Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_14-cv-00893/USCOURTS-casd-3_14-cv-00893-0/pdf.json

Nature of Suit Code: 891
Nature of Suit: Agricultural Acts
Cause of Action: 07:499 Agricultural Commodities Act

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

CALIFORNIA SPLENDOR, INC. a

corporation,

Plaintiff,

CASE NO. 14cv893-GPC(RBB)

ORDER DENYING PLAINTIFF’S

EX PARTE APPLICATION FOR

RIGHT TO ATTACH ORDER AND

WRIT OF ATTACHMENT

[Dkt. No. 3.]

vs.

V.J. CATALANO, INC. d/b/a

IMPERIAL SALES COMPANY, a

corporation,

Defendant.

On April 15, 2014, Plaintiff California Splendor, Inc. filed a complaint and an

ex parte application for right to attach order and writ of attachment, or in the

alternative, for temporary protective order against V.J. Catalano, Inc. d/b/a/ Imperial

Sales Company. (Dkt. Nos. 1, 3.) Based on the docket, Plaintiff has not served

Defendant with the Complaint and has not filed a certificate of service as to the

Application for Writ of Attachment. No opposition has been filed. Based on the

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reasoning below, the Court DENIES Plaintiff’s ex parte application for right to attach

order and writ of attachment, and in the alternative, temporary protective order. 

According to the declaration of Ryan Maughan, Plaintiff’s counsel called Kate 1

Ellis, attorney for Plaintiff, informing her that Plaintiff would be filing an ex parte

application for writ of attachment and sent her a courtesy copy of the pleadings. (Dkt.

No. 3-5, Maughan Decl. ¶¶ 4, 5.) 

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Background

This action arises pursuant to the Perishable Agricultural Commodities Act

(“PACA”) arising out of Defendant’s failure to pay the agreed price for shipment of

strawberries. According to the Complaint, on or about February 23, 2013, at the

America Frozen Food Institute convention in Anaheim, California, Isabelle Chalepas,

Cal Splendor’s Vice-President of Operations, met with Nick Pengelly, head ofBusiness

Development for Imperial Sales, and began negotiations regarding the sale of

strawberries in connection with a USDA contract. Shortly thereafter, the parties

entered into an oral agreement, (Dkt. No. 3-3, Vano Decl. ¶ 6), whereby Cal Splendor

would be the supplier, processor, and packer ofstrawberries and Imperial would act as

the Vendor/Broker if Imperial was awarded a contract with the USDA. Cal Splendor

and Imperial worked together to prepare a bid and submitted a bid for the USDA

contract on April 5, 2013. On April 25, 2013, Imperial was awarded a contract with

the USDA to supply strawberries for a school lunch program. The bid was submitted

by Imperial because Imperial had a prior relationship with the USDA. 

Imperial was to invoice the USDA and receive payment from the USDA, then

remit the payment, minus their broker fee, to Cal Splendor. In June of 2013, Cal

Splendor began shipping strawberries to locations specified by the USDA, including

Oklahoma, Texas, and New York. Shortly after deliveries began, Cal Splendor

encountered an issue with the color of some of the strawberries. The USDA found that

certain batches of strawberries had discoloration but were otherwise acceptable.

Working together, Nick Pengelly and IsabelleChalepas drafted and submitted a waiver

request to the USDA for the loads ofstrawberriesfacing this issue. The USDA agreed

to grant the waiver requests in exchange for a 5% discount off the price of the loads. 

Cal Splendor and Imperial made a deal that Cal Splendor would pay 4% of the discount

and Imperial would pay 1%. The 5% discount to the USDA as well as the 1% off of

Imperial’s brokerage fee is reflected on all the affected invoices. 

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In November of 2013, Cal Splendor noticed that Imperial had fallen behind on

some of its payments. Defendant was apologetic and provided different reasons why

it was unable to timely pay the amounts due. (Dkt. No. 3-2, Smith Decl. ¶ 19; Dkt. No.

3-4, Chelapas Decl. ¶¶ 11-16.) Numerous attempts were made to inquire and demand

payment. While Imperial made some subsequent payments, it has not fully paid the

amounts due. Defendant even created a payment plan provided to Plaintiff on March

6, 2014. (Dkt. No. 3-2, Smith Decl. ¶ 24, Ex. 8.) Plaintiff alleges that Defendant is

indebted in the amount of $315,918.61 for the sale of strawberries grown and shipped

by Plaintiff. 

In the Complaint, Plaintiff alleges causes of actions for breach of contract;

enforcement of Statutory Trust Provision of PACA, 7 U.S.C. § 499e(4); violation of

Perishable Agricultural Commodities Act-failure to account and pay promptly;

conversion and unlawful retention of PACA Trust Funds; unjust enrichment;

declaratory relief; attorneys’ fees and costs; and finance charges and/or interest on the

unpaid balance owed. (Dkt. No. 1.) 

A. Civil Local Rule 83.3(h)

Under the Local Civil Rule,

A motion for an order must not be made ex parte unless it appears by

affidavit or declaration (1) that within a reasonable time before the

motion the party informed the opposing party or the opposing party's

attorney when and where the motion would be made . . . .” 

Local Civ. R. 83.3(h). 

Here, the Court questions whether Plaintiff has complied with Local Civil Rule

83.3(h) requiring Plaintiff to notify the “opposing party or the opposing party’s

attorney.” Id. 

The declaration of Ryan Maughan, attorney for Plaintiff, states that he has been

in communication with Kate Ellis, attorney for Imperial and provided her telephone

number. (Dkt. No. 3-5, Maughan Decl. ¶ 4.) On February 14, 2014, Maughan called

Kate Ellis and informed her that Plaintiff would be filing an ex parte application for

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writ of attachment the next day. (Id. ¶ 5.) He indicates that he sent Ellis a courtesy

copy of the pleading on the morning of April 15, 2014. (Id.) When the Court

contacted Ms. Ellis to determine if Defendant intended to file an opposition, she

indicated that she was not the attorney for Imperial for purposes of this litigation but

would inform Plaintiff of the application. Defendant was not directly served with any

of these documents. The Court questions whether Plaintiff has properly notified

Defendant under the Civil Local Rule. However, the Court addresses whether Plaintiff

has satisfied its burden to seek ex parte relief in this application. 

B. Ex Parte Application for Writ of Attachment

Under Federal Rule of Civil Procedure (“Rule”) 64, state law provides all

remedies when property is to be seized for the purpose of securing satisfaction of a

judgment, unless a federal statute governs. Fed. R. Civ. P. 64. The effect of Rule 64

isto incorporate state law to determine the availability of prejudgment remedies for the

seizure of property to secure satisfaction of a judgment ultimately entered. Granny

Goose Foods, Inc. v. Brotherhood of Teamsters & Auto Truck Drivers Local No. 70

of Alameda Co., 415 U.S. 423, 436 n.10 (1974). Attachment is a prejudgment remedy

that allows a creditor to have a lien on the debtor’s assets until final adjudication of the

claim sued upon. The creditor must follow statutory guidelines in applying for the

attachment and establish a prima facie claim; and the court is required to make a

preliminary determination of the merits of the dispute. Lorber Industries of Calif. v.

Turbulence, Inc. 175 Cal. App. 3d 532 (1985)(internal citation omitted). The applicant

bears the burden of proving each element by a preponderance of the evidence. Bank

of America v. Salinas Nissan, Inc. 207 Cal. App. 3d 260, 270 (1989). “[T]he

requirements for the issuance of a writ of attachment are strictly construed against the

applicant.” Blastrac, N.A. v. Concrete Solutions & Supply, 678 F. Supp. 2d 1001,

1004 (C.D. Cal. 2010).

The Court must find: (1) the claim is one on which an attachment may be issued;

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(2) the plaintiff has established the probable validity of the claim upon which the

attachment is based; (3) the attachment is not sought for any other purpose than to

secure recovery on the claim; and (4) the amount to be secured by the attachment is

greater than zero. Cal. Civ. Proc. Code §484.090. In an action on a contract, the total

amount of the claim must be a fixed or readily ascertainable amount not lessthan $500. 

See Cal. Civ. Proc. Code § 483.010. The probable validity requirement is satisfied

“where it is more likely than not that the Plaintiff will obtain a judgment against the

defendant on that claim.” Cal. Civ. Proc. Code § 481.190. 

Plaintiff is also seeking relief ex parte pursuant to section 485.010 which

provides as follows:

[N]o right to attach order or writ of attachment may be issued pursuant

to this chapter unlessit appearsfromfacts shown by affidavit that great

or irreparable injury would result to the plaintiff if issuance of the

order were delayed until the matter could be heard on notice.

Cal. Code Civ. P. § 485.010(a). The requirement ofsubdivision (a) is met if any of the

following are shown:

(1) Under the circumstances of the case, it may be inferred that there

is a danger that the property sought to be attached would be

concealed, substantially impaired in value, or otherwise made

unavailable to levy if issuance of the order were delayed until the

matter could be heard on notice.

(2) Under the circumstances of the case, it may be inferred that the

defendant has failed to pay the debt underlying the requested

attachment and the defendant is insolvent in the sense that the

defendant is generally not paying his or her debts as those debts

become due, unless the debts are subject to a bona fide dispute.

Plaintiff’s affidavit filed in support of the ex parte attachment shall

state, in addition to the requirements of Section 485.530, the known

undisputed debts of the defendant, that the debts are not subject to

bona fide dispute, and the basis for plaintiff’s determination that the

defendant’s debts are undisputed.

Cal. Civ. P. Code §§ 485.010(b)(1) and (2).

Plaintiff argues that the writ should be issued ex parte under California Code of

Civil Procedure section 485.010(b)(1) and (2). First, Plaintiff has not demonstrated

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that the property sought to be attached will be concealed, or otherwise made

unavailable if the issuance of the order were delayed until matter could be heard on

notice. See Cal. Civ. Proc. Code § 485.010(b)(1); see Western Steel and Ship Repair,

Inc. v. RMI, Inc., 176 Cal. App. 3d 1108, 1114 (1986) (inadequate to meet statutory

requirement of a showing of “great or irreparable injury” based on an inference that

“there is a danger that the property sought to be attached would be concealed,

substantially impaired in value, or otherwise made unavailable to levy if issuance of

the order were delayed” pursuant to section 485.010(a) and (b) based on a declaration

that if defendant was given notice of the hearing, it would takes steps to hide its assets). 

In Western Steel & Ship Repair, the court explained that “neither a precariousfinancial

condition nor refusal to pay a disputed claim warrants an inference that a debtor will

abscond with all his assets or otherwise conceal them from the creditor.” Id. at 1114. 

Similarly, Plaintiff merely alleges that it will be irreparably harmed and any

assets that may be available or become available to pay the debt will be “diverted,

concealed or otherwise made unavailable to pay any judgment.” (Dkt. No. 3-2, Smith

Decl. ¶ 31.) Plaintiff has not provided any evidence of any past dishonesty or

concealment of assets. See Western Steel & Ship Repair, 176 Cal. App. 3d at 1114. 2

As to section 485.010(b)(2), the Court concludes that while Plaintiff has

demonstrated that Defendant has failed to pay the debt underlying the requested

attachment, Plaintiff has failed to demonstrate that Defendant is “insolvent in the sense

that the defendant is generally not paying his or her debts as those debts become due

Plaintiff’s President and CEO states that Pengelly told him that Imperial’s 2

retained earnings had been lost in an embezzlement and federal wire fraud case; that

Michael Brown, a principal of Imperial, had embezzled money from Imperial to

another company, and thatBrown made jewelry purchases at Kay Jewelersfor his wife. 

(Dkt. No. 3-3, Vano Del. ¶13.) However, alleged fraud, without evidence that

Defendant will likely hide or dissipate assetsif given notice of this application does not

satisfy the ex parte standard. Novus Optimum Labs v. Tamayo, No. 13cv1119-JST,

2013 WL 1390457, at *2 (N.D. Cal. Apr. 4, 2013). 

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. . . .” Id. § 485.010(b)(2). In one case, the court denied an ex parte application for

writ of attachment and explained that the plaintiffs have not shown any evidence that

defendants generally fail to pay debts and that there could be defenses that have not

been raised. Walters v. Newberry, No. C 06-05396 WHA, 2006 WL 3201042 at *3

(N.D. Cal. Nov. 6, 2006). Here, Plaintiff’s President CEO and President generally

states that “I believe that the Defendant is either insolvent or on the verge of

insolvency.” (Dkt. No. 3-3, Vano Decl. ¶ 17.) Without evidence, the Court concludes

that Plaintiff has not demonstrated that Defendant is not generally paying its debts. 

Since Plaintiff has failed to meet the requirements for ex parte relief, the Court

will defer discussion of the merits of the application until such time as Plaintiff brings

the matter before the Court with proper notice to Defendant. 

In the alternative, Plaintiff seeks a temporary protective order pursuant to

California Code of Civil Procedure section 486.010. Section 486.010 provides:

The application shall state what relief is requested and shall be

supported by an affidavit, which may be based on information and

belief, showing that the plaintiff would suffer great or irreparable

injury (within the meaning of Section 485.010) if the temporary

protective order were not issued.

Cal. Code Civ. Proc. § 486.010. Since the Court has already determined that Plaintiff

has failed to demonstrate “great or irreparable harm” under section 485.010, the Court

DENIES Plaintiff’s application for a temporary protective order. 

Conclusion

Based on the above, the Court DENIES Plaintiff’s ex parte application for writ

of attachment, and in the alternative, for a temporary protective order. 

 IT IS SO ORDERED. 

DATED: April 25, 2014

HON. GONZALO P. CURIEL

United States District Judge

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