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Fidelity National Financial, Inc. v. Friedman

June 17, 2010

FIDELITY NATIONAL FINANCIAL, INC., A DELAWARE CORPORATION, AND FIDELITY EXPRESS NETWORK, INC., A CALIFORNIA CORPORATION, PLAINTIFFS,
v.
COLIN H. FRIEDMAN, INDIVIDUALLY AND AS TRUSTEE OF THE FRIEDMAN FAMILY TRUST UDT, DATED JULY 23, 1987; HEDY KRAMER FRIEDMAN, INDIVIDUALLY AND AS TRUSTEE OF THE FRIEDMAN FAMILY TRUST UDT, DATED JULY 23, 1987; FARID MESHKATAI, AN INDIVIDUAL; ANITA KRAMER MESHKATAI, INDIVIDUALLY AND AS TRUSTEE OF THE ANITA KRAMER LIVING TRUST, DATED JULY 23, 1987; STEVEN SPECTOR, AS TRUSTEE OF THE KRAMER FAMILY TRUST, THE FRIEDMAN INSURANCE TRUST, THE NEGEV TRUST, THE BRENDON FRIEDMAN TRUST, THE JASON FRIEDMAN TRUST, THE ELAN MESHKATAI IRREVOCABLE TRUST, THE ARIANNA MESHKATAI IRREVOCABLE TRUST, THE ANNA AND NOACH KRAMER INSURANCE IRREVOCABLE TRUST (1992), AND THE ARIES TRUST; LORRAINE ROSS, AS TRUSTEE OF THE FRIEDMAN INSURANCE TRUST; SPACE PLANNERS LLC, DBA CLOSETS BY DESIGN, AN ARIZONA LIMITED LIABILITY COMPANY; AZURA INTERNATIONAL LLC, AN ARIZONA LIMITED LIABILITY COMPANY; WORLDWIDE NETWORK, INC., A CALIFORNIA CORPORATION; EXECUTIVE-WORLDWIDE INC., A CALIFORNIA CORPORATION; EXECUTIVE LEGAL NETWORK, INC., A CALIFORNIA CORPORATION; KZE ATTORNEY SERVICE, INC., A CALIFORNIA CORPORATION, WORLDWIDE REPROGRAPHICS, INC., DOING BUSINESS AS SIMPLEX REPROGRAPHICS, A CALIFORNIA CORPORATION; NECESSARY HOLDINGS, INC., A CALIFORNIA CORPORATION; MEDHI EKTEFAIE, AN INDIVIDUAL; ZELMAN KREMMERMAN AND/OR INVESTEC TRUST (SWITZERLAND), S.A., AS TRUSTEE(S) FOR THE ZODIAC TRUST; TRUSTEE OF THE NOACH KRAMER SWISS TRUST; RTC NOMINEES AG; THE KRAMER FOUNDATION; SERGE RICHARDS; AND DOES 1 THROUGH 10, INCLUSIVE, DEFENDANTS.



The opinion of the court was delivered by: Christina A. Snyder United States District Judge

FINDINGS OF FACT AND CONCLUSIONS OF LAW REGARDING PLAINTIFF'S CLAIM TO SET ASIDE/INVALIDATE THE SPENDTHRIFT PROVISIONS OF DEFENDANT TRUSTS

Plaintiffs, Fidelity National Financial, Inc. and Fidelity Express Network, Inc. (collectively, "Fidelity"), are judgment creditors on a $13.5 million judgment awarded to plaintiffs on June 18, 2002, against defendants Colin and Hedy Friedman ("the Friedmans") and Farid Meshkatai and Anita Kramer Meshkatai ("the Meshkatais") in Fidelity Nat'l Fin., Inc. et al. v. Friedman, et al., Case No. CV 00-06902-GAF. Plaintiffs were able to collect only a nominal amount from the judgment debtors despite serving over ten levy and garnishment orders on judgment debtors' bank accounts and businesses. On July 6, 2006, plaintiffs filed the present action, alleging violations of the Racketeering Influenced and Corrupt Organizations Act ("RICO"); fraudulent conveyance in violation of California Civil Code § 3439.04 (the California Fraudulent Transfer Act) ("CUFTA"); and conspiracy to defraud creditors against seven judgment debtor defendants and fifteen other persons and entities. Compl. ¶¶ 27-32. On January 9, 2007, plaintiffs filed a first amended complaint ("FAC"), adding a claim seeking to set aside the spendthrift provisions in the defendant trusts, and adding a number of additional parties as defendants, including Investec Trust (Switzerland) S.A. ("Investec"), as trustee for the Zodiac Trust. On July 23, 2007, Fidelity filed a second amended complaint ("SAC"), adding Mehdi Ektafaie as a defendant to the third claim for relief for fraudulent conveyance in violation of the CUFTA and terminating three unserved defendants.*fn1

Trial of this case took place on January 5, 6, 7 and 8, 2010 and on January 12, 13, 14 and 15, 2010. Orlando F. Cabanday, Janice M. Kroll, and Thomas H. Case, of Hennelly & Grossfeld, LLP appeared as counsel for plaintiffs. Bart L. Kessel and Matthew I. Kaplan of Tucker Ellis & West, LLP appeared as counsel for Investec; Medhi Ektefaie appeared pro per; and David M. Bass and Janine F. Cohen of David M. Bass & Associations appeared as counsel for the remaining defendants. On January 15, 2010, the jury returned a verdict in favor of defendants on all claims tried to the jury.*fn2

The fifth claim to set aside and invalidate the spendthrift provisions of all trust defendants based on the judgment debtors' alleged excessive control over disbursement of the trusts' assets was tried to the Court.

On February 17, 2010, plaintiffs filed an opening post-trial brief in support of the claim to set aside and invalidate the spendthrift provisions of all trust defendants. Defendants filed their post-trial briefs in opposition on March 10, 2010. Plaintiffs filed a reply on March 17, 2010. On April 5, 2010, the Court heard post-trial oral argument on this remaining claim for relief. After carefully considering the arguments set forth by both parties, the Court finds and concludes as follows.

I. FINDINGS OF FACT

1. Anita Meshkatai is the daughter of Noach and Anna Kramer.

2. Farid Meshkatai is the husband of Anita Meshkatai.

3. Hedy Friedman is the daughter of Noach and Anna Kramer.

4. Colin Friedman is the husband of Hedy Friedman.

5. Elan Meshkatai, Arianna Meshkatai, Jason Friedman, and Brendon Friedman are the grandchildren of Noach and Anna Kramer.

THE KRAMER FAMILY TRUST

6. The Kramer Family Trust consists of three trusts: Trust A, Trust B, and Trust C. Ex. 329.

7. The Kramer Family Trust, Trust A is governed by an Amendment and Restatement Dated September 4, 2002.

8. The Kramer Family Trust, Trusts B and C are governed by the original Declaration of Trust of the Kramer Family Trust.

9. Kramer Family Trust, Trust A is governed by Arizona law.

10. Kramer Family Trust, Trusts B and C are governed by California law.

11. Kramer Family Trust A is a spendthrift trust.

12. Kramer Family Trusts B and C are spendthrift trusts.

13. The beneficiaries of the Kramer Family Trust, Trust A are Hedy Kramer Friedman and Anita Kramer Meshkatai. Should one of these beneficiaries be deceased, their living issue become beneficiaries.

14. The beneficiaries of the Kramer Family Trust, Trust B and C are Anita Kramer Meshkatai and Hedy Kramer Friedman. Should one of these beneficiaries be deceased, their living issue become beneficiaries.

15. Colin Friedman and Farid Meshkatai are not beneficiaries of the Kramer Family Trust.

16. The original trustees of the Kramer Family Trust were Anna and Noach Kramer.

17. Anna Kramer became the sole trustee of the Kramer Family Trust upon Noach Kramer's death.

18. Steven Spector became the trustee of the Kramer Family Trust in 2005. Mr. Spector testified that as trustee, he complied with the terms of the trust, and made decisions for the trust in accordance with his fiduciary duties.

19. The beneficiaries have no rights under the Kramer Family Trust to direct disbursements of the trust's funds to themselves or for any other purpose.

20. Only the trustee shall determine what distributions will be made from the Kramer Family Trust.

THE ANNA AND NOACH KRAMER IRREVOCABLE INSURANCE TRUST

21. The Insurance Trust is governed by a Declaration of Trust dated May 11, 1992.

22. The Insurance Trust is governed by California law. Ex. 330.

23. The Insurance Trust is a spendthrift trust and has always been a spendthrift trust.

24. The primary beneficiaries of the Insurance Trust are Hedy Kramer Friedman and Anita Kramer Meshkatai. Should one of these beneficiaries be deceased, their living issue become beneficiaries.

25. Colin Friedman and Farid Meshkatai are not beneficiaries of the Insurance Trust.

26. The original trustee of the Insurance Trust was Colin Friedman.

27. Colin Friedman resigned as trustee in 1997, at which time Norman Ross became the successor trustee.

28. In January 2004, Steven Spector was validly appointed as successor trustee of the Insurance Trust.

29. Between January 2004 and April 2009, Steven Spector acted as trustee of the Insurance Trust. Mr. Spector testified that as trustee, he complied with the terms of the trust, and made decisions for the trust in accordance with his fiduciary duties.

30. Plaintiffs have made numerous judicial admissions that Steven Spector was the trustee of the Insurance Trust.

31. In June 2005, the Arizona Probate Court confirmed that the Insurance Trust is a spendthrift trust.

32. The beneficiaries have no rights under the Insurance Trust to direct disbursements of the trust funds to themselves or for any other purpose.

33. Only the trustee shall determine what distributions will be made from the Insurance Trust.

THE NEGEV TRUST

34. The Negev Trust is governed by the Negev Trust Deed of Domestication.

35. The Negev Trust was domesticated on December 11, 2001.

36. Prior to domestication of the Negev Trust, Radcliffes Trustee Company S.A. was the trustee, and Zalman Kremerman was the Protector.

37. When the Negev Trust was domesticated, A. Steven Charney assumed the position of trustee and Colin Friedman assumed the position of Protector.

38. The Negev Trust is governed by Arizona law.

39. The Negev Trust is a spendthrift ...


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