Judge: Mark A. Young, Case: 22SMCV01192, Date: 2023-01-05 Tentative Ruling
Case Number: 22SMCV01192 Hearing Date: January 5, 2023 Dept: M
CASE NAME: Baker & McKenzie LLP v. MM Enterprises USA LLC
CASE NO.: 22SMCV01192
MOTION: Application for Writ of Attachment
HEARING DATE: 1/5/2022
Legal Standard
“Upon the filing of the complaint or at any time thereafter, the plaintiff may apply pursuant to this article for a right to attach order and a writ of attachment by filing an application for the order and writ with the court in which the action is brought.” (CCP § 484.010.) The application shall be executed under oath and must include: (1) a statement showing that the attachment is sought to secure the recovery on a claim upon which an attachment may be issued; (2) a statement of the amount to be secured by the attachment; (3) a statement that the attachment is not sought for a purpose other than the recovery on the claim upon which the attachment is based; (4) a statement that the applicant has no information or belief that the claim is discharged or that the prosecution of the action is stayed in a proceeding under the Bankruptcy Act (11 U.S.C. section 101 et seq.); and (5) a description of the property to be attached under the writ of attachment and a statement that the plaintiff is informed and believes that such property is subject to attachment. (CCP § 484.020.)
“The application [for a writ of attachment] shall 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.) The defendant must be served with summons and complaint, notice of application and hearing, and the application and supporting evidence. (CCP § 484.040.)
The Court shall issue a right to attach order if it finds all the following:
(1) The claim upon which the attachment is based is one upon which an attachment may be issued.
(2) The plaintiff has established the probable validity of the claim upon which the attachment is based.
(3) The attachment is not sought for a purpose other than the recovery on the claim upon which the attachment is based.
(4) The amount to be secured by the attachment is greater than zero.
(CCP § 484.090.)
“A claim has ‘probable validity’ where it is more likely than not that the plaintiff will obtain a judgment against the defendant on that claim.” (CCP § 481.190.) “In determining the probable validity of a claim where the defendant makes an appearance, the court must consider the relative merits of the positions of the respective parties and make a determination of the probable outcome of the litigation.” (See Loeb & Loeb v. Beverly Glen Music, Inc. (1985) 166 Cal.App.3d 1110, 1120.) “The Attachment Law statutes are subject to strict construction.”¿(Epstein v. Abrams¿(1997) 57 Cal.App.4th 1159, 1168.)¿
EVIDENTIARY ISSUES
Defendant’s objections to the declaration of William Dugan are OVERRULED. The critical objection is that Exhibit 1 was unsigned. The only difference between the original Dugan declaration and the amended declaration is that the new declaration provided a signed copy of Exhibit 1. Given the technical nature of the objection, which has been corrected, the Court will accept the amended Dugan declaration.
Defendant’s objections to the application itself (verified by counsel C. Griffith Towle) are SUSTAINED. Mr. Towle states his declaration on information and belief, and therefore does not appropriately lay the foundation for each necessary element.
Analysis
Probable Validity of Plaintiff’s Claim
“[A]n 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) exclusive of costs, interest, and attorney's fees.” (CCP § 483.010(a).) “An attachment may not be issued on a claim which is secured by any interest in real property arising from agreement ….” (CCP § 483.010(b).)
“It is a well-recognized rule of law in this state that an attachment will lie upon a cause of action for damages for a breach of contract where the damages are readily ascertainable by reference to the contract and the basis of the computation of damages appears to be reasonable and definite. [Citations.] The fact that the damages are unliquidated is not determinative. [Citations.] But the contract sued on must furnish a standard by which the amount due may be clearly ascertained and there must exist a basis upon which the damages can be determined by proof.’¿” (See CIT Group/Equipment Financing, Inc. v. Super DVD, Inc. (2004) 115 Cal.App. 4th 537, 541.)
The application is based on a claim under an express, written agreement. The total amount of the claim is greater than $500, as the claim is over $600,000.00. There is no real property at issue. Plaintiff provides evidence of damages that are readily ascertainable by reference to the contract itself. The basis of the computation of damages appears to be definite and based on counsel’s prevailing rates. Specifically, the application is based on claims for breach of a fee agreement.
On November 12, 2018, Baker and MedMen entered into a signed written agreement (the “Engagement Agreement”) pursuant to which Baker agreed to provide legal services to MedMen in connection with a “demand letter sent by James Parker” and for “corporate governance.” (Amended Dugan Decl., ¶ 7, Ex. 1.) Baker’s “Standard Terms of Engagement for Legal Services” (the “Standard Terms of Engagement”) were enclosed with the Engagement Agreement. (¶ 11.) The Engagement Agreement explained that both documents would “govern this engagement and any future assignments we accept from you” unless the parties mutually agreed in writing otherwise. (Id.) Mr. Dugan would “have primary responsibility for the representation and [would] use other Firm lawyers and paralegals, including lawyers in other offices of our Firm as [he] believe[d] appropriate in the circumstances.” (¶ 8.) Over multiple engagements for MedMen, Mr. Dugan acted as the primary client service lawyer and ensured that MedMen’s requests for legal services were met. (Id.)
Plaintiff provides evidence of the services rendered. (See Dugan Decl., ¶¶ 15-26.) Plaintiff provides evidence of a breach of the agreement – MedMen’s failure to pay. (¶¶27-35; Towle Decl., ¶ 3.) Plaintiff asserts that this application is to preserve funds which may be at risk due to MedMen’s current financial condition. (Towle Decl., ¶¶ 6-7.) Thus, Plaintiff has established the probable validity of its claim.
Purpose and Amount of Attachment
Code of Civil Procedure section 484.090 states that the Court shall issue a right to attach order if “the attachment is not sought for a purpose other than the recovery on the claim upon which the attachment is based . . . [and] the amount to be secured by the attachment is greater than zero.” Plaintiff declares that attachment is not sought for a purpose other than the recovery on Plaintiff’s claim. (Appl. ¶ 4.) The amount to be secured is greater than zero.
Subject Property
Code of Civil Procedure section 487.010(a) provides that “[w]here the defendant is a corporation, all corporate property for which a method of levy is provided” is subject to attachment.
Exemptions
Defendants have not claimed any specific exemptions. Also, generally, corporate defendants may not claim exemptions.
Reduction of Amount to be Secured
Code of Civil Procedure section 483.015(b) provides that the amount to be secured by the attachment shall be reduced by, inter alia:
(2) The amount of any indebtedness of the plaintiff that the defendant has claimed in a cross-complaint filed in the action if the defendant’s claim is one upon which an attachment could be issued.
(3) The amount of any claim of the defendant asserted as a defense in the answer pursuant to Section 431.70 if the defendant's claim is one upon which an attachment could be issued had an action been brought on the claim when it was not barred by the statute of limitations.
“[T]o sustain reduction in a writ amount, most courts require that the defendant provide enough evidence about its counterclaims and/or defenses to prove a prima facie case [for attachment against Plaintiff].” (Ahart, California Practice Guide: Enforcing Judgments and Debts, ¶ 4:64 (1998 rev.).)
Defendants have not supported an attachable defense or claim for offset. “[D]efendant should produce detailed, factual declarations showing the nature and extent of the claimed offset.” (Cal. Prac. Guide Civ. Pro. Before Trial Ch. 9(II)-D.)
Undertaking
Code of Civil Procedure section 489.210 requires the plaintiff to file an undertaking before issuance of a writ of attachment. Code of Civil Procedure section 489.220 provides, with exceptions, for an undertaking in the amount of $10,000. Defendants argue for an undertaking equal to the attachment.
Conclusion
At the December 14, 2022, hearing the Court addressed the substantive issues raised by both the application and the opposition and concluded that Plaintiff met the elements of Code of Civil Procedure § 483.010. The Court, however, had sustained Defendant’s evidentiary objection to the Declaration of Mr. Towle, whose testimony was based upon information and belief. After oral argument on December 14, 2022, the Court concluded that the only element not supported by the record, or by matters of which the Court could take judicial notice, is that the attachment is not sought for a purpose other than the recovery on the claim upon which the application is based. The Court did not permit Defendant the ability to
On December 16, 2022, Plaintiff provided the Supplemental Declaration of William F. Duggan, which cured this defect. Thus, the application for a right to attach order and writ of attachment is GRANTED. The Court further orders a $10,000 undertaking.