Judge James C. Chalfant, Case Number: 23STCV23721, Date: 2024-02-27 Tentative Ruling

Plaintiff Synergistic Solutions International, LLC (“SSI”) applies for a right to attach order against KSI Data Sciences, Inc. (“KSI”) for $84,747.09, including $13,225 in attorney’s fees and $727.57 in costs.

The court has read and considered the moving papers and opposition (no reply was filed)[1] and renders the following tentative decision.

A. Statement of the Case

1. Complaint

Plaintiff SSI filed this action on September 29, 2023 against “SKI Data Sciences, Inc.”, alleging (1) damages for breach of written contract, (2) account stated, (3) open book account, and (4) declaratory relief. On October 2, 2023, SSI amended the complaint to substitute KSI for SKI Data Sciences, Inc. The Complaint alleges in pertinent part as follows.

The parties entered a Settlement and Release Agreement (“Settlement”), effective June 1, 2019. Christopher Keon (“Keon”) signed it on SSI’s behalf, and Jonathan Gaster (“Gaster”) signed as KSI’s CEO.

The Settlement stated the parties had entered into several agreements (“Existing Agreements”), including one dated August 19, 2016 (“2016 Agreement”). The 2016 Agreement gave KSI a 10% interest in SSI. To resolve any claims the parties may have against each other under the Existing Agreements, the Settlement required KSI to sell 90% of its interest in SSI, or 9% of all shares, back to SSI for $1.

KSI also agreed to remit $50,000 to SSI to satisfy any and all obligations between the parties. The failure to do so by December 31, 2019 would cause KSI to forfeit its remaining 1% interest in SSI. Although SSI waived any right to recover under the Existing Agreements, it did not waive its right to seek legal recourse for payment of the $50,000. It could also recover attorney’s fees and costs incurred to enforce the Settlement. The Settlement did not specify an interest rate for prejudgment interest.

As of the effective date of the Settlement, KSI was organized under the state of Delaware and had filed a Statement and Designation by Foreign Corporation with the California Secretary of State. This allowed KSI to transact business in California as a foreign entity.

On February 11, 2021, Gaster filed Articles of Incorporation with a Statement of Conversion – Foreign Entity to a California Stock Corporation with the California Secretary of State. This converted KSI to a California corporation. Although this means that KSI is now governed by California law, it has no effect on KSI’s responsibilities under the Settlement.

Despite multiple payment demands since December 31, 2019, KSI has failed to pay the $50,000 required under the Settlement. Gaster has admitted the failure to pay and has made various excuses.

Under Civil Code section 3289, in the absence of a specified interest rate, the applicable prejudgment interest rate is 10% per year. Interest accrues at a rate of $13.70 per day, or $18,698.63 as of September 29, 2023.

SSI seeks $50,000, $18,698.63 in pre-judgment interest as of September 29, 2023, further prejudgment interest at a daily rate of $13.70 thereafter, and attorney’s fees and costs. SSI also seeks a declaration that KSI has no equity interest in SSI.

2. Course of Proceedings

On October 2, 2023, SSI amended the Complaint to substitute KSI for SKI Data Sciences, Inc. as a Defendant.

On October 24, 2023, SSI served KSI with the Complaint and Summons by substitute service, effective November 3, 2023.

On November 21, 2023, KSI filed an Answer.

B. Applicable Law

Attachment is a prejudgment remedy providing for the seizure of one or more of the defendant’s assets to aid in the collection of a money demand pending the outcome of the trial of the action. See Whitehouse v. Six Corporation, (1995) 40 Cal.App.4th 527, 533. In 1972, and in a 1977 comprehensive revision, the Legislature enacted attachment legislation (CCP §481.010 et seq.) that meets the due process requirements set forth in Randone v. Appellate Department, (1971) 5 Cal.3d 536. See Western Steel & Ship Repair v. RMI, (12986) 176 Cal.App.3d 1108, 1115. As the attachment statutes are purely the creation of the Legislature, they are strictly construed. Vershbow v. Reiner, (1991) 231 Cal.App.3d 879, 882.

A writ of attachment may be issued only in an action on a claim or claims for money, each of which is based upon a contract, express or implied, where the total amount of the claim or claims is a fixed or readily ascertainable amount not less than five hundred dollars ($500). CCP §483.010(a). A claim is “readily ascertainable” where the amount due may be clearly ascertained from the contract and calculated by evidence; the fact that damages are unliquidated is not determinative. CIT Group/Equipment Financing, Inc. v. Super DVD, Inc., (“CIT”) (2004) 115 Cal.App.4th 537, 540-41 (attachment appropriate for claim based on rent calculation for lease of commercial equipment).

All property within California of a corporation, association, or partnership is subject to attachment if there is a method of levy for the property. CCP §487.010(a), (b). While a trustee is a natural person, a trust is not. Therefore, a trust’s property is subject to attachment on the same basis as a corporation or partnership. Kadison, Pfaelzer, Woodard, Quinn & Rossi v. Wilson, supra, 197 Cal.App.3d at 4.

The plaintiff may apply for a right to attach order by noticing a hearing for the order and serving the defendant with summons and complaint, notice of the application, and supporting papers any time after filing the complaint. CCP §484.010. Notice of the application must be given pursuant to CCP section 1005, sixteen court days before the hearing. See ibid.

The notice of the application and the application may be made on Judicial Council forms (Optional Forms AT-105, 115). The application must be supported by an affidavit showing that the plaintiff on the facts presented would be entitled to a judgment on the claim upon which the attachment is based. CCP §484.030.

Where the defendant is a corporation, a general reference to “all corporate property which is subject to attachment pursuant to subdivision (a) of Code of Civil Procedure Section 487.010” is sufficient. CCP §484.020(e). Where the defendant is a partnership or other unincorporated association, a reference to “all property of the partnership or other unincorporated association which is subject to attachment pursuant to subdivision (b) of Code of Civil Procedure Section 487.010” is sufficient. CCP §484.020(e). A specific description of property is not required for corporations and partnerships as they generally have no exempt property. Bank of America v. Salinas Nissan, Inc., (“Bank of America”) (1989) 207 Cal.App.3d 260, 268.

A defendant who opposes issuance of the order must file and serve a notice of opposition and supporting affidavit as required by CCP section 484.060 not later than five court days prior to the date set for hearing. CCP §484.050(e). The notice of opposition may be made on a Judicial Council form (Optional Form AT-155).

The plaintiff may file and serve a reply two court days prior to the date set for the hearing. CCP §484.060(c).

At the hearing, the court determines whether the plaintiff should receive a right to attach order and whether any property which the plaintiff seeks to attach is exempt from attachment. The defendant may appear the hearing. CCP §484.050(h). The court generally will evaluate the attachment application based solely on the pleadings and supporting affidavits without taking additional evidence. Bank of America, supra, 207 Cal.App.3d at 273. A verified complaint may be used in lieu of or in addition to an affidavit if it states evidentiary facts. CCP §482.040. The plaintiff has the burden of proof, and the court is not required to accept as true any affidavit even if it is undisputed. See Bank of America, supra, at 271, 273.

The court may issue a right to attach order (Optional Form AT-120) if the plaintiff shows all of the following: (1) the claim on which the attachment is based is one on which an attachment may be issued (CCP §484.090(a)(1)); (2) the plaintiff has established the probable validity of the claim (CCP §484.090(a)(2)); (3) attachment is sought for no purpose other than the recovery on the subject claim (CCP §484.090(a)(3); and (4) the amount to be secured by the attachment is greater than zero (CCP §484.090(a)(4)).

A claim has “probable validity” where it is more likely than not that the plaintiff will recover on that claim. CCP §481.190. In determining this issue, the court must consider the relative merits of the positions of the respective parties. Kemp Bros. Construction, Inc. v. Titan Electric Corp., (“Kemp”) (2007) 146 Cal.App.4th 1474, 1484. The court does not determine whether the claim is actually valid; that determination will be made at trial and is not affected by the decision on the application for the order. CCP §484.050(b).

Except in unlawful detainer actions, the amount to be secured by the attachment is the sum of (1) the amount of the defendant’s indebtedness claimed by the plaintiff, and (2) any additional amount included by the court for estimate of costs and any allowable attorneys’ fees under CCP section 482.110. CCP §483.015(a); Goldstein v. Barak Construction, (2008) 164 Cal.App.4th 845, 852. This amount must be reduced by the sum of (1) the amount of indebtedness that the defendant has in a money judgment against plaintiff, (2) the amount claimed in a cross-complaint or affirmative defense and shown would be subject to attachment against the plaintiff, and (3) the value of any security interest held by the plaintiff in the defendant’s property, together with the amount by which the acts of the plaintiff (or a prior holder of the security interest) have decreased that security interest’s value. CCP §483.015(b); see also CCP §483.010(b) (“an attachment may not be issued on a claim which is secured by any interest in real property arising from agreement, statute, or other rule of law…However, an attachment may be issued where the claim was originally so secured but, without any act of the plaintiff or the person to whom the security was given, the security has become valueless or has decreased in value to less than the amount then owing on the claim). A defendant claiming that the amount to be secured should be reduced because of a cross-claim or affirmative defense must make a prima facie showing that the claim would result in an attachment against the plaintiff.

Before the issuance of a writ of attachment, the plaintiff is required to file an undertaking to pay the defendant any amount the defendant may recover for any wrongful attachment by the plaintiff in the action. CCP §489.210. The undertaking ordinarily is $10,000. CCP §489.220. If the defendant objects, the court may increase the amount of undertaking to the amount determined as the probable recovery for wrongful attachment. CCP §489.220. The court also has inherent authority to increase the amount of the undertaking sua sponte. North Hollywood Marble Co. v. Superior Court, (1984) 157 Cal.App.3d 683, 691.

KSI was formed in Virginia on September 26, 2013. Soffer Decl., ¶3, Ex. B. As of January 1, 2022, Virginia’s State Corporation Commission Clerk lists KSI’s status as Inactive. Soffer Decl., ¶3, Ex. B.

In April 2016, KSI was incorporated in Delaware. Soffer Decl., ¶4, Ex. C. It also filed a Statement and Designation by Foreign Corporation with the California Secretary of State. Soffer Decl., ¶5, Ex. D. Gaster signed the Statement as KSI’s CEO, and it lists him as the agent for service of process. Soffer Decl., ¶5, Ex. D.

On February 11, 2021, KSI filed the Statement of Conversion – Foreign Entity to a California Stock Corporation with the California Secretary of State. This converted KSI to a California corporation. Soffer Decl., ¶6, Ex. E. Gaster signed as an authorized person for KSI. Soffer Decl., ¶6, Ex. E.

KSI’s latest Statement of Information, filed with the California Secretary of State on June 6, 2023, lists Gaster as CEO and CFO. Soffer Decl., ¶2, Ex. A.

Keon is the manager of both SSI and Synergistic Solutions International Unmanned LLC (“Unmanned”). Keon Decl., ¶¶ 1, 3-4. In 2016, Unmanned sold unmanned systems(drones) to public safety and enterprise customers. Keon Decl., ¶3. SSI sold training services to public safety and enterprise customers, including those who purchased Unmanned’s products. Keon Decl., ¶4.

On August 19, 2016, the parties entered into the 2016 Agreement in which KSI bought 10% of Unmanned for $30,000. Keon Decl., ¶6, Ex. A. In turn, KSI agreed to provide marketing support to Unmanned regarding a product named “Unmanned Systems and Accessories.” Keon Decl., ¶7, Ex. A. Gaster signed as KSI’s CEO. Keon Decl., ¶6, Ex. A.

On August 31, 2018, SSI and Unmanned merged. Keon Decl., ¶¶ 5, 8. Keon gave Gaster prior notice of this merger, and Gaster never objected. Keon Decl., ¶8.

As of June 1, 2019, KSI owed Keon $102,000 in fees based on various invoices for work performed from 2014 to 2019. Keon Decl., ¶9. When Keon demanded payment of the $102,000, Gaster claimed a right to recoup KSI’s $30,000 investment in Unmanned plus a return on its investment. Keon Decl., ¶10. Keon agreed to repay KSI its $30,000 investment plus a $22,000 return, which reduced KSI’s debt to $50,000. Keon Decl., ¶10.

The parties entered the Settlement, effective June 1, 2019, to resolve the claims for amounts owed to KSI and address KSI’s investment in Unmanned. Keon Decl., ¶11, Ex. B. Keon signed it on SSI’s behalf, and Gaster signed as KSI’s CEO. Keon Decl., ¶11, Ex. B.

The Settlement recitals stated the parties had entered into several Existing Agreements, including the 2016 Agreement. Keon Decl., ¶12, Ex. B. The 2016 Agreement gave KSI a 10% interest in SSI. Keon Decl., ¶13, Ex. B. The Settlement sought to settle all obligations due and overdue under the Existing Agreements and resolve any claims the parties may have against each other. Keon Decl., ¶14, Ex. B.

Under Settlement Paragraph 2, KSI sold 90% of its interest in SSI, or 9% of all shares, back to SSI for $1. Keon Decl., ¶15, Ex. B. SSI acknowledged receipt of this dollar. Keon Decl., ¶15, Ex. B. KSI also agreed to remit $50,000 to SSI to satisfy any and all obligations between the parties. Keon Decl., ¶15, Ex. B. The failure to do so by December 31, 2019 would cause KSI to forfeit its remaining 1% interest in SSI. Keon Decl., ¶15, Ex. B.

Settlement Paragraph 6 required both parties to release each other from any obligations under the Existing Agreements. Keon Decl., ¶16, Ex. B. Paragraph 7 clarified that the release did not include the $50,000 KSI owed under the Settlement, should it fail to pay by December 31, 2019. Keon Decl., ¶17, Ex. B.

Settlement Paragraph 8 allowed a prevailing party in any action to enforce the Settlement to recover attorney’s fees and costs so incurred. Keon Decl., ¶23, Ex. B.

Paragraph 10 requires the Settlement be interpreted based on California law, and that any dispute arising from the Settlement be heard only in state and federal courts in Los Angeles County. Keon Decl., ¶18, Ex. B.

KSI has failed to pay the $50,000 required under the Settlement despite multiple demands from Keon. Keon Decl., ¶¶ 19, 21. As the only individual who dealt with KSI on SSI’s behalf, Keon never waived compliance under the Settlement. Keon Decl., ¶20.

Counsel for SSI has invoiced KSI for $13,225 in attorney’s fees and $727.57 in costs. Soffer Decl., ¶8.

On August 23, 2023, Gaster informed KSI shareholders of discussions to merge with a European entity sometime in January 2024. Keon Decl., ¶23. This would make KSI an offshore entity. Keon Decl., ¶23.

SSI only seeks attachment to ensure recovery on its claims under the Complaint. Keon Decl., ¶22.

Plaintiff SSI applies for a right to attach order against Defendant KSI for $84,747.09, including $13,225 in attorney’s fees and $727.57 in costs.

SSI’s claim is for breach of the Settlement, under which KSI owes $50,000 before interest, attorney’s fees, and costs. Keon Decl., ¶23, Ex. B. Attachment may be based on this claim.

A claim is “readily ascertainable” where the damages may be readily ascertained by reference to the contract and the basis of the calculation appears to be reasonable and definite. CIT, supra, 115 Cal.App.4th at 540-41. The fact that the damages are unliquidated is not determinative. Id. But the contract must furnish a standard by which the amount may be ascertained and there must be a basis by which the damages can be determined by proof. Id. (citations omitted).

Under Settlement Paragraph 2, KSI agreed to remit $50,000 to SSI. Keon Decl., ¶15, Ex. B. Failure to do so by December 31, 2019 would cause KSI to forfeit its remaining 1% interest in SSI. Keon Decl., ¶15, Ex. B. Both parties released each other from preexisting contract claims, but not any claim by SSI for KSI’s failure to timely pay the $50,000. Keon Decl., ¶¶ 16-17, Ex. B. SSI asserts that KSI has failed to pay the $50,000 required under the Settlement despite multiple demands from Keon. Keon Decl., ¶¶ 19, 21.

The Settlement does not list an interest rate for amounts past due. Keon Decl., Ex. B. If a contract entered into after January 1, 1986, does not stipulate a legal rate of interest, the obligation shall bear interest at a rate of 10% per annum after a breach. Civil Code §3289(b).

Interest of $5,000 per year ($50,000 x 0.1) accrued from December 31, 2019 to December 31, 2023, a total of $20,000. Mem. at 9. SSI has calculated the daily interest on $50,000 as $13.6986 ($50,000 x (0.1/365). Id. The interest between December 31, 2023 to February 27, 2024 is $794.52 ($13.6986 x 58). Id. As of the hearing on this application, $20,794.52 in interest has accrued.

Settlement Paragraph 8 allowed a prevailing party in any action to enforce the Settlement to recover attorney’s fees and costs so incurred. Keon Decl., ¶23, Ex. B. Counsel for SSI asserts it has invoiced KSI for $13,225 in attorney’s fees and $727.57 in costs. Soffer Decl., ¶8. Counsel’s assertion of the amount of attorney’s fees and costs is sufficient.

Ascertainable damages total $84,747.09 ($50,000 + $20,794.52 + $13,225 + $727.57).

A claim has “probable validity” where it is more likely than not that the plaintiff will recover on that claim. CCP §481.190. In determining this issue, the court must consider the relative merits of the positions of the respective parties. Kemp, supra, 146 Cal.App.4th at 1484. The court does not determine whether the claim is actually valid; that determination will be made at trial and is not affected by the decision on the application for the order. CCP §484.050(b).

SSI presents evidence that the parties entered the Settlement, effective June 1, 2019, to resolve the claims for amounts owed to KSI and address KSI’s investment in Unmanned. Keon Decl., ¶11, Ex. B. Keon signed it on SSI’s behalf, and Gaster signed as KSI’s CEO. Keon Decl., ¶11, Ex. B. KSI agreed to pay $50,000 by December 31, 2019. Keon Decl., ¶15, Ex. B. To date, KSI has failed to do so despite multiple demands from Keon. Keon Decl., ¶¶ 19, 21.

KSI objects to the admissibility of the 2016 Agreement and Settlement attached to Keon’s declaration. Keon Decl., Exs. A-B. Opp. at 1-2. KSI asserts the agreements attached to Keon’s declaration fail to meet the hearsay exception requirement for a business record under Evid Code section 1271.[2]

KSI misunderstands the law of evidence. The Settlement, and the underlying 2016 Agreement, are operative documents between the parties to which hearsay law does not apply. Jazayeri v Mao (2009) 174 Cal.App.4th 301, 316. KSI’s evidentiary objections are overruled for this reason.

Attachment must not be sought for a purpose other than the recovery on the claim upon which attachment is based.¿ CCP §484.090(a)(3). SSI seeks attachment for a proper purpose. Keon Decl., ¶22.

The application for a right to attach order against KSI is granted in the amount of $84,747.09. No writ shall issue until SSI files a $10,000 undertaking.

[1] KSI failed to lodge courtesy copies of its opposition in violation of the Presiding Judge’s First Amended General Order Re: Mandatory Electronic Filing. Defense counsel is admonished to provide courtesy copies in all future filings.

[2] Evidence of a writing made as a record of an act, condition, or event is not made inadmissible by the hearsay rule when offered to prove the act, condition, or event if: (a) the writing was made in the regular course of a business; (b) it was made at or near the time of the act, condition, or event; (c) a custodian or other qualified witness testifies to its identity and the mode of its preparation; and (d) the sources of information and method and time of preparation were such as to indicate its trustworthiness. Evid. Code §1271.