Judge James C. Chalfant, Case Number: 24STCP02772, Date: 2024-11-07 Tentative Ruling

Carl Rinsch and Home VFX v. Ice Cream Fridge, LLC and Netflix Entertainment, LLC, 24STCP02772

Tentative decision on applications for right to attach orders: granted

Respondents Ice Cream Fridge, LLC (“Ice Cream”) and Netflix Entertainment, LLC (“Netflix”) (collectively, (“Netflix Parties”) apply for right to attach orders against Petitioners Carl Rinsch (“Rinsch”) and Home VFX (collectively, “Debtors”).

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

On August 2, 2024, an Arbitration Award was issued requiring Petitioners to pay Respondents $11,819,857.80.

On October 31, 2024, the court denied Debtors motion to vacate the arbitration award and granted the Netflix Parties’ petition to confirm the arbitration award.

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., (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.

The Netflix Parties and Debtors were parties to a written Term Sheet dated November 12, 2018 (the “Term Sheet”). Burrow Decl., ¶4. In the Term Sheet, Debtors agreed to deliver “[t]he project currently referred to as ‘Conquest’ (aka ‘White Horse’) inclusive of… [a]ll existing scripts and episodes for the first season of episodes of the Series comprised of approximately 13 episodes ranging from approximately 4 to 14 minutes in length and totaling 110-120 minutes.” Burrow Decl., ¶4, Ex. A. The Term Sheet required that the parties resolve any claims arising from the Term Sheet through binding arbitration with ADR Services, Inc. Burrow Decl., ¶5.

The Netflix Parties and Debtors engaged in arbitration proceedings at ADR Services, Inc. with the Hon. Rita Miller (Ret.) (the “Arbitrator”) presiding, on the following dates: November 6-10, 2023; November 13-17, 2023; December 13-15, 2023; and January 14, 2024. Burrow Decl., ¶6.

On May 30, 2024, the Arbitrator issued an Interim Award in favor of Netflix and Ice Cream and against Rinsch and Home VFX. Burrow Decl., ¶7. In the Interim Award, the Arbitrator found that: (a) Rinsch and Home VFX failed to prove their claims and were not entitled to any recovery or the declaration they requested; and (b) Netflix and Ice Cream proved their counterclaim for breach of contract and were entitled to recover damages in the amount of $8,783,705.06, imposition of a constructive trust over the footage of Conquest in the control of Rinsch and Home VFX, and the declaration Netflix and Ice Cream requested in their third counterclaim. Burrow Decl., ¶7, Ex. B.

As set forth in the Interim Award, Rinsch is a writer, director and producer, and the CEO of Home VFX, and Rinsch and Home VFX breached the Term Sheet relating to a science fiction series called Conquest (previously known as White Horse). Burrow Decl., ¶8, Ex. B. The contract claim asserted by Netflix and Ice Cream in the counterclaim they filed in the Arbitration against Rinsch related to his conduct of a trade, business, or profession. Burrow Decl., ¶8.

On August 1, 2024, the Arbitrator issued an Order awarding Netflix and Ice Cream their attorneys’ fees in the amount of $2,902,234.21 and costs in the amount of $133,918.52. Burrow Decl., ¶9, Ex. C.

On August 2, 2024, the Arbitrator issued the Final Award, which incorporates by reference her May 30, 2024 Interim Award and August 1, 2024 Order and awards Netflix and Ice Cream damages in the amount of $8,783,705.06 as stated in the Interim Award, plus attorneys’ fees in the amount of $2,902,234.21 as stated in the August 1, 2024 Order, plus costs in the amount of $133,918.52, plus a constructive trust over the Conquest/White Horse footage in the custody or control of Home VFX. Burrow Decl., ¶10, Ex. D.

Upon being retained, the Netflix Parties’ counsel immediately started conducting asset searches for Rinsch and Home VFX. Bloom Decl., ¶6. Respondents’ counsel engaged the services of private investigators to assist in locating assets. Bloom Decl., ¶6. The work being conducted by the private investigators is ongoing and protected by the attorney work product doctrine. Bloom Decl., ¶6. Based on Respondents’ counsel’s past experience in enforcing judgments and obtaining right to attach orders /writs of attachment, debtors almost always move assets if they learn that a creditor is seeking to seize such assets. Bloom Decl., ¶6. Accordingly, Respondents describe the assets sought to be attached from Rinsch in very general terms. Bloom Decl., ¶6.

Rinsch has listed his assets, including his bank accounts, in court filings made in connection with his pending divorce. Bloom Decl., ¶7, Ex. E.

Respondents Netflix Parties seek right to attach orders against Petitioners Rinsch and Home VFX in the amount of $12,019,857.80.

Respondents’ claim for attachment is based on the Arbitrator’s Final Award and exceeds $500.

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 Group/Equipment Financing, Inc. v. Super DVD, Inc., (“CIT”) (2004) 115 Cal.App.4th 537, 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).

The amount sought for attachment is based on the Arbitrator’s Final Award in the amount of $12,019,857.80. This amount is fixed and readily ascertainable.

The Netflix Parties obtained a nearly $12 million arbitration award against Debtors. The arbitration was conducted pursuant to a contractual arbitration clause, and the Final Award includes an award of attorneys’ fees and costs. This award has been confirmed by the I/C court. All that remains is entry of judgment.

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).

Debtors have not made any payments toward satisfying the arbitration award. To the contrary, Debtors filed a petition to vacate the award. The Netflix Parties are concerned that Debtors may dissipate assets before final judgment is entered. This is a proper purpose for attachment.

If the action is against a defendant who is a natural person, an attachment may be issued only on a commercial claim which arises out of the defendant’s conduct of a trade, business, or profession. CCP §483.010(c). Consumer transactions cannot form a basis for attachment. CCP §483.010(c); Kadison, Pfaelzer, Woodard, Quinn & Rossi v. Wilson, (1987) 197 Cal.App.3d 1, 4 (action involving trust property was a commercial, not a consumer, transaction).

Rinsch is a writer, director and producer, and the CEO of Home VFX. Burrow Decl., ¶8, Ex. B. The contract claim asserted by the Netflix Parties in the Arbitration related to his conduct of a trade, business, or profession. Burrow Decl., ¶8.

Where the defendant is a natural person, the description of the property must be reasonably adequate to permit the defendant to identify the specific property sought to be attached. CCP §484.020(e). Although the property must be specifically described, the plaintiff may target for attachment everything the individual defendant owns. Bank of America v. Salinas Nissan, Inc., (1989) 207 Cal.App.3d 260, 268.

The application seeks general categories of Rinsch’s assets while listing their specific nature pursuant to CCP section 484.020. This suffices.

Debtors also have pending lawsuits against third parties, and the Netflix Parties also seeks an order that includes the right for them to create liens in those actions pursuant to CCP section 491.410. Without such relief, Debtors could recover money in one or more of those actions and then spend the money prior to judgment being entered herein. Mem. at 8-9. The request is granted.

CCP section 1281.8(b) (“section 1281.8") provides that a party to an arbitration agreement may apply to the court for provisional relief in connection with an arbitrable controversy, but only upon the ground that the award may be rendered ineffectual without provisional relief. The requirements of CCP section 1281.8 are in addition to the other elements of proof for provisioinal relief. See Woolley v. Embassy Suites, Inc., (1991) 227 Cal.App.3d 1520, 1529 (applying section 1281.8 to preliminary injunction). The “ineffectual” element exists to ensure that the court does not invade the province of the arbitrator; the court is empowered to grant relief only where the arbitrator’s award may be inadequate to make the moving party whole. California Retail Portfolio Fund GMBH & Co. v. Hopkins Real Estate Group, (2011) 193 Cal.App.4th 849, 856 (citing Woolley). In the context of attachment, the irreparable harm requirement for ex parte attachment provides guidance on the issue of, and is similar to, ineffectual relief under section 1281.8. Id. at 859. This includes both insolvency and the inability to otherwise pay damages that might be awarded in the arbitration. Ibid.

The status of this case is that an Arbitration Award has been issued and confirmed by the I/C court. All that remains is entry of judgment before the Netflix Parties can collect.

The Netflix Parties argue that it has been over two years since the arbitration was filed, and Rinsch reportedly has a propensity to go on spending sprees. Rinsch has also declared, under penalty of perjury in his divorce action, that he has no income. Bloom Decl., ¶9, Ex. E, p.2. Before Debtors dissipate more assets, and while the Netflix Parties await entry of judgment, they seek right to attach orders so they can ensure that their arbitration award is not rendered ineffective in the interim. Mem. at 1.

The Neflix Parties’ evidence of ineffectual relief is weak, based only on Rinsch’s assertion that he has no income and an argument that he has a reputation of dissipating assets. Nonetheless, Debtors do not oppose, and the period of any pre-judgment attachment should be brief.

The applications for right to attach orders against Petitioners Rinsch and Home VFX in the amount of $12,019,857.80 are granted. A $10,000 bond will be required for each Defendant before a writ of attachment may be issued against that Defendant. The Netflix Parties have not submitted right to attach orders on the appropriate Judicial Council form and are ordered to do so in two court days or they will be deemed waived.

[1] Respondents request judicial notice of Rinsch’s May 14, 2023 Income and Expense Declaration filed in his divorce case, Rinsch v. Rinsch, LASC Case No. 20STFL07216. Bloom Decl., ¶7, Ex. E. The request is granted. Evid. Code §452(d).