Judge Monica Bachner, Case BS172538 2022-08-30 Tentative Ruling

Department 71: Attorneys who elect to submit on these published tentative rulings, without making an appearance at the hearing, may so notify the Court by communicating this to the Department's staff at (213) 830-0771 before the set hearing time. See, e.g., CRC Rule 324(b). All parties are otherwise encouraged to appear by Court Call for all matters.

Judgment Creditors’ motion to amend judgment to add Los Angeles Apparel as an additional judgment debtor is denied. Judgment Creditors’ motion for a preliminary injunction as to Los Angeles Apparel is denied.

Judgment Creditors’ motion to amend judgment to add Morris Charney as Trustee of the Morris Family Trust as an additional judgment debtor is denied. Judgment Creditors’ motion for a preliminary injunction as to Morris as Trustee is denied.

Judgment Creditors P Standard General Ltd. and Standard General Master Fund, LP (“Judgment Creditors”) have two pending motions as to Judgment Debtors Dov Charney (“Charney”), Art Commerce & Manufacturing Solutions, LLC (“Art Commerce”), and Apex Real Estate Management, LLC (“Apex RE”) (collectively, “Judgment Debtors”): (1) for an amendment of the operative judgment dated February 16, 2018, amended August 26, 2019 (the “Third Judgment”) to add as additional judgment debtors nonparty Morris Charney (“Morris”) as trustee of the Montreal Family Trust (“MFT”) (collectively, “Morris as Trustee” or “Trustee”) and Los Angeles Apparel (“LAA” or “LA Apparel”) (“Amendment Motion”); and (2) for a Temporary Restraining Order (“TRO”) and/or preliminary injunction enjoining Judgment Debtors as well as Morris as Trustee and LA Apparel from transferring, spending, or otherwise disposing of any assets or property belonging to Judgment Debtors pending determination of the Assignment Motion and Amendment Motion (“Injunction Motion”).

Judgment Creditors’ 9/23/21 filings were filed with a Request for Judicial Notice (“RJN”) in support of all four motions, including the Amendment Motion. The Court incorporates its 9/29/21 ruling on Judgment Creditors’ 9/23/21 RJN as follows: the Court takes judicial notice of the following: Exhibits 1-10, 12, 17, 18, 19, 21, 22, 24, 25, 27, 28, 29, 30, 1, 33, 34, 35, 36, 38, and 40 [but not as to the truth of the matters asserted in court records]. The Court will not take judicial notice of the following: Exhibits 11, 13-16, 20, 26, 32, 37, and 39.

The Court incorporates by reference its 7/26/22 ruling granting Judgment Creditors’ 2/23/22 RJN; however, these materials are not relevant given they address LAA and Trustee’s responses on the issue of jurisdiction, to which the parties have submitted. (RJN, Exhs. 1-31.)

The Court incorporates by reference its 7/26/22 rulings on: (1) Judgment Debtors’ 3/4/22 evidentiary objections to the Amendment Motion (overruled); and (2) Judgment Debtors’ 3/4/22 evidentiary objection to Judgment Creditors’ 9/23/21 RJN (overruled in part and moot in part); and (3) The Court has considered Judgment Creditors’ 3/9/22 objections and responses to Judgment Debtors’ evidentiary objections.

LA Apparel’s 7/15/22 evidentiary objections to sections of the Turnover Motion and Amendment Motion are overruled as to Nos. 1-9. LA Apparel objects to arguments presented in the motion itself and does not properly set forth or cite to the underlying evidence as to which the objection is raised. LA Apparel also improperly combines objections to multiple items of evidence in one objection. The Court notes the Objections indicate that the Amendment Motion and Turnover Motion cite to Judgment Creditors’ RJN and the Declaration of Taran filed on September 23, 2021. LA Apparel’s evidentiary objection No. 10 (RJN Exhs. 1-40) for failure to authenticate is overruled. LA Apparel’s evidentiary objections to exhibits attached to the RJN are overruled as to Nos. 11, 12, 13, and 14.

LA Apparel’s 7/15/22 request for judicial notice is granted as to Nos. 1, 2, 5, 7, 9, 12, 15, 18, 20 and denied as to Nos. 3, 4, 6, 8, 10, 11, 13, 14, 16, 17, 19, and 21. The Court does not take judicial notice of the truth of the matters asserted in the filings. (LA-RJN, Exhs. A, B, C, D, E, F, G, H, I.)

Morris as Trustee’s 7/15/22 evidentiary objections to evidence he contends is irrelevant since it is evidence of him acting in his personal capacity and does not refer to MFT is overruled as to No. 1. Morris as Trustee also improperly combines objections to multiple items of evidence in one objection.

Morris as Trustee’s 7/15/22 request for judicial notice is denied. The documents subject to the request are not attached.

Judgment Creditors’ 7/29/22 request for judicial notice in support of their reply to LA Apparel’s opposition is granted. However, the Court does not take judicial notice of the truth of the matters asserted in the documents. (Reply-LAA-RJN, Exhs. 1, 2, 3.)

Judgment Creditors’ 7/29/22 request for judicial notice in support of their reply to Morris as Trustee’s opposition is granted. However, the Court does not take judicial notice of the truth of the matters asserted in the documents. (Reply-Trustee-RJN, Exhs. 1, 2, 3, 4, and 5.)

LA Apparel’s 8/24/22 objections to evidence submitted in reply are overruled. The Court finds Judgment Creditors’ evidence submitted in reply responds to new arguments and evidence first introduced in the opposition and/or involves evidence already part of the Court’s record.

The Court has considered Judgment Creditors’ 7/29/22 responses to LA Apparel’s evidentiary objections.

Judgment Creditors’ two motions were filed together with their motion for an assignment order in aid of judgment execution directed at Judgment Debtors (“Assignment Motion”) and motion for an order appointing a receiver in aid of judgment enforcement over Judgment Debtors and Schmatta LA Inc. (“Schmatta LA”) (“Receivership Motion”) on September 23, 2021. The Injunction Motion was filed as an ex parte application, while the Amendment Motion, Assignment Motion, and Receivership Motion had set hearing dates. On September 29, 2021, the Court denied Judgment Creditors’ ex parte application for a TRO and issued an Order to Show Cause (“OSC”) Re: Why a Preliminary Injunction should not Issue scheduled for December 7, 2021, and set a briefing schedule for the opposition and reply for the OSC. Second, the Court deemed the ex parte application for a turnover order in aid of judgment execution directed to Judgment Debtors a motion (“Turnover Motion”), which was ultimately set for December 7, 2021. On November 16, 2021, Judgment Debtors filed a consolidated opposition to the Injunction Motion, Assignment Motion, and Amendment Motion, together with a supporting declaration. On November 29, 2021, Judgment Creditors filed a consolidated reply to the opposition. The Court continued the hearing on the motions to January 11, 2022, after which the Court continued the Amendment Motion, Assignment Motion, and Injunction motion to January 25, 2022.

On December 30, 2021, Judgment Creditors filed a Supplemental Declaration of Taran in support of their Turnover Motion, Assignment Motion, Amendment Motion, and Injunction Motion. The Supplemental Declaration submits testimony from Charney’s December 28, 2021 deposition which Judgment Creditors assert further supports their position that Schmatta LA and LAA are Charney’s alter egos without raising any new theories or arguments, but to supplement Judgment Creditors’ previously asserted arguments. (Supp-Decl. of Taran ¶¶4-7.)[1]

On January 13, 2022, the Court granted Judgment Debtors’ unopposed motion to seal. The Court also granted Judgment Creditors’ Turnover Motion in part, denying the motion as to “future funds” but otherwise granting the motion, as set forth in the ruling.

On January 19, 2022, Judgment Debtors filed supplemental declarations of Charney, Morris, and Stan Katz (“Katz”) in support of their oppositions to the Amendment Motion, Assignment Motion, Injunction Motion, and Receivership Motion.

On January 24, 2022, Non-Parties LAA and the MFT filed a written request for a continuance of the hearings scheduled for January 25, 2022, indicating that those parties had not properly been served with process.

On January 25, 2021, the Court held a hearing on the Assignment, Amendment, Injunction, and Receivership Motions. At the hearing, special appearances were made by Steptoe & Johnson, LLP (“Steptoe”) on behalf of Morris as Trustee, Seddigh Arbetter, LLP (“Seddigh”) on behalf of LAA, and David Gernsbacher (“Gernsbacher”) for Schmatta LA. Counsel for Non-Parties did not previously file written oppositions to the pending Amendment Motion. Counsel for LAA and Morris as Trustee argued the Court lacked jurisdiction to amend the judgment as their clients had not been served with the motion. The Court granted the Assignment Motion and continued the Amendment and Injunction Motions to March 9, 2022. With respect to the Amendment Motion, the Court ordered non-parties objecting to jurisdiction to file oppositions on the issue of jurisdiction only, and Judgment Creditors to file a supplemental reply. The Court also continued the Receivership Motion to March 14, 2022, and permitted Judgment Debtors to file a sur-reply in response to new arguments raised by Judgment Creditors for the first time in reply.

On March 3, 2022, LA Apparel filed a conditional request to present oral testimony in opposition to Judgment Creditors’ Amendment Motion. Specifically, LA Apparel requested 1.5 hours of direct testimony, conditional on the Court’s denial of LA Apparel’s jurisdictional opposition to oppose the merits of the Amendment Motion. Morris as Trustee filed a joinder to LA Apparel’s request. Judgment Creditors filed an opposition to this request and an objection to the joinder. On March 9, 2022, the matter was continued to March 11, 2022.

Prior to the March 11, 2022 hearing on these matters, on March 10, 2022, Charney filed Chapter 11 bankruptcy and his bankruptcy counsel filed a Notice of Stay of Proceedings in the instant action. Accordingly, on March 11, 2022, the Court ordered the case stayed in its entirety. On May 5, 2022, Judgment Creditors filed an Amended Notice of Remand Transmittal Letter indicating that on April 29, 2022, the Bankruptcy Court granted Judgment Creditors’ motion to remand the case to the Los Angeles Superior Court. On June 17, 2022, the Court re-scheduled the Amendment Motion (as to Schmatta LA) and the proposed intervenors’ ex parte applications for hearing on July 19, 2022, which was continued to July 26, 2022. On June 17, 2022, the Court entered an Order on Stipulation Re: March 11, 2022 Tentative Ruling and Proposed Briefing Schedule on Plaintiff’s Motion to Amend Judgment (“Stipulation Order”), in which it ordered as follows with respect to Judgment Creditors, LAA, and Morris as Trustee: (1) the parties submitted on the jurisdictional issue and will submit a supplemental order; (2) on or before July 15, 2022, LAA and MFT shall each file an opposition to the Amendment Motion; (3) on or before July 29, 2022, Judgment Creditors may file a reply; (4) any oral argument shall be conducted on August 30, 2022; (5) no party shall file or attempt to file a sur-reply; (6) the parties shall work mutually should the opportunity for mediation(s) or settlement conferences arise; and (7) the parties will not engage in any transactions outside the ordinary course until the hearing on the motion. Thereafter, on July 5, 2022, the Court signed the supplemental order.

On July 26, 2022, the Court granted Judgment Creditors’ motion to amend judgment to add Schmatta LA as an additional judgment debtor. The Court also denied the ex parte applications to intervene of Non-Party Intervenors LA 9 LLC (“LA 9”) and Michael Serruya (“Serruya”) (collectively, “Intervenors”).

On February 16, 2018, Judgment Creditors filed this action against Charney as an Application for Entry of Sister State Judgment based on judgments against Charney in the principal amount of nearly $30 million, comprised of three separate judgments: (1) a January 29, 2016 judgment for $151,808.16 (“First Judgment”), (2) a September 25, 2017 judgment for $92,045.70 (“Second Judgment”), and (3) a January 8, 2018 sister state judgment filed in this court on February 16, 2018 for $29,481,097.60 (“Third Judgment”) (collectively, “Judgments”). (Turnover Motion, pgs. 3-4; RJN, Exhs. 1, 2, 3.) On July 16, 2019, the Court found Apex RE and Art Commerce were Charney’s alter egos and on August 26, 2019, the Court granted Judgment Creditors’ motion to amend the Third Judgment to add Apex RE and Art Commerce as judgment debtors. (RJN, Exhs. 4, 19.)

Charney’s home is located at 1809 Apex Avenue, Los Angeles California (“1809 Apex”) and Charney also owned real property located at 1349 Douglas Street, Los Angeles, CA 90026 (“1349 Douglas”). (Decl. of Taran, Exhs. T, U, V.) While Charney was previously the record owner of 1809 Apex and 1349 Douglas (collectively, “Residential Properties”), in May 2016, he transferred these properties’ deeds to “Apex Property Management, LLC” (“APM”), an entity unrelated to Charney, but with a similar name as Charney’s alter ego/fellow judgment debtor, Apex RE, to which Charney intended to transfer the deeds. (RJN, Exh. 25 at 2, Exh. 16 at 65:21-66:7 [“It’s a grant deed [for 1809 Apex] for myself, but there’s a scrivener error. It’s supposed to be to [Apex RE], but it says [APM].”]; Exh. 22, ¶¶8-15.) The evidence suggest Charney is the true owner of the Residential Properties notwithstanding the fact the deeds are no longer in Charney’s name.

Judgment Creditors move to amend the Third Judgment against Judgment Debtors to add LA Apparel as an additional judgment debtor. Judgment Creditors rely on arguments and evidence set forth in the Statement of Facts (“SOF”) section of their Turnover Motion and accordingly cite to the SOF in support of the instant motion. This ruling’s references to this evidence will accordingly refer to sections within the SOF and evidence cited therein.

“Section 187 grants every court the power and authority to carry its jurisdiction into effect. [Citation.] This includes the authority to amend a judgment to add an alter ego of an original judgment debtor, and thereby make the additional judgment debtor liable on the judgment. [Citation.] Amending a judgment to add an alter ego of an original judgment debtor is an equitable procedure based on the theory that the court is not amending the judgment to add a new defendant but is merely inserting the correct name of the real defendant.” (Highland Springs Conf. & Training Ctr. v. City of Banning (2016) 244 Cal.App.4th 267, 280, internal quotation marks omitted.) “The court is not required to hold an evidentiary hearing on a motion to amend a judgment, but may rule on the motion based solely on declarations and other written evidence.” (Ibid.)

“The ability under section 187 to amend a judgment to add a defendant, thereby imposing liability on the new defendant without trial, requires both (1) that the new party be the alter ego of the old party and (2) that the new party had controlled the litigation, thereby having had the opportunity to litigate, in order to satisfy due process concerns. The due process considerations are in addition to, not in lieu of, the threshold alter ego issues.” (Triplett v. Farmers Ins. Exchange (1994) 24 Cal.App. 4^th 1415, 1421; see also LSREF2 Clover Property 4, LLC v. Festival Retail Fund 1, LP (2016) 3 Cal. App. 5^th 1067, 1081.)

“Alter ego is an extreme remedy, sparingly used. [Citation.] The standards for the application of alter ego principles are high, and the imposition of alter ego liability is to be exercised reluctantly and cautiously.” [Citation.] Still, the greatest liberality is to be encouraged in allowing judgments to be amended to add the “real defendant,” or alter ego of the original judgment debtor, in order to see that justice is done.” (Highland Springs Conf. & Training Ctr., supra, 244 Cal.App. 4^th at 280, internal quotation marks, ellipses, and brackets omitted.)

“In California, two conditions must be met before the alter ego doctrine will be invoked. First, there must be such a unity of interest and ownership between the corporation and its equitable owner that the separate personalities of the corporation and the shareholder do not in reality exist. Second, there must be an inequitable result if the acts in question are treated as those of the corporation alone.” (Sonora Diamond Corp. v. Superior Court (2000) 83 Cal.App.4th 523, 538.)

The Court should consider all of the circumstances to determine whether the doctrine should be applied. These factors include “commingling of funds and other assets of the two entities, the holding out by one entity that it is liable for the debts of the other, identical equitable ownership in the two entities, use of the same offices and employees, [] use of one as a mere shell or conduit for the affairs of the other. . . inadequate capitalization, disregard of corporate formalities, lack of segregation of corporate records, and identical directors and officers.” (Id., at 538-539.)

Judgment Creditors argue LA Apparel is Charney’s alter ego given the following evidence supporting a unity of ownership: (1) Charney commingled LA Apparel’s assets with his own [SOF at B.1] and as a result, funds flowed between LA Apparel and Charney’s alter egos Art Commerce, Apex RE, and Schmatta LA [SOF at B.1, B.2.b]; (2) LA Apparel’s participation in diversion of Charney’s assets by paying his CEO salary and rental income to his alter egos [SOF at B.1]; (3) Charney’s identical equitable ownership of LA Apparel given his immediate family were LA Apparel’s sole owners and MFT remains LA Apparel’s primary shareholder [SOF at C]; (4) evidence that MFT was founded for the purpose of setting up LA Apparel demonstrates LA Apparel is a mere shell, instrumentality, or conduit of a single venture [SOF at C]; (5) LA Apparel’s use of 1809 Apex as an address [SOF at B.3]; (6) LA Apparel is represented by the same counsel as Charney; (7) inadequate capitalization; and (8) evidence that there is a disregard of corporate formalities, lack of separate corporate records, and/or identical officers and directors including evidence of Charney’s role as officer and director of LA Apparel and the sole owner of Apex RE and Art Commerce, LA Apparel’s failure to take board minutes until March 2018 despite forming in Spring 2016. (Motion, pgs. 7-11.) Judgment Creditors argue that absent amendment, there will be an inequitable result because LA Apparel, which is openly controlled by Charney, has depleted its own assets to fund Charney’s lifestyle so as to avoid judgment enforcement. (Motion, pg. 12.) Judgment Creditors argue LA Apparel, together with Schmatta LA and Trustee, have been working together as a bad faith “single enterprise” dedicated to advancing Charney’s goal of evading judgments which is sufficient basis to find alter ego liability. (Motion, pg. 13.) Judgment Creditors argue that even if the Court finds the formal elements to establish alter ego liability are not present, the Court should find an alter ego relationship exists given the equities favor adding LA Apparel as a judgment debtor. (Motion, pg. 13.)

In opposition, LA Apparel argues the Amendment Motion should be denied for three reasons: (1) such a finding would deprive LA Apparel of due process, (2) as single enterprise theory is inapplicable, and (3) assuming a standard alter ego analysis, Judgment Creditors do not prove a unity of interest or ownership, or that an inequitable result would follow if piercing were not allowed.

The Court finds that Judgment Creditors have not sustained their burden to establish LA Apparel is the alter ego of Charney for purposes of amending the operative judgment to add LA Apparel as a judgment debtor.

In support of the assertion that Charney and LA Apparel “commingled” assets, Judgment Creditors cite to the SOF at B.1, a three-page section of the Turnover Motion’s Statement of Facts summarizing LA Apparel’s role in the alleged single-enterprise scheme to evade judgment creditors. (Motion, pg. 7.) Specifically, Judgment Creditors assert commingling of assets is demonstrated by Charney’s having routinely taken assets from LA Apparel through checks to cash, which he used to fund his life by arranging for LA Apparel to pay for his food, clothing, transportation, and father’s credit card bills. (Motion, pg. 7, citing Ming-Hsiang Kao v. Holiday (2020) 58 Cal.App.5th 199, 207 (“Kao”) [“appellants… made unauthorized use of corporate assets as they used corporate funds to pay their personal rent and used personal funds to pay Kao’s salary”]; citing SOF at B.1: Decl. of Taran, Exh. I, ¶4 [Consulting Agreement demonstrating Charney’s LLC, Art Commerce, would be paid for CEO services].) [The Court notes this section also asserts Charney claims he has no income, notwithstanding the CEO salary LA Apparel had been paying to Art Commerce, but Judgment Creditors do not sufficiently cite to the evidence, e.g., RJN, Exh. 16 at 51:22-54:20 is a transcript of Morris’s testimony not related to Charney’s compensation.] However, Judgement Creditors fail to demonstrate how evidence that LA Apparel had been paying Charney a CEO salary to various LLCs Charney controlled is evidence that Charney had been commingling assets for purposes of finding alter ego. Judgment Creditors’ assertion that “funds flowed” from LA Apparel to Charney’s alter ego LLCs for their, i.e., Charney’s, provision of CEO Services does not demonstrate Charney is commingling his assets with those of LA Apparel for purposes of demonstrating LA Apparel is Charney’s alter ego. Judgment Creditors cite to SOF at B.2.b, however, this section addresses the other entities Charney controls, such as Schmatta LA; however, whether Charney improperly commingled his assets with Schmatta LA is not relevant to establishing LA Apparel’s alter ego. Moreover, Judgment Creditors have not submitted sufficient evidence suggesting the transfer of funds from LA Apparel to Charney (via his LLCs) was not for an ascertainable reason of paying Charney’s CEO salary. Moreover, Judgment Creditor fails to identify any commingling of Charney’s assets with Los Angeles Apparel.

LA Apparel presented evidence to establish the business purposes of certain challenged transactions. Specifically, LA Apparel presented evidence that the five checks to cash could be traced to payments to a vendor, to pay for services, employee advances or other expenses (Decl. of Nisenbaum, ¶¶ 108-112, Exhs. FF-JJ); that the reimbursements were proper reimbursements for business expenses (Decl. of Holmes, Ex. A, pg. 7. ) LA Apparel presented evidence that Charney never borrowed from or gave money to the MFT. (Decl. of Morris, ¶¶ 18, 24-25, 37.) Finally, LA Apparel presented evidence that Charney and LA Apparel do not share a bank account, but as CEO Charney is a signatory on LA Apparel’s accounts. In the absence of the CFO, Charney signs checks on behalf of LA Apparel as CEO, and signed less that five checks payable to cash since 2016. (Decl. of Nisenbaum, ¶ 106.)

In reply, Judgment Creditors assert Charney testified to having used LA Apparel’s corporate assets to pay for what Judgment Creditors contend were not business expenses, namely, food, clothing, transport, and a company credit card. (Reply, pg. 6, citing Reply-Decl. of Taran, Exh. A, Charney Depo at 253:24-254:6 (food); 253:20-22 (clothing); 254:20-255:7 (private transportation); 217:14-21.) However, Judgment Creditors’ assertion that these expenses are not business expenses is conclusory, especially given Charney’s testimony that the expenses are business related, corroborated by the CFO. (See Decl. of Nisenbaum, ¶¶ 128-136.) This is further corroborated by the fact that the requests for reimbursements were reviewed and about 10 % were not paid. (Id., ¶ 134.)

Judgment Creditors assert that Schmatta LA’s bank records indicate Charney used assets received from LA Apparel to pay for his personal expenses. (Reply, pg. 6.) However, evidence of how Schmatta LA, a named judgment debtor and alter ego of Charney, used funds it received from LA Apparel is not evidence that LA Apparel is also Charney’s alter ego and is not relevant. Judgment Creditors must submit evidence that Charney engaged in an unauthorized, i.e., improper, use of LA Apparel’s corporate assets. This factor weighs against finding alter ego liability.

Judgment Creditors also assert LA Apparel’s payment of Charney’s CEO salary and rent, by paying the salary to his alter ego LLCs, amounted to a “diversion” of Charney’s assets, a factor supporting alter ego. However, Judgment Creditors submit no conclusive, unrefuted evidence that the payments made by LA Apparel were not business related given they were for the purpose of paying a CEO salary. Judgment Creditors do not submit evidence suggesting Charney’s CEO salary is so excessive as to amount to an improper or unauthorized business expense, especially considering LA Apparel’s evidence that the compensation is within a typical range for a company of LA Apparel’s size. (See Decl. of Lewin, pgs. 8-11.)

In reply, Judgment Creditors suggest the fact LA Apparel’s actual payments to Apex RE for managing 1809 Apex exceeded the amount set forth in the Apex RE Agreement demonstrates the funds were paid for an improper purpose and not a business purpose; however, this assertion is conclusory. (Reply, pg. 6.) Judgment Creditors similarly contend the fact LA Apparel’s total payments to Art Commerce dramatically exceeded the amounts contemplated for “CEO Services” in the Art Commerce Agreement demonstrates diversion. (Reply, pg. 7.) However, Judgment Creditors’ contention that LA Apparel overpaid for CEO services is not evidence that these payments to Art Commerce were unauthorized or for an improper purpose so as to qualify as diversion. Judgment Creditors’ citation to Nisenbaum’s email in which he contends that Art Commerce, “was primarily set up to shield assets and income from an ongoing lawsuit with Standard General,” is not relevant to demonstrate LA Apparel’s alter ego status, but Art Commerce’s alter ego status. (Reply, pg. 7.) This factor weighs against finding alter ego liability.

Judgment Creditors argue the fact LA Apparel was owned by the MFT, and accordingly Charney’s immediate family members, from its inception through August 2018 and that MFT remains LA Apparel’s primary shareholder is evidence of the factor of identical equitable ownership, i.e., that LA Apparel is essentially owned by Charney. (Motion, pg. 9, citing SOF C.) In Section C of the SOF, LA Apparel cites to the following evidence that Charney’s family is closely involved with MFT, the trust that owns LA Apparel: (1) MFT was formed in spring 2016, and was LA Apparel’s sole owner when it first became a corporation; (2) as of December 2018, MFT owned 85% of LA Apparel’s stock; and (3) MFT’s trustee is Charney’s father Morris, its trustor is his mother Sylvia Safdie, and its named beneficiary is his sister Maya Charney. (RJN, Exh. 15, Tr. 95:24-96:2, 75:15-16, 26:24-27:1; Decl. of Taran, Exh. G, pg. 1.) However, this evidence only demonstrates a connection between Charney and LA Apparel given it is mostly owned by MFT, not that Charney himself has a direct ownership interest in the company. In addition, 15% of the company is owned by other shareholders independent of Charney and the MFT. Judgment Creditors contention in reply that the fact an investor’s check to LA Apparel initially made out the check to “Dov Charney” before correcting it to be made out to “LA Apparel” demonstrates that LA Apparel’s investors consider LA Apparel and Charney to be the same and/or cannot tell them apart is not persuasive. (Reply, pgs. 7-9, citing Reply-Decl. of Taran, Exh. E.) However, the contention that a rewritten check indicates Rina Amaya cannot tell Charney and LA Apparel apart and/or considers them the same is conclusory. Judgment Creditors do not otherwise respond the issue of LA Apparel’s other shareholders and investors.

In opposition, LA Apparel submits evidence that Charney has no equitable or legal ownership in LA Apparel. (Decl. of Nisenbaum, ¶¶ 21, 35.) However, this evidence appears to be contradicted by LA Apparel’s Preliminary Offering Circular (“POC”), which LA Apparel submitted as evidence in opposition. The POC discloses that Charney and MFT beneficially owned 144,000,000 shares in LA Apparel in 2016. (Decl. of Nisenbaum, Exh. E, pg. 32, fn. 4.) The POC further states: “Although there are no formal agreements between the [MFT] and [Charney], in view of the family relationship between them, and [Charney’s] role in founding and operating [LA Apparel], it may be expected that [Charney] may be able to exert significant influence and/or control over the business and operations of [LA Apparel].” (Decl. of Nisenbaum, Exh. E, pgs. 14.) This language in the POC runs counter to LA Apparel’s assertion that it is in no way controlled by Charney and/or that there is no showing of identical ownership. Thus the factor weighs in favor of the Judgment Creditors establishing alter ego liability.

Judgment Creditors assert that Morris’s testimony that MFT was formed to “help set up a new apparel company” as well as the Court’s prior ruling as to the intertwined nature of LA Apparel, Charney, Apex RE, and Art Commerce demonstrate that LA Apparel is a shell. (Motion, pgs. 9-10; SOF at C, RJN Ex. 15, Tr. 75:15-16.) However, the fact some of LA Apparel’s expenses are paid entities owned by Charney is not sufficient evidence that LA Apparel’s entire existence is to fund Charney’s lifestyle as opposed to existing as its own independent clothing manufacturer and seller. LA Apparel has operated and continues to operate as a real company, generating millions in revenue and paying vendors, creditors, and Los Angeles based employees independent of Charney. (Decl. of Nisenbaum ¶¶70-72, 90-102-104.) In addition, it is not clear how evidence that MFT was founded to establish LA Apparel is relevant to whether LA Apparel actually functions as a real company as opposed to a shell or conduit. The cases cited in reply are inapposite. (See Butler America, LLC v. Aviation Assurance Company, LLC (2020) 55 Cal.App.5th 136, 146 [LLC which had no substantial business activity or income to pay its debts acted as a screen to avoid paying creditor]; Dos Pueblos Ranch & Improvement Co. v. Ellis (1937) 8 Cal. 2d 617, 621 [“mere circumstances that all capital stock of a corporation is owned or controlled by one or more persons, does not, and should not, destroy its separate existence; were it otherwise, few private corporations could preserve their distinct identity, which would mean the complete destruction of the primary object of their organization.”) Judgment Creditor does not cite to authority supporting the position that a real functioning company should be deemed a shell company simply because some of its assets are paid to a judgment debtor who is avoiding judgment. The fact LA Apparel pays Charney for services performed is not evidence that LA Apparel is a shell corporation or Charney’s alter ego. This factor weighs against finding alter ego liability.

Judgment Creditors assert LA Apparel’s use of 1809 Apex as an address supports the alter ego factor of “use of same office or business location.” (Motion, pg. 9, citing SOF at B.3) However, LA Apparel does not deny its use of 1809 Apex when it was being formed, but asserts there is no evidence that LA Apparel and Charney used the same offices and employees, especially considering evidence that once LA Apparel grew, it moved its mailing address and physical operations to a larger industrial space in 2017, which it has occupied since. (Decl. of Watson ¶16, Exh. N: 6:18-19; Decl. of Nisenbaum ¶¶24, 41.) In reply, Judgment Creditors maintain the fact LA Apparel used the 1809 Apex address at the time of its formation is sufficient for purposes of the “same office/business location” factor. (Reply, pg. 9.) However, the Court is not persuaded, given LA Apparel no longer uses the 1809 Apex address and even if it had closeness with Charney at its formation, it is a functioning real company. This factor weighs against finding alter ego liability.

Judgment Creditors contend the fact LA Apparel has used the same counsel as Charney is evidence of alter ego, however, they do not cite to authority supporting this contention. (Motion, pg. 10.) Although this is a relevant factor, shared professional services could also be appropriate. (See Sonora Diamond Corp, supra, 83 Cal. App. 4^th 523, 540-41.) This factor weighs in favor of finding alter ego liability.

Judgment Creditors argue that both Charney and MFT held themselves as personally liable for LA Apparels debts. (Motion, pg. 10, citing SOF, Section C.) Specifically, LA Apparel’s factoring agreement include the personal guarantee of Charney and the MFT, and MFT is the guarantor to an asset-based lender of LA Apparel. (Decl. of Taran, Exhs. DD, EE.) LA Apparel acknowledges that Charney initially guaranteed loans for purposes of securing LA Apparel’s initial financing, but presents evidence it is a common practice for startup businesses in their early stage and not evidence of alter ego especially considering it is not standard practice for LA Apparel or Charney to hold out as liable for the debts of the other. (Opposition, pg. 12; citing Decl. of Hirsch ¶¶10-14, 22-24.) This factor weighs somewhat in favor of finding alter ego liability.

Judgment Creditors argue Charney and LA Apparel’s “commingling of funds” demonstrates it is inadequately capitalized. (Motion, pg. 11.) However, this argument is based on the conclusory assertion that LA Apparel’s payment of the CEO salary to Charney’s LLCs is an unauthorized/non-business expense, which is not sufficiently supported in light of evidence that payments are for business expense reimbursements. (Decl. of Nisenbaum ¶¶114-137.) Moreover, LA Apparel submitted evidence that it is adequately capitalized and has sufficient assets to pay ordinary business liabilities as they arise. (Decl. of Nisenbaum ¶¶92-93 [LA Apparel CFO asserts LA Apparel is not in default on any obligations owed to creditors and it has never defaulted on any obligations].) In reply, Judgment Creditors again contend that evidence of Charney’s control of LA Apparel’s assets and commingling funds is sufficient to show inadequate capitalization. (Reply, pg. 10, citing Favila v. Pasquarella (2021) 65 Cal.App.5th 934, 947.) However, Favila involved a showing that the judgment debtor was the only person who controlled the assets of the company she had created, that was added as a judgment debtor by alter ego. Here, despite the POC indicating that Charney it “may be expected” that Charney may exert influence in LA Apparel, this is not a showing that Charney had and has total control of LA Apparel’s assets so as to support a finding LA Apparel is inadequately capitalized. This factor weighs against finding alter ego liability.

In support of their assertion that LA Apparel disregarded corporate formalities and failed to maintain separate corporate records, Judgment Creditors cite to Charney’s simultaneous roles as an officer and director of LA Apparel while also the owner of Apex RE and Art Commerce; however, it is not clear how this demonstrates LA Apparel disregarded corporate formalities. (Motion, pg. 11.) Judgment Creditors also cite to LA Apparel’s failure to take board minutes until March 2018, despite forming in spring 2016. (Motion, pg. 11; Decl. of Taran Exh. OO.) However, in opposition, LA Apparel submitted evidence it does not disregard corporate formalities given LA Apparel has issued 86 million shares, properly maintains its own set of books and records which show no irregularities, has filed proper state and federal tax returns since its inception, contributes to a 401(k) plan for its employees, engages a payroll vendor to manage tax withholdings, keeps substantial records as required under ERISA and California law, and maintains all major forms of insurance from premises liability to workers’ compensation. (Decl. of Nisenbaum ¶¶36, 2, 52, 65-72, 26-27, 31, 58-62, 76-79.) The Court finds this evidence demonstrates Judgment Creditors have not sufficiently established this factor for purposes of finding alter ego liability as to LA Apparel.

Also, the Court finds Judgment Creditors have not established that inequity will result if amendment is not granted as to LA Apparel. Judgment Creditors cite to their difficulty in collecting the judgment as a basis for naming LA Apparel, a key source of funds Charney presently has access to; however, this disregards that LA Apparel is a real, functioning garment company with shareholders, lenders, and creditors separate from Charney as well as at least 1,200 employees. The equities do not favor amendment because naming LA Apparel as an additional judgment debtor would necessarily harm these third parties.

Judgment Creditors also contend LA Apparel should be added as a judgment debtor based on its participation with Judgment Debtors and Apex RE, Morris as Trustee, and Schmatta LA in a bad faith “single enterprise” devoted to evading judgments against Charney. (Motion, pg. 5, 13, citing TMCO Ltd. v. Green Light Energy Sols. R&D Corp., 2020 WL 1531226, at *2 (N.D. Cal. Feb. 3, 2020) [unopposed motion, not reported], Limestone Memory Sys. LLC v. Micron Tech., Inc., 2019 WL 8690217, at *17 (C.D. Cal. Dec. 26, 2019) [not reported] [“Single-enterprise liability requires two elements: “(1) such a unity of interest and ownership that the separate corporate personalities are merged, so that one corporation is a mere adjunct of another or the two companies form a single enterprise; and (2) an inequitable result if the acts in question are treated as those of one corporation alone… Inequitable results flowing from the recognition of the corporate form include the frustration of a meritorious claim, perpetuation of a fraud, and the fraudulent avoidance of personal liability.”]; citing also Toho-Towa Co., Ltd. v. Morgan Cr. Prods., Inc. (2013) 217 Cal.App.4th 1096, 1107-08 [“Under the ‘single business enterprise’ doctrine, separate corporations may operate with integrated resources in pursuit of a single business purpose… The ‘single-business-enterprise’ theory is an equitable doctrine applied to reflect partnership-type liability principles when corporations integrate their resources and operations to achieve a common business purpose… In California, common principles apply regardless of whether the alleged alter ego is based on piercing the corporate veil to attach liability to a shareholder or to hold a corporation liable as part of a single enterprise.”(Emphasis added.)].)

As these cases recognize, the single enterprise theory does not apply where, as here, a judgment creditor attempts to hold a corporation liable for an individual’s debts. Even if it did, this theory relies on considering the same factors and evidence in determining whether it is appropriate to disregard the corporate form and hold it liable for the debts of another. The Court finds Judgment Creditors have not submitted sufficient evidence of LA Apparel’s participation in a bad faith single enterprise for purposes of finding alter ego under this theory. LA Apparel’s alleged participation is based on its payment of a CEO Salary to LLCs controlled by Charney and Judgment Creditors’ allegations that Charney effectively controls LA Apparel and treats it as his personal bank. However, as discussed above, LA Apparel submitted evidence that it is a functioning business with business expenses, including the CEO salary and other expenses authorized by Charney as part of the carrying out of LA Apparel’s business of clothing manufacturing, and is not owned or controlled directly by Charney.

Finally, Judgment Creditors argue that even if the Court finds the formal elements to establish alter ego are not present, it should nonetheless find an alter ego relationship exists given the equities favor adding LA Apparel as a judgment debtor. (Motion, pgs. 5-6, 13, citing Carolina Casualty Ins. Co. v. L.M. Ross Law Group, LLP (2012) 212 Cal.App.4th 1181, 1188-89 [“In addition, even if all the formal elements necessary to establish alter ego liability are not present, an unnamed party may be included as a judgment debtor if ‘the equities overwhelmingly favor’ the amendment and it is necessary to prevent an injustice.”].) Based on the reasoning and evidence discussed above, the Court finds Judgment Creditors have not established that the equities overwhelmingly favor finding an alter ego relationship between Charney and LA Apparel.

Given Judgment Creditors have not sufficiently established LA Apparel is the alter ego of Charney, the Court need not reach the issues raised in opposition as to whether due process violations prevent amending the judgment to add LA Apparel as a judgment debtor and/or whether adding LA Apparel as a judgment debtor under a single enterprise theory of alter ego liability would amount to improper outside reverse veil piercing.

Based on the foregoing, Judgment Creditors’ motion to amend judgment to add LA Apparel as a judgment debtor is denied.

Judgment Creditors moved to amend the Third Judgment to add Morris as Trustee of the MFT (“Trustee”) as an additional judgment debtor. As with their LA Apparel motion, Judgment Creditors rely on arguments and evidence set forth in the Turnover Motion’s SOF. This ruling’s references to this evidence will refer to sections within the SOF and evidence cited therein.

Judgment Creditors argue the Court should find Trustee is Charney’s alter ego given the following evidence supporting a unity of interest and ownership between Charney and the MFT: (1) Charney commingled MFT’s assets with his own [SOF at B.1.c, C]; (2) MFT participated in diversion of Charney’s assets by receiving Charney’s assets soon after the Second Judgment [SOF at C]; (3) the fact MFT was established for the purpose of setting up LA Apparel demonstrates it is a mere shell [SOF at C]; (4) MFT’s use of 1809 Apex as an address supports use of the same office or business location as Charney [SOF at B.3]; and (5) MFT’s 2016 decision to invest in LA Apparel knowing its CEO Charney had outstanding judgments against him violates the duties of prudence set forth in the trust formation document and California law and demonstrates a disregard of corporate formalities. (Motion, pgs. 7-12.) [The Court notes Judgment Creditors’ evidence of identical equitable ownership does not address ownership of MFT, but the fact LA Apparel is owned by MFT, which Judgment Creditors contend should be treated as an extension of Charney. (Motion, pg. 9.)] Judgment Creditors argue that absent amendment, there will be an inequitable result because Trustee has for years funneled money to and from Charney to help him evade the judgments and will continue to do so absent Court intervention own assets to fund Charney’s lifestyle to avoid judgment enforcement. (Motion, pg. 12.) Judgment Creditors argue that even if the Court finds the formal elements to establish alter ego liability are not present, the Court should find an alter ego relationship exists given the equities favor adding Trustee as a judgment debtor. (Motion, pg. 13.) Judgment Creditors assert there are no countervailing equitable concerns given there is no innocent member of MFT, which is comprised of Charney’s family members and given the MFT was formed for the purpose of setting up Charney’s company, LA Apparel. (Motion, pg. 14.)

In opposition, LA Apparel argues the Amendment Motion should be denied for three reasons: (1) such a finding would deprive MFT of due process, (2) a lack of authority to find a trustee liable for the debts of an individual who is not the trustee, trustor or beneficiary of the trust and who does not control the trustee and trust assets, and (3) assuming a standard alter ego analysis, Judgment Creditors do not prove a unity of interest or ownership, or that an inequitable result would follow if piercing were not allowed.

The Court finds that Judgment Creditors have not sustained their burden to establish Trustee is the alter ego of Charney for purposes of amending the operative judgment to add LA Apparel as a judgment debtor.

Judgment Creditors assert Charney’s execution of a $47,000 promissory note in favor of Morris and his granting Morris a corresponding security interest in American Central Plaza suggests commingling of assets between Charney and the MFT. (Motion, pg. 8, SOF at C, Decl. of Taran, Exh. HH.) However, the promissory note and corresponding security interest are at most evidence of a transfer of funds between Charney and Morris, not between Charney and Morris as Trustee of the MFT, given the Note itself makes no reference to MFT and the UCC Financing Statement acknowledging the debt refers to Morris in his individual capacity, not as Trustee. (Decl. of Taran, Exh. HH; RJN, Exh. 28.)

Judgment Creditors also cite to evidence that LA Apparel pays Morris’s credit card bills as proof of commingling of funds. (Motion, pg. 8; SOF at B.1.c [discussion of evidence that LA Apparel reimbursed credit card expenses of Morris (RJN, Exh. 9, 53:24-54:3; 186:4-187:3).].) However, Trustee submitted evidence that the charges reimbursed on Morris’s credit cards were incurred in connection with LA Apparel business expenses, which is within LA Apparel’s company policy. (RJN, Exh. 9, Charney Transcript 53:24–54:3, 186:4–187:3; Decl. of Nisenbaum ¶129.) The Court finds LA Apparel’s reimbursement of business expenses incurred on Morris’s credit cards is not evidence of the commingling of assets between Trustee and Charney. In reply, Judgment Creditors contend the lack of a direct connection between the MFT and Charney does not preclude a showing of commingling of assets given the MFT has funneled money to Charney through LA Apparel and other alter egos and given the POC treated the stock of MFT and Charney as equivalent. (Reply, pg. 6.) In addition, as discussed above, the guarantee of a loan does not establish that monies are commingled. Finally, although a consideration, the mere fact of a shared address does not demonstrate that the assets were commingled. For the purposes of this factor, Judgment Creditors have not established Trustee and Charney have commingled assets to support alter ego.

Judgment Creditors’ assertion that MFT diverted Charney’s assets is based on its alleged receipt of Charney’s assets soon after the Second Judgment and facilitation in Charney’s judgment evasion. (Motion, pg. 9 citing SOF at C.) However, a review of the cited SOF Section C suggests this argument is based on the same $47,000 promissory note to Morris as an individual; there is no part of Section C in which Judgment Creditors contend the MFT received funds from Charney. In opposition, Trustee submitted evidence that the alleged transaction of MFT receiving Charney’s assets did not occur. (Decl. of Morris ¶27, Exhs. 2, 5, 6.) In reply, Judgment Creditors again take issue with Trustee distinguishing Morris acting in his individual capacity and as trustee, contending that MFT is effectively Charney given it is composed entirely of Charney’s immediate family and holds shares in a company intimately tied to Charney. (Reply, pg. 6.) However, the fact Charney’s immediate family members are involved in the MFT is not sufficient to find the MFT is an alter ego for Charney himself. This factor weighs against finding alter ego liability.

Judgment Creditors claim that through MFT, Charney’s family were the sole owners of LA Apparel from its inception through at least August 5, 2018. (Motion, pg. 9.) As discussed above, the POC discloses that Charney and MFT beneficially owned 144,000,000 shares in LA Apparel in 2016. (Decl. of Nisenbaum, Exh. E, pg. 32, fn. 4.) The POC further states: “Although there are no formal agreements between the [MFT] and [Charney], in view of the family relationship between them, and [Charney’s] role in founding and operating [LA Apparel], it may be expected that [Charney] may be able to exert significant influence and/or control over the business and operations of [LA Apparel].” (Decl. of Nisenbaum, Exh. E, pgs. 14.) This language in the POC runs counter to LA Apparel’s assertion that it is in no way controlled by Charney and/or that there is no showing of identical ownership. Thus the factor weighs in favor of the Judgment Creditors establishing alter ego liability.

Judgment Creditors assert that evidence the MFT was established for the purpose of setting up LA Apparel demonstrates it is and should be treated as a mere shell. (Motion, pgs. 9-10, citing SOF at C.) In opposition, Trustee submitted evidence that MFT’s purpose is to invest and manage trust assets for the benefit of Maya Charney, the MFT’s beneficiary. (Decl. of Maya, Exh. 1, §§2.01, 3.01.) Judgment Creditors contend this is false and belied by the conduct of MFT itself, which only holds shares in companies intimately tied to Charney (LA Apparel and Central Shoemakers, LLC (“CS”)) demonstrating the true purpose of MFT is as a shell to keep Charney employed. (Reply, pg. 8.) Judgment Creditors further assert representations that the MFT was established for Maya’s benefit are false given information in the POS, credit card statements demonstrating payments were made for LA Apparel, and the fact MFT has not invested in any businesses other than those intimately tied to Charney. (Reply, pg. 8.) However, Judgment Creditors fail to address why MFT’s investment in LA Apparel precludes it from being for the benefit of Maya. [The Court notes Judgment Creditors argue that other third party lenders in LA Apparel are friends and associates of Charney in the context of asserting MFT is a shell, contrary to Charney’s sworn assertion; however, these arguments are not relevant to MFT. (Reply, pgs. 8-9.)] This factor weighs against a finding of alter ego liability.

Judgment Creditors contend MFT’s use of Charney’s home at 1809 Apex as an address supports the “same office or business location” factor of alter ego liability. (Motion, pg. 10, citing SOF at B.3, Decl. of Taran ¶29, Exh. Z [Chase Bank statement for the MFT from 11/19/19 to 12/16/19 listing address as 1809 Apex].) In opposition, Trustee submitted evidence that its active bank account reflects the address from which Morris as Trustee manages the MFT, 12 Melbourne Avenue, Westmount, Quebec. (Decl. of Morris ¶22, n. 2, Exh. 6.) In addition, Trustee submitted evidence that MFT’s address with the IRS is 21700 Oxnard Street; Woodland Hills, CA 91387, and that Trustee manages the trust from his home address in Quebec. (Opposition, pgs. 16-17; Decl. of Morris ¶8.) Trustee also submitted evidence that while Morris as Trustee used 1809 Apex as an address when visiting his son and opening an MFT bank account at that time, the associated bank account was not used to make financial transactions on behalf of MFT and has since been updated to list Morris’s home address, from where he operates MFT. (Decl. Of Morris ¶¶21-25, Exhs. 5-6.) In reply, Judgment Creditors argue MFT’s updating its bank records’ mailing address does not undo the fact it has had connections to 1809 Apex, Charney’s home. (Reply, pg. 9.) The Court acknowledges the evidence suggests MFT has used the Apex address in the past for the purposes of opening the at issue bank account but finds the evidence does not conclusively establish this use of the address demonstrates MFT and Charney shared the same office or business location for purposes of supporting a finding of alter ego. Aside from evidence of a single banking statement from 2019, Judgment Creditors submit no other evidence of 1809 Apex’s connection to MFT. This factor weighs against finding alter ego liability.

Judgment Creditors contend the fact MFT has used the same counsel as Charney is evidence of alter ego, however, they do not cite to authority supporting this contention. (Motion, pg. 10.) Although this is a relevant factor, shared professional services could also be appropriate. (See Sonora Diamond Corp, supra, 83 Cal. App. 4^th 523, 540-41.) This factor weighs for finding alter ego liability.

Judgment Creditors claim that because “both [Dov] Charney and [Morris as Trustee] held themselves out as personally liable for LA Apparel’s debts,” the Court should find there is a unity of interest between Morris as Trustee and Dov Charney. (Motion, pg. 10.) Specifically, LA Apparel’s factoring agreement include the personal guarantee of Charney and the MFT, and MFT is the guarantor to an asset-based lender of LA Apparel. (Decl. of Taran, Exhs. DD, EE.) The Court considers that the evidence that MFT held itself out as liable for certain debts as a factor weighing in favor of alter ego liability.

Judgment creditors make no argument in their moving papers that MFT is inadequately capitalized. Accordingly, this factor weighs against a finding of alter ego liability.

Judgment Creditors assert MFT’s 2016 decision to invest in LA Apparel knowing its CEO Charney had outstanding judgments against him violates the duties of prudence set forth in the trust formation document and California law and demonstrates a disregard of corporate formalities. (Motion, pgs. 11-12, citing Probate Code §§16040, 16046, 16047; Decl. of Taran Exh. 10 [MFT formation document].) However, the Court finds Trustee’s decision to invest in LA Apparel, a company whose founder and CEO Charney had judgments against him, is not evidence that Trustee disregarded corporate formalities for purposes of supporting a finding of alter ego. In opposition, Trustee argues there is no evidence that Trustee failed to take any administrative action on behalf of MFT and/or failed to perform administrative duties in a manner consistent with his responsibilities as a trustee given loans between MFT and LA Apparel were properly documented. (Opposition, pgs. 18-19, Decl. of Taran, Exh. JJ.) In reply, Judgment Creditors dispute Trustee’s contention that he performed his trustee administrative duties given the evidence demonstrates Morris allowed Charney free access to the assets of LA Apparel, and therefore those of MFT, for his personal use and in furtherance of judgment evasion which amounts to a disregard of corporate formalities. (Reply, pg. 10.) However, this argument relies on disregarding evidence that the at-issue funds went toward business expenses of LA Apparel, including Charney’s CEO salary and other business-related expenses approved by the company. The weight of the evidence does not support Judgment Creditors’ assertion that the MFT is merely an alter ego of Charney and that it should be added as a judgment debtor to the operative judgment for that reason.

In considering the range of factors to be considered in determining the unity of interest and the evidence submitted by both parties, the Court finds that based on the totality of the circumstances, the alter ego doctrine should not be applied to hold the MFT liable for the personal debts of Charney by way of naming Trustee as an additional judgment debtor. Although the factors of identical ownership, the employment of the same attorney, and the liability for certain debts cut in favor of alter ego liability, they do not negate the other factors which cut against the Judgment Creditors. In addition, the Court finds Judgment Creditors have not established that inequity will result if amendment is not granted as to Trustee. Judgment Creditors cite to their difficulty in collecting the judgment as a basis for naming Trustee, who Judgment Creditors content has “for years funneled money to and from Charney to help him evade the Judgments” (Motion, pg. 12.) However, this conclusory assertion fails to distinguish between Morris as an individual and Morris as Trustee of MFT. As discussed above, Judgment Creditors did not establish that MFT has been providing Charney funds, only that MFT is involved in the formation of LA Apparel, the company Charney founded which pays Charney a CEO salary. This is not direct evidence of the MFT funneling money to Charney. The Court finds the equities do not favor amendment.

Given Judgment Creditors have not sufficiently established Trustee is the alter ego of Charney, the Court need not reach the issues raised in opposition as to whether due process violations prevent amending the judgment to add Trustee as a judgment debtor and/or whether adding Trustee as a judgment debtor under a single enterprise theory of alter ego liability is not permissible given Charney is not the trustee, trustor, or beneficiary of the MFT. (Opposition, pgs. 10-12; Reply, pgs. 2-4.)

Based on the foregoing, Judgment Creditors’ motion to amend judgment to add Morris as Trustee of the MFT as a judgment debtor is denied.

Judgment Creditors move for a preliminary injunction enjoining Charney, Art Commerce, Apex RE, Morris as MFT’s Trustee, LA Apparel, and Schmatta LA from transferring, spending, or otherwise disposing of any assets or property belonging to Judgment Debtors pending determination of Judgment Creditors’ Assignment Motion and Amendment Motion.

C.C.P. §708.520 provides that “[w]hen an application is made pursuant to¿Section 708.510¿or thereafter, the judgment creditor may apply to the court for an order restraining the judgment debtor from assigning or otherwise disposing of the right to payment that is sought to be assigned.”¿(C.C.P. §708.520(a).)¿“The court may issue an order pursuant to this section upon a showing of need for the order.” (Id., § 708.520(b).)

A preliminary injunction can issue when the standards of C.C.P. §526(a) are met. When deciding whether to issue a preliminary injunction, a trial court must evaluate two interrelated factors: (1) the likelihood that the plaintiff will prevail on the merits (Langford v. Superior Court (1987) 43 Cal.3d 21), and (2) the interim harm that the plaintiff is likely to sustain if the injunction were denied, as compared to the harm that the defendant is likely to suffer if the preliminary injunction were issued (Common Cause v. Board of Supervisors (1989) 49 Cal.3d 432, 441-442.) Judgment Creditors rely on their request for judicial notice and the supporting declarations of Jessica Taran to demonstrate that they will prevail on its motion to amend the judgment to add LA Apparel and Trustee of MFT as judgment debtors.

In light of the Court’s ruling on the Amendment Motion, the motion for preliminary injunction as to LA Apparel and Trustee of MFT are denied.

[1] In its July 26, 2022 ruling, the Court acknowledged Judgment Debtors’ filing of Supplemental Declarations of Imbar Sagi-Lebowitz (“Sagi-Lebowitz”) and Charney in response to Taran’s Supplemental Declaration, but ruled that it would consider the Supplemental Declaration of Taran and overruled Judgment Debtors’ objections thereto.