BOONE CIRCUIT COURT54TH JUDICIAL DISTRICT

Case No. 05-CI-436

MILDRED ABBOTT,et aI., PLAINTIFFS

v.

PLAINTIFFS' MOTION FOR ENTRY OF CHARGINGORDER AGAINST JUDGMENT DEBTOR,

SmRLEY A. CUNNINGHAM, JR.'S, INTERESTSIN LIMITED LIABILITY COMPANIES

STANLEY M. CHELSEY, et aI.,******

DEFENDANTS

Pursuant to KRS §275.260, Plaintiffs, through counsel, respectfully move the Court for

entry of a charging order, in favor of Plaintiffs, against the chargeable membership interests of

the Judgment Debtor, Shirley A. Cunningham, Jr. ("'Cunningham") in the following limited

liability companies:

Shirley Allen Cunningham, Jr., PLLC;

Tandy, LLC d/b/a Midnight Cry Stables;

Hillcrest Farm I, LLC;

Hillcrest Farm II, LLC;

Kentucky Vineyard and Winery, LLC;

Kentucky Basketball Academy, LLC;

Jet Law, LLC;

and against the chargeable membership interests of the Judgment Debtor William J. Gallion

("Gallion") in the following limited liability companies:

Tandy, LLC d/b/a Midnight Cry Stables;

Onyx One, LLC

Jet Law, LLC;

WJG Holdings, LLC;

WJG Investments, LLC;

and in any and aU other limited liability companies in which the Judgment Debtors, Cunningham

and Gallion, may have an interest, with payment of the unsatisfied amount of the Judgment

owing to the Plaintiffs, with interest thereon until paid. In support of their motion, the Plaintiffs

rely upon the Memorandum of Law tendered herewith and incorporated herein by reference.

NOTICE OF HEARING

PLEASE TAKE NOTICE that the foregoing Motion shall be heard by the Boone Circuit

Court, on Wednesday, October 31, 2007 at the hour of 11:00 am. or as soon as the parties can be

heard.

Respectfully submitted,

"v1

Angt!fM~ FordNo. 81510

Chevy Chase Plaza836 Euclid Avenue, Suite 311Lexington, Kentucky 40502(859) 268-2923Emai1: amford@allteLnet

William T. RamseyNEAL & HARWELL, PLCTBANo.9248150 Fourth Avenue NorthSuite 2000

Nashville, TN 37219(615) 244-1713

COUNSEL FOR PLAINTIFFS

2

CERTIFICATE OF SERVICE

The undersigned hereby certifies that a true and accurate copy of the foregoing has beenserved by regular mail on the October 11, 2007 by U. S. mail to:

Mary E. Meade-Mckenzie, Esq.3290 Blazer ParkwaySuite 150

Lexington, KY 40509

Michael L. Gay, Esq.Jeffrey J. Harmon, Esq.Cors & Bassett, LLC537 East Pete Rose Way, Suite 400Cincinnati, OH 45202~3578

Elizabeth R. Seif, Esq.Seif & Austin, PLLC163 East Main Street, Suite 130

Lexington, KY 40507

Calvin R. Fulkerson, Esq.Lynn, Fulkerson, Nichols & Kinkel267 West Short StreetLexington, KY 40507

James A. Shuffett, Esq.271 West Short Street, Suite 400Lexington,.KY 40507

C. Alex Rose, Esq.471 West Main StreetSuite 400

Louisville, KY 40202

Frank Benton, IV, Esq.P.O. Box 72218

Newport, KY 41072

Byron E. Leet, Esq.Wyatt, Tarrant & Combs, LLP500 West Jefferson StreetSuite 2800

Louisville, KY 40202

Luther C. Conner, Jr., Esq.103 N. Cross Street

Albany, KY 42602

RobinGwinnAssistant United States Attorney260 West Vine Street, Suite 300Lexington,lCl' 40507

4

BOONE CIRCUIT COURT54TH JUDICIAL DISTRICT

Case No. 05-CI-436

MILDRED ABBOTT, et at, PLAINTIFFS

v.

PLAINTIFFS' MEMORANDUM OF LAW IN SUPPORTOF MOTION FOR ENTRY OF CHARGING ORDER

AGAINST LIMITED LIABILITY COMPANY INTERESTS

OWNED BY JUDGMENT DEBTORS, SHIRLEY A.CUNNINGHAM .•JR. AND WILLIAM J. GALLION

STANLEY M. CHELSEY, et al., ******DEFENDANTS

The Plaintiffs, through counsel, respectfully submit the following memorandum of law in

support of their motion for entry of a charging order against the judgment debtors, Shirley A.

Cunningham, Jr. and William J. Gallion. In support of the motion, the Plaintiffs state as follows:

FACTUAL AND PROCEDURAL BACKGROUND

On August 1, 2007, this Court entered a joint and several judgment against Shirley A.

Cunningham, Jr. ("Cunningham"), Melbourne Mills, Jr. ("Mills") and William J. Gallion

("Gallion") (collectively, the "Judgment Debtors"), in the principal amount of $42,000,000.00,

exclusive of pre-judgment and post-judgment interest (the "Judgment"). On August 22,2007,

this Court ordered that the Judgment be made fmal and appealable. All post-judgment motions

brought by the Judgment Debtors have been considered by this Court and rejected. The

Defendants have appealed the Judgment, but have not sought or posted a supersedeas bond in

accordance with the terms of Rule 73.04 of the Kentucky Rules of Civil Procedure.

Accordingly, execution is ripe with respect to the Judgment. See Ky.R.Civ.P. 62.01.

At present, the entire amount of the Judgment remains unsatisfied. The Defendants,

Gallion and Cunningham, own an interest in several limited liability companies, the earnings of

which should be used to satisfy the Judgment. The Plaintiffs, through discovery and

investigation,. have information that indicates that Cunningham owns an interest in the followinl

limited liability companies:

Shirley Allen Cunningham, Jr., PLLC, see Exhibit A;

Tandy, LLC d/b/a Midnight Cry Stables, see Exhibit B;

Hillcrest Farm I, LLC, see Exhibit C;

Hillcrest Farm II, LLC, see E){]]ilJitp;

Kentucky Vineyard and Winery, LLC, see Exhibit E;

Kentucky Basketball Academy, LLC, see Exhibit E;

Jet Law, LLC, see Exhibit G;

Additionally, the Plaintiff is informed that Gallion possesses an interest in the following limited

liability companies:

Tandy, LLC d/b/a Midnight Cry Stables, see ~~1:)Jt B;

Onyx One, LLC, see Exhibit H;

Jet Law, LLC, see Exhibit G;

WJG Holdings, LLC, see Exhibit I;

WJG Investments, LLC, see ;gxlribit I;

The Plaintiffs believe that both Gallion and Cunningham possess additional limited liability

company interests which will be revealed through post-judgment discovery and made a portion

of an amended or supplemental motion for charging order.

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ARGUMENT

KRS §275.260 provides that a charging order may be entered to charge the interest of a

judgment debtor member in a limited liability company towards the satisfaction of a judgment.

The statute provides, in pertinent part:

On application to a court of competent jurisdiction by a judgmentcreditor of a member or a member's assignee, a court may chargethe judgment debtor's interest in the limited liability company withpayment of the unsatisfied amount of the judgment. To the extentso charged, the judgment creditor has only the rights of an assigneeand shall have no right to participate in the management or tocause the dissolution of the limited liability company.

KRS §275.260(2). The statute further authorizes the Court to liquidate the interest of a

judgment debtor in any limited liability company. "The court may order a foreclosure upon the

limited liability company interest subject to the charging order at any time." KRS §275.260( 4).

The provisions ofKRS §275.260 provide the "exclusive remedy by which the Judgment

creditor of a member ... may satisfy a Judgment out of the Judgment debtor's limited liability

company interest." KRS 276.260(1) (emphasis provided). Accordingly, the Plaintiffs in this

action can only gain any recovery out of the numerous assets the Judgment Debtors have chosen

to shelter in wholly- or partially-owned LLCs if the Court enters an appropriate charging order.

Such relief is particularly warranted under the present circumstances because each of the

Judgment Debtors is a licensed attorney with an acute awareness of the various hurdles a

tortfeasor/debtor can create for his creditors by executing an asset sheltering plan featuring,

among other tactics, transfers of assets to separate limited liability companies.

In this case, the Plaintiffs are already aware of several million dollars worth of assets held

in the names of companies owned by Cunningham and Gallion. For example, Cunningham owns

real property in Scott County through two wholly-owned limited liability companies named

3

''Hillcrest Farm I, LLC" and ''Hillcrest Farm n,LLC." See Exhibits C and D. The Hillcrest

Farms companies are not judgment debtors and, therefore, the assets owned by those companies

are not subject to execution. However, the membership units of both companies are the property

of the judgment debtor, Cunniugb~ro, and the Court is free to charge his ownership interest in

any fashion it sees fit to reach the end goal of satisfaction of the Plaintiffs' Judgment.

The Plaintiffs' need for a charging order is pressing. In the absence of a charging order

the Judgment Debtors remain uninhibited from pursuing asset sheltering techniques that

undermine the Plaintiffs' efforts to recover amounts this Court has awarded them. Again, an

example best proves the dangers endemic to delay. C<Hiebtors Gallion and Cunningham own

Tandy, LLC, the company that underlies its better~lmown assumed name "Midnight Cry

Stables." Midnight Cry Stables, in turn, owns a partial interest in the celebmted thoroughbred,

Curlin; a racehorse that has recently earned a substantial purse by winning the Grade IJockey

Club Gold Cup at Belmont Park and is scheduled to compete again in the Grade I, $5 million

Breeder's Cup Classic at Monmouth Park in less than three weeks. Presumably, cash has already

been distributed to Tandy for Curlin's success at Belmont Park. Without a charging order the

Judgment Debtors are free to extract from Tandy all cash awarded from the Gold Cup purse and

distribute the funds in such a manner as to insure the Plaintiffs will never see a cent. If Curlin's

upcoming performance holds true to form, substantial additional cash will be distributed to

Tandy following the Breeder's Cup. Tandy's owners have absolutely no motivation to retain any

of Curlin's earnings. To the contrary, it is in Gallion's and Cunningham's interest for Tandy to

make cash distributions as soon as cash is available and dispense it as best they can, thus creating

additional hardship for the Plaintiffs in achieving their goal of realizing recovery. Such an unjust

4

result is furthered by any delay in the entry of a charging order directing that all of Tandy's cash

distributions be paid over to the Plaintiffs.

Moreover, the immediate entry of charging orders sets the stage for future actions by this

Court aimed at satisfaction ofthe Judgment. The Court's discretion includes the authority to sell

the debtors' interest in any company at a foreclosure sale or to sell assets owned by the company

and distribute the proceeds to judgment holders. Both remedies are highly appropriate in the

case of companies that are wholly owned by one or more of the judgment debtors because sale of

100% interest in a company often maximizes its value and because no damage can possibly be

inflicted on innocent stakeholders in the sold company by virtue of an unconsented-to sale.

However, because post-judgment discovery is in its infancy, Plaintiffs' counsel are presently

unable to discern which companies should be subject to additional collection-oriented orders in

order to maximize recovery to the injured Plaintiffs. As discovery proceeds regarding the

ownership structure and income-producing nature of each of the Judgment Debtor's business

ventures, the Plaintiffs will be better positioned to seek additional relief from the Court in the

form of liquidation or foreclosure orders. Absent a charging order, however, the judgment

debtors could easily convert assets owned by the companies to cash and distribute the same

leaving the aggrieved Plaintiffs with nothing meaningful to liquidate.

In sum, the Plaintiffs have followed the statutorily prescribed method for recovering

against a judgment debtor possessing an interest in a limited liability company. This Court has

ruled that the Plaintiffs are entitled to $42,000,000 from the judgment debtors. It should now

enter the charging orders that will permit them to recover a portion of that sum.

5

CONCLUSION

For the foregoing reasons, the Plaintiffs respectfully request that the Court enter orders

charging any ownership interests of the judgment debtors, William J. Gallion and Shirley A.

Cunningham, Jr., in any limited liability company identified in the motion accompanying this

memorandum, and applying all distributions to the unsatisfied amount of the judgment debt

owing to the Plaintiffs.

Respectfully submitted,

hgelKBJ'No.8151OChevy Chase Plaza836 Euclid Avenue, Suite 311Lexington, Kentucky 40502(859) 268-2923Email: amford@alltel.net

William T. RamseyNEAL & HARWELL, PLCTBANo.9248150 Fourth Avenue NorthSuite 2000

Nashville, TN 37219(615) 244-1713

COUNSEL FOR PLAINTIFFS

CERTIFICATE OF SERVICE

The undersigned hereby certifies that a true and accurate copy of the foregoing has beenserved by regular mail on the October 11, 2007 by U. S. mail to:

Mary E. Meade-Mckenzie, Esq.3290 Blazer ParkwaySuite 150

Lexington, KY 40509

6

Michael L. Gay~Esq.Jeffi:ey J. Harmon~ Esq.Cors & Basset4 LLC537 East Pete Rose Way~ Suite 400Cincinnati, OH 45202-3578

Elizabeth R. Seif, Esq.Seif & Austin, PLLC163 East Main Street, Suite 130Lexington, KY 40507

Calvin R. Fulkerson, Esq.Lynn, Fulkerson, Nichols & Kinkel267 West Short StreetLexington,lClr 40507

James A. Shuffett, Esq.271 West Short Street, Suite 400Lexington, KY 40507

C. Alex Rose, Esq.471 West Main Street, Suite 400Louisville, KY 40202

Frank: Benton~ IV, Esq.P.O. Box 72218Newport, Klr 41072

Byron E. Leet, Esq.Wyatt, Tarrant & Combs, LLP500 West Jefferson StreetSuite 2800

Louisville, KY 40202

Luther C. Conner, Jr., Esq.103 N. Cross StreetAlbany, KY 42602

RobinGwinn

Assistant United States Attorney260 West Vine Street, Suite 300Lexington, KY 40507