CAPE GIRARDEAU – A federal magistrate judge in the U.S. District Court for the Eastern District of Missouri, Southeastern Division, recently denied an insurer's request for damages and fees from a group it claims fraudulently diverted at least $3.5 million in proceeds.
According to a June 8 order issued by U.S. Magistrate Abbie Crites-Leoni in the case, Hanover Insurance Co. had not demonstrated it should receive damages against parties it sued last year in the district court in Cape Girardeau.
Hanover sued Harding Enterprises, Diamond H, Greggory Harding and Andrea Dawn Harding alleging they breached contracts regarding bonds issued for construction projects by diverting at least $3,529,055 in bonded contract trust fund proceeds through their "false representations, false pretenses and actual fraud."
Hanover had been granted its motion to strike pleadings and for default judgment in late February after the court found the defendants unwilling to comply with the discovery process and present a defense, the order states.
Because the court was unable to assess the amount of damages requested, it directed Hanover to submit additional documentation to support its request for $4,976,855 by early March.
By late February, the individual defendants – Greggory and Andrea Harding – had filed a notice of bankruptcy, which triggered an automatic stay of proceedings. Defendant Harding Enterprises then also filed its notice of bankruptcy with the court.
On May 9, Hanover asked for damages for the remaining defendant not in bankruptcy – Diamond H.
Hanover's complaint states the basis for Diamond H's liability is that it is the alter ego of the Hardings, created to "defraud creditors," and sought to have funds in possession of Diamond H held in constructive trust for Hanover.
Crites-Leoni wrote that in light of "these unique facts and the bankruptcy filing of the Hardings, the court questions whether it can award damages against an entity alleged to be nothing more than the alter ego of the Hardings."
In denying Hanover's motion for damages, Crites-Leoni wrote, "The court finds that Hanover has not demonstrated that this court should award damages against Diamond H at this time."