Gov't of Lao People's Democratic Republic v. Baldwin

THE GOVERNMENT OF THE LAO PEOPLE'S DEMOCRATIC REPUBLIC, Plaintiff, v. JOHN K. BALDWIN ET AL., Defendants.

Case No.: 2:20-cv-00195-CRK

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF IDAHO

July 20, 2021

MEMORANDUM DECISION AND ORDER RE: MOTION FOR PRELIMINARY INJUNCTION/TEMPORARY RESTRAINING ORDER

I. INTRODUCTION

On May 21, 2021, Plaintiff, the Government of the Lao People's Democratic Republic ("Plaintiff or "Lao PDR") moved for a temporary restraining order ("TRO") and preliminary injunction ("PI"). See [Pl.'s] Mot. for [TRO] & [PI], May 21, 2021, Dkt. 58 ("Pl.'s Mot. for TRO & PI"). Plaintiff sought to "halt the sale of the Hayden Lake Lodge and Parcels until the Court can consider the merits and enter judgment[,]" at which time Plaintiff would request the Court "appoint a receiver to oversee the sale, manage the sale, and dispose of the sale proceeds (up to the amount of the arbitral awards—$3.72 million)." See Memo. Supp. [Pl.'s Mot. for TRO & PI] at 3, May 21, 2021, Dkt. 58-1 ("Pl.'s Br."). Defendants oppose. See Defs.' Resp. to [Pl.'s Mot. for TRO & PI], July 13, 2021, Dkt. 96. ("Defs.' Resp."). Plaintiff has since submitted that the Court "need not restrain the sale of the Hayden Lake property"; rather, Plaintiff urges the Court to issue an order requiring that Defendants place a total of $3.7 million into a third-party escrow account. Pl.'s Reply Supp. [Pl.'s Mot. for TRO & PI] at 1, July 16, 2021, Dkt. 105 ("Pl.'s Reply Br."). For the following reasons, Plaintiff's motion is denied.

II. BACKGROUND

The Court assumes familiarity with the facts as set forth in the July 16, 2021 Amended Memorandum and Order granting Plaintiff's third motion to amend its complaint, see Amended Memo. & Order, July 16, 2021, Dkt. 103 ("Memo. & Order") and recounts those facts necessary for disposition of the pending motion for a TRO and PI. On August 6, 2019, arbitral tribunals of the International Centre for Settlement of Investment Disputes ("ICSID") and the Permanent Court of Arbitration ("PCA") issued to Lao PDR two cost awards (the "Final Awards") that dismissed bilateral investment treaty claims brought by Lao Holdings N.V. ("LHNV") and Sanum Investments Ltd. ("Sanum"), and, according to Plaintiff, awarded Lao PDR a sum total of $3,727,35.98¹ "in fees, expenses, and costs of the arbitrations." See Third Amended Compl. ¶¶ 2-3, 109-12, 119-21, Exs. C-D, July 16, 2021, Dkt. 108.²

Pursuant to the New York Convention,³ Lao PDR commenced this action seeking enforcement of the Final Awards against Defendants John K. Baldwin,Bridge Capital LLC, a Commonwealth of the Northern Mariana Islands ("CNMI") Limited Liability Company ("Bridge Capital"), Coleman, LLC, a CNMI LLC ("Coleman"), and Campbell Holdings, LLC, an Idaho LLC ("Campbell"), (collectively, "Defendants") as alter egos of non-party arbitral award debtors LHNV and Sanum. See id. ¶¶ 1-4, 6-13, 238-52 (Count I).⁴ Moreover, Plaintiff claims that Defendants are liable for having made voidable transfers under Idaho's Uniform Voidable Transactions Act ("UVTA") and CNMI common law. See id. ¶¶ 1-3, 5, 253-83 (Counts II and III).

Campbell is an Idaho LLC owned by Baldwin and Shawn A. Scott, managed by Baldwin's nephew Bradley J. Shaw, and headquartered in Kootenai County, Idaho. Kersti H. Kennedy ¶ 4, Exs. A-B, May 21, 2021, Dkts. 58-2-4 ("Kennedy Decl."). Dianne Shaw, Baldwin's sister, is Campbell's registered agent. See id. By December 5, 2019, around four and a half months after the arbitral awards were issued, Campbell would acquire four parcels of real property, collectively referred to as the "Hayden Lake Parcels,"⁵ in Kootenai County, Idaho. See id. ¶ 22, Ex. O. Based on Kootenai Property Tax Assessor web records, the Hayden Lake Parcels hold a combined value of around $7 million. See id. ¶¶ 19-20, Ex. K.

The Hayden Lake Parcels were previously owned by Lee's Bay LLC ("Lee's Bay") and Synergy Investments LLC ("Synergy"). See id. ¶¶ 8, 16, Exs. D, E, F.Maxwell Drever ("Drever"), a real estate investor, was a manager for Lee Bay's and Synergy, see id. ¶¶ 8, 16, Exs. L-N, F, and Lee Bay's initial filings list "The Hayden Lake Trust" as the sole member. See id. ¶ 8, Ex. E. News articles and county court filings suggest that, sometime around 2018, Drever began experiencing financial difficulties. See id. ¶ 14, Ex. G-H. On July 23, 2018, Lee Bay's and Synergy, borrowed $1,312,500 from Bridge CNMI, see id. ¶ 16, Ex. L, followed by another $400,000 in September, secured by a Deed of Trust on the Hayden Lake Parcels. Id. ¶ 16, Ex. M. On June 4, 2019, Bridge CNMI filed a UCC-1 Financing Statement with the State of Idaho's Secretary of State, listing, in relevant part, Synergy, Lee's Bay, Drever, and the Hayden Lake Trust as debtors. Id. ¶¶ 8, 17, Ex. F.

On July 18, 2019, Glacier Bank, also known as Mountain West Bank, initiated foreclosure proceedings on the Hayden Lake Parcels against Lee Bay's and Bridge CNMI, alleging, upon information and belief, that it held a mortgage lien interest that was senior to Bridge CNMI's interest in the Hayden Lake Parcels. Decl. of Taylor Bruun ¶¶ 4-5, Exs. A-B, June 8, 2021, Dkt. 71 ("Bruun Decl."). Baldwin and one non-party partner formed "Campbell Holdings, LLC" in the CNMI ("Campbell CNMI") and loaned Campbell CNMI money to purchase the Hayden Lake Parcels from Mountain West for $3,750,000—a reduced price that had been negotiated by Drever. See Decl. of Baldwin ¶¶ 12-14, Exs. H-I, June 9, 2021, Dkts. 70, 70-1-19 ("Baldwin's June 9^th Decl."). Baldwin states that he lent Campbell CNMI the funds for the sale with the understanding that the loan would be refinanced with a conventional loan, and that he would be promptly repaid. Id. ¶ 12. On August 13, 2019, Lee's Bay and Synergy and Campbell CNMI entered into a Purchase and SaleAgreement, transferring title of the Hayden Lake Parcels for $3,800,000.00 on the condition that the proceeds be used to satisfy Mountain West's lien. Id. ¶ 15, Ex. J (Section 3.1(q) of the Purchase and Sale Agreement). In December 2019, Baldwin formed a new LLC—Defendant Campbell—in the state of Idaho, which subsequently merged with Campbell CNMI, with Defendant Campbell being the surviving entity. Id. ¶ 17, Ex. L. As such, the Hayden Lake Parcels became the property of Defendant Campbell. See id. ¶ 17.

Baldwin and Shaw state that the merger was arranged in order to take advantage of an opportunity to obtain a loan from the Idaho Central Credit Union ("ICCU") that was only available to Idaho or Washington residents. See id. ¶¶ 16-17; Decl. of Bradley Shaw ¶¶ 5-6, Ex. B, June 8, 2021, Dkts. 73, 73-1-7 ("Shaw Decl."). The ICCU approved a loan in the amount of $5,520,000, and on December 19, 2019, recorded a Deed of Trust on the Hayden Lake Parcels. See Shaw Decl. ¶¶ 5-6, Ex. B.

Plaintiff alleges that a portion of the Hayden Lake Parcels underlying this dispute ("the Property") was placed on the market in September of 2019 for $12.9 million,⁶ see Third Amended Compl. ¶ 228, and later reduced to $5.5 million in May of 2021. Id. After the Drevers defaulted on a lease arrangement, Campbell beganmarketing the Property for sale. Baldwin's June 9^th Decl. ¶¶ 19-20, Exs. N-P; Shaw Decl. ¶¶ 9-10. Although a website showing the Property could be found at johnbaldwinproperty.com, Third Amended Compl. ¶ 229, Caleb Reed states that Baldwin's name was used as a placeholder for development purposes. See Decl. of Caleb Reed ¶¶ 4-6, June 8, 2021, Dkt. 72.

In its third amended complaint, Plaintiff alleges that its claim against Campbell LLC under the UVTA stems from the company taking title of the Hayden Lake Parcels, putting a lien on the Property, and removing the loan proceeds. Third Amended Compl. ¶ 260. Plaintiff believes that the loan proceeds were likely transferred out of state to Drever or to a Baldwin affiliate. Id. ¶ 267. On the same day that it filed its Third Motion to Amend, Plaintiff filed this motion for a TRO and PI,⁷ seeking an order enjoining the disposal, transfer, or encumbrance of certain property set forth in its filing. See Pl.'s Mot. for TRO & PI.⁸ Plaintiff has since adjusted its request, and now seeks an order from this Court requiring that thevarious Defendants put $3.7 million in escrow. See Pl.'s Reply Br. at 1. On July 19, 2021, the Court heard oral argument on the matter.

III. STANDARD OF REVIEW

To obtain a preliminary injunction, Plaintiff must establish that (1) it is likely to succeed on the merits, (2) it is likely to suffer irreparable harm without a preliminary injunction, (3) the balance of the equities favors Plaintiff, and (4) the injunction is in the public interest. See Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 20 (2008). However, each factor need not be given equal weight. Nken v. Holder, 556 U.S. 418, 434 (2009). Likelihood of success on the merits and irreparable harm are generally considered the most significant factors in evaluating a motion for injunctive relief. See id. at 434. The Court of Appeals for the Ninth Circuit supports a sliding scale approach, such that where there are "serious questions going to the merits" a preliminary injunction may issue so long as "a balance of hardships . . . tips sharply towards the plaintiff . . . [and] the plaintiff also shows that there is a likelihood of irreparable injury and that the injunction is in the public interest." All. for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1135 (9th Cir. 2011) ("Cottrell") (citation omitted).

IV. DISCUSSION

A. Likelihood of Success on the Merits

Plaintiff fails to demonstrate that it will likely prevail on the merits.⁹ Based on the filings thus far, even putting aside the open question of whether Baldwin isthe alter ego of the arbitral debtors, the Court cannot say that it is likely that the Plaintiff will be successful in establishing that Campbell is the alter ego of Baldwin, or that Campbell made a voidable transfer under the UVTA.

A transfer by a debtor is voidable if the "debtor made the transfer or...