The opinion of the court was delivered by: Audrey B. Collins Chief United States District Judge
ORDER DENYING MOTION TO AMEND JUDGMENT (Docket No. 121), DENYING MOTION TO DETERMINE THE CHARACTER OF ASSETS OF CORINNE BUCKLEY (Docket No. 119), AND DENYING MOTION FOR CONSTRUCTIVE TRUST (Docket No. 127)
Pending before the Court are three motions filed by Plaintiff and Judgment Creditor Internet Direct Response, Inc. ("Plaintiff"): a Motion to Amend Judgment (Docket No. 121), a Motion to Determine the Character of Assets of Corinne Buckley (Docket No. 119), and a Motion for Constructive Trust (Docket No. 127). Plaintiff also filed a separate brief in support of its alter ego theory of liability. (Docket No. 122.) Defendant and Judgment Debtor Fred Buckley opposed only the Motion to Amend the Judgment on February 14, 2011. Non-party Corinne Buckley opposed the Motion to Amend Judgment and the Motion to Determine the Character of Assets of Corinne Buckley on February 14, 2011 and opposed the Motion for a Constructive Trust on February 21, 2011. Plaintiff filed untimely replies on March 4, 2011, but the Court has nevertheless considered them. Cf. Local Rules 7-10, 7-12.
The Court finds these matters appropriate for resolution without oral argument and VACATES the March 14, 2011 hearing date. Fed. R. Civ. P. 78; Local Rule 7-15. For the reasons below, the Court DENIES all of Plaintiff's motions.*fn1
In February 2009, an American Arbitration Association award was entered against Defendant Fred Buckley in North Carolina and on May 12, 2009, a judgment on the award was entered in federal district court in the Western District of North Carolina. The federal judgment was registered in this district in November 2009 and Plaintiff began collection efforts thereafter.
According to the arbitration decision, Plaintiff had entered into a contract with a company called Smart Health USA, its subsidiaries, assigns, and related companies to develop and maintain a website and manage internet advertising for a product called Herbal V. Apparently Fred Buckley was the signatory to the contract for Smart Health USA. For a reason not clear in the record, the parties agreed that Fred Buckley would be the individual defendant in the arbitration and any award would be imposed against Buckley individually for actions by Smart Health USA and any subsidiaries.*fn2
During the course of this contractual relationship, other products were apparently added to the scope of the contract, including Zyrexin, which was a product sold by Superbalife International, LLC ("Superbalife"). A dispute arose between the parties over whether Plaintiff was owed for the work done related to Zyrexin and Superbalife. The parties submitted the issue to arbitration.
The arbitrator ruled in Plaintiff's favor, concluding that the website and other work related to Zyrexin was compensable under the contract and the contract had been breached. The arbitrator relied on email correspondence that "clearly indicate[d] in writing that Buckley expected [Plaintiff] to develop and manage a website for Zyrexin and/or Superbalife," including an email in which Buckley said that "'one quick thing I want to change on the site is the Smart Health USA thing. I need to get Smart Health USA out and replace it with Superbalife International." (Mot. to Amend Judgment, Ex. A at 2.) The arbitrator also found "no emails from Buckley to [Plaintiff] stating that Zyrexin or Superbalife are separate entities apart from Smart Health USA or Buckley or that Zyrexin was not a product covered by the September 2005 contract." (Id.) The arbitrator awarded Plaintiff over $120,000 with interest.
After obtaining a federal judgment confirming the award and registering it in this District, Plaintiff immediately sought to conduct judgment debtor examinations on both Defendant Fred Buckley and his wife, Corinne Buckley. (Docket Nos. 1, 2.) Defendant Buckley and his wife resisted, and, after many additional proceedings, including unsuccessful settlement discussions, Plaintiff now asks this Court to issue several different rulings that may enable it to collect the judgment against two parties not named as defendants in either the arbitration proceedings or the federal judgment: Corinne Buckley and Superbalife.
In brief, Plaintiff claims that Defendant Buckley is the President and Corinne Buckley is the owner of Superbalife. Plaintiff argues that, because the arbitration involved Zyrexin, a product of Superbalife, Corinne Buckley and Superbalife could have participated in the arbitration, but chose not to because Corinne and Fred Buckley falsely assumed that a post-nuptial agreement preserved Corinne Buckley's assets used to create Superbalife as separate property, which protects her and Superbalife from Plaintiff's collection efforts here. On this basis, Plaintiff asks the Court for leave to amend the federal judgment to add Corinne Buckley and Superbalife as defendants, to declare Corinne Buckley's separate asserts as community assets subject to collection for the judgment against Fred Buckley, and to impose a constructive trust on Fred Buckley's, Corinne Buckley's, and Superbalife's assets.
I. MOTION TO AMEND JUDGMENT
Federal Rule of Civil Procedure 69(a)(1) provides jurisdiction to the Court to enforce a judgment by utilizing California state law. One such law is California Code of Civil Procedure section 187, which allows a federal court to "'amend a judgment to add additional judgment debtors.'" Levander v. Prober (In re Levander), 180 F.3d 1114, 1121 (9th Cir. 1999). To amend a judgment under section 187, a plaintiff must show: "'(1) that the new party [is] the alter ego of the old party and (2) that the new party had controlled the litigation, thereby having had the opportunity to litigate, in order to satisfy due process concerns.'" Id. (emphasis in original). The judgment creditor bears the burden to satisfy both requirements by a preponderance of evidence. See Wollersheim v. Church of Scientology, 69 Cal. App. 4th 1012, 1017--18 (1999).
Two general conditions must be satisfied to apply to find alter ego status: (1) whether there is a unity of interest and ownership such that the corporation and individual no longer exist separately; and (2) whether the corporate form must be disregarded to avoid inequity. Greenspan v. LADT, LLC, 191 Cal. App. 4th 486, ___, 2010 WL 5395685, at *13 (Dec. 30, 2010). These requirements are somewhat relaxed in the context of adding new defendants to a judgment pursuant to section 187; so long as the "'equitable principles regarding alter ego'" are satisfied, a court may add the new defendant to avoid "injustice." Levander, 180 F.3d at 1122. Nevertheless, "'the corporate form will be disregarded only in narrowly defined circumstances and only when the ends of justice so require,'" Greenspan, 191 Cal. App. 4th at __, 2010 WL 5395687, at *13, and the "mere fact ...