Passport Health, Inc. v. Travel Med Inc. et al

Filing 142

ORDER signed by Judge Garland E. Burrell, Jr. on 4/13/2012 ORDERING 132 Plaintiffs request for an injunction is DENIED. Plaintiff's request for a Post-Judgment order is DENIED. (Reader, L)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE EASTERN DISTRICT OF CALIFORNIA

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PASSPORT HEALTH, INC., a
Maryland Corporation,

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Plaintiff,

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v.
TRAVEL MED, INC., a California
Corporation, and GINA FLAHERTY,
an individual,
Defendants.
________________________________

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2:09-cv-01753-GEB-JFM
ORDER

Plaintiff filed a motion for post-judgment orders against
Defendant Travel Med, Inc. (“Travel Med”), seeking:
An Order pursuant to Code of Civil Procedure
section 699.040 that [Travel Med] shall turn over
to PLAINTIFF all non-exempt personal property
together with documentary and electronic evidence
of title, including but not limited to [Travel
Med’s] customer list, business telephone number(s),
. . . and [Travel Med’s] business web address(es)
. . . .
An Order pursuant to Code of Civil Procedure
sections 708.510-708.560 directing [Travel Med] to
assign to PLAINTIFF, or in the alternative to a
Receiver, to the extent necessary to fully pay and
satisfy the judgment with all accrued interest and
post-judgment costs, the rights to any and all
payments due or to become due to [Travel Med]
including but not limited to from [Travel Med’s]
business operations at 4250 H Street, Suite 4,
Sacramento, CA 95819, 850 Iron Point Road, Suite
150, Folsom, CA 95630 and 125 N. Lincoln Street,
Suite I, Dixon, CA . . . .
An Order pursuant to Code of Civil Procedure
sections 564(b)(4) and 708.620 appointing a Post
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Judgment Receiver to take possession of [Travel
Med’s] business and any and all real and/or
personal property owned by [Travel Med] either
directly, indirectly, or beneficially (which are
not exempt from execution), all for the purpose of
having it lawfully liquidated and the proceeds
applied to the satisfaction of the Judgment, and to
have access to all books and records pertaining to
[Travel Med’s] business, all for the purpose of
identifying
and
applying
its
assets
toward
satisfaction of the Judgment . . . .

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An Order pursuant to Code of Civil Procedure
sections 526 and 708.520(a) restraining [Travel
Med] from assigning or otherwise disposing, through
sale, transfer, conveyance, or encumbrance of all
of [Travel Med’s] property, assets and rights to
payments pending satisfaction of the Judgment
herein.

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(Pl.’s

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“Plaintiff’s motion must be denied in its entirety because Travel Med’s

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sole shareholder, [Gina Flaherty], filed for bankruptcy on or about

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December 30, 2011 and an automatic stay bars [Plaintiff] from taking any

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further action[.]” (Def.’s Opp’n 1:24-26.) Further, Travel Med argues

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Plaintiff’s

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requested

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ambiguous; and its requests for a receiver and a restraining order is

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unnecessary. Id. 2:3-16.

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Mot.

1:23-2:23.)

requested

assignment

Travel

turnover
order

for

Med

opposes

order
all

is

the

improper

payments

is

motion,

arguing

and

broad;

its

broad,

vague,

and

I. AUTOMATIC STAY

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Travel Med argues “an automatic stay bars [Plaintiff] from

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taking any further action against [Travel Med] under 11 [U.S.C.] § 362

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because protection of the automatic stay is extended to non-debtors

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where an action [against] a non-debtor might have a significant adverse

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impact upon the debtor.” Id. 1:26-28. Plaintiff rejoins, arguing “the

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automatic stay [imposed because of Flaherty’s] Chapter 7 filing does not

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extend to [Travel Med], despite the fact that [Travel Med] is wholly

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owned by Ms. Flaherty.” (Pl.’s Reply 2:5-7.)
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“The automatic stay of § 362(a)(1) prohibits the ‘commencement

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or continuation . . . of a judicial, administrative, or other action or

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proceeding against the debtor . . . to recover a claim against the

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debtor that arose before the commencement of the case under this

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title.’” Zurich Am. Ins. Co. v. Trans Cal Assoc., No. CIV. 2:10-01957,

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2011 WL 6329959, at *2 (E.D. Cal. Dec. 16, 2011) (quoting § 362(a)(1)).

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“In the absence of special circumstances, stays pursuant to [§] 362(a)

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are limited to debtors and do not include . . . non-bankrupt co-

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defendants.” Ingersoll-Rand Fin. Corp. v. Miller Mining Co., 817 F.2d

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1424, 1427 (9th Cir. 1987). Here, “the entity defendant[] [has] not

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filed

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automatically stayed by § 362(a).” Zurich Am. Ins. Co., 2011 WL 6329959,

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at *2; see also Queenie, Ltd. v. Nygard Int’l, 321 F.3d 282, 287 (2d

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Cir. 2003) (“[A] suit against a codefendant is not automatically stayed

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by a debtor’s bankruptcy filing.”).

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for

bankruptcy,

and

so

the

claims

against

[it]

are

not

II. REQUESTED RELIEF
The execution of final judgments is governed by Federal Rule
of Civil Procedure (“Rule”) 69(a)(1), which states:

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A money judgment is enforced by a writ of
execution, unless the court directs otherwise. The
procedure
on
execution—and
in
proceedings
supplementary to and in aid of judgment or
execution—must accord with the procedure of the
state where the court is located, but a federal
statute governs to the extent it applies.

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Therefore, “[p]ost-judgment enforcement proceedings in this court must

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comply with California law.” Garden City Boxing Club, Inc. v. Briano,

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No. CIV-F-06-1270, 2007 WL 4463264, at *2 (E.D. Cal. Dec. 17, 2007)

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(citing Credit Suisse v. U.S. Dist. Court for Cent. Dist. of Cal., 130

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F.3d 1342, 1344 (9th Cir. 1997); Hilao v. Estate of Marcos, 95 F.3d 848,

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850 (9th Cir. 1996)). The California Code of Civil Procedure “provides

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procedures for the assignment of assets, issuance of restraining orders,

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and issuance of turnover orders.” UMG Recordings, Inc. v. BCD Music

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Grp., Inc., No. CV 07-05808, 2009 WL 2213678, at *1 (C.D. Cal. July 9,

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2009).

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A.

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Turnover Order Under Section 699.040
Plaintiff

seeks

“[a]n

Order

pursuant

to

Code

of

Civil

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Procedure section 699.040 that [Travel Med] shall turn over to PLAINTIFF

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all

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electronic evidence of title, including but not limited to [Travel

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Med’s] customer list, business telephone number(s), including but not

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limited

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address(es)[.]” (Pl.’s Mot. 1:23-2:2.) Defendant counters arguing, inter

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alia, that “a turnover order under [section] 699.040 may only be used to

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have the judgment debtor transfer tangible property to the levying

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officer because that is property that can be taken into custody.”

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(Def.’s Opp’n 4:13-15 (emphasis omitted).)

non-exempt

to

personal

(916)

property

254-2100,

and

together

[Travel

with

documentary

Med’s]

business

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web

Section 699.040(a) prescribes:

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and

(a) If a writ of execution is issued, the judgment
creditor may apply to the court ex parte, or on
noticed motion if the court so directs or a court
rule so requires, for an order directing the
judgment debtor to transfer to the levying officer
either or both of the following:

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(1) Possession of the property sought to be
levied upon if the property is sought to be
levied upon by taking it into custody.

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(2) Possession of documentary evidence of
title to property of or a debt owed to the
judgment debtor that is sought to be levied
upon. An order pursuant to this paragraph may
be served when the property or debt is levied
upon or thereafter.

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Cal. Civ. Proc. Code. § 699.040(a). “The statute allows a judgment

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creditor to seek an order directing the judgment debtor to transfer [the
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enumerated property and documentary evidence] to the levying officer

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. . . . It does not allow a turnover to the judgment creditor.”

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Del Mar Homeowners Ass’n, Inc. v. McMahon, 174 Cal. App. 4th 1386, 1391

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(2009) (emphasis in original). Therefore, Plaintiff’s request to turn

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over all non-exempt personal property to Plaintiff is DENIED.

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B.

Palacio

Assignment Order Under Section 708.510-.560

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Plaintiff also seeks

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An Order pursuant to Code of Civil Procedure
sections 708.510-708.560 directing [Travel Med] to
assign to PLAINTIFF, or in the alternative to a
Receiver, to the extent necessary to fully pay and
satisfy the judgment with all accrued interest and
post-judgment costs, the rights to any and all
payments due or to become due to [Travel Med]
including but not limited to from [Travel Med’s]
business operations at 4250 H Street, Suite 4,
Sacramento, CA 95819, 850 Iron Point Road, Suite
150, Folsom, CA 95630 and 125 N. Lincoln Street,
Suite I, Dixon, CA[.]

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(Pl.’s Mot. 2:3-10.) Travel Med rejoins, arguing Plaintiff’s “request

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for ‘all payments due to [Travel Med] from its business operations’ is

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too broad, vague, and ambiguous to warrant consideration.” (Def.’s Opp’n

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6:21-22.)

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Under section 708.510(a):

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Except
as
otherwise
provided
by
law,
upon
application of the judgment creditor on noticed
motion, the court may order the judgment debtor to
assign to the judgment creditor or to a receiver
appointed pursuant to Article 7 (commencing with
Section 708.610) all or part of a right to payment
due or to become due, whether or not the right is
conditioned on future developments, including but
not limited to the following types of payments: (1)
Wages due from the federal government that are not
subject
to
withholding
under
an
earnings
withholding order. (2) Rents. (3) Commissions.
(4) Royalties. (5) Payments due from a patent or
copyright. (6) Insurance policy loan value.

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“Although the Court may take into consideration all relevant factors,
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[including those enumerated in section 708.510(c),] the sole constraints

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placed on the Court are that the right to payment be assigned only to

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the extent necessary to satisfy the creditor’s money judgment and that,

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where part of the payments are exempt, the amount of payments assigned

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should not exceed the difference between the gross amount of the

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payments and the exempt amount.” Sleepy Hollow Inv. Co. No. 2 v.

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Prototek, Inc., No. C 03-4792, 2006 WL 279349, at *2 (N.D. Cal. Feb. 3,

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2006); see also Cal. Civ. Pro. Code § 708.510(d) (“A right to payment

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may be assigned pursuant to this article only to the extent necessary to

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satisfy the money judgment.”).

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“‘[D]etailed

evidentiary

support’

is

not

required

under

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[section]

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[section] 708.510 refers to a ‘payment due or become due,’ which

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suggests

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required.” Legal Additions LLC v. Kowalksi, No. C-08-2754, 2011 WL

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3156724, at *2 (N.D. Cal. July 26, 2011) (emphasis omitted) (internal

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citations

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speculation before the remedy of an assignment can be provided.” Id.

708.510.

some

But

degree

omitted).

some

of

evidentiary

concreteness

“Certainly,

there

support

to

the

needs

to

is

still

expected

be

more

needed;

payment

than

is

just

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“Plaintiff’s request appears to be for a general assignment of

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all possible funds due to Defendant; [it] has failed to identify any

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specific source of money to be assigned.” Garden City Boxing Club, Inc.

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v. Briano, No. CIV-F-06-1270, 2007 WL 4463264, at *2 (E.D. Cal. Dec. 17,

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2007); see also UMG Recordings, Inc. v. BCD Music Grp., Inc., No. CV 07-

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05808, 2009 WL 2213678, at *2 (C.D. Cal. July 9, 2009) (“The Court

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rejected UMG’s assignment request because of its generality and failure

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to identify any specific assets.”). Therefore, Plaintiff’s request for

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an assignment of all payments due is DENIED.

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C.

Appointment of a Receiver

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Plaintiff also seeks

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[a]n Order pursuant to Code of Civil Procedure
sections 564(b)(4) and 708.620 appointing a Post
Judgment Receiver to take possession of [Travel
Med’s] business and any and all real and/or
personal property owned by [Travel Med], either
directly, indirectly, or beneficially (which are
not exempt from execution), all for the purpose of
having it lawfully liquidated and the proceeds
applied to the satisfaction of the Judgment, and to
have access to all books and records pertaining to
[Travel Med’s] business, all for the purpose of
identifying
and
applying
its
assets
toward
satisfaction of the Judgment[.]

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(Pl.’s Mot. 2:11-19.) Travel Med rejoins, arguing “the appointment of a

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receiver is not necessary to protect anyone’s interest in the property.”

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(Def.’s Opp’n 8:15-17.)

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“Rule 66 governs the appointment of a receiver in federal

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court.” Office Depot Inc. v. Zuccarini, 596 F.3d 696, 701 (9th Cir.

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2010). “Under [Rule] 66, federal courts are authorized to appoint

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receivers, but doing so is considered an ‘extraordinary remedy.’” First

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Cmty. Bank v. Miller, No. 09-80131, 2010 WL 2528964, at *2 (N.D. Cal.

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June 18, 2010) (quoting Canada Life Assurance Co. v. LaPeter, 563 F.3d

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837, 844 (9th Cir. 2008)).

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“Notwithstanding,

when

the

federal

statute

is

a

general

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procedural rule, specific state statutes addressing the particular

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proceeding at issue apply.” Joe Hand Promotions, Inc. v. Saddeldin, No.

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1:09-cv-02197, 2011 WL 1806919, at *1 (E.D. Cal. May 10, 2011) (citing

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Office Depot Inc., 596 F.3d at 701). “Therefore, state law has been

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applied under Rule 69(a) to appointment of receivers, when such actions

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are undertaken in aid of executing a judgment.” Id.

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Under California law, “the court may appoint a receiver to

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enforce the judgment where the judgment creditor shows that, considering
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the interests of both the judgment creditor and the judgment debtor, the

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appointment of a receiver is a reasonable method to obtain the fair and

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orderly satisfaction of the judgment.” Cal. Civ. Proc. Code § 708.620.

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“The legislative comment to [section] 708.620 indicates that, under this

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section, a receiver may be appointed where a writ of execution would not

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reach certain property and other remedies appear inadequate.” J&J Sports

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Prods., Inc. v. Huezo, No. C 09-4906, 2011 WL 1134265, at *2 (N.D. Cal.

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Mar. 25, 2011).

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Plaintiff argues as follows in support of its request for
appointment of a receiver:

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The appointment of a post-judgment receiver would
be the most efficient way to enforce collection and
the most efficient way to affect an assignment
order. There would be minimal interruption in
[Travel Med’s] business by having a post-judgment
receiver appointed to take possession of [Travel
Med’s] business and any and all non-exempt real
and/or personal property owned by [Travel Med] for
the purpose of having it lawfully liquidated and
the proceeds applied to the satisfaction of the
Judgment, and to have access to all books and
records pertaining to [Travel Med’s] business, all
for the purpose of applying such assets toward
satisfaction of the Judgment.

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(Pl.’s Mot. 7:1-8.) Since Plaintiff has not shown why appointment of a

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receiver is a reasonable method of satisfying the judgment, that certain

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property is unable to be reached without it, and that other remedies are

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inadequate, Plaintiff’s request to appoint a receiver is DENIED.

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D.

Injunction
Plaintiff

seeks

“[a]n

Order

pursuant

to

Code

of

Civil

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Procedure sections 526 and 708.520(a) restraining [Travel Med] from

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assigning or otherwise disposing, through sale, transfer, conveyance, or

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encumbrance of all of [Travel Med’s] property, assets and rights to

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payments pending satisfaction of the Judgment herein.” (Pl.’s Mot. 2:208

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23.)

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“Under

[section]

708.520,

a

court

may

issue

an

order

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restraining the judgment debtor from assigning or otherwise disposing of

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the right to payment that is sought to be assigned upon a showing of

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need for the order.” Legal Additions LLC v. Kowalksi, No. C-08-2754,

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2011 WL 3156724, at *2 (N.D. Cal. July 26, 2011) (internal quotation

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marks omitted). However, “[a]s the court is denying Plaintiff’s request

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for assignment under [section] 708.510, the court also declines to issue

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a restraining order.” Garden City Boxing Club, Inc. v. Briano, No. CIV-

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F-06-1270, 2007 WL 4463264, at *2 (E.D. Cal. Dec. 17, 2007). Therefore,

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Plaintiff’s request for an injunction is DENIED.

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III. CONCLUSION

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For the stated reasons, Plaintiff’s request for post-judgment

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orders is DENIED.

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Dated:

April 13, 2012

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GARLAND E. BURRELL, JR.
United States District Judge

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