Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_05-cv-00545/USCOURTS-caed-2_05-cv-00545-13/pdf.json

Nature of Suit Code: 820
Nature of Suit: Copyright
Cause of Action: 17:504 Copyright Infringement

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 This matter was referred to the undersigned by the district judge on June 20, 2007.

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IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

ODNIL MUSIC LIMITED and 

FIFTY-SIX HOPE ROAD MUSIC 

LIMITED,

Plaintiffs, No. CIV S-05-545 WBS EFB

vs.

KATHARSIS LLC, WILLIAM 

JOSEPH SCHECK and NATHANIEL FINDINGS & RECOMMENDATIONS

CHRISTOPHER SCHECK,

Defendants. 

 /

This matter was before the court on June 26, 2007, for hearing on plaintiffs’ (and now

judgment creditors’) motion for a temporary restraining order and preliminary injunction.1

Although plaintiffs style the application as an ex parte motion, it is not ex parte within the

meaning of Local Rule 65-231(c)(8). Defendant and judgment debtor, William J. Scheck,

received notice of the hearing, was personally served the moving papers in advance of the

hearing, was provided an opportunity to file an opposition to the motion, which he did not do,

and appeared at the hearing and argued in his own behalf. Alan M. Steinberg appeared on behalf

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of judgment creditors. After careful consideration of all submitted documents and the arguments

at the hearing, this court recommends that the motion for a preliminary injunction be granted. It

is further recommended that judgment debtor William J. Scheck, in his individual capacity and

in his capacity as trustee of the William J. Scheck Trust, be immediately restrained, as specified

below, pending the entry of the district judge’s order on the motion for preliminary injunction. 

I. BACKGROUND

The instant motion seeks to prevent William J. Scheck or his agents from withdrawing a

portion of the funds from an escrow account designated to hold the proceeds from the sale of the

Owl Club. The William J. Scheck Trust owns the Owl Club and is in the process of finalizing a

sale of this property to a third party. Mr. Scheck is the sole trustee of this trust, and has broad

discretion regarding management and distribution of trust assets. As explained below, the

judgment creditors believe the trust’s property may be subject to the judgment entered against

Mr. Scheck. Escrow is about to close and the background regarding Mr. Scheck’s conduct in

this case strongly suggests that the funds will be concealed if released to his control, either in his

capacity as trustee or otherwise. 

Judgment was entered against defendants in this copyright infringement action on July

21, 2006. Judgment creditors, Odnil Music Limited, et al., now seek to enforce this judgment

against judgment debtor, William J. Scheck. As noted below, Mr. Scheck has persistently

obstructed post-judgment proceedings seeking to determine whether certain assets are subject to

satisfaction of the judgment. Accordingly, after Mr. Scheck refused to respond to judgment

creditors’ discovery requests regarding assets, judgment creditors noticed a judgment debtor

examination in the courtroom of the undersigned on May 16, 2007. At the commencement of

that examination, the undersigned cautioned Mr. Scheck of his obligation to answer questions

regarding the existence and location of assets that might be used to satisfy the judgment. Upon

Mr. Scheck’s continued refusal to produce relevant documents, the undersigned granted

judgment creditors’ motion to compel on June 11, 2007, and sanctioned Mr. Scheck in the

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 Mr. Scheck has appealed that order to the Ninth Circuit. 

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amount of $1,600.2

The documents judgment creditors seek relate primarily to several trusts established by

Mr. Scheck, including the William J. Scheck Trust. This trust owns the Owl Club, a bar

operated by Mr. Scheck, and is on the brink of finalizing the sale of this property. See

Declaration of Alan M. Steinberg in Support of Judgment Creditors’ Ex Parte Application

(“Steinberg Decl.”), at 

¶ 12. The trust is selling the Owl Club for $975,000, and escrow on this sale is scheduled to

close in early July 2007. Id. Based on Mr. Scheck’s responses during the post-judgment

examination proceedings, judgment creditors believe that the property owned by the William J.

Scheck Trust, including the Owl Club, may be subject to satisfaction of the judgment against Mr.

Scheck. Id., at ¶ 13. 

Given Mr. Scheck’s uncooperativeness throughout the post-judgment discovery process,

the looming sale of the Owl Club, and Mr. Scheck’s stated intention to move to Nevada or

Southern California after escrow closes in early July 2007, the judgment creditors have filed this

application for a temporary restraining order and preliminary injunction. Id., at ¶¶ 12-16. 

Specifically, judgment creditors seek an order preventing distribution of $100,000 of the Owl

Club sale proceeds pending a determination of the judgment creditors’ rights to attach those

proceeds. They request that this portion of the sale proceeds be ordered to remain in the escrow

account maintained by Placer Title Company pending that determination. 

II. PRELIMINARY INJUNCTION STANDARD

 The Ninth Circuit standard for preliminary injunctive relief is well-established. “The

traditional equitable criteria for granting preliminary injunctive relief are (1) a strong likelihood

of success on the merits, (2) the possibility of irreparable injury to plaintiff if the preliminary

relief is not granted, (3) a balance of hardships favoring the plaintiff, and (4) advancement of the

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public interest (in certain cases).” Dollar Rent A Car v. Travelers Indem. Co., 774 F.2d 1371,

1374 (9th Cir. 1985). The criteria are traditionally treated as alternative tests. “Alternatively, a

court may issue a preliminary injunction if the moving party demonstrates either a combination

of probable success on the merits and the possibility of irreparable injury or that serious

questions are raised and the balance of hardships tips sharply in his favor.” Martin v. Int’l

Olympic Comm., 740 F.2d 670, 675 (9th Cir. 1984) (quoting William Inglis & Sons Baking Co. v.

ITT Continental Baking Co., 526 F.2d 86, 88 (9th Cir. 1975) (emphasis in original)). 

Requests for temporary restraining orders which are not ex parte and without notice are

governed by the same general standards that govern the issuance of a preliminary injunction. See

New Motor Vehicle Bd. v. Orrin W. Fox Co., 434 U.S. 1345, 1347 n.2 (1977); Los Angeles

Unified Sch. Dist. v. United States Dist. Court, 650 F.2d 1004, 1008 (9th Cir. 1981) (Ferguson, J.

dissenting); Century Time Ltd. v. Interchron Ltd., 729 F. Supp. 366, 368 (S.D.N.Y. 1990). 

III. DISCUSSION

Here, plaintiffs seek both a temporary restraining order and preliminary injunction, and

have provided notice to the judgment debtor. The court finds that a preliminary injunction is

appropriate. 

First, the court notes that judgment creditors’ motion arises in the context of postjudgment proceedings. Judgment creditors have already prevailed on the merits of their

copyright infringement claims against judgment debtor. They seek now to satisfy that judgment. 

Secondly, the judgment creditors have demonstrated a probability of success in showing that

under the applicable statutes, the asset in question and the proceeds of that asset, are subject to

the judgment and should not be released by the third party escrow to the control of Mr. Scheck. 

Finally, the plaintiffs/judgment creditors have shown a high probability that allowing Mr. Scheck

control over the proceeds of the asset will irreparably harm their ability to satisfy their judgment.

Rule 69 of the Federal Rules of Civil Procedure provides that the process for enforcing a

judgment is to be conducted in accordance with the procedures of the state in which the district

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court is held. Fed. R. Civ. P. 69(a). California law provides for the remedy judgment creditors

seek. In particular, section 708.108(c) of the California Code of Civil Procedure provides that a

court may make an order forbidding transfer of property to a judgment debtor until the interests

in the property are determined. Cal. Civ. Proc. Code § 708.180(c). Where the asset is in the

custody of a third party, such as an escrow, section 708.240 likewise expressly authorizes “[a]n

order restraining the third person from transferring to the judgment debtor the property in which

the judgment debtor is claimed to have an interest, or from paying to the judgment debtor the

alleged debt.” Cal. Civ. Proc. Code § 708.240(a). This section also authorizes “[a] temporary

restraining order or a preliminary injunction or both, restraining a third person from transferring

to any person or otherwise disposing of the property in which the judgment debtor is claimed to

have an interest.” Cal. Civ. Proc. Code § 708.240(b) (emphasis added).

Here, the judgment creditors point to the likelihood that property in the William J.

Scheck Trust could be used to satisfy the judgment against Mr. Scheck. Judgement creditors

have sought to confirm through discovery that the Trust is dominated and controlled by

Mr. Scheck and was established to shield him from liability. For example, to the extent trust

documents demonstrate that Mr. Scheck is a beneficiary of the trust or has the power to revoke

any part of the trust, the trust property could be subject to creditors’ claims. See Cal. Prob. Code

§§ 15304 and 18200. Further, any assets fraudulently transferred to a trust are subject to

creditors’ claims. See Cal. Civ. Code §3439.04. If judgment creditors are able to demonstrate

these circumstances, they could amend the judgment to add a nonparty alter ego (i.e., the

William J. Scheck Trust) as a judgment debtor. See Hall, Goodhue, Haisley & Barker, Inc. v.

Marconi Conference Center Board, 41 Cal.App.4th 1551, 1554-1555 (1996). The judgment

creditors are entitled to determine whether the trust assets, particularly the Owl Club and its sale

proceeds, may be subject the judgment against Mr. Scheck. See Troy v. Superior Court, 186

Cal.App.3d 1006, 1014 (Cal. Ct. App. 1986) (the purpose of the examination is “to leave no

stone unturned in the search for assets which might be used to satisfy the judgment.”); Young v.

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Keele, 188 Cal.App.3d 1090, 1093 (Cal. Ct. App. 1987) (Judgment creditors are accorded “the

widest scope for inquiry concerning property and business affairs of the debtor.”). 

Mr. Scheck’s uncooperativeness throughout post-judgment proceedings have hindered

judgment creditors’ efforts in this regard, and Mr. Scheck’s own testimony indicates a high

degree of likelihood that the sale proceeds may be attached for satisfaction of the judgment. 

Based on their unsuccessful attempts to obtain documents from Mr. Scheck, and based on

his responses during the judgment debtor examination proceedings, judgment debtors allege that

Mr. Scheck used his control of the William J. Scheck Trust as a means of holding, using and

transferring assets of the Owl Club. Judgment debtors point to the fact that Mr. Scheck has

refused to produce trust documents and other information, and argue that such conduct is

intended to obstruct judgment creditors from confirming that the Owl Club is operated and

controlled by Mr. Scheck in a manner designed to frustrate his creditors. 

Judgment debtors also point out that during the copyright infringement, the Owl Club

was owned and operated by judgment debtor Katharsis, LLC, of which Mr. Scheck was a

member. See Findings of Fact, Conclusions of Law, and Order, filed July 21, 2006, at 3:3-25. 

Just prior to trial, Mr. Scheck sought to dissolve Katharsis, LLC and to operate the Owl Club

through Asgard Entertainment Trust (another trust established by Mr. Scheck). See Debtor’s

Examination Transcript (Exhibit 2 to Steinberg Decl.), at 43:1-14; 46:4-47:4. Operation of the

Owl Club was effectively transferred from Katharsis, LLC to Asgard Entertainment Trust

following the Clerk’s entry of default against Katharsis, LLC on May 12, 2006, and immediately

prior to the June 12, 2006, findings and recommendations of the magistrate judge for default

judgment in the amount of $33,846.97. 

Asgard Entertainment Trust was established by Mr. Scheck in 2003 with $100. Id., at

40:1-16. The trust remained dormant until 2006, when the William J. Scheck Trust transferred

$12,000 to it in order to purchase a new liquor license for the Owl Club. Id., at 39:19-25; 42:14-

25. 

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According to Mr. Scheck, the William J. Scheck Trust owns the Owl Club and all of its

assets. Mr. Scheck is the sole trustee, and has broad discretion regarding management and

distribution of trust assets. Id., at 11:21-23; 25:12-26:2. Katharsis, LLC and Asgard

Entertainment Trust operated the Owl Club at a loss. Id., at 49:7-9. All business expenses of the

Owl Club were paid for with cash. Id., at 37:15-16 and 49:7-9. The only asset held by

Katharsis, LLC was the alcohol license worth approximately $500. Id., at 39:1-8. Similarly, the

Asgard Entertainment Trust held the alcohol license paid for by the William J. Scheck Trust. Id.,

at 39:19-25. Yet, Katharsis, LLC and Asgard Entertainment Trust funneled $2,000 per month to

the William J. Scheck Trust as rent for the Owl Club to occupy the premises. Id., at 48:12-25;

50:23-51:7. 

Judgment creditors also cite to Mr. Scheck’s personal financial situation as suggestive of

improper efforts to avoid collection. Mr. Scheck testified that his sole source of income is a

monthly annuity in the amount of $1,051. Id., at 32:5-18. Notwithstanding the strong

appearance of self dealing, he testified that he does not receive any income from operating or

managing the Owl Club, that he lives at the Owl Club free of rent, and that all his furniture is

owned by the William J. Scheck Trust. Id., at 53:7-17; 29:13-20, 72:5-17. Despite such meager

means, Mr. Scheck testified that he was carrying $564 cash in his wallet which he claimed to

hold on behalf of the Owl Club to make change for customers. Id., at 71:8-19.

Based on these facts, the judgment creditors allege that the William J. Scheck Trust is the

alter ego of judgment debtors and defendant Katharsis. Under the alter ego doctrine, the

ostensibly separate nature of an entity is disregarded if there is such a unity of interest and

ownership between the entity and the individual controlling it that their separate personalities no

longer exist. Courts apply this doctrine where failure to disregard the entity would sanction a

fraud or promote injustice. Webber v. Inland Empire Invs., 74 Cal.App.4th 884, 900 (Cal. Ct.

App. 1999). 

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 At the hearing, Mr. Scheck represented that he, on behalf of the trust, intends to

immediately reinvest the Owl Club proceeds into property in Las Vegas, Nevada.

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Here, judgment creditors allege that Mr. Scheck created unfunded, sham entities to hold

the alcohol license, operate the Owl Club (at a loss), and shield Mr. Scheck from liability, while

diverting profits disguised as rent to the William J. Scheck Trust. Judgment creditors are entitled

to test Mr. Scheck’s assertions regarding the William J. Scheck Trust, and to determine whether

it is the alter ego of Mr. Scheck. If it is determined that the trust and Mr. Scheck are not truly

separate entities, or that he fraudulently transferred assets to the trust, or that he is a beneficiary

of the trust, or has the power to revoke any part of the trust, judgment creditors may be able to

satisfy their judgment from the Owl Club sale proceeds. The applicable statute provides for an

injunction to preserve these potentially attachable assets pending that determination. The

judgment creditors’ evidence has established sufficient facts regarding the likelihood of a unity

of interest between judgment debtors and the William J. Scheck Trust to justify issuance of the

requested temporary restraining order and preliminary injunction.

Judgment creditors have also demonstrated irreparable injury to their ability enforce their

judgment if an injunction were not to issue. The William J. Scheck Trust is selling the Owl Club

to third parties for $975,000, and as part of that transaction, the Asgard Entertainment Trust will

transfer the liquor license to purchasers. Id., at 18:1-17; 26:22-27:1; 51:17. Escrow on that sale

is scheduled to close in early July 2007, and Mr. Scheck plans to leave town immediately

thereafter. Steinberg Decl., at ¶¶ 12, 15. Judgment creditors fear they may not be able to locate

Mr. Scheck once he leaves town, and that Mr. Scheck could further transfer or convert the funds

before judgment creditors have a chance to establish their claim.3

 Steinberg Decl., at ¶ 16. 

Finally, the requested relief imposes little hardship on Mr. Scheck or the trust. The

judgment creditors merely seek an order to retain a fraction of the sale proceeds in escrow

pending resolution of whether the judgment creditors’ have a right to attach them. Neither Mr.

Scheck (nor the William J. Scheck Trust) will be harmed by maintaining $100,000 of the

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 Moreover, plaintiff has not filed an application for stay of the discovery order pending

appeal. If he were to do so, he must address appellate jurisdiction and the likelihood of success

of the appeal. See Richmark Corp. v. Timber Falling Consultants, Inc., 937 F.2d 1444, 1449

(9th Cir. 1991) (holding that post-judgment orders compelling discovery may be appealed only

after the issuance of a contempt order for failure to comply). More to the point, no contempt

order has been sought or issued in this case.

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$975,000 sale proceeds in the escrow account. The requested amount of $100,000 will cover the

$85,545.52 judgment, plus almost one year of interest to date, post-judgment enforcement costs,

and sanctions in the amount of $1,600. Id., at ¶ 17. Those funds will be available for immediate

distribution upon final determination of judgment creditors’ right to attach the proceeds. 

Although Mr. Scheck has appealed this court’s June 11, 2007, discovery order requiring

him to produce documents regarding various trusts, including the William J. Scheck Trust, the

pendency of that appeal has no bearing on the appropriateness of injunctive relief. In Baker v.

Limber, 647 F.2d 912 (9th Cir. 1981), the Ninth Circuit held that the district court did not abuse

its discretion by enjoining a judgment debtor from disposing of stock sale proceeds pending

appeal of a discovery order requiring the debtor to produce documents relevant to those stocks. 

Id., at 920. In the present case, Mr. Scheck has appealed this court’s discovery order requiring

him to produce documents regarding various trusts, including the William J. Scheck Trust. 

However, just as in Baker, the pendency of that appeal has no bearing on this application for

injunctive relief.4

IV. CONCLUSION

Based on the foregoing, IT IS RECOMMENDED that judgment creditors’ motion be

granted. It is further recommended that judgment debtor William J. Scheck, his employees,

agents, and all persons in active concert or participation with him, be enjoined from transferring

or disposing of $100,000 of the proceeds from the sale of the Owl Club out of the escrow

account maintained by Placer Title Company (at 193 Fulweiler Avenue, Auburn, California

95603), pending final determination of judgment creditors’ right to attach the sale proceeds for

satisfaction of the judgment of $85,545.52 plus post-judgment interest, enforcement costs and

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 At the hearing, Mr. Scheck represented that a $25,000 deposit was currently in the

escrow account pending finalization of the sale. 

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sanctions. Specifically, $100,000 of the sales proceeds shall remain in the Placer Title Company

escrow pending final resolution of this issue. It is also recommended that the Court reserve

jurisdiction to modify or dissolve the injunction as may be required by the interests of justice. 

The court recommends that pending the district judge’s consideration of these findings

and recommendations, a temporary restraining order be entered to enjoin William J. Scheck, the

William J. Scheck Trust, or their agents and all persons acting in concert with them, from

withdrawing any funds currently in the above-referenced escrow account.5

Given the exigent nature of the requested injunctive relief, the time for objections to

these findings and recommendations is shortened. Any objections to these findings and

recommendations shall be filed no later than June 29, 2007. Such a document should be

captioned “Objections to Magistrate Judge’s Findings and Recommendations.” Failure to file

objections within the specified time may waive the right to appeal the District Court’s order.

Turner v. Duncan, 158 F.3d 449, 455 (9th Cir. 1998); Martinez v. Ylst, 951 F.2d 1153, 1157 (9th

Cir. 1991).

DATED: June 26, 2007.

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