Judge: Mary H. Strobel, Case: 22STCV13810, Date: 2022-08-18 Tentative Ruling

Case Number: 22STCV13810    Hearing Date: August 18, 2022    Dept: 82

Plaintiff/Cross-Defendant Factory X Pty. LTD (“Plaintiff”) moves for a writ of attachment against Defendant/Cross-Complainant ModCloth Partners, LLC (“Defendant”) in the amount of $1,929,687.94, which includes $1,000.00 in estimated costs.  Defendant opposes.

Request for Judicial Notice

Defendant requests the court to take judicial notice of four file numbers assigned to itself and ModCloth Holdings, LLC by the Delaware Department of State, Division of Corporations and California Secretary of State.

The request for judicial notice is GRANTED.

Evidentiary Objections

Defendant’s evidentiary objections:

Perry Declaration

1, 2, 4, 6, 8-14. Overruled.

3. Sustained in part as to characterization of to whom the invoices were sent (“and sent to Modcloth Partners”) and Overruled as to balance.

5.  Sustained in part as to the characterization of to whom the shipped goods were sent, Overruled as to balance.

7.  Sustained in part as to characterization of to whom the shipped goods were sent, Overruled as to balance.

Memorandum of Points and Authorities

1-10.    OVERRULED.  The memorandum of points and authorities is not evidence.

Motion to Strike Perry Declaration Exhibit 7 – Denied.  Defendant does not show Exhibit 7 is subject to the non-disclosure agreement.  Nor does Defendant present any evidence that it was part of any settlement discussion.

Plaintiff’s evidentiary objections:

Van Haeren Declaration

1.    Overruled.

2.    Sustained.

3.    Overruled.

4.    Sustained.

5.    Sustained.

Defendant’s Objection to Plaintiff’s Reply Evidence-

Overruled.  Defendant does not identify the specific evidence to which it objects.  In general, the reply evidence appears to be proper response or rebuttal to Defendant’s opposition.

Procedural History

            On April 26, 2022, Plaintiff filed its complaint against Defendant and Does 1 to 10.  The complaint contains seven causes of action: (1) breach of contract; (2) goods sold and delivered; (3) quantum valebant; (4) money had and received; (5) account stated; (6) open book account; and (7) conversion.  Plaintiff alleges that it entered into a series of agreements with Defendant between April 2021 and December 2021 partially in writing and partially in implied conduct whereby Plaintiff sold finished garments (the “Goods”) to Defendant.  (Complaint ¶ 8.)  Plaintiff performed its contractual obligations and delivered the Goods to Defendant, which accepted receipt, but Defendant did not make payment for the Goods.  (Id. ¶ 9.)  Plaintiff prays for monetary damages of $1,928,687.94.

            On April 27, 2022, Plaintiff filed this application for a writ of attachment against Defendant.

            On June 27, 2022, the court (Hon. Mark V. Mooney) overruled Defendant’s demurrer and denied Defendant’s motion to strike.

            On July 18, 2022, Defendant filed its answer to the complaint.

            On July 18, 2022, Defendant filed a cross-complaint against Plaintiff and Roes 1 through 100.  The cross-complaint contains seven causes of action: (1) breach of contract; (2) breach of the implied warranty of merchantability; (3) ) breach of the implied warranty of fitness for a particular purpose; (4) fraudulent misrepresentation; (5) negligent misrepresentation; (6) breach of the covenant of good faith and fair dealing; (7) unfair competition (violation of Business and Professions Code section 17200 et seq.) and (8) common law unfair competition. 

            On August 11, 2022, Defendant filed an opposition with evidentiary objections.

            On August 16, 2022, Plaintiff filed a reply and evidentiary objections.

Summary of Applicable Law

“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 court shall issue a right to attach order if the court finds all of 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.)

At the times prescribed by CCP section 1005(b), the defendant must be served with summons and complaint, notice of application and hearing, and the application and supporting evidence.  (CCP § 484.040.) 

“The Attachment Law statutes are subject to strict construction.”  (Epstein v. Abrams (1997) 57 Cal.App.4th 1159, 1168.) 

Analysis 

1.    Probable Validity of Plaintiff’s Claim

The application is based on a claim for breach of a contract, specifically a series of purchase orders.  To establish a claim for breach of contract, a plaintiff must prove: (1) existence of a contract; (2) plaintiff’s performance or excuse for nonperformance; (3) defendant’s breach of the contract; and (4) damages incurred by plaintiff as a result of the breach.  (Durell v. Sharp Healthcare, (2010) 183 Cal.App.4th 1350, 1367.)  Plaintiff also bases its application on the common count of goods sold and delivered; and the common count of quantum valebant for the reasonable value of goods. 

Plaintiff, though Marty Perry, its Chief Operations Officer, submits the following evidence. Plaintiff is an Australian corporation that manufacturers clothing apparel and sells them to wholesale customers, including Defendant.  (Perry Decl. ¶ 2.)  In or about February 2019, Plaintiff originally began doing business with Defendant’s predecessor company, ModCloth Holdings, LLC (“ModCloth Holdings”).  (Id. ¶ 8.) 

In or about the second quarter of 2021, Defendant took over ModCloth Holdings but continued to operate from the same offices using the same key contact personnel, doing so using the same fictitious business name, log, email domain, and website.  (Id. ¶¶ 8-9; compare Exh. 5 [Modcloth Holdings’ purchase order dated September 17, 2020] with Exh. 6 [Defendant’s purchase order dated July 20, 2021].)  Perry heard from Michael Bassiri, one of Defendant’s investors, that Defendant was only responsible for goods received after April 26, 2021.  (Id. ¶ 10.) 

Plaintiff received a series of purchase orders from Defendant from September 17, 2020 through July 20, 2021, which resulted in Plaintiff issuing invoices for the purchase orders to Defendant from April 21, 2021 through December 21, 2021. (Id. ¶¶ 4, 8, Exh. 1 [purchase orders], 2 [invoices].)  Pursuant to the terms of the purchase orders and invoices, Plaintiff shipped the Goods to Defendant, which accepted the Goods but did not pay the invoices.  (Id. ¶¶ 5-7, Exh. 3 [seaway bills showing finished Goods ready for shipment], 4 [account summary of unpaid invoices for Goods].)  All the orders were received starting no earlier than the end of June 2021.  (Perry Reply Decl. ¶¶ 2-3.)  The timing of this date is critical because it means that all of the orders totaling $1,928,687.94 were received by Defendant after that April 26, 2021 start date.  (Perry Reply Decl. ¶ 6.) 

Plaintiff has calculated the owed payment and it is a total of $1,928,687.94 owed by Defendant.  (Id. ¶¶ 11-12, Exh. 7 [spreadsheet of invoice information].)

This evidence, if not rebutted, is sufficient to show the probable validity of  Plaintiff’s claim.

In opposition, Defendant argues that itself, i.e., ModCloth Partners, LLC, and its alleged predecessor, i.e., ModCloth Holdings, LLC, are two entirely distinct corporate entities.  Therefore, Plaintiff cannot seek to bind ModCloth Holdings’ debts to Defendant without any admissible evidence linking the two, especially when the admissible evidence shows they are two separate entities.  Defendant proffers evidence showing that the two entities are active corporate entities with their own identifying file numbers.  (RJN; Fraher Decl. ¶¶ 3-6.)  The entities are distinct from each other pursuant to the Transfer Statement pursuant to UCC section 9-619.  (Van Haeren Decl. ¶ 3, Exh 7.) 

While Defendant disputes it took over the debts of ModCloth Holdings, it does not deny that it received the goods shipped after April 26, 2021.  Nor does it present any evidence it timely rejected the quality of any of those goods.  Plaintiff has met the elements of an implied contract.  Defendant has used for its benefit property of Plaintiff in such a manner and under circumstances to imply an obligation to pay for those goods.  Plaintiff has shown the probable validity of its claim upon which attachment may issue.

2.    Basis of Attachment

“[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.) 

Plaintiff’s application for writ of attachment is based on a series of purchase orders where the total amount allegedly due is in excess of $500.  There is no evidence Plaintiff’s claim is secured by real property.  The damages on the implied contract are fixed and may be readily ascertained from Plaintiff’s business records and declaration.

3.    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.

Defendant’s argument that the attachment is sought for an improper purpose is unpersuasive.  There is no evidence that Plaintiff is acting in bad faith, or seeks attachment for any purpose other than recovery of its claim upon which attachment may be issued. 

4.    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.  A request for attachment of all of Defendant’s property is appropriate.

5.    Exemptions

Defendant has not claimed any specific exemptions.  Also, generally, corporate defendants may not claim exemptions.

6.    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.).)

Defendant does not expressly argue for the amount to be attached should be reduced or eliminated based on its affirmative defenses, which includes non-conforming goods based on a fiber content test.  Further, as Plaintiff correctly notes in its Reply, there is no evidence before the court that Defendant gave reasonable notice to Plaintiff about any alleged non-conformity of the goods as required by California Commercial Code section 2-607(3)(A).  (Reply Allyn Decl. Ex. 1 at Response to No. 13)  Additionally, Plaintiff persuasively shows in Reply that the claim of the defective goods is too generic, failing to specify which garments are implicated.  The court has also sustained evidentiary objections to admission of the Intertek reports.   

Therefore, the court does not find a basis to reduce the amount to be attached.

7.    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.  Defendant argues for an increased amount of undertaking, but does not specify another amount and does not explain why the court should do so other than generally restating its arguments.  (Opposition 11:2-5 [“The bond or undertaking amount of $10,000.00 pursuant to C.C.P. § 489.220(a) is insufficient in the present case, as plaintiff claims are so ill-founded defendant will have a probable recovery for wrongful attachment if the present application is granted. (C.C.P. § 489.220(a)-(b).)”].)

The court finds a $10,000.00 undertaking appropriate.

Conclusion

            The application is Granted in the requested amount.