In re Fredeman Litigation

William Fredeman Jr. and Henry Fredeman II (Fredeman brothers) (defendants) were brothers who controlled and managed a group of companies in the marine industry involved with towing, repairing, and refueling (defendants). A group of plaintiffs, including customers and competitors of the Fredeman brothers, brought civil claims under the Racketeer Influenced and Corrupt Organizations Act (RICO), alleging that the Fredeman brothers systematically charged their customers for more fuel and oil than was delivered. The customers sought money damages, including treble damages under RICO. When the lawsuit was filed, the United States government was actively prosecuting criminal RICO charges and had obtained a court order preventing the Fredeman brothers from disposing of most of their assets. None of the Fredeman brothers were convicted of RICO violations, and the asset restraining order expired after the criminal cases were resolved. The customers sought and obtained a temporary restraining order from the trial court that also restricted the Fredeman brothers from disposing of most of their assets. The customers then moved for a preliminary injunction on the same terms. The trial court held a hearing and determined that the customers were likely to prevail on the merits of their RICO claims. The trial court then granted the preliminary injunction, determining that the court’s inherent equitable powers included the power to ensure that assets would be available to satisfy the probable monetary judgment. The injunction prevented the Fredeman brothers from dispersing any assets outside normal business and operating procedures without the court’s permission and customers’ knowledge and required the Fredeman brothers to file a list of all cash disbursements exceeding specified amounts. The Fredeman brothers appealed.