Illumination Dynamics Co., LTD. v. Pacific Lighting Solutions L.L.C. et al

Filing 69

ORDER by Judge Claudia Wilken GRANTING DEFENDANTS 50 MOTION FOR RELIEF FROM NON-DISPOSITIVE PRETRIAL ORDER OF MAGISTRATE JUDGE. (ndr, COURT STAFF) (Filed on 8/18/2014)

1
2

UNITED STATES DISTRICT COURT

3

FOR THE NORTHERN DISTRICT OF CALIFORNIA

4

OAKLAND DIVISION

5
6 ILLUMINATION DYNAMICS CO., LTD., a

Case No: C 14-0078

foreign company,
7

Plaintiff,
8

vs.
9

ORDER GRANTING
DEFENDANT’S MOTION FOR
RELIEF FROM NON-DISPOSITIVE
PRETRIAL ORDER OF
MAGISTRATE JUDGE

PACIFIC LIGHTING SOLUTIONS L.L.C.,
10 and BILL ZHANG, an individual,
11

Dkt. 50

Defendants.

12
13

Plaintiff Illumination Dynamics (“Plaintiff”) brings the instant action against

14

Defendant Pacific Lighting Solutions L.L.C. (“Defendant”), alleging that it breached the

15

parties’ agreements to pay for goods that Defendant received from Plaintiff. Prior to the

16

reassignment of the action to this Court, the previously assigned judge, Magistrate Judge

17

Joseph Spero (“Magistrate”), granted Plaintiff’s application for a Writ of Attachment

18

(“Writ”). Due to defects in the Writ, the Magistrate, upon referral from the Court,

19

considered and granted Plaintiff’s request for an additional Writ.

20

The parties are presently before the Court on Defendant’s Motion for Relief from

21

Nondispositive Pretrial Order of Magistrate Judge, pursuant to Federal Rule of Civil

22

Procedure 72(a), 28 U.S.C. § 636(b)(1)(A), and Local Rule 72-2. Def.’s Mot., Dkt. 50.

23

Having read and considered the papers filed in connection with this matter and being fully

24

informed, the Court hereby GRANTS the motion for the reasons set forth below. The

25

Court, in its discretion, finds this matter suitable for resolution without oral argument. See

26

Fed. R. Civ. P. 78(b); N.D. Cal. Civ. L.R. 7-1(b).

27
28

1

I.

BACKGROUND

2

A.

3

Plaintiff is a Taiwanese company that manufactures electronic lighting products.

FACTUAL SUMMARY

4

Compl. ¶ 1, Dkt. 1. Defendant is a limited liability company which was organized and has

5

its principal place of business in Washington. Id. ¶ 2. In April 2012, Plaintiff and

6

Defendant entered into an oral agreement pursuant to which Defendant was to act as

7

Plaintiff’s importer of its products into the United States. Id. ¶ 6. Specifically, Defendant

8

arranged for the importation of the goods, which were then, in turn, sold to major retailers,

9

such as Menard, Inc. (“Menard”), Orchard Supply Hardware and True Value Company. Id.

10

Within sixty days of the delivery of the goods, the retailers were to pay Defendant, which,

11

in turn, agreed to telex its payment for the goods to Plaintiff. Id. ¶ 7.

12

In or around April 2013, Defendant allegedly breached the parties’ agreement by

13

failing to remit to Plaintiff an outstanding balance of $1,474,879.41, representing the cost

14

of goods manufactured by Plaintiff and imported and sold in the United States by

15

Defendant. Id. ¶ 10. As a result, on April 15, 2013, the parties entered into a written

16

agreement that stipulated, inter alia, that Defendant was to make a down payment of

17

$150,000, id., and to “direct all of the above said retailers to submit all of their payments

18

for the goods purchased to a dedicated post office box located in Fremont, California,” id.

19

¶ 11. According to Plaintiff, in October 2013, Defendant “began to breach this written

20

agreement by having the above said retailers stop directing the payments for goods received

21

to the dedicated post office box, and, instead had the retailers send the payments directly to

22

the Defendant.” Id. ¶¶ 14.

23

B.

24

On January 6, 2014, Plaintiff filed the instant diversity jurisdiction action in this

PROCEDURAL HISTORY

25

Court alleging four state law claims for: (1) breach of contract; (2) anticipatory breach of

26

contract; (3) money had and received; and (4) fraud. Dkt. 1. At the time of filing, the

27

action was assigned to the Magistrate for all purposes. Dkt. 3.

28
-2-

1

On January 16, 2014, Plaintiff filed an Ex Parte Application for Writ of Attachment.

2

Dkt. 8. The Magistrate set a briefing schedule and motion hearing date of January 23,

3

2014. Dkt. 10. Defendant neither filed an opposition to the application nor appeared at the

4

hearing. Consequently, the Magistrate granted Plaintiff’s application. Dkt. 12, 14. The

5

Magistrate signed the proposed order submitted by Plaintiff which states that, “The Plaintiff

6

has the right to attach the property of Defendant . . . in the amount of $228,457.16.” Dkt.

7

14 at 2. The order further provided that “the defendant, or any other person, shall transfer

8

to the levying officer possession of the following property: Any and all monies from

9

Menard, Inc. which represents its payment for [seven] Purchase Orders . . . .” Id.

10

The Magistrate issued a Writ on January 24, 2014. Dkt. 16. The Writ, which was

11

prepared by Plaintiff, directed the Sheriff of Eau Claire County, Wisconsin (the county

12

where Menard maintains its corporate office and has its principal place of business) to

13

attach the payments from Menard. Id. However, the Writ failed to specify that the levying

14

officer was to retain custody of the attached property pending the entry of judgment in this

15

case or order of the Court. As a result, Menard sent a check in the amount of $183,504.60

16

to the Eau Claire County Sheriff’s Department with directions to forward the check to this

17

Court. Id. Ex. 4. On March 18, 2014, the Clerk of this Court notified Plaintiff that, absent

18

specific instruction from the Court, he was required to return the check for the attached

19

amount to Menard. Id. Ex. 3.

20

As a result of the foregoing, on March 25, 2014, Plaintiff filed an Ex Parte

21

Application for Issuance of Additional Writ of Attachment, which the Court referred to the

22

Magistrate for resolution, pursuant to 28 U.S.C. § 636(b)(1)(A). Dkt. 31, 33.1 Defendant

23

filed an opposition to the application on March 26, 2014. Dkt. 34. On March 27, 2014, the

24

Magistrate granted Plaintiff’s application and ordered the issuance of an additional Writ,

25

which specifies that: (1) “the Clerk of the Court [is] to retain the above-referenced property

26

and forthwith deposit the money with the Treasurer of the United States or a designated

27
28

1

As a result of Defendant’s refusal to consent to the jurisdiction of the Magistrate,
Dkt. 23, the action was reassigned to this Court on February 20, 2014, Dkt. 23.
-3-

1

depository[.] . . . .” and (2) “the levying officer or Clerk of the Court shall maintain custody

2

of the attached property, pending a judgment in the above reference[d] case or other orders

3

of the court.” Dkt. 35.

4

On April 14, 2014, Defendant filed the instant Motion for Relief from

5

Nondispositive Pretrial Order of Magistrate Judge, which seeks to the reverse the

6

Magistrate’s order on the application for an additional Writ. Dkt. 50. Defendant argues

7

that the Magistrate exceeded his authority on the ground that a California court has no

8

jurisdiction to issue a writ of attachment to levy property located outside of California.

9

Alternatively, Defendant asserts that the additional Writ impermissibly transmutes the

10

Clerk of the Court into a levying officer. Plaintiff responds that Defendant waived its right

11

to challenge either Writ by failing to oppose the original Writ application. Dkt. 55.

12

II.

13

LEGAL STANDARD
The Court reviews a motion to reconsider a magistrate judge’s ruling under the

14

“clearly erroneous or contrary to law” standard set forth in 28 U.S.C. § 636(b)(1)(A). Fed.

15

R. Civ. P. 72(a); Civ. L.R. 72-2. “A finding is ‘clearly erroneous’ when although there is

16

evidence to support it, the reviewing court on the entire evidence is left with the definite

17

and firm conviction that a mistake has been committed.” United States v. U.S. Gypsum

18

Co., 333 U.S. 364, 395 (1948); Sec. Farms v. Int’l Bhd. of Teamsters, 124 F.3d 999, 1014

19

(9th Cir. 1997). Questions of law are reviewed de novo. Osband v. Woodford, 290 F.3d

20

1036, 1041 (9th Cir. 2002).

21

III.

DISCUSSION

22

A.

23

The threshold question presented is whether Defendant’s objection to the

24

Magistrate’s additional Writ is properly before the Court. As noted, the instant motion

25

challenges the additional Writ on two grounds; to wit, the Magistrate exceeded his

26

jurisdiction in attaching out-of-state property and his order impermissibly transmutes the

27

Clerk of the Court into a levying officer. As to the first contention, Plaintiff contends that

28

Defendant waived any challenge to the scope of the Magistrate’s authority by failing to

WAIVER

-4-

1

challenge the first Writ application. More specifically, Plaintiff argues that under Federal

2

Rule of Civil Procedure 72(a), Defendant had fourteen days to object to the Magistrate’s

3

original ruling, and that by failing to do so, it cannot now seek to challenge the additional

4

Writ based on an alleged defect in the original Writ. This contention lacks merit.

5
6
7
8
9
10
11

Rule 72(a) provides, in relevant part:
(a) Nondispositive Matters. When a pretrial matter not
dispositive of a party’s claim or defense is referred to a
magistrate judge to hear and decide, the magistrate judge must
promptly conduct the required proceedings and, when
appropriate, issue a written order stating the decision. A party
may serve and file objections to the order within 14 days after
being served with a copy. A party may not assign as error a
defect in the order not timely objected to. The district judge in
the case must consider timely objections and modify or set
aside any part of the order that is clearly erroneous or is
contrary to law.

12

Fed. R. Civ. P. 72(a) (emphasis added). By its own terms, Rule 72(a) applies where the

13

case has been “referred” to a magistrate judge by a district court. In that case, a party

14

dissatisfied with the magistrate judge’s ruling may file objections, which are then heard by

15

the district judge assigned to the case. Id. That situation is not presented here. At the time

16

the Magistrate issued the first Writ, he was properly assigned to this case for all purposes

17

under the Court’s Assignment Plan. See Gen. Order 44. Because the Magistrate was then

18

acting as the assigned judge, and not on a referral, there was no district court judge assigned

19

to the case, and ergo, no district court judge to whom objections could have been presented.

20

Since the Magistrate was properly presiding over the action when he issued the first

21

Writ, Defendant’s remedy is governed by Civil Local Rule 7-9, which provides that a party

22

may file a motion for leave to move for reconsideration based on a change in the facts or

23

law, the discovery of new facts or legal authority, or a manifest failure of the court to

24

consider material facts or dispositive legal arguments. Civ. L.R. 7-9(b). Unlike Rule 72(a),

25

there is no specific deadline to file a motion for leave to file a motion for reconsideration,

26

except that such motion must be filed “[b]efore the entry of a judgment adjudicating all of

27

the claims and the rights and liabilities of all the parties in a case . . . .” Id. 7-9(a). Since no

28

such judgment has been entered in this case, the Magistrate’s original ruling remains
-5-

1

subject to challenge. For that reason, the Court rejects Plaintiff’s contention that Defendant

2

has waived its right to challenge the Magistrate’s authority to issue a writ of attachment to

3

attach out-of-state property. The Court now turns to the merits of Defendant’s motion.

4

B.

5

Under Federal Rule of Civil Procedure 64, a federal court applies the attachment

6

laws and procedures of the state in which it is located, which, in this case, is California.

7

Under California law, a court may issue an attachment “only in an action on a claim or

8

claims for money, each of which is based upon a contract, express or implied, where the

9

total amount of the claim or claims is a fixed or readily ascertainable amount not less than

MERITS

10

five hundred dollars ($500) . . . .” Cal. Civ. Proc. Code § 483.010. In issuing a writ of

11

attachment, the court must make the following findings:

12

(1) The claim upon which the attachment is based is one upon
which an attachment may be issued.

13
14
15

(2) The plaintiff has established the probable validity of the
claim upon which the attachment is based.
(3) The attachment is not sought for purposes other than the
recovery on the claim upon which the attachment is based.

16
17
18
19

(4) The amount to be secured by the attachment is greater than
zero.
Id. § 484.090(a).
“If a writ of attachment is issued, the court may also issue an order directing the

20

defendant to transfer to the levying officer either or both of the following: [¶]

21

(1) Possession of the property to be attached if the property is sought to be attached by

22

taking it into custody. [¶] (2) Possession of documentary evidence of title to property of or

23

a debt owed to the defendant that is sought to be attached. An order pursuant to this

24

paragraph may be served when the property or debt is levied upon or thereafter.” Id.

25

§ 482.080(a). “The Attachment Law statutes are subject to strict construction, and where a

26

court is required to exercise its jurisdiction in a particular manner or subject to certain

27

limitations, an act beyond those limits is in excess of its jurisdiction and void.” Epstein v.

28

Abrams, 57 Cal.App.4th 1159, 1168 (1997).
-6-

1

Under California law, when property under a writ of attachment is levied upon, an

2

attachment lien on the property is created. Cal. Code Civ. Proc. § 488.500. “‘Levying

3

officer’ means the sheriff or marshal who is directed to execute a writ or order . . . .” Id.

4

§§ 481.140. “A writ of attachment shall be directed to a levying officer in the county in

5

which the property of the defendant described in the writ may be located and to any

6

registered process server.” Cal. Civ. Code § 488.020(a). As such, a California court’s

7

jurisdiction to compel a levying officer to levy a writ of attachment is generally limited to

8

property located within California. Pac. Decision Sciences Corp. v. Superior Court, 121

9

Cal. App. 4th 1100, 1107 (2004) (“[A] California court lacks jurisdiction to command a

10

sheriff, marshal, or constable in Florida or New Jersey to levy a California writ of

11

attachment on a New Jersey company or a Florida bank.”); accord Paul H. Ashchkar & Co.

12

v. Curtis, 327 F.2d 306, 307-308 (9th Cir. 1963) (holding that a California district court had

13

no authority to issue a writ of attachment on property located in New York).

14

“The type of property sought to be attached determines its location.” Id. In this

15

case, the property at issue is intangible, as it consists of the monies that Menard allegedly

16

owes to Defendant, which, in turn, is owed to Plaintiff. Pac. Decision Sciences, 121 Cal.

17

App. 4th at 1107. In that instance, the location of the debtor or obligor, i.e., Menard, “is

18

considered the location of the intangible property [P]laintiff seeks to reach.” Id. Since

19

Menard is located in Eau Claire County, Wisconsin, the attachment order must be directed

20

to the Sheriff or Marshal in that county. Id. However, the Magistrate lacked the authority

21

to issue an order to attach property located in another state. Id. Notably, while Pacific

22

Decision Sciences and Paul H. Ashchkar & Co., are on point, dispositive and discussed at

23

length in Defendant’s moving papers, Plaintiff addresses neither case in its opposition.

24

Rather, Plaintiff focuses on the issue of waiver, which, as discussed, is without merit.

25
26
27
28
-7-

1

Accordingly, the Court concludes that the Magistrate clearly erred in issuing the Writs at

2

issue.2

3

IV.

CONCLUSION

4

For the reasons stated above,

5

IT IS HEREBY ORDERED THAT Defendant’s Motion for Relief from

6
7
8

Nondispositive Pretrial Order of Magistrate Judge is GRANTED.
IT IS SO ORDERED.
Dated: August 18, 2014

______________________________
SAUNDRA BROWN ARMSTRONG
United States District Judge

9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
2

28

Since it is clear that the Magistrate had no authority to levy property located in
another state, the Court need not reach Defendant’s alternative argument that the additional
Writ impermissibly transmutes the Clerk of the Court into a levying officer.
-8-