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Ben Gordon, G7, Inc, and Bg4 v. Vitalis Partners

November 8, 2012


The opinion of the court was delivered by: Kendall J. Newman United States Magistrate Judge


On September 27, 2012, counsel for defendant Larry W. Harmon filed the proposed stipulated settlement (the "Stipulation") currently pending before the undersigned.*fn1

(Stipulation, Dkt. No. 77.) For the reasons that follow, the undersigned declines to approve the proposed Stipulation as currently drafted. The parties shall have 30 days from the date of this order in which to file a revised Stipulation, or, in the alternative, supplemental briefing supporting the current Stipulation and addressing each of the issues described below.


The Northern District of Illinois entered a judgment in plaintiffs' favor on January 27, 2010 (the "Judgment"). (See Dkt. No. 19 at 2-3.) On June 25, 2010, plaintiffs "registered" that foreign judgment in the amount of $1,386,666.67 in the Eastern District of California on grounds that "the Judgment Debtors reside in this District." (Dkt. No. 1; see also Dkt. No. 5, Attachment.) Plaintiffs sought to enforce the Judgment in the Eastern District of California, and asked this court to issue an Order Requiring the Examination of Judgment Debtor Larry Harmon. (Dkt. No. 8.) The court ordered the examination defendant Harmon as a judgment debtor. (Dkt. No. 10.) This court had no involvement in the underlying action that led to entry of the final Judgment in the Northern District of Illinois. In fact, this court's only role in this dispute, thus far, has been to order the examinations of judgment debtor Larry Harmon (Dkt. No. 8 at 1, Dkt. No. 69), Frank Castillo on behalf of third party Harmon-Castillo LLP (Dkt. No. 68), and of a third party custodian of records (Dkt. No. 70).


A. Jurisdiction In Eastern District Of California v. Northern District Of Illinois

The parties have not compellingly shown that the Eastern District of California has authority to approve the settlement of a suit filed in this court solely to "enforce" the judgment of a district court in Illinois. If the Stipulation is intended to "settle" the enforcement action filed in this court, but not to settle all of the defendant's debts to plaintiffs that arise from the Judgment, the Stipulation is unclear in this regard.

B. Magistrate Judge's Authority And Timing Issues Even if the Eastern District of California properly has jurisdiction to approve the settlement of this enforcement action, it is not clear that the undersigned magistrate judge has authority/jurisdiction to approve the Stipulation. The magistrate judge's authority in this particular case has been pursuant to Eastern District of California Local Rule 302(c)(11) ["Examinations of judgment debtors"]. The pending Stipulation does not fall into the category of an "examination of judgment debtor." Accordingly, the parties are invited to review Local Rule 302 and to consider refiling the Stipulation before the assigned United States District Judge.

Further, if the parties were to show that the undersigned has authority to approve the Stipulation, given that the Stipulation would potentially dispose of this case, at minimum the undersigned would have to issue proposed Findings and Recommendations for the district judge's review before the Stipulation can be fully approved. If time is of the essence to the parties - and it seems to be, given certain upcoming dates listed in the Stipulation - the parties will likely need to request resolution of the Stipulation upon shortened time, request the district judge's approval of proposed Findings and Recommendations on shortened time, and/or seek some similar form of emergency relief.

C. Substantive Questions About The Stipulation's Terms Even if the parties compellingly demonstrate that the undersigned has authority to approve of their Stipulation, substantive questions exist.

1. The Unnamed "Lender"

The parties deliberately decline to reveal the identity of a "Lender" that is repeatedly and materially referenced in the Stipulation. Yet, the parties offer no reason for the secrecy surrounding the identity of the "Lender." Similarly, the "Lender's" name is redacted from Exhibit B to the Stipulation, but no reason is given for the redaction. Given that the Lender appears to play a somewhat significant role in the proposed stipulated settlement, the parties should identify the Lender, or explain why no such identification is necessary, or explain the need for secrecy with respect to the Lender's identity.

2. The "Assignment" And The Non-Disclosure Provision According to the terms of the proposed Stipulation, the "Lender" has assigned to defendant Larry Harmon & Associates ("LHA") the "right to apply for" money (in the form of \ sales tax refunds)*fn2 from the State of California. Moreover, as part of the stipulated settlement, LHA seeks to transfer those refunds to plaintiff Gordon immediately upon receiving them. On the undersigned's review, the Stipulation reflects that LHA is effectively promising to obtain the money from the State of California, and then to immediately pay it to plaintiff "forthwith" and "by check." (Stipulation ΒΆΒΆ 3-4.) However, the parties' Stipulation also references California Regulation ...

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