Judge: Frank M. Tavelman, Case: BC633340, Date: 2024-06-28 Tentative Ruling

Case Number: BC633340    Hearing Date: June 28, 2024    Dept: A

LOS ANGELES SUPERIOR COURT

NORTH CENTRAL DISTRICT - BURBANK

DEPARTMENT A

MOTION TO QUASH APPLICATION AND ORDER

FOR APPEARANCE AND EXAMINATION

NOTICE:

The Court is not requesting oral argument on this matter.  Pursuant to California Rules of Court, Rule 3.1308(a)(1) notice of intent to appear is required.  Unless the Court directs argument in the Tentative Ruling, no argument will be permitted unless a “party notifies all other parties and the court by 4:00 p.m. on the court day before the hearing of the party’s intention to appear and argue.  The tentative ruling will become the ruling of the court if no notice of intent to appear is received.”  

Notice may be given either by email at BurDeptA@LACourt.org or by telephone at (818) 260-8412.

ALLEGATIONS: 

On February 7, 2023, this Court entered judgment against Coachella Management Partners LLC (Coachella). The Court ruled that Coachella was liable for damages incurred by Patricia Healy (Healy), Andrea Lui (Lui), Juan Godinez (Godinez), (collectively “Plaintiffs”) resulting from the improper removal of a wooden structure on Coachella’s property.

The Court found that Alexis Gevorgian was liable under alter ego for the damages liability of Coachella.  On August 16, 2023, the Court entered amended judgment against Defendant and in favor of Plaintiffs. This amended judgment has subsequently been appealed by both Gevorgian and Coachella.

Before the Court is a motion by Gevorgian to quash Plaintiff’s Application and Order for Appearance and Examination (ORAP). On February 29, 2024, an ORAP occurred in which Gevorgian testified on behalf of Coachella. This motion seeks to quash the ORAP requesting Gevorgian testify as an individual judgment debtor. Plaintiffs oppose the motion and Gevorgian replies.

ANALYSIS: 

1.      LEGAL STANDARD

C.C.P. § 1987.1 grants the trial court authority to quash a subpoena when necessary.  C.C.P. § 1987.1 states, “If a subpoena requires the attendance of a witness or the production of books, documents, or other things before a court, or at the trial of an issue therein, or at the taking of a deposition, the court, upon motion reasonably made by any person described in subdivision (b), or upon the court’s own motion after giving counsel notice and an opportunity to be heard, may make an order quashing the subpoena entirely, modifying it, or directing compliance with it upon those terms or conditions as the court shall declare, including protective orders.  In addition, the court may make any other order as may be appropriate to protect the person from unreasonable or oppressive demands, including unreasonable violations of the right of privacy of the person.”  

2.      MERITS

In moving to quash the ORAP, Gevorgian argues (1) that he is not a judgment debtor subject to independent examination and (2) that the examination is impermissible as Gevorgian’s appeal has stayed enforcement measures. The Court will address each of these arguments in turn.

Gevorgian argues that he is not a judgment debtor within the meaning of C.C.P. 708.110(a). This argument is largely one of the language employed by the judgment, as Gevorgian argues that his alter ego liability is conditional upon nonpayment by Coachella. For sake of clarity, the Court reproduces the portion of the judgment which addresses alter ego below:

The Court further rules that Plaintiffs have met their burden to “pierce the corporate veil” under the alter-ego doctrine against Coachella Management Partners, LLC. Alexis M. Gevorgian, as the sole member-manager of Coachella Management Partners, LLC operated the LLC in such a manner, including but not limited to the removal of all assets with the knowledge of pending liabilities, such that member liability protection afforded by a Limited Liability Company would be inequitable. Alexis M. Gevorgian testified that any potential liabilities against Coachella Management Partners, LLC may possibly be covered through a loan or other method of recapitalizing the LLC. As such, Court ruled that Alexis M. Gevorgian, individually, is liable for debts of Coachella Management Partners, LLC if the LLC fails to satisfy dollar damages that may be awarded in Phase III (Damages).

The Court first notes that the authority relied upon by both Gevorgian and Plaintiffs is scant. This does not seem a reflection of the parties so much as the result of the novel nature of the Court’s ruling on alter ego. The Court understands Gevorgian’s argument, but ultimately finds it unpersuasive.

If Gevorgian’s argument is correct, it is unclear when, if ever, he would be subject to a debtor’s examination. Gevorgian appears to agree that, under the current judgment, he would be become a judgment debtor if Coachella failed to pay the damages. The reality is that Coachella has not paid the judgment.  The difficulty stems from determining when the transition from “conditional judgment debtor” to “judgment debtor” occurs. Are Plaintiffs forced to wait until years down the road? How are Plaintiffs expected to prove that Coachella will not pay except for the reality that Coachella has not paid.

In resolving the above ambiguities, the Court finds it useful to revisit its logic in imposing the conditional alter ego liability. The Court maintains that Plaintiffs sufficiently demonstrated Gevorgian to be the alter ego of Coachella at trial. Thus, the imposition of the condition was more of a practical consideration than a concern with Gevorgian’s actual liability. The Court wished to preserve a potential scenario in which Coachella had available assets to pay the judgment and Plaintiffs needed to go no further.  For example, if Gevorgian returned money to Coachella which was removed after the events leading to liability, the Coachella could pay the judgment; or if Coachella obtained a loan to fund payment, then Coachella could pay the judgment. This being said, it is apparent at this point that such a scenario will not come to pass.

Plaintiffs contend that the February 29, 2024 ORAP of Coachella revealed that Coachella has no assets and is unable to pay. Plaintiffs offer the testimony of Gevorgian from his examination as the director of Coachella. Gevorgian testified that the current value of the Coachella’s assets is “zero”. (Opp. Exh. 2, p. 18.) Further, Gevorgian explicitly answered that Coachella had no assets and no business activity. (Opp. Exh. 2, pgs. 38-39.)

The Court finds these showings sufficient to establish that Coachella is unable to pay the damages. By Gevorgian’s own admission, Coachella appears to have no assets and no way of accumulating assets. Gevorgian has offered no showing to the contrary. Given Plaintiff’s showing of Coachella’s inability to pay, the Court finds Gevorgian personally subject to examination.

Gevorgian also argues that the debtor examination cannot occur because enforcement of the judgment is stayed pending his appeal. Gevorgian argues that his appeal, including the alter ego finding, bars the examination from going forward as per C.C.P. § 916. C.C.P. § 916 provides:

(a) Except as provided in Sections 917.1 to 917.9, inclusive, and in Section 116.810, the perfecting of an appeal stays proceedings in the trial court upon the judgment or order appealed from or upon the matters embraced therein or affected thereby, including enforcement of the judgment or order, but the trial court may proceed upon any other matter embraced in the action and not affected by the judgment or order.

(b) When there is a stay of proceedings other than the enforcement of the judgment, the trial court shall have jurisdiction of proceedings related to the enforcement of the judgment as well as any other matter embraced in the action and not affected by the judgment or order appealed from.

The Court notes that Coachella, an entity under the direct control of Gevorgian, did not raise this concern with respect to its own ORAP, despite the fact that Coachella is also appealing the Court’s judgment.

As concerns Gevorgian, the Court notes he has filed no undertaking in reference to his appeal. C.C.P. § 916(a) explicitly states an exception to the mandatory stay where C.C.P. § 917.1 applies. C.C.P. § 917.1 provides:

(a) Unless an undertaking is given, the perfecting of an appeal shall not stay enforcement of the judgment or order in the trial court if the judgment or order is for any of the following:

(1) Money or the payment of money, whether consisting of a special fund or not, and whether payable by the appellant or another party to the action.

Given that the judgment here is for money, it falls under the purview of C.C.P. § 917.1(a)(1). Thus, Gevorgian is required to file an undertaking if he wishes to stay enforcement proceedings. 

Gevorgian argues in his reply that C.C.P. § 917.1 cannot apply to this case because he is not a judgment debtor. The Court finds this argument unpersuasive. As previously discussed, the Court is not persuaded by Gevorgian’s argument that he is not a judgment debtor. The same logic applies here. The judgment clearly establishes Gevorgian’s obligation to pay should Coachella not have assets sufficient to cover the damages. The Court does not see how the judgment is not one which is “payable by the appellant” under C.C.P. § 917.1(a)(1). It follows that Gevorgian is required to file an undertaking to stay enforcement of the judgment pursuant to C.C.P. § 917(a). As Gevorgian has posted no such undertaking, no stay of enforcement is in effect here.

In short, the Court finds that Gevorgian is a judgment debtor for the purposes of this ORAP. As such, Gevorgian is subject to the debtor’s examination barring his filing of an undertaking pending appeal. Accordingly, the motion to quash the ORAP is DENIED.

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RULING:

In the event the parties submit on this tentative ruling, or a party requests a signed order or the court in its discretion elects to sign a formal order, the following form will be either electronically signed or signed in hard copy and entered into the court’s records. 

ORDER 

Alexis Gevorgian’s Motion to Quash came on regularly for hearing on June 28, 2024, with appearances/submissions as noted in the minute order for said hearing, and the Court, being fully advised in the premises, did then and there rule as follows: 

THE MOTION TO QUASH IS DENIED.

ALEXIS GEVORGIAN IS ORDERED TO PARTICIPATE IN AN ORAP WITHIN 30 CALENDAR DAYS UNLESS JUDGMENT CREDITORS STIPULATE TO A LATER DATE.

UNLESS ALL PARTIES WAIVE NOTICE, PLAINTIFFS LUI AND GODINEZ TO GIVE NOTICE.  

IT IS SO ORDERED. 

DATE:  June 28, 2024                            _______________________________ 

                                                                        F.M. TAVELMAN, Judge 

Superior Court of California 

County of Los Angeles