Cadence Design Systems, Inc. v. Pounce Consulting, Inc.

Filing 267

ORDER by Judge Phyllis J. Hamilton denying 228 Administrative Motion to File Under Seal; denying 229 Motion to Amend/Correct ; denying 254 Administrative Motion to File Under Seal; denying 261 Administrative Motion To File Additional Information. (pjhlc2S, COURT STAFF) (Filed on 8/6/2019)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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CADENCE DESIGN SYSTEMS, INC.,

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v.

ORDER

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POUNCE CONSULTING, INC., et al.,

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United States District Court
Northern District of California

Case No. 17-cv-04732-PJH

Plaintiff,

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Re: Dkt. 229

Defendants.

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Plaintiff Cadence Design Systems, Inc.’s (“Cadence”) motion to amend judgment

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to add Roger Viera as a judgment debtor came on for hearing before this court on July

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17, 2019. Plaintiff appeared through its counsel, Guy Ruttenberg and Michael

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Eshaghian. Both defendants, Pounce Consulting, Inc. (“Pounce USA”) and Pounce

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Consulting, S.A. de C.V. (“Pounce Mexico” or “Pounce SA,” collectively “Pounce”), are in

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default and did not appear. Roger Viera appeared through his counsel, Tammy Lund.

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Having read the papers filed by the parties and carefully considered their arguments and

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the relevant legal authority, and good cause appearing, the court hereby rules as follows.

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BACKGROUND

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As with its previous order, the court declines to recite this action’s tortured

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procedural history. The court finds it sufficient to note that after nearly two years of on-

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and-off again participation, the court entered both defendants’ default for failing to retain

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substitute counsel. On April 22, 2019, the court adopted Magistrate Judge Sallie Kim’s

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recommendations that this court grant default judgment against both defendants and find

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that Pounce USA is an alter ego of Pounce Mexico. See Dkts. 205, 218, 219. Three

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days later, the court entered final judgment, awarding plaintiff $6,983,178.29 for

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defendants’ breach of contract, copyright infringement, and circumvention of copyright

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protections. Dkt. 221 at 2-3. A subsequent order awarded plaintiff about $2.1 million in

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attorneys’ fees and costs. Dkt. 242.
The Pounce defendants have not voluntarily paid any of those amounts, which has

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forced plaintiff to engage in post-judgment litigation to secure payment. Presumably as

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part of that attempt, on May 29, 2019, plaintiff filed the present motion to amend the

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judgment to add Viera as a judgment debtor pursuant to Federal Rule of Civil Procedure

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69(a) and California Code of Civil Procedure § 187. That motion argues that Viera was

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not only the named CEO of Pounce Mexico and the named CFO of Pounce USA at times
relevant to this litigation, but in fact was the alter ego of both companies and controlled

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United States District Court
Northern District of California

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the Pounce entities’ conduct in this litigation. On June 26, 2019, Viera filed an opposition

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and plaintiff subsequently filed a timely reply.
DISCUSSION

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A.

Legal Standard

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Rule 69(a) provides that “[t]he procedure on execution—and in proceedings

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supplementary to and in aid of judgment or execution—must accord with the procedure of

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the state where the court is located, but a federal statute governs to the extent it applies.”

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The Ninth Circuit has interpreted Rule 69(a) as “empower[ing] federal courts to rely on

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state law to add judgment-debtors[.]” In re Levander, 180 F.3d 1114, 1120–21 (9th Cir.

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1999).

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Here, the applicable state law is § 187 of the California Code of Civil Procedure.

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“Under section 187, the court has the authority to amend a judgment to add additional

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judgment debtors.” See NEC Elecs. v. Hurt, 208 Cal. App. 3d 772, 778 (1989) (“NEC”).

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“This is an equitable procedure based on the theory that the court is not amending the

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judgment to add a new defendant but is merely inserting the correct name of the real

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defendant.” Id. The doctrine “does not guard every unsatisfied creditor of a corporation

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but instead affords protection where some conduct amounting to bad faith makes it

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inequitable for the corporate owner to hide behind the corporate form. Difficulty in
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enforcing a judgment or collecting a debt does not satisfy this standard.” Sonora

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Diamond Corp. v. Superior Court, 83 Cal. App. 4th 523, 539 (2000); Perfect 10, Inc. v.

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Giganews, Inc., 847 F.3d 657, 677 (9th Cir. 2017) (same).
“A § 187 amendment requires (1) that the new party be the alter ego of the old

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party and (2) that the new party had controlled the litigation, thereby having had the

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opportunity to litigate, in order to satisfy due process concerns.” Katzir's Floor & Home

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Design, Inc. v. M-MLS.com, 394 F.3d 1143, 1148 (9th Cir. 2004) (internal quotation

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marks omitted; emphasis in original) (henceforth, “Katzir”); Toho–Towa Co., Ltd. v.

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Morgan Creek Prods., Inc., 217 Cal. App. 4th 1096, 1106 (2013) (same); NEC, 208 Cal.
App. 3d at 778-79 (same). The judgment creditor bears the burden of satisfying both

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United States District Court
Northern District of California

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requirements by a preponderance of the evidence. Wollersheim v. Church of

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Scientology, 69 Cal. App. 4th 1012, 1018 (1999); Reno-Tahoe Specialty, Inc. v. Mungchi,

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Inc., No. CV 16-00663-GHK, 2018 WL 6267823, at *3 (C.D. Cal. Sept. 19, 2018).

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B.

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Analysis
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Whether Due Process Prohibits a § 187 Amendment of a Default
Judgment.

Viera first argues that § 187’s amendment procedure does not apply to default

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judgments. That argument, if correct, would short circuit plaintiff’s present motion. Nor is

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it a position that lacks support. Indeed, a leading authority on California civil procedure

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states that “because of due process concerns, a default judgment is not subject to . . .

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amendment” pursuant to § 187. Rutter Group, Amending Judgment to Add Nonparty

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Alter Egos as Judgment Debtors, Cal. Prac. Guide Enf. J. & Debt Ch. 6G-15 (2019) (the

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“Rutter Guide”); see also Lloyd v. Martinez, No. E057370, 2014 WL 5162226, at *3 (Cal.

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Ct. App. Oct. 15, 2014) (unpublished) (“ ‘When a judgment is by default, the defendant

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did not have an opportunity to present a defense and amending the judgment would

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violate due process.’ ” (quoting 3 Cal. Trial Practice: Civil Procedure During Trial (Cont.

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Ed. Bar 3d ed. 2014) Judgments, § 23.31 at 23–30.)). In support, the Rutter Guide cites

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what appear to be the three seminal California cases on the topic: Motores De Mexicali,
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S. A. v. Superior Court In & For Los Angeles Cty., 51 Cal. 2d 172, 173 (1958); NEC, 208

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Cal. App. 3d at 775–781; and Wolf Metals Inc. v. Rand Pac. Sales, Inc., 4 Cal. App. 5th

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698 (2016).

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This court, however, concludes that those cases do “not stand for the broad

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proposition that piercing the corporate veil to enforce a default judgment is a per se

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violation of due process.” Ermis Mgmt. Co. Ltd. v. United California Disc. Corp., 2008 WL

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11450869, at *4 (D. Nev. Jan. 2, 2008) (reaching the same conclusion with respect to

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Ninth Circuit precedent). And, as explained below, the Ninth Circuit appears to agree.
In Motores, the California Supreme Court first recognized the due process

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concerns implicated by § 187. There, after suing a corporation and obtaining a default

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United States District Court
Northern District of California

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judgment, plaintiff sought to add three individuals as judgment debtors on an alter ego

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theory. Motores, 51 Cal. 2d at 173. The California Supreme Court held that adding the

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alleged debtors to a default judgment would violate their due process rights. Id. at 176.

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In reaching that conclusion, Motores distinguished two prior California appellate court

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opinions, by explaining that, unlike in those cases, the proposed judgment debtors in

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Motores “in no way participated in the defense of the basic action[.]” Id. at 175. The

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proposed judgment debtors “did not have attorneys subsidized by them appearing and

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defending the action against the corporation [ ] alleged to be their alter ego. Instead, the

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judgment was entered against [the corporation] strictly by default.” Id. at 175-76.

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Motores explained that due process “guarantees that any person against whom a claim is

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asserted in a judicial proceeding shall have the opportunity to be heard and to present his

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defenses.” Id.. “To summarily add” the proposed debtors “to the judgment . . . without

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allowing them to litigate any questions beyond their relation to the allegedly alter ego

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corporation would patently violate this constitutional safeguard.” Id. at 176. Nor were the

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proposed judgment debtors under any “duty to appear and defend personally in that

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action, since no claim had been made against them personally.” Id.1

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The California Supreme Court reached that conclusion without engaging with plaintiff’s
allegation that the proposed judgment debtors “knew that their financial manipulations
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Thirty years later, in NEC, a California appellate court applied Motores to a

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situation where the corporate defendant failed to present a defense at trial. NEC, 208

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Cal. App. 3d at 775-81. After appearing and filing a general denial—and without any

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other proceedings being conducted—the day before trial, the corporate defendant’s CEO

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and sole shareholder notified the plaintiff that the corporation would not appear,

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apparently in light of a potential bankruptcy. Id. at 775, 781. The court subsequently

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entered judgment after holding a one-day trial, for which defendant did not appear. Id. at

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775–76. Thereafter, the court granted the plaintiff’s § 187 motion to add the corporation’s

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CEO to the judgment. Id. at 776.

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Relying on Motores, the California Court of Appeals reversed. NEC explained that

United States District Court
Northern District of California

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because the corporation “did not make any attempt to defend the NEC lawsuit . . . [the

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CEO’s] interests were [not] represented in the underlying action.” Id. at 780. NEC,

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however, did not stop there. Rather, NEC next turned to whether the corporate

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defendant’s interests aligned with the proposed judgment debtor’s interest. Id. at 780.

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The NEC court answered that question in the negative. Though the corporate defendant

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believed it had a defense, it let the matter proceed uncontested because it planned to file

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a Chapter 11 bankruptcy petition and thus had no incentive to defend against the lawsuit.

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Id. In contrast, and unlike the usual situation where alter ego interests align, the CEO

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“was not named as a party, had no risk of personal liability and therefore was not

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required to intervene.” Id. at 780–81. Because the interests of the corporation and the

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CEO were different, the appellate court could not “say that [the CEO] had occasion to

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conduct the litigation with a diligence corresponding to the risk of personal liability that

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was involved or that [the CEO] was virtually represented in the lawsuit.” Id. at 781. Like

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Motores, NEC completed its analysis by considering whether there was sufficient

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“evidence to show that [the CEO] controlled the defense of the litigation.” Id. at 781. The

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would ultimately lead the [the corporate judgment debtor] into bankruptcy.” Motores, 51
Cal. 2d at 174.
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court held that that factor too was not met because “[t]here was no defense for [the

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proposed judgment debtor] to control,” as other than a “general denial, no further

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proceedings were conducted.” Id. (control contemplates “some active defense of the

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underlying claim”).

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Admittedly, Wolf Metals, the final case cited by the Rutter Guide, gets closest to

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stating a per se rule against amending default judgments. In Wolf Metal, after initially

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appearing and answering the complaint, the corporate defendant abandoned the

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litigation, which prompted the trial court to strike the corporation’s answer and enter

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default judgment. Wolf Metals, 4 Cal. App. 5th at 701-02. Subsequently, the trial court
granted plaintiff’s § 187 motion to amend judgment to add the corporation’s president. Id.

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United States District Court
Northern District of California

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702. Reviewing the holdings in NEC and Motores, the Wolf Metals appellate court

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reversed. The court held that the action was factually indistinguishable from Motores:

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“Like the defendant corporation in Motores, [the corporate defendant] offered no

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evidence-based defense in the underlying action, and the judgment against [the

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corporation] was entered by default.” Id.

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But neither Motores nor NEC stand for the conclusion that § 187 does not apply to

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judgments entered after a defendant fails to present an “evidence-based defense.”

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Rather, Motores and NEC require courts to consider whether the proposed judgment

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debtor’s interest aligned with the named debtor’s interest, and whether the type of and

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degree of control the proposed judgment debtor exerted over the named debtor

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ameliorates any due process concerns. Critically, that analysis does not require active

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litigation or an “evidence-based defense.” Instead, what matters is whether the proposed

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judgment debtor had “the opportunity to be heard and to present his defenses.” Motores,

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51 Cal. 2d at 176 (emphasis added). Requiring that defenses actually be presented

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“would create a perverse incentive for potential alter ego defendants to incur default

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judgments when their corporations are sued, because default judgments would make

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them immune from personal liability.” Ermis, 2008 WL 11450869, at *4 (rejecting

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conclusion that there is a per se rule against § 187 amendments to default judgments).
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And requiring that the corporate defendant actually present defenses related to its

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officers’ personal liability—the natural extension of the argument—would aggravate those

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perverse incentives.
Moreover, the Ninth Circuit has implicitly recognized that the normal § 187

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analysis applies to attempts to amend a default judgment. In Katzir, the Ninth Circuit

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reversed a district court’s order adding the owner, “sole director, president, treasurer, and

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secretary of the corporation” to a default judgment under Cal. Civ. Code § 187. Katzir,

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394 F.3d at 1148-50. Reviewing Motores and NEC, Katzir concluded that NEC

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“represents the law that the California Supreme Court would apply if faced with th[e]
issue of” whether the proposed judgment debtor exercised sufficient control. Katzir, 394

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United States District Court
Northern District of California

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F.3d at 1150. Katzir, however, did not go on to interpret NEC as prohibiting § 187

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amendments of default judgments. To the contrary, the Ninth Circuit applied the

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standard § 187 two-part analysis and held that the trial court had failed to make factual

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findings to support either the alter ego finding or the finding of control.
As to the “control” prong, which embodies the due process concerns first set forth

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in Motores, see Katzir, 394 F.3d at 1149, in lieu of applying a per se rule, the Ninth Circuit

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explained that “Section 187 ‘is an equitable procedure . . . [that] ‘bind[s] new individual

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defendants where it can be demonstrated that in their capacity as alter ego of the

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corporation they in fact had control of the previous litigation, and thus were virtually

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represented in the lawsuit.” Id. at 1149 (quoting NEC; alterations in original; some

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internal quotations omitted). “A prior judgment against a corporation . . . ‘can be made

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individually binding on a person associated with the corporation only if the individual to be

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charged . . . [1] had control of the litigation and [2] occasion to conduct it with a diligence

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corresponding to the risk of personal liability that was involved.’ ” Id. at 1150 (emphasis

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added) (quoting NEC). As the Katzir trial court failed to analyze that question as it

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applied to the owner of the defaulted corporation, the Ninth Circuit reversed.2 Further,

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The Ninth Circuit also found insufficient plaintiff’s evidence that the owner had hired the
corporation’s attorneys, appeared at settlement conferences, financed the litigation, and
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the Ninth Circuit noted that, as in NEC, the owner “was not named individually, knew [the

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corporation] was on the verge of dissolution through Canadian bankruptcy law, and had

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no personal duty to defend the underlying lawsuit.” Katzir, 394 F.3d at 1150. That is, like

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the NEC court, the interests of the owner and his corporation were not aligned, such that

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the owner was not virtually represented in the underlying suit. In short, beyond how it

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factored into the control analysis, it was of no matter to the Ninth Circuit that the judgment

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was entered pursuant to default.

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True, at first blush, one might conclude that that is a distinction without a

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difference because the control requirement articulated by Motores, NEC, and Kazmir
could never be satisfied vis-à-vis a default judgment. For, how could a proposed

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United States District Court
Northern District of California

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judgment debtor’s interest be effectively represented by a named defendant that failed to

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present any defense at all? Relatedly, if an alter ego faces personal liability, is it

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consistent for him to control the litigation “with a diligence corresponding to the risk of

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personal liability” by allowing the named defendant to default?

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While those considerations factor into a § 187 analysis, they do not show that the

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analysis is a foregone conclusion when applied to a default judgment.3 That is because,

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as noted above, Motores, NEC, and Kazmir stand for a narrower proposition: The

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proposed judgment debtor must have had the “opportunity to be heard and present

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defenses[,]” Motores, 51 Cal. 2d at 176 (emphasis added), and the “occasion to conduct”

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the litigation “with a diligence corresponding to the risk of personal liability,” Katzir, 394

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F.3d at 1149 (emphasis added); NEC, 208 Cal. App. 3d at 781. “The real issue is not

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whether [the proposed judgment debtors] (or, technically, [the named defendant]) actually

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litigated the issue of [the named defendant’s] liability, but rather whether [the proposed

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judgment debtors] had an opportunity to present a defense.” Dow Jones Co. v. Avenel,

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discharged the attorneys. Katzir, 394 F.3d at 1150.
3 Indeed, numerous post-NEC, Katzir, and Motores cases have amended default
judgments. See, e.g., Mad Dogg Athletics, Inc. v. NYC Holding, 565 F. Supp. 2d 1127,
1130 (C.D. Cal. 2008); Oceans II, Inc. v. Skinnervision, Inc., No. 212CV06867CASEX,
2015 WL 4484208, at *5 (C.D. Cal. July 20, 2015).
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151 Cal. App. 3d 144, 150 (1984) (emphasis added) (proposed judgment debtors were

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given opportunity to litigate summary judgment through alter ego corporate defendant).

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And that is all due process requires. See Mathews v. Eldridge, 424 U.S. 319, 333 (1976)

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(“The fundamental requirement of due process is the opportunity to be heard at a

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meaningful time and in a meaningful manner.” (internal quotation marks and citation

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omitted)); Shanghai Minguang Int'l Grp. Co. v. Yang, No. E044331, 2008 WL 4004697, at

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*4 (Cal. Ct. App. Aug. 29, 2008) (unpublished) (default judgment amended where

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proposed judgment debtor had “the opportunity to present his own defense and

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controlled the corporations' defense but chose not to do so[.]”).
Accordingly, like the Ninth Circuit in Katzir, this court applies § 187’s standard two-

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United States District Court
Northern District of California

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prong analysis to plaintiff’s request to amend the default judgment to add Viera. In

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undertaking that analysis, the court is cognizant of the serious due process concerns

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implicated by applying that analysis to a default judgment, as plaintiff requests the court

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do here.

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2.

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As discussed above, a § 187 amendment requires plaintiff prove by a

Section 187 Analysis

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preponderance of the evidence “(1) that the new party [is] the alter ego of the old party

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and (2) that the new party [ ] controlled the litigation, thereby having had the opportunity

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to litigate, in order to satisfy due process concerns.” Katzir, 394 F.3d at 1148. Plaintiff no

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doubt has a strong argument regarding the alter ego prong of that analysis.4 The court,

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however, finds no cause to reach that issue because plaintiff has failed to show that Viera

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“controlled” the litigation in a manner that satisfies due process. As explained above,

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under Katzir and NEC, due process requires that Viera (1) controlled the litigation and (2)

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had occasion to conduct that control with a diligence corresponding to the risk of personal

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See, e.g., Dkt. 218 at 10 (adopted report and recommendation stating “Cadence has
adduced ample evidence that Viera treats Pounce USA as a personal piggy bank”);
Dkt. 215-6 (email from Viera instructing counsel to make Pounce USA the contracting
party “[b]ecause [it] is the one that has no ASSETS!!!”).
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liability that was involved. Those issues require consideration of, inter alia, whether Viera

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was “virtually represented in the lawsuit” and whether his interest in the litigation aligned

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with the judgment debtors’ interests.
Here, plaintiff has shown that Viera exercised some control over the litigation.

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Plaintiff has uncovered evidence that shows Viera controlled Pounce’s pre-litigation

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response to Cadence’s accusation of copyright infringement. Dkt. 102-7 at

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CAD_0000018, 21–22; Dkt. 229-8 (pre-litigation emails between Viera and Cadence);

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Ruttenberg Decl., Ex. F (Viera directing lawyer to “handle” plaintiff’s continued pre-

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litigation communications); Dkt. 181-23 (Viera directing counsel to stop responding to
Cadence’s prelitigation communication). Further, the evidence shows that Viera

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United States District Court
Northern District of California

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controlled Pounce’s litigation strategy in the immediate aftermath of plaintiff filing this suit.

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Dkt. 172-4 (Viera directing Pounce USA’s counsel to respond that plaintiff had sued the

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wrong entity because Pounce SA and Pounce USA were independent entities that have

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no relationship); Dkt. 15 ¶¶ 4-7 (Pounce USA’s Answer largely following Viera’s

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instruction);5 Dkt. 172-5 (pre-Answer email from Viera directing counsel to file for an

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extension).
That said, beyond Pounce’s early litigation strategy, the evidence of Viera’s control

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becomes murkier. True, plaintiff has submitted the declaration of Pounce USA’s former

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CEO, Juan Llera, who testified that he reported to Viera and was expected to comply with

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Viera’s instructions and that Viera “dictate[d] case strategy.” Llera Decl. ¶¶ 7, 53-54.

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Llera’s testimony also provides support for plaintiff’s argument that Viera caused Pounce

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USA to default by refusing to allow Pounce USA to produce his emails, in contravention

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of this court’s discovery order. Id. ¶ 55 (Llera asked Viera to produce emails but Viera

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refused); see also id. ¶ 56 (Llera testifying that “[i]It was not [his] decision to stop Pounce

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USA from participating in the Cadence litigation.”); Dkt. 189 (order requiring Pounce USA

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Subsequent discovery has proven those representations misleading if not outright false.
Indeed, the court has already found that Pounce USA is an alter ego of Pounce SA. See
Dkt. 218 at 8-11; Dkt. 219.
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to produce Viera’s emails).
Viera, however, tells a different story. Viera testifies that while he “was involved in

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some of the decisions regarding how to proceed with the case, [ ] [he] was also following

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direction of the Board of Directors of Pounce SA.” Viera Decl. ¶ 39. According to Viera,

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he could not ignore that direction because Pounce SA was paying Pounce USA’s

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litigation costs. Id. Relatedly, Viera testifies that Pounce USA stopped participating in

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this litigation not because Viera refused to produce discovery, as Llera implies, but rather

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because Pounce SA’s Board refused to continue funding Pounce USA’s litigation. Id.

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Pounce USA’s Board of Directors, according to Viera, reached the similar conclusion that

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“irrespective of the merits of Cadence’s position . . . Pounce USA simply did not have the

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United States District Court
Northern District of California

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funds to continue paying the costs of defense[.]” Id. ¶ 33. As to Pounce SA, Viera

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testifies that the company is currently undergoing “debt restructuring,” and, “at the

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insistence of Pounce SA’s banks and lenders,” Pounce SA’s Board has “refused to

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provide any further funds for litigation.” Id. ¶¶ 33, 39.

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In sum, the court finds that there is largely undisputed evidence that Viera

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controlled Pounce’s litigation strategy early on in this litigation. But that evidence does

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not translate into evidence that Viera controlled the entire litigation. On that issue, the

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evidence largely amounts to a battle of contradicting declarations. That contradictory

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evidence extends to certain critical issues, like whether Viera strategically controlled

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Pounce’s decision to default—a decision that could show Viera exercised control with his

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personal interests in mind and not those of the corporation. With only that contradictory

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evidence before it, the court finds plaintiff has not carried its burden to show by a

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preponderance of the evidence that Viera controlled the litigation.6 See Reno-Tahoe

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Plaintiff emphasizes that the timing of Pounce USA’s default is suspicious because it
occurred after the court ordered Pounce USA to produce Viera’s documents. See
Dkt. 189 (November 8, 2018 order requiring production of documents); Dkt. 193
(December 11, 2018 request to withdraw as attorney for Pounce USA); Dkt. 206 (January
30, 2019 entry of default against Pounce USA for failure to retain substitute counsel).
Given the heady due process concerns at issue, the court declines to tip the scales in
plaintiff’s favor based on a suspicious temporal correlation.
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Specialty, 2018 WL 6267823, at *3 (denying § 187 motion when faced with, inter alia,

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competing declarations regarding control).
Moreover, even if plaintiff could show that Viera controlled the litigation, plaintiff

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has presented virtually no evidence that Viera had “occasion to conduct [that control] with

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a diligence corresponding to the risk of personal liability.” Katzir, 394 F.3d at 1150. True,

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Viera participated in this litigation in various ways, such as being deposed and submitting

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declarations. But a CEO/CFO’s participation in his companies’ litigation is neither

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uncommon nor sufficient. Id. (finding insufficient evidence of control where owner hired

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and discharged the corporation’s attorneys, appeared at settlement conferences, and
financed the litigation); Milton v. Cavaney, 56 Cal. 2d 576, 581 (1961) (“It is not sufficient

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United States District Court
Northern District of California

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that [the alter ego] supplies the funds for the prosecution or defense, that he appears as

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a witness or cooperates without having control.” (citing Rest., Judgments, § 84)). In any

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event, Viera’s mere participation in this litigation does not come close to outweighing the

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lack of evidence showing that Viera had notice that he faced the risk of personal liability

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before the court entered judgment.7 Given the due process concerns at stake, the court

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cannot conclude that Viera had the opportunity to control the litigation with a diligence

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corresponding to the risk of personal liability when there is no evidence that Viera knew

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or should have known he faced the risk of such liability.8 Compare Oceans II, Inc., 2015

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WL 4484208, at *5 (amending default judgment to add CEO who was sued in his

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individual capacity and later defaulted).
Nor has plaintiff shown that it could not have raised Viera’s liability at an earlier

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stage because it only recently discovered that there was evidence supporting Viera’s

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Though Viera was represented both by Pounce lawyers and at least one personal
lawyer at his deposition, see Dkt. 254-10, Ex. T, at 11:19-16:15, that provides little
evidence that Viera thought he faced personal liability.
8 The relevant notice also cannot be derived from Viera’s control and participation in this
litigation. That is because such involvement only shows the proposed judgment debtor
had notice of the litigation. It does not show that the proposed judgment debtor had
notice that he faced the risk of being held personally liable. NEC, 208 Cal. App. 3d at
781 (“[I]t is not enough [to establish control] that [the proposed judgment debtor] was
‘aware’ of the action[.]”).
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alleged alter ego status. Indeed, much of the alter ego evidence plaintiff relies upon

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matches the evidence that plaintiff’s February 2019 motion for default judgment relied

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upon. Compare Dkt. 208-25 at 9-16 to Dkt. 228-4 at 6-15. Plaintiff has provided no

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persuasive explanation for its failure to raise the issue of Viera’s alleged alter ego status

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until after default judgment had been entered. And the court will not countenance the

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strategic use of § 187 in a manner that raises due process concerns. See also Correa

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Pallet, Inc. v. Lambeth, No. F052934, 2008 WL 1822639, at *15 (Cal. Ct. App. Apr. 24,

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2008) (unpublished) (discussing § 187 and explaining that the alter ego doctrine is

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grounded in equity that requires the movant to act with “due diligence”). For those
reasons, the court finds that plaintiff has not shown by a preponderance of the evidence

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United States District Court
Northern District of California

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that Viera had the “opportunity” or “occasion” to conduct this litigation with a diligence

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corresponding to his risk of personal liability.
For similar reasons, plaintiff has not shown that Viera was virtually represented in

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the lawsuit or that his interests aligned with the judgment debtors. Like in NEC, it is not

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apparent that Pounce’s “interests and [Viera’s] interests were [ ] the same.” NEC, 208

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Cal. App. 3d at 780. Though disputed, evidence shows that, as in NEC, Pounce

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defaulted because it “had no incentive to defend the [ ] lawsuit,” as it “was on the verge of

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bankruptcy.” Id. Plaintiff had the burden of showing that that litigation strategy effectively

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represented the personal interests of Pounce’s alleged alter ego, Viera, who “was not

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named as a party, had no risk of personal liability and therefore was not required to

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intervene.” Id. Because plaintiff has failed to carry that burden, the court “cannot say

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that [Viera] . . . had occasion to conduct the litigation with a diligence corresponding to

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the risk of personal liability that was involved or that [Viera] was virtually represented in

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the lawsuit.” Id. at 781.9

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Pointing to Shanghai Minguang, 2008 WL 4004697, *5-6 (unpublished), plaintiff argues
that because Viera is the alter ego of the Pounce entities, his interests necessarily align
with the companies’ interest. That analysis, however, largely collapses § 187’s control
prong into its alter ego prong. It also disappears the due process-based requirement that
the proposed judgment debtor not only had the opportunity to control the litigation
generally, but the opportunity to do so knowing that he or she risked being held
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CONCLUSION

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For the foregoing reasons, plaintiff’s motion to amend the default judgment to add

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Roger Viera is DENIED.10 Plaintiff’s administrative motion to file additional information in

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support of its motion to amend, Dkt. 261, is DENIED as moot because the evidence

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therein would not change the analysis set forth above.

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IT IS SO ORDERED.
Dated: August 6, 2019

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PHYLLIS J. HAMILTON
United States District Judge

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United States District Court
Northern District of California

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personally liable. Plaintiff’s citation to In re Levander, 180 F.3d at 1118, is similarly
unpersuasive because that case did not involve a default judgment and discusses neither
Motores nor NEC. See also Katzir, 394 F.3d at 1148 (citing Levander but not discussing
it in the context of using § 187 to amend a default judgment).
10 Plaintiff’s motions to seal, Dkts. 228, 254, are DENIED because no declaration was
filed showing that the documents sought to be sealed met the relevant standard. See
Ctr. for Auto Safety v. Chrysler Grp., LLC, 809 F.3d 1092, 1101–02 (9th Cir. 2016)
(setting forth sealing standard).
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