Chopp Computer Corporation, Inc., a British Columbia Corporation v. United States of America Painewebber Incorporated, a Delaware Corporation

5 F.3d 1344, 93 Daily Journal DAR 12370, 93 Cal. Daily Op. Serv. 7262, 1993 U.S. App. LEXIS 24887, 1993 WL 378825
CourtCourt of Appeals for the Ninth Circuit
DecidedSeptember 29, 1993
Docket91-15991
StatusPublished
Cited by23 cases

This text of 5 F.3d 1344 (Chopp Computer Corporation, Inc., a British Columbia Corporation v. United States of America Painewebber Incorporated, a Delaware Corporation) is published on Counsel Stack Legal Research, covering Court of Appeals for the Ninth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Chopp Computer Corporation, Inc., a British Columbia Corporation v. United States of America Painewebber Incorporated, a Delaware Corporation, 5 F.3d 1344, 93 Daily Journal DAR 12370, 93 Cal. Daily Op. Serv. 7262, 1993 U.S. App. LEXIS 24887, 1993 WL 378825 (9th Cir. 1993).

Opinions

CANBY, Circuit Judge.

CHoPP Computer Corporation (CHoPP) appeals from the district court’s summary judgment in favor of the United States and PaineWebber Incorporated (PaineWebber), in CHoPP’s action for damages arising from an alleged wrongful levy of funds contained in a PaineWebber account. We have jurisdiction under 28 U.S.C. § 1291, and we affirm.

I

Alex Laurins, a former investment promoter, controlled the PaineWebber. account. The competing claims to that account arose from separate actions that CHoPP and the United States had pursued against Laurins.

CHoPP sued Laurins and others in 1986, contending that they had engaged in a scheme to disparage CHoPP and thereby drive down the price of CHoPP’s stock, so that Laurins and others could profit from short sales of that stock. CHoPP sought to recover profits from the short sale of its stock, wherever found, that resulted from the tortious disparagement. CHoPP obtained a preliminary injunction from the Superior Court for the City and County of San Francisco. That injunction provided, in relevant part:

A. Pending final resolution of this action, defendants are hereby enjoined from doing any of the following acts:
3. Withdrawing or transferring, directly or indirectly, any proceeds of any “short” sale of CHoPP stock.

CHoPP Computer Corp. v. Laurins, No. 862163, slip. op. at 2 (Cal.Sup.Ct. Aug. 25, 1986) (preliminary injunction). Neither the United States nor PaineWebber was a party to CHoPP’s state court action.

Meanwhile, as CHoPP’s suit against Lau-rins was pending, the United States had launched a .tax investigation against one of [1346]*1346Laurins’ alter ego companies.1 Laurins’ continuing failure to comply with a discovery order of the federal court resulted in a penalty of $444,000, which the United States reduced to judgment. Subsequently, Laurins was convicted in federal court of obstruction of justice and criminal contempt, and was fined $250,000 (and sentenced to a prison term).2

The United States then obtained two writs of execution to collect the judgment and fine, which together totalled $694,000. The Government learned of the PaineWebber account that Laurins controlled, and it served the broker with the writs. On February 17, 1990, CHoPP notified the United States of the state court injunction freezing Laurins’ short-sale proceeds. The PaineWebber account contained short-sale positions. Paine-Webber notified the United States that it would not cooperate in the levy unless the United States obtained a court order requiring PaineWebber to disburse the money. The Government obtained the order from the federal district court (without informing that court of the existence of the injunction), and PaineWebber delivered $694,000 from the account to the government.

In March 1990, CHoPP submitted an administrative claim for $694,000 under the Federal Tort Claims Act (FTCA), 28 U.S.C. § 1346(b) (1988). The Attorney General denied CHoPP’s claim in August of that year.

Then, in October 1990, after a jury trial, CHoPP and a coplaintiff obtained a judgment in excess of $29 million against the defendants in the state court action. See CHoPP Computer Corp. v. Laurins, No. 862163, slip, op. at 2 (Cal.Sup.Ct. Oct. 25, 1990) (final judgment).3 The superior court judgment provided:

3. Effective as of the dates of the transactions, a constructive trust is imposed on all profits from any transaction in CHoPP stock by, or on behalf of, for the benefit of, or in the name of any Defendant.
3. [sic] The preliminary injunction entered by the Court of August 25, 1986, is hereby made permanent, except that PaineWebber Inc. is hereby directed to pay forthwith to the order of the Plaintiffs the entire contents of [the] [a]ccount ... previously frozen by the Court’s preliminary injunction.

Id., slip. op. at 2-3. Pursuant to this judgment, PaineWebber delivered to CHoPP approximately $263,000 that remained in the account.

CHoPP then brought this action against the Government and PaineWebber in the United States District Court for the Northern District of California. CHoPP averred that it had a prior claim to the PaineWebber account. It alleged that the Government’s levy and retention of the funds were conversions under California law and the FTCA. It further alleged that PaineWebber’s acquiescence in the levy was a conversion. CHoPP also claimed that each defendant had violated the preliminary injunction. The district court granted the defendants’ motions for summary judgment and denied CHoPP’s cross-motion for summary judgment.

We review summary judgments de novo. Jones v. Union Pac. R.R., 968 F.2d 937, 940 (9th Cir.1992). In this case there are no disputed material facts. The United States and PaineWebber each knew of the preliminary injunction at the time of the levy. The United States concedes that it refused to return the levied funds to CHoPP after the state court’s final judgment had been entered. We therefore ask only whether the district court correctly applied the relevant substantive law. See Federal Deposit Ins. Corp. v. O’Melveny & Meyers, 969 F.2d 744, 747 (9th Cir.1992).

[1347]*1347II

California provides the relevant substantive law in this case. That state permits recovery on a conversion theory either for the wrongful taking or for the wrongful retention of property. See Edwards v. Jenkins, 214 Cal. 713, 7 P.2d 702, 705 (1932). In order to maintain an action for conversion, CHoPP must show that it had title to or a right to possess the funds in the Paine-Webber account. Moore v. Regents of the Univ. of Cal., 51 Cal.3d 120, 271 Cal.Rptr. 146, 155, 793 P.2d 479, 488 (1990), cert. denied, 499 U.S. 936, 111 S.Ct. 1388, 113 L.Ed.2d 444 (1991); Baldwin v. Marina City Properties, Inc., 79 Cal.App.3d 393, 145 Cal.Rptr. 406, 416 (1978). CHoPP’s interest must have existed, if at all, at the time of the levy or at the time that CHoPP demanded return of the funds after entry of the final judgment in state court.

A

We pause to consider whether Congress has waived the sovereign immunity of the United States for a conversion, as California law defines that tort. The FTCA subjects the United States to monetary liability for

[a] loss of property ... caused by the negligent or wrongful act or omission of any employee of the Government while acting within the scope of his office or employment, under circumstances where the United States, if a private person, would be liable to the claimant in accordance with the law of the place where the act or omission occurred.

28 U.S.C. § 1346(b) (1988). The United States contends here that because California views a conversion as a strict liability tort,

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5 F.3d 1344, 93 Daily Journal DAR 12370, 93 Cal. Daily Op. Serv. 7262, 1993 U.S. App. LEXIS 24887, 1993 WL 378825, Counsel Stack Legal Research, https://law.counselstack.com/opinion/chopp-computer-corporation-inc-a-british-columbia-corporation-v-united-ca9-1993.