Legal News and Appellate Tips

Has your client decided to enforce the judgment before the appeal is over? Beware, says collection attorney Joseph Chora—after losing an appeal, a judgment creditor is liable in restitution. (The plaintiff in Dr. Leevil LLC v. Westlake Health Care Ctr. was liable for $5.7 million, as written up here: https://lnkd.in/geJWrrin.)

But on the flipside, judgment creditors should be on the lookout for grounds to file a disentitlement motion, which are supported when the appellant refuses to comply with court orders—including judgment enforcement discovery.

File away these two “gold nuggets” for next time you enforce a judgment, courtesy of judgment-enforcement specialist Joseph Chora:

1. If the debtor is transferring assets to third parties, sure, you could file a fraudulent-transfer complaint. But why? You can simply levy on the transferred asset. Not only is this faster and cheaper, but it puts the burden of proof on the debtor and transferee to prove the transfer was valid.

2. With a little research, attorneys can handle most aspects of judgment enforcement, but consider farming out these two tasks:
• Asset research—if you don’t know what you’re looking for, you’re likely to miss it.
• collecting on real property—there are too many technical requirements likely to wrongfoot you if it’s your first rodeo.

When you are trying to enforce a judgment, you may be tempted to seize special personal property, like mementos, or the beloved family pet. But while these are personal property, if they do not have significant value, it will be seen as an improper purpose. So that might not be a good strategy.

But judgment-enforcement attorney Joseph Chora suggests a couple of good collection practices:

💡Does the debtor have a girlfriend? Set the examinations for the debtor, his wife, and his girlfriend all on the same day. You may find that the examinations will quickly become unnecessary.

💡Does the debtor have valuable intellectual property? The creditor may be able to acquire the IP for nominal value, depriving the debtor of its golden goose. In one case, Joseph relates, this resulted in settling the judgment for 125% of its face value!

“When I got out of law school,” Joseph Chora, Esq. related, “I knew nothing.” So like many of us, he started out by taking any case that came in. Until, that is, a mentor told him “that’s a dumb idea.” Instead, you should “find something that is difficult, arcane, and that nobody knows how to do.”

A lot of trial attorneys seeking a judgment are like the dog that caught the car. So you got what you were after—now what?
There are few areas more important than judgment enforcement. After all, a judgment by itself has at best dubious value. Yet because the rules of judgment enforcement are so technical, few attorneys are prepared to turn that judgment into cash.

The issue that most often drags appeals back into more litigation is attorney fee and costs. What happens when, while focusing on the appeal, the prevailing party gets a substantial award of fees and costs?

• Do you have to separately appeal from the fees and costs award? (Yes…usually.)

• How can you stay enforcement of the fees and costs award? (Fee & cost awards are stayed automatically…sometimes.)

• If you win the underlying appeal, what happens to the fees and costs award? (It goes away automatically…in theory.)

We discuss these questions and more in this nuts-and-bolts episode of the California Appellate Law Podcast.

CEB has published my article, “Personal Jurisdiction Unnecessary to Issue Judgment on an Out-of-State Judgment, New Published CA Case Holds.”

The article is about a surprising recent appellate opinion, WV 23 Jumpstart, LLC v. Mynarcik (D3 Nov. 21, 2022) No. C095046, that allowed a Nevada judgment debtor to domesticate a judgment in California—even though the debtor had no contacts with California. And even more surprising, after the Nevada judgment expired, the court allowed the creditor to re-domesticate the judgment back to Nevada.

There are two reasons you should take strong notice of this case, particularly if other states follow this approach:

(1) Judgments accrue interest at different rates depending on state law, so consider domesticating all your judgments in a high-yield jurisdiction—the highest yields are in Massachusetts, Rhode Island, Vermont, and Washington, at 12%.

(2) Judgments lapse after a certain time depending on state law, so consider domesticating all your judgments in a “stay-fresh” jurisdiction—judgments in Delaware, for instance, never expire.

The new postjudgment opportunities suggested in the published case of WV 23 Jumpstart, LLC v. Mynarcik (D3 Nov. 21, 2022) No. C095046. The court holds that an out-of-state money judgment may be domesticated in California, even though California lacks personal jurisdiction over the defendant. There are two reasons you should take strong notice of this if other states follow this approach:

(1) Judgments accrue interest at different rates depending on state law, so you should domesticate all your judgments in a high-yield jurisdiction—the highest yields are in Massachusetts, Rhode Island, Vermont, and Washington, at 12%.

(2) Judgments lapse after a certain time depending on state law, so you should domesticate all your judgments in a “stay-fresh” jurisdiction (e.g., judgments never expire in Delaware).

Here is what happened in Jumpstart:

Nevada issued a $1.5 million judgment against loan guarantors. Lenders then got the judgment domesticated in California. The Nevada judgment expired in 2016. But the California judgment remained.

Nevada-based defendant Mynarcik had no contacts or assets in California. Jumpstart, the new assignee of the judgment, wanted to enforce the judgment against Mynarcik in Nevada, but the Nevada judgment had been expired for several years already. So Jumpstart decided to take the domesticated California judgment and domesticate it right back to Nevada. A little like standing in a bucket and pulling yourself up by the handle, but worth a shot.

Mynarcik raised a personal jurisdiction challenge to the California judgment. The Sacramento Superior Court agreed, but the Court of Appeal reversed, finding a court does not need personal jurisdiction to domesticate a sister-state judgment.

I am curious to know what the #AppellateLinkedIn community thinks about this one. Will other state courts follow this reasoning?

When a nonagenarian’s new 35-years-junior wife started liquidated his assets, his daughter, Lisa Royals, intervened. In her resulting lawsuit of Royals v. Lu (D1d4 Jul. 18, 2022) 81 Cal.App.5th 328., not only did Royals allege almost $1.1 million in financial elder abuse, she also sought a writ of attachment for three times that amount—apparently based on statutory penalties and attorney fees. And despite the requirement that attachments be based on retrospective rather than prospective debts, the trial court issued a $3.4 million attachment order.

The First District Court of Appeal reversed. Royals’s pleadings and affidavit were “unclear what justified an attachment amount of more than three times the actual damages that Royals pleaded on information and belief.” And even after the appellate court’s request for supplemental briefing on that point, the court found “Royals’s elusiveness” to be “troubling.”

The court held that seeking damages based on penalties and punitive damages, or in “an open-ended way” to justify an inflated damages award, cannot satisfy the attachment statutes.

There was also an interesting procedural quirk when the trial court ordered the attachment vacated, purportedly rendering the appeal moot. That didn’t work: a trial court cannot vacate an order once it’s on appeal.

So you won a huge court case? Big deal — can you collect? Judgment enforcement, and defense against judgment enforcement, are critically important to litigants. But enforcement sits in that twilight region in between the trial and the appeal, so most trial and appellate attorneys do not know a lot about it. But Joseph Chora, Esq. Chora does. Judgment enforcement is all he does.

We ask Joseph to share some of his best enforcement tips (a teaser: don’t file fraudulent-transfer actions; file a lien instead—it’s faster, cheaper, and it flips the burden of proof). And some of the biggest pitfalls (e.g., failing to make an enforcement plan early).

We also discuss:

• How to cut off the plaintiff’s right to judgment-enforcement fees — and if you’re the plaintiff, how to avoid this
• Increasing an appellate bond
• Enforce judgments against a trustee
• Pursuing alter egos
• Using evasions of judgment enforcement to get an appeal dismissed under the disentitlement doctrine
• How plaintiffs should safeguard against restitution awards if a satisfied judgment is reversed on appeal

After an ear doctor was sued for pushing a charity on one of his patients, the jury returned a defense verdict. But the Court of Appeal reversed in Silvester v. Niparko (D2d7 Jun. 20, 2022 no. B301926) 2022 WL 2197100 (nonpub. opn.), holding that the trial court abused its discretion when it refused to allow Silvester to offer evidence of his impaired and vulnerable state when Dr. Niparko pushed his charity on him.

Seldom do judgments get reversed based on evidentiary rulings. But the judge here steadfastly kept out all Silvester’s evidence on an element of his claims, even rebuttal evidence.

There was one more curious detail in the opinion. The opinion notes that, during the trial, “Respondent agreed to a general verdict form in exchange for Silvester's written agreement that he would not seek to execute on any estate assets other than insurance and indemnity protection.”

Typically, defendants prefer to have special verdict forms, because it is easier to challenge them in posttrial motions and appeal. Silvester, to get his way on a general verdict form, agreed to limit his rights to enforce the judgment against the estate beyond the insurance and indemnity coverage.

This is an interesting strategy that may be worth exploring in your next trial.

When trying to settle or mediate a case on appeal, how important is it to stay enforcement of judgment? Appellate mediator John Derrick talks with Tim Kowal and Jeff Lewis about whether posting a bond make a judgment-creditor more or less likely to come to the table. And what about the strange and rare personal-surety bonds?

When you have a judgment against a shell entity, you can amend the judgment to name the sole shareholder or member. That is called piercing the corporate veil. Until a few years ago, it didn’t work in reverse: if you have a judgment against a judgment-proof business owner, you can’t add the entity as a judgment-debtor. (Postal Instant Press, Inc. v. Kaswa Corp. (2008) 162 Cal.App.4th 1510, 1513, 77 Cal.Rptr.3d 96 (Postal Instant Press).) Except in 2017 in Curci Investments, LLC v. Baldwin (2017) 14 Cal.App.5th 214, 221 (Curci), the same appellate court said you could do that — that is, at least if you were dealing with an LLC. (Curci did not apply to corporations.)

But what if the LLC has innocent members? It wouldn’t be fair to innocent LLC members to add the LLC to a judgment because of whatever some other member did. That is the issue that came up in Blizzard Energy, Inc. v. Schaefers (D2d6 Nov. 18, 2021 no. B305774) 71 Cal.App.5th 823. And the court answered the question by holding: Yes, the LLC may be liable for the judgment, but no, we can’t offer any suggestions how it could be done consistent with an innocent member’s rights. The court remanded for the trial court to think about that.