The opinion of the court was delivered by: Honorable George H. Wu United States District Court
FINDINGS OF FACT AND CONCLUSIONS OF LAW; ORDER GRANTING PLAINTIFFS' APPLICATION FOR APPOINTMENT OF RECEIVER Status Conference: October 14, 2010 Time: 8:30 a.m. Courtroom: 10
On June 29, 2010, Plaintiffs Santa Barbara Channelkeeper and Environmental Defense Center ("Channelkeeper") filed their Notice of Application and Application to Appoint a Receiver, and Notice of Motion and Motion Add Richard Sloan as a Defendant and Judgment Debtor ("Motion"). Dkt. Nos. 414 and 415. Chickadee filed its Opposition to Application for Appointment of Receiver and Motion to Amend Judgment ("Opposition") on July 9, 2010. Dkt. No. 416.
On July 22, 2010 the Court held a status conference and heard oral argument on Channelkeeper's Motion. Dkt. No. 419. Channelkeeper and defendants Chickadee Environmental Remediation Company ("Chickadee") (collectively "the Parties") appeared. Id. The Court held further status conferences regarding Channelkeeper's Motion on August 2, 2010 (Dkt. No. 420), August 23, 2010 (Dkt. No. 422), August 30, 2010 (Dkt. No. 423), and September 20, 2010 (Dkt. No. 427). On September 14, 2010, Channelkeeper filed a supplemental statement regarding Chickadee's accounting documents produced (Dkt. No. 424) and Chickadee filed its objections on September 16, 2010 (Dkt. No. 426).
Findings of Fact and Conclusions of Law
Having considered the Motion, the Opposition, supplemental briefing, and evidence and oral argument presented at the five status conferences the Court hereby makes the following Finds of Fact and Conclusions of Law:
1. A district court has broad discretion in appointing a receiver and may consider a host of relevant factors, no single one of which is dispositive. Canada Life Assurance Co. v. LaPeter, 563 F.3d 837, 845 (9th Cir. 2009).
2. Among other things, the court may consider whether there is an imminent danger of loss of property, the inadequacy of legal remedies, and whether harm to be caused by denying the appointment would outweigh harm to the party opposing the appointment of a receiver, if one is appointed. Id.; Solis v. Matheson, 563 F.3d 425, 438 (9th Cir. 2009).
3. Channelkeeper has a property interest in Chickadee's assets as a judgment creditor.
4. Given that Chickadee has refused to pay any amount of the judgment against it since October of 2008, almost two years ago, and has repeatedly failed to fully comply with Channelkeeper's reasonable discovery requests concerning Chickadee's financial assets and status, and whereas a receiver can take exclusive control and possession over Chickadee's assets for the purpose of executing the judgment entered in this case there is a clear necessity to protect Channelkeeper's property interest through receivership.
5. Channelkeeper has a valid claim in the underlying action as evidenced in the settlement agreement first entered by this Court on October 31, 2008 (Dkt. No. 330), subsequently modified and ordered on December 11, 2008 (Dkt. No. 345), and because Channelkeeper has obtained orders from this Court finding Chickadee in civil contempt. Dkt. Nos. 372, 374, and 386.
6. There is imminent risk of fraudulent conduct. Chickadee has repeatedly disobeyed this Court's orders, including this Court's May 4, 2010 order granting Channelkeeper's motion for civil contempt, its August 25, 2009 order requiring payment by September 25, 2009, and the U.S. Magistrate Judge's order for debtor's exam. Dkt. Nos. 372, 386, 391, 410 at ¶ 9, respectively. Further, Chickadee gave post-judgment discovery responses that were inconsistent with the information it provided during the October 2009 debtor's exam. See Dkt. No. 410, ¶ 20. Finally, though Channelkeeper had been seeking payment of its judgment since at least October 20, 2008, Chickadee concealed the existence of outstanding state court judgments in Texas until the debtor's examination of Chickadee, which was conducted approximately one year later. See Dkt. No. 410, ¶ 9.
7. There is also imminent risk of loss of Channelkeeper's property interest. Chickadee has failed to pay any portion of the judgment against it first obtained by Channelkeeper on October 31, 2008 -- almost two years ago. See Dkt. No. 410, ¶¶ 5 and 8. Chickadee has also failed to pay according to the payment schedule stipulated and ordered by the Court to on December 11, 2008. See Dkt. Nos. 344 and 345; see also Dkt. No. 410, ¶ 6. Chickadee's President Richard Sloan testified during the examination that Chickadee lacked the cash or corporate assets sufficient to pay the judgment, and that Chickadee would not have any assets with which to pay the judgment until one or more of Chickadee's site remediation transactions cleared escrow or resulted in income to Chickadee. Dkt. No. 410, ¶ 9. However, Chickadee failed, despite repeated requests, and despite Channelkeeper's duly propounded post judgment discovery, to produce adequate financial documentation to allow Channelkeeper to identify corporate assets sufficient to satisfy the Judgment and this Court's orders. See Dkt. No. 410, ¶¶ 9-23. On August 2, 2010, Chickadee this Court ordered Chickadee to provide Channelkeeper all accounting documents relating to Chickadee within two weeks of that date. Dkt. No. 420. Chickadee was then ordered to have its accountant contact counsel for Channelkeeper no later than August 25, 2010 (Dkt. No. 422), and was again ordered to provide all accounting documents on September 7, 2010 (Dkt. No. 423). Chickadee failed to produce a complete set of the required documents. See Dkt. No. 427. Further, Richard Sloan, Chickadee's President, also disclosed at the October 2009 debtor's examination conducted by Channelkeeper that, in addition to this Court's August 25, 2009 order totaling nearly $293,000, two other outstanding money judgments were pending against Chickadee in the State of Texas totaling approximately $300,000.00. See Dkt. No. 410, ¶ 9. Sloan further revealed that a receiver had been appointed by a Texas state court to recover one of these judgments. See id.
8. The legal remedies available to Channelkeeper are, and have been to date, inadequate due to Chickadee's repeated refusal to comply with this Court's prior orders. On May 4, 2009, the Court issued an Order granting Channelkeeper's Contempt Motion, which awarded Channelkeeper the money due, as well as interest and Channelkeeper's attorneys' fees and costs, and allowed Chickadee, at its request, on or before July 13, 2009 to pay. Dkt. No. 372. Chickadee failed to make any payment under that order. See Dkt. No. 410, ¶ 5. After Channelkeeper notified the Court that no payment was made, Chickadee's President, Richard Sloan, signed and filed a Declaration with the Court on August 19, 2009 asserting that in a matter of weeks Chickadee would obtain the funds it needed to begin paying the judgment, and further requesting a 30-day extension of time in which to pay. Dkt. No. 381. On August 25, 2009, the Court entered an order awarding Channelkeeper all money past due, Channelkeeper's additional attorneys' fees and costs, and a contempt sanction of $1,000.00 for a total of $292,909.68. Dkt. No. 386. That order also awarded Channelkeeper attorneys' fees and costs for conducting the debtor examination, and interest on the judgment at the rate of 10 % per annum. Id. Chickadee has failed to pay any portion of that August 25, 2009 order. See Dkt. No. 410, ¶ 8. Additionally, Chickadee has not complied with the Court's orders issued on August 2, 2010, August 25, 2010, and August 30, 2010 relating to Chickadee's failure to produce post-judgment discovery documents. See Dkt. Nos. 420, 422, 423, and 425.
9. There is no harm to Chickadee in appointing a receiver to protect Channelkeeper's interests and effectuate payment of the judgment against it by Chickadee. Chickadee has already agreed to pay Channelkeeper the judgment amount as established by the settlement agreement executed on or about July 31, 2008, and entered by this Court in October 2008. See Dkt. No. 330. Chickadee has represented to the Court that payment would be made in a declaration from its President Richard Sloan filed on August 19, 2009 (Dkt. No. 381), and during the civil contempt proceedings in May of 2009. See Dkt. No. 410, ¶ 6.
10. Further, any harm to Chickadee is outweighed by the harm to Channelkeeper because Channelkeeper is a non-profit public interest organization with a valid property interest as a judgment creditor. See Dkt. No. 410, ¶¶ 4-5.
11. Channelkeeper was successful on its claims underlying this action as it obtained the settlement agreement entered by this Court in October 2008. Dkt. Nos. 326, 330 and 345. Appointing a receiver with authority to control, assess, and distribute, as necessary, Chickadee's assets in satisfaction of Channelkeeper's property interest in the judgment will provide a reasonable remedy to Channelkeeper, as discussed above, thus preventing irreparable injury resulting from Chickadee's non-payment.
12. It is unclear when, if ever, that Channelkeeper will recover its property interest in the judgment absent appointment of a receiver. On August 19, 2009, Chickadee filed a declaration stating it had insufficient funds to satisfy the judgment, or that payment would be delayed until its site remediation projects were approved and the funds released from escrow. Dkt. No. 381. Chickadee has failed to make any payments on the judgment, however, and Channelkeeper has established that there are other judgments entered against Chickadee in Texas (Dkt. No. 410, ¶ 9); further, Chickadee has failed to provide Channelkeeper with all financial records and accounts as required and ordered by this Court (See Dkt. Nos. 420, 422, 423, and 425).
13. In the Courts' discretion to consider the above facts, the Court finds that imposing a receivership upon Chickadee for the purpose of executing the judgment entered in favor of Channelkeeper in this case is warranted.
Having reviewed Channelkeeper's Application for Appointment of Receiver and Motion to Amend Judgment to Add Richard Sloan as a Defendant and Judgment Debtor, Chickadee's Opposition to Application for Appointment of Receiver and Motion to Amend Judgment, and having considered the Parties' oral argument during the Status Conference held October 14, 2010 and the previous hearings before this Court held on August 2, 2010, August 23, 2010, August, 30, 2010, and September 20, 2010, and having made the above Findings of Fact and Conclusions of Law:
IT IS HEREBY ORDERED that David J. Pasternak is appointed as Limited Receiver of Chickadee Environmental Remediation Company, effective upon filing of a Receiver's oath in this Court to faithfully perform his duties. The Receiver is appointed for the limited purpose of executing the judgment entered in this case, including all past and ...