United States District Court, D. Massachusetts
MEMORANDUM AND ORDER
Talwani, United States District Judge.
forth below, Jennifer H. Hawthorne’s Limited Motion
to Intervene and to Quash/Modify Continuing Writ of
Garnishment and Memorandum in Support Thereof [#77]
(“Hawthorne Mot.”) in this action (the “SEC
action”) is DENIED as untimely.
in 2009, Defendant Lee Dana Weiss acted as an investment
advisor for Applicant in Intervention, Jennifer Hawthorne.
Hawthorne Aff. ¶ 2 [#79]. In March 2015, Weiss informed
Hawthorne that he “had been accused of perpetrating
several schemes to defraud clients[.]” Id. at
¶ 6. In September 2015, Plaintiff Securities and
Exchange Commission (“SEC”) initiated the SEC
action by filing a complaint against Weiss related to those
schemes, alleging that Weiss and his company, Family
Endowment Partners, LP (“FEP”), engaged in
fraudulent conduct, in violation of 15 U.S.C.
§§77q(a)(1-3), 77j(b)(5), 80b-6(1-5) and 17 C.F.R.
§§ 240.10b-5, 275.206(4)-2, 275.206(4)-8,
204-1(a)(1). Compl. [#1]. The complaint also named a number
of other entities as Relief Defendants, including Mosaic
Investment Partners, Inc. (“MIP”) and MIP Global,
Inc. (“MIP Global”). Id. During the
litigation, the SEC was in contact with alleged victims of
the fraud, including Hawthorne’s counsel. See
SEC’s Sur-Reply, Attachment 1, Declaration of Stacy L.
Bogert (“Bogert Decl.”) [#95-1].
February 4, 2016, the SEC gave notice that SEC staff had
reached a settlement in principle with Defendants and Relief
Defendants that would resolve the claims in the case, see
Joint Motion to Continue Scheduling Conference in Light of
Parties’ Tentative Agreement to Settlement Terms [#29],
and the court stayed the action for sixty days. Elec. Order.
March 3, 2016, the SEC gave notice here of a potentially
related case in which the plaintiff had sought a temporary
restraining order. Notice [#33]. In that case, Lauring et
al. v. Weiss et al., 16-cv-40015-TSH (D. Mass.), a
temporary restraining order was entered on that date, in
which the court found that the plaintiff had shown, inter
alia, that unless the defendants (including Weiss, MIP
and MIP Global) were restrained, these defendants “may
dissipate and conceal assets.” See Lauring et al.
v. Weiss et al., 16-cv-40015-TSH (D. Mass.), Temporary
Restraining Order [#23] at 2. These defendants were enjoined
from transferring, pledging or in any way disposing or
distributing any interests or assets they held, except as
would be permitted in the SEC action or two related pending
actions before this court. Id. ¶¶1-5. The
TRO was subsequently extended until April 21, 2016.
Lauring et al. v. Weiss et al., 16-cv-40015-TSH (D.
Mass.), Amendments to Temporary Restraining Order [#54] at
April 1, 2016, the SEC and Weiss moved to further stay the
SEC action for an additional 60 days, stating that
“[t]he settlement in principle previously reported by
the parties remains in effect.” Joint Motion to Stay
[#34]. The court granted this request on April 5, 2016.
April 9, 2016, while the TRO issued in the Lauring
case and the stay based on the “settlement in
principle” in the SEC action were both in effect,
Weiss, on his own behalf and on behalf of MIP, MIP Global and
others, and Hawthorne executed an assignment and security
agreement (hereinafter the “Agreement”).
Hawthorne Aff., Ex. C (“Agreement”) [#79-3]. The
document’s “whereas” clauses explained that
“MIP [had] an equity interest in “a registered
broker-dealer by the name of Stillpoint Capital, LLC
(“Stillpoint”), ” and that that“MIP
Global, MIP, and Weiss have agreed to grant Hawthorne a
security interest and assign to Hawthorne any payments,
distributions or other amounts Weiss is entitled to receive
from or in respect of his interest in Stillpoint[.]”
Id. at 1. The Agreement provided that: “Weiss
consents to the grant of a security interest in all net
proceeds, distributions and other payments subsequently
received from or with respect to Stillpoint”;
“Weiss shall hereinafter instruct Stillpoint . . . to
pay directly to Hawthorne” referenced amounts; and
“the Agreement was intended as a transfer and present
assignment of . . . Weiss’s interest in
Stillpoint.” Id. ¶¶ 1, 6. On June
20, 2016, in accordance with the parties’ expressed
interest, the court entered a Final Judgment as to All
Defendants and Relief Defendants (“Final
Judgment”) [#55] in the SEC action, restraining,
enjoining, and holding liable Weiss, MIP Global, MIP, and
other Relief Defendants.
7, 2017, upon SEC application, the court issued a
Post-Judgment Continuing Writ of Garnishment [#63]
to Stillpoint, directing it to withhold and retain any
property in its control that Weiss had a present or future
interest in. Stillpoint answered that it “ha[d] or
anticipated having future possession, custody or control of
non-earnings property in which Defendants may or will have an
interest, to wit: Buyout of MIP Global, Inc.’s interest
as a disassociated member of Stillpoint Capital, LLC, with an
approximate value of $80, 000 less expenses.” Answer of
Garnishee, Stillpoint at 2 [#65].
October 22, 2018, the SEC sought a Post-Judgment
Continuing Writ of Garnishment [#70] directing
Stillpoint to withhold and retain any property in its control
in which MIP Global had a present or future interest. The
court issued the writ on October 26, 2018 [#73], and the
garnishee reiterated MIP Global’s interest in
Stillpoint. Answer of Garnishee, Stillpoint at 2-3 [#83].
the week of October 22, 2018, Hawthorne reviewed her
Agreement. Hawthorne Aff. ¶ 15. On October 31, 2018,
Hawthorne and Weiss (on his own behalf and on behalf of MIP,
MIP Global and other entities) made changes to the Agreement,
and signed an Acknowledgement and Agreement asserting that
“they have corrected certain scrivener’s errors
and clarified certain provisions in the Agreement . . . in
order to reflect the Parties’ original intent in
executing the Agreement. Hawthorne Aff., Ex. D
(“Amended Agreement”) [#79-4]. According to the
Amended Agreement, MIP Global, rather than MIP, has an equity
interest in Stillpoint. Amended Agreement [#79-4] at 3. Also,
in the Amended Agreement each reference to Weiss’s
interest in Stillpoint was changed to “they” or
“their” interest. Id. at 1, and
¶¶ 1, 6.
November 5, 2018, Hawthorne moved to intervene and quash or
modify the Post-Judgment Continuing Writ of