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Forreststream Holdings Ltd. v. Shenkman

United States District Court, N.D. California, San Francisco Division

July 16, 2017

FORRESTSTREAM HOLDINGS LIMITED, Plaintiff,
v.
GREGORY SHENKMAN, Defendant.

          ORDER DENYING WITHOUT PREJUDICE FORREST STREAM'S MOTION FOR ASSIGNMENT OF PAYMENTS AND ORDER RESTRAINING ASSIGNMENT OF PAYMENTS RE: ECF NO. 128

          LAUREL BEELER, UNITED STATES MAGISTRATE JUDGE

         INTRODUCTION

         This is a breach-of-contract lawsuit arising from a borrower's breach of a multi-million-dollar loan agreement.[1] Forreststream, the lender, sued Gregory Shenkman, the borrower, for failing to repay the loan and for failing to pledge his interest in a company called EIS Group to secure the loan.[2] The court granted Forreststream summary judgment, found Mr. Shenkman personally liable for the loan, and entered judgment in the amount of $10, 503, 285.19 plus interest.[3] Mr. Shenkman appealed and has not paid any part of the judgment.[4]

         Forreststream asserts that Mr. Shenkman has an equity interest in, and an entitlement to payments from, several entities; it asks for an order assigning the payment rights to it and restraining Mr. Shenkman's assignment of his rights to payments.[5] The court can decide the motion without oral argument under Civil Local Rule 7-1(b). The court denies the motion without prejudice to allow further discovery about whether Mr. Shenkman has assignable rights to payments.

         STATEMENT

         Forreststream's investigation reveals that Mr. Shenkman has “an equity interest in and may otherwise be entitled to payments from the following entities:” (1) Return on Intelligence, Ltd., a Bermuda chartered corporation (“ROI”); (2) MeForo USA, Inc., a California Corporation, and its affiliate MeForo Ltd. (collectively, “MeForo”); and (3) Exigen East, LLC, a Delaware limited liability company, and its affiliates Exigen Capital (GP), L.P., Exigen Capital (GPLLC), LLC, Exigen Capital, L.P., and Exigen Capital Management, LLC (collectively, “Exigen”).[6]

         Mr. Shenkman apparently invested in and is a shareholder in (and a former director of) ROI; ROI sued him in January 2016, alleging that he breached his fiduciary duty as a director by interfering in a business deal.[7] Exhibit A to that complaint is a letter agreement that Mr. Shenkman signed as “Manager” on behalf of each Exigen entity.[8] Mr. Shenkman is MeForo's CEO and signed its latest Statement of Information filed with the California Secretary of State on March 8, 2017.[9] The court previously ordered Mr. Shenkman to pay Forreststream's attorney's fees and costs for the default-judgment motion; he paid those fees from MeForo U.S.A., Inc.'s account at JPMorgan Chase.[10] Forreststream asserts that Mr. Shenkman's status as MeForo's CEO and his ability to pay personal obligations from MeForo's account show that he controls it and is its sole owner.[11]

         At least as of the date it filed its motion, Forreststream has not obtained financial information from Mr. Shenkman.[12] The due date for Mr. Shenkman's responses to discovery was June 19, 2017, six days after the motion filing date.[13] He served his responses, saying that he would produce relevant information after the parties agreed on a protective order.[14] The parties stipulated to a protective order on July 6, 2017.[15] On July 5, 2017, in its reply brief, Forreststream represented that to date, Mr. Shenkman had provided no documents and no interrogatory responses (“beyond where he now claims to live”).[16] Forreststream re-noticed the judgment-debtor exam for August 14, 2017.[17]

         ANALYSIS

         Citing California Code of Civil Procedure § 708.510, Forreststream asks for assignment of Mr. Shenkman's right to payments from the entities.[18] The parties do not dispute that the court retains jurisdiction to enforce its judgment or that Mr. Shenkman's appeal does not divest the court of that jurisdiction.[19] Stein v. Wood, 127 F.3d 1187, 1189 (9th Cir. 1997); Ketab Corp. v. Mesriani Law Grp., No. 14-CV-7241-RSWL, 2016 WL 5921932, at *1 (C.D. Cal. Feb. 1, 2016). At least on this record, an order assigning assets is premature until further discovery illuminates whether Mr. Shenkman has assignable rights to payments. The court denies the motion without prejudice.

         The post-judgment enforcement proceedings here are governed by California law. Fed.R.Civ.P. 69(a); Hilao v. Estate of Marcos, 95 F.3d 848, 851 (9th Cir. 1996). Under California Code of Civil Procedure § 708.510, a court may assign the judgment debtor's right to payments from third parties to the judgment creditor to satisfy the judgment:

Except as otherwise provided by law, upon application of the judgment creditor upon noticed motion, the court may order the judgment debtor to assign to the judgment creditor . . . all or part of a right to payment due or to become due, whether or not the right is conditioned on future developments, including but not limited to the following types of payments:
(1) Wages dues from the federal government that are not subject to withholding under an earnings withholding order.
(2) Rents.
(3) Commissions.
(4) Royalties.
(5) Payments due from a patent or ...

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