The firm recently won an important victory in the Second Circuit for the former Bank Mutiara, an Indonesian bank newly emerged from receivership. A “hedge fund” called Weston had purchased for $1 a company with purported claims against Bank Mutiara. In early 2013, Weston obtained a default judgment against Bank Mutiara in Mauritius. In late 2013, Weston created a Delaware special purpose entity, transferred the judgment to that entity, and initiated an action in S.D.N.Y. to collect on the Mauritian judgment. See Weston Cap. Advisors v. PT Bank Mutiara, Tbk, No. 13 Civ. 6945 (PAC) (S.D.N.Y.). Weston’s lawyers sought enforcement though an ex parte petition, which the district court inexplicably granted without giving Bank Mutiara notice or an opportunity to be heard. The court then signed turn-over orders for Bank Mutiara’s assets at correspondent banks in New York. Quinn Emanuel was retained after Bank Mutiara received notice of the proceeding, and quickly convinced the district court to vacate the judgment, see Weston Cap. Advisors, Inc. v. PT Bank Mutiara, No.13 Civ. 6945 (PAC), 2013 WL 6084402 (S.D.N.Y. Nov. 19, 2013), rescind its turn-over orders, and order Weston to return to Bank Mutiara the money it had improperly obtained.
Despite the court’s orders, Weston has refused since November 2013 to return the approximately $3.6 million it took. In early 2014, the firm moved to hold the nominal plaintiff—the Delaware special purpose entity—in contempt, but when Weston still did not repay the funds, the firm sought and obtained permission to take discovery of Weston and its affiliates. Based on the information gleaned, the firm moved in March 2015 to hold Weston’s principle, John Liegey, personally in contempt along with ten other non-party Weston entities spread around the globe, and also to impose fines on each contemnor to compel compliance. In September 2015, the district court issued an expanded contempt order imposing escalating fines of $1,000 per day until the contemnors repay the funds, with the daily fine doubling each month on each of John Liegey and the Weston entities. Weston Cap. Advisors, Inc. v. PT Bank Mutiara, No. 13 Civ. 6945 (PAC), 2015 WL 5246984 (S.D.N.Y. Sept. 8, 2015).
Weston appealed both the expansion of contempt to non-parties and the imposition of escalating fines to the Second Circuit. It claimed, among other things, that the court had improperly treated the various Weston entities and their founder as one entity, that the fines were disproportionately large, and that the fines were useless as Weston did not have the money to comply even if it wanted to. Oral argument was not kind to Weston, and the Second Circuit issued a decision only three weeks later rejecting these arguments and affirming the district court’s order with respect to both the contempt finding and the escalating fines. Weston Cap. Advisors, Inc. v. PT Bank Mutiara, Tbk, No. 15-3158-CV, -- Fed. App’x --, 2016 WL 3472375 (2d Cir. June 24, 2016). The appellate court also separately dismissed as interlocutory and impermissible the appeal lodged by the Delaware special purpose entity which was the nominal plaintiff.
Weston then petitioned the Second Circuit for rehearing. In doing so, it bizarrely and untruthfully asserted that Quinn Emanuel and Bank Mutiara had participated in a money laundering scheme in an unrelated case. This, Weston claimed, constituted unclean hands and merited both rehearing and remand to the district court for supplementation of the record. The Second Circuit denied Weston’s motion within two weeks, and the firm has sought sanctions against opposing counsel for its frivolous and ad hominem arguments.
The case and the decisions it occasioned highlight the district court’s authority to enforce compliance with its orders, and will doubtless become even more relevant as cross-border, cross-jurisdictional finance and litigation become ever more common.