The opinion of the court was delivered by: Honorable Janis L. Sammartino United States District Judge
ORDER: GRANTING IN PART AND DENYING IN PART MOTION FOR WRIT OF ATTACHMENT (Doc. No. 4)
Presently before the Court is Plaintiff's motion for a writ of attachment. (Doc. No. 4) Also before the Court are Defendants' opposition and Plaintiff's reply. (Doc. Nos. 10 & 13.) The Court GRANTS IN PART and DENIES IN PART Plaintiff's motion.
Plaintiff Craig Irving brings this suit against Defendants Ebix, Inc. and Ebix Software India Private Limited on behalf of the shareholders of ConfirmNet Corporation. (See Compl. ¶¶ 1--3.) He wishes "to enforce [the shareholders'] entitlement to the full amount of the 'Second Earn Out' plus interest, pursuant to an Agreement and Plan of Merger . . . [between] Ebix, Inc., ConfirmNet Corporation, Ebix Software India Private Limited, ConfirmNet Acquisition Sub, Inc., and Plaintiff Shareholders' Representative." (Id. ¶ 2.)
The parties entered into this agreement on November 24, 2008. (Id. ¶ 8.) The agreement provided the holders of ConfirmNet Corporation with, inter alia, cash at the time of the closing and future contingent consideration. (See Compl., Ex. A (Merger Agreement) §§ 1.2(a) & (b).) The contingent consideration consisted of three "Earn Outs." (Id. § 1.2(b).) These payments were to be calculated as multiples of either Ebix's gross revenue or incremental increase in gross revenue, depending on the "Earn Out" period. (Id.)
The "Second Earn Out," the subject of dispute here, consisted of "cash consideration equivalent to 1.538 times the incremental increase, if any, of Gross Revenue for the 12-month period beginning January 1, 2009 as compared to the Gross Revenue for the 12-month period beginning January 1, 2008." (Id.) Defendants were to pay the "Second Earn Out" promptly after financial results for the 12-month period beginning January 1, 2009 are tabulated . . . (but in no event later than 30 days after the end of calendar year 2009)." (Id.) Additionally, Defendants were also required by the Agreement to "deliver to each Shareholder a copy of the financial statements . . . and a certificate showing the calculation of the Contingent Merger Consideration for the applicable period, certified by the Chief Financial Officer of Parent to be a good faith calculation of the Contingent Merger Consideration derived from the accounting records of [Defendant] ('Contingent Gross Revenue Certificate')." (Id. § 1.2(b)(i).)
Plaintiff alleges that Defendants did not timely pay the "Second Earn Out," nor did they deliver the Contingent Gross Revenue Certificate. (Compl. ¶ 12.) On February 12, 2010, Defendants allegedly proposed a Second Earn Out schedule to which Plaintiff responded with requested revisions. (Id. ¶ 13.) Plaintiff also claims that on March 9, 2010 Defendants agreed to the suggested revisions and stated that the money would be transferred on March 11, 2010. (Id. ¶ 14.) Defendants shortly thereafter informed Plaintiff of a new deduction, did not transfer the money at the time designated. (Id.) On March 12, Defendants delivered the Contingent Gross Revenue Certificate for the Second Earn Out, which indicated that the payment would be "nearly $550,000 less than the amount to which the parties agreed three days earlier." (Id. ¶ 15.) Defendants also stated "that they would not make any payment to Plaintiff . . . unless and until Plaintiff . . . agreed to accept almost $550,000 (exclusive of interest) less than was owed." (Id. ¶ 20.) Plaintiff threatened to sue unless Defendants paid the full amount Plaintiff expected. (Id. ¶ 21.) On March 26, 2010, Defendants transferred $2,975,386 to Plaintiff. (Id.) Because this was not the full amount Plaintiff believed owed on the Second Earn Out and did not include interest, Plaintiff filed suit on April 12, 2010. (Id.)
Federal Rule of Civil Procedure 64(a) allows a party to invoke any remedy for seizing property allowed under the law of the state in which the district court sits. In California, writs of attachment are governed by the Civil Procedure Code sections 481.010 through 493.060. Section 484.90(a) sets forth four elements that the Plaintiff must show in order for the Court to issue such a writ. "(1) The claim upon which the attachment is based [must be] one upon which an attachment may be issued.
(2) The plaintiff [must] establish the probable validity of the claim upon which the attachment is based. (3) The attachment [must] not sought for a purpose other than the recovery on the claim upon which the attachment is based. (4) The amount to be secured by the attachment [must be] greater than zero." Cal. Civ. Proc. Code § 484.90(a). Further, when the request for attachment occurs "in an action for a claim of money which is based upon an express or implied contract[,] . . . the total amount of such claim [must be] a fixed or 'readily ascertainable' amount not less than $500.00." Pos-ATraction, Inc. v. Kelly-Springfield Tire Co., 112 F. Supp. 2d 1178, 1181--82 (C.D. Cal. 2000) (citing Cal. Civ. Proc. Code § 483.010(a)).
This "provisional remedy" is designed "to aid in the collection of a money demand." Kemp Bros. Constr., Inc. v. Titan Elec. Corp., 53 Cal. Rptr. 3d 673, 674 (Cal. Ct. App. 2007). However, "[a]ttachment is a harsh remedy because it causes the defendant to lose control of his property before the plaintiff's claim is adjudicated." Martin v. Aboyan, 196 Cal. Rptr. 266, 269 (Cal. Ct. App. 1983) (citation omitted). Because of this, the statutory requirements are "strictly construed." Kemp Bros.,
53 Cal. Rptr. 3d at 674--75; see also Blastrac, N.A. v. Concrete Solutions & Supply, 678 F. Supp. 2d 1001, 1004--05 (C.D. Cal. 2010); Pos-A-Traction, 112 F. Supp. 2d at 1181 ("Attachment is a purely statutory remedy, which is subject to strict construction." (citing Jordan-Lyon Prods., Ltd. v. Cineplex Odeon Corp., 35 Cal. Rptr. 2d 200, 203--04 (Cal. Ct. App. 1994))). Moreover, the Court is required by statute to hold a hearing before issuing a writ. Cal. Civ. Proc. Code § 484.040.
As previously stated, there are six distinct elements which Plaintiff must establish in this case prior to the issuance of a writ. They will be addressed in turn below.
I. THIS CLAIM IS ONE UPON WHICH A WRIT OF ATTACHMENT MAY ISSUE
The first requirement under section 484.90(a) is that the "claim upon which the attachment is based [must be] one upon which an attachment may be issued." There is no question that Plaintiff's breach of contract claim is one upon which an attachment may be issued. Attachment based on breach of contract is specifically contemplated by Civil Procedure Code section 483.010(a) ("an attachment may be issued . . . in an action on a claim . . . for money . . . based upon a contract"). Defendants do not dispute this. The Court FINDS this element satisfied.
II. THE AMOUNT TO BE SECURED IS GREATER THAN ZERO
Next, the Court FINDS that the amount to be secured by the attachment is greater than zero. Cal. Civ. Proc. Code § 484.90(a)(4). The Complaint states that Plaintiff is seeking at least $595,068.20. (See, e.g.,Compl. at 8.) This is obviously greater than zero and Defendants, by their silence, concede the point.
III. THIS CLAIM IS FOR A 'READILY ASCERTAINABLE'AMOUNT NOT LESS THAN FIVE HUNDRED DOLLARS
Further, since this is an action for a claim of money which is based upon an express or implied contract, the Plaintiff must also establish that the total amount of his claim is a fixed or readily ascertainable amount not less than $500.00. Cal. Civ. Proc. Code § 483.010(a). The Court FINDS that ...