Active Way International Limited v. Smith Electric Vehicles Corp.

Filing 52

ORDER by Judge Edward M. Chen Adopting Magistrate Judge's Report and Recommendations as to 44 . (emcsec, COURT STAFF) (Filed on 1/25/2018)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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ACTIVE WAY INTERNATIONAL

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Case No. 17-mc-80118-EMC

LIMITED,
Plaintiff,

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v.

ORDER ADOPTING MAGISTRATE
JUDGE’S REPORT AND
RECOMMENDATION
Docket No. 44

SMITH ELECTRIC VEHICLES CORP.,

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For the Northern District of California

United States District Court

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Defendant.

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This is an action to register and enforce a judgment entered by the Western District of

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Missouri (“Missouri Judgment”) against Defendant Smith Electric Vehicles Corp. and in favor of

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Plaintiff Active Way International Limited. The Missouri Judgment, in turn, was based on the

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recognition of a judgment obtained by Plaintiff against Defendant in Hong Kong (“Hong Kong

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Judgment”). The detailed factual and procedural background of both proceedings is set forth in

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the Magistrate Judge’s Report and Recommendation. See Docket No. 44 at 2-3.

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Defendant’s motion for a temporary stay of enforcement of the judgment, Docket No. 10,

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and Plaintiff’s motion to authorize sale of stock and credit bid, Docket No. 27, are both pending.

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The Magistrate Judge previously denied Defendant’s motion and granted Plaintiff’s motion, but

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after appeal to and remand from the Ninth Circuit, both orders were vacated because the parties

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had not consented to the jurisdiction of a magistrate judge. See Docket No. 43. Upon remand, the

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Magistrate Judge published a report and recommendation and re-assigned the case to an Article III

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judge. See Docket No. 44.

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Defendant filed objections to the report and recommendation and Plaintiff has responded.

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See Docket Nos. 46 and 51. For the reasons explained below, the Court ADOPTS the Magistrate

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Judge’s well-reasoned recommendations.
I.

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LEGAL STANDARD

hearings, and to submit to a judge of the court proposed findings of fact and recommendations for

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the disposition, by a judge of the court,” of various motions enumerated in the statute, including

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motions for injunctive relief. 28 U.S.C. § 636(b)(1)(B); see also Fed. R. Civ. P. 72(b)(1). After

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service of the magistrate judge’s recommendations, “any party may serve and file written

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objections to such proposed findings and recommendations as provided by rules of court.” Id. §

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636(b)(1); see also Fed. R. Civ. P. 72(b)(2). When such objections are made, “[a] judge of the

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court shall make a de novo determination of those portions of the report or specified proposed

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findings or recommendations to which objection is made.” Id. The reviewing court “may accept,

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For the Northern District of California

A magistrate judge may be designated “to conduct hearings, including evidentiary

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United States District Court

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reject, or modify, in whole or in part, the findings or recommendations made by the magistrate

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judge.” Id.; see also Fed. R. Civ. P. 72(b)(3).
This Court’s local rules further require that a motion for de novo determination “must

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specifically identify the portions of the Magistrate Judge’s findings, recommendation or report to

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which objection is made and the reasons and authority therefor.” Local Civ. R. 72-3(a).
II.

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DISCUSSION

Defendant objects that the Magistrate Judge’s report and recommendation should not be

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considered in toto because the parties did not consent to a magistrate judge’s jurisdiction. To the

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extent the Court considers the report and recommendation, Defendant objects that (i) the

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Magistrate Judge “neglects to point out that the judgment [it] was contesting was a default

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judgment in Hong Kong”; (ii) the Magistrate Judge erred by refusing to review either the Missouri

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Judgment or the Hong Kong Judgment under Rule 60(b); and (iii) the Magistrate Judge did not

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consider “new” evidence that the stock Plaintiff sought to execute upon had been improperly

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issued. Each issue is addressed below.

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A.

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The Magistrate Judge Was Authorized to Issue a Report & Recommendation
Defendant argues that in the absence of consent, the Magistrate Judge was not authorized

to issue a report and recommendation on the pending motions and that this Court should therefore
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magistrate judge’s jurisdiction that the magistrate judge must prepare a report and

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recommendation on dispositive motions, and then refer the matter to an Article III judge for

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decision. See 28 U.S.C. § 636(b)(1)(B). Moreover, this Court’s General Order No. 44 provided

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for initial assignment of the matter to the Magistrate Judge. See General Order No. 44, Section

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E.3 (“Upon filing . . . all civil miscellaneous matters will be randomly assigned in the first instance

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to a magistrate judge who will either resolve the matter or, if necessary, prepare a report and

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recommendation and request assignment of the matter to the district judge who was the general

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duty judge on the date the miscellaneous matter was filed.”). Thus, there is no merit to the claim

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that the Magistrate Judge lacked authorization to issue a report and recommendation. This Court

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will therefore consider the report and recommendation consistent with 28 U.S.C. § 636 and

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For the Northern District of California

disregard it. That argument is meritless. It is precisely when the parties do not consent to a

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United States District Court

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Federal Rule of Civil Procedure 72.

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B.

The Magistrate Judge’s Recommendations Are Sound

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Defendant’s objections to the Magistrate Judge’s recommendations are not persuasive.

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With respect to the objection that the Magistrate Judge “neglected” to mention that the

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Hong Kong Judgment was entered in default, that simply mischaracterizes the record. The

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Magistrate Judge was cognizant that the Hong Kong judgment was issued in default, see Docket

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No. 44 at 2:26, and was well aware that Defendant was arguing the Hong Kong judgment was

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procured improperly and therefore should be set aside, id. at 3:24-27. Thus, the Magistrate Judge

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did not “neglect” that contention.

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To the extent Defendant objects that the Magistrate Judge incorrectly held that Rule 60(b)

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does not permit this Court to reconsider or review a judgment entered by another court on the

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merits, the Magistrate was correct for the same reasons she stated.

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Moreover, Plaintiff seeks to enforce the Missouri Judgment in this Court, not the Hong

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Kong judgment. As the Magistrate correctly explained, Defendant is limited here to challenging

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the personal jurisdiction of the Missouri court, not the Hong Kong court. Such an argument would

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be futile because the docket of the Missouri case reveals that Defendant appeared there,

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participated in the proceedings, never objected to that court’s personal jurisdiction, and never filed
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a motion to dismiss on that basis. See Active Way Int’l Ltd. v. Smith Electric Vehicles Corp., Case

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No. 5:16-mc-06158-RK, Docket Nos. 21, 26, 30, 38, 43, 52 (W.D. Mo. 2016). Having failed to

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challenge the Missouri court’s personal jurisdiction in that court or take an appeal from its final

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judgment, Defendant may not now challenge that court’s personal jurisdiction for the first time in

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this Court.
Finally, Defendant argues there is “new” evidence concerning the validity of the stock

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certificates issued by Chanje, Inc. to Defendant and then seized by Plaintiff in executing the

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judgment against Defendant. Specifically, Defendant contends that the stocks were “issued” for

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the purpose of making them available for physical seizure. However, that appears to be an attack

judgment.1 Moreover, Defendant’s argument that this Court lacks jurisdiction to effectuate the

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For the Northern District of California

on the validity of the stock certificates, not to whether they could be seized in executing the

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United States District Court

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seizure of the stock certificates simply because Chanje is a Delaware corporation is unavailing

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because the certificates were physically located in California at Chanje’s principal place of

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business. The Magistrate Judge therefore correctly applied California law in executing the

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judgment and authorizing seizure of the stock certificates in California. See Docket No. 44 at 4-5

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(citing Fed. R. Civ. P. 69, which provides that federal courts apply state law in which it sits to

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execute a judgment); Cal. Code Civ. Proc. § 701.530 (explaining procedure for sale of personal

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property); see also Newco Energy Acquisitions Holdings, LLC v. Schulgen, 2017 WL 633897, at

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*2 (E.D. Cal. Feb. 15, 2017) (explaining stock is considered “personal property” under California

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law).

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Indeed, if Defendant contends the stock certificates are invalid, then it is unclear how it is
prejudiced by their seizure.
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Accordingly, Defendant’s objections are unavailing. For the reasons stated in the

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Magistrate Judge’s persuasive and well-reasoned report and recommendation, and those stated

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above, the Court hereby ADOPTS the recommendation in full, DENIES Defendant’s motion for a

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stay of enforcement, and GRANTS Plaintiff’s motion to authorize sale of stock and credit bid.

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This order disposes of Docket Nos. 10, 27, and 44.

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IT IS SO ORDERED.

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______________________________________
EDWARD M. CHEN
United States District Judge

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For the Northern District of California

United States District Court

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Dated: January 25, 2018

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