United States District Court, D. Rhode Island
DARREN MALLOY HEKKING & SHAUN EGAN HEKKING, on behalf of himself and on behalf of C.H. and B.H., Plaintiffs,
CRAIG ANTONY HEKKING & MOLLY DURANT HEKKING, Defendants.
MEMORANDUM AND ORDER
MARY M. LISI, District Judge.
This case involves a bitter family dispute over a considerable inheritance. The eldest of three brothers, Craig Antony Hekking ("Craig H."), was appointed as executor of their late father's and stepmother's estates (the "Estate") and as the trustee of a separate trust established by the stepmother (the "Trust"). The plaintiffs, Darren Malloy Hekking ("Darren H.") and Shaun Egan Hekking ("Shaun H."), both on his own and his children's behalf (together with Darren and Shaun H., the "Plaintiffs"), have alleged that Craig H., with the assistance of his wife, Molly Durant Hekking ("Molly H., " together with Craig H., the "Defendants"), has converted the multi-million-dollar Estate-which was to be shared equally by his brothers and a portion of which was intended to benefit Craig's and Shaun's children-to his own benefit.
The matters before the Court are (1) Craig Hekking's objection (Dkt. No. 58) to the November 25, 2014 Report and Recommendation ("R&R") (Dkt. No. 50), in which Magistrate Judge Sullivan recommends that the previously imposed default against Craig H. be reinstated and that he be enjoined from serving as personal representative of the Estate and trustee of the Trust; (2) Craig H.'s motion for extension of time to complete discovery (Dkt. No. 51); (3) Craig H.'s motion to dismiss for lack of jurisdiction or, in the alternative, for joinder (Dkt. No. 53); (4) Craig H.'s motion to compel Rule 26(a) initial disclosures from all Plaintiffs; and (5) Molly H.'s motion to join indispensable parties and to dismiss for lack of subject matter jurisdiction (Dkt. No. 54).
I. First Default Imposed and Vacated
Default against the Defendants was first entered on a procedural basis only: they had failed to file a timely answer or other response to the June 27, 2014 complaint (the "Complaint"). Only after the Plaintiffs sought an entry of default and a preliminary injunction against the Defendants to preclude them from disposing or concealing property of the Estate, did the Defendants enter the litigation by seeking to vacate the default. The Defendants, who initially had engaged counsel to represent them jointly, asserted that they had never been served with the summons and Complaint (Dkt. No. 15-1). In support, they submitted a sworn affidavit by Craig H., in which he asserted that he and his wife had not been at their residence on the day that service had purportedly been effected and that they had been unaware of the lawsuit until they received Plaintiffs' related motions in the mail (Dkt. No. 15-2).
On September 17, 2014, following an evidentiary hearing in which Craig H.'s version of the events was conclusively disproved by a meticulous service processor and a highly qualified handwriting expert, this Court issued a lengthy Memorandum and Order (Dkt. No. 28). Although the Court determined that the default in this case had been willful, there was no evidence that established that the Defendants' delay had been done to gain an advantage or that the Plaintiffs had been unduly prejudiced that early in the litigation. Accordingly, the Court decided to vacate the default, but only with an express caveat: in the event it were to become apparent that the Defendants were using delay to gain a litigation or practical advantage, the Court would reconsider its ruling and reinstate the Default. Memorandum and Order at 18 (Dkt. No. 28). In light of Craig H.'s blatantly perjurious conduct at the evidentiary hearing, the Court also required the Defendants to reimburse the Plaintiffs for counsel fees and other expenses in the amount of $30, 777.93, such sums to be paid from the Defendants' personal assets, not the Estate. October 2, 2014 Order (Dkt. No. 34).
II. Discovery Proceedings and Court Orders
In the interim, following a pretrial conference on August 15, 2014, in which all parties were represented, the Court granted the Plaintiffs' request for expedited discovery. Text Order 08/15/14. On September 25, 2014, Magistrate Judge Sullivan issued an order (Dkt. No. 32) requiring the Defendants to produce, by September 27, 2014, a list of various discovery materials, including copies of their personal tax returns and bank statements from domestic and international accounts. All other materials requested in discovery were to be produced by October 5, 2014. The Plaintiffs were directed to advise the Court by October 7, 2014 whether the Defendants had complied with the Magistrate Judge's order.
On September 29, 2014, just prior to a scheduled hearing related to the Plaintiffs' motion for a preliminary injunction (Dkt. No. 11), the parties submitted a consent order (the "Consent Order") (Dkt. No. 33), pursuant to which the Defendants both agreed to refrain from using or converting any of the Estate property. Under the terms of the Consent Order, the Defendants were permitted to use up to $9, 000 per month for living expenses, provided that such sums originated from a source other than the Estate and that the Defendants submitted monthly operating statements showing their expenses from the preceding month. In addition, the Defendants (both of whom signed the Consent Order) agreed to identify all Estate property and Craig H. agreed to execute all necessary documents to release funds in a known bank account in Hamburg, Germany, for the benefit of the Plaintiffs.
On October 7, 2014, the Plaintiffs submitted a status report (Dkt. No. 36) detailing how the Defendants had failed to comply with most aspects of the September 29, 2014 Consent Order. The Plaintiffs also described how, through their own independent investigation and third party subpoenas, they had discovered extensive banking information that the Defendants were obligated, but had failed, to provide.
On November 3, 2014, the Plaintiffs filed a further memorandum in which they advised the Court of the Defendants' continuing violation of prior Court orders (Dkt. No. 41). Again, the Plaintiffs set forth in great detail how the Defendants had continued to dissipate Estate property. Specifically, the Plaintiffs noted that, based on the Plaintiffs' own discovery, the Defendants had spent or withdrawn $195, 000 since commencement of the litigation in July 2014 and had spent or withdrawn $406, 000 from the same bank since February 2014, when Craig H. was informed that the Plaintiffs were investigating his actions as personal representative of the Estate. The Plaintiffs also pointed out that they had yet to be reimbursed $30, 777 in attorney's fees and costs, payment of which had been due by October 10, 2014.
On November 12, 2014, Magistrate Judge Sullivan conducted a hearing on Plaintiffs' motion for expedited discovery and sanctions (Dkt. No. 25). Both Defendants were present and newly engaged counsel for Craig H. (who, just prior to the second day of his deposition, had begun to invoke his rights under the Fifth Amendment) advised the Court that Craig H. would agree to being removed as administrator/executor of the Estate. Transcript of 11/12/14 hearing at 10:2-14.
On November 25, 2014, the Magistrate Judge issued an R&R in which she recommended, inter alia, that this Court reinstate the default against Craig H.; that he be enjoined from acting as a personal representative of the Estate or trustee of the Trust; and that he be directed to execute all documents to remove himself from those positions (Dkt. No. 50).
Shortly after issuance of the R&R, the Defendants, now both represented by separate counsel, ...