United States District Court, D. Idaho
R. AARON SEEHAWER, as Trustee of the B.A. FISCHER SALES, INC. TRUSTEED CROSS-PURCHASE AGREEMENT; and R. AARON SEEHAWER as Trustee of the TBM, INC. TRUSTEED CROSS-PURCHASE AGREEMENT, Plaintiffs,
KATHY KEHOE, as Trustee of the SICKNESS, ACCIDENT & DISABILITY INDEMNITY TRUST 2005; and KATHY KEHOE, as Trustee of the GRIST MILL TRUST WELFARE BENEFIT PLAN, Defendants.
MEMORANDUM DECISION AND ORDER
LYNN WINMILL, CHIEF JUDGE UNITED STATES DISTRICT COURT
before the Court are Seehawer's Motion to Dissolve
Preliminary Injunction Order (Dkt. 65) and Kehoe's Motion
to Reconsider Preliminary Injunction Order (Dkt. 45). For the
reasons set forth below, the Court will grant the Motion to
Dissolve and deny as moot the Motion for Reconsideration.
filed his Complaint in this case on February 24, 2016 (Dkt.
1), asserting claims for declaratory judgment, breach of
contract, and breach of fiduciary duty. The dispute arises
from Grist Mill's failure to pay proceeds of certain life
insurance policies held in trust for the benefit of Seehawer.
Those insurance proceeds are also the subject of an
Interpleader action pending in the United States District
Court for the Southern District of New York
(“S.D.N.Y.”), styled Penn Mutual Life
Insurance Company v. Kathy Kehoe, as Trustee of the Sickness,
Accident & Disability Indemnity Trust 2005; Kathy Kehoe,
as Trustee of the Grist Mill Trust Dated 10-1-03; and
Universitas Education LLC, Case No. 15-CV-01111,
consolidated with Life Insurance Company of the Southwest
v. Kathy Kehoe, as Trustee of the Grist Mill Trust Dated
October 1, 2003; and Universitas Education LLC, Case No.
15-CV-04594-AJN (the “Interpleader”).
parties agreed to stay this case pending the S.D.N.Y.'s
ruling as to the ownership of the insurance proceeds.
See Dkts. 36, 37. During the pendency of the stay,
however, Grist Mill and Universitas Education, LLC entered
into a settlement agreement in the Interpleader action under
which the funds, to which Seehawer claims an interest as
trustee, would be pledged as collateral to secure Grist
Mill's own obligations to Universitas. See Second
Mot. for Prelim. Inj. at 2-3, Dkt. 38-1. The insurance
proceeds would then be disbursed to Seehawer in installments
as Grist Mill made payments to Universitas. Id.
objected to the terms of the settlement agreement but was not
then a party to the interpleader action. To preserve its
interests, Seehawer filed a Motion for Preliminary Injunction
in this case, seeking to enjoin Grist Mill from offering the
insurance proceeds as collateral or further effecting the
settlement in the Interpleader action. Id. On June
29, 2016, this Court granted Seehawer's Motion for
Preliminary Injunction. See Preliminary Injunction
Order, Dkt. 42. Grist Mill filed a Motion to Reconsider
the Preliminary Injunction Order which remains pending. Dkt.
thereafter sought and was granted leave to intervene in the
Interpleader action. On August 17, 2016, Universitas filed a
motion in the Interpleader action to enforce the settlement
agreement with Grist Mill. Seehawer opposed the motion on the
grounds that it has a superior right to the insurance
proceeds and that Kehoe, as trustee of Grist Mill, lacked the
authority pledge the funds as collateral under the settlement
March 21, 2017, Judge Nathan of the Southern District of New
York ruled that the Settlement Agreement between Universitas
and Grist Mill is enforceable. See SDNY Memorandum and
Order, Dkt. 60-1. In light of that order, Seehawer has
made the strategic choice to obtain what monies it can
pursuant to the terms of the Settlement Agreement. Grist Mill
argues that this Court's Preliminary Injunction Order
inhibits the release of any funds to Seehawer under the
Settlement Agreement. Accordingly, on April 4, 2017, Seehawer
filed a Motion to Dissolve the Preliminary Injunction Order.
Dkt. 65. Grist Mill does not oppose the motion. Dkt. 66.
district judge always has power to modify or to overturn an
interlocutory order or decision while it remains
interlocutory.” Credit Suisse First Bos. Corp. v.
Grunwald, 400 F.3d 1119, 1123 (9th Cir. 2005) (quotation
marks omitted). Thus, absent an appeal, a district Court has
“wide discretion” to dissolve or modify a
preliminary injunction. Sys. Fed'n No. 91 v.
Wright, 364 U.S. 642, 647-48 (1961). “[S]ound
judicial discretion may call for modification of the terms of
an injunction decree if the circumstances, whether of law or
fact, obtained at the time of its issuance have changed, or
new ones have arisen.” Mariscal-Sandoval v.
Ashcroft, 370 F.3d 851, 859 (9th Cir. 2004) (quoting
Wright, 364 U.S. at 647-48). “A party seeking
modification or dissolution of an injunction bears the burden
of establishing that a significant change in facts or law
warrants revision or dissolution of the injunction.”
Sharp v. Weston, 233 F.3d 1166, 1170 (9th Cir.
case, Seehawer contends that there has been a significant
change in circumstances due to Judge Nathan's recent
ruling that the Settlement Agreement between Universitas and
Grist Mill is enforceable. This Court issued its Preliminary
Injunction out of concern that a settlement would subordinate
Seehawer's interest in the insurance proceeds, violate
Grist Mill's fiduciary duties, and irreparably harm
Seehawer's interest in the funds. Under the present
circumstances, however, Seehawer asserts that its interests
will be better protected by obtaining what monies it can
under the terms of the Settlement Agreement. The Preliminary
Injunction has prevented Seehawer from obtaining such ...