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Williams v. The Estates LLC, 2022 WL 3226659 (M.D.N.C., Aug. 10, 2022).

Opinion 2022 North_Carolina Conflicts Jurisdiction Foreign_LLC Receiver Opinion2022NorthCarolinaWilliamsConflictsJurisdiction

Williams v. The Estates LLC, 2022 WL 3226659 (M.D.N.C., Aug. 10, 2022).

United States District Court, M.D. North Carolina.

BRIAN C. WILLIAMS, et al., Plaintiffs,

THE ESTATES LLC, et al, Defendants.

1:19-CV-1076

Filed 08/10/2022

MEMORANDUM OPINION AND ORDER

Catherine C. Eagles, District Judge.

PAGE_1 In June 2022, the Court entered a money judgment in favor of the plaintiffs, Brian Williams, Maricol de Leon, Jairo da Costa, and Mike Gustafson, and against the defendants, including Avirta LLC, King Family Enterprises LLC, GG Irrevocable Trust, and Craig Brooksby. The judgment has not been satisfied.

The plaintiffs seek to collect on the judgment through the entry of charging orders: court orders that direct a limited liability company in which a judgment debtor has an economic interest to pay any money the LLC would otherwise pay the judgment debtor toward satisfaction of the judgment. The plaintiffs have identified several LLCs in which they say defendants Avirta, King Family Enterprises, GG Irrevocable Trust and Mr. Brooksby have economic interests, and they seek entry of charging orders directing those LLCs to withhold any distributions, allocations, or other payment obligations to these defendants and instead to make such payments toward satisfying the judgment.

Under the applicable North Carolina statute, the plaintiffs are judgment creditors of the defendants and have applied for a charging order to a court of competent jurisdiction. A charging order is thus appropriate to any LLC in which a defendant is an “interest owner.”

Avirta, King Family Enterprises, and GG Irrevocable Trust are interest owners in various LLCs and their economic interest in those LLCs will be charged with the payment of the unsatisfied amount of the judgment. But the plaintiffs have not shown that Mr. Brooksby is an interest owner in any of the LLCs. For these reasons, the plaintiffs’ motion will be granted only in part.

I. North Carolina's Charging Order Statute

Federal Rule of Civil Procedure 69(a)(1) governs the enforcement of a money judgment in federal court. The procedure to execute a money judgment in federal court “must accord with the procedure of the state where the court is located,” Fed. R. Civ. P. 69(a)(1), here, North Carolina. Under North Carolina law, a “charging order” is “the exclusive remedy by which a judgment creditor of an interest owner [in an LLC] may satisfy the judgment from or with the judgment debtor's ownership interest.” N.C. Gen. Stat. § 57D-5-03(d).

The North Carolina Limited Liability Company Act, § 57D-1-01 et seq., governs “the internal affairs of every LLC,” including a determination of “the rights and duties of interest owners, managers, and other company officials.” § 57D-1-02(a). Section 57D-5-03 of the Act provides that:

On application to a court of competent jurisdiction by any judgment creditor of an interest owner, the court may charge the economic interest of an interest owner with the payment of the unsatisfied amount of the judgment with interest.

§ 57D-5-03(a).

An “interest owner” is “[a] member or an economic interest owner.” § 57D-1-03(15). An “economic interest owner” “owns an economic interest but is not a member [of an LLC].” § 57D-1-03(11). An “economic interest” is “[t]he proprietary interest of an interest owner in the capital, income, losses, credits, and other economic rights and interests of a limited liability company, including the right of the owner of the interest to receive distributions from the limited liability company.” § 57D-1-03(10).

PAGE_2 When entered, a charging order provides “a lien on the judgment debtor's economic interest” once it is served upon the LLC. § 57D-5-03(b). The judgment creditor has “the right to receive the distributions that otherwise would be paid to the interest owner with respect to the economic interest,” but the LLC is not otherwise responsible for the judgment. § 57D-5-03(a).

To obtain a charging order, a plaintiff must show three things. First, the plaintiff must be a judgment creditor of the defendant. Second, the court to which application is made must be a court of competent jurisdiction. And third, the defendant must be an interest owner in the LLC.

The defendants say in passing that “North Carolina law is not the proper choice of law for this situation,” Doc. 251 at 1, but they do not explain why or provide any support for this perfunctory assertion. Here, the rules and statutes apply on their face, and “it is not the court's job to undertake the analysis and legal research needed to support ... perfunctory argument[s].” Cathey v. Wake Forest Univ. Baptist Med. Ctr., 90 F. Supp. 3d 493, 509 (M.D.N.C. 2015); accord Lab. Corp. of Am. Holdings v. Kearns, 84 F.Supp.3d 447, 460 (M.D.N.C. 2015); Hughes v. B/E Aerospace, Inc., No. 12-CV-717, 2014 WL 906220, at PAGE_1 n.1 (M.D.N.C. Mar. 7, 2014) (“A party should not expect a court to do the work that it elected not to do.”). This choice-of-law argument is waived.1

fn1 See, e.g., Grayson O Co. v. Agadir Int'l LLC, 856 F.3d 307, 316 (4th Cir. 2017) (“A party waives an argument by failing to present it in its opening brief or by failing to develop its argument—even if its brief takes a passing shot at the issue.”) (cleaned up); Schaefer v. Universal Scaffolding & Equip., LLC, 839 F.3d 599, 607 (7th Cir. 2016) (“Perfunctory and undeveloped arguments are waived, as are arguments unsupported by legal authority.”); Russell v. Absolute Collection Servs., Inc., 763 F.3d 385, 396 n.PAGE_ (4th Cir. 2014) (same).

II. Are the Plaintiffs Judgment Creditors?

In April 2022, the jury returned a verdict in favor of each plaintiff on several causes of action arising out of a bid-rigging conspiracy in which the defendants rigged bids at public auctions on foreclosed properties.2 Doc. 235. In June 2022, the Court entered a money judgment in favor of each of the plaintiffs and against the defendants, including Avirta, King Family Enterprises, GG Irrevocable Trust, and Mr. Brooksby. Doc. 245. The defendants are jointly and severally liable as to each of the judgment amounts. The judgment has not been satisfied. It is undisputed that each plaintiff is a judgment creditor of Avirta, King Family Enterprises, GG Irrevocable Trust, and Mr. Brooksby. See id.

fn2 For each of the plaintiffs’ causes of action, the defendants and the total judgment amounts sometimes varied. See Doc. 235. The defendants discussed in this Order are the defendants upon which the plaintiffs have moved for a charging order.

III. Is This Court a Court of Competent Jurisdiction?

The United States District Court for the Middle District of North Carolina has subject matter jurisdiction over the dispute and personal jurisdiction over each defendant. Judgment was entered in this court, which is also responsible for issuing orders as needed to enforce its judgment. The Court concludes that the Middle District is a court of competent jurisdiction.

PAGE_3 The defendants do not directly say the Middle District is not a court of competent jurisdiction, but they use words that might be directed to this requirement. First, the defendants make passing reference to “minimum contacts” in the briefing. Doc. 251 at 2. They make no argument nor provide any cases or other law that supports what appears to be a personal jurisdiction theory, and the Court need not spend time on this perfunctory argument. See supra note 1. Second, the defendants say the Court cannot issue a charging order to any LLC formed in another state, Doc. 251 at 2, implicitly conceding the propriety of charging orders directed to LLCs formed under North Carolina law.

As to foreign LLCs, the defendants contend that the Court may not enter charging orders against interests in foreign LLCs because “LLC” is defined by the statute as “[a]n entity formed under this Chapter.” § 57D-1-03(19). But this isolated definition is not determinative. The statute authorizes a charging order against “the economic interest of an interest owner,” § 57D-5-03, and an “economic interest” is defined as, inter alia, the “economic rights and interests of a limited liability company,” § 57D-1-03(10), which is defined as either a North Carolina LLC or a foreign LLC. § 57D-1-03(17). Read together, these statutes say a court can issue a charging order to a foreign LLC.

There is no language in the statute that bars such a charging order, see § 57D-5-03, and other courts applying Chapter 57D have entered a charging order as to foreign LLCs. See Am. Bank Ctr. v. Barker, No. 18-MC-103, 2019 U.S. Dist. LEXIS 120685, at PAGE_2–4 (W.D.N.C. July 17, 2019); see also Strum v. Ultima WNC Dev., LLC, No. 13 CVS 719, 2022 WL 2190134, at PAGE_3 (N.C. Sup. Ct. June 16, 2022) (denying charging order as to defendant's interests in foreign LLCs on other grounds and noting the plaintiff could renew its motion should it uncover evidence the defendant was a member of those LLCs).3 The defendants have not provided any case support for their argument.

fn3 Other courts interpreting similar state statutes have reached the same conclusion. See Vision Mktg. Res., Inc. v. McMillin Grp., LLC, No. 10-CV-2252, 2015 WL 4390071, at PAGE_5–6 (D. Kan. July 15, 2015) (similar Kansas statute); German Am. Cap. Corp. v. Morehouse, No. 13-CV-296, 2017 WL 3411941, at PAGE_1 (D. Md. Aug. 4, 2017) (similar Maryland statute); SEC v. Brogdon, No. 15-CV-8173, 2021 WL 2802153, at PAGE_6–7 (D.N.J. July 2, 2021) (similar New Jersey statute); but see McElroy v. Sumrall, No. 18-CV-0002, 2021 WL 1741850, at PAGE_1–2 (S.D. Ala. May 3, 2021) (holding Alabama charging order statute applied only to Alabama LLCs).

IV. Is the Defendant an Interest Owner in an LLC?

A defendant is an interest owner if it is a member of an LLC or has an economic interest in an LLC, as defined by the statute. See discussion supra.

A. Avirta

The plaintiffs seek to charge Avirta's interest in 28 LLCs. See Doc. 248 at 3–4.4 According to records of the Utah Secretary of State provided by the plaintiffs, Doc. 248-1, Avirta is a member of 26 LLCs for which the plaintiffs seek a charging order. See id. A member's interest in an LLC is subject to a charging order, see §§ 57D-5-03, 57D-1-03(15), so, as to these 26 LLCs a charging order will enter.5

fn4 In their motion, the plaintiffs use spellings of the names of some of these LLCs that differ from that in the records of the Utah Secretary of State provided by the plaintiffs. Compare Doc. 248 at 4 (motion, referencing Tibra LLC, Ourhome320EL, LLC, and Galeon, LLC) with Doc. 248-1 at 1–2 (Secretary's records for Timbra LLC, OurHome3012EL LLC, Galleon, LLC). The Court will use the spelling from the Utah Secretary of State's records.

fn5 The Court will charge Avirta's interest in the following LLCs: Avignon, LLC, Brigadier, LLC, Citadel Management, LLC, Daria, LLC, Debt Executor LLC, Etienne, LLC, Galleon LLC, La Rochelle LLC, Land Development and Investment, LLC, Lightstone Pictures, LLC, Liken LLC, Liken the Bible LLC, Liken the Scriptures LLC, Likenit LLC, Marseille, LLC, Montclair, LLC, Oriental Holdings, LLC, OurHome3012EL, LLC, Pescadero, LLC, Rouen, LLC, Santex LLC, Shaka Management LLC, and The Estates, LLC, The Estates Developments LLC, The Estates Real Estate Group, LLC, and Timbra LLC.

PAGE_4 As to the two remaining LLCs, Celona, LLC, and Citadel Management of North Carolina, the motion will be denied. The evidence the plaintiffs submit does not establish that Avirta is a member of either LLC. See Doc. 248-1. Nor have they provided any other evidence that Avirta is an interest owner in those LLCs.

B. King Family Enterprises

The plaintiffs seek to charge King Family Enterprises’ interest in five LLCs. See Doc. 248 at 4. According to Utah Secretary of State records provided by the plaintiffs, King Family Enterprises is a member of each of these five LLCs, see Doc. 248-2, so King Family Enterprises is an “interest owner” in them. See §§ 57D-5-03, 57D-1-03(15). A charging order will enter as to King Family Enterprises’ interest in the five LLCs.6

fn6 The Court will charge King Family Enterprises’ interest in the following LLCs: Avirta LLC, Brothers King LLC, King Entertainment LLC, RCK Marketing LLC, and Temporal Sustainment LLC.

C. GG Irrevocable Trust

The plaintiffs seek to charge GG Irrevocable Trust's interest in King Family Enterprises LLC, its co-defendant. See Doc. 248 at 5. According to Utah Secretary of State records provided by the plaintiffs, GG Irrevocable Trust is a member of King Family Enterprises. See Doc. 248-3. The Court will charge GG Irrevocable Trust's interest in King Family Enterprises with payment of the unsatisfied amount of the judgment.

The defendants contend that King Family Enterprises is not the proper subject of a charging order, Doc. 251 at 5–6, but the argument is not clear or comprehensible. The defendants agree that a named defendant LLC may be the subject of a charging order if paying out money to another named defendant, id. at 7, and they do not address the undisputed fact that GG Irrevocable Trust is a member of this LLC.

D. Mr. Brooksby

The plaintiffs say that Mr. Brooksby has an economic interest in The Estates, LLC, Timbra LLC, Avirta, King Family Enterprises and 80 to 100 “equity share” LLCs that were assigned title to properties purchased through the Estates’ bid-rigging scheme. Doc. 248 at 5–6. The plaintiffs do not contend that Mr. Brooksby is a member of any of these LLCs, and instead contend that he has an “economic interest” in these LLCs such that the LLC is subject to a charging order.7 See § 57D-5-03.

fn7 The defendants say Mr. Brooksby has no direct economic interest in Rex King Limited Partnership. Doc. 251 at 6–7. The plaintiffs have not sought a charging order as to any interest Mr. Brooksby has in that entity. Doc. 248 at 5–8.

1. The Estates, Timbra, Avirta, and King Family Enterprises

Mr. Brooksby is a beneficiary of the GG Irrevocable Trust, see Doc. 252-1 at 2, which is a member of King Family Enterprises LLC and which receives funds from The Estates, Timbra, Avirta, and King Family Enterprises. See Doc. 248-4 at 2–3. The plaintiffs contend that because Mr. Brooksby is a beneficiary of a trust that receives funds from an LLC, he has an economic interest in that LLC sufficient to satisfy the statutory definition for an interest owner. Doc. 248 at 5.

The statutory definition of “economic interest” is not unlimited. The judgment debtor must have a “proprietary interest ... in the capital, income, losses, credits, and other economic rights and interests of a limited liability company, including the right ... to receive distributions from the limited liability company.” § 57D-1-03(10). The statute does not define a “proprietary interest,”8 and the plaintiffs have not provided any case law or other authority that sheds light on whether a trust beneficiary has an economic interest in an LLC because the trust receives funds from or is a member of the LLC. Nor have they pointed to a specific term in the GG Irrevocable Trust that supports a finding that Mr. Brooksby has an “economic interest” in any LLC of which the trust is a member.

fn8 Black's Law Dictionary defines the term as “[a] property right; [specifically], the interest held by a property owner together with all appurtenant rights, such as a stockholder's right to vote the shares.” Interest, Black's Law Dictionary (11th ed. 2019). Rather than settle the issue, this prompts the question of whether the beneficiary to a trust has a property right in the trust. The plaintiffs provided no law on that question either.

PAGE_5 The burden is on the plaintiffs to show Mr. Brooksby's economic interest in an LLC, and the Court has no obligation to undertake legal research that a litigant chooses not to provide. See discussion supra. This aspect of the motion will be denied.

2. The “Equity Share” LLCs

The evidence at trial established that The Estates, another defendant and judgment debtor, was a membership organization; persons who paid a fee were called members and allowed to use its services. The plaintiffs have presented evidence that:

When an Estates member bought a property out of foreclosure, the buyer assigned title to an LLC, characterized by Mr. Brooksby as an “equity share” LLC.
Mr. Brooksby is the manager of these LLCs.
When the property was later flipped at a profit, the LLC distributed those profits to the Estates member, his or her lender, and The Estates.
The Estates took somewhere between 40–50% of the profits.
Mr. Brooksby receives payments from The Estates for his role facilitating these transactions.
At the time of Mr. Brooksby's deposition, there were 80 to 100 such LLCs in existence, which were often used more than once.

Doc. 248-4 at 6–11.

This evidence is insufficient to show that Mr. Brooksby has an economic interest in these LLCs. The evidence shows The Estates receives distributions from the equity share LLCs, and there is no evidence that Mr. Brooksby receives those distributions. The fact that Mr. Brooksby later is paid by The Estates, by inference for his work as manager, does not by itself establish that Mr. Brooksby has a “proprietary interest ... in the capital, income, losses, credits, and other economic rights and interests of a limited liability company, including the right ... to receive distributions” from the “equity share” LLCs. § 57D-1-03(10); see generally First Bank v. S & R Grandview, L.L.C., 232 N.C. App. 544, 550, 755 S.E.2d 393, 397 (2014) (noting that a charging order does not affect managerial rights).

The plaintiffs say that Mr. Brooksby has an “indirect” right to payments from the equity share LLCs via the Estates and cite cases they contend support the view that such indirect rights are an economic interest as defined by the statute. But that position is not supported by the text of the statute, as discussed supra, or any cases they cite.

In American Bank Center, for example, the court entered charging orders only as to LLCs in which the judgment debtor had an ownership interest. 2019 U.S. Dist. LEXIS 120685, at PAGE_2–5. Specifically, the judgment debtor had a significant ownership interest in two LLCs, including Merlin Holdings, LLC, and Merlin Holdings owned an interest in nine other LLCs. Id. at PAGE_3. The court entered a charging order to the two LLCs, ordering them to make all payments ordinarily due to the judgment debtor to the plaintiff until satisfaction of the judgment. Id. at PAGE_4–5. In so doing, the court expressly ordered that Merlin Holdings could not make any payments to the judgment debtor until otherwise ordered, including any money Merlin Holdings received from the nine LLCs in which it owned an interest. Id. at PAGE_4. The court did not, however, issue a charging order to the nine LLCs in which the judgment debtor owned no interest, which is what the plaintiffs propose here.

PAGE_6 Likewise, in Top Gains Mineral Macao Commercial Offshore v. Chen, 2015 Cal. Super. LEXIS 14834, at PAGE_2–4 (Cal Super. Ct. Sept 4, 2015), a judgment debtor owned 60% of the membership interests in Spiro Mining, LLC. The court extended a lien only on distributions owed to the judgment debtor from Spiro, not to distributions a different LLC owed to Spiro. Id. at PAGE_3. And in Arvest Bank v. Byrd, No. 10-CV-2004, 2014 WL 4161987, at PAGE_2 (W.D. Tenn. Aug 19, 2014), the court entered a charging order as to “any interest the [judgment debtors] may own in them,” noting there was “uncertainty and conflicting information” about the judgment debtors’ individual ownership interests in those LLCs.

These cases do not support entering a charging order to LLCs if the judgment debtor receives money from them indirectly via another entity. This aspect of the motion will be denied.

V. Conclusion

The plaintiffs are judgment creditors and have applied to a court of competent jurisdiction, so a charging order is appropriate to the extent the named defendants are “interest owners” in LLCs. The Court will charge the economic interest that Avirta, King Family Enterprises, and GG Irrevocable Trust have in various LLCs with the payment of the unsatisfied amount of the judgment. But a charging order as to Mr. Brooksby's purported interest in various LLCs is not appropriate because the plaintiffs have not shown that he is an interest owner in those LLCs.

It is ORDERED that the plaintiffs’ motion for a charging order, Doc. 247, is DENIED as to Avirta's purported interest in Celona, LLC, and Citadel Management of North Carolina, LLC, and Mr. Brooksby's purported interest in The Estates, Timbra, Avirta, King Family Enterprises and the 80 to 100 “equity share” LLCs. The motion is otherwise GRANTED. A separate charging order will issue.

This the 10th day of August, 2022.

Williams v. The Estates LLC, 2022 WL 17490729 (M.D.N.C., Dec. 7, 2022).

Only the Westlaw citation is currently available.

United States District Court, M.D. North Carolina.

Brian C. WILLIAMS, et al., Plaintiffs,

The ESTATES LLC, et al., Defendants.

1:19-CV-1076

Signed December 7, 2022

Attorneys and Law Firms

Dhamian A. Blue, Blue LLP, Raleigh, NC, Jonathan T. Dickerson, James C. White, J.C. White Law Group, PLLC, Chapel Hill, NC, for Plaintiffs Brian C. Williams, Maricol Yunaira Tineo De Leon, Jairo Vensrique Leon Da Costa.

Jonathan T. Dickerson, James C. White, J.C. White Law Group, PLLC, Chapel Hill, NC, for Plaintiff Mike Gustafson.

David J. Martin, David J. Martin PLLC, Apex, NC, John David Matheny, II, Moorseville, NC, Steven W. Shaw, Law Office of Steven W. Shaw, Mapletoon, UT, for Defendants The Estates LLC, The Estates Real Estate Group, LLC, Timbra of North Carolina, LLC, Versa Properties, LLC, Red Tree Holdings, LLC, Maldives, LLC, Tonya Newell, Lynn Pinder, Craig Orson Brooksby, Avirta, LLC, King Family Enterprises, LLC.

John David Matheny, II, Moorseville, NC, Steven W. Shaw, Law Office of Steven W. Shaw, Mapletoon, UT, David J. Martin, David J. Martin PLLC, Apex, NC, for Defendant The Estates (UT), LLC.

John David Matheny, II, Moorseville, NC, Steven W. Shaw, Law Office of Steven W. Shaw, Mapletoon, UT, David J. Martin, David J. Martin PLLC, Apex, NC, Robert E. Culver, The Culver Firm, P.C., Tacoma, WA, for Defendant Carolyn Souther.

Steven W. Shaw, Law Office of Steven W. Shaw, Mapletoon, UT, David J. Martin, David J. Martin PLLC, Apex, NC, for Defendant GG Irrevocable Trust.

John David Matheny, II, Moorseville, NC, Joseph Houchin, Kaufman & Canoles, Raleigh, NC, Steven W. Shaw, Law Office of Steven W. Shaw, Mapletoon, UT, David J. Martin, David J. Martin PLLC, Apex, NC, for Defendant NC Bidding-2, LLC.

MEMORANDUM OPINION AND ORDER

Catherine C. Eagles, District Judge.

PAGE_1 After a trial, the jury found that the defendants had engaged in a bid-rigging conspiracy to limit competition and reduce prices paid for real estate in foreclosure. Judgment of over one million dollars was entered against the defendants and in favor of the plaintiffs. By permanent injunction, the defendant Craig Brooksby and others were prohibited from participating with any other person or entity in the sale of property obtained in public foreclosure auctions. The defendants have not satisfied the judgment and Mr. Brooksby has violated the permanent injunction by actively participating with others in the sale of pieces of real property bought at public foreclosure auctions.

The plaintiffs seek appointment of a receiver to gather and protect the assets of defendant Craig Brooksby, The Estates, LLC, Avirta LLC, GG Irrevocable Trust, and King Family Holdings, LLC. Doc. 316. In view of the overwhelming evidence that these defendants are hiding assets, and in light of the defendants' consent to the appointment of a Receiver at a hearing on November 29, 2022, the motion was granted in open court and an Order appointing a Receiver has been entered. See Doc. 362. This Order memorializes the Court's findings and conclusions leading to that appointment.

The plaintiffs have also filed a motion to hold Mr. Brooksby in contempt for violating the permanent injunction and the charging orders. Doc. 329. In view of the violation by Mr. Brooksby and the modified relief sought by the plaintiffs at the present time, the motion will be granted in part and otherwise denied without prejudice.

I. Findings of Fact

The Court finds the following based on the evidence of record and at trial.1 Additional findings of fact are made infra in the Discussion section.

fn1 While the Court has included some citations to the record, it has not attempted to cite all of the evidence which supports its findings of fact. Among the sources available and considered are the evidence submitted at summary judgment, class certification, and on post-trial motions, trial testimony the Court remembers, and trial exhibits.

A. The Bid-Rigging Scheme and the Defendants' Operations2

fn2 For simplicity, the Court will not repeat the facts that underlie the extortion verdicts. Suffice it to say, those facts were compelling as to the shady and deceptive conduct of the responsible defendants, including Mr. Brooksby and the Estates.

The Estates LLC is a membership-based limited liability company founded by Craig Brooksby that operates across multiple states, including North Carolina. Doc. 244 at 3. Mr. Brooksby manages and runs the Estates. He uses a number of other LLCs to conduct real estate deals and distribute profits, including defendants Avirta, Doc. 172 at 1353 (testimony by Mr. Brooksby characterizing Avirta as "one of my LLCs"), and King Family Enterprises. See infra pages 6–7. Family partnerships and trusts like defendant GG Irrevocable Trust are also part of the way he distributes profits.

fn3 The Court has used the pagination appended by the CM-ECF system for this and other deposition cites, not the internal pagination used by the court reporters transcribing the deposition.

PAGE_2 The Estates required members to pay a monthly subscription fee for access to its services. Doc. 244 at 3. This included exclusive access to the Estates' website, http://www.estatestracking.com. Id. at 3–4. The website featured an online database providing real estate information on various properties in foreclosure or otherwise for sale, including information such as estimated debt on a property, estimated value of a property, and location of a property. Id. at 4.

Estates members submitted internal bids on properties listed on the Estates' website by clicking on a "Buy It" button and disclosing the maximum amount they would pay for the property in question. Id. Based on that information, Mr. Brooksby, the acquisition assistants retained by the Estates, or some other agent of the Estates selected one bidder the Estates would represent in submitting bids at a public foreclosure auction or in the upset bid process. Id. The Estates often did not choose the member offering the highest amount, instead frequently choosing a lower bid that had a better possibility of making more money for Mr. Brooksby and others or which he favored for other undisclosed reasons. Id.

Estates members were required to use their own individual "bidding LLC"—an LLC set up with the specific intent of bidding on properties—to bid on properties. Doc. 172 at 119–21; Doc. 354-1, Interrogatory No. 6 (listing 120 "bidding llc[s]"). And as part of their membership, Estates members received the services of an acquisition assistant who was made manager of the bidding LLC and then attended the foreclosure sale and bid on behalf of the bidding LLC. Doc. 172 at 120–21; Doc. 244 at 4. Estates members were also entitled to consultations with and advice from Mr. Brooksby, the Estates' acquisition assistants, or both, about bidding strategies. Doc. 244 at 4. If there was a later upset bid process, the acquisition assistant kept the chosen Estates member informed and continued to make bids on his or her behalf, through the bidding LLC. Id.

Only one member of the Estates could use its services to place public bids on properties in foreclosure, and the Estates members agreed not to bid against one another. Id. at 4–5. If an Estates member acquired property found through the Estates' database, he or she owed the Estates an acquisition fee, even if he or she did not use an acquisition assistant's services. Id. at 5; Doc. 172 at 122.

Mr. Brooksby was entitled to some of the profits obtained from selling any property acquired using the Estates' services. Doc. 244 at 5. The exact arrangements for paying Mr. Brooksby are complicated and opaque. Mr. Brooksby and Estates members used multiple limited liability companies for the real estate transactions. See Doc. 172 at 84–87, 222, 231; Doc. 248-1; Doc. 354-1, Interrogatory No. 5 (Mr. Brooksby's interrogatory response identifying over 125 LLCs in which he has an interest), Interrogatory No. 6 (listing 120 bidding LLCs). Mr. Brooksby has cloaked the distribution of funds, fees, and profits through multiple LLCs and other entities, including a limited partnership and trust. See Doc. 172 at 84–87, 221–24, 231. These entities are often managers or members of the other entities, creating a complicated web. See, e.g., Doc. 256-2 (showing that King Family Enterprises, LLC, is managed by Citadel Management LLC and its members are Rex King Limited Partnership and GG Irrevocable Trust); Doc. 248-2 (showing that King Family Enterprises, LLC, is a member of Avirta LLC); 256-3 (showing that Citadel Management LLC is managed by Craig Brooksby and Rex King); Doc. 256-5 (showing that Avirta LLC is managed by Citadel Management LLC and Rex King and its member is King Family Enterprises LLC); Doc. 248-1 (showing that Avirta LLC is a member of The Estates, LLC, The Estates Real Estate Group LLC, Citadel Management LLC, Citadel Management of North Carolina, LLC, as well as several other LLCs); Doc. 354-1, Interrogatory No. 5 (showing some of the relationships between over 125 different LLCs that Mr. Brooksby was involved with or had an economic interest in). Because of this, and the sheer number of LLCs involved in this scheme, the Court is not sure exactly where the profits ended up or how much money ended up under Mr. Brooksby's control.

PAGE_3 The mechanics of selling property through the Estates are also complicated, and difficult to ascertain with specificity. Generally speaking, and based on the record in this case, when an Estates member bought a property out of foreclosure, they would assign title to the property to another LLC, called an "equity share" LLC. See Doc. 172 at 177–178, 220–221. The Estates member who bought the property was the member of this equity share LLC. Id. at 220–21. There were typically other investors or lenders involved in financing the purchase and any renovations or other expenses. And the buyer, the lender, and one of Mr. Brooksby's LLCs each had what Mr. Brooksby characterized as an "equity share" in the property. See, e.g., id. at 105; see also id. at 221 (characterizing each entity as an "economic interest holder"). Avirta, LLC, which Mr. Brooksby controls, was a member of or took an equity share interest in many of these LLCs. Id. at 222 (testimony that Avirta "ha[d] many LLCs that t[ook] an equity share interest" in these properties). At the time of Mr. Brooksby's deposition, he estimated that there were 80 to 100 such LLCs in existence, which were often used more than once. Id. at 231; see also Doc. 322 at 2–3; Doc. 354-1, Interrogatory No. 5 (listing over 125 LLCs in which Mr. Brooksby has an interest); Doc. 354 at 17 ("[T]here are over 100 entities that are involved here which means that there are probably thousands of transactions....").

When a property was later flipped at a profit, the equity share LLC distributed those profits to the Estates member, the lender, and the Brooksby/Avirta-controlled LLC. See e.g., Doc. 172 at 224, 229–30. The Estates also took a fee. Id. at 224, 226. The Estates or the Brooksby/Avirta-controlled LLC took somewhere between 40–50% of the profits. Id. at 112, 224.

Mr. Brooksby received payments from the Estates for his role facilitating these transactions. Id. at 231. Although the transactions are difficult to follow, it seems as though the money that goes to the Brooksby/Avirta-controlled LLC also often eventually ends up under Mr. Brooksby's control through GG Irrevocable Trust and King Family Enterprises LLC or perhaps other entities. GG Irrevocable Trust and King Family Enterprises LLC are in the line of distributions that eventually make their way to Mr. Brooksby, or for his benefit. See, e.g., id. at 85–87 (testimony about an "irrevocable trust" and "family limited partnership"); Docs. 252-2, 252-3, 252-4 (showing Rex King Limited Partnership and GG Irrevocable Trust as members of King Family Enterprises LLC); Doc 172 at 71 (Mr. Brooksby's testimony that Rex King is his brother-in-law); Doc. 252-1 at 1–3 (showing Mr. Brooksby as trustee and as one of the beneficiaries of GG Trust who may receive payments from the trustee, and who has "the power to terminate the trust with respect to their own interest" and receive a distribution).

Whatever the technicalities, the reality is that Mr. Brooksby played a large role in the bid-rigging scheme and controls many of the entities that profited or that control the profits. See, e.g., Doc. 299 at 11 (the defendants' brief noting that although Frosty Properties LLC owned a certain property and someone else owned that LLC, it was Mr. Brooksby who "ran the sale [of that property] from start to finish. He controlled the process ... This has been the practice for years"); Doc. 299-1 at 6–7; Doc. 354-1, Interrogatories No. 5, No. 12. And to the extent that money from the scheme ended up in GG Irrevocable Trust, Mr. Brooksby directly profits as a beneficiary of the Trust, and he has the power to terminate the trust with respect to his own interest at any time. Doc. 252-1 at 1–3.

B. The Trial, Judgment, Injunctive Relief, and Charging Orders

After hearing several days of evidence, the jury returned a verdict finding that the various defendants engaged in a bid-rigging conspiracy in violation of the Sherman Act and state law by agreeing to limit bids by Estates members to one Estates member per property during the time they were placing bids on the plaintiffs' properties. Doc. 235 (Jury Verdict, Issues 1, 4, 7). To compensate the plaintiffs for injuries caused by these federal and state antitrust violations, the jury awarded $87,300 in damages to Mr. Williams, id. at 2, $85,000 in damages to Mr. da Costa and Ms. de Leon, id. at 6, and $34,900 in damages to Mr. Gustafson. Id. at 10.

PAGE_4 The jury also found that the defendants engaged in extortion and/or unfair and deceptive trade practices. Id. (Jury Verdict, Issues 2, 5, and 8). To compensate the plaintiffs for injuries caused by the defendants' attempted extortions and misrepresentations, the jury awarded $35,000 in damages to Mr. Williams, id. at 3, $50,000 in damages to Mr. da Costa and Ms. de Leon, id. at 7, and $10,000 in damages to Mr. Gustafson. Id. at 11.

Finally, the jury found that some of the defendants were unjustly enriched by their conduct at the expense of the plaintiffs. Id. (Jury Verdict, Issues 3, 6, 9). To prevent the defendants from being unjustly enriched by their misconduct, the jury awarded damages in the amount of $110,000 to Mr. Williams, id. at 4, $110,000 to Mr. da Costa and Ms. de Leon, id. at 8, and $55,000 to Mr. Gustafson. Id. at 12.

On June 2, 2022, the Court entered judgment in favor of the plaintiffs and against the relevant defendants. Doc. 245. With trebling and prejudgment interest, the judgment against Mr. Brooksby and the Estates totaled approximately $1,287,675, and GG Irrevocable Trust, Avirta, and King Enterprises are jointly liable for approximately $659,766 of that based on their participation in the bid-rigging. Doc. 245.

That same day, the Court also entered a permanent injunction, Doc. 246, after finding that there was a cognizable danger that existing antitrust violations would continue to recur and that a permanent injunction was appropriate to protect the public from the impact of future antitrust violations. Doc. 244 at 13–14, 22, 26–27, 29–30. Among other things, the defendants were enjoined from operating the Estates website in its current form or any website that allowed sharing of information about bidding. Doc. 246 at ¶ 5. Mr. Brooksby and other individual defendants were prohibited from acting with any other person or entity to buy or sell property obtained through a public real estate foreclosure auction for eight years. Id. at ¶ 9.

On August 10, 2022, the Court entered a charging order to multiple limited liability companies in which defendants Avirta LLC, King Family Enterprises LLC, and GG Irrevocable Trust have economic interests. Doc. 293.4 A "charging order" is a court order that directs a limited liability company in which a judgment debtor has an economic interest to pay any money the LLC would otherwise pay the judgment debtor toward satisfaction of the judgment. See generally Doc. 292; N.C. Gen. Stat. § 57D-5-03; First Bank v. S & R Grandview, LLC, 232 N.C. App. 544, 548–49, 755 S.E.2d 393, 396 (2014).

fn4 The plaintiffs also asked for charging orders as to Mr. Brooksby's purported interest in The Estates, LLC, Timbra, LLC, Avirta, LLC, King Family Enterprises, and 80 to 100 "equity share" LLCs that were assigned title to properties purchased through the Estates' bid-rigging scheme. Doc. 248 at 5–8. The Court denied this request, finding that the plaintiffs had not shown that Mr. Brooksby was an interest owner in those LLCs, as that term is used in the relevant statute. Doc. 292 at 9–12.

No defendant has paid anything towards satisfaction of the judgment.

C. Defendants' Post-Judgment Conduct & Plaintiffs' Motions

Since the filing of the permanent injunction on June 2, 2022, Mr. Brooksby has continued to participate with others in the sale of properties bought at public foreclosure auctions. For example, on June 28, 2022, he signed various documents for the sale of real estate in South Carolina on behalf of Biscay, LLC. Doc. 277-5 at 5–6, 8. This property was bought at a public foreclosure auction, Doc. 277 at ¶ 9, and the closing documents themselves show that Mr. Brooksby acted with another entity, Biscay LLC, to sell real estate. Mr. Brooksby has admitted his acts in the Biscay sale, as well as his participation in another real estate sale involving and on behalf of limited liability companies. See Doc. 299 at 7–9, 11 (the defendants' statement noting that these sales were "performed" by Mr. Brooksby); Doc. 300 at 1 ¶ 2 (declaration of Mr. Brooksby declaring facts in Doc. 299 are true).

PAGE_5 Plaintiffs have filed a motion to hold Mr. Brooksby in contempt for these violations of the permanent injunction.5 Doc. 329.

fn5 The plaintiffs also asked the Court to hold Mr. Brooksby in contempt for violation of the Charging Order, see Doc. 329, but at the hearing on November 29, 2022 they told the Court they were no longer pursuing that avenue and instead wanted to focus on the violations of the permanent injunction.

The plaintiffs also filed a motion asking that James C. Lanik be appointed as receiver of the assets of Mr. Brooksby, The Estates LLC, Avirta LLC, GG Irrevocable Trust, and King Family Enterprises LLC.6 Doc. 316. These defendants initially opposed the motion, but their brief in opposition contained no citations to the record or case law. Doc. 323. And in open court on November 29, 2022, the defendants withdrew their opposition and consented to the appointment of a receiver. The defendant Carolyn Souther, represented by different counsel, asked at the hearing that a Receiver be appointed to protect assets in which she has in interest.

fn6 The motion refers to King Family Holdings, LLC, but that is not a judgment debtor or a defendant. Judgment was entered against King Family Enterprises LLC, see Doc. 245, and the evidence with which the Court is familiar concerns King Family Enterprises LLC. See, e.g., Docs. 245–248. The Court assumes the reference to King Family Holdings was a clerical error.

II. Motion for Contempt – Violations of the Permanent Injunction

The plaintiffs have filed a motion to hold Mr. Brooksby in contempt for selling properties in violation of paragraph 9 of the permanent injunction. "To ensure compliance with its orders, a district court has the inherent authority to hold parties in civil contempt." Rainbow Sch., Inc. v. Rainbow Early Educ. Holding LLC, 887 F.3d 610, 617 (4th Cir. 2018) (citing Shillitani v. United States, 384 U.S. 364, 370 (1966)).

Before a court will find a party in civil contempt, the entity seeking the contempt order must establish four things by clear and convincing evidence: "(1) the existence of a valid decree of which the alleged contemnor had actual or constructive knowledge; (2) that the decree was in the movant's 'favor'; (3) that the alleged contemnor by its conduct violated the terms of the decree, and had knowledge (at least constructive knowledge) of such violations; and (4) that the movant suffered harm as a result." Ashcraft v. Conoco, Inc., 218 F.3d 288, 301 (4th Cir. 2000) (cleaned up) (quoting Colonial Williamsburg Found. v. The Kittinger Co., 792 F. Supp. 1397, 1405–06 (E.D. Va. 1992), aff'd, 38 F.3d 133, 136 (4th Cir. 1994)).

Paragraph 9 of the permanent injunction, in effect since June 2, 2022, enjoins Mr. Brooksby and other defendants from acting together, in any combination, or with any other persons or entities to buy or sell directly or indirectly any property obtained through a public real estate foreclosure auction anywhere in the United States for a period of eight years. Doc. 246 at ¶ 9. In other words, the enjoined defendants may buy or sell property individually and on his or her own behalf, but none may buy or sell property through or with any entity, including any LLC.

PAGE_6 On July 28, 2022, defendant Carolyn Souther filed a declaration of compliance in which she described how Mr. Brooksby violated this injunction on June 29, 2022. Doc. 277 at ¶¶ 9–15. On or around this date, Mr. Brooksby signed various documents for the sale of real estate ("202 River Bluff") in South Carolina on behalf of Biscay, LLC. Doc. 277-5 at 5–6, 8. This property was bought at a public foreclosure auction, Doc. 277 at ¶ 9, and the closing documents show that Mr. Brooksby acted with another entity, Biscay LLC, to sell this property in violation of the injunction. Doc. 277-5 at 5–6, 8. Mr. Brooksby has admitted his acts in the Biscay sale, as well as his participation in another real estate sale ("2019 Tennessee Avenue") involving and on behalf of limited liability companies. See Doc. 299 at 7–9, 11 (the defendants' statement noting that the June sale and another sale were both "performed" by Mr. Brooksby through LLCs); Doc. 300 at 1 ¶ 2 (declaration of Mr. Brooksby declaring facts in Doc. 299 are true); see also Doc. 322.

There is some evidence that Mr. Brooksby has violated the injunction through sales of other properties. At least two other properties that had been bought through foreclosure were sold sometime after June 2, 2022, see Doc. 322 at 3, and the evidence suggests that Mr. Brooksby played a role in those sales as well. See, e.g., Doc. 299-1 at 6–7 (letter from Mr. Shaw, Mr. Brooksby's counsel, explaining that "Mr. Brooksby handles, directs and controls various aspects of properties acquired through The Estates system" and that he "always" handled transactions and sales of Estates' property).

It is undisputed that the permanent injunction, Doc. 246, was a valid decree issued by this Court, and that Mr. Brooksby had actual knowledge of the injunction. The injunction was in the plaintiffs' favor, as it was designed to prevent the same type of antitrust violations that harmed the plaintiffs. And Mr. Brooksby violated the terms of this injunction through the sales of 202 River Bluff and 2019 Tennessee Avenue, discussed supra.

Mr. Brooksby initially contended that he should not be held in contempt because he did not know that his conduct was in violation of the permanent injunction. This argument is frivolous. The injunction itself is clear that Mr. Brooksby could not act with any entity to sell, directly or indirectly, "any property obtained through a public real estate foreclosure auction anywhere in the United States for a period of eight years." Doc. 246 at ¶ 9. The Court further explained in its Memorandum Opinion and Order that the injunction prohibited the defendants from acting with any entity to "sell any property obtained at public foreclosures for the next eight years," but that the defendants could continue to individually participate in the public foreclosure market. Doc. 244 at 28. This is sufficient to provide Mr. Brooksby with "at least constructive knowledge" that his conduct was in violation. See Ashcraft, 218 F.3d at 301.

Additionally, "[t]he absence of wilfulness does not relieve from civil contempt." McComb v. Jacksonville Paper Co., 336 U.S. 187, 191 (1949). Because the purpose of civil contempt is remedial, not punitive, it does not matter "with what intent the defendant did the prohibited act." Id. "An act does not cease to be a violation ... of a decree merely because it may have been done innocently." Id. Mr. Brooksby's argument that he did not willfully violate the injunction does not save him from being in contempt.

As stated in open court on November 29, 2022, the Court grants the plaintiffs' motion to hold Mr. Brooksby in civil contempt.

At the November 29, 2022, hearing, the plaintiffs essentially withdrew their other contentions as to contempt, in light of the appointment of a Receiver, and for the same reason modified their request for relief, asking only that Mr. Brooksby be ordered to provide copies of the closing documents for the transactions in which he participated in violation of the injunction. This is an appropriate remedy, as it will allow the plaintiffs to begin tracing those assets to determine if they are available to satisfy the judgment. As reflected in the Minute Entry, the Court ordered Mr. Brooksby to provide the plaintiffs with the closing documents for five sales—202 River Bluff, 2019 Tennessee Avenue, 1825 St. Julian Place Unit 17, 15050 Mesquite Trail, and 934 Riverstone—by December 2, 2022. See Minute Entry 11/29/2022; Doc. 329 at 1 ¶ 2. Mr. Brooksby filed documents he identified as responsive on December 1, 2022. Doc. 361.

III. Motion to Appoint a Receiver

PAGE_7 The plaintiffs filed a motion asking that James C. Lanik be appointed as receiver of the assets of Mr. Brooksby, The Estates LLC, Avirta LLC, GG Irrevocable Trust, and King Family Enterprises LLC. Doc. 316. They contend that Mr. Brooksby is in control of the other entities and that these entities are liquidating or likely to liquidate their assets, specifically by selling the properties obtained during the bid-rigging scheme, in avoidance of paying the judgment. Doc. 317. The defendants7 initially opposed the motion, Doc. 323, but in open court on November 29, 2022, they withdrew this opposition and consented to appointment of a receiver.

fn7 Defendants Souther and NC Bidding-2 are represented by other counsel, see Docs. 276, 295, and did not respond to the motion, which is not directed towards them or their assets. At the November 29 hearing, counsel for Ms. Souther joined in the plaintiffs' motion for a receiver. Unless otherwise specified, the Court uses the term "the defendants" in this section to refer to the defendants who are the subject of the motion for a receiver.

A "district court has within its equity power the authority to appoint receivers and to administer receiverships." Gilchrist v. Gen. Elec. Cap. Corp., 262 F.3d 295, 302 (4th Cir. 2001); see also Fed. R. Civ. P. 66. Receivers appointed by a federal court "manage and operate" the receivership estate "according to the requirements of the valid laws of the State in which such property is situated, in the same manner that the owner or possessor thereof would be bound to do if in possession thereof." 28 U.S.C. § 959(b); accord Gilchrist, 262 F.3d at 302. Receiverships are granted for numerous reasons, including "[w]hen a judgment creditor seeks to acquire and preserve the assets of the litigation prior to its destruction or demise," and whether to appoint a receiver is subject to the broad discretion of the district court. 13 Moore's Federal Practice – Civil § 66.04.

Neither the Supreme Court nor the Fourth Circuit has provided a concrete list of factors for courts to weigh in considering whether to appoint a receiver. See Manuel v. Gembala, No. 10-CV-4, 2010 WL 3860407, at PAGE_6 (E.D.N.C. Sept. 30, 2010) ("[T]here is no precise formula for determining whether receivership is appropriate...."). Courts have considered a variety of factors before appointing a receiver. See, e.g., LNV Corp. v. Harrison Family Bus., LLC, 132 F. Supp. 3d 683, 689–90 (D. Md. 2015) (collecting cases and summarizing authorities); Brill & Harrington Invs. v. Vernon Sav. & Loan Ass'n, 787 F. Supp. 250, 253–54 (D.D.C. 1992). Generally, the following considerations are likely to be relevant:

fraudulent conduct on the part of defendant; the imminent danger of the property being lost, concealed, injured, diminished in value, or squandered; the inadequacy of the available legal remedies; the probability that harm to plaintiff by denial of the appointment would be greater than the injury to the parties opposing appointment; and, in more general terms, plaintiff's probable success in the action and the possibility of irreparable injury to his interests in the property.

12 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 2983 (3d ed. 2022) (cleaned up); see also 13 Moore's Federal Practice – Civil § 66.04 (listing factors courts generally consider important when appointing receivers).

The evidence of record supports the inference that Mr. Brooksby and the entities he controls are engaged in a plan to hide their assets and to avoid paying the judgment. Mr. Brooksby, acting with and on behalf of an entity and in direct violation of the permanent injunction, has sold property obtained through public foreclosure auctions on at least two occasions. See supra pages 12–13. For at least some of these sales, some of the profits should have been paid toward satisfying the judgment. Yet the record does not show that the Clerk has received any money from any defendant or any entity subject to the charging order towards satisfying the judgment. Neither Mr. Brooksby nor any other defendant has explained what happened to the proceeds of these sales.

PAGE_8 The evidence is overwhelming that Mr. Brooksby and the entities he controls or manages plan to sell properties bought through public foreclosure auctions, despite the permanent injunction prohibiting Mr. Brooksby from doing so. The bulk of their entire response to the plaintiffs' motion for a receiver is to explain how these defendants are "willing to work through" (i.e., sell) the properties, "for a fee," pointing to their claimed expertise. Doc. 323 at 1. In other words, Mr. Brooksby initially intended to keep violating the permanent injunction for his own profit and those of his undisclosed "investors." The evidence further shows that at least some of the profits from these sales will be funneled through the defendants, specifically the Estates, Avirta, GG Irrevocable Trust, or King Family Enterprises, eventually making their way to or for the benefit of Mr. Brooksby.

While these defendants through counsel say they will "hand the profits over to the court," id., their conduct to date provides no such assurance. Mr. Brooksby was up front during his deposition that he uses these and other entities to protect his assets. Doc. 172 at 84–87. He paid nothing towards a multi-million dollar verdict entered against him in Nevada some years ago. Doc. 354 at 20, 26–27.

And Mr. Brooksby and his entities are not the best record-keepers. He has been unable to timely comply in full with the Court's supplemental compliance order, see Doc. 322 at 1 (Mr. Brooksby's declaration noting that as to blanks in the chart attached to his declaration, "I don't know that formation [sic] at this time"), and the Court's Order compelling him to answer the plaintiffs' post-judgment interrogatories.

The defendants' track record throughout this litigation has been to deny and delay. The involvement of Mr. Brooksby's attorneys provides no assurance that the involvement of counsel will increase the reliability of Mr. Brooksby's record-keeping, as their work has been sloppy at best and potentially complicit at worst.

The plaintiffs have legitimate concerns that few if any of the profits and fees will make their way to the judgment creditors. Once the property has been sold and the proceeds distributed, the plaintiffs' options to trace the money for satisfaction of the judgment become much more complicated, if not impossible. Mr. Brooksby's testimony, Doc. 172, and the public records available on some of the various entities he controls or from which he benefits establish that there is a complex web of transactions and relationships that an outsider will have difficulty untangling. Mr. Brooksby during his deposition and at trial tended conveniently not to "remember" details about his various entities, including their names. See Doc. 172 at 18, 22, 31–32, 34–35, 84, 135.8

fn8 No party has yet filed the trial transcript, but the Court remembers Mr. Brooksby's evasive demeanor and convenient forgetfulness during his testimony.

A qualified receiver is in a good position to oversee the properties, keep good records, track down and maintain other assets of the defendants, and make more funds available for satisfaction of the judgment than if the defendants are left in charge. Mr. Lanik is highly qualified to serve as a receiver. He is licensed to practice law in North Carolina, Virginia, and Colorado and a partner at Waldrep Wall Babcock & Bailey PLLC. Doc. 318 at ¶¶ 2–3. He is admitted to practice in the three Federal District Courts in North Carolina and the United States Court of Appeals for the Fourth Circuit, among others. Id. at ¶ 3. Mr. Lanik's practice is focused on bankruptcy law, and he is board-certified in business bankruptcy law by the North Carolina State Bar and the American Board of Certification. Id. at ¶ 4. He is currently on the panel of Chapter 7 Trustees for this district, and he has served as a court-appointed receiver in state court. Id.

PAGE_9 The evidence against Mr. Brooksby and the Estates was compelling, as the Court has previously explained here and elsewhere. But in the unlikely event they should prevail on appeal, the assets will be protected by the work of the receiver.

Upon full evaluation of the evidence in the entire record and based on the Court's years-long knowledge of this case, the Court finds and concludes that: there is imminent danger that property in which the defendants have a financial interest will be sold and the defendants will conceal or squander the money they are entitled to receive upon sale of those properties rather than turning over those proceeds to satisfy the judgment; that the legal remedies available to the plaintiffs when that happens are non-existent in practical terms; that failure to appoint a receiver is likely to result in substantial harm to the plaintiffs' ability to collect the judgment while appointment of a qualified receiver is unlikely to harm the defendants' financial interests; and that the plaintiffs are highly likely to succeed on appeal as to Mr. Brooksby and the Estates and likely to succeed as to Avirta, GG Irrevocable Trust, and King Family Enterprises.

IV. Conclusion

Mr. Brooksby violated the permanent injunction by joining with others to sell real estate bought out of foreclosure. He is in contempt of court. He and other defendants are actively engaged in hiding assets and for this and other reasons, and in the absence of an objection, appointment of a receiver is appropriate.

It is ORDERED that:

1. Plaintiffs' motion for contempt, Doc. 329, is GRANTED in part, and Craig Brooksby is in contempt of court for violations of the permanent injunction by acting with others to sell real property bought out of foreclosure. Otherwise, the motion is DENIED without prejudice.

2. Mr. Brooksby is ORDERED to produce the closing documents for the sales of the 202 River Bluff, 2019 Tennessee Avenue, 1825 St. Julian Place Unit 17, 15050 Mesquite Trail, and 934 Riverstone properties. These closing documents SHALL be filed on the public docket no later than December 2, 2022.

3. Plaintiffs' motion for appointment of a receiver, Doc. 316, is GRANTED. A separate Order appointing Mr. Lanik has been entered. Doc. 362.

Williams v. The Estates LLC, 2023 WL 6929380 (M.D.N.C., Oct. 19, 2023).

United States District Court, M.D. North Carolina.

BRIAN C. WILLIAMS, et al., Plaintiffs,

THE ESTATES LLC, et al., Defendants.

1:19-CV-1076

Filed 10/19/2023

MEMORANDUM OPINION AND ORDER

Catherine C. Eagles, Chief District Judge.

PAGE_1 In April 2022, a jury returned a verdict for the plaintiffs. In June 2022, the Court entered a money judgment against the defendants, including Carolyn Souther. That judgment has not been satisfied.

In August 2023, the plaintiffs filed a motion for a charging order against Ms. Souther. A charging order directs a limited liability company in which a judgment debtor is an interest owner to pay money that would otherwise go to the judgment debtor toward satisfaction of the judgment. The plaintiffs allege that Ms. Souther is an interest owner in numerous LLCs and that any distributions, allocations, dividends, or payments that would be distributed to Ms. Souther by the LLCs instead should go toward their judgment.

Under the applicable North Carolina statute, a plaintiff can receive a charging order if (1) she is a judgment creditor of the defendant; (2) the court to which she has applied is of competent jurisdiction; and (3) the defendant is an “interest owner” in the LLC. The plaintiffs are judgment creditors of Ms. Souther, this Court is of competent jurisdiction, and Ms. Souther is an interest owner in 153 Fish, LLC, Souther Real Estate Investments, LLC, Ichthus Holdings, LLC, and Flint Acquisitions, LLC, so the charging order will issue as to those LLCs. The retirement account held by CSIRA, LLC itself is protected by statute from creditors, but the Court is still evaluating whether any distributions made by CSIRA to Ms. Souther are also protected; the motion as to CSIRA remains under advisement. The record does not clearly establish that Ms. Souther has an ownership interest in the remaining LLCs, so as to those, the motion will be denied.

I. North Carolina's Charging Order Statute

The enforcement of a money judgment is governed by Rule 69 of the Federal Rules of Civil Procedure, which requires that procedures be in accordance “with the procedure of the state where the court is located,” Fed. R. Civ. P. 69(a)(1), here North Carolina. North Carolina law defines a “charging order” as the “exclusive remedy by which a judgment creditor of an interest owner [in an LLC] may satisfy the judgment from or with the judgment debtor's ownership interest.” N.C. Gen. Stat. § 57D-5-03(d).

This Court previously discussed charging orders in-depth in connection with an earlier motion filed by the plaintiffs seeking charging orders against other defendants. See Doc. 292 at 2–4; Williams v. Estates LLC, No. 19-CV-1076, 2022 WL 3226659, at PAGE_1–3 (M.D.N.C. Aug. 10, 2022). That discussion is incorporated by reference. To summarize, a court of competent jurisdiction can require the economic interest of an interest owner in an LLC to be paid to a judgment creditor rather than the interest owner. See Williams, 2022 WL 3226659, at PAGE_1; § 57D-5-03(a).

North Carolina statute defines an “interest owner” as a “member or an economic interest owner.” § 57D-1-03(15). An “economic interest owner” is “a person who owns an economic interest but is not a member,” § 57D-1-03(11), and an “economic interest” is “[t]he proprietary interest of an interest owner in the capital, income, losses, credits, and other economic rights and interests of a limited liability company, including the right of the owner of the interest to receive distributions from the limited liability company.” § 57D-1-03(10). When entered, a charging order gives the judgment creditor “the right to receive distributions that would otherwise be paid to the interest owner with respect to the economic interest,” but the LLC is not responsible for the judgment. See § 57D-5-03(a); Williams, 2022 WL 3226659, at PAGE_2.

PAGE_2 A plaintiff seeking a charging order must show (1) the plaintiff is a judgment creditor of the defendant; (2) the court to which the plaintiff applied is a court of competent jurisdiction; and (3) the defendant is an interest owner in the LLC. Williams, 2022 WL 3226659, at PAGE_2. Here, neither party contests that the plaintiffs are judgment creditors of the defendant or that this Court is of competent jurisdiction.1

fn1. For further discussion on why the plaintiffs are judgment creditors and this Court is of competent jurisdiction see Williams, 2022 WL 3226659, at PAGE_2–3.

II. Defendant's Ownership Interests

A. 153 Fish, LLC and Souther Real Estate Investments, LLC

In her answers to interrogatories, Ms. Souther affirms that she is a member and owner of 153 Fish, LLC and Souther Real Estate Investments, LLC, Doc. 508 at 5–6, and she acknowledges these facts in her response to the plaintiffs’ motion seeking charging orders. Doc. 518-1 at 2. Because Ms. Souther's membership makes her an interest owner, § 57D-1-03(15), the plaintiffs are entitled to a charging order directing those LLCs to pay any moneys due to Ms. Souther into the court to be used towards satisfaction of the judgment.

B. Ichthus Holdings, LLC and Flint Acquisitions, LLC

In her answers to interrogatories, Ms. Souther explicitly affirms that she is the owner and 50% economic interest (EI) holder of Ichthus Holdings, LLC. Doc. 508 at 11. It seems obvious that an owner of an LLC has an economic interest in the LLC, and under North Carolina law, an owner of an LLC is the same as a member. Hamby v. Profile Prods., LLC, 361 N.C. 630, 636, 652 S.E.2d 231, 235 (2007); S. Shores Realty Servs., Inc. v. Miller, 251 N.C. App. 571, 584, 796 S.E.2d 340, 351 (2017). This admission establishes that Ms. Souther has an economic interest in Ichthus subject to a charging order.

As to Flint Acquisitions, LLC, Ms. Souther states in her answers to interrogatories that she has a 10% economic interest in Flint. Doc. 508 at 15. This likewise establishes that she has an interest in Flint subject to a charging order.

Ms. Souther contends that these admissions by her, under oath, id. at 37, are insufficient to prove she has an ownership interest in these two LLCs. Doc. 518 at 4–5. In her briefing in opposition to the motion, she says that the interrogatory did not define the phrase “economic interest” with specificity, and that she interpreted “economic interest” more broadly than the statutory definition. Id. These arguments are not persuasive.

First the term “economic interest” is defined by statute. N.C. Gen. Stat. § 57D-1-03(10). In her answers to the interrogatories, Ms. Souther does not object to the term as vague. See Doc. 508 at 5 (objecting only to the phrase “directly or indirectly involved” as vague and ambiguous). Moreover, these interrogatories were answered in August 2023, Doc. 508 at 37, after the plaintiffs had previously sought charging orders against other judgment debtors, Doc. 247, after the Court issued an opinion in which it discussed the statutory term “economic interest,” Doc. 292 at 3, and after court hearings at which the plaintiffs, in Ms. Souther's lawyer's presence, discussed the possibility of seeking other charging orders. Doc. 499 at 24–25. Ms. Souther's claim that she understood this phrase more broadly is disingenuous.

Second, Ms. Souther does not provide evidence to support a finding that she does not have an economic interest in either LLC. She offers her sworn statement explaining her affiliation with some of the other LLCs at issue, but she does not address Flint or Ichthus directly. See Doc. 518-1. In her brief, Ms. Souther through counsel says she has no interest in many of the LLCs she names in her answers to the interrogatory, but statements in a brief are not evidence. City of Greensboro v. Guilford Cnty. Bd. of Elections, No. 15-CV-559, 2017 WL 11488724, at PAGE_1 n.4 (M.D.N.C. Jan. 26, 2017) (collecting cases); see also Hill v. Carvana, LLC, No. 22-CV-37, 2022 WL 1625020, at PAGE_3 (M.D.N.C. May 23, 2022). Even if the statements in the brief are considered, counsel says nothing in the brief about Flint and Ichthus specifically.

PAGE_3 Third, Ms. Souther's answers to the interrogatory are clear. In those answers, she states, under oath, that she is an owner of and 50% “EI” holder in Ichthus. Doc. 508 at 11. When answering the interrogatory, Ms. Souther defined her relationship with some LLCs, by using other terms like contractor, lender, or client. See, e.g., id. at 14. Ms. Souther includes the label “client” when discussing Ichthus, but she offers no explanation of this label, and it doesn't contradict the fact, which she herself affirms under oath, that she is an owner of the LLC. Id. at 11. As to Flint, Ms. Souther explicitly states that she has a 10% “EI” in the LLC. Id. at 15.2

fn2. Even if one accepted the assertions in her brief as evidence, they support a finding that she has an economic interest. In her interrogatory answer, Ms. Souther included the label “contractor” in her answer about Flint. Doc. 508 at 15. In her brief, she says that being a contractor means she is entitled to a percentage of an LLC's profits. Doc. 518 at 5. This constitutes an economic interest. See § 57D-1-03(10), -(11), -(15).

The plaintiffs are entitled to a charging order directing these two LLCs to pay any moneys due to Ms. Souther into the court to be used towards satisfaction of the judgment.

C. CSIRA, LLC

In her answer to interrogatories, Ms. Souther states that she has a 100% “EI” in CSIRA, LLC. Id. at 6. She thus has an economic interest in CSIRA.

In a clarifying declaration, Ms. Souther affirms that American IRA, LLC established CSIRA to administer and make investments for Ms. Souther's self-directed IRA. Doc. 518-1 at 1, 22–24. The plaintiffs offer no contradictory evidence. North Carolina law protects certain property from the claims of creditors, including “[i]ndividual retirement plans as defined in the Internal Revenue Code and any plan treated in the same manner.” § 1C-1601(a)(9).

While funds held in an IRA are protected from creditors by statute, the Court is still evaluating whether that same protection extends to funds once they are disbursed to the owner of the IRA. The motion for a charging order against CSIRA remains under advisement.

D. Remaining LLCs

For the 48 remaining LLCs, the only evidence cited by the plaintiffs is in Ms. Souther's interrogatory answers. Doc. 507 at 6; Doc. 508 at 5–22. But these answers do not establish that Ms. Souther is a member or that she has an economic interest in any of these LLCs.

In her interrogatory answers, Ms. Souther affirms that 24 of these LLCs are dissolved or delinquent3 and the plaintiffs offer no contrary evidence. If an LLC is dissolved, it is hard to see how anyone has an economic interest in it. The plaintiffs do not address this in their briefing.

fn3. Ms. Souther affirmed that the following LLCs were considered dissolved or delinquent: Jonah Holdings, Doc. 508 at 6–7, Castednet, LLC, id. at 7, High Places 1B, LLC, id., Scottish Pass, LCC, id. at 8, 2 and 5 Fish, LLC, id., Keziah Holdings, LLC, id. at 9, GSBoreals, LLC, id., CH Property Holdings, id. at 10, Beau Holdings, id., Cedar House Properties, id., Mister Property Holdings, LLC, id. at 10–11, Sweet Conifer Holdings, LLC, id. at 11, Field View, LLC, id. at 11–12, Bethsaida, LLC, id. at 12, KTL Holdings, LLC, id., 12085 Morehead Holdings, id. at 12–13, Misty Meadows 25A, LLC, id. at 13, Misty Meadows 35A, LLC, id., Chunker, LLC, id. at 14, Sand Fin Holdings, LLC, id., Eris Acquisitions, id. at 15, Dover Properties, id. at 17, Crius Properties, id. at 18–19, and Aurus Holdings. Id. at 19–20.

For the additional 24 LLCs, which Ms. Souther identifies as either active or of unknown legal status, Ms. Souther either names other people or LLCs as members, or she does not admit she is an owner or otherwise has any interest that constitutes an economic interest.4 For example:

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She identifies James Randal Souther IRA, LLC as an IRA belonging to her husband. Doc. 508 at 6. Nothing in the interrogatory answer implies that she has an economic interest in this LLC.
She identifies Maldives, LLC as owned by Mbeja Lomotay and says that she does not know who the members are. Id. at 16. She says she is or was a “contractor” for this LLC, but that her “EI” is “0%.” Id.
She names Timber Refuge as an active LLC and admits to being a manager of it and a lender to it, but she denies being an owner or member. Id. at 19.
She names Evergreen Property Holdings as an active LLC and admits to being a manager, but she identifies 153 Fish as a member and Craig Brooksby as owner.5 Id. at 13.

fn4. These LLCs are: James Randal Souther IRA, LLC, Doc. 508 at 6, Gideer, id. at 9, Evergreen Property Holdings, id. at 13, King David I, id. at 14, 71 Cam, id. at 14–15, Trench Holdings, id. at 15–16, Vilnius, id. at 16, Maldives, LLC, id., Versa Properties, LLC, id. at 16–17, Centauri Acquisitions, id. at 17, Hunter Path, id. at 17–18, Hunter Valley, id. at 18, Biscay, LLC, id., Icon Acquisitions, id., Timber Refuge, id. at 19, Outlander Acquisitions, id., Little Strand, id. at 20, Oxford Acquisition, id., Stansted, id. at 20–21, Hillside Acquisitions, id. at 21, Bristol Acquisitions, id., Greenmeadows Acquisitions, id. at 21–22, Hevea, id. at 22, and Lynx Holdings. Id.

fn5. Whether someone who is a member of an LLC that is a member of a second LLC has an economic interest in the second LLC is not completely clear. At least one court has held that indirect ownership through another LLC is not enough to establish a chargeable ownership interest. See Am. Bank Ctr. v. Barker, No. 18-CV-103, 2019 WL 13221937, at PAGE_1–2 (W.D.N.C. July 18, 2019). The plaintiffs have not persuasively explained why this case should not be followed.

There are similar problems with the rest of the LLCs of active or of unknown legal status. The plaintiffs do not make a specific argument about these LLCs and instead make only the conclusory argument that “in post-judgment interrogatories Ms. Souther identified an ‘economic interest’ in multiple other LLCs.” Doc. 507 at 6. This is insufficient, especially when the interrogatory answers do not appear to support this contention.

The plaintiffs’ motion seeking a charging order against the remaining LLCs will be denied as the evidence does not show Ms. Souther has an ownership interest in any of the companies.

It is ordered that the plaintiffs’ motion for a charging order, Doc. 506, is GRANTED as to Ms. Souther's interest in 153 Fish, LLC, Souther Real Estate Investments, LLC, Ichthus Holdings, LLC, and Flint Acquisitions, LLC. A separate charging order will issue. The motion as to CSIRA, LLC remains under advisement. As to all other LLCs, the motion is DENIED.

This the 19th day of October, 2023.

Williams v. The Estates LLC, 2025 WL 892943 (M.D.N.C., March 24, 2025).

United States District Court, M.D. North Carolina.

BRIAN C. WILLIAMS, et al., Plaintiffs,

THE ESTATES LLC, et al., Defendants.

1:19-CV-1076

Filed 03/24/2025

MEMORANDUM OPINION AND ORDER

Catherine C. Eagles, Chief District Judge.

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The defendants Craig Brooksby, GG Irrevocable Trust, and King Family Enterprises, LLC have ignored and disobeyed court orders for the entirety of this lawsuit, before and after judgment against them for a fraudulent bid-rigging scheme and continuing after a receiver was appointed to gather their assets. All three have been held in contempt, Mr. Brooksby twice, and for a brief time, he was ordered into the custody of the United States Marshal to compel compliance. Only when threatened with contempt do these three receivership defendants attempt to comply. Mr. Brooksby, the Trust, and KFE continue to evade enforcement of the judgment and conceal assets and records from the Receiver.

Faced with ongoing long-term willful violations, the Court finds Mr. Brooksby, the Trust, KFE, and KFE's managers Mr. Brooksby, Sonja Brooksby, and Rex King in civil contempt. Mr. Brooksby will be held in custody until he complies. Mr. King will be held in custody until he complies, though the Court will stay that order for six business days in hopes of full compliance. Ms. Brooksby must pay a daily fine until she complies and pay some of the attorneys' fees that the Receiver and the plaintiff incurred to attend the multiple contempt hearings.

The Court has previously made extensive findings of facts in other orders that detail the specifics of this case and the post-judgment proceedings. See, e.g., Docs. 244, 364, 397, 425. Those findings are incorporated in full by reference. The Court makes the following additional findings of fact and reaches the following conclusions of law. All findings of fact are based on and supported by clear and convincing evidence.1

fn1. While some citations to the record are provided, the Court has not attempted to comb through the entire voluminous record to identify and cite all the evidence that supports each finding of fact.

I. Background and Procedural History

A. The Antitrust Case and Verdict

The plaintiffs filed this case against Mr. Brooksby, KFE, the Trust, and others alleging, inter alia, that they engaged in a bid-rigging conspiracy in violation of the Sherman Act. Doc. 104. At the April 2022 trial, the jury returned a verdict for the plaintiffs. Doc. 235.

The Estates was a membership-based limited liability company founded and run by Mr. Brooksby that operated across multiple states, including North Carolina. Doc. 244 at 3. Estates members paid a monthly fee to access its website listing properties in foreclosure. Id. at 3–4. Members submitted internal bids stating how much they would pay for a particular property, and Mr. Brooksby or other agents of the Estates would select one member to represent in bidding on the property at the public foreclosure auction. Id. at 4. Only one Estates member could use its services to bid on properties in foreclosure, and the members agreed not to bid against one another. Id. at 4–5.

If an Estates member acquired property found through the Estates' database, he or she owed the Estates an acquisition fee. Id. at 5. Mr. Brooksby was also entitled to some of the profits obtained from selling property acquired using the Estates' services, id., although Mr. Brooksby deliberately made the exact arrangements complicated and opaque. Doc. 364 at 4. Mr. Brooksby also engaged in other illegal conduct when dealing with foreclosed homeowners, including extortion and unfair trade practices. See Doc. 245.

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Mr. Brooksby and other defendants created numerous LLCs to conduct these real estate transactions, hiding the distribution of funds, fees, and profits through a myriad of LLCs. Doc. 364 at 4. The Estates required its members to set up an LLC to bid at a foreclosure sale, Doc. 381 at 47–48, and often other LLCs were set up for the purchase. Id. at 75. At the top of this tangled pyramid were Mr. Brooksby, the Trust under Mr. Brooksby's control, and KFE run and managed by Mr. Brooksby, his wife Sonja Brooksby, and his brother-in-law Rex King, along with receivership defendants Avirta LLC and Citadel Management LLC. See Doc. 364 at 4–7; Doc. 425 at 7 & nn.1–2; Doc. 381 at 67–68 (testimony that Avirta and the Trust received profits from the Estates).

B. Judgment, Permanent Injunction, and Charging Order

In June 2022, consistent with the verdict, the Court entered a $1.2 million dollar judgment against the defendants. Doc. 245. The Court also imposed a permanent injunction prohibiting Mr. Brooksby from engaging in certain activity connected to real estate foreclosure sales. Doc. 246. Mr. Brooksby and two other individual defendants appealed the judgment and injunction; the Fourth Circuit affirmed. Williams v. Brooksby, No. 22-1982, 2024 WL 4490636 (4th Cir. Oct. 15, 2024).

Shortly after the Court entered the judgment and permanent injunction, the plaintiffs moved for a charging order against the economic interests of Mr. Brooksby and other defendants. Doc. 247.2 The Court granted the motion in part, Doc. 292, and entered a charging order directing a number of LLCs to pay any funds owed to certain defendants toward the judgment instead. Doc. 293.

fn2. A charging order directs an LLC in which a judgment debtor has an economic interest to pay any money the LLC would otherwise pay to the judgment debtor toward satisfaction of the judgment. See Doc. 292 at 1.

C. Defendants' Defiance, Appointment of a Receiver, and Contempt Proceedings

In September 2022, the plaintiffs asked the Court to appoint a receiver over the assets of Mr. Brooksby and other defendants. Doc. 316. The next month, while that motion was pending, the plaintiffs filed a motion for contempt against Mr. Brooksby, Doc. 329, contending he had violated the permanent injunction, Doc. 330 at 3, and the charging order. Id. at 4–5. The Court later found that Mr. Brooksby violated the permanent injunction by participating in the sale of property bought at a public foreclosure auction and held him in civil contempt. See Doc. 364 at 12–13.

By separate order, the Court appointed James Lanik as Receiver, directing him to take possession and control of all the assets of Mr. Brooksby, The Estates, LLC, Avirta LLC, the Trust, and KFE. Doc. 362 at 2; see also Doc. 399 at ¶ 2. The Court also ordered those defendants to turn over all records and assets to the Receiver. Doc. 362 at 2–3; see also Doc. 399 at ¶¶ 9, 15, 17–18. Soon thereafter, the Court revoked permission for out-of-state counsel to appear on behalf of Mr. Brooksby and other defendants due to "an excessive and unjustified drain on court resources." Doc. 363 at 6.

Even though he knew that a Receiver had been appointed for Avirta, Mr. Brooksby filed a bankruptcy petition on Avirta's behalf in Utah. See Doc. 377; Doc. 395 and attachments. In February 2023, that petition was dismissed, as Mr. Brooksby did not have authority to file it. Doc. 395 at 45–46; see also id. at p. 4 ¶ 9.

Mr. Brooksby continued to sell property and evade court orders, and the receivership defendants did not comply with orders concerning the receivership. Id. at 2, 4–6. So in March 2023, the Court amended the receivership order ("Receivership Order") expanding the Receiver's powers and the receivership entities. Doc. 399; see also Doc. 397. Around the same time, the Court sanctioned Mr. Brooksby and his attorneys for violating Rule 11 of the Federal Rules of Civil Procedure. Doc. 400 at 34–35.

PAGE_3

Soon thereafter, the remaining lawyer representing Mr. Brooksby, the Trust, and KFE was allowed to withdraw without objection. Doc. 403. Mr. Brooksby has since represented himself, and no attorney has made an appearance on behalf of KFE, the Trust, or any other receivership defendant relevant to the proceedings herein.3 Counsel has represented Sonja Brooksby personally since April 2023. See, e.g., Doc. 429.

fn3. Counsel entered an appearance for NC Bidding-2, LLC, see Doc. 276, and Carolyn Souther, see, e.g., Doc. 277, but the conduct of those defendants is not at issue.

At an April 2023 hearing, the Receiver confirmed he had received no assets and only some additional documents for receivership defendants. Doc. 414 at 4–7. The Receiver and plaintiffs' counsel agreed that a show cause order directed to the receivership defendants and potential civil contempt were appropriate. Id. at 9–10. The Court thereafter entered a show cause order directing Mr. Brooksby, the Trust, KFE, the Estates, and Avirta to show cause as to why they should not be held in civil contempt for violating the Receivership Order. Doc. 411. The Court identified four specific potential violations, noting that it appeared the defendants had violated the Receivership Order:

by failing to immediately surrender possession and control of assets to the Receiver, by failing to deliver to the Receiver all your records, by failing to provide ... required sworn statements and accountings, including identity and contact information for all employees, attorneys, agents, accountants, and contractors, and by failing to turn over rental proceeds ....

Id. at 2.

At the show cause hearing, Mr. Brooksby appeared personally, as trustee of the Trust, and as a person with control of KFE and other defendants. Doc. 425 at 2; see Doc. 256-1 at 1 (showing that Mr. Brooksby is the trustee of the Trust); Doc. 256-3 (showing that Mr. Brooksby is a manager of Citadel Management, LLC); Doc. 256-2 (showing that Citadel is a manager of KFE).4 Sonja Brooksby appeared as a manager of KFE. Doc. 425 at 2; see Doc. 256-2. Rex King appeared as a manager of Avirta LLC. Doc. 425 at 2; see Doc. 256-5. The record also shows that at the time the Receiver was appointed, Ms. Brooksby was a partner in Rex King Limited Partnership, itself a member of KFE, Docs. 256-2, 256-6, and Mr. King was a manager of Citadel, itself a manager of KFE. Docs. 256-2, 256-3.

fn4. Citadel was a partner in Rex King Limited Partnership, itself a member of KFE. Docs. 256-2, 256-6.

The Court held Mr. Brooksby, the Trust, KFE, the Estates, and Avirta in civil contempt. Doc. 425 at 14. It found that they "ha[d] not filed the declarations required by the Amended Receivership Order, they ha[d] not immediately or even belatedly surrendered possession and control of all assets to the Receiver, and they ha[d] not delivered to the Receiver all records." Id. at 11 (cleaned up).

In addressing an appropriate remedy, the Court noted that "the receivership defendants have had ample opportunity to comply with the Receivership Orders and ample warnings that failure to comply could lead to coercive incarceration" and pointed out that "[t]his is not the first time the Court has dealt with these defendants violating court orders." Id. at 17. Finding that "the contempt is flagrant and has continued for months despite clear warnings and an Amended Order," the Court found it "necessary here to coerce these otherwise-unwilling defendants to comply by incarcerating Mr. Brooksby until the receivership defendants named herein comply." Id. at 17-18.

PAGE_4

Mr. Brooksby was placed in the custody of the United States Marshal, pending compliance and further order from the Court. Id. at 19; Minute Entry 04/11/2023. The matter was held open as to Ms. Brooksby, as manager of KFE, and Mr. King, as manager of Avirta LLC, Doc. 425 at 16, 18, and was set for review within the week. Id. at 19. Ms. Brooksby, Mr. King, and all other managers and members of KFE, among others, were ordered to appear. Id.

After Mr. Brooksby went into custody, the receivership defendants finally produced some responsive documents. See, e.g., Doc. 427 and attachments; Doc. 588 at 16–17; Doc. 457 at ¶ 3. With this partial compliance, the Court authorized the U.S. Marshal to release him. Minute Entry 04/21/2023; Doc. 440 at 2, 4. But the Court held that the five original receivership defendants, including Mr. Brooksby, the Trust, and KFE, had "not yet purged themselves of civil contempt and deficiencies remain[ed]." Doc. 440 at 2. The matter was held open to give the defendants additional time to bring themselves into full compliance. Id. at 3. The Court explicitly warned the defendants that failure to bring themselves into full compliance could result in additional civil contempt remedies to coerce compliance. Id. at 3; see also Doc. 588 at 25, 30–31. There was no appeal of any of these contempt orders.

II. Recent Developments, Renewed Motion for Contempt, and Pending Show Cause Order

Over the next 15 months or so, the Receiver filed quarterly reports. Docs. 493, 533, 546, 547, 548. Beginning with the October 2023 report, the Receiver consistently noted that he still had not received all the information from the receivership defendants required by the Receivership Order and that he intended to file a separate statement of deficiencies. Doc. 533 at 3; Doc. 546 at 3; Doc. 547 at 2; Doc. 548 at 2. All of the Receiver's reports were served on Mr. Brooksby, Mr. King, and Ms. Brooksby's personal attorney. See, e.g., Doc. 533 at 14–16.

In August 2024, the plaintiffs filed a motion asking the Court to hold Mr. Brooksby in civil contempt because he still had not provided required information to the Receiver. Doc. 551; Doc. 552 at 4.5 Upon review, the Court established a schedule for the Receiver to file a statement of deficiencies and for Mr. Brooksby to respond to the contempt motion and statement of deficiencies. Doc. 554.

fn5. The plaintiffs also seek a finding of civil contempt because Mr. Brooksby has resumed violating the permanent injunction. Doc. 551; Doc. 552 at 9–10. The violation of the permanent injunction is addressed in a separate order.

On August 30, 2024, the Receiver filed a statement of deficiencies, identifying a number of ongoing violations of the Receivership Order by Mr. Brooksby, the Trust, and KFE. Doc. 555. Among other things, the Receiver stated that he had "received no documents or any information relating to" the Trust or KFE. Id. at ¶ 1.

On September 10, 2024, Mr. Brooksby filed a response to the motion for contempt and the statement of deficiencies, Doc. 556, along with declarations under oath. Docs. 556-7, 557. Upon an order from the Court, Text Order 09/18/2024, Mr. Brooksby filed with the Court a flash drive containing hundreds of documents he contended support his response to the statement of deficiencies. See Doc. 559. No one else filed a response or evidence on behalf of the Trust or KFE.

The Court then issued show cause orders directing Mr. Brooksby, the Trust, KFE, and Sonja Brooksby and Rex King, as persons with control of KFE, to appear and show cause why they should not be held in civil contempt. Docs. 560, 561, 562. The show cause order gave Mr. Brooksby notice that he could be held in contempt for failing to turn over all assets and records and file all required statements and accountings. Doc. 560 at 5. It gave notice to KFE, the Trust, and their managers, members, and trustees at the time the Receivership Order was entered that they could be held in contempt for failing to turn over all assets and records and file all required statements and accountings. Doc. 562 at 3–4. And it gave notice to Ms. Brooksby and Mr. King that they could be held in contempt for those same failures by KFE. Id.; Doc. 561 at 2–3.

PAGE_5

On October 21, 2024, the Receiver filed a quarterly status report. Doc. 566. The Receiver noted Mr. Brooksby's recent provision of documents, which the Receiver was reviewing. Id. at 2. On November 9, 2024, three days before the scheduled show cause hearing, Ms. Brooksby filed a declaration in response to the show cause orders with well over 200 exhibits. Doc. 567.

The Court held a hearing on November 12, 2024. Minute Entry 11/12/2024. Mr. Brooksby and Mr. King appeared without representation, and Ms. Brooksby appeared with counsel representing her individually. Doc. 572 at 1. Mr. King filed a declaration the morning of the hearing, Doc. 569, but he did not address the Court at the hearing. Doc. 572 at 14, 139, 151. Mr. Brooksby made proffers but did not testify. Id. at 139, 143. Ms. Brooksby testified, id. at 20–139, and some exhibits from her recent filing were admitted into evidence. See id. at 34, 36, 62–63, 70, 89, 91.

At the end of the hearing, the Receiver asked for time to digest the information presented in recent filings and at the hearing. Id. at 144–47. The Court held the matter open and scheduled another hearing to determine if KFE, the Trust, Mr. Brooksby, Ms. Brooksby, and Mr. King had purged themselves of contempt. Id. at 151–52. The Court noted that "what the three people here should have done long ago is, say to everybody who has any materials for any of these receivership defendants, everything you have, give it directly to" the Receiver. Id. at 152.

On January 7, 2025, the Receiver filed an updated statement of deficiencies identifying numerous ongoing failures to comply. Doc. 575. Four days before the scheduled January hearing, Ms. Brooksby filed yet another declaration with well over 200 more exhibits. Doc. 576. The day of the hearing, Mr. Brooksby and Mr. King filed supplemental declarations, Docs. 578, 579, and someone filed a document purporting to be a declaration of one "Dave Williams," who purports to be a former employee of the Estates. Doc. 577.

A hearing was held on January 14, 2025. Minute Entry 01/14/2025. Mr. Brooksby and Mr. King appeared without representation, and Ms. Brooksby appeared with counsel. Id. Mr. Brooksby and Mr. King made proffers but did not testify. In his quarterly report, the Receiver reported that he "has still yet to receiver many documents required by the Amended Receivership Order." Doc. 580 at 2.

In February, the Receiver filed a notice of additional receivership defendants, asking to add four LLCs controlled by Mr. Brooksby that he never disclosed to the Receiver. Doc. 584. Without objection, these LLCs were added as receivership defendants. Doc. 589.

III. Civil Contempt

District courts have "the inherent authority to hold parties in civil contempt" to ensure compliance with their lawful orders. Rainbow Sch., Inc. v. Rainbow Early Educ. Holding LLC, 887 F.3d 610, 617 (4th Cir. 2018) (citing Shillitani v. United States, 384 U.S. 364, 370 (1966)). A court may impose civil contempt remedies "to coerce obedience to a court order or to compensate the complainant" for injuries resulting from the contemnor's noncompliance. Cromer v. Kraft Foods N. Am., Inc., 390 F.3d 812, 821 (4th Cir. 2004) (quoting In re Gen. Motors Corp., 61 F.3d 256, 258 (4th Cir. 1995)).

Before a court holds a party in civil contempt, it must provide the alleged contemnors with "notice and an opportunity to be heard." Int'l Union, United Mine Workers of Am. v. Bagwell, 512 U.S. 821, 827 (1994). A contempt order requires proof by clear and convincing evidence: (1) that there was a valid decree of which the alleged contemnor had knowledge; (2) that the decree benefitted the opposing party; (3) that the alleged contemnor violated the terms of the decree and knew he violated its terms; and (4) that the opposing party suffered harm as a result. dmarcian, Inc. v. dmarcian Eur. BV, 60 F.4th 119, 145 (4th Cir. 2023). Once there is a "prima facie showing of these elements, the burden shifts to [the] alleged contemnor to justify his non-compliance." U.S. Commodity Futures Trading Comm'n v. Capitalstreet Fin., LLC, No. 09-CV-387, 2010 WL 2131852, at *2 (W.D.N.C. May 25, 2010) (citing United States v. Rylander, 460 U.S. 752, 757 (1983)).

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LLCs, trusts, and other entities "act only through their agents." Braswell v. United States, 487 U.S. 99, 110 (1988). For an LLC, this includes its members and managers. See, e.g., N.C. Gen. Stat. § 57D-3-20; Utah Code Ann. § 48-3a-407 (West). For a trust, this includes the trustee. See, e.g., N.C. Gen. Stat. § 36C-8-816; Utah Code Ann. § 75-7-814 (West). These entities' agents are then subject to contempt for the entities' violations of court orders. See, e.g., JK Moving & Storage, Inc. v. J & K Moving LLC, No. 17-CV-849, 2022 WL 3999962, at *2 (E.D. Va. Aug. 31, 2022) (holding a manager and member of an LLC defendant in contempt because he was subject to the violated order and had actual knowledge of it); cf Fed. R. Civ. P. 65(d)(2)(B) (parties' officers and agents are subject to injunctions and restraining orders). And incarceration of an entity's agents is an available contempt remedy. See Cascade Cap., LLC v. DRS Processing LLC, No. 17-CV-470, 2018 WL 4705559, at *3–4 (W.D.N.C. Oct. 1, 2018) (holding in contempt and ordering the incarceration of LLC defendant's owner); Quilling ex rel. Sardaukar Holdings, IBC v. 3-D Mktg., LLC, No. 06-CV-293, 2007 WL 9711514, at *3 (N.D. Tex. July 18, 2007) (Mag. J., findings and recommendation) (recommending a finding of contempt and incarceration of LLC defendant's "principal agent"), adopted, No. 06-CV-293, Doc. 73 (N.D. Tex. Sept. 20, 2007).

IV. The Receivership Order Is Enforceable by Contempt

The Receivership Order, Doc. 399, is a valid decree issued by this Court, as is the predecessor order. Doc. 362. The order benefits the plaintiffs by providing a mechanism for collection of funds to satisfy the $1.2 million judgment in their favor, see Doc. 245, and they suffer harm from violations because concealment of assets and information impedes satisfaction of the judgment. Mr. Brooksby had actual knowledge of the Receivership Order and its predecessor. See, e.g., Doc. 395 at 96 (testimony in January 2023); Docs. 556, 557, 578 (court hearings).

The Trust had actual knowledge of the Receivership Order through its trustee, Mr. Brooksby, see Doc. 256-1, and through its attorney at the time the order was entered. See Doc. 403 (order allowing attorney for the Trust and KFE, among others, to withdraw on March 24, 2023). And KFE had actual knowledge of the order through its attorney, see id., and through Mr. Brooksby, who was a manager of Citadel which managed KFE. See Docs. 256-2, 256-3.

KFE also had knowledge through Ms. Brooksby, one of its managers, and Mr. King, a manager of Citadel which managed KFE, see Docs. 256-2, 256-3, each of whom has had actual knowledge of the Receivership Order for years. Both Ms. Brooksby and Mr. King were present at hearings before this Court on April 11, 2023, and April 21, 2023, at which the Receivership Order was discussed extensively. Minute Entry 04/11/2023; Minute Entry 04/21/2023; see Doc. 425 at 2; Doc. 440 at 1–2. Mr. King and counsel for Ms. Brooksby were also present at a July 6, 2023, hearing at which the Receivership Order was again discussed. Minute Entry 07/06/2023; see Doc. 587 at 44–50. The Court has repeatedly informed them that because of their management role over KFE, they are responsible for seeing that KFE complies with the Receivership Order. See, e.g., Doc. 414 at 38–39; Doc. 424 at 69, 71, 83–84; Doc. 588 at 2–3.

V. Violations of Receivership Order

A. Records of Mr. Brooksby, the Trust, and KFE

The Receivership Order requires Mr. Brooksby, the Trust and its trustees, and KFE and its members and managers to each deliver all records and surrender all assets to the Receiver. Doc. 399 at ¶¶ 9, 11, 15, 17–18. This includes all records and assets over which they have control, including those of the Estates, an entity controlled by Mr. Brooksby and by entities owned or controlled by KFE and the Trust and whose profits ultimately went to the Trust, KFE, and Mr. Brooksby. See discussion infra at 15–17.

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Mr. Brooksby, the Trust, and KFE have not delivered all required records to the Receiver. As of August 30, 2024, the Receiver had received no documents relating to the Trust or KFE, Doc. 555 at ¶ 1,6 and he had not received documentation of all property "owned or controlled by Craig Brooksby, the Trust, or KFE." Id. at ¶ 2. Since then, despite the plethora of documents filed by Mr. Brooksby and Ms. Brooksby on the eve of court hearings, these defendants still have not fully complied.

fn6. The document establishing the Trust is in the record, see, e.g., Doc. 256-1 (redacted excerpts); Doc. 567-4 (full document), as are documents showing the members and managers of KFE. See, e.g., Doc. 252-2 (2013 articles of organization); Doc. 252-3 (2018 changes); Doc. 252-4 (2022 list of members and managers).

The claims that KFE and the Trust do not have such documents or assets, see, e.g., Doc. 427-1 at 1, 26; Doc. 446-12; Doc. 446-37; Doc. 567 at ¶¶ 8, 10; Doc. 567-7; Doc. 572 at 26, 31, are not credible. The Estates was fully owned by Avirta and was managed by Mr. Brooksby through Citadel and by Mr. King. Doc. 567-9 at 13. Mr. Brooksby testified at trial that Avirta received profits from the Estates, Doc. 386 at 67-68, and that "at the end of the day" the Trust received the profits from his operations via the King Family Limited Partnership. Id. at 68. Ms. Brooksby testified in November 2024 that KFE fully owns Avirta, Doc. 572 at 31–32, and that the Trust has a 99% ownership interest in King Family Limited Partnership and a 10% ownership interest in KFE. Id. at 28; see also Docs. 567-6, 567-7. It is not credible that the Trust and KFE, entities at the top of Mr. Brooksby's pyramid of operations, have no financial records and no assets.

Given the number of real estate transactions conducted as part of the operations of the Estates bid-rigging scheme and other activities, the nature and scope of the relevant operations, and that Mr. Brooksby, KFE, and the Trust received the profits from those operations, there must be records documenting these arrangements and transactions. Mr. Brooksby and his associates have made every effort to muddle the way the Estates and all of Mr. Brooksby's affiliated entities operated, see, e.g., Doc. 395 at 45–46, but from sworn testimony by Mr. Brooksby and others and from what the Receiver has determined, the following is a general outline.

Estates members had to create an LLC to bid on foreclosed properties through the Estates. Doc. 364 at 3. When an Estates member successfully bid on real property at foreclosure, another LLC was often formed specifically for that transaction, almost always with a Brooksby-controlled owner, such as Avirta. Id. at 5–6; Doc. 395 at 96.

This process often involved Mr. Brooksby linking the Estates member with one or more "investors" who were entitled to a share of the profits, along with the Estates member. See, e.g., Doc. 380 at 44 (testimony that the "investor" had "equity title"); id. at 46–47, 51–55 (testimony about Estates agent's negotiations with homeowners post-foreclosure on behalf of "investors" and investor entitlement to profits); id. at 67, 109, 183, 195, 208 (testimony about "investors"); see also Doc. 461 at ¶ 4 (the Receiver identifying deeds of trust on receivership property); Doc. 475 at ¶ 4 (same); Doc. 582 at ¶ 12 ("The Receiver has determined that each of the Sale Entities is saddled with interests of third parties ....").7

fn7. By way of further example, Mr. King apparently has a claim against Marylebone LLC, a receivership defendant that owns the residence where the Brooksbys and Mr. King live. See Doc. 572 at 41; Doc. 567-2 at 4 (noting a creditor claim, among others, by Rex King against Marylebone LLC's property for $84,397.37); Doc. 572 at 104–105 (Ms. Brooksby's testimony that this claim is "[p]robably a note that [Mr. King] holds against the property").

PAGE_8

The Estates and Mr. Brooksby, through Avirta, Citadel, the Trust, and KFE, were also entitled to a share of any profits received. Doc. 364 at 6; Doc. 395 at 96. These profits might result either from a "buyback" with the foreclosed homeowner, see, e.g., Doc. 380 at 54, or from flipping the foreclosed property. See, e.g., id. at 47–48, 188; Doc. 364 at 6. Mr. Brooksby usually decided how the profits were distributed. Doc. 395 at 96. This scheme involved many agents working on behalf of Mr. Brooksby, Avirta, Citadel, KFE, and the Trust, such as attorneys, brokers, and other professionals. See, e.g., Doc. 380 at 83, 88, 109, 187, 208. Mr. Brooksby, the Trust, and KFE have control of the Estates, Citadel, and Avirta, as well as all the other receivership defendants.

The idea that Mr. Brooksby, KFE, and the Trust have no records to reflect all of this activity is laughable. At the least, they had to have ledgers or other accounting records to keep up with these complicated transactions; if they did not, they could not be sure that they would get the resulting profits. And they must have had those records, plus contracts, to know how to accurately distribute money to investors, Estates members, and any agents owed commissions. Even if the entire scheme is fraudulent, with "investors" serving as shams or fronts for Mr. Brooksby, there would still be documents related to foreclosure bids, especially those that resulted in a purchase. And the money from all these transactions must have gone somewhere.

The hodgepodge of records these three receivership defendants have provided is a far cry from full compliance. It is not credible that Mr. Brooksby, KFE, and the Trust have no ledgers or accounting records of their finances or of the Estates' dealings, only a few copies of contracts or other writings reflecting agreements with investors, and no organized list of records of properties bought in foreclosure by Estates members and their investors.

The Receiver has a list of some of the LLCs affiliated with Mr. Brooksby's operations, see, e.g., Doc. 395 at 13–24 (list filed in Avirta bankruptcy case); Doc. 399 at 33–44 (same list attached to Receivership Order); Doc. 555 at 8–17, but this list is not complete. The Receiver continues to uncover the existence of more LLCs affiliated with Mr. Brooksby and the Estates; recently, for example, the Receiver identified several LLCs controlled by Mr. Brooksby or otherwise affiliated with receivership defendants, some of which own property, and none of which Mr. Brooksby or any other receivership defendant disclosed to the Receiver. Doc. 575 at ¶ 2; Doc. 584 at 2. Mr. Brooksby, KFE, and the Trust should have disclosed the existence of these entities to the Receiver long ago, and these entities should have long been under the Receiver's control.

To make matters worse, in 2024, Mr. King filed reinstatement paperwork for several of these undisclosed LLCs as well as some previously identified ones, Doc. 575 at ¶¶ 2(c), 2(d), 3, in violation of the Receivership Order. See Doc. 399 at ¶¶ 6–7. Mr. King testified in an affidavit that he did not file the paperwork, blaming someone named Dave Williams. Doc. 579 at ¶¶ 4–5. Mr. Brooksby proffered that Dave Williams filed this paperwork independently and without direction from Mr. Brooksby or Mr. King. While there is a paper writing that purports to be a declaration under oath from someone purporting to be named Dave Williams, Doc. 577, this evidence is not credible.

Mr. Brooksby has repeatedly identified Dave or David Williams as someone who lives in the Philippines and who works for the Estates and all his related businesses. See, e.g., Doc. 395 at 102; see also Doc. 572 at 52 (Ms. Brooksby identifying Dave Williams in the Philippines as holding documents related to litigation for one of her companies). In April 2023, Mr. Brooksby testified that he read "the order" to his "staff," including "David," and instructed them to provide all documents to Mr. Lanik. Doc. 424 at 17–18. Now this "Dave Williams" says that he took action to reinstate certain receivership LLCs despite his knowledge of the Receivership Order. Doc. 577 at ¶ 6. But he does not explain why he took such action beyond saying that he "felt the need to keep them current," id. at ¶ 7, nor does he say where he got the money to pay the associated fees. The proposition that this "Dave," upon his own initiative and despite his knowledge of the Receivership Order, reinstated certain receivership LLCs is not credible.

PAGE_9

Indeed, the Court questions whether "Dave" even exists; Mr. Williams' declarations are not notarized and have inconsistent signatures, compare Doc. 556-1, with Doc. 577, and there are a number of other suspicious circumstances about this Dave Williams. See, e.g., Doc. 395 at 101–02 (testimony by Mr. Brooksby that "Dave Williams" is a "U.S. name," but Dave and other overseas staff use their "real" names in their countries). There are emails purporting to be from Dave Williams, see, e.g., Docs. 577-1, 577-2, 577-3, but they could have come from anyone who created an email address using that name.

In any event, the Court gives the purported testimony of this "Dave Williams" no weight. These declarations are yet another effort by Mr. Brooksby and Mr. King to mislead the court, confuse the record, and evade the Receivership Order. Mr. King, who doesn't do much without Mr. Brooksby's knowledge and direction, was able to file reinstatement paperwork for some of the undisclosed LLCs. He and Mr. Brooksby could have disclosed the existence of those LLCs to the Receiver as required, yet they did not.8

fn8. Even if the Court accepted the defendants' explanations, that does not help them. If Dave Williams is a real person who filed the renewal paperwork, he is an agent of Mr. Brooksby and KFE and acted at their direction and control. They have offered no excuse for why they did not disclose these LLCs to the Receiver even though their agent knew about them and was able to renew their corporate paperwork.

In addition to failing to disclose some LLCs, neither Mr. Brooksby, KFE, nor the Trust turned over bank statements for many of the known LLCs to the Receiver, who had to get them directly from banks. Doc. 533 at 3.9 And the Receiver still does not have banking information for many of the known LLCs. See Doc. 555 at 8–17.

fn9. Some receivership defendants provided some banking information and bank statements to the Receiver. See, e.g., Doc. 480 at ¶ 2; id. at 4–5; Doc. 588 at 19.

The Court has long made clear that third persons holding records for Mr. Brooksby, KFE, and the Trust must turn over those records to the Receiver and that Mr. Brooksby, KFE, and the Trust must ensure that this is done. See, e.g., Doc. 414 at 39 (the Court saying to Mr. Brooksby and Mr. King, "Whoever you tell what to do, you tell them to turn [the records] over."). There were attorneys, accountants, and brokers involved in the operations of Mr. Brooksby, KFE, and the Trust and the entities they controlled.10 Beyond assertions by Mr. Brooksby that he has told his "staff" to turn over documents,11 see, e.g., id. at 12–14, there is nothing in the record to indicate that these receivership defendants have made any real effort to see that documents under their control but in the possession of third persons are turned over to the Receiver.

fn10. By way of example only, attorney Steven W. Shaw has fingerprints all over the activities of the Estates, Mr. Brooksby, and all of these LLCs, see, e.g., Doc. 572 at 38; Doc. 424 at 30; Doc. 552-1 at 45; Doc. 395 at 95, and other attorneys have also been involved. See, e.g., Doc. 75 at 29 (statements by then counsel for the defendants that she also represented an Estates member in other matters); Doc. 572 at 103 (testimony by Ms. Brooksby of an attorney who "invested" in one of her real estate companies). Other relatives and persons were listed as registered agents and decisionmakers around the time the original receivership order was entered. See, e.g., Doc. 350 at 3–13. In the show cause order as to KFE, the Court specifically referred to Mr. Shaw, accountant Bart E. White, registered agent Sierra Brooksby, and others. See Doc. 562 at 2–3. The Court warned Mr. Brooksby in April 2023 that there would be "real problems" if Mr. Shaw and Mr. White continued to fail to turn over their records to the Receiver. Doc. 588 at 26.

fn11. The Receiver told the Court in April 2023 that he had recently been in touch with "some of the staff who ha[d] provided some information and documents," Doc. 588 at 13, but nearly two years later, the Receiver still does not have all the documents required to be turned over to him by the Receivership Order.

PAGE_10

The Receiver needs these records to do his work. His job is to "marshal[ ] and preserv[e] all assets" of the receivership defendants. Doc. 399 at 2. If Mr. Brooksby, KFE, and the Trust refuse to tell him about the entities that hold those assets, refuse to provide documents related to those assets, refuse to identify real property bought by the entities and other "investors" who might have claim to any sales proceeds, and refuse to direct all of their agents to turn over documents to the Receiver, all as required by the Receivership Order, then the Receiver's ability to do his job is impaired.

These receivership defendants are not entitled to demand that the Receiver dig out these records himself. Nor are they entitled to wait for the Receiver to make specific requests or for a show cause order to be entered before they make a show of compliance.

The Court finds that Mr. Brooksby, the Trust acting through Mr. Brooksby, and KFE, acting through Mr. Brooksby, Ms. Brooksby, and Mr. King, continue to conceal information and assets from the Receiver and have violated paragraphs 9, 11, 15, 17, and 18 of the Receivership Order. Id.

The Court further finds that these violations were knowing. As summarized supra at 13–14, Mr. Brooksby, Ms. Brooksby, and Mr. King have long known of their responsibilities under the Receivership Order. They have heard and acknowledged their duty to comply many times. See, e.g., Doc. 424 at 69–71, 83–84; Doc. 588 at 2–3. Mr. Brooksby, Ms. Brooksby, and Mr. King knew long ago that they were not in compliance with the Receivership Order, and they have continued to knowingly violate the order.

These defendants have provided no credible evidence that they have attempted in good faith to turn over all records and accountings to the Receiver or to inform others who may hold such records of the duty to turn those records over to the Receiver. Instead, the Receiver has largely been left to uncover them himself. Since the initiation of the most recent show cause hearings, Mr. Brooksby, Ms. Brooksby, and Mr. King have produced two additional volleys of information. Doc. 567 and attachments; Doc. 576 and attachments; Docs. 577, 578, 579. They consistently produce such additional information on the eve of court hearings, making it impossible for the Court and the Receiver to evaluate them in time for a meaningful hearing. These late productions of new and additional information provide further proof that they did not comply with the Receivership Order when initially ordered or in the many months thereafter. And in any event, as discussed supra, even with all these late submissions, they still have not turned over all the books and records that must exist, nor have they identified all the responsive LLCs or provided an accounting. These submissions are not intended to be complete; rather, these three receivership defendants are using them as instruments of delay and obfuscation.

Mr. Brooksby is ultimately the one in charge of these operations and is responsible for these violations both personally and on behalf of the Trust and KFE. But Ms. Brooksby and Mr. King also had actual and apparent authority for KFE when the Receiver was appointed, and they are equally responsible for KFE's violations of the Receivership Order. Mr. Brooksby, his wife, and his brother-in-law initially created the tangled web of interrelated LLCs. They cannot now claim that they don't understand them and don't know what assets they have. The web is their creation, and they are the ones who must explain it to the Receiver, locate and provide all documents, and identify all assets.

PAGE_11

The Court held that Mr. Brooksby, KFE, and the Trust were "in ongoing civil contempt" nearly two years ago but held the matter open to give them time to fully comply with the Receivership Order. Doc. 440 at 3. Despite plenty of time and additional opportunities given by recent show cause orders detailing their ongoing failures, they still have not done so. Mr. Brooksby, the Trust, KFE, and Ms. Brooksby and Mr. King, as agents of KFE, have not complied or attempted to comply with the Receivership Order, and they are in contempt of court.

B. Other Violations

1. Mr. Brooksby's Employment with Soren LLC

The Receivership Order requires Mr. Brooksby to deliver all personal records and assets to the Receiver. Doc. 399 at ¶¶ 15, 17. He did not comply.

At some point before September 4, 2023, Mr. Brooksby began working on behalf of and receiving money from Soren, LLC; Mr. Brooksby characterizes this as employment for wages. See Doc. 556-7; Doc. 576-199 (Mr. Brooksby's 2023 W-2 from Soren). But Mr. Brooksby did not turn over any of his income from Soren to the Receiver, nor did he turn over documentation of this income or even tell the Receiver he had received such income. Doc. 575 at ¶ 1. Ms. Brooksby testified that Mr. Brooksby's income from Soren was paid directly to her at her direction. Doc. 572 at 69, 85–86.

The Court finds that Mr. Brooksby violated paragraphs 15 and 17 of the Receivership Order, Doc. 399, by failing to deliver records of his work with Soren to the Receiver and by hiding assets when he authorized delivery of his money from Soren to his wife without informing the Receiver.

The Court further finds that this violation was knowing. Mr. Brooksby knew long ago that he was obligated to turn over the required records and property to the Receiver. See discussion supra at 13–14. And Mr. Brooksby and Ms. Brooksby were both present when the Court explicitly said that it is a violation of the Receivership Order for Mr. Brooksby to give his money to his wife rather than to the Receiver. Doc. 588 at 9.

Mr. Brooksby proffers that he is no longer working. Doc. 572 at 151. For reasons which are obvious at this point, his testimony and unsworn assertions are generally not credible absent reliable corroboration from independent sources. The Court does not believe him. It is highly likely that he continues to find ways to bring in money, one way or another, or, perhaps, to access money he has squirreled away in the past.

Ms. Brooksby has provided the Receiver with Mr. Brooksby's 2023 W-2 from Soren along with some other Soren records. See, e.g., Doc. 576-199, Doc. 567-169 at 325–37 (showing Soren paid Mr. Brooksby by bank deposit into an account number ending in 1588 throughout 2023 and into 2024); Doc. 567-207 at 3, 6 (bank statement for that account showing a deposit from Soren in September 2024); see also Doc. 572 at 69. But these few records, provided only under threat of contempt, are hardly complete.

There is nothing to indicate that Mr. Brooksby has given payroll stubs or an equivalent to the Receiver, provided all bank records that clearly show where his money from Soren was deposited, or otherwise accounted to the Receiver for this income, all as required by the Receivership Order. Mr. Brooksby has not fully complied with this provision of the Receivership Order, and he is in contempt of court.

2. Mr. Brooksby's Tax Returns

The Receivership Order requires Mr. Brooksby to deliver all federal income tax returns for 2018 through 2023 and underlying documentation to the Receiver within five days of the entry of the order in March 2023. Doc. 399 at ¶ 12. As of August 30, 2024, the Receiver had not received Mr. Brooksby's 2023 tax return or the underlying documents for prior year tax returns. Doc. 555 at ¶ 4.

PAGE_12

November 2024, after the pending show cause order was entered, Doc. 560, Ms. Brooksby provided the Brooksbys' joint federal and state tax returns and some underlying documentation for 2018 through 2022, Doc. 567-169 at 71–144 (2018), 145–208 (2019), 213–44 (2020), 249–79 (2021), 285–312 (2022), all purportedly prepared by a CPA. See, e.g., id. at 288. This filing also included purported 2023 tax returns and some underlying documents, id. at 313–324; Doc. 567-168, but those returns are incomplete. In January 2025, Ms. Brooksby again provided purported 2023 tax returns and some additional underlying documents, Docs. 576-199 to 576-204; Docs. 576-219 to 576-221 (signed copies), with some changes from the 2023 returns she turned over in November.12

fn12. There is no evidence that the 2023 return was actually delivered to the IRS.

Two years ago, the Court ordered Mr. Brooksby to provide his tax returns and underlying documentation for 2018 through 2023. Doc. 399 at ¶ 12. He did not do so. He represented to the Court in April 2023 that he had "a staff of five accounting team" working on gathering information and that "Art White" had filed the tax returns for 2017 through 2022 that week. Doc. 414 at 11–12. Yet Mr. Brooksby still did not provide the underlying documentation for those tax returns to the Receiver. Only after the court issued a show cause order in September 2024 did he provide some of these documents through his wife. But the underlying documentation provided by Ms. Brooksby is spotty, and there is nothing to show that Mr. Brooksby has directed the "staff of five accounting team" or the tax preparer who supposedly prepared these returns to make all supporting documentation available to the Receiver. These records are particularly important to the Receiver in light of Mr. Brooksby's efforts to hide income received from Soren. See discussion supra at 24–25.

Mr. Brooksby has not fully complied with this provision of the Receivership Order, and he is in contempt of court.

VI. Remedy

Mr. Brooksby, the Trust, KFE, and Ms. Brooksby and Mr. King, as agents of KFE, are and have been in contempt for failing to deliver all records and surrender all assets to the Receiver in violation of paragraphs 9, 11, 15, 17, and 18 of the Receivership Order. Mr. Brooksby is also in contempt for failing to deliver records of his income from Soren to the Receiver and for failing to account to the Receiver for this income in violation of paragraphs 15 and 17 of the Receivership Order, and for failing to deliver the underlying documentation for his tax returns to the Receiver in violation of paragraph 12 of the Receivership Order.

The Receivership Order unequivocally requires the defendants to comply. The plaintiffs here are entitled to recover on the judgment entered against them based on a verdict by the jury. The defendants are not entitled to hide their assets behind a veil of self-created complexity and tangled webs of deception.

Finding an appropriate remedy is challenging. Mr. Brooksby has shown repeatedly that he will attempt to avoid the Receivership Order in any way possible. KFE, acting through Mr. Brooksby, Ms. Brooksby, and Mr. King, has repeatedly displayed a willingness to delay and obscure. Only when called to account do Mr. Brooksby, the Trust, and KFE make any effort to bring themselves into compliance. Mr. Brooksby provides little information himself, relying on his wife to meet his personal obligations.

Coercive orders will be imposed as to each. To purge their contempt, each must turn over all required assets and records to the Receiver. The Clerk will not accept voluminous exhibits, as the court docket is not the appropriate place to unload hundreds of exhibits that should be delivered to the Receiver.

A. Mr. Brooksby

PAGE_13

After considering numerous options, the Court concludes that as to Mr. Brooksby, incarceration is the only real option that has any possibility of forcing compliance. Court orders limiting Mr. Brooksby's activities and imposing other sanctions have had little effect. If Mr. Brooksby will not follow the clear rules laid out by the Receivership Order, there is little reason to think more detailed rules would be effective. The last time he was incarcerated for civil contempt, some progress was made. Therefore, the Court will order Mr. Brooksby taken into custody and held until he shows that he has fully and completely complied with all of his obligations under the Receivership Order.

B. KFE

1. Mr. Brooksby

For the same reasons just stated, coercive incarceration of Mr. Brooksby is appropriate until KFE complies.

2. Mr. King

As to Mr. King, the Court concludes that incarceration has become necessary. Mr. King has been involved from the get-go. He continues to take actions on behalf of receivership entities that are prohibited by the Receivership Order while at the same time blaming others and denying knowledge. He has not shown that he has taken any real steps to require, or even ask, others holding KFE records to turn those records over to the Receiver. His purported ignorance of details is not credible; he was, after all, a manager of the LLCs at the top of the Estates bid-rigging scheme, the receivership defendants Citadel Management LLC and Avirta LLC, in addition to managing KFE through its manager Citadel. Docs. 256-2, 256-3, 256-5.

Therefore, the Court will order Mr. King taken into custody and held until he shows that KFE has fully and completely complied with its obligations under the Receivership Order. In its discretion, the Court will stay this order for six business days, until April 1, 2025, to give Mr. King one last chance to bring himself into full compliance while out of custody.

3. Ms. Brooksby

As to Ms. Brooksby, the issue is a little more complicated. On the one hand, Ms. Brooksby has allowed her name to be used in Mr. Brooksby's business operations through KFE for many years, and she is complicit in Mr. Brooksby's ongoing efforts to hide financial assets from the Receiver. She only complies, and then partially, when threatened with contempt. On the other hand, she did eventually turn over many financial records and documents to the Receiver. After considering numerous options including coercive incarceration, the Court in its discretion concludes that the remedies most likely to coerce Ms. Brooksby's compliance are a coercive daily fine and a requirement to pay some of the attorneys' and Receiver's fees associated with these contempt proceedings.

"[C]ivil contempt sanctions are intended to coerce the contemnor into compliance with court orders or to compensate the complainant for losses sustained." Bradley v. Am. Household Inc., 378 F.3d 373, 378 (4th Cir. 2004) (cleaned up). One permissible coercive sanction is a "fine ... payable to the court ... when the defendant can avoid paying the fine simply by performing the affirmative act required by the court's order." Hicks ex rel. Feiock v. Feiock, 485 U.S. 624, 632 (1988); accord Bradley, 378 F.3d at 378. Such a fine often takes the form of a daily fine imposed until the contemnor complies. See Bagwell, 512 U.S. at 829 (discussing the civil contempt remedy of a "per diem fine imposed for each day a contemnor fails to comply with an affirmative court order"); see, e.g., Su v. S. Living for Seniors of Louis burg NC, LLC, No. 22-CV-178, 2023 WL 5814418, at *2 (E.D.N.C. Aug. 25, 2023) (imposing $500 per day fine until contempt is purged); GlaxoSmithKline, LLC v. Brooks, No. 22-CV-364, 2022 WL 1443735, at *11 (D. Md. May 6, 2022) (imposing $200 per day fine until contempt is purged).

PAGE_14

Ms. Brooksby appears to have money for paying KFE's fine. She testified that she has a substantial regular salary for part-time work, Doc. 572 at 116, 118, 124 ($6,000 a month, for an annual salary of $72,000), and that she is running a business to make money. Id. at 80. While she has also testified to some financial hardships, she has been able to support her family, pay a mortgage, and pay a lawyer. See, e.g., id. at 65–68, 94–95. She has found the money to pay for trips to Korea. Doc. 593. There is no reason that Ms. Brooksby cannot pay a relatively small amount of $25 per day (approximately $750 a month) until she gets serious about compliance. If she fails to pay the fine on a weekly basis until she has complied with the Receivership Order, the Court will consider other coercive options.

In addition to coercive daily fines, courts remedying civil contempt may "order[ ] the contemnor to reimburse the complainant for ... reasonable attorney's fees" related to the contempt proceeding. In re Gen. Motors, 61 F.3d at 259; see also De Simone v. VSL Pharms., Inc., 36 F.4th 518, 536 (4th Cir. 2022) (holding that attorney's fees are permissible compensatory contempt sanctions).

The plaintiffs' motion for contempt requests that plaintiffs be awarded "their attorneys' fees for bringing this motion and for preparing for and attending any hearings concerning this motion." Doc. 551 at 1. An attorney for the plaintiff was present at the court hearings related to compliance with the Receivership Order on April 11, 2023, April 21, 2023, July 6, 2023, November 12, 2024, and January 14, 2025, as was the Receiver. Minute Entries 04/11/2023, 04/21/2023, 07/06/2023, 11/12/2024, 01/14/2025. Some of these hearings lasted several hours, and all lasted at least one hour. See, e.g., Docs. 424, 572, 587, 588.

The Court will require Ms. Brooksby to partially reimburse the plaintiffs and the Receiver for the attorneys' fees incurred to attend these hearings. To avoid complicated and unnecessary supplemental proceedings over the amount of the fee, the Court will impose a partial fee, estimated conservatively, by requiring payment of one hour per hearing. Should Ms. Brooksby's contempt continue and upon motion by the plaintiff setting forth such fees incurred, the Court will consider requiring her to pay all such fees.

The Receiver's hourly rate is $520 per hour. Doc. 399 at ¶ 61. At one hour for five hearings, the total fee is $2,600, which Ms. Brooksby shall pay directly to the Receiver within five business days. The Receiver shall file a notice if Ms. Brooksby does not pay the Receiver within the time required, which the Court will treat as a supplemental motion for contempt.

While the Court did not easily locate evidence of record as to the hourly rates of plaintiffs' counsel, based on the Court's extensive experience in other complex matters involving attorneys with similar levels of experience, the Court conservatively estimates an hourly rate of $350. At one hour for five hearings, the total fee is $1,750, which Ms. Brooksby shall pay directly to the plaintiffs' counsel within five business days. Plaintiffs' counsel shall file a notice if Ms. Brooksby does not pay counsel within the time required, which the court will treat as a supplemental motion for contempt.

If Ms. Brooksby wishes to challenge the hourly rate used to calculate plaintiffs' counsel fee, she may do so by filing a timely motion with evidence of a more appropriate rate, to which plaintiffs' counsel may respond. The Court will then consider whether a lower or higher hourly rate is more appropriate. And, as mentioned, if the Receive or plaintiff's counsel wants to submit a motion requiring her to pay all their fees associated with KFE's contempt, they may do so.

VII. Other Matters

PAGE_15

There are indications that Mr. Brooksby, with the assistance of his wife and others, is violating the Receivership Order in other ways. It seems likely, for example, that Mr. Brooksby has not accounted for income he has received and assets he has obtained since the Receivership Order was entered, instead hiding those assets in other LLCs purportedly formed and run by his wife. He may even be funneling profits from his operations to his wife in the form of wages paid to her under cover of the shady accounting operation he says he has used for years.

Much of this information has come to light since the various show cause orders were entered. These potential violations are not the basis for the contempt findings herein or the remedies imposed herein. But all receivership defendants and their agents, as well as persons who are in active concert or participation with them, see Fed. R. Civ. P. 65(d)(2)(C), are subject to further proceedings, upon motion by the Receiver or the plaintiffs.

It is ORDERED that:

1. The plaintiffs' motion for contempt, Doc. 551, is GRANTED and defendant Craig Brooksby is in civil contempt for failing to comply with the Receivership Order. The plaintiffs' motion for civil contempt related to the permanent injunction is resolved by separate order.

2. Subject to further order of the Court, Craig Brooksby SHALL be imprisoned until such time as he purges himself of contempt as to his obligations under the Receivership Order.

3. Defendants GG Irrevocable Trust and King Family Enterprises, LLC are in civil contempt for failing to comply with the Receivership Order.

4. Subject to further order of the Court, Rex King SHALL be imprisoned until such time as KFE purges itself of contempt as to its obligations under the Receivership Order. This Order is STAYED for six business days, and Mr. King SHALL report to the Marshal's office at the Greensboro Courthouse on April 1, 2025, at 2 p.m.

5. Subject to further order of the Court, Sonja Brooksby SHALL pay a fine of $25 per day to the Clerk of Court beginning today and continuing until the KFE purges itself of contempt as to its obligations under the Receivership Order. For administrative ease, she may pay these fees on a weekly basis every Friday by noon, with the first payment due Friday, March 28, 2025. If Ms. Brooksby does not pay as ordered, the Clerk SHALL file on the docket a status report so indicating.

6. Sonja Brooksby SHALL pay the Receiver $2,600 within five business days. If Ms. Brooksby does not pay the Receiver within the time required, the Receiver SHALL file on the docket a status report so indicating, which the Court will treat as a supplemental motion for contempt.

7. Sonja Brooksby SHALL pay Plaintiffs' counsel $1,750 within five business days. If Ms. Brooksby does not pay counsel within the time required, Plaintiffs' counsel SHALL file on the docket a status report so indicating, which the Court will treat as a supplemental motion for contempt.

8. This matter is set for a compliance hearing on April 1, 2025, at 9:30 a.m.

9. The Clerk SHALL NOT accept for filing any submission by or on behalf of Craig Brooksby, Sonja Brooksby, Rex King, KFE, or the Trust that has more than three attachments, absent a court order allowing such filing.

This the 24th day of March, 2025.

Williams v. The Estates LLC, 2025 WL 900002 (M.D.N.C., March 24, 2025).

United States District Court, M.D. North Carolina.

BRIAN C. WILLIAMS, et al., Plaintiffs,

THE ESTATES LLC, et al., Defendants.

1:19-CV-1076

Filed 03/24/2025

MEMORANDUM OPINION AND ORDER

Catherine C. Eagles, Chief District Judge.

PAGE_1

The defendants ran a fraudulent bid-rigging scheme limiting bids on property in foreclosure, injuring the plaintiffs and others. A jury held them to account, and the Court entered a money judgment and permanent injunction. Among other things, defendant Craig Brooksby was prohibited from acting together or with any other person or entity to bid on. buy, or sell directly or indirectly any property obtained through a public real estate foreclosure auction anywhere in the United States for eight years.

For the entirety of this lawsuit, before and after judgment, Mr. Brooksby has ignored and violated court orders. He has twice been held in contempt and once was confined in the custody of the United States Marshal to compel compliance with orders related to a receivership. Despite this, he has yet again violated the permanent injunction by acting with others to buy foreclosed real property.

Faced with ongoing long-term willful violations of the permanent injunction, and on motion by the plaintiffs, the Court again finds Mr. Brooksby in civil contempt for violation of the permanent injunction. As a remedy to force compliance, the Court will expand and extend the permanent injunction and impose additional reporting requirements on Mr. Brooksby.1

fn1. Violations by Mr. Brooksby and others of the receivership orders will be dealt with by separate order.

The Court makes the following findings of fact by clear and convincing evidence and reaches the following conclusions of law.

I. Background and Procedural History

A. The Antitrust Case and Verdict

The plaintiffs filed this case against a number of defendants, including Mr. Brooksby and The Estates LLC, alleging a bid-rigging conspiracy in violation of the Sherman Act and asserting two other state law causes of action. Doc. 104. At the April 2022 trial, the jury returned a verdict for the plaintiffs. Doc. 235.

The Estates was a membership-based limited liability company founded and run by Mr. Brooksby that operated across multiple states, including North Carolina. Doc. 244 at 3. Estates members paid a monthly fee to access its website, where properties in foreclosure were listed. Id. at 3–4. Members submitted internal bids stating how much they would pay for a particular property, and Mr. Brooksby or other agents of the Estates would select one member to represent in bidding on the property at the public foreclosure auction. Id. at 4. Only one Estates member could use its services to bid on properties in foreclosure, and members agreed not to bid against one another. Id. at 4–5.

If an Estates member acquired property found through the Estates' database, he or she owed an acquisition fee. Id. at 5. Mr. Brooksby was also entitled to some of the profits obtained from selling property acquired using the Estates' services, id., although the exact arrangements for paying Mr. Brooksby were complicated and opaque. He and other defendants created numerous LLCs to conduct these real estate transactions, and Mr. Brooksby hid the distribution of these funds, fees, and profits through a myriad of LLCs. Doc. 364 at 4.

B. Judgment, Permanent Injunction, and Charging Order

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In early June 2022, consistent with the verdict, the Court entered a money judgment against the defendants. Doc. 245. The Court also imposed a permanent injunction. Doc. 246. Among other things, Mr. Brooksby and others are prohibited from "acting together ... or with any other persons or entities to buy or sell directly or indirectly any property obtained through a public real estate foreclosure auction anywhere in the United States for a period of eight years." Id. at ¶ 9. Mr. Brooksby and two other individual defendants appealed the judgment and injunction; the Fourth Circuit affirmed. Williams v. Brooksby, No. 22-1982, 2024 WL 4490636 (4th Cir. Oct. 15, 2024).

Shortly after the Court entered the judgment and permanent injunction, the plaintiffs moved for a charging order against the economic interests of Mr. Brooksby and other defendants. Doc. 247. The Court granted the motion in part. Doc. 292, and entered a charging order directing a number of LLCs to pay any funds owed to certain defendants toward the judgment instead. Doc. 293.2

C. Defendants' Defiance, Appointment of a Receiver, and Contempt Proceedings

In July 2022, a defendant subject to the permanent injunction informed the Court that Mr. Brooksby may have violated the injunction by selling a property obtained through a foreclosure sale. Doc. 277 at ¶¶ 9–10. After a status conference to review compliance, Minute Entry 09/09/2022, the Court required the defendants, including Mr. Brooksby, to file supplemental compliance declarations. Doc. 310 at ¶ 1. In early October 2022, the Court reminded the defendants that the permanent injunction remained in effect, Doc. 325 at 3, and warned Mr. Brooksby that violation of the permanent injunction is contempt of court. Doc. 326 at 3.

In September 2022, the plaintiffs asked the Court to appoint a receiver over the assets of Mr. Brooksby and other defendants. Doc. 316. In late October 2022, while that motion was pending, the plaintiffs filed a motion for contempt against Mr. Brooksby. Doc. 329. They contended that Mr. Brooksby had sold five properties in violation of the injunction, Doc. 330 at 3, and that he had violated the charging order in relation to one of those properties. Id. at 4–5. The Court directed Mr. Brooksby to show cause as to why he should not be held in civil contempt. Doc. 331.

In December 2022, the Court found by clear and convincing evidence that Mr. Brooksby had violated the permanent injunction by acting with others to sell real property bought at foreclosure auctions and held Mr. Brooksby in civil contempt. Doc. 364 at 12–13. The Court ordered Mr. Brooksby to produce the closing documents for the violative sales. Id. at 20.

By separate order, the Court appointed a receiver and directed him to take possession and control of all the assets of Mr. Brooksby, The Estates, LLC, Avirta LLC, GG Irrevocable Trust, and King Family Enterprises, LLC. Doc. 362 at 2; see also Doc. 399 at ¶ 2. The Court ordered those defendants to turn over all records and assets to the Receiver. Doc. 362 at 2–3; see also Doc. 399 at ¶¶ 9, 15, 17, 18.

In March 2023, the Court expanded the receivership order to include more LLCs after Mr. Brooksby continued to sell properties and evade court orders through various LLCs and because the receivership defendants continued to refuse to comply with court orders concerning the receivership. Doc. 399; see also Doc. 397 at 1.

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Also in March 2023, Mr. Brooksby and his attorneys were sanctioned for violating Rule 11 of the Federal Rules of Civil Procedure. Doc. 400. Soon thereafter, the remaining lawyer representing Mr. Brooksby was allowed to withdraw without objection. Doc. 403. Mr. Brooksby has since represented himself.

Over the next several weeks, the Court conducted hearings about the failure of Mr. Brooksby and others to comply with the receivership orders. Ultimately, in April 2023, the Court held Mr. Brooksby and other defendants under his control in civil contempt for failing and refusing to turn over records and assets to the Receiver in knowing violation of the receivership orders. Doc. 425 at 11–12, 14. To compel compliance, Mr. Brooksby was placed in the custody of the United States Marshal, pending compliance and further order from the Court. Minute Entry 04/11/2023; Doc. 425 at 19. The matter was held open as to other defendants. Doc. 425 at 16, 18.

At a hearing several days later, Mr. Brooksby showed he was in partial compliance, and the Court authorized the U.S. Marshal to release him. Minute Entry 04/21/2023; Doc. 440 at 2, 4. But the Court held that Mr. Brooksby and other defendants had "not yet purged themselves of civil contempt and deficiencies remain[ed]." Doc. 440 at 2. The Court, in its discretion, held the matter open to give the defendants "additional time to cooperate with the Receiver and bring themselves into full compliance with this Court's orders." Id. at 3. The Receiver has since filed quarterly reports, see Docs. 493, 533, 546, 547, 548, 566, 580, which have noted ongoing deficiencies since October 2023. Doc. 533 at 3; Doc. 546 at 3; Doc. 547 at 2; Doc. 548 at 2; Doc. 566 at 2; Doc. 580 at 2.

II. The Pending Motion for Contempt and Show Cause Order

In August 2024, the plaintiffs filed a motion asking the Court to hold Mr. Brooksby in civil contempt because of new violations of the permanent injunction. Doc. 551.3 The plaintiffs rely on pleadings and evidence submitted in a lawsuit filed by Soren LLC against Tomas Leal in Texas. See Docs. 552-1, 552-2. The Court established a schedule for written submissions, Doc. 554, and after review issued a show cause order giving Mr. Brooksby notice that he could be held in contempt for failing to comply with the permanent injunction. Doc. 560 at 5.

fn3. The plaintiffs contend that Mr. Brooksby has still not provided required information to the Receiver, Doc. 552 at 4, and that he has resumed violating the permanent injunction by acting with others to buy or sell property obtained through foreclosure through an entity called Soren LLC. Id. at 9–10. This order will address only the alleged violation of the permanent injunction. The alleged failure to comply with the receivership orders will be addressed in a separate order. See supra note 1.

The Court held a hearing on November 12, 2024. Minute Entry 11/12/2024. Mr. Brooksby appeared without representation and did not testify under oath. Doc. 572 at 1, 139, 143. Mr. Brooksby and others submitted additional evidence thereafter, see, e.g., Docs. 576, 577, 578, and the Court held another hearing on January 14, 2025. Minute Entry 01/14/2025.

III. Civil Contempt

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IV. Mr. Brooksby Is In Civil Contempt

The permanent injunction is a valid decree issued by this Court. Mr. Brooksby had actual knowledge of the injunction. See, e.g., Doc. 374 at 2–3 (noting Mr. Brooksby's presence at a November 2022 hearing at which the injunction was extensively discussed). The injunction benefitted the plaintiffs by preventing the same type of antitrust violations that harmed them.

The permanent injunction prohibits Mr. Brooksby and certain other defendants from "acting together, in any combination, or with any other persons or entities to buy or sell directly or indirectly any property obtained through a public real estate foreclosure auction." Doc. 246 at ¶ 9. Mr. Brooksby is in civil contempt for his violation of this provision in at least two ways, either of which independently supports the finding of contempt and the remedies imposed herein. First, he acted on behalf of Soren, LLC and with others, including David Ginn, to buy real property previously owned by Tomas Leal and obtained by a third party through a public real estate foreclosure auction. Second, and more generally, he has acted with Soren and others to buy real estate from other third parties who obtained the real property through a foreclosure sale.

Soren does business as Greenlight Property Group, LLC, Doc. 556-3 at ¶ 2; Doc. 556-7 at ¶ 2, and is part of Mr. Brooksby's operations in Texas. See Doc. 414 at 12 (testimony by Mr. Brooksby that Greenlight is "the company that we work with" in Texas). David Ginn, who says he is a manager of Soren, Doc. 556-3 at ¶ 2, had a close business relationship with Mr. Brooksby and has worked with and on behalf of the Estates in Texas.4 As the evidence at trial overwhelmingly showed, the Estates and its members, acting through various LLCs, were in the business of buying real property out of foreclosure and then selling it.5

fn4. Mr. Ginn's LinkedIn profile states that he worked with Craig Brooksby before deciding to "join the company" and become "the coordinator for The Estates" in Texas, Doc. 552-1 at 23, and a Reddit user, "theestatesllc," displays its name as David Ginn. Id. at 25.

fn5. There is no evidence that Soren does not buy homes in foreclosure. However, the Court need not determine whether that is so or whether Mr. Brooksby participated in such buying and selling, given the overwhelming evidence of other violations of the permanent injunction.

In 2023, after the entry of the permanent injunction, Mr. Brooksby spent substantial time in Texas acting on behalf of Soren; his 2023 W-2 from Soren showed a Texas address for him, Doc. 576-199, he was paid by Soren on commission, Doc. 572 at 69, and he earned at least $27,500 for his work with Soren in 2023. Doc. 576-199.

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As part of its operations, Soren contracts with individuals to attempt to "recover[ ]" their property in or after foreclosure. Doc. 552-2 at 2. This includes buying back real property sold to third parties in foreclosure. See discussion infra. A part of Mr. Brooksby's responsibilities at Soren is to work directly with homeowners to recover their property after its sale at foreclosure. Doc. 556-3 at ¶ 3; Doc. 556-7 at ¶ 4.

In late 2022, Tomas Leal lost his Texas home in foreclosure proceedings. See Doc. 556-3 at ¶ 7. He talked with agents of Soren about an "asset recovery agreement" wherein Soren would help him recover some of the assets he lost in the foreclosure in exchange for a share of those recovered proceeds. See Doc. 552-1 at 14–17. During those talks, an agent of Soren texted Mr. Leal in an effort to convince him to sign the agreement by quoting Mr. Brooksby as follows: "Craig said, 'If you sign as agreed, sign now.... Go get Niurka6 if he doesn't do it today.' " Id. at 18 (translated from Spanish).7

fn6. "Niurka" appears to be a reference to Niurka Mordouch, the person who sold Mr. Leal the real property at issue. See Doc. 552-1 at p. 1 ¶¶ 4–6.

fn7. Mr. Brooksby has not denied that he is the "Craig" referenced in this text.

Soon thereafter, in January 2023, Mr. Leal signed the asset recovery agreement with Soren. Id. at 14–17; Doc. 556-3 at ¶ 6.8 This asset recovery agreement is strikingly similar to agreements used by Somul Group, LLC, a receivership defendant controlled by Mr. Brooksby before entry of the receivership order. See Doc. 399 at ¶ 1; compare Doc. 552-1 at 14–17 (Soren agreement with Mr. Leal), with Docs. 576-33, 576-46, 576-56, 576-80, 576-98, 576-131, 576-152, 576-168, 576-169, 576-173 (Somul agreements).

fn8. Soren later sued Mr. Leal in Texas, and Mr. Leal countersued for fraud and other claims. See Doc. 552-1 at 1–10. While Mr. Brooksby challenges some of the facts alleged in Mr. Leal's pleadings, he has not challenged the authenticity of the contracts, text messages, or other documentary materials filed in that case which have now been submitted in this Court.

Mr. Leal retained Josue Dorleus as his attorney, Doc. 552-1 at 11–13,9 and hired Soren to "locate and recover ... assets ... which may belong to" him and to "attempt to collect the [a]ssets for [his] benefit." Id. at 14. The agreement, which referred to Soren as "Company," provided that:

In the event, Company acquires the Asset from the third-party buyer, then Client agrees that Company, shall have the sole discretion and exclusive right to sale [sic] the Asset to a third party subject to Company being paid the Compensation from the gross proceeds and the Company being reimbursed for the Costs for Assets paid by Company for the Matter.

Id. at 16. Mr. Brooksby procured Mr. Leal's assent to this agreement, which covered the real property Mr. Leal had recently lost in foreclosure and authorized Soren to acquire that property on behalf of Mr. Leal. See id. at 14, 16.

fn9. The signature line for Mr. Dorleus says that he would sign the agreement "For the Law Office of Steven W. Shaw." Doc, 552-1 at 13. Mr. Shaw was Mr. Brooksby's attorney in this case until he was removed by court order for repeated violations of the rules. See Doc. 363.

Mr. Ginn, acting for Soren, texted Mr. Leal on September 7, 2023, to confirm that Mr. Leal and Mr. Brooksby had "reached an agreement" to "drop[ ] [Mr. Leal's] pursuit of the house" and proceed only with collecting money. Doc. 552-2 at 34. An invoice for legal services provided in Mr. Leal's matter by "Greenlight Legal LLC," including Mr. Dorleus, Doc. 552-1 at 41–46, includes an entry for "[m]ultiple telephone conferences with bidder's counsel regarding purchasing the property back," id. at 41, and contains multiple other references to the "bidder." See id. at 42–46. As this evidence shows, Soren's efforts to recover Mr. Leal's house included efforts to buy the house back from the party that had purchased the house at a foreclosure auction. Soren's efforts were not limited to recovering excess funds Mr. Leal may have been owed.

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Mr. Brooksby was involved in Soren's efforts to buy Mr. Leal's house. Mr. Ginn's text, Doc. 552-2 at 34, so suggests, and the invoice for legal services, Doc. 552-1 at 41–46, explicitly mentions consultation with Mr. Brooksby three times. Id. at 45 ("Obtained status of discovery from Craig Brooksby – told that he is waiting to review discovery with Steven Shaw and will revert back"); id. ("Correspondence with Craig/Shaw Law"); id. at 46 ("Telephone conference with David Ginn, Craig Brooksby, Isabel [and] Dora regarding case strategy").

These facts show by clear and convincing evidence that Mr. Brooksby violated the permanent injunction in his work with Soren, both in his actions as to Mr. Leal and more generally.10 The injunction prohibits him from "acting ... with any other persons or entities to buy ... directly or indirectly any property obtained through a public real estate foreclosure auction." Doc. 246 at ¶ 9. First, Mr. Brooksby acted together with Soren in efforts to buy Mr. Leal's property that had been obtained through a public real estate foreclosure auction. This violates the injunction. Soren may not have succeeded in buying the property, but the injunction prohibits indirect acts to buy property, not just the act of purchase itself. See id. Second. Mr. Brooksby's actions on behalf of Soren were not limited to Mr. Leal; he was involved in communicating and working with other clients too. Soren's business includes "recovering" property lost in foreclosure such as buying back real property, and Mr. Brooksby worked with Soren in all parts of its business, including matters concerning foreclosed real property, in violation of the injunction.

fn10. Either of these violations independently supports a finding of civil contempt and the remedies imposed herein.

Mr. Brooksby says that Mr. Leal's case "was not about bidding and buying a property to renovate, flip, and resell." Doc. 556 at 6. But that is not all the injunction prohibits. Soren, acting through Mr. Brooksby and others, tried to buy the property from the foreclosure owner. The injunction prohibits Mr. Brooksby from acting with others to buy property obtained through a foreclosure auction, regardless of the purpose. See Doc. 246 at ¶ 9. And the injunction is broad: it prohibits direct and indirect acts. See id.

Mr. Brooksby alludes to paragraph 8 of the permanent injunction, id. at ¶ 8, which allows him to bid on real property in foreclosure when acting with a spouse or wholly-owned entity. See Doc. 572 at 81–82, 158. But that is a very narrow exception to the broad prohibition in paragraph 8. Mr. Brooksby has offered no evidence that Soren is wholly owned by himself and his wife. Even if it were, the injunction does not allow the conduct here, which involved acting with Mr. Ginn and others, not just Ms. Brooksby, to buy real property obtained through foreclosure.

Mr. Brooksby also points to testimony by Mr. Ginn that Mr. Brooksby has no management authority or ownership interest in Soren. Doc. 556-3 at ¶ 4; see also Doc. 572 at 143–44 (unsworn assertions by Mr. Brooksby that he does not own or control Soren). That is neither credible nor determinative.

First, the Court doubts this is true. Mr. Brooksby's credibility is weak to non-existent, and Mr. Ginn is one of Mr. Brooksby's cronies via the Estates, giving rise to questions about his credibility. Neither Mr. Ginn nor Mr. Brooksby has provided any corporate records for Soren establishing who its managers and members are or other documentation corroborating their testimony. Second, even if Mr. Brooksby is not a member or manager of Soren, the permanent injunction prohibits Mr. Brooksby from acting to buy foreclosed property, including as part of his employment for someone else. See Doc. 246 at ¶ 9. Third, even if that were not so, the record shows that Mr. Brooksby had extensive decisional authority in Soren's relationship with Mr. Leal. Mr. Ginn's September 7, 2023, text to Mr. Leal said, "Craig said he will be assisting you and directing us in this process personally." Doc. 552-2 at 34. That does not describe someone without authority; that describes someone in charge. Mr. Brooksby's authority even extended to the decision by Soren to file a lawsuit against Mr. Leal. See id. at 13 (text dated September 19, 2023, stating "Tomas refuses to sign the documents and Craig gave him until today or we are going to file a lawsuit against him"). Finally, all of the credible evidence establishes that Mr. Brooksby exercises substantial decision-making authority at Soren. He admits he gave directions to an attorney for Greenlight in connection with the receivership, Doc. 414 at 12–14, and the tone of the communications about the Leal property make it clear that Mr. Brooksby is running the show. As he has done for years, Mr. Brooksby continues to use LLCs and other people as fronts for his operations.11

fn11. The record is replete with examples. Without attempting anything approaching an exhaustive summary, here is some of the more recent evidence on this point: Soren uses some of the same people to handle accounting and recordkeeping that Mr. Brooksby and the Estates used. See, e.g., Doc. 572 at 87–88. 120. Rex King, another of Mr. Brooksby's confederates in Estates matters, see, e.g., Docs. 256-3, 256-5, also works for Soren, see Doc. 576-199 (partial Soren W-2 for Mr. King), and Mr. Brooksby's wife is "a manager or member" of Soren. See Doc. 424 at 39. While he worked in Texas for Soren, Mr. Brooksby had full access to a debit card for Somul Group LLC, another one of his companies now subject to the receivership order, see Doc. 399 at ¶ 1, and once Somul became a receivership defendant, Mr. Brooksby's wife let him use her personal debit card. Doc. 572 at 92.

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Mr. Brooksby knew he was violating the permanent injunction. These acts occurred in 2023, after he had already been found in contempt in 2022 for violating paragraph 9 of the permanent injunction by selling properties obtained through foreclosure, see Doc. 364 at 13, and the language prohibiting buying such properties is in the same sentence of the permanent injunction. The injunction is clear that acting with other people is prohibited, and the Court emphasized this point at a hearing in November 2022. Doc. 374 at 46 (Court stating in Mr. Brooksby's presence, "[H]e's acting on behalf of LLCs. He's acting on behalf of other people. That's clearly in violation of the injunction."). The fact that he purportedly told foreclosed homeowners about the injunction, Doc. 556-7 at ¶ 4, does not mean he can violate it, even if the Court assumed that was true.12

fn12. Mr. Ginn testified that "Mr. Brooksby's case had been disclosed to [Soren]'s client." Doc. 556-3 at ¶ 5. The document he provided as making this "disclosure" states that Soren and "the people working with it have been involved in ... bid rigging lawsuits ... [and] [t]hey have judgments against them and have judgments in their favor." Doc. 556-4 at ¶ 14. This purported disclosure document does not mention the injunction.

Mr. Brooksby's violation of the permanent injunction causes the harm that it was entered to prevent. The permanent injunction was designed to prevent Mr. Brooksby from dealing with other people about the buying and selling of foreclosed property, which the trial established was part of his bid-rigging scheme. Doc. 244 at 29. Here, the violation involved dealing with other people, including co-workers, lawyers, bidders, and homeowners about foreclosed real property. "Where a prior judgment includes a finding that the contemnor's conduct harmed the movant, that finding continues to bind the contemnor." De Simone v. VSL Pharms., Inc., 36 F.4th 518, 534 (4th Cir. 2022) (cleaned up) (quoting Rainbow Sch., 887 F.3d at 619). Mr. Brooksby is bound by the Court's entry of judgment against him for bid-rigging conduct that harmed the plaintiffs, Doc. 245, and by the Court's finding that paragraph 9 of the permanent injunction was necessary to lower the risk of such conduct reoccurring. See Doc. 244 at 28–30.

Mr. Brooksby is in contempt of court for violating the permanent injunction in his work with Soren.13

fn13. After the Court entered the show cause order, Doc. 560, other potential violations of the permanent injunction came to light and were the subject of extensive evidentiary submissions and testimony. All of the evidence to date suggests that Mr. Brooksby violated the permanent injunction in connection with his activities on behalf of Melton Guild LLC and other LLCs purportedly operated by his wife and that his wife has facilitated his violations. The Court has not relied on these acts to reach its conclusions herein and will deal with them separately, if and when there is a pending motion.

V. Remedy

Finding an appropriate remedy to force compliance is challenging. Mr. Brooksby has repeatedly shown that he will attempt to avoid the permanent injunction and other court orders in any way possible. Even after he was held in contempt for violating the permanent injunction in December 2022, Doc. 364 at 12–13, he continued to work with Soren and others in a business remarkably similar to the Estates, doing the same kind of work he did when he was involved in the Estates: negotiating deals about foreclosed real property. He continues to use other people and entities as fronts for his activities and tried to justify his acts here by pointing to paragraph 8 of the permanent injunction, which clearly does not apply.

He has repeatedly violated the permanent injunction. Only when called to account does Mr. Brooksby purportedly change his conduct. For example, when his actions in Texas related to Soren came to light, Mr. Brooksby began claiming that he no longer worked for Soren. Doc. 572 at 151.

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A financial sanction will be ineffective. Mr. Brooksby has no bank account, has paid nothing toward the judgment, uses his wife's bank account, and acts through a maze of LLCs. Incarceration to coerce compliance does not fit these violations, though it would prevent Mr. Brooksby from easily dealing with others about foreclosed real estate.

After considering these and numerous other options, the Court concludes that extending and expanding the permanent injunction and adding additional reporting requirements is an appropriate way to respond to Mr. Brooksby's repeated and ongoing contempt and to force compliance with the permanent injunction. Specifically, the Court will:

1. Extend the duration of paragraphs 8 and 9 of the permanent injunction from eight years to ten years. Mr. Brooksby has spent the last two years repeatedly violating the injunction, so this remedy is appropriate.

2. Expand the permanent injunction to prohibit Mr. Brooksby from:

a. working for or with any other person or entity who is involved in any way with the purchase or sale of real property, including any family members;

b. providing any services of any kind to or on behalf of persons or entities who have had their homes or other real property foreclosed or are in the foreclosure process; and

c. serving as a member, manager, or organizer of any limited liability company, as an officer or director of any corporation, or otherwise holding any organizational position with any entity of any kind, including but not limited to a partnership or limited liability partnership.

This expansion is necessary to prevent Mr. Brooksby from violating the original permanent injunction by subterfuge and by acting with and through other people and entities, as he has repeatedly done.

3. Expand paragraph 8 of the permanent injunction to remove the limited permission Mr. Brooksby had to bid on foreclosure property personally or with a spouse or a wholly owned entity, so that he is totally and completely prohibited from acting alone or with any other person or entity to bid directly or indirectly in any public real estate foreclosure auction anywhere in the United States. This expansion is necessary to prevent Mr. Brooksby from violating the original permanent injunction by subterfuge and by acting with and through other people and entities, including family members.

4. Require Mr. Brooksby to provide a declaration under oath to plaintiff's counsel identifying all income, wages, compensation, money, or other financial benefits he has received from any person or entity since June 2, 2022. This requirement is necessary to ensure that Mr. Brooksby has not violated the permanent injunction in other ways as he did with Soren.

5. Require Mr. Brooksby to regularly show compliance by providing monthly declarations under oath to plaintiff's counsel identifying any income, gifts, or financial support of any kind, monetary or in-kind, that he has received from any source whatsoever, including family members, and specifying what he has done with all such receipts. Every dollar given to him or spent on his behalf and every in-kind form of support must be reported. This requirement is necessary to ensure that Mr. Brooksby is not violating the permanent injunction by acting through and with the financial support of colleagues or family members, as he did with Soren, or otherwise hiding his income by turning it over to other people.

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It is ORDERED that the plaintiffs' motion for contempt, Doc. 551, is GRANTED and defendant Craig Brooksby in civil contempt for violating the permanent injunction. To the extent the plaintiffs seek a finding of contempt related to the receivership orders, that will be dealt with by separate order. A supplemental permanent injunction will be entered separately.

This the 24th day of March, 2025.