United States District Court, C.D. California
Present: The Honorable CHRISTINA A. SNYDER
CIVIL MINUTES - GENERAL
MOTION TO DISMISS FIRST AMENDED COMPLAINT (Dkt.26, filed June
February 12, 2019, plaintiff Noah's Ark Processors, LLC
filed this action against CMBG Advisors, Inc.
(“CMBG”), alleging claims for breach of fiduciary
duty and constructive fraud. Dkt. 1. On March 13, 2019, CMBG
filed a motion to dismiss pursuant to Federal Rule of Civil
Procedure 12(b)(6). Dkt. 9. The Court granted CMBG's
motion and provided plaintiff with leave to amend the
complaint. Dkt. 24 (“Order”).
20, 2019, plaintiff filed the first amended complaint which
alleges a single claim for breach of fiduciary duty. Dkt. 25
(“FAC”). On June 10, 2019, CMBG filed the instant
motion to dismiss pursuant to Rules 12(b)(1) and 12(b)(6).
Dkt. 26 (“Mot.”). Plaintiff filed an opposition
on June 24, 2019. Dkt. 28 (“Opp'n”). CMBG
filed a reply on July 1, 2019. Dkt. 29 (“Reply”).
Court held a hearing on July 15, 2019. After carefully
considering the parties' arguments, the Court finds and
concludes as follows.
An Assignment for the Benefit of Creditors
assignment for the benefit of creditors (“ABC”)
is a “business liquidation device available to an
insolvent debtor as an alternative to formal bankruptcy
proceedings.” Credit Managers Assn. v. Nat'l
Indep. Bus. All., 162 Cal.App.3d 1166, 1169 (1984). Such
assignments in California are governed by common law and a
patchwork of state statutes. See id. Under an ABC, a
distressed entity transfers its property to a third-party
assignee who becomes responsible for liquidating the
entity's estate in a fiduciary capacity for the benefit
of the estate's creditors. See id. at 1169-
1171. The laws governing ABCs require the third-party
assignee to pay certain claims, such as secured claims or
priority unsecured claims, before any general unsecured
claims. See, e.g., Myzer v. Emark Corp., 45
Cal.App.4th 884 (1996); Cal. Code Civ. P. § 1204.5
(providing for priority treatment of consumer deposit
claims); Cal. Code Civ. P. § 1204 (providing for
priority treatment of claims for wages, salaries,
commissions, and employee benefit contributions).
filed suit against Value Meats, Inc. dba Charlie's Pride
(“VMI”) in the Superior Court for the County of
Los Angeles. FAC ¶ 4. In approximately August 2016,
plaintiff reached a settlement with VMI in which VMI agreed
to pay plaintiff $180, 000. Id. Ex. A
(“Judgment”) at 2. VMI made a single payment of
$42, 107.18 on or about August 31, 2016, but failed to make
any subsequent payments. Id. On October 18, 2016,
VMI entered a general ABC in favor of CMBG. FAC Ex. B
to the VMI ABC, VMI transferred ownership of its assets to
CMBG, and in so doing, designated CMBG to act, pursuant to
California law, as the assignee for the benefit of creditors
of VMI. VMI ABC at 1-2. The VMI ABC provides that the net
proceeds from the liquidation of VMI's estate are to be
applied first to certain prioritized claims, including
secured claims, taxes, and employee claims, and that
“all distributions to other creditors shall be, within
each class, pro-rata in accordance with the terms of
each creditor's indebtedness, until all such debts are
paid in full.” Id. at 6.
learned that VMI had entered an ABC on November 4, 2016. FAC
¶ 5. On November 14, 2016, plaintiff requested a
judgment against VMI in the Los Angeles Superior Court.
Id. ¶ 4. The Superior Court granted
plaintiff's motion and entered judgment against VMI in
the amount of $137, 892.82, representing the principal of
$180, 000 less VMI's payment of $42, 107.18, as well as
interest in the amount of $2, 684.90, attorneys' fees in
the amount of $15, 000, and interest at the rate of $37.78
daily through the date of satisfaction of judgment.
Id.; Judgment at 2. Plaintiff represents that the
amount required to satisfy that judgment is now $189, 693.06.
Id. ¶ 4.
January 2017, plaintiff submitted a claim form to CMBG for an
unsecured claim in the amount of $157, 957.86. Compl. ¶
5; Ex. C. On May 3, 2017, plaintiff's counsel, Ami
Meyers, asked CMBG about the status of plaintiff's claim.
CMBG, through Lisa van Eyssen, responded the next day that it
was “in the process of settling a class action wage
lawsuit with an agreed amount still pending” and that
“[o]nce the priority claims have been paid out, [CMBG]
will disburse to unsecured creditors on a pro-rata
basis.” FAC ¶ 6. CMBG also included a spreadsheet
that listed VMI's creditors. Id.
9, 2017, Meyers emailed van Eyssen requesting another status
update. Id. ¶ 7. After receiving no response
for over a month, Meyers emailed van Eyssen again around July
18, 2017. Id. That same day, van Eyssen responded
that CMBG was “reviewing the 100 claims that came in