We last visited the case of Craig Brooksby and The Estates LLC in my article, Three Interesting Charging Order Opinions In The Estates Bid-Rigging Scheme (Oct. 24, 2023). That article related Brooksby’s bid-rigging scheme for which he suffered a civil damages award of a little over $1.28 million with some of his affiliated entities and a trust being jointly liable for $660,000 of that award. This previous article discussed the charging orders that were entered against various of Brooksby’s LLC and ended with the appointment of a receiver to enforce the judgment.
Now we rejoin this case still in progress and an interesting new ruling in Williams v. The Estates LLC, 2025 WL 892943 (M.D.N.C., March 24, 2025).
In the time since the receiver was appointed to take possession of Brooksby’s assets and those of his affiliated companies and trust, Brooksby continued to bid on foreclosed properties in violation of the court’s permanent injunction. Brooksby also filed for bankruptcy for one of these companies (Avirta LLC), but that bankruptcy was dismissed since he did not have the authority to file the petition. The court sanctioned Brooksby and his attorneys for violating Rule 11 and stopped allowing Brooksby’s out-of-state attorneys to appear for him. Brooksby’s last remaining lawyer then withdrew and Brooksby started representing himself.
Meanwhile, Brooksby failed to cooperate with the receiver, such as by failing to produce documents. Eventually, the court entered an order for Brooksby to show cause why he and his entities that were also judgment debtors should not be held in contempt.
At the ensuing contempt hearing, Brooksby showed up in his personal capacity, as the trustee of his trust, and for some of his LLCs. A fellow by the name of Rex King showed up as the manager of Avirta LLC and Sonja Brooksby showed up as the manager of another Brooksby entity.
The court found Brooksby, his trust, several of the Brooksby LLCs, and Avirta LLC in civil contempt because they had not surrendered possession and control of their assets to the receiver, nor had they delivered to the receiver all the required records. For his part, Brooksby was taken in custody by the U.S. Marshal and sent of to jail. The court then set a review of the matter within a week at which Brooksby, King, and others were ordered to appear.
After Brooksby went to jail, the receiver got “some responsive documents” or at least enough that the court ordered Brooksby released from the slammer. However, the court held the contempt matter open so that the debtors could bring themselves into full compliance. That of course did not happen.
With the receiver reporting to the court that he had still not received all the information needed from the debtors, the court ordered the receiver to file a statement of deficiencies and for Brooksby to respond to that statement. The receiver did so, noting that the receiver had not received much of the needed information and no documents or information relating to Brooksby’s trust or a Brooksby-controlled entity known as King Family Enterprises, LLC (“KFE”).
In response, Brooksby filed a response to the statement of deficiencies and the contempt order that included declarations under oath and a flash drive containing hundreds of documents. Despite this, the court entered another order compelling Brooksby, his trust, KFE, Sonja Brooksby and Rex King (as persons who controlled KFE) to appear and show cause why they should not be held in contempt. The court also warned these folks that they could be held in contempt for failing to turn over to the receiver all assets and records of the debtors and affiliated entities or for failing to turn over all requested documents. Brooksby then filed yet another declaration with 200 exhibits.
After reviewing the latest document production, the receiver filed an updated statement of deficiencies that identified “numerous ongoing failures to comply”. Sonja Brooksby then filed another declaration with over 200 exhibits, and both Brooksby and King also filed additional declarations. The, out of the blue, somebody called “Dave Williams”, who purported to be a former employee of The Estates, also filed a declaration.
The court held a hearing on January 14, 2025, in which Brooksby and King appeared without counsel but Sonja Brooksby brought her attorney along. For his part, the receiver told the court that he still have no received many of the requested documents. After the hearing, the receiver discovered four more Brooksby-controlled LLC which had never been disclosed, and the court added these four LLCs to the receivership.
By now the court had its fill of these antics and so on March 24, 2025, released its Memorandum and Order which you can and should read here.
The court began its opinion by noting that civil contempt powers are within the inherent powers of the court and may be employed either to force compliance with a court order to to compensate another party (such as the creditor) for the harm caused by the noncompliance. [By contrast, criminal contempt punishes for a past noncompliance.]
Next, since LLCs act only through their agents, their agents are subject to contempt if the LLC violates a court order. The same is true for trusts which act only through their trustees.
The court then noted that its receivership order required Mr. Brooksby, his trust and KFE to turn over all their assets to the receiver as well as deliver all their books and records to the receiver. This order extended to all entities controlled by Brooksby, his trust or KFE, which basically meant every Brooksby entity. This had not been done, at least fully.
The court found the claims that Brooksby’s trust and KFE had no such documents or assets “not credible”. At the very least, there should have been transactional documents and other records from the entities that were involved in the bid-rigging that led to the judgment in the first place. Instead, “Mr. Brooksby and his associates have made every effort to muddle the way the Estates and all of Mr. Brooksby’s affiliated entities operated.” The court then continued:
“The idea that Mr. Brooksby, KFE, and the Trust have no records to reflect all of this activity is laughable. At the least, they had to have ledgers or other accounting records to keep up with these complicated transactions; if they did not, they could not be sure that they would get the resulting profits. And they must have had those records, plus contracts, to know how to accurately distribute money to investors, Estates members, and any agents owed commissions. Even if the entire scheme is fraudulent, with ‘investors’ serving as shams or fronts for Mr. Brooksby, there would still be documents related to foreclosure bids, especially those that resulted in a purchase. And the money from all these transactions must have gone somewhere.”
The bottom line was that Brooksby and the others were simply not complying with the receiver order. Even the documents they belatedly did produce should have been produced shortly after the receivership order and not years later. They also did not disclose all of Brooksby’s LLCs as the receiver later found others through his own investigation. It was not as if they didn’t know about the LLCs or forget about them, as King has filed paperwork to bring some of them back into good standing.
This now brings us back to the mysterious “Dave Williams” who Brooksby and King claimed had filed the reinstatement paperwork without their knowledge. They claimed that “Dave Williams” was an employee of The Estate and other Brooksby businesses while living in the Philippines. The court did not find “Dave Williams” credible and instead questioned whether he really even existed, noting among other things that his declarations were not notarized and had inconsistent signatures.
Moving along, the court noted that banking information had not been provided for many of the LLCs nor had much accounting information been turned over. Brooksby’s claims that he had instructed his staff to turn those items over was dismissed by the court because Brooksby had made no real effort to see that they were actually provided. The court also noted that it had specifically noted that the records of attorney Steven W. Shaw (who, the court stated, “has fingerprints all over the activities of the Estates”), accountant Bart E. White and registered agent Sierra Brooksby had been specifically mentioned for production but had not been provided.
Since the receiver needed these records to do his job of marshaling the assets of the receivership defendants, and Brooksby and the others were withholding those documents, the receiver’s ability to carry out his task was impaired. Brooksby and the others thus violated the receivership order and did so in a knowing fashion. Thus, the court:
“These defendants have provided no credible evidence that they have attempted in good faith to turn over all records and accountings to the Receiver or to inform others who may hold such records of the duty to turn those records over to the Receiver. Instead, the Receiver has largely been left to uncover them himself. Since the initiation of the most recent show cause hearings, Mr. Brooksby, Ms. Brooksby, and Mr. King have produced two additional volleys of information. * * * They consistently produce such additional information on the eve of court hearings, making it impossible for the Court and the Receiver to evaluate them in time for a meaningful hearing. These late productions of new and additional information provide further proof that they did not comply with the Receivership Order when initially ordered or in the many months thereafter. And in any event * * * even with all these late submissions, they still have not turned over all the books and records that must exist, nor have they identified all the responsive LLCs or provided an accounting. These submissions are not intended to be complete; rather, these three receivership defendants are using them as instruments of delay and obfuscation.
“Mr. Brooksby is ultimately the one in charge of these operations and is responsible for these violations both personally and on behalf of the Trust and KFE. But Ms. Brooksby and Mr. King also had actual and apparent authority for KFE when the Receiver was appointed, and they are equally responsible for KFE’s violations of the Receivership Order. Mr. Brooksby, his wife, and his brother-in-law initially created the tangled web of interrelated LLCs. They cannot now claim that they don’t understand them and don’t know what assets they have. The web is their creation, and they are the ones who must explain it to the Receiver, locate and provide all documents, and identify all assets.”
The court then turned to Brooksby employment with a company called Soren, LLC. Noting that Brooksby claimed to be earning wages, but he failed to turn over those wages to the receiver, the court also noted that Brooksby authorized Soren to deliver his earnings to his wife without telling the receiver. Brooksby also failed to fully turn over documents relating to Soren. For all this, Brooksby was additionally in contempt.
Brooksby had also not fully turned over his tax returns as also required by the receivership order. The returns that were provided were incomplete. While Brooksby also attempted to pin this failure on his staff, there was no evidence that Brooksby instructed them to provide these documents to the receiver. Thus, Brooksby was also in contempt for not fully providing his tax returns.
The court next moved to the remedies that it would impose and noted that Brooksby had shown that he would try “to avoid the Receivership Order in any way possible,” and he, Sonja Brooksby and Rex King had “repeatedly displayed a willingness to delay and obscure.” Having held all of them in contempt, the court stated that that the contempt could be purged by finally turning over all assets and records to the receiver. This then brings us to the individual contempt orders for each defendant.
Brooksby would go back to jail until KFE complied with the receivership order.
As to Rex King, he would also go to jail until KFE complied with the receivership order, but the court stayed the order for six business days to give him the chance to bring KFE into full compliance.
As to Sonja Brooksby, the court would impose a $25 daily fine, which she could stop by finally complying with the receivership order, and also make her pay a fine of $4,350 for some of the attorneys’ and receiver’s fees relating to the contempt proceedings.
Additionally, the court indicated that it would be willing to revisit the contempt issue if additional facts came to light showing that Brooksby, King or Sonja Brooksby had been involved in other activities to hide Brooksby’s assets and income.
In a separate order entered the same day, Williams v. The Estates LLC, 2025 WL 900002 (M.D.N.C., March 24, 2025), which you read here, the court also found that Brooksby had violated the court’s injunction that prohibited him from buying or selling properties through a public real estate foreclosure auction anywhere in the U.S. for a period of eight years. According to that order, Brooksby basically went back to his old business through the aforementioned Soren, LLC, and its manager, David Ginn, whom the court described as “one of Mr. Brooksby’s cronies”. The court thus expanded the injunction from eight years to ten years, basically prohibited Brooksby from participating in any fashion whatsoever in any public real estate foreclosure auction, and also imposed additional reporting requirements upon him.
ANALYSIS
Some debtors believe that they can play games with the court. They are wrong. Eventually, the judge will get fed up at a debtor and throw them into the slammer until they comply with the court’s orders and that is what happened here. At that point, the debtor holds their own keys to the jail and they let themselves out at any time simply by complying with the court’s orders.
Really, not much more to it than that, other than to note the obvious: If somebody is held in contempt of court for a serious matter such as this, any reputation they might have had before as a respectable and honest person is basically destroyed. This also goes for folks who are attempting to help out and get caught up in contempt themselves. As here.