SKAZZI3 Capital Limited v. Pathway Genomics Corporation

CourtDistrict Court, S.D. California
DecidedMarch 3, 2020
Docket3:18-cv-00317
StatusUnknown

This text of SKAZZI3 Capital Limited v. Pathway Genomics Corporation (SKAZZI3 Capital Limited v. Pathway Genomics Corporation) is published on Counsel Stack Legal Research, covering District Court, S.D. California primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
SKAZZI3 Capital Limited v. Pathway Genomics Corporation, (S.D. Cal. 2020).

Opinion

1 oe [FILED

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7 8 □ UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 |} SKAZZI3 CAPITAL LIMITED, Case No.: 18cv3 17-BEN(KSC) Petitione!, ORDER DENYING WITHOUT 13 |} Vv. □□ PREJUDICE PLAINTIFF'S EX □ 14 || PATHWAY GENOMICS INSPECTION GaDER □□ 15 CORPORATION, 6 Respondent. [Doc. No. 67.] |

13 Before the Court is petitioner’s Ex Parte Application for an Order to Inspect. 19 Respondent’s Principal Place of Business. [Doc. No. 67.] Respondent has not filed a || PesPonse oF opposition to the Ex Parte Application, and it is not clear from the papers submitted that respondent was properly served with petitioner’s moving papers. For the ||teasons outlined more fully below, the Court finds that petitioner’s Ex Parte Application 53 must be DENIED.

Background □ 95 || By way of a Petition to Enforce an Arbitration Award, petitioner seeks to enforce a 96 || money judgment against respondent. [Doc. No. 1.] On December 26, 2018, the District Court entered judgment against defendant in the amount of $442,670.25 , an amount that ng || as due and owing under the parties’ Settlement Agreement. At the same time, the

1 || District Court granted a writ of attachment in the amount of $442,670.25. [Doc. No. 26.] 2 || Thereafter, a writ of attachment was imposed on April 30, 2019 as to certain corporate 3 || property of defendant’s, including bank accounts and accounts receivable arising out of 4 || any trade with certain identified third parties. [Doc. No. 36, at pp. 1-2.] On or about 5 May 10, 2019, petitioner recovered a total of $4,199.43 via writ of execution. [Doc. No. 6 1|67-2, at p. 2.] 7 On May 8, 2019, petitioner completed a judgment debtor examination of 8 respondent through respondent’s representative, Stephanie Cox. [Doc. No. 37.| In 9 || support of the current Ex Parte Application, petitioner submitted a transcript of this □ 10 ||examination. [Doc. No. 67-2, at pp. 40-57.] -At the time of the examination, Ms. Cox 11 || testified she was employed by respondent as an office manager, had been in this position 12 about a year, and had been employed by respondent since November 2014. [Doc. No. 13 || 67-2, at p. 45-46.] Ms. Cox testified she did not have any knowledge about respondent’ 14 || property, receivables, and assets, and she did not know who would be familiar with these ‘15 topics. [Doc. No. 67-2, at p. 55.] In general terms, Ms. Cox was able to describe the 16 operations taking place at respondent’s principal place of business and did identify some 17 employees and former employees who may have knowledge about respondent’s finances. 18 || [Doc. 67-2, at pp. 46-54.] 19 On December 20, 2019, the District Court issued an Order requiring defendant to 20 || assign to plaintiff its interest and rights in all monetary payments due or to become due 21 || from retail portals CVS, Meijer pharmacies, Walmart, and Amazon.com, as well as credit 22 processors American Express Corporation, Visa U.S.A. Inc., and Mastercard International Incorporated. [Doc. No. 62, at p. 6.] At the same time, the District Court 24 |lissued an order restraining defendant from assigning or otherwise disposing of its rights 25 interests to payments through these portals. [Doc. No. 62, at p. 6.] 26 ||. Although respondent was initially represented by counsel in this action, counsel 27 || filed a Motion to Withdraw on October 1, 2019. [Doc. No. 49.] This Motion was granted in an Order filed December 17, 2019. Although respondent was directed to

1 obtain new counsel within thirty days and have new counsel file a notice of appearance 2.||[Doc. No. 59, at p. 4], no appearance of counsel has been filed and respondent remains 3 || unrepresented in this action. 4 . Discussion 5 In the Ex Parte Application, petitioner seeks an order allowing a direct inspection _ 6 ||of respondent’s principal place of business, because it has been unable to determine — 7 through a judgment debtor examination and written discovery requests what property, 8 ||receivables, and other assets could be used to satisfy the judgment. [Doc. No. 67-1, at p. 9 || 7.] In addition, on January 15, 2020, petitioner received a document entitled Notice of 10 || Sale Process for Pathway Genomics Corporation Assets from a “secured creditor” named tl Vadim Shulman. [Doc. No. 67-1, at p. 3; Doc. No. 67-2, at pp. 34-35.] Petitioner 12 || believes this notice raises significant concerns that respondent is being stripped of all its [3 || vaiue and assets through self-dealing and/or fraudulent transfers that will prevent plaintiff 14 || from being able to enforce the judgment. [Doc. No. 67-1, at p. 6.] 15 Although no confirming evidence was submitted, petitioner’s Ex Parte Application 16 suggests that Mr. Shulman is respondent’s “CEO, Secretary, CFO, and board member.” 17 ||[Doc. No. 67-1, at p. 4.] According to the Notice of Sale, respondent defaulted on 18 “Promissory Notes” in the aggregate original principal amount of $9,250,000 and □ 19 || “Additional Amounts” of approximately $16,028,400 that were owed to Mr. Shulman, □□ 20 secured creditor. Therefore, Mr. Shulman exercised his right to “take control of the || Collateral.” [Doc. No. 67-2, at p. 34,] Pursuant to the Notice of Sale, Mr. Shulman 22 provided shareholders and stakeholders ten (10) business days to make offers to acquire 23 ||respondent’s “operating assets,” including “all personal and intellectual property and 24 || goodwill.” [Doc. No. 67-2, at p. 34.] An auction was scheduled to occur if acceptable 25 || offers were received. [Doc. No. 67-2, at p. 35.] 26 The Notice of Sale also states as follows: “The Secured Creditor [i.e., 27 || Mr. Shulman] has provisionally agreed to continue to finance [respondent] through the 28 restructuring period on a modified basis in order to maintain operations sufficient to

1 || support the fulfillment of customer contracts and [respondent’s] goodwill. All □□□□ 2 || financing will be senior secured credit. [§]][Respondent] is working with its advisors to 3 || determine the level of financing required.” [Doc. No. 67-2, at p. 35.] For further 4 ||information, Notice recipients were provided with contact information for Mark A. 3 || Greenberg of Silverstone Capital Advisors, LLC and John A. Sten of Pierce Atwood 6 ||LLP. [Doc. No. 67-2, at p.35.] Although petitioner’s counsel submitted a Declaration in 7 || support of the Ex Parte Application to Inspect Respondent’s Principal Place of Business, 8 ||the Declaration does not state whether these individuals were contacted for additional 9 |linformation. [Doc. No. 67-2, at pp. 1-5.] 10 Respondent argues that the Notice of Sale creates exigent circumstances which 11 ||justify an inspection order. [Doc. No. 67-1, at p. 6.] However, petitioner did not cite, 12 || and this Court was unable to locate, any authority which would authorize the Court to 13 an order granting petitioner the right to enter and inspect respondent’s principal 14 || place of business under the circumstances presented to locate assets that may aid in the 15 || enforcement of the judgment. Federal Rule of Civil Procedure 34 does provide in part as 16 |} follows: - 17 (a) A party may serve on any other party a request within the scope ig of Rule 26(b): .

19 |) (2) to permit entry onto designated land or other property 20 possessed or controlled by the responding party, so that the requesting party may inspect, measure, survey, photograph, test or sample the 21 property or any designated object or operation on it. 22 (b) The request: □ 23 || (A) must describe with reasonable particularity | 24 □□ . each item or category of items to be inspected; 25 | 6 (B) must specify a reasonable time, place and □ manner for the inspection and for performing the related 27 - acts; and 28 ||

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SKAZZI3 Capital Limited v. Pathway Genomics Corporation, Counsel Stack Legal Research, https://law.counselstack.com/opinion/skazzi3-capital-limited-v-pathway-genomics-corporation-casd-2020.