
after it defaulted on the note. The Court need not make any
findings regarding the total amount that ABCD Holdings is
likely to succeed in recovering from Hannon, however, because
whatever that amount may be Plaintiffs are still not entitled
to the preliminary injunctive relief sought in the two
Unavailability of Preliminary Injunctive Relief
Requested Injunction against Hannon
noted above, Plaintiffs seek a preliminary injunction that
would bar Hannon from encumbering or disposing of any of his
assets or income, except to satisfy ordinary living or
request is essentially a " nonstatutory action [ ] to
reach and apply" that used to be known as a "
creditor's bill." See Cavadi v. DeYeso, 458
Mass. 615, 625, 941 N.E.2d 23 (2011). " Traditionally a
creditor's bill could be brought (i) by a judgment
creditor, (ii) who had attempted to obtain satisfaction at
law, and (iii) who sued in equity for the purpose of reaching
property that could not be taken on execution at law."
Id. The " true rule in equity is that under
usual circumstances a creditor's bill may not be brought
except by a judgment creditor after a return of 'nulla
bona' on execution." First Nat. Bank of Boston
v. Nichols, 294 Mass. 173, 182, 200 N.E. 869 (1936),
quoting Harkin v. Brundage, 276 U.S. 36, 52, 48
S.Ct. 268, 72 L.Ed. 457 (1928). In cases involving fraudulent
conveyances that leave a judgment debtor insolvent, the
judgment creditor need not prove a fruitless attempt at
execution, but still must show that it has obtained a final
and enforceable judgment before obtaining equitable relief in
the nature of a creditor's bill. See Foster v.
Evans, 384 Mass. 687, 693-94, 429 N.E.2d 995 (1981).
Plaintiffs are not yet judgment creditors of Hannon, the
Court may not exercise its general equity jurisdiction to
temporarily grant injunctive relief in the nature of
creditors' bill attachment. See First Nat. Bank,
294 Mass. at 182-83; Consolidated Ordnance Co. v.
Marsh, 227 Mass. 15, 23, 116 N.E. 394 (1917); In re
Rare Coin Galleries of America, Inc., 862 F.2d 896,
904-05 (1st Cir. 1988) (applying Massachusetts law);
Hunter v. Youthstream Media Networks, 241 F.Supp.2d
52, 55-57 (2002) (Collings, M.J.) (applying Massachusetts
law). The Court notes that the United States Supreme Court
has reached the same result under federal law, holding that
federal courts have " no authority to issue a
preliminary injunction preventing" parties " from
disposing of their assets pending adjudication of [a] claim
for money damages, " where the plaintiff does not claim
any lien upon or other equitable interest in the assets.
Grupo Mexicano de Desarrollo, S.A. v. Alliance Bond Fund,
Inc., 527 U.S. 308, 310, 333, 119 S.Ct. 1961, 144
L.Ed.2d 319 (1999).
Court recognizes that it has the power to grant the requested
relief against Hannon to the extent that ABCD Holdings is
claiming that it has an equitable interest in funds held by
Hannon, rather than claiming that it has a legal right to
recovery monetary compensation from Hannon for damages
suffered by ABCD or its assignee. See, e.g., Gucci
America, Inc. v. Weixing Li, 768 F.3d 122, 130-31 (2d
Cir. 2014) (distinguishing Grupo ...