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United States v. Krol

United States District Court, E.D. North Carolina, Western Division

April 16, 2018

UNITED STATES OF AMERICA, Plaintiff and Judgment Creditor,
v.
KURT MICHAEL KROL, Defendant and Judgment Debtor,
v.
BRANCH BANKING & TRUST COMPANY, Garnishee, UNIVERSAL MANIA, INC. Garnishee, USAA FEDERAL SAVINGS BANK, Garnishee, ALL AMERICAN HOMES, INC., Garnishee.

          ORDER

          LOUISE W. FLANAGAN UNITED STATES DISTRICT JUDGE

         This case returns to the court's attention in post-judgment proceedings, including on joint motion of petitioners Regina Krol and Universal Mania, Inc. (“Universal Mania”) to quash writs of garnishment, (DE 97), supplemented by petitioners' separate response, joined in by Sims Enterprises, Inc. (“Sims Enterprises”) and Singh Harpreet Enterprises, Inc. (“Singh Enterprises”), to amended answer of garnishee Branch Banking & Trust Company (“BB&T”) (DE 116). Petitioner Regina Krol's motion to quash writ of garnishment issued against All American Homes, Inc. (“All American Homes”) also comes now before the court. (DE 142). An assembly of other, related motions are ripe for decision, too. These include: 1) petitioners' motion for stay of discovery pending resolution of petitioners' motions to quash (DE 150); 3) the government's motion to seal its response in opposition to petitioner's response to BB&T's amended answer (DE 121); and 4) the underlying response itself raising for determination whether accounts on deposit with BB&T should be subject to a restraining order (DE 119).

         STATEMENT OF THE CASE

         On December 15, 2015, defendant pleaded guilty, pursuant to plea agreement, to trafficking in counterfeit goods, in violation of Title 18, United States Code, Section 2320(a)(1). On May 3, 2017, the court entered a criminal judgment against defendant. The court sentenced defendant to 72 months imprisonment and ordered him to pay $4, 214, 317.08 in restitution. (DE 55, p. 7, 10). The restitution payment was “due in full immediately.” (Id. at 10, ¶ F). If, “[h]owever, . . . defendant [was] unable to pay [the restitution] in full immediately, ” the court's judgment indicates that “the special assessment and restitution may be paid through the Inmate Financial Responsibility Program (IFRP).” (Id. at 8). The judgment further provides that “any balance still owed [by defendant] at the time of release shall be paid in installments of $100 per month to begin 60 days after the defendant's release from prison.” (Id.). Also on May 3, 2017, the court entered a preliminary order and judgment of forfeiture. (DE 51).

         In the preliminary order and judgment of forfeiture, the court found the following property forfeitable pursuant to 18 U.S.C. §§ 2320(c) and 2323(b):

A. All counterfeit articles seized, including all parts and accessories;
B. Proceeds of $156, 932.00 seized from [four] BB&T account[s] . . .;
C. Proceeds of $51, 988.00 seized from [two] USAA account[s] . . .;
D. 201 Forest Creek Drive, Fayetteville, North Carolina, . . .; and
E. 179 Oakridge Drive, Raeford, North Carolina, . . . .

(DE 51, p. 1). As such, there are two distinct, but related, post-judgment actions before the court. In addition to issues concerning the government's attempt to collect restitution, also pending are proceedings related to the court's preliminary order of forfeiture (DE 51), and petitioners' objections thereto. (DE 61). Pursuant to 21 U.S.C. § 853(n), Regina Krol, defendant's wife, and Universal Mania, filed petition contesting forfeiture on June 13, 2017. (DE 61). On July 26, 2017, the Cumberland County Tax Collector filed a petition for the court to preserve its tax lien on real property identified in the preliminary order of forfeiture, described as 201 Forest Creek Drive, Fayetteville, North Carolina. (DE 70). The government does not contest the tax lien. (See DE 89). On August 23, 2017, the court consolidated proceedings on the tax lien with proceedings on petitioners' joint petition contesting forfeiture. (DE 61). This court does not address the forfeiture proceeding here, except to the extent of scheduling the dispositive motions deadline.

         In an effort to collect restitution, on July 12, 2017, the government filed four applications for writs of garnishment directed to the following: 1) BB&T (DE 63); 2) JP Morgan Chase Bank NA (“JP Morgan”) (DE 64); 3) Universal Mania (DE 65); and 4) USAA Federal Savings Bank (“USAA”) (DE 66). On July 28, 2017, the court granted the government's writ of garnishment as to JP Morgan. With regard to the remaining three writs, the court ordered the government to show cause by August 4, 2017, as to why the writs should issue. Following receipt of the government's response, the magistrate judge granted the government's applications for the then remaining writs on August 8, 2017.

         Garnishee JP Morgan filed answer August 16, 2018, attesting to no indebtedness due and owing the judgment debtor, (DE 88). Garnishee USAA filed its answer two days later, on August 18, 2018, attesting to control over the sum of $3.55 on deposit in a joint bank account belonging to the judge debtor and his spouse, Regina Krol. Garnishee Universal Mania filed its answer to the writ of garnishment issued to it August 21, 2017, (DE 93), stating through Anthony Krol, its president, that it maintains no interest in any property belonging to the judgment debtor. (DE 93). Finally, garnishee BB&T answered under oath the writ of garnishment issued to it on August 23, 2017. (DE 95).

         On August 28, 2017, petitioners filed a joint motion to quash the writs of garnishment as to BB&T, Universal Mania, and USAA. (DE 97). On September 12, 2017, petitioners, together with Sims Enterprises and Singh Enterprises, separately responded to garnishee BB&T's answer. (DE 99). BB&T's answer was amended by it on October 13, 2017 (DE 106). Petitioners, again together with Sims Enterprises and Singh Enterprises, signaled persistent objections to BB&T actions in response to the writ freezing subject accounts. (DE 116). In its amended answer, BB&T attests that it is in control of amounts spread between five accounts as follows:

         (Table Omitted)

(DE 106, p. 3).

         Upon referral, United States Magistrate Judge James E. Gates issued order November 22, 2017, denying petitioners' motion to quash writs of garnishment directed to BB&T, Universal Mania, and USAA. Petitioners timely filed objections to the magistrate judge's rulings, or in the alternative, noticed appeal of his order, (DE 134), to which the judgment creditor responded in opposition. (DE 141). Petitioners contend that the writs should be quashed, in part, because the terms of the payment set forth in defendant's criminal judgment preclude the government from collecting restitution through garnishment. The government maintains that issuance of the writs was, in all respects, proper.

         On December 1, 2017, the government filed an application for writ of continuing garnishment against All American Homes, Inc. (“All American Homes”). (DE 132). On January 6, 2018, petitioner Regina Krol filed the instant motion to quash the writ of garnishment (DE 142) against All American Homes, which answered January 10, 2018, under oath, that it was in the possession of the following rental funds belonging to the judgment debtor:

         (Table Omitted)

(DE 143, p. 3).

         Included in petitioner's motion was a list of claimed exemptions and request for hearing, where Regina Krol contends this property is exempt under law from levy, where garnished funds are necessary for the care of her children, to provide fuel and food, and to secure tools of business, among other things. The judgment creditor's opposition was made in filing entered on the record January 11, 2018. (DE 144).

         Meanwhile, in the parallel forfeiture proceeding, consent discovery commenced in July 2017, for a period of 180 days, set to conclude January 25, 2018, remained ongoing.[1] On January 18, 2017, petitioners, including Sims Enterprises, Singh Enterprises, Universal Mania, and Regina Krol, filed motion to stay discovery pending resolution of the motions to quash, (DE 150), which motion the judgment creditor opposed. (DE 152). In its opposition filing, the government described discovery ongoing on two fronts, where discovery on restitution necessarily was intertwined with that on forfeiture. The government noted petitioners' motion's focus is solely on the part of discovery directed to restitution.

         On February 8, 2018, the parties made joint report to the court wherein they indicated consent to extend the deadline for written discovery on forfeiture to February 26, 2018, and the deadline to complete any remaining deposition until February 28, 2018.[2] (DE 153). The parties also requested deadline of April 30, 2018, to file any dispositive motion on forfeiture.

         On February 26, 2018, petitioner Regina Krol sought protective order prohibiting the government from taking her deposition, scheduled for March 1, 2018. (DE 154). Petitioner argued that the court should preclude the government from taking her deposition where the government failed to follow certain court orders and federal rules governing discovery. Finding no good cause existed to prohibit or otherwise delay the scheduled deposition, the court denied petitioner's by text order dated March 1, 2018.

         DISCUSSION

         A. Motions to Quash ...


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