Asset Lien Necessary for Injunction, Third Circuit Rules

Asset Lien Necessary for Injunction, Third Circuit Rules U.S. District Chief Judge Gregory M. Sleet

An injunction to freeze assets cannot be entered unless an equitable interest against them is imposed, a federal appellate court has ruled.

The U.S. Court of Appeals for the Third Circuit opinion affirmed last month’s U.S. District Court for the District of Delaware decision denying a sexual-abuse victim’s injunction to prevent her attacker from transferring his house in order to prevent her from collecting judgment if she prevails.

A three-judge panel issued the opinion in Karpov v. Karpov, affirming a ruling by U.S. District Chief Judge Gregory M. Sleet, and was composed of Judges Marjorie O. Rendell and Joseph A. Greenaway Jr. and Senior Judge Ruggero J. Aldisert.

Karolina Karpov filed a lawsuit against her adoptive parents, Vladimir and Svetlana Karpov, alleging that Vladimir Karpov sexually abused her while underage and that Svetlana Karpov beat her for complaining about the abuse. The initial complaint was filed in the U.S. District Court for the Southern District of New York, but later transferred to the District of Delaware. Karolina Karpov raises claims of child sexual abuse, intentional infliction of emotional distress, battery, assault, abduction, seduction and child exploitation, among other torts.

Vladimir Karpov was convicted of sexually abusing Karolina Karpov and is currently incarcerated in a Delaware prison, according to court documents.

Svetlana Karpov had placed real estate owned by the couple up for sale and asked the court to approve a transfer and deposit any profits into an escrow account to fund her defense, according to court documents. In December 2012, Karolina Karpov filed a stay of transfer of property asking the court to prevent Svetlana Karpov from transferring the real estate because it will be needed to fund any damages awarded to her.

Sleet rejected Karolina Karpov’s motion. He ruled under Grupo Mexicano de Desarrollo v. Alliance Bond Fund, a 1999 U.S. Supreme Court decision, that the district court cannot issue an injunction when no lien or equitable interest had been awarded.

“This court, however, has ‘no authority to issue a preliminary injunction preventing [the Karpovs] from disposing of [their] assets, pending adjudication of [plaintiff's] claims for money damages,’” Sleet said, citing Grupo Mexicano.

In the alternative, Sleet concluded that even if he did have the authority to issue a preliminary injunction, Karolina Karpov’s motion would fail because she did not demonstrate that she will suffer immediate irreparable injury if Svetlana Karpov sells the property.

“Establishing irreparable harm is not enough,” Sleet said. “A plaintiff has the burden of making a ‘clear showing of irreparable injury.’”

Karolina Karpov claimed that she did face irreparable injury because if Svetlana Karpov transfers her money and property, then nothing of value can be awarded upon any judgment in her favor.

Sleet ruled that it is not clear that Karolina Karpov will succeed with her claims against Svetlana Karpov, and even if she did, it is unclear that the real estate transaction would create immediate irreparable harm.
”Given Vladimir’s criminal prosecution, Karolina has demonstrated a likelihood of success on the merits as to the claims against him,” he said. “It is not so clear, with regard to her claims against Svetlana. In addition, Karolina has failed to establish that she has or will suffer an immediate ‘irreparable harm’ that would justify issuing a preliminary injunction stripping the Karpovs’ control of their assets. It seems that Karolina’s main intent is to prevent the Karpovs from transferring assets prior to a decision in this matter.”

Karolina Karpov appealed to the Third Circuit, but the appellate court affirmed Sleet’s decision. In a per curiam decision, the appellate court held that Sleet did not have the authority to issue an injunction because judgment had not been awarded in Karolina Karpov’s favor and she failed to meet the immediate irreparable harm standard necessary for an injunction.

The panel ruled that under Grupo Mexicano, freezing assets cannot be entered for damages if no lien or equitable interest is claimed and that Karolina Karpov could not prove that she would suffer immediate irreparable harm if the Karpovs transfer their assets.

“We agree with the district court that even assuming that it had the authority to grant the relief Karolina requested, she failed to satisfy the standard for issuance of a preliminary injunction,” the court said.

The court also affirmed Sleet’s ruling that Karolina Karpov was unable to meet the immediate irreparable injury standard necessary for the court to issue an injunction.

“Karolina has not provided any information to suggest that she will be placed in danger of immediate harm should the Karpovs transfer their property,” the court said. “Further, even if Karolina ultimately prevails on her claims against the Karpovs, she has not demonstrated that the Karpovs will be unable to satisfy the judgment from the sale of their home, or via other personal assets.”

Karolina Karpov and her adoptive parents appeared pro se in both the district court and Third Circuit case. 

Jeff Mordock can be contacted at 215-557-2485 or jmordock@alm.com. Follow him on Twitter @JeffMordockTLI.

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