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UMB Bank, N.A. v. City of Central Falls

United States District Court, D. Rhode Island

April 26, 2019

UMB BANK, N.A., as Trustee, Plaintiff,
v.
CITY OF CENTRAL FALLS; JAMES A. DIOSSA, MAYOR OF THE CITY OF CENTRAL FALLS; MARIA RIVERA, CITY COUNCILOR; JONATHAN ACOSTA, CITY COUNCILOR; HUGO FIGUEROA, CITY COUNCILOR; FRANKLIN SOLANO, CITY COUNCILOR; JESSICA VEGA, CITY COUNCILOR, CENTRAL FALLS DETENTION FACILITY CORPORATION; WILDER ARBOLEDA, CORPORATION DIRECTOR; GARY BERDUGO, CORPORATION DIRECTOR; JOSEPH MOLINA FLYNN, CORPORATION DIRECTOR; and HERMAN YIP, CORPORATION DIRECTOR, Defendants.

          ORDER GRANTING PRELIMINARY INJUNCTION AND APPOINTMENT OF BOARD MONITOR PURSUANT TO FEDERAL RULE OF CIVIL PROCEDURE 65

          WILLIAM E. SMITH CHIEF JUDGE

         On April 10, 2019, UMB Bank, N.A., (the “Trustee”), as indenture trustee, filed its Verified Petition for Appointment of Receiver and Complaint (the “Verified Petition”[1]) against the Central Falls Detention Facility Corporation (the “Corporation”), the City of Central Falls (the “City”), Mayor James A. Diossa (the “Mayor”), City Councilors Maria Rivera, Jonathan Acosta, Hugo Figueroa, Franklin Solano, and Jessica Vega (collectively, the “City Council”), and the Board of Directors for the Corporation, Wilder Arboleda, Gary Berdugo, Joseph Molina Flynn, and Herman Yip (collectively, the “Board of Directors”), for violations of statutory law, common law, and contract, and for declaratory relief, along with its Motion to Appoint a Receiver and for Preliminary Injunction Pursuant to Federal Rule of Civil Procedure 65 (the “Motion”).

         Upon due consideration of the Verified Petition, the Motion, and the terms set forth herein, it appearing that sufficient notice has been given to all necessary parties, that this Court has jurisdiction with respect to the matters set forth in the Verified Petition, the Motion, and this Order (the “Order”), and that this is a proper case for entry of a preliminary injunction and related relief, the Court finds that the Trustee's showing is sufficient, and considering the interests of both the Trustee and the Corporation, the entry of a preliminary injunction is necessary and appropriate as set forth herein, and is consistent with the terms set forth in this Court's Order Appointing Special Master, entered today.

         IT IS ORDERED THAT:

         1. The Trustee's request for entry of a preliminary injunction is GRANTED as provided herein.

         2. This litigation between and among the parties hereto is stayed until July 24, 2019, (the “Termination Date”). The Court shall review the status of the litigation at its status conference on July 11, 2019, at 10:00 AM.

         3. The Board of Directors of the Corporation is directed on or before April 29, 2019, to:

A. Rescind: (i) the April 5, 2019, vote of the Board of Directors, requiring: (a) suspending the January 9, 2019, Modification of Intergovernmental Agreement (the “ICE Addendum”), (b) the Warden to arrange for the ICE detainees to be removed from the Wyatt prior to April 12, 2019, and (c) the Warden and Corporation's legal counsel to draft rules and regulations in accordance with RI Gen. Laws § 54-45-6; and (ii) the April 14, 2019, vote of the Board of Directors staying for 30 days the aforesaid April 5, 2019, vote suspending the ICE Addendum;
B. Ratify the ICE Addendum in accordance with its terms and conditions set forth therein; and
C. Direct the Warden to provide immediate notice to ICE that the Corporation has rescinded its suspension of the ICE Addendum.

         It is the intent of the Parties that the Warden will continue to manage the day-to-day operations of the Corporation and perform the Corporation's contractual obligations under the USMS Contract, the ICE Addendum, and all other contracts relating to the detention of persons at the Wyatt in accordance with contractual terms and under applicable law.

         4. The Board of Directors of the Corporation is directed to, on or before May 14, 2019, take action to unseal such portions of the April 24, 2019, Board meeting minutes that reflect the votes and actions set forth in Paragraph 3(A), (B), and (C) above.

         5. Effective as of April 24, 2019, and continuing through and including the Termination Date, the Court appoints Mr. Peter Argeropulos to act as Board Monitor, subject to the timely filing of any objection by a party to this litigation challenging Mr. Argeropulos's qualifications on or before April 29, 2019. The Board of Directors shall advise of and contemporaneously provide the Board Monitor with copies of all material communications to/from the Board of Directors to the extent they may impact the assets of the Corporation, the security of the Bonds, and/or the revenue stream of the Corporation with any necessary redactions to the extent such communications are subject to the attorney-client privilege (collectively “Impacting Activities”). Until the occurrence of the Termination Date, the Board Monitor is authorized to:

A. Participate in the Board of Directors' activities, including Board activities in executive session (but excluding any attorney-client privileged communications), and to take whatever actions are ...

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