Noble Prestige Ltd. v. Galle

83 F.4th 1366

NOBLE PRESTIGE LIMITED, Plaintiff-Appellee, v. Craig Thomas GALLE, individually, Paul Horn, individually, Galle Law Group, P.A.,a Florida professional association, Defendants-Appellants.

No. 22-11520

United States Court of Appeals, Eleventh Circuit

Filed: October 16, 2023

Appeal from the United States District Court for the Southern District of Florida, D.C. Docket No. 9:20-cv-82357-RS

James H. Wyman, Hinshaw & Culbertson, LLP, Coral Gables, FL, Rory Eric Jurman, Jenelle E. La Chuisa, Hinshaw & Culbertson, LLP, Fort Lauderdale, FL, Edward K. Lenci, Hinshaw & Culbertson, LLP, New York, NY, for Plaintiff-Appellee.

James McCann, Akerman, LLP, West Palm Beach, FL, for Defendants-Appellants.

Before William Pryor, Chief Judge, Luck^*, and Marcus, Circuit Judges.

Marcus, Circuit Judge:

Noble Prestige Limited lent Paul Thomas Horn $500,000 to pursue litigation against a telecommunications company. Under the terms of the loan, Horn agreed to repay Noble $5,000,000, or 5% of the recovery from the litigation, whichever turned out to be greater. While the litigation was pending, however, a conservatorship over Horn's assets was commenced in a probate court in Denver, Colorado (the "Denver Probate Court"), due to a longstanding mental illness that interferes with Horn's ability to make his own decisions or convey his wishes to others. Horn's longtime counsel, Craig Thomas Galle, was appointed conservator and authorized to resolve the litigation on Horn's behalf. The case settled, and the proceeds were placed in the conservatorship estate, subject to Galle's management and the ultimate custody and control of the Denver Probate Court.

Following settlement, the Denver Probate Court refused to authorize the payment of $5,000,000 to Noble because of concerns it had about the enforceability of the loan agreement. So, Noble decided to arbitrate its dispute with Horn in Hong Kong, ultimately obtaining arbitral awards that required Horn to pay Noble the debt owed under the loan agreement and Galle to pay Noble costs associated with the arbitration.

With its international arbitral awards in hand, Noble moved to confirm the awards under the New York Convention in the United States District Court for the Southern District of Florida. Noble also sought a temporary restraining order prohibiting Galle, Horn, and Galle's law firm, Galle Law Group ("GLG"), from transferring, using, dissipating, or otherwise encumbering funds up to the amount owed to Noble under the arbitral awards. Galle and GLG (together, "Respondents") opposed Noble's request and moved to dismiss the action. The district court granted Noble's request, entering what it termed a "temporary restraining order" that prohibited Galle from dissipating or transferring $10,000,000 "notwithstanding any order(s) entered by the [Denver] Probate Court." The district court also entered an order granting Respondents' motion to dismiss in part and denying it in part. Now, Respondents appeal both orders.

After careful review and with the benefit of oral argument, we dismiss in part and vacate and remand in part. We do not have appellate jurisdiction to review the partial denial of the motion to dismiss. But we do have jurisdiction over the "temporary restraining order" because it was actually a preliminary injunction. We hold, however, that the injunction was improperly entered, and therefore vacate that order and remand the matter to the district court for further proceedings consistent with this opinion.

I.

A.

The dispute giving rise to this litigation dates back to 2011, when Noble agreed to a Loan Facility Agreement ("Facility Agreement") with Horn to fund a dispute in which he was involved with AT&T. Noble agreed to loan Horn $500,000, and, in exchange, Horn agreed to repay Noble $5,000,000 or 5% of Horn's eventual recovery (sometimes referred to by the parties as Horn's "Appreciated Value Interest"), whichever turned out to be greater.¹ The Facility Agreement dictated that the parties would resolve any dispute arising out of the Agreement through arbitration in Hong Kong.

To secure repayment of its loan, Noble also obtained "a security interest (lien) in the sums paid by the ATT Parties to Horn on account of the Appreciated Value Interest" by entering into a "Security Agreement" with Horn. The Security Agreement limited the amount of the lien to "those portion[s] of the funds that equal the sums due Noble under the [Facility] Agreement."

Noble disbursed the loan principal to Horn between December 2011 and February 2014. However, AT&T and Horn were unable to resolve their dispute informally so, in 2014, Horn sued AT&T in a Colorado state court (the "AT&T litigation").

B.

Horn suffers from a mental illness known as Functional Neurological Deficit, also commonly referred to as Conversion Disorder, which causes various neurological impairments in those afflicted. Because of the impact this illness has on Horn's ability to make his own decisions, in 2017, while the AT&T litigation was pending, a conservatorship proceeding was instituted in the Denver Probate Court (the "Conservatorship") to ensure that any proceeds owed to Horn from the AT&T litigation would not be wasted or lost.

The Colorado Probate Code authorizes the State's probate courts to institute a conservatorship to manage the estate of an adult if, after notice and hearing, the probate court determines (1) by clear and convincing evidence that "the individual is unable to manage property and business affairs because the individual is unable to effectively receive or evaluate information or both or to make or communicate decisions . . . or because the individual is missing, detained, or unable to return to the United States," and (2) by a preponderance of the evidence, that "the individual has property that will be wasted or dissipated unless management is provided . . . ." Colo. Rev. Stat. § 15-14-401(1)(b) (2023). Based on expert opinion reports authored by Horn's psychiatrist and neurologist, as well as testimony provided by a clinical psychologist at an evidentiary hearing, the Denver Probate Court concluded that Horn was "incapable of making decisions concerning his lawsuit," "incapable of communicating, giving input or direction, or responding clearly with his Counsel and other professionals assisting him," and "lacks the ability to make simple decisions." Because "substantial assets belonging to Mr. Horn [would] be wasted, if not lost," the Probate Court entered an order appointing Galle as "Special Conservator" to "make any and all decisions concerning" the AT&T litigation. See Colo. Rev. Stat. § 15-14-412(3)(a) (2023). The Probate Court also appointed a guardian ad litem, James Britt, to represent and protect the best interests of Horn and report to the Probate Court as necessary.

Following his appointment as Special Conservator, Galle agreed to settle the AT&T litigation on Horn's behalf for $57,500,000, and the Denver Probate Court approved the settlement on August 23, 2017. The settlement proceeds (the "AT&T settlement funds") were paid into Horn's estate, and placed in accounts managed by Galle in his capacity as Special Conservator, subject to the ultimate control of the Denver Probate Court. As of September 2021, the Conservatorship estate contained funds exceeding $30,000,000.

Around two months after the AT&T litigation settled, in November 2017, Noble sought payment of the $5,000,000 it claimed it was owed under the Facility Agreement. The Denver Probate Court had authorized Galle, as Special Conservator, to pay certain expenditures and debts of Horn's using the AT&T settlement funds, but expressly denied him permission to pay Noble because of questions it had regarding the Facility Agreement's enforceability (given Horn's mental state) and the potentially "usurious" nature of the loan (inasmuch as that payment would net Noble $4,500,000 on a $500,000 loan). Britt, the guardian ad litem, offered to pay Noble $2 million to resolve its claim against Horn's estate, but Noble rejected this offer. Instead, Noble filed for arbitration against Horn in the Hong Kong International Arbitration Centre ("HKIAC"), under the terms of the Facility Agreement, seeking to collect on the debt.

Once Galle learned of the arbitration in January 2018, he sought, and the Denver Probate Court granted him, specific authorization to represent Horn's interests in the arbitration and to hire local Hong Kong counsel. Then, on March 21, 2018, the Denver Probate Court issued an order (the "Conservatorship Order") terminating all of Horn's pre-existing financial powers of attorney and broadening the scope of Galle's authority to that of a general Conservator -- tasking him with managing Horn's estate in Horn's best interest and empowering him to take a variety of different actions on behalf of the estate under Colorado law. See Colo. Rev. Stat. §§ 15-10-201(9) (2023), 15-14-411 (2023), 15-14-425 (2023). The Probate Court reiterated its finding that Horn was "unable to manage property and business affairs because of an inability to effectively receive or evaluate information or both or to make or communicate decisions." The Probate Court further found that Horn was "missing, detained, or unable to return to the United States." According to an affidavit submitted by Galle, Horn has not resided in the United States since at least 1996 and was last known to have resided in Thailand.

C.

Having obtained authorization from the Denver Probate Court to represent Horn's interests in the HKIAC arbitration, Galle made an appearance before the arbitral tribunal and, through local counsel, filed an answer on Horn's behalf. The tribunal (the "HKIAC Tribunal") concluded, however, that the orders of the Denver Probate Court authorizing Galle to represent Horn in the arbitration were insufficient to convey that authority as a matter of Hong Kong Law, and, on March 29, 2019, issued an "Interim Award" prohibiting Galle from further participation in the...