sum. The Rivercross defendants also argue that the relief sought amounts to the relicf
Thombrook would obtain if it prevailed on the merits, making it an inappropriate subject for
preliminary injunctive relief. Defendants also make other arguments which the Court will
address in the body of this ruling.

Discussion

A district court is authorized to modify a preliminary injunction if the proposed changes
are equitable in light of subsequent changes in the facts or law, or for any other good reason.
See, e.g., Movie Systems, Inc. vy. MAD Minneapolis Auto Distributors, 717 F.2d 427, 430 (8th
Cir. 1983); Canal Authority v. Callaway, 489 F.2d 567, 578 (Sth Cir. 1974).

In this case, evidence that has become apparent since the original consent preliminary
injunction was entered makes modification appropriate. Though the account or accounts in
which the trust ves is held was or were “blocked” prior to the entry of the agreed preliminary
injunction, it has now become clcar that the “block” was imposed well after Thombrook’s
Tevocation of the trust agreement took effect. Thus rather than returning the trust property, the
Rivercross defendants permitted it to become encumbered — an apparent violation of the trust
agreement ~ after they became obligated to return the property to Thombrook. In addition, more
recently it has become apparent that the Rivercross defendants cannot or will not provide bank
statements reflecting the continuing integrity of the trust res for any period after December 31,
2002, These two facts together are more than sufficient to warrant modification of the
preliminary injunction.

A party sceking a preliminary injunction must establish some likelihood that it will

prevail on the merits, the absence of an adequate remedy at law, and that it will suffer irreparable


2003 the sum of $3,485,000 in United States dollars.

United States District Judge

Date: October 6, 2003



under the name Geryline Participation Corporation and that the funds were “blocked.” ft also
alleged that Rivercross was claiming that it lacked direct control over the trust finds and that it
had given that authority to Rudolf Keller, an individual not affiliated with Rivercross.
Thornbrook alleged that Rivercross had not advised Keller, Geryline, or Credit Suisse of the
agreed preliminary injunction order, and that Rivercross had failed to produce current bank
statements for the account.

After holding an evidentiary hearing, the Court found that Rivercross had failed to prove
the terms of the preliminary injunction had been violated since its entry. The “block” on the
funds predated the preliminary injunction, and there was no showing that the defendants had,
since the injunction, caused or permitted any further encumbrances of the trust res -- the only
prohibition that the injunction imposed upon them. The Court therefore vacated the mle to show
cause.

In conncction with its findings, the Court indicated that the circumstances of the
investment of the trust funds were rather suspicious and that Thornbrook might wish to consider
seeking modification of the injunction. Thornbrook has now filed such a motion, It asks the
Court to direct the Rivercross defendants to pay $3,485,000 into the registry of the Court, to be
held pending final adjudication on the merits.’ The Rivercross defendants do not dispute that iL
owes this amount to Thombrook, see Dfdt. Resp. to Pltf, Mot. for Entry of Modif. Prelim. Inj.
Order at 6, but they contest the proposed modification. They say that due to the “block” imposed

on the funds, a ten percent penalty would be assessed upon withdrawal, a not-inconsiderable

' There is a dispute regarding whether $15,000 of the amount returned by Rivercross was
areturn of the trust res or payment for certain expenses. Thornbrook has asked the Court to
order deposit only of the undisputed amount.


harm without injunctive relief. Publications International v. Meredith Corp., 88 F.3d 473, 478
(7th Cir.1996). If these threshold requirements are met, the court balances the irreparable harm
to plaintiff against the harm that the enjoined party would experience if injunctive relief were
granted, and also considers thc interests of non-parties. Jd.

Thornbrook has made a sufficient showing of likelihood of success on the merits. The
Rivercross defendants do not dispute that they are required to return the trust property to
Thornbrook; the only issue is when. Thornbrook is likely to succeed in jts claim that whatever
amount of time Rivercross had to comply with the properly-served revocation and demands for
the retum of the property, i was far less than the nearly one ycar period that has now passed. In
addition, Thornbrook is likely to succeed in its claim that the Rivercross defendants violated the
agreement and/or breached their fiduciary duty to Thornbrook by permitting the trust property to
become encumbered (“blocked”) in November 2002, after Thombrook had revoked the
agrecment in full.

Thornbrook has also made a sufficient showing of the absence of an adequate remedy at
law. Rivercross concedes that it had to obtain replacement funds to satisfy Thombrook’s demand
even in part, and the evidence reflects that this took an extended period, long beyond what is
likely to be considered reasonable by any standard. Moreover, the last bank statement or
equivalent that has bcen produced by the Rivercross defendants covers the period ending on
December 31, 2002; after that date there are only second-hand, verbal “assurances” of the
integrity of the trust property. These same factors suffice to establish the likelihood of
irreparable harm - i.e. the eventual inability of Rivercross to produce the trust funds — if the

requested injunction is denied.



Minute Order Farm (08°97)

United States District Court, Northern District of Iinois

Name of Assigued Judge
or Magistrate Judge

Matthew F. Kennelly

Sitting Judge If Other
than Assigned Judge

CASE NUMBER

03 C1113

DATE

10/6/2003

courtroom mera ty oe LEY
deputy’s
initials

OR

Date/time received int?
central Clark's Office

‘musing deputy mutts

CASE Thornbrook vs. Rivercross
TITLE
[ln the following box (a) indicate the party filing the motion, e.g. plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
MorTion: af the mation being presented]
DOCKET ENTRY:
(1) Oo Filed motion of [ use listing in “Motion” box above.]
(2) Oo Brief in support of motion due
(3) oO Answer brief to motion duc____. Reply to answer brief due.
(4) 0 Ruling/IIearing on setfor_ at
(5) oa Status hearing[held/continued to] [set for/re-set for] on __ set for at
(6) oO Pretrial conference[held/continued to] {set for/re-set for] on setfor at
(7) o Trial[set for/re-set for] on at
(8) o (Bench/Jury trial] [Hearing] held/continued to at
(9) a] This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to}
OFRcP4(m) CO Local Rule 41.1 OFRCP41(a)(1) OO FRCP41(a)(2).
qo) if [Other docket entry] For the reasons set forth on the attached order, the Court grants plaintiff's
motion for entry of a modified preliminary injunction (36-1), The preliminary injunction is modified,
effective immediately, to require defendants Rivercross Foundation, David P. Mahany, and Walter
Maslowski, and all persons acting in concert with them who may be deemed to have notice or upon whom
this order is served, to deposit into the registry of this Court on or before 10/23/03, the sum of $3,485,000
in United States dollars.
(i) (For further detail sec order attached to the original minute order.]
No notices required, advised in open court, | Document
Number
No notices required.
umber of noxiser
Notices mailed by judge’s staff. OCT 0 vd 2003
Notified counsel by telephone. duce docheted C 2
| Docketing to mail notices oO
Mail AO 450 form. von
Copy to judge/magisteate judge.



The balance of harms tilts in favor of the issuance of the requested modified injunction.
The only harm identified by the Rivercross defendants is the 10% penalty that evidently will be
imposed if the “block” on the trust property is broken. But as indicated earlier, the block was
imposed in mid-November 2002, after the Rivercross defendants had become obligated to retum
the trust property to Thornbrook. Thus any potential harm to the Rivercross defendants was, as
best as the Court can determine, the result of their own action or inaction in permitting the trust
res to become encumbered after Thombrook had revoked the trust agreement and demanded
return of the trust property. Finally, there is no indication that any third party will be harmed if
the requested modification to the preliminary injunction is made.

The Rivercross defendants argue that Thornbrook is essentially asking for all of the relict
to which it would be entitled if it prevailed on the merits. Not so, Thombrook requests that the
funds be deposited into the registry of the Court, not (at this point) that they be returned to
Thornbrook. In addition, if it prevails on the merits, Thornbrook may be entitled to relief beyond
return of the funds.

Conclusion

For the reasons stated above, the Court grants plaintiff's motion for entry of a modified
preliminary injunction [docket # 36-1]. The preliminary injunction is modified, cffective
immediately, to require defendants Rivercross Foundation, David P, Mahany, and Walter

Maslowski, and all persons acting in concert with them who may be deemed to have notice or

upon whom this order is served, to deposit into the registry of this Court on or before October 23,



IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION Be -
Hikas

THORNBROOK INTERNATIONAL, INC., OCT 0 7 2003

Plaintiff,
VS. Case No. 03 C1113
RIVERCROSS FOUNDATION; DAVID
MAHANY; WALTER MASLOWSKI; and
MARJORIE RAWLS ROBERTS, P.C.,

Defendants.

MEMORANDUM OPINION AND ORDER
MATTHEW F, KENNELLY, District Judge:

Plaintiff Thombrook International, Inc. entered into a revocable grantor trust agreement
with defendant Rivercross Foundation in August 2001, pursuant to which Thornbrook deposited
$5 million with Rivercross. The agreement required Rivercross to maintain the trust assets in a
demand deposit or custodial account at a bank or financial institute rated A or better by Standard
& Poor’s or Moody’s and to keep the assets free and cleat of all liens, claims, and encumbrances.
The assets were to be held in cash or equivalents (United States government-guaranteed
securities or instruments of similar quality and liquidity) and were to be held “on a non-depletion
basis,” i.e. they werc not to be invested in depreciable or depletable asscts. The agreement
provided that upon its expiration, “or upon demand of [Thornbrook] in accordance with the terms
of this trust,” Rivercross “shall return 100% of the Trust Res (Principal) to [Thornbrook] as sole
beneficiary.” Thornbrook was permitted to revoke the trust upon thirty days written notice.

Between July 23 and September 5, 2002, Thornbrook sent Rivercross a series of writlen

2



notices revoking the trust as to various amounts that added up to $5 million, the total amount of
funds it had deposited. The last of thesc notices took effect on October 5, 2002. According to
Thombrook, however, Rivercross, via its representatives David Mahany and Walter Maslowski
stalled returning the funds (except for the first installment of $250,000) and offered phony
excuses for their delays. By January 24, 2003, only $1,115,000 of the $5,000,000 had been
retumed,

On February 13, 2003, Thornbrook sued Rivercross, Mahany, and Maslowski (to whom
we will refer collective as “the Rivercross defendants”) for breach of the trust agreement,
conversion, breach of fiduciary duty, fraud, and civil conspiracy, and for imposition of a
constructive trust and for an accounting. They also sucd attorney Marjorie Rawls Roberts, P.C.,
who was designated as “trust protector” pursuant to a contract she made with Rivercross of
which Thornbrook claimed to be third party beneficiary.

On March 3, 2003, the Rivercross defendants agreed to entry of a preliminary injunction
order in which they represented that the trust res was “being held at banking institutions.” The
order preliminary enjoined them from “transferring or otherwise encumbering or using for any
purpose the trust res .,. or funds held in any banking institution that represent, or are traceable to
the trust res,” except that defendants were permitted to transfer the funds lo a specified Bank of
Montreal account for the purpose of returning the funds to Thornbrook. See Order of March 3,
2003.

In July 2003, Thornbrook moved for entry of a rule to show cause why the Rivercross
defendants should not be held in contempt for violating the order. In its motion, Thornbrook

stated that it had leamed that the trust funds were held in a Credit Suisse Privatebank account