The Omaha Indemnity Co. And the Mutual of Omaha Insurance Co. v. James R. Wining, Ram Syndicate, Inc. Program Administrative Service, Inc. Patrician Realty, Inc. William Alexander Reinsurance Management Inc. Laramie Insurance Company, a Wyoming Insurance Company

Citations: 949 F.2d 235; 1991 U.S. App. LEXIS 26530Docket: 90-2256

Court: Court of Appeals for the Eighth Circuit; November 7, 1991; Federal Appellate Court

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

James R. Wining appeals interlocutory orders from the United States Court of Appeals, Eighth Circuit, which enjoined him from transferring assets without court approval and appointed a receiver to reverse a transaction violating a prior injunction. The court affirmed these orders, deeming them within the district court's equitable discretion. Wining, as president of Royal American Managers (RAM), was involved in a managing general agency agreement with Omaha Indemnity Company, which alleged that Wining and others acted negligently, causing significant underwriting losses.

After Omaha Indemnity filed its complaint, it sought a preliminary injunction against RAM and Wining, which the defendants did not contest, leading to a stipulation that prohibited them from transferring assets related to Omaha Indemnity's business without court direction. This stipulation was approved by the district court in April 1986. 

The case was later stayed for arbitration at the defendants' request, but all parties were required to comply with the stipulation. In September 1987, Wining directed a reinsurance company to rescind its relationship with Omaha Indemnity and transfer approximately $31 million in assets to Laramie Insurance Company, a new entity. Omaha Indemnity contended this transfer violated the April stipulation and hindered its ability to recover losses, while the defendants claimed the transfer was permissible under their interpretation of the stipulation.

In November 1988, Omaha Indemnity filed a motion to hold defendants in contempt or to seek further injunctive relief, claiming that the Fielding/Laramie asset transfer breached a stipulated injunction and a stay order due to Fielding's assets being related to its reinsurance liabilities. The defendants contended that the transfer did not breach any orders because Fielding had unilaterally rescinded its reinsurance obligations, thus lacking any related assets. A district court hearing on July 6, 1989, led to a February 9, 1990 order, which found the transfer violated the injunction and mandated the restoration of assets to Fielding.

Subsequently, a Wyoming state court hearing on February 14, 1990, resulted in the appointment of a receiver for the insolvent Laramie, with defendant William A. Schonacher consenting without disclosing the district court's order. The receiver later deemed the district court's order invalid. In response to this defiance, the district court ordered Wining, Schonacher, RAM, and others to show cause for potential contempt. Following a July 16, 1990 evidentiary hearing, the court issued three orders: holding Wining and others in contempt, restraining asset transfers without court approval, and appointing a receiver for Fielding to reverse the asset transfer, while awarding Omaha Indemnity its attorneys' fees.

Wining appealed, challenging the existence and violation of a valid injunction, primarily contesting the contempt ruling. However, the court noted limitations on its jurisdiction to review interlocutory orders, asserting that civil contempt findings are not subject to appeal as established in prior cases. Thus, the contempt issues raised by Wining were deemed beyond the current jurisdiction for review.

An interlocutory civil contempt order can be appealed under 28 U.S.C. 1292(a)(1) if it functions as an independent preliminary injunction by altering the legal relationship among parties. In this case, the sanctions against Wining, which involve restraining his expenditures and appointing a receiver, are deemed injunctive and modify the initial preliminary injunction's terms. The potential serious consequences of these sanctions warrant immediate appeal, despite the contempt determination not being separately appealable at this stage.

The appellate review of the modification of a preliminary injunction adheres to an abuse of discretion standard rather than a strict standard of changed circumstances. The district court found that Wining's actions violated the stipulated injunction and that he knowingly evaded it. Notably, his involvement in placing Laramie into receivership without disclosing the court's reversal order exacerbated the situation.

Given these findings, the district court's decision to strengthen the injunction was justified. The order preventing Wining from transferring assets was necessary due to his complex business structure and previous attempts to evade compliance. The court emphasized the need for a comprehensive injunction to ensure compliance and restore confidence in the enforcement of its orders, reflecting a clear intent to prevent further disobedience.

In 1986, the court communicated to the defendants the need to maintain the status quo based on their good faith. By 1990, this expectation shifted to a more proactive stance, with the court emphasizing its intent to uphold the status quo while relying less on the defendants' good faith. The district court's appointment of a receiver was justified, as the defendants were unable and unwilling to reverse the prior transfer of assets as ordered. When standard equitable remedies are insufficient, a court may resort to less common remedies like receivership, particularly to support an injunction.

The court concluded that it did not abuse its discretion in granting additional relief, noting that the equities favored Omaha Indemnity in July 1990. The orders to prevent Wining from asset transfers and to appoint a receiver adhered to procedural rules, providing clear, specific guidance on the acts to be restrained. Additionally, the arbitration panel had ruled in May 1989 that RAM owed Omaha Indemnity $225 million, and the district court subsequently confirmed a judgment against Wining for $132.3 million, although these later rulings were not contested in the appeal.

The minutes from a board meeting indicated a cautious analysis of asset transfers in light of potential objections from Omaha Indemnity, but the Board determined that the proposed transfer did not violate any orders. Furthermore, the Wyoming Commissioner of Insurance sought to liquidate Laramie under a consent statute. Omaha Indemnity had sought contempt sanctions or further preliminary injunctive relief, and the court found Wining's argument regarding the nature of the injunction to be nearly frivolous. The excerpt mentions several legal precedents to support these conclusions.