Opinion
Civil Action No. H-03-467.
January 17, 2006
MEMORANDUM AND ORDER
Pending is the Fisher Plaintiffs' Application for Post Judgment Turnover Relief (Document No. 330) and Motion to Permit Judgment Registration (Document No. 331). After carefully considering the motions, responses, and the applicable law, the Court concludes that the motions should be granted.
Also pending is the Fisher Plaintiffs' Motion for Expedited Hearings or Ruling on the foregoing motions (Document No. 332), which is DENIED with respect to a hearing because the written briefs submitted by the parties obviate any need for further argument; the motion is GRANTED with respect to the request for an expedited ruling.
On December 8, 2005, a final judgment was entered against Ivan Modrovich ("Modrovich") in favor of Plaintiffs Fisher Scientific International Inc. and Fisher Scientific Company L.L.C. ("Fisher") for $2,968,040.00 plus interest in costs and attorney's fees, with additional attorney's fees on appeal (the "Judgment"). Document No. 312. On December 16, 2005, Modrovich sought a temporary stay on the execution of the Final Judgment and a waiver of the supersedeas bond requirement pending disposition of his post-judgment motions, which the Court denied after a hearing held on December 21, 2005. See Document No. 328. Fisher now seeks leave to register the Judgment in the Central and Southern judicial districts of California pursuant to 28 U.S.C. § 1963 and turnover relief under Texas law.
Judgment Registration
Section 1963 provides in pertinent part:
A judgment in an action for the recovery of money or property entered in any court of appeals, district court, [or] bankruptcy court, . . . may be registered by filing a certified copy of the judgment in any other district . . . when the judgment has become final by appeal or expiration of the time for appeal or when ordered by the court that entered the judgment for good cause shown.28 U.S.C. § 1963 (emphasis added). Because the time for appeal has not yet expired in this case, Fisher must show that good cause exists for entry of the judgment in California. Good cause may be established under § 1963 by showing that the defendant lacks sufficient property in the judgment forum to satisfy the judgment but has substantial assets in the registration forum. See Karaha Bodas Company, LLC v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, No. Civ. A. H01-0634, 2002 WL 32107930, at *1 (S.D. Tex. Feb. 20, 2002) (Atlas, J.); Dyll v. Adams, No. Civ. A. 3:91-CV-2734D, 1998 WL 60541, at *1 (N.D. Tex. Feb. 6, 1998); see also Chicago Downs Ass'n., Inc. v. Chase, 944 F.2d 366, 371-72 (7th Cir. 1991). Also relevant to the good cause determination is the risk that the judgment debtor might transfer or conceal assets located in the foreign judicial district. See Chicago Downs, 944 F.2d at 372 (upholding district court's "good cause" determination where judgment creditor feared that judgment debtor could "transfer or conceal [assets that would] otherwise [be] necessary to satisfy the judgment if given time to do so"). Ultimately, the decision to allow registration of the Judgment lies in the Court's discretion. Karaha Bodas, 2002 WL 32107930, at *1 (citing Chicago Downs, 944 F.2d at 372)).
Although Modrovich claims that § 1963 registration is premature because no appeal has been filed and the time for filing such an appeal has not yet expired, § 1963 does not, by its terms, limit the Court's power to order registration in other districts to the time during which an appeal is pending. See 28 U.S.C. § 1963; see also Garden State Tanning, Inc. v. Mitchell Mfg. Group, Inc., No. Civ. A. 98-4789, 2000 WL 1-72, at *1-2 (E.D. Pa. Aug. 4, 2000).
In showing good cause for judgment registration, Fisher cites the representation of Modrovich's counsel at a December 21, 2005, hearing in this Court that counsel has no information that Modrovich owns any assets within the State of Texas with which to satisfy the Judgment. See Document No. 327 at 11-12. Fisher also submits the Declaration of its counsel, C. Thomas Kruse, who states that Fisher has performed asset searches for Modrovich both in Texas and in California, where Modrovich has been a long-time resident. See Document No. 331 ¶¶ 4, 12. According to Kruse, the searches revealed that while Modrovich owns no identifiable assets in Texas, he owns significant assets in California, including real property in the Central District of California and a pending lawsuit, entitled Ivan Modrovich v. Diamed AG, Diamed Holding, AG, and Does 1-50, Case No. 04CV0818-J (the "Diamed Lawsuit"), in the Southern District of California. Id. ¶¶ 4, 12-14. Pleadings in the Diamed Lawsuit indicate that Modrovich, who is a shareholder in the company, is asserting against Diamed AG and Diamed Holding, AG a breach of contract claim and is seeking damages and a declaration that he may sell his Diamed shares. Document No. 330 exs. 1-2. Court documents reveal that settlement conferences are currently underway in the Diamed Lawsuit and that Modrovich may receive funds from settlement of the litigation. See Document No. 331 exs. 13-14. Finally, Fisher submits evidence that Modrovich recently sold real property in California with a total assessed value of $221,342,id. exs. 10-11, which Fisher argues may indicate that Modrovich will take measures to transfer or conceal his assets in California if given time to do so, see Chicago Downs, 944 F.2d at 372. None of Fisher's evidence is directly controverted by Modrovich. On this record, Fisher has demonstrated good cause to register the Judgment in the California district courts.
Post Judgment Turnover Relief
Fisher also seeks a turnover order requiring Modrovich to turn over any proceeds from a judgment rendered or settlement reached in his favor in the Diamed Lawsuit and enjoining Modrovich from otherwise releasing, transferring, or assigning any of the proceeds of a judgment or settlement in the Diamed Lawsuit without first paying Fisher the Judgment amount.Federal Rule of Civil Procedure 69(a) provides that a federal court may enforce a money judgment "in accordance with the practice and procedure of the state in which the district court is held." FED. R. CIV. P. 69(a). Under the Texas turnover statute, a judgment creditor is entitled to aid from a court in order to reach property to satisfy a judgment. TEX. CIV. PRAC. REM. CODE ANN. § 31.002. The statute provides in pertinent part:
(a) A judgment creditor is entitled to aid from a court of appropriate jurisdiction through injunction or other means in order to reach property to obtain satisfaction on the judgment if the judgment debtor owns property, including present or future rights to property, that:
(1) cannot readily be attached or levied on by ordinary legal process; and
(2) is not exempt from attachment, execution, or seizure for the satisfaction of liabilities.
(b) The court may:
(1) order the judgment debtor to turn over nonexempt property that is in the debtor's possession or is subject to the debtor's control, together with all documents or records related to the property, to a designated sheriff or constable for execution;
. . .
(3) appoint a receiver with the authority to take possession of the nonexempt property, sell it, and pay the proceeds to the judgment creditor to the extent required to satisfy the judgment.Id. The statute, which is a procedural device "`by which judgment creditors may reach assets of a debtor that are otherwise difficult to attach or levy on by ordinary legal process,'" Resolution Trust Corp. v. Smith, 53 F.3d 72, 77 (5th Cir. 1995) (quoting Beaumont Bank, N.A. v. Buller, 806 S.W.2d 223, 224 (Tex. 1991)), allows a court to reach assets owned and subject to the control of a judgment debtor, Resolution Trust Corp. v. Tex. Moline Ltd., 96 F. Supp. 2d 644, 646 (S.D. Tex. 2000) (Rosenthal, J.). The judgment creditor must show only that non-exempt property cannot be readily attached or levied; "[n]either the statute nor the case law provides a corresponding requirement that the judgment creditor demonstrate that other methods of collecting the judgment have failed." Resolution Trust Corp., 53 F.3d at 78.
Fisher has shown that Modrovich has asserted against Diamed AG and Diamed Holding, AG a cause of action for breach of contract. See Document No. 330 exs. 1-2. Under Texas law, such a cause of action is a property right that is subject to turnover. See Charles v. Tamez, 878 S.W.2d 201, 205 (Tex.App. — Corpus Christi 1994, writ denied); Renger Memorial Hosp. v. Texas, 674 S.W.2d 828, 830 (Tex.App.-Austin 1984, no writ). Because Modrovich's interest in the out-of-state Diamed Lawsuit cannot be readily attached or levied, Fisher has satisfied the requirements for post-judgment turnover relief under § 31.002.
Although Modrovich claims that Fisher's requested turnover relief violates public policy, the public policy concerns expressed in Criswell v. Ginsberg Foreman, 843 S.W.2d 304, 306-07 (Tex.App.-Dallas 1992, no writ) and Commerce Sav. Ass'n v. Welch, 783 S.W.2d 668, 671-72 (Tex.App.-San Antonio 1989, no writ) — both of which involved "the use of the turnover statute as a means to extinguish a cause of action against oneself" — are not present here.
Accordingly, it is
ORDERED that Fisher's Motion to Permit Judgment Registration is GRANTED, and Fisher may, pursuant to 28 U.S.C. § 1963, register the Judgment entered in this case on December 8, 2005 in the United States District Courts for the Central and Southern Districts of California. It is further
ORDERED that Fisher's Application for Post Judgment Turnover Relief is GRANTED, and Defendant Ivan Modrovich is ORDERED to turn over to Fisher the amount of the Judgment entered in this case on December 8, 2005, including interest and fees, from the proceeds of any judgment rendered in his favor against Diamed AG or Diamed Holding, AG in the lawsuit entitled Civil Case No. 04CV0818-J; Ivan Modrovich v. Diamed AG; Diamed Holding, AG; and DOES 1 through 5; or from any settlement proceeds obtained by Modrovich from Diamed AG or Diamed Holding, AG in that action. It is further
ORDERED that Modrovich is enjoined from releasing, transferring, or assigning any of the proceeds of a judgment or settlement in the aforementioned Diamed Lawsuit without first paying to Fisher all amounts required to satisfy fully the Final Judgment entered in this case. It is further
ORDERED that Modrovich join Fisher in a petition to Magistrate Judge Jan Adler requesting an exception to her ruling that the parties in the Diamed Lawsuit are not to disclose settlement discussions, so that Fisher may be included among those who are privy to the confidential information and thereby may be fully informed of the status of the Diamed Litigation and of any settlement offers between Modrovich and Diamed AG and/or Diamed Holding, AG.
The Clerk shall notify all parties and provide them with a true copy of this Order.