Kremen: TRO Asset Freeze for Fraudulent Transfers

Discussion of transfers made in defraud of creditors and the Uniform Fraudulent Transfers Act (UFTA)
Forum rules The information given on this page is for educational and informational purposes only, and does not constitute any legal or tax advice or opinion. This page is meant to give a quick start to research by other professionals, but it should absolutely not be relied upon for any purposes whatsoever. Additionally, this page is kept current only as our time allows, and the information given here may not be current. We make NO GUARANTEES as to the accuracy of the information herein and you should not rely on it. Even professionals who use this information must independently verify whether it is correct and current. Nothing in the information given below should imply that the drafters of this webpage are admitted to practice law in the referenced state or have any special expertise in the areas listed. Nothing herein should be construed as a solicitation by the drafters of this website to practice law in the referenced state. Persons desiring planning should contact a licensed attorney or other appropriate planning professional in this state. Certainly, nothing herein is any substitute for the services, advice, or counsel of a properly licensed attorney in the relevant state!

Kremen: TRO Asset Freeze for Fraudulent Transfers

Postby Riser Adkisson LLP » Fri Dec 23, 2011 8:52 am

Kremen v. Cohen, 2011 WL 6113198 (N.D.Cal., Slip Copy, Dec. 7, 2011).

United States District Court, N.D. California,

San Jose Division.

Gary KREMEN, Plaintiff,

v.

Michael Joseph COHEN, an individual; and FNBPay Corporation, an Arizona corporation, Defendants.

No. 5:11–cv–05411–LHK.

Dec. 7, 2011.

ORDER GRANTING EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER; ORDER TO SHOW CAUSE WHY A PRELIMINARY INJUNCTION SHOULD NOT ISSUE; AND ORDER GRANTING PLAINTIFF'S MOTION TO CONDUCT EXPEDITED DISCOVERY

LUCY H. KOH, District Judge.

*1 Plaintiff Gary Kremen ("Kremen" or "Plaintiff") filed this action on November 8, 2011 under California's Uniform Fraudulent Transfer Act ("CUFTA"), Cal. Civ.Code secs. 3439.04, 3439.07, 3440 against Defendants Michael Joseph Cohen ("M.Cohen") and FNBPay Corporation ("FNBPay"), a corporation incorporated under the laws of the State of Arizona (collectively "Defendants"), upon information and belief that Defendants are the transferees of certain property, including money, fraudulently transferred to each of them by Stephen Michael Cohen ("S.Cohen"), an individual against whom Plaintiff has an enforceable and unpaid money judgment in the amount of $67,867,053.36 (the "Renewed Judgment"). See ECF No. 1. On December 2, 2011, Plaintiff filed an ex parte motion pursuant to Federal Rule of Civil Procedure 65 and Civil Local Rules 7–10 and 65–1 seeking (1) a temporary restraining order ("TRO") against Defendants M. Cohen and FNBPay; (2) an Order to Show Cause ("OSC") why a preliminary injunction should not issue; and (3) an order expediting discovery. See ECF No. 5. Because Plaintiff requests immediate injunctive relief, and none of the parties have consented to magistrate jurisdiction, the case was reassigned from Magistrate Judge Howard R. Lloyd to the undersigned on December 2, 2011. See ECF Nos. 8, 9. For the reasons set forth in this Order, Plaintiff's ex parte Motion for a Temporary Restraining Order is GRANTED, and Defendants are hereby ORDERED TO SHOW CAUSE at a hearing on Friday, December 16, 2011, at 3:00 p.m., why a preliminary injunction should not issue. For good cause shown, the Court also GRANTS Plaintiff's Motion for Expedited Discovery.

I. BACKGROUND

The following facts are taken from Plaintiff's Complaint, Plaintiff's attorney's declaration submitted in support of this ex parte Motion for Temporary Restraining Order, and judicially noticeable documents.FN1 See Fed.R.Civ.P. 65(b)(1). Plaintiff is an internet entrepreneur who obtained a $65 million judgment (the "Judgment") in the United States District Court for the Northern District of California against S. Cohen and S. Cohen's alter ego entities on April 3, 2001, for fraudulently converting the internet domain name, www.sex.com. See RJN Ex. 1; Dillon Decl. para. 4.

FN1. The Court may take judicial notice of matters that are either "generally known within the territorial jurisdiction of the trial court" or "capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned." Fed.R.Evid. 201(b). Under the doctrine of incorporation by reference, the Court may take judicial notice of documents attached to or referenced in the Complaint. See Coto Settlement v. Eisenberg, 593 F.3d 1031, 1038 (9th Cir.2010); Lee v. City of L.A., 250 F.3d 668, 688–89 (9th Cir.2001); see also Fed.R.Civ.P. 10(c). Public records, including judgments and other court documents, are also proper subjects of judicial notice. See, e.g., United States v. Black, 482 F.3d 1035, 1041 (9th Cir.2007). Records filed with a county recorder or obtained from administrative agencies are also generally judicially noticeable. See Barron v. Reich, 13 F.3d 1370, 1377 (9th Cir.1994). Exhibits 1 through 17 of Plaintiff's Request for Judicial Notice ("RJN") are all prior court judgments or documents filed in previous court actions in the Northern District of California or Southern District of California. See ECF No. 5–6. Exhibit 18 of Plaintiff's RJN is a Mexican Apostilled Document recorded in the Public Registry of Property and Commerce in Tijuana, State of Baja California, Mexico, index no. 5546422, dated August 7, 2007. Accordingly, the Court finds Plaintiff's RJN Exhibits 1 through 18 proper subjects of judicial notice under Federal Rule of Evidence 201(b) and GRANTS Plaintiff's request that the Court take judicial notice of all 18 exhibits. Non-party Stephen Michael Cohen ("S.Cohen"), the alleged Judgment–Debtor, has also filed a Request for Judicial Notice ("S. Cohen's RJN"), asking the Court to take judicial notice of various facts regarding the relationship between First National Bank, S.A. de C.V., SOFOM ENR ("FNB Mexico") and FNB Corporation, as supported by declarations of S. Cohen and Marcello Zuniga, non-parties to this suit. See ECF No. 10. Plaintiff objects to S. Cohen's RJN. See ECF No. 13. Because S. Cohen asks the Court to take judicial notice of facts whose accuracy is subject to reasonable dispute, the Court DENIES S. Cohen's request.

Plaintiff filed his underlying suit against S. Cohen in July 1998. On November 27, 2000, the district court granted Plaintiff's motion for a preliminary injunction and ordered S. Cohen to transfer the www.sex.com domain name back to Kremen, to repatriate $25,000,000.00 that S. Cohen had sent to offshore accounts, to sign waivers for the release of tax returns and bank account records, and to sign FOIA waivers. See RJN Ex. 2. After S. Cohen failed to comply with the preliminary injunction order, the district court issued an Order Requiring Defendants to Appear and Sign Waivers on February 7, 2001. RJN Ex. 15. S. Cohen did not comply with the February 7, 2001 order and was subsequently held in civil contempt on February 12, 2001. RJN Ex. 3 at 2. The civil contempt order was followed by an arrest warrant on March 2, 2001 for S. Cohen's continued refusal to comply with the court's prior orders. See RJN Ex. 4 at 4. S. Cohen fled to Mexico until October 27, 2005, when he was detained by the Mexican authorities and deported into the custody of the United States Marshal. Dillon Decl. para. 16; RJN Ex. 6. S. Cohen remained in custody for almost 14 months for civil contempt of the court's prior orders. Dillon Decl. para. 17.

*2 Since the Judgment was entered in April 2001, S. Cohen has never made a single voluntary payment on Plaintiff's Judgment. S. Cohen currently resides in Tijuana, Mexico. Compl. paras. 18, 22. Plaintiff has made various previous efforts to collect on his Judgment. In September 2005, Plaintiff brought an enforcement application for a TRO and turnover order. In a September 28, 2005 Order, the United States District Court for the Northern District of California found that seven individuals and twelve companies were acting in concert with S. Cohen to evade enforcement of the Judgment and enjoined them from doing anything to interfere with Plaintiff's rights thereunder. Id. para. 18(a); RJN Ex. 5. One of the companies identified in the September 2005 Order was Pacnet, S.A. de C.V. ("Pacnet"), and one of the individuals was Jhuliana Cohen, S. Cohen's step-daughter. RJN Ex. 5. On June 28, 2005, Plaintiff filed an action in the Southern District of California and obtained a judgment and permanent injunction on November 18, 2009 against S. Cohen's step-daughter (Jhuliana Cohen) in the amount of $4,931,781.13, his ex-wife (Rosa Cohen) in the amount of $1,094,579.45, and his former attorney (Gustavo Cortez) in the amount of $802,620, based on their participation in fraudulent transfers to assist S. Cohen in concealing and transferring his assets with the intent of avoiding the Judgment. Compl. para. 18(b); RJN Exs. 6, 7. On March 22, 2011, the United States District Court for the Northern District of California renewed the Judgment against S. Cohen in the renewed amount of $67,867,053.36 ("Renewed Judgment"). Compl. Ex. A.

Plaintiff filed this action on November 8, 2011, now seeking relief against M. Cohen, S. Cohen's cousin, and against FNBPay, a corporation created by M. Cohen on July 15, 2010, and of which M. Cohen is listed as the sole officer, director, incorporator, and 100% shareholder. Compl. paras. 14, 19; Dillon Decl. para. 49. Plaintiff brings this action on information and belief that M. Cohen has formed FNBPay Corporation to assist S. Cohen in funneling money through various websites with intent to conceal S. Cohen's assets from Plaintiff. Plaintiff alleges that S. Cohen has used M. Cohen to conduct business through FNBPay on S. Cohen's behalf, and to open bank accounts in M. Cohen's and/or FNBPay's name at S. Cohen's behest in order to transfer money and conduct business for the benefit of S. Cohen and/or S. Cohen's related entities. Compl. para. 20. Plaintiff further alleges on information and belief that M. Cohen and FNBPay knowingly conspired and agreed with S. Cohen to cause monies to be transferred and deposited into the bank account held in FNBPay's name, and to cause payments of money to M. Cohen personally to pay his mortgage, among other things, with the actual intent to hinder, delay, or defraud Plaintiff in exercising his rights as a creditor of S. Cohen. Id. paras. 27–28. Plaintiff alleges that the deposit payments at the FNBPay bank account and payments toward M. Cohen's mortgage were for no consideration and were simply a device to place these assets beyond Plaintiff's reach, as evidenced by the fact that they were re-transferred to S. Cohen at S. Cohen's request. Id. paras. 29, 47–51.

*3 Specifically at issue in this ex parte Motion for a TRO is a Wells Fargo account no. 2806354318 opened by M. Cohen under the name FNBPay ("Wells Fargo Account") that holds funds alleged to be directly controlled by S. Cohen. Br. at 7, 10; Dillon Decl. paras. 46–47. S. Cohen's revenue-generating business dealings relate to a Mexican online payment processing corporation First National Bank S.A. de C.V., SOFOM ENR ("FNB Mexico"), registered with the California Secretary of State as a Mexican corporation authorized to do business in California. Dillon Decl. paras. 21–22. S. Cohen admits to having formed FNB Mexico and appears to be Chairman of the Board of Directors, Senior Vice President, and beneficial owner of FNB Mexico. Dillon Decl. paras. 24–26. During a judgment debtor examination of S. Cohen conducted by Plaintiff's attorney on July 12, 2011, S. Cohen explained that FNBPay.com operates as the credit card processing arm of FNB Mexico. See Dillon Decl. Ex. 1 at 71:5–10. Based on other evidence gathered by Plaintiff's attorney, it appears that FNBPay is wholly owned by FNB Mexico. See Dillon Decl. paras. 31–46. FNB Mexico earns money by charging fees for facilitating wire transfers through the website www.fnbpay.com. See Dillon Decl. paras. 42–45.

The subject Wells Fargo Account, opened with Wells Fargo Bank at 1004 W. Chandler Blvd., has a balance of $109,205.00. Dillon Decl. para. 50. According to www.fnbpay.com, United States users who wish to wire or deposit funds to FNBPay.com are instructed to use wiring instructions for the Wells Fargo Account. FNB Mexico customers are directed to deposit money directly into the Wells Fargo Account. Dillon Decl. paras. 45–50.

II. LEGAL STANDARDS

The Court may issue a TRO without written or oral notice to the adverse party only if (1) "specific facts in an affidavit or a verified complaint clearly show that immediate and irreparable injury, loss, or damage will result to the movant before the adverse party can be heard in opposition"; and (2) "the movant's attorney certifies in writing any efforts made to give notice and the reasons why it should not be required." Fed.R.Civ.P. 65(b)(1). The Local Civil Rules require that any ex parte motion for a temporary restraining order be accompanied by (1) a copy of the complaint; (2) a separate memorandum of points and authorities in support of the motion; (3) the proposed temporary restraining order; and (4) such other documents in support of the motion which the party wishes the Court to consider. Civil L.R. 65–1(a). A party seeking an ex parte TRO nevertheless still must deliver notice of such motion to opposing counsel or party on or before the day of filing the motion with the Court, unless otherwise relieved by court order. Civil L.R. 65–1(b). An ex parte TRO may be appropriate in some limited circumstances, such as "where notice to the adverse party is impossible either because the identity of the adverse party is unknown or because a known party cannot be located in time for a hearing," Am. Can Co. v. Mansukhani, 742 F.2d 314, 322 (7th Cir.1984), or where, even though notice could be given to the adverse party, "notice to the defendant would render fruitless the further prosecution of the action," Reno Air Racing Ass'n, Inc. v. McCord, 452 F.3d 1126, 1131 (9th Cir.2006).

III. DISCUSSION

A. Temporary Restraining Order

*4 To obtain preliminary injunctive relief, a plaintiff generally must show that (1) he is likely to succeed on the merits; (2) he is likely to suffer irreparable harm in the absence of preliminary relief; (3) the balance of equities tips in his favor; and (4) an injunction is in the public interest. Winter v. Natural Res. Def. Council, 555 U.S. 7, 24–25, 129 S.Ct. 365, 172 L.Ed.2d 249 (2008); accord Stormans, Inc. v. Selecky, 586 F.3d 1109, 1126–27 (9th Cir.2009). An injunction may also be appropriate where the plaintiff raises "serious questions going to the merits" and demonstrates that "the balance of hardships tips sharply in the plaintiff's favor." Alliance for the Wild Rockies v. Cottrell, 622 F.3d 1045, 1052 (9th Cir.2010). To succeed on its motion for a temporary restraining order, Plaintiff must satisfy all four elements of the Winter test.

1. Likelihood of Success on the Merits

The Court finds that Plaintiff has shown a likelihood of success on the merits of his claim for fraudulent transfers in violation of CUFTA sec. 3439.04. California Civil Code sec. 3439.04(a)(1) provides that a transfer is fraudulent to a creditor if it is made with actual intent to hinder, delay, or defraud any creditor of the debtor. In determining intent to defraud, courts may consider, inter alia, whether: (1) the transfer or obligation was to an insider; (2) the debtor retained possession or control of the property transferred after the transfer; (3) the transfer or obligation was disclosed or concealed; (4) before the transfer was made or obligation was incurred, the debtor had been sued or threatened with suit; (5) the transfer was of substantially all the debtor's assets; (6) the debtor absconded; (7) the debtor removed or concealed assets; (8) the value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred; (9) the debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred; (10) the transfer occurred shortly before or shortly after a substantial debt was incurred; and (11) the debtor transferred the essential assets of the business to a lienholder who transferred the assets to an insider of the debtor. Cal. Civ.Code sec. 3439.04(b).

Since April 3, 2001, Plaintiff has been a creditor of S. Cohen in an amount not less than $65 million. Plaintiff obtained a Renewed Judgment in the amount of $67,867,053.36 on March 22, 2011. S. Cohen has a history of removing or concealing assets for the past ten years. Moreover, S. Cohen has accomplished this removing or concealing of assets by using his relatives and other associates to fraudulently convey his assets in an effort to avoid payment of this Judgment to Plaintiff. M. Cohen is S. Cohen's cousin and thus "an insider," i.e. a blood relative. Moreover, FNBPay, incorporated by M. Cohen and of which M. Cohen is the sole officer and shareholder, appears to be wholly owned by FNB Mexico, of which S. Cohen appears to be the beneficial owner. Payments to FNB Mexico appear to be channeled through FNBPay's Wells Fargo Account. In light of S. Cohen's past practice of using relatives and shell corporations to divert funds with the intent of defrauding Plaintiff and preventing him from being able to collect on his Judgment, and in light of the numerous alleged links between FNB Mexico and FNBPay suggesting that the Wells Fargo Account in FNBPay's name is in fact under the control of S. Cohen, the Court finds Plaintiff likely to succeed on the merits of his fraudulent conveyances claims.

2. Likelihood of Irreparable Harm

*5 To qualify for a temporary restraining order, Plaintiff must show that he is likely to suffer irreparable harm in the absence of the order. Monetary injury is not normally considered to be irreparable. See Nelson v. Nat'l Aeronautics and Space Admin., 530 F.3d 865, 881 (9th Cir.2008). Even though Plaintiff's injury will be monetary in nature, Plaintiff nonetheless argues that such injury is irreparable because, based on S. Cohen's past behavior, Defendants likely have acted, and likely will continue to act, in concert with S. Cohen to transfer, conceal, hypothecate, destroy, move, or otherwise make unavailable assets held in constructive trust for Plaintiff, thereby foreclosing Plaintiff from being able to execute on his April 3, 2001 Judgment against S. Cohen, which was renewed on March 22, 2011 in the amount of $67,867,053.36. Specifically, Plaintiff argues it is likely Defendants and Judgment Debtor S. Cohen will directly or indirectly transfer, sell, assign, pledge, hypothecate, encumber, dissipate, distribute, or move the contents of the Wells Fargo Account, and/or other currently unknown accounts, or interfere with funds earmarked for the Wells Fargo Account, and/or other currently unknown accounts, if Plaintiffs were to proceed on notice to Defendants of a hearing and ruling on this TRO. Plaintiff argues that an ex parte TRO is therefore necessary to preserve his ability to execute on his Judgment.

"A party seeking an asset freeze must show a likelihood of dissipation of the claimed assets, or other inability to recover monetary damages, if relief is not granted." Johnson v. Couturier, 572 F.3d 1067, 1085 (9th Cir.2009) (citing Conn. Gen. Life Ins. Co. v. New Images of Beverly Hills, 321 F.3d 878, 881 (9th Cir.2003)). An injunction freezing assets may also issue where plaintiff demonstrates that "defendant has engaged in pattern of secreting or dissipating assets to avoid judgment." In re Estate of Ferdinand Marco, Human Rights Litig., 25 F.3d 1467, 1480 (9th Cir.1994). Furthermore, while a preliminary injunction ordinarily may not issue to preserve assets to which a party does not yet have a legal claim, see Grupo Mexicano de Desarrollo, S.A. v. Alliance Bond Fund, Inc., 527 U.S. 308, 318–33, 119 S.Ct. 1961, 144 L.Ed.2d 319 (1999), specifically excepted from this rule are "instances of fraudulent conveyance and bankruptcy," In re Focus Media Inc., 387 F.3d 1077, 1084 (9th Cir.2004). " 'The law of fraudulent conveyances and bankruptcy was developed to prevent such conduct,' i.e., debtors trying to avoid paying their debts, or seeking to favor some creditors over others." Id. at 1084 (quoting Grupo Mexicano, 527 U.S. at 324–25); see also Conn. Gen. Life Ins. Co. v. New Images of Beverly Hills, 321 F.3d 878, 882 (9th Cir.2003); United States ex rel. Rahman v. Oncology Assocs., 198 F.3d 489, 494–99 (4th Cir.1999) (district court has authority to issue asset-freezing injunction where equitable relief is sought, even though substantial money damages are also claimed).

*6 Plaintiff here has shown that S. Cohen has a history of dishonest behavior and of making fraudulent conveyances through the assistance of his family and associates to avoid execution of Plaintiff's Judgment. For example, in granting Plaintiff's Motion for Preliminary Injunction on November 27, 2000, the district court found that:

the evidence demonstrates that defendants, including Mr. Cohen in particular, appear to improperly have thwarted plaintiff's efforts to obtain discovery of financial information, to have engaged in activities designed to conceal money they have made from the operation of the sex.com website, and to have transferred substantial assets to entities for the purpose of avoiding ultimate financial responsibility at the conclusion of this litigation. These wrongful activities have accelerated in recent weeks, and the threat of irreparably injury is imminent.

RJN Ex. 2 at 2. After S. Cohen failed to comply with the preliminary injunction order, and was subsequently held in civil contempt on February 12, 2001, the district court stated:

[a]s they have throughout this litigation, Defendants have simply ignored this Court's orders. This Court has now on four separate occasions ordered Defendants to sign waivers for the release of tax returns, bank account records, and FOIA waivers. All four times, Defendants have turned a deaf ear. This Court cannot countenance such blatant disregard for its orders.

RJN Ex. 3 at 2. The civil contempt order was followed by an arrest warrant on March 2, 2001 for S. Cohen's continued refusal to comply with the court's prior orders. See RJN Ex. 4 at 4.

Here, Plaintiff seeks to enjoin not S. Cohen, the original Judgment–Debtor, but rather S. Cohen's cousin, M. Cohen, as well as a corporation of which M. Cohen is sole shareholder, based on M. Cohen's and FNBPay's alleged support and assistance to S. Cohen in avoiding the Renewed Judgment through fraudulent conveyances. Although it is S. Cohen, and not M. Cohen or FNBPay, who has exhibited the past pattern of defying court orders and thwarting Plaintiff's efforts to execute on his Judgment, Plaintiff shows that S. Cohen has engaged in his deceptive practices with the assistance of his relatives and sham corporate entities. On June 28, 2005, Plaintiff filed an action in the Southern District of California and obtained a judgment and permanent injunction on November 18, 2009 against S. Cohen's step-daughter, his ex-wife, and his former attorney (Gustavo Cortez), based on their participation in fraudulent transfers to assist S. Cohen in concealing and transferring his assets with the intent of avoiding the Judgment.

Based on S. Cohen's past practices, and in light of the Court's determination that Plaintiff is likely to succeed in showing that Defendants are liable under CUFTA for fraudulent conveyances in connection with S. Cohen's avoidance of the Judgment, the Court finds there is an appreciable risk that Defendants or Judgment Debtor S. Cohen will dispose of the subject Wells Fargo Account and other currently unknown funds prior to resolution of Plaintiff's action. The Court further concludes that if such funds are dissipated, Plaintiff will incur irreparable harm in that he may not be able to execute on his Judgment.

3. Balance of Equities

*7 Plaintiff is a Judgment Creditor and seeks only such equitable relief as is necessary to preserve his rights to recover his own property. As such, the Court finds that the balance of hardships weighs in Plaintiff's favor. Plaintiff has been attempting to execute on his Judgment against S. Cohen for over ten years and is pursuing a chimeric Judgment Debtor.

4. Public Interest

When an injunction will impact non-parties and has the potential to impact the public, the public interest is relevant. See Stormans, Inc. v. Selecky, 586 F.3d 1109, 1139 (9th Cir.2009). By contrast, "[w]hen the reach of an injunction is narrow, limited only to the parties, and has no impact on non-parties, the public interest will be at most a neutral factor in the analysis rather than one that favors granting or denying the preliminary injunction." Id. at 1138–39 (quoting Bernhardt v. L.A. Cnty., 339 F.3d 920, 931 (9th Cir.2003)) (internal quotations marks and brackets omitted). The Court finds that, under the circumstances presented, the reach of the injunction is narrow and limited to the parties and the relevant non-parties, namely S. Cohen, and therefore the public interest is not a major factor in the TRO analysis.

5. Relief

Given S. Cohen's extensive history of evasive and abusive conduct, including fraudulent intra-family transfers and refusal to disclose asset information in defiance of court orders, and the suspect relationship between S. Cohen's FNB Mexico and M. Cohen's FNBPay Corp., the Court finds that Plaintiff has shown he is both likely to succeed on the merits of his CUFTA claims and that he is likely to suffer irreparable harm in the absence of an ex parte TRO preventing the dissipation of assets contained in the Wells Fargo Account held in Defendants' possession. Plaintiff has demonstrated that Judgment–Debtor S. Cohen has a history of utilizing family members and associates to help him divert and conceal property, including money, and that M. Cohen is likely assisting S. Cohen by fraudulently conveying S. Cohen's funds with intent to hinder, delay, or defraud Plaintiff from collecting on his Judgment. As the district court previously found in issuing a TRO against S. Cohen and his associates,

Cohen and/or other persons acting in concert with Cohen likely may, as they have repeatedly done in the past, transfer, convey, conceal, hypothecate, destroy, move or otherwise make unavailable the property set forth herein below that, pursuant to the Judgment, is held in constructive trust for Kremen, if Kremen were to proceed on notice to Cohen, thus frustrating the ultimate relief Kremen seeks in this action.

RJN Ex. 14 at 4. The Court finds good cause for issuing a TRO ex parte because it is likely that Defendants will attempt to secret away or dissipate the assets in their control if given notice, irreparably harming Plaintiff from being able to collect on his Judgment.

Good cause being shown, the Court hereby ORDERS that, pending the OSC hearing described below, Defendants, and each of them, and their officers, agents, servants, employees, attorneys and all persons in active concert or participation with them who receive actual notice of this Order by personal service or otherwise, are restrained and enjoined from directly or indirectly transferring, selling, assigning, pledging, hypothecating, encumbering, dissipating, distributing or moving the contents of the Wells Fargo Account, and/or other currently unknown deposit accounts containing funds that are directly and/or indirectly held for the benefit of Defendants or for Judgment Debtor S. Cohen, or interfering with funds earmarked for the Wells Fargo Account, and/or other currently unknown deposit accounts containing funds that are directly and/or indirectly held for the benefit of Defendants or for Judgment Debtor, S. Cohen.

*8 Wells Fargo Bank, N.A., holding Business Checking Account No. 2806354318, shall take no action and make no transaction of assets or securities and no disbursement of assets or securities (including extensions of credit or advances on existing lines of credit), including the honor of any negotiable instrument (including any check, draft, or cashier's check) purchased by or for Defendants, and each of them related to the Wells Fargo Account and/or any other account holding funds on behalf of either Defendant, pending further order of this Court.

To effectuate the immediately preceding provision, Plaintiff may cause a copy of this Order to be served on Wells Fargo Bank, N.A., holding Business Checking Account No. 2806354318, through its office located at 1004 W. Chandler Blvd., Chandler, Arizona either by United States mail or facsimile as if such service was personal service, to restrain and enjoin Wells Fargo Bank, N.A., holding Business Checking Account No. 2806354318, from disbursing assets from the Wells Fargo Account and/or any other account holding funds on behalf of either Defendant, or any companies or persons or entities under their control.

The Court notes that both M. Cohen and the Wells Fargo Account appear to be located in Chandler, raising potential personal jurisdiction and improper venue concerns. Given the urgency of Plaintiff's ex parte TRO request, the Court finds that temporary injunctive relief is warranted. However, the Court will not issue a preliminary injunction absent Plaintiff's showing that this Court has personal jurisdiction over Defendants and in rem jurisdiction over any property sought to be enjoined, and that venue in this district is proper. Plaintiff shall file a brief addressing these issues by Monday, December 12, 2011, at 5:00 p.m. Defendants shall file a response, if any, by Wednesday, December 14, 2011, at 5:00 p.m.

6. Bond

The Court may issue a preliminary injunction or a temporary restraining order only if the movant gives security in an amount that the court considers proper to pay the costs and damages sustained by any party found to have been wrongfully enjoined or restrained. Fed.R.Civ.P. 65(c). Notwithstanding the seemingly mandatory language, "the district court may dispense with the filing of a bond when it concludes there is no realistic likelihood of harm to the defendant from enjoining his or her conduct." Johnson, 572 F.3d at 1086.

Contrary to Plaintiff's suggestion, the Court finds there is a likelihood of harm to Defendants should the preliminary injunction later be found to have issued in error. The Wells Fargo Account amounts to $109,205.00; the value of Defendants' other potential assets is unknown. If improperly enjoined, Defendants will have suffered from having their assets temporarily frozen. Accordingly, the Court sets the bond at $2,000.00.

B. Order to Show Cause

In accordance with Civil Local Rule 65–1(c) and Federal Rule of Civil Procedure 65(b), the Court hereby Orders Defendants M. Cohen and FNBPay to Show Cause at a hearing on Friday, December 16, 2011, at 3:00 p.m., in Courtroom 8 on the 4th Floor of the San Jose Courthouse, 280 South First Street, San Jose, California 95113, why a preliminary injunction should not issue freezing the funds located in the Wells Fargo Account, and any other currently unknown deposit accounts, and restraining and enjoining Defendants from directly or indirectly transferring, selling, assigning, pledging, hypothecating, encumbering, dissipating, distributing, or moving the contents of the Wells Fargo Account, and/or other currently unknown deposit account containing funds held directly and/or indirectly for the benefit of Defendants and/or Judgment Debtor S. Cohen, or interfering with funds earmarked for the Wells Fargo Account, and/or other currently unknown deposit accounts containing funds that are directly and/or indirectly held for the benefit of Defendants and/or Judgment Debtor S. Cohen.

*9 This Order to Show Cause and supporting papers must be served on Defendants within 24 hours of the time of this Order's issuance, and proof of service shall be filed within 24 hours after service. Service shall be made on Plaintiff's Counsel, Timothy P. Dillon, Esq. by email at tdillon @dillongerardi.com, facsimile at (858) 587–2587, and/or by personal service or overnight mail at Dillon & Gerardi, APC, 4660 La Jolla Village Dr., Ste. 1040, San Diego, California 92122.

Defendants shall file their opposition, if any, by Monday, December 12, 2011 at 5:00 p.m. Plaintiff shall file his reply, if any, by Wednesday, December 14, 2011, at 5:00 p.m.

C. Expedited Discovery

In conjunction with his ex parte motion for a TRO and OSC why a preliminary injunction should not issue, Plaintiff also files a motion for expedited discovery so that he may seek discovery materials from Defendants in preparation for the order to show cause hearing for preliminary injunction.

Ordinarily, a party may not seek discovery from any source until the parties have conferred as required by Federal Rule of Civil Procedure 26(f), unless authorized by the Federal Rules of Civil Procedure, by stipulation, or by order of the Court. Fed.R.Civ.P. 26(d)(1). A court may grant a motion for expedited discovery upon a showing of good cause, balancing the benefit to the requesting party against the possible prejudice or hardship on the responding party. See Semitool, Inc. v. Tokyo Electron Am., Inc., 208 F.R.D. 273, 274 (N.D.Cal.2002). " 'The good cause standard may be satisfied where a party seeks a preliminary injunction,' " although the sheer act of seeking a preliminary injunction does not automatically entitle a party to expedited discovery. Am. Legalnet, Inc. v. Davis, 673 F.Supp.2d 1063, 1066 (C.D.Cal.2009) (quoting Qwest Comm'ns Int'l, Inc. v. WorldQuest Networks, Inc., 213 F.R.D. 418, 419 (D.Colo.2003)). Rather, in deciding whether to grant a request for expedited discovery in connection with a preliminary injunction hearing, the Court examines the reasonableness of the request in light of all the surrounding circumstances. Id. at 1067. Among the factors commonly considered in determining the reasonableness of expedited discovery are: (1) whether a preliminary injunction is pending; (2) the breadth of the discovery requests; (3) the purpose for requesting the expedited discovery; (4) the burden on the responding party in complying with the request; and (5) how far in advance of the typical discovery process the request was made. Id.; Disability Rights Council of Greater Wash. v. Wash. Metro. Area Transit Auth., 234 F.R.D. 4, 6 (D.D.C.2006). The Court "has the discretion, in the interests of justice, to prevent excessive or burdensome discovery." American Legalnet, 673 F.Supp.2d at 1067 (internal quotation marks and citations omitted).

Here, Plaintiffs seeks expedited discovery to (1) conduct the deposition of M. Cohen and the person most knowledgeable for FNBPay Corporation upon 72 hours written notice; (2) request production of documents from Defendants related to the Wells Fargo Account and any other accounts maintained by either Defendant that relate to S. Cohen and his related entities, the corporate governance and control of FNBPay and FNB Mexico, and the relationship between the two entities; (3) subpoena Wells Fargo related to the Wells Fargo Account and any other account opened by Defendants; (4) propound interrogatories and document requests to defendants related to S. Cohen, and the movement of funds from S. Cohens' related entities to Defendants; and (5) serve a third-party subpoena on the hosting sites for each of the FNBPay related websites set forth in Plaintiff's motion papers to request information regarding the registrants for the websites.

*10 The Court finds that Plaintiff's expedited discovery requests are all related to his motion for a preliminary injunction and are narrowly tailored to discover evidence necessary to prove the probability of prevailing on the merits of his case. Although this is an extremely expedited discovery schedule, and the burden on Defendants to comply with the requests is not insignificant, the Court finds that the balance of factors weighs in Plaintiff's favor and accordingly GRANTS Plaintiff's request for expedited discovery.

Plaintiff may, upon 72 hours written notice, conduct the deposition of Defendant Michael Joseph Cohen and the person most knowledgeable for Defendant FNBPay Corporation. Plaintiff may request production of documents from Defendants related to the Wells Fargo Account, corporate governance and control of FNBPay Corporation and First National Bank S.A. de C.V., SOFOM ENR ("FNB Mexico") and Judgment Debtor S. Cohen's involvement with FNBPay Corporation and FNB Mexico. Plaintiff may request all bank statements, ledgers, canceled checks, transaction reports, and other information related to the use and sources of income for the Wells Fargo Account and any other account with funds held beneficially for Defendants. Defendants shall produce for inspection and copying all documents and things that are requested within 72 hours of service of a written request for those documents or things.

Plaintiff may propound interrogatories related to the Wells Fargo Account, ownership of FNBPay Corporation, FNB Mexico, control of FNBPay Corporation and FNB Mexico, corporate governance of FNBPay Corporation and FNB Mexico, and the involvement of Judgment Debtor S. Cohen with FNBPay Corporation and FNB Mexico and involvement with all financial transactions conducted by such entities. Defendants shall deliver written responses to Plaintiff within seven days of service of the interrogatories.

Defendants shall serve written responses to Plaintiff's request for discovery. Defendants' responses shall be sent to Plaintiff as follows:

Timothy P. Dillon, Esq.
Tdillon [at] dillongerardi.com
Dillon & Gerardi, APC
4660 La Jolla Village Dr., Ste. 1040 San Diego, California 92122
Facsimile at (858) 587–2587

IV. CONCLUSION

For the foregoing reasons, Plaintiff's Ex Parte Motion for a TRO is GRANTED, and the Court hereby ORDERS Defendants to SHOW CAUSE at a hearing on Friday, December 16, 2011, at 3:00 p.m., in Courtroom 8 on the 4th Floor of the San Jose Courthouse, 280 South First Street, San Jose, California 95113, why a preliminary injunction should not issue. Plaintiff's Motion for Expedited Discovery in preparation for the preliminary injunction hearing is likewise GRANTED. Defendants shall file their opposition to preliminary injunction, if any, by Monday, December 12, 2011 at 5:00 p.m. Plaintiff shall file his reply, if any, by Wednesday, December 14, 2011, at 5:00 p.m. Also by Monday, December 12, 2011 at 5:00 p.m., Plaintiff shall file a brief addressing whether venue in this district is proper and whether the Court has jurisdiction over any Defendants and/or property sought to be preliminarily enjoined. Defendants shall file a response, if any, by Wednesday, December 14, 2011, at 5:00 p.m.

*11 IT IS SO ORDERED.

= = = = = = = A S S E T P R O T E C T I O N = = = = = = = =

Posted by Jay D. Adkisson, a co-author along with Chris Riser of Asset Protection: Concepts & Strategies (McGraw-Hill 2003) with main website http://www.assetprotectionbook.com and blog at http://www.assetprotectionblog.com see also http://www.jayadkisson.com and http://www.risad.com

Join our LinkedIn Group on Asset Protection at http://www.linkedin.com/groups?mostPopular=&gid=3694878

Join our Twitter on Asset Protection at http://www.twitter.com/jay_adkisson

Get our RSS Feed on Asset Protection at http://assetprotectionbook.com/forum/feed
RISER ADKISSON LLP, 100 Bayview Circle, Suite 210, Newport Beach, CA 92660, Ph: 949-200-7284, Fax: 877-296-0678, jay --at-- risad.com - http://www.risad.com - http://www.jayadkisson.com - http://www.captiveinsurancecompanies.com - http://www.eaibook.com - http://www.calejl.com

Purchase our book "Asset Protection: Concepts and Strategies" at
http://www.amazon.com/gp/product/0071432167?ie=UTF8&tag=httpassetproc-20&linkCode=as2&camp=1789&creative=9325&creativeASIN=0071432167?
User avatar
Riser Adkisson LLP
Riser Adkisson LLP
 
Posts: 2132
Joined: Thu Nov 13, 2008 8:06 pm
Location: California, Georgia, North Carolina, Oklahoma, and Texas

Re: Kremen: TRO Asset Freeze for Fraudulent Transfers

Postby Riser Adkisson LLP » Thu Jan 12, 2012 7:02 am

Kremen v. Cohen, 2012 WL 44999 (N.D.Cal., Jan. 7 2012).

United States District Court, N.D. California, San Jose Division.

Gary KREMEN, Plaintiff,

v.

Michael Joseph COHEN, an individual; and FNBPay Corporation, an Arizona corporation, Defendants.

No. 5:11–cv–05411–LHK.

Jan. 7, 2012.

ORDER DENYING DEFENDANTS' MOTION TO DISMISS FOR LACK OF PERSONAL JURISDICTION AND IMPROPER VENUE; AND DENYING PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION

LUCY H. KOH, District Judge.

*1 Plaintiff Gary Kremen ("Kremen" or "Plaintiff") filed this action on November 8, 2011 under California's Uniform Fraudulent Transfer Act ("CUFTA"), Cal. Civ.Code secs. 3439.04, 3439.07, 3440, against Defendants Michael Joseph Cohen ("M.Cohen") and FNBPay Corporation ("FNBPay"), a corporation incorporated under the laws of the State of Arizona (collectively "Defendants"), upon information and belief that Defendants are the transferees of certain property, including money, fraudulently transferred to each of them by Stephen Michael Cohen ("S. Cohen" or "Judgment–Debtor"), an individual against whom Plaintiff has an enforceable and unpaid money judgment, obtained for $65,000,000 on April 3, 2001 in the U.S. District Court for the Northern District of California, and renewed on March 22, 2011 by the same court in the amount of $67,867,053.36 (the "Renewed Judgment"). On December 2, 2011, Plaintiff filed an ex parte motion seeking a temporary restraining order ("TRO") freezing certain assets "to prevent the dissipation of more than $109,000 that is currently being held at Wells Fargo Bank (Account No. 2806354318) [ (the "Wells Fargo Account") ] under the name FNBPay." Ex Parte Motion for Temporary Restraining Order ("TRO Mot.") at 2. The Wells Fargo Account held in Defendants' possession is alleged to be the vehicle for the alleged fraudulent transfers from S. Cohen.

For good cause shown, the Court granted the TRO on December 7, 2011, granted Plaintiff's request for limited expedited discovery, and issued an Order to Show Cause ("OSC") setting a briefing schedule and hearing date on Plaintiff's motion for preliminary injunction enjoining Defendants from disposing of funds held in the Wells Fargo Account.FN1 See ECF No. 16. However, the Court also requested supplemental briefing on whether this Court has personal jurisdiction over Defendants and whether venue in this district is proper. Defendants answered the OSC on December 20, 2011, see ECF No. 38,FN2 and both sides submitted supplemental briefing on personal jurisdiction and venue, see ECF Nos. 21, 40, 58. In addition, Defendants filed a Motion to Dismiss for Lack of Jurisdiction and Improper Venue, or, in the alternative, a Motion to Transfer to the District of Arizona pursuant to 28 U.S.C. sec. 1404. FN3 See ECF No. 31. Plaintiff filed an opposition to the motion to dismiss, see ECF No. 46, and Defendants filed a reply, see ECF No. 62.

FN1. The Court revised this briefing schedule on December 15, 2011 to allow Defendants additional time for briefing. See ECF No. 30.

FN2. On December 27, 2011, Defendants also filed, without the Court's permission, a "Supplemental Brief in Opposition to Ex Parte Motion for Temporary Restraining Order, Order to Show Cause re: Preliminary Injunction and for an Order Expediting Discovery; Motion to Quash Service on Both the Subpoena and the Request for Production of Documents and His Request for Sanctions; Motion for Referral to the Court's Standing Committee of Professional Conduct and His Request for Court Ordered Sanctions; and Motion Requiring Plaintiff Gary Kremen's [sic] to Post a Five Million Dollar Bond Pursuant to the California Civil Code of Procedures Section 1030." ECF No. 59. This unauthorized sur-reply does not comply with Civil Local Rule 7–3(d) and is therefore STRICKEN.

FN3. Although Defendants' motion is titled "Motion Under Federal Rules of Civil Procedures Rule 12(b) 2, 3, 5, and 6 to Dismiss for Lack of Jurisdiction, Improper Venue and Insufficient Service of Process or, in the Alternative, to Transfer Pursuant to 28 U.S.C. sec. 1404 to the District of Arizona," Defendants do not discuss the basis for their purported motions to dismiss pursuant to Rules 12(b) (5) (insufficient service of process) or 12(b)(6) (failure to state a claim upon which relief can be granted) anywhere in the body of their memorandum of points and authorities. See ECF No. 32. Accordingly, the Court has no basis on which to adjudicate the merits of these asserted grounds for dismissal and therefore deems those motions waived.

The Court held a hearing on the motion for preliminary injunction on January 5, 2012, at which only Plaintiff appeared. Pursuant to Civil Local Rule 7–1(b), the Court finds Defendants' motion to dismiss or transfer appropriate for determination without oral argument and accordingly VACATES the hearing scheduled for April 5, 2012.FN4 Having considered the parties' submissions and the relevant law, the Court hereby DENIES Defendants' motion to dismiss or to transfer, and DENIES Plaintiff's motion for a preliminary injunction. The TRO previously granted expires effective upon the date of this Order.FN5

FN4. Defendants' Ex Parte Motion to Shorten Time for Defendants' Motion to Dismiss or Transfer (ECF No. 47) is accordingly DENIED as moot.

FN5. Defendants' Emergency Ex Parte Motion to Cancel the Temporary Restraining Order Pending Hearing on Defendants' Motion to Dismiss or Transfer (ECF No. 52) is accordingly DENIED as moot.

I. BACKGROUNDFN6

FN6. Defendants have filed multiple requests for judicial notice. Although Defendants do not submit these requests in connection with any particular motion, see ECF Nos. 42, 53, 54, 55, 56, the Court construes them as requests for judicial notice of documents in connection with Defendants' motion to dismiss. A matter may be judicially noticed if it is either "generally known within the territorial jurisdiction of the trial court" or "capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned." Fed.R.Evid. 201(b). Requests for Judicial Notice Dkt No. 53 and Dkt No. 42 are identical and seek judicial notice of documents filed and an order issued in another case in this district, Kremen v. Stephen Michael Cohen, No. C98–20718–JW. Because judicial notice may be taken of court records, the Court GRANTS Defendants' request as to ECF No. 53. However, Requests for Judicial Notice Dkt Nos. 54, 55, and 56 seek judicial notice of declarations of various individuals. These declarations are not "capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned," Fed.R.Evid. 201(b), and therefore the Court DENIES Defendants' requests as to ECF Nos. 54, 55, and 56.

*2 Plaintiff is an internet entrepreneur who obtained a $65 million judgment (the "Judgment") in the United States District Court for the Northern District of California against S. Cohen and S. Cohen's alter ego entities on April 3, 2001, for fraudulently converting the internet domain name, www.sex.com. See Pl.'s Request for Judicial Notice (ECF No. 5–6) ("RJN") Ex. 1; Declaration of Timothy P. Dillon in Support of Motion for TRO ("Dillon Decl.") para. 4; see also Kremen v. Stephen Michael Cohen, 337 F.3d 1024, 1026–27 (9th Cir.2003) (describing the factual background between Kremen and S. Cohen common to this case); Kremen v. Jhuliana Aramis Cohen, No. 05–cv–01319–JM (POR), 2007 WL 1875779 (S.D. Cal. June 28, 2007) (same).

Plaintiff filed his underlying suit against S. Cohen in July 1998. On November 27, 2000, the district court granted Plaintiff's motion for a preliminary injunction and ordered S. Cohen to transfer the www.sex.com domain name back to Kremen, repatriate $25,000,000.00 that S. Cohen had sent to offshore accounts, sign waivers for the release of tax returns and bank account records, and sign FOIA waivers. See RJN Ex. 2. After S. Cohen failed to comply with the preliminary injunction order, the district court issued an Order Requiring Defendants to Appear and Sign Waivers on February 7, 2001. RJN Ex. 15. S. Cohen did not comply with the February 7, 2001 order and was subsequently held in civil contempt on February 12, 2001. RJN Ex. 3 at 2. The civil contempt order was followed by an arrest warrant on March 2, 2001 for S. Cohen's continued refusal to comply with the court's prior orders. See RJN Ex. 4 at 4. S. Cohen fled to Mexico until October 27, 2005, when he was detained by the Mexican authorities and deported into the custody of the United States Marshal. Dillon Decl. para. 16; RJN Ex. 6. S. Cohen remained in custody for almost 14 months for civil contempt of the court's prior orders. Dillon Decl. para. 17.

Since the Judgment was entered in April 2001, S. Cohen has never made a single voluntary payment on Plaintiff's Judgment. S. Cohen currently resides in Tijuana, Mexico. Compl. paras. 18, 22. Plaintiff has made various previous efforts to collect on his Judgment. In September 2005, Plaintiff brought an enforcement application for a TRO and turnover order. In a September 28, 2005 Order, the United States District Court for the Northern District of California found that seven individuals and twelve companies were acting in concert with S. Cohen to evade enforcement of the Judgment and enjoined them from doing anything to interfere with Plaintiff's rights thereunder. Compl. para. 18(a); RJN Ex. 5. One of the companies identified in the September 2005 Order was Pacnet, S.A. de C.V. ("Pacnet"), and one of the individuals was Jhuliana Cohen, S. Cohen's step-daughter. RJN Ex. 5. On June 28, 2005, Plaintiff filed an action in the Southern District of California and obtained a judgment and permanent injunction on November 18, 2009 against S. Cohen's step-daughter (Jhuliana Cohen) in the amount of $4,931,781.13, his ex-wife (Rosa Cohen) in the amount of $1,094,579.45, and his former attorney (Gustavo Cortez) in the amount of $802,620, based on their participation in fraudulent transfers to assist S. Cohen in concealing and transferring his assets with the intent of avoiding the Judgment. Compl. para. 18(b); RJN Exs. 6, 7. On March 22, 2011, the United States District Court for the Northern District of California renewed the Judgment against S. Cohen in the renewed amount of $67,867,053.36 ("Renewed Judgment"). Compl. Ex. A.

*3 The instant action is Plaintiff's most recent endeavor to collect on his Renewed Judgment. Plaintiff filed this action on November 8, 2011, seeking relief against M. Cohen, S. Cohen's cousin, and against FNBPay, a corporation created by M. Cohen on July 15, 2010, and of which M. Cohen is listed as the sole officer, director, incorporator, and 100% shareholder. Compl. paras. 14, 19; Dillon Decl. para. 49. Plaintiff brings this action on information and belief that M. Cohen has formed FNBPay Corporation to assist S. Cohen in funneling money through various websites with intent to conceal S. Cohen's assets from Plaintiff. Plaintiff alleges that S. Cohen has used M. Cohen to conduct business through FNBPay on S. Cohen's behalf, and to open bank accounts in M. Cohen's and/or FNBPay's name at S. Cohen's behest in order to transfer money and conduct business for the benefit of S. Cohen and/or S. Cohen's related entities. Compl. para. 20. Plaintiff further alleges on information and belief that M. Cohen and FNBPay knowingly conspired and agreed with S. Cohen to cause monies to be transferred and deposited into the bank account held in FNBPay's name, and to cause payments of money to M. Cohen personally to pay his mortgage, among other things, with the actual intent to hinder, delay, or defraud Plaintiff in exercising his rights as a creditor of S. Cohen. Compl. paras. 27–28. Plaintiff alleges that the deposit payments at the FNBPay bank account and payments toward M. Cohen's mortgage were for no consideration and were simply a device to place these assets beyond Plaintiff's reach, as evidenced by the fact that they were re-transferred to S. Cohen at S. Cohen's request. Compl. paras. 29, 47–51.

Specifically at issue in this motion for a preliminary injunction is Wells Fargo Account No. 2806354318 opened by M. Cohen under the name FNBPay ("Wells Fargo Account") that holds funds alleged to be directly controlled by S. Cohen. TRO Mot. at 7, 10; Dillon Decl. paras. 46–47. Plaintiff alleges that S. Cohen's revenue-generating business dealings relate to a Mexican online payment processing corporation, First National Bank S.A. de C.V., SOFOM ENR ("FNB Mexico"), which is registered with the California Secretary of State as a Mexican corporation authorized to do business in California. Dillon Decl. paras. 21–22 & Ex. 2. S. Cohen admits to having formed FNB Mexico and appears to be Chairman of the Board of Directors, Senior Vice President, and beneficial owner of FNB Mexico. Dillon Decl. paras. 24–26.

Based on other evidence gathered by Plaintiff's attorney, it appears that FNBPay is wholly owned by FNB Mexico. See Dillon Decl. paras. 31–46. During a judgment debtor examination of S. Cohen conducted by Plaintiff's attorney on July 12, 2011, S. Cohen explained that FNBPay.com operates as the credit card payment processing arm of FNB Mexico. See Dillon Decl. Ex. 1 at 71:5–10. FNB Mexico earns money by charging fees for facilitating wire transfers through the website www.fnbpay.com. See Dillon Decl. paras. 42–45. The FNBPay.com website instructs persons in the United States who wish to wire or deposit funds to FNBPay.com to wire their money to the Wells Fargo Account. See Dillon Decl. paras. 45–50 & Ex. 14. FNB Mexico customers are directed to deposit money directly into the Wells Fargo Account. Id.

*4 Plaintiff also argues that S. Cohen owns, operates, and generates revenue through several affiliated websites, all with the assistance of M. Cohen. M. Cohen is listed as the contact person on the following websites: www.newmerchantnow.com, www.fnbprocessing.com, and www.rxpill.com. Dillon Decl. paras. 61–62 & Ex. 18. The contact information on each of these three websites for the "Mexican Office" lists an address that matches the address for FNB Mexico, and lists a telephone number that matches S. Cohen's cell phone number, as stated during his judgment debtor examination. Dillon Decl. paras. 62–64 & Ex. 18. The contact information for the "United States" office lists "4492 Camino de la Plaza, Suite 2097, San Ysidro, CA 92173," which is a P.O. Box opened by S. Cohen, as stated during his judgment debtor examination. Dillon Decl. para. 62. Allegedly, these websites are also engaged in credit card processing. See Dillon Decl. Ex. 18. A fourth website at issue is www.fnbpay.net. The website's "About Us" page lists the same San Ysidro address as its "Main Office," with the "Corporate Office" located in Chandler, Arizona, at the same address on file with the Arizona Secretary of State for FNBPay Corporation. Dillon Decl. paras. 52–57. Plaintiff contends that any funds in the Wells Fargo Account traceable to sales, transfers, or deposits related to these various websites were also fraudulently conveyed and are properly subject to execution by Plaintiff in enforcement of the Renewed Judgment against S. Cohen. TRO Mot. at 13.

According to the report of a private investigator hired by Plaintiff, the subject Wells Fargo Account, opened with Wells Fargo Bank at 1004 W. Chandler Blvd., has a "business checking account balance of $109,205.00." Dillon Decl. para. 50 & Ex. 22. However, after the Court issued the TRO and granted Plaintiff limited expedited discovery, Defendants produced bank statements for the Wells Fargo Account from January 1, 2010 through August 31, 2011 and alleged that the Account was closed in August 2011 with a closing balance of $0.00. By Plaintiff's own admission, "[i]t is unclear what funds remain or were deposited/withdrawn from the account since August 31, 2011." Reply Br. ISO PI at 5.FN7

FN7. Plaintiff argues that his inability to acquire more information regarding "the relationship between FNBPay Corp. and FNB Mexico, the relationship between S. Cohen and M. Cohen, as well as S. Cohen's involvement in the origination of funds that pass through the Wells Fargo Account," was due to the fact that S. Cohen attended M. Cohen's deposition on December 13, 2011 and refused to leave. Declaration of Timothy P. Dillon in Support of Reply Brief in Support of OSC Re: Preliminary Injunction ("Dillon Reply Decl.") paras. 4–12, ECF No. 24–1. To that end, he has filed an "Ex Parte Application for a Protective Order to Exclude Stephen Michael Cohen from Defendants' Pretrial Depositions and to Seal Defendants' Pre–Trial Depositions or, Alternatively, for an Order Shortening Time on Motion." See ECF No. 23. Plaintiff's ex parte motion does not comply with Civil Local Rule 7–10 and therefore is DENIED without prejudice. He may renew this motion in accordance with the Civil Local Rules.

II. LEGAL STANDARDS

A. Rule 12(b)(2) Motion to Dismiss for Lack of Personal Jurisdiction

Where a defendant moves to dismiss a suit for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2), the plaintiff bears the burden of establishing that jurisdiction is proper. Boschetto v. Hansing, 539 F.3d 1011, 1015 (9th Cir.2008). Where, as here, the defendant's motion is based on written materials rather than an evidentiary hearing, the plaintiff need only make a prima facie showing of jurisdictional facts to withstand a motion to dismiss for lack of personal jurisdiction. Mavrix Photo, Inc. v. Brand Techs., Inc., 647 F.3d 1218, 1223 (9th Cir.2011) (citing Brayton Purcell LLP v. Recordon & Recordon, 606 F.3d 1124, 1127 (9th Cir.2010)). At this stage of the proceeding, "uncontroverted allegations in plaintiff's complaint must be taken as true, and conflicts between the facts contained in the parties' affidavits must be resolved in plaintiff's favor." Brayton Purcell, 606 F.3d at 1127 (internal quotation marks, citations, and alterations omitted).

B. Rule 12(b)(3) Motion to Dismiss for Improper Venue

*5 Where a defendant moves to dismiss for improper venue pursuant to Federal Rule of Civil Procedure 12(b)(3), the plaintiff bears the burden of showing that venue is proper. Piedmont Label Co. v. Sun Garden Packing Co., 598 F.2d 491, 496 (9th Cir.1979). When considering a motion to dismiss pursuant to Rule 12(b)(3), a court need not accept the pleadings as true and may consider facts outside of the pleadings. Murphy v. Schneider Nat'l, Inc., 362 F.3d 1133, 1138 (9th Cir.2004). Pursuant to 28 U.S.C. sec. 1406(a), if the Court determines that venue is improper, the Court must either dismiss the action or, if it is in the interests of justice, transfer the case to a district or division in which it could have been brought. Whether to dismiss for improper venue, or alternatively to transfer venue to a proper court, is within the discretion of the district court. See King v. Russell, 963 F.2d 1301, 1304 (9th Cir.1992).

C. Motion to Transfer Venue Pursuant to 28 U.S.C. sec. 1404(a)

28 U.S.C. sec. 1404(a) authorizes the transfer of a case to another district in which the case would be properly brought, for the convenience of parties and witnesses or in the interests of justice. For a court to transfer venue pursuant to sec. 1404(a), the moving party bears the burden of showing that: (1) the transferee court is one in which the original action could have been brought, and (2) the convenience of the parties and witnesses in the interest of justice favor transfer. See Hatch v. Reliance Ins. Co., 758 F.2d 409, 414 (9th Cir.1985). The decision to transfer pursuant to sec. 1404(a) is within the court's discretion. See Ventress v. Japan Airlines, 486 F.3d 1111, 1118 (9th Cir.2007).

D. Motion for Preliminary Injunction

The issuance of a preliminary injunction is at the discretion of the district court. Indep. Living Ctr. of S. Cal., Inc. v. Maxwell–Jolly, 572 F.3d 644, 651 (9th Cir.2009). To obtain a preliminary injunction, a plaintiff generally must show that (1) he is likely to succeed on the merits; (2) he is likely to suffer irreparable harm in the absence of preliminary relief; (3) the balance of equities tips in his favor; and (4) an injunction is in the public interest. Winter v. Natural Res. Def. Council, 555 U.S. 7, 24–25, 129 S.Ct. 365, 172 L.Ed.2d 249 (2008); accord Stormans, Inc. v. Selecky, 586 F.3d 1109, 1126–27 (9th Cir.2009). An injunction may also be appropriate where the plaintiff shows "serious questions going to the merits and a balance of hardships that tips sharply towards the plaintiff ... so long as the plaintiff also shows that there is a likelihood of irreparable injury and that the injunction is in the public interest." Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1135 (9th Cir.2011). To succeed on its motion for a preliminary injunction, Plaintiff must satisfy his burden of proving all four elements of the Winter test. Id. In determining whether to issue a preliminary injunction, a district court may consider hearsay and other evidence otherwise inadmissible. See Johnson v. Couturier, 572 F.3d 1067, 1083 (9th Cir.2009); see also Republic of the Philippines v. Marcos, 862 F.2d 1355, 1363 (9th Cir.1988) (en banc); Flynt Distrib. Co. v. Harvey, 734 F.2d 1389, 1394 (9th Cir.1984) ("The trial court may give even inadmissible evidence some weight, when to do so serves the purpose of preventing irreparable harm before trial.").

III. DISCUSSION

A. Motion to Dismiss for Lack of Personal Jurisdiction

*6 To determine the propriety of asserting personal jurisdiction over a nonresident defendant, the Court examines whether such jurisdiction is permitted by the applicable state's long-arm statute and comports with the demands of federal due process. Bauman v. DaimlerChrysler Corp., 644 F.3d 909, 919 (9th Cir.2011). Because California's long-arm statute, Cal.Civ.Proc.Code sec. 410.10, is coextensive with federal due process requirements, the jurisdictional analyses under state law and federal due process are the same. See Cal.Civ.Proc.Code sec. 410.10 ("[A] court of this state may exercise jurisdiction on any basis not inconsistent with the Constitution of this state or of the United States."); Mavrix Photo, 647 F.3d at 1223. For a court to exercise personal jurisdiction over a nonresident defendant consistent with due process, that defendant must have "certain minimum contacts" with the relevant forum "such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice .' " Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 85 L.Ed. 278 (1940)). In addition, "the defendant's 'conduct and connection with the forum State' must be such that the defendant 'should reasonably anticipate being haled into court there.' " Sher v. Johnson, 911 F.2d 1357, 1361 (9th Cir.1990) (quoting World–Wide Volkwagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980)).

A court may exercise either general or specific jurisdiction over a nonresident defendant. Ziegler v. Indian River Cnty., 64 F.3d 470, 473 (9th Cir.1995). General jurisdiction exists where a nonresident defendant's activities in the state are "continuous and systematic" such that said contacts approximate physical presence in the forum state. See Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 801 (9th Cir.2004) (internal quotation marks and citation omitted). Where general jurisdiction is inappropriate, a court may still exercise specific jurisdiction where the nonresident defendant's "contacts with the forum give rise to the cause of action before the court." Doe v. Unocal Corp., 248 F.3d 915, 923 (9th Cir.2001).

Plaintiff does not claim that the Court has general jurisdiction over Defendants; rather, he argues only for specific jurisdiction. To determine whether a defendant's contacts with the forum state are sufficient to establish specific jurisdiction, the Ninth Circuit employs a three-part test:

(1) The non-resident defendant must purposefully direct his activities or consummate some transaction with the forum or resident thereof; or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws;

(2) the claim must be one which arises out of or relates to the defendant's forum-related activities; and

(3) the exercise of jurisdiction must comport with fair play and substantial justice, i.e. it must be reasonable.

*7 Schwarzenegger, 374 F.3d at 802 (quoting Lake v. Lake, 817 F.2d 1416, 1421 (9th Cir.1987)). Plaintiff bears the burden of satisfying the first two prongs. Sher, 911 F.2d at 1361. If Plaintiff does so, then the burden shifts to Defendants to "set forth a 'compelling case' that the exercise of jurisdiction would not be reasonable." CollegeSource, Inc. v. AcademyOne, Inc., 653 F.3d 1066, 1076 (9th Cir.2011) (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476–78, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985)).

1. Purposeful Availment/Purposeful Direction

The first prong is satisfied by either purposeful availment or purposeful direction. Brayton Purcell, 606 F.3d at 1128. For suits sounding in contract, courts typically apply the "purposeful availment" test, which asks whether the defendant has "performed some type of affirmative conduct which allows or promotes the transaction of business within the forum state.' " Sher, 911 F.2d at 1361 (quoting Sinatra v. Nat'l Enquirer, Inc., 854 F.2d 1191, 1195 (9th Cir.1988)). By contrast, for cases involving tortious conduct, courts most often employ a purposeful direction analysis, which asks whether the defendant has " 'purposefully direct[ed] his activities at the forum state, applying an "effects" test that focuses on the forum in which the defendant's actions were felt, whether or not the actions themselves occurred within the forum.' " CollegeSource, 653 F.3d at 1077 (quoting Yahoo! Inc. v. La Ligue Contre Le Racisme, 433 F.3d 1199, 1206 (9th Cir.2006) (en banc)). Here, Plaintiff claims a type of intentional tort, alleging that Defendants knowingly received transfers from S. Cohen, a Judgment–Debtor, for the express purpose of preventing Plaintiff from being able to enforce his valid Judgment, in violation of the UFTA, and thus purposeful direction analysis is applicable.

The Ninth Circuit evaluates purposeful direction using the three-part "Calder-effects" test. See Schwarzenegger, 374 F.3d at 803; see also Calder v. Jones, 465 U.S. 783, 104 S.Ct. 1482, 79 L.Ed.2d 804 (1984). Under this test, "the defendant allegedly must have (1) committed an intentional act, (2) expressly aimed at the forum state, (3) causing harm that the defendant knows is likely to be suffered in the forum state." Yahoo! Inc., 433 F.3d at 1206 (internal quotation marks omitted).

All three elements are satisfied here because Plaintiff has alleged that Defendants' intentional act of receiving fraudulently conveyed assets from S. Cohen to M. Cohen via FNBPay was done for the express purpose of frustrating Plaintiff's ability to enforce his judgment, obtained here in the Northern District of California. See State Farm Mut. Auto. Ins. Co. v. Tz'doko V'CHESED of Klausenberg, 543 F.Supp.2d 424, 431 (E.D.Pa.2008) (asserting jurisdiction over nonresident defendants who were alleged to be fraudulent transferees of judgment debtor, because effect of alleged fraudulent conveyance was to interfere with enforcement of a judgment in the forum state); Gutierrez v. Givens, 1 F.Supp.2d 1077, 1082–83 (S.D.Cal.1998) (asserting jurisdiction over nonresident bank defendant who was alleged to have knowingly engaged in fraudulent transactions "in furtherance of an illegal conspiracy to purposefully defraud 29,000 Californians of a judgment duly awarded by a California state court"). As alleged by Plaintiff, Defendants' conduct, as they knew it likely would, had the effect of injuring Plaintiff in California, where he resides and where he seeks to enforce his Renewed Judgment. Thus, under the "effects test," the purposeful direction requirement necessary for specific jurisdiction is satisfied.FN8

FN8. Moreover, even if this Court were to apply the purposeful availment test, Plaintiff has provided adequate documentary evidence supporting his allegation that Defendants have "purposefully avail[ed] [themselves] of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws ." Schwarzenegger, 374 F.3d at 802 (internal quotations omitted). For example, the www.fnbpay.com website is hosted by Pacnet, whose business address is in San Diego, California, and the FNBPay.com IP address location is San Ysidro, California. Declaration of Timothy P. Dillon in Support of Opposition to Defendants' Motion to Dismiss ("Dillon Opp'n Decl.") paras. 4–5 & Exs. 2–3. Furthermore, the address listed on the affiliated websites, www.newmerchantnow.com, www.fnbprocessing.com, and www.rxpillnet, is located in San Ysidro, California, and M. Cohen is listed as the contact person. Dillon Decl. paras. 61–62 & Ex. 18. Defendants insist in their opposition to Plaintiff's Brief Regarding Personal Jurisdiction and Venue that they have "[n]ever rented the post office box at 4492 Camino de la Plaza in San Ysidro, California," ECF No. 40 at 3, but in their motion to dismiss, they concede that "FNBPay did have use of a small mail box at private postal center located at 4492 Camino de la Plaza, in San Ysidro, California," between May 2010 and July 30, 2010, ECF No. 32 at 2. In any event, at this early stage, the Court construes all factual disputes regarding jurisdiction in favor of Plaintiff. See Brayton Purcell, 606 F.3d at 1127. Finally, S. Cohen, on behalf of FNB Mexico, appointed M. Cohen as FNB Mexico's "sole representative in the United States" and authorized him "to open and maintain a bank account with Wells Fargo Bank on behalf of First National Bank, S.A. de C.V.," arguably for purposes of doing business in the State of California. See Declaration of Timothy P. Dillon in Support of Reply Brief Regarding Personal Jurisdiction and Venue, Ex. 1. Thus, Defendants' contacts with California appear sufficient to establish specific jurisdiction even under a purposeful availment analysis.

2. Arising Out of or Relating to Forum–Related Activities

*8 The second prong of the test for specific jurisdiction requires that "the claim asserted in the litigation arises out of the defendant's forum related activities." Panavision Int'l, L.P. v. Toeppen, 141 F.3d 1316, 1322 (9th Cir.1998). This requires a showing of "but for" causation. Id. Here, the Court finds that "but for" Defendant's alleged forum-related activities of fraudulently transferring assets from S. Cohen to M. Cohen for the purpose of frustrating Plaintiff's ability to enforce his Renewed Judgment in the Northern District of California, Plaintiff would not have been injured as alleged. Accordingly, Plaintiff's claim arises out of Defendants' forum-related activities, and the second requirement for specific jurisdiction is satisfied. Plaintiff has therefore established a prima facie case of personal jurisdiction over Defendants.

3. Reasonableness

Finally, the Court must consider whether it is reasonable to exercise personal jurisdiction over Defendants. An otherwise valid exercise of specific jurisdiction is presumed reasonable, unless defendants " 'present a compelling case that the presence of some other considerations would render jurisdiction unreasonable.' " Ballard v. Savage, 65 F.3d 1495, 1500 (9th Cir.1995) (quoting Burger King, 471 U.S. at 477). Courts often consider the following seven factors: (1) the extent of the defendant's purposeful interjection into the forum state's affairs; (2) the burden on the defendant of defending in the forum; (3) the extent of conflict with the sovereignty of the defendant's state; (4) the forum state's interest in adjudicating the dispute; (5) the most efficient judicial resolution of the controversy; (6) the importance of the forum to the plaintiff's interest in convenient and effective relief; and (7) the existence of an alternative forum. Core–Vent Corp. v. Nobel Indus. AB, 11 F.3d 1482, 1487–88 (9th Cir.1993); see also Burger King, 471 U.S. at 476–77.

Defendants have failed to meet their high burden to overcome the presumption of reasonableness. Although Defendants' contacts with the forum state are not particularly extensive, nor are they insignificant, and the other factors are either neutral or favor exercising jurisdiction. First, Defendants' burden of defending this suit in California is no greater than would be the burden on Plaintiff, who resides in the Northern District of California, of litigating in Arizona. Second, maintaining the suit would not interfere with Arizona's sovereignty, since the only claim at issue is brought under the UFTA, which both Arizona and California have adopted. Third, California has a very strong interest in the enforcement of judgments of its courts, and in providing a forum for its residents to protect their judgments won in a California district court. Finally, judicial efficiency is best served by maintaining this suit in this district, where the underlying proceedings giving rise to Plaintiff's claim for fraudulent conveyance occurred.

*9 Balancing these seven factors, the Court concludes that the exercise of jurisdiction over Defendants is not unreasonable. The requirements of due process being satisfied, the Court finds that it has specific jurisdiction over Defendants, and accordingly DENIES Defendants' motion to dismiss for lack of personal jurisdiction.

B. Motion to Dismiss or Transfer for Improper Venue

Defendants argue that venue is not proper under 28 U.S.C. sec. 1391(a) and, alternatively, that the Court should exercise its discretion and transfer venue pursuant to 28 U.S.C. sec. 1404(a).

1. Motion to Dismiss

Under 28 U.S.C. sec. 1391(a), a civil action may be brought

only in (1) a judicial district where any defendant resides, if all defendants reside in the same State, (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated, or (3) a judicial district in which any defendant is subject to personal jurisdiction at the time the action is commenced, if there is no district in which the action may otherwise be brought.

28 U.S.C. sec. 1391(a). Venue may be proper in multiple districts so long as a "substantial part" of the underlying events took place in each of those districts. See Gulf Ins. Co. v. Glasbrenner, 417 F.3d 353, 356 (2d Cir.2005) (citing cases from various circuits).

Plaintiff claims that venue is proper because "a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated" in this District. 28 U.S.C. sec. 1391(a)(2). Plaintiff makes two arguments. First, Plaintiff argues that the events giving rise to the alleged claims include the issuance of the original Judgment in the Northern District of California and the recently Renewed Judgment by the same court, which Defendants' alleged unlawful conduct has prevented Plaintiff from being able to enforce. Second, Plaintiff argues that a substantial part of property that is the subject of the action is situated in the Northern District of California because the subject of this action is a Wells Fargo Account, and Wells Fargo is headquartered and maintains its principal place of business in San Francisco, California. See Pac. Decision Sciences Corp. v. Superior Court, 121 Cal.App.4th 1100, 1108, 18 Cal.Rptr.3d 104 (2004) ("When ... the issue, as in this case, involves jurisdiction to compel the obligor to pay one claimant and not a competing claimant, the debt or claim is usually regarded as having a situs in any state in which personal jurisdiction of the debtor can be obtained." (internal quotation marks and citations omitted)).

Plaintiff's arguments are well-taken, and Defendants have offered no convincing arguments in rebuttal. Defendants' arguments are directed more at transferring pursuant to 28 U.S.C. sec. 1404, and will therefore be addressed in the following section. The Court concludes that venue in this district is proper, and therefore Defendants' motion to dismiss for improper venue is DENIED.

2. Motion to Transfer

*10 Defendants also move, in the alternative, to transfer pursuant to 28 U.S.C. sec. 1404(a). Under 28 U.S.C. sec. 1404(a), a district court may, in its discretion, transfer any civil action to any other district or division where the action may have originally been brought, based on "the convenience of parties and witnesses, in the interest of justice." 28 U.S.C. sec. 1404(a); accord Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29, 108 S.Ct. 2239, 101 L.Ed.2d 22 (1988). However, a party seeking transfer must make "a strong showing of inconvenience to warrant upsetting the plaintiff's choice of forum." Decker Coal Co. v. Commonwealth Edison Co., 805 F.2d 834, 843 (9th Cir.1986).

"Section 1404(a) is intended to place discretion in the district court to adjudicate motions for transfer according to an individualized, case-by-case consideration of convenience and fairness." Stewart Org., 487 U.S. at 29 (internal quotation marks and citation omitted). Before transferring pursuant to sec. 1404(a), the Court should consider public factors relating to "the interest of justice" and private factors relating to "the convenience of the parties and witnesses." Decker Coal, 805 F.2d at 843. Such factors may include: (1) the location where relevant agreements were negotiated and executed; (2) the state that is most familiar with the governing law; (3) the plaintiff's choice of forum; (4) the parties' respective contacts with the forum; (5) the contacts relating to the plaintiff's cause of action in the chosen forum; (6) the differences in the costs of litigation in the two forums; (7) the availability of compulsory process to compel attendance of unwilling non-party witnesses; (8) the ease of access to sources of proof; (9) the presence of a forum selection clause; and (10) the relevant public policy of the forum state, if any. Jones v. GNC Franchising, Inc., 211 F.3d 495, 498–99 (9th Cir.2000).

Although Defendants argue that the convenience of witnesses and Defendants favors transferring this case to the District of Arizona, the Court is not persuaded that these factors outweigh both the private and public interest factors that favor maintaining the case in this District. First, although Defendants are located in Arizona, Plaintiff is located in California, and thus the convenience to the parties is a neutral factor. It would be equally burdensome for Plaintiff to litigate this case in Arizona as it would be for Defendants to litigate in California.

Second, Defendants assert that all of the relevant documents and records are located at Defendant FNBPay's principal place of business, which is located in the District of Arizona. However, M. Cohen concedes that FNBPay used a mailbox in San Ysidro, California from May 2010 to July 30, 2010. See Mot. to Dismiss at 2. Moreover, four websites allegedly affiliated with FNBPay—www.fnbpay.net, www.newmerchantnow.com, www.fnbprocessing.com, and www.rxpill.com—list the same FNBPay address in San Ysidro, California as their contact address. Dillon Decl. paras. 52–62 & Ex. 18. Clearly, at least some of the evidence is located in California.

*11 Third, although Defendants claim that all of their witnesses are located in Arizona, Defendants have failed to identify which witnesses—apart from Defendants themselves—would be inconvenienced by litigating this case in California. See Mot. to Dismiss at 6–7. For example, the factual allegations suggest that S. Cohen, the Judgment–Debtor, will be a key witness, and that he is presently located in Mexico. Thus, there is only a minimal difference in burden between requiring S. Cohen to appear in this case in Arizona or California. Furthermore, as discussed previously, Wells Fargo is domiciled in California and would therefore not be inconvenienced if called as a witness in this case. It is therefore unclear that transferring this case to Arizona would, in fact, be a greater convenience to the parties and witnesses.

Meanwhile, several factors favor retaining the case in the Northern District of California. As previously discussed, the underlying events giving rise to Plaintiff's current claims occurred in this district. S. Cohen, the Judgment–Debtor, has already been found in contempt by the Northern District for actions related to those alleged in the Complaint, and the district is already familiar with the background of the case. Therefore, it would not serve the interests of judicial economy to transfer this case, nor would it serve the interests of justice to require Plaintiff, a Northern District of California resident, to travel to Arizona to prosecute his claims. See Allen v. Scribner, 812 F.2d 426, 436–37 (9th Cir.1987) (holding that where the court is familiar with the case and transfer may lead to delay, the court is justified in refusing to transfer). Furthermore, California has a strong public policy interest in providing a forum for its residents to litigate to enforce judgments obtained in this state. See Gutierrez, 1 F.Supp.2d at 1084 (declining to transfer upon making similar findings).

Defendants have not met their burden of showing that litigating this action in this District will cause great inconvenience or unfairness as would justify transfer. In the absence of such a showing, the plaintiff's choice of forum is generally treated with great deference. See Creative Tech., Ltd. v. Aztech Sys. Pte, Ltd. ., 61 F.3d 696, 703 (9th Cir.1995). Accordingly, Defendants' motion to transfer venue is DENIED.

C. Preliminary Injunction

A plaintiff may not obtain a preliminary injunction unless he shows that "irreparable injury is likely in the absence of an injunction." Winter, 129 S.Ct. at 375 (emphasis in original). A mere possibility that irreparable injury will result is insufficient to warrant the extraordinary relief of a preliminary injunction. See Enyart v. Nat'l Conference of Bar Exam'rs, Inc., 630 F.3d 1153, 1165 (9th Cir.2011).

In its order granting a TRO, the Court previously found that Plaintiff had shown (1) S. Cohen has a history of dishonest behavior and of making fraudulent conveyances through the assistance of his family and associates to avoid execution of Plaintiff's Judgment; (2) it is likely that M. Cohen has assisted S. Cohen in channeling funds through the FNBPay Wells Fargo Account with intent to defraud Plaintiff, a creditor; and (3) ex parte temporary injunctive relief was necessary "to prevent the dissipation of more than $109,000 that is currently being held [in the Wells Fargo Account ... under the name FNBPay." TRO Mot. at 2; see TRO Order at 6–10. Based on these findings, the Court granted Plaintiff limited expedited discovery so that he could substantiate his claims in support of his motion for a preliminary injunction.

*12 Although it appeared at the time of Plaintiff's TRO application that he was likely to succeed on the merits of at least some of his claims and that he was likely to suffer irreparable injury in the absence of ex parte TRO relief, there now appear to be substantial questions concerning whether the subject Wells Fargo Account is still open, and if so, what funds remain. As previously noted, Plaintiff concedes "[i]t is unclear what funds remain or were deposited/withdrawn from the account since August 31, 2011." Reply Br. ISO PI.

Defendants produced bank statements for the Wells Fargo Account from January 1, 2010 through August 31, 2011, which show an ending balance of zero in August 2011, a negative ending balance in June and July 2011, and ending balances of $100 or less in February through May 2011. Dillon Reply Decl. para. 15 & Ex. 3. Admittedly, Defendants' bank statements reflect some curious activity. For example, the bank statement for the period July 1 through July 30, 2010 shows that $47,371.81 was deposited and $48,913.93 withdrawn during that month. Id.FN9 The bank statement for the period August 1 through August 31, 2010 shows that $110,833.09 was withdrawn on August 2, 2010, and then deposited back on August 3, 2010. See id. The Court agrees with Plaintiff that this pattern of transactions appears suspect and creates at least an inference of misconduct, when considered in the context of S. Cohen's past pattern and practice of fraudulently conveying funds through his relatives' bank accounts. Nevertheless, according to the bank statements produced and submitted as evidence to the Court, it appears that the last period of major activity in the Wells Fargo Account was February 2011. See id. From February 2011 to August 2011, there appear to be no significant transactions into or out of the Account, and Defendants assert that the Account has been closed since August 2011. See id. In light of this evidence that the Account may no longer be open or hold any funds, Plaintiff has not demonstrated that it is likely, as opposed to merely possible, that he will suffer irreparable harm in the absence of preliminary injunctive relief. See Stormans, 586 F.3d at 1127 (explaining that "[i]n Winter, the Supreme Court definitively refuted our 'possibility of irreparable injury' standard").

FN9. The second page of the bank statement exhibit is missing from the Dillon Reply Declaration but is reproduced is full in Exhibit A attached to the Declaration of Michael J. Cohen in Support of his Opposition to Plaintiff Gary Kremen's Reply in Support of Order to Show Cause Re: Preliminary Injunction ("Cohen Opp'n Decl."). The second page of the bank statement for the month of July 2010 shows more specifically that, among other transactions, $5,997.00 was withdrawn on July 23, 2010 and then deposited on July 26, 2010, and $15,129.45 was deposited on July 26, 2010 and then withdrawn the following day. Cohen Opp'n Decl. Ex. A at 21.

At the hearing, Plaintiff articulated a theory of what he believes is Defendants' and S. Cohen's "whack-a-mole" practice of opening and then closing various bank accounts under FNBPay's name, all with intent to defraud Plaintiff. While Plaintiff may ultimately be able to prove his theory, "[s]peculative injury does not constitute irreparable injury sufficient to warrant granting a preliminary injunction." Caribbean Marine Servs. Co. v. Baldrige, 844 F.2d 668, 674 (9th Cir.1988). At this time, Plaintiff has produced no evidence regarding these potential other accounts, merely hypothesizing that Defendants have other, as yet unidentified accounts containing fraudulently conveyed funds. Plaintiff's allegations of irreparable harm do not rise above the level of speculation.

*13 A preliminary injunction is "an extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such relief." Winter, 129 S.Ct. at 375–76 (internal citations omitted). Because it is no longer clear that Plaintiff is likely to suffer irreparable harm, no preliminary injunction can issue at this time. Therefore, the Court will not now revisit whether Plaintiff has shown a likelihood of success on the merits or whether the balance of equities and the public interest favor granting or denying a preliminary injunction.

IV. CONCLUSION

For the reasons discussed herein, the Court DENIES Defendants' filed a Motion to Dismiss for Lack of Jurisdiction and Improper Venue, and DENIES Defendants' Motion to Transfer to the District of Arizona pursuant to 28 U.S.C. sec. 1404. At this time, the Court also DENIES Plaintiff's motion for a preliminary injunction, without prejudice. The TRO previously granted expires effective upon the date of this Order.

IT IS SO ORDERED.

= = = = = = = A S S E T P R O T E C T I O N = = = = = = = =

Posted by Jay D. Adkisson, a co-author along with Chris Riser of Asset Protection: Concepts & Strategies (McGraw-Hill 2003) with main website http://www.assetprotectionbook.com and blog at http://www.assetprotectionblog.com see also http://www.jayadkisson.com and http://www.risad.com

Join our LinkedIn Group on Asset Protection at http://www.linkedin.com/groups?mostPopular=&gid=3694878

Join our Twitter on Asset Protection at http://www.twitter.com/jay_adkisson

Get our RSS Feed on Asset Protection at http://assetprotectionbook.com/forum/feed
RISER ADKISSON LLP, 100 Bayview Circle, Suite 210, Newport Beach, CA 92660, Ph: 949-200-7284, Fax: 877-296-0678, jay --at-- risad.com - http://www.risad.com - http://www.jayadkisson.com - http://www.captiveinsurancecompanies.com - http://www.eaibook.com - http://www.calejl.com

Purchase our book "Asset Protection: Concepts and Strategies" at
http://www.amazon.com/gp/product/0071432167?ie=UTF8&tag=httpassetproc-20&linkCode=as2&camp=1789&creative=9325&creativeASIN=0071432167?
User avatar
Riser Adkisson LLP
Riser Adkisson LLP
 
Posts: 2132
Joined: Thu Nov 13, 2008 8:06 pm
Location: California, Georgia, North Carolina, Oklahoma, and Texas

Re: Kremen: TRO Asset Freeze for Fraudulent Transfers

Postby Riser Adkisson LLP » Sat Jan 19, 2013 8:28 pm

Kremen v. Cohen, 2013 WL 61194 (N.D.Cal., Jan 2, 2013). http://goo.gl/LKyAJ

United States District Court, N.D. California, San Jose Division.

Gary KREMEN, Plaintiff,

v.

Michael Joseph COHEN, an individual; and FNBPay Corporation, an Arizona corporation, Defendants.

No. 5:11–CV–05411–LHK.

Jan. 2, 2013.

Attorneys and Law Firms

Timothy Patrick Dillon, Dillon & Gerardi, APC, San Diego, CA, for Plaintiff.

Michael Joseph Cohen, Chandler, AZ, pro se.

Stephen Michael Cohen, Meredith y Asociados, Attorneys at Law, Tijuana, B.C., MX, pro se.

Opinion

ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

LUCY H. KOH, District Judge.

*1 Plaintiff Gary Kremen ("Plaintiff") filed this action on November 8, 2011, under California's Uniform Fraudulent Transfer Act ("UFTA"), Cal. Civ.Code secs. 3439.04, 3439.05, 3439.07, 3440, against Defendants Michael Joseph Cohen ("M.Cohen") and FNBPay Corporation ("FNBPay"), a corporation incorporated under the laws of the State of Arizona (collectively "Defendants"). See ECF No. 1 ("Compl."). Plaintiff alleges that Defendants are the transferees of certain property, including money, fraudulently transferred to each of them by Stephen Michael Cohen ("S. Cohen" or "Judgment Debtor"), an individual against whom Plaintiff has an enforceable money judgment in the amount of $67,867,053.37 ("Renewed Judgment"). At a hearing on July 19, 2012, counsel for Plaintiff acknowledged that Plaintiff had by that point succeeded in collecting approximately $20 million. Tr. at 8:3–8. Now before the Court is Defendant Michael Cohen ("M.Cohen")'s renewed motion for summary judgment. The Court finds these matters appropriate for determination without oral argument and accordingly VACATES the January 3, 2012 hearing on the motion for summary judgment, see Civ. L.R. 7–1(b), and denies at moot M. Cohen's motion to appear by telephone at that hearing. Having considered the parties' submissions and the relevant law, and for the reasons discussed herein, the Court GRANTS M. Cohen's motion for summary judgment.1

I. BACKGROUND

A. Factual Background

The facts of this case have previously been summarized in the Court's Order Denying Defendants' Motion to Dismiss for Lack of Personal Jurisdiction and Improper Venue; and Denying Plaintiff's Motion for Preliminary Injunction, ECF No. 68, and will therefore be recounted here only to the extent necessary. Plaintiff is an internet entrepreneur who obtained a $65 million judgment (the "Judgment") in the United States District Court for the Northern District of California, on April 3, 2001, against S. Cohen and S. Cohen's alter ego entities for fraudulently converting the internet domain namewww.sex.com. See Compl. para. 16; see also Kremen v. Cohen, 337 F.3d 1024, 1026–27 (9th Cir.2003) (describing the facts giving rise to the Judgment and history between Kremen and S. Cohen relevant to this case); Kremen v. Jhuliana Aramis Cohen, No. 05–cv–01319–JM (POR), 2007 WL 1875779 (S.D. Cal. June 27, 2007) (same).

S. Cohen has resisted court orders and Kremen's attempts to exact payment on the Judgment. During the underlying litigation between Kremen and S. Cohen, S. Cohen failed to comply with a preliminary injunction order requiring the repatriation of $25 million from offshore accounts. See Pl.'s Request for Judicial Notice ("RJN") Ex. 15, ECF No. 158–7. S. Cohen fled to Mexico, where, in October 2005, he was detained and deported into the custody of the U.S. Marshal pursuant to an arrest warrant issued in March 2001 for S. Cohen's refusal to comply with various court orders. See RJN Ex. 4; RJN Ex. 6; Compl. at para. 18. In September 2005, Plaintiff brought an enforcement application, and the United States District Court for the Northern District of California found that seven individuals and twelve companies were acting in concert with S. Cohen to evade enforcement of the Judgment and enjoined them from acting to interfere with Plaintiff's rights thereunder. Pl.'s Opp'n to Def.'s First Mot. for Summ. J., ECF No. 76 ("Opp'n to First MSJ"), at 4. On November 18, 2009, Plaintiff obtained a judgment and permanent injunction against S. Cohen's step-daughter, Jhuliana Cohen; his ex-wife, Rosa Cohen; and his former attorney, Gustavo Cortez, based on their participation in fraudulent transfers to assist S. Cohen's attempts to conceal assets and avoid the Judgment. Id. at 4–5. On March 22, 2011, the United States District Court for the Northern District of California renewed the Judgment against S. Cohen in the amount of $67,867,053.36 ("Renewed Judgment"). Id. at 1–2.

*2 Most recently, Plaintiff filed this action on November 8, 2011, seeking relief against M. Cohen, who is S. Cohen's cousin, and against FNBPay, a corporation created by M. Cohen. Plaintiff alleges that M. Cohen formed FNBPay to assist S. Cohen in funneling money through various websites with the intent to conceal S. Cohen's assets from Plaintiff and avoid payment of Plaintiff's Renewed Judgment. Compl. at para. 21. Plaintiff further alleges that S. Cohen has used M. Cohen to conduct business through FNBPay on S. Cohen's behalf, and to open bank accounts in M. Cohen's and/or FNBPay's name to transact business for the benefit of S. Cohen. Id. at para. 20. In particular, Plaintiff asserts that deposits and withdrawals of funds into and out of a specific Wells Fargo bank account (the "Wells Fargo Account"), opened by M. Cohen under the name FNBPay, were the result of transfers made by, or at the direction of, S. Cohen. Id.

B. Procedural History

Plaintiff filed this action on November 8, 2011. On December 2, 2011, Plaintiff filed an ex parte motion seeking a temporary restraining order ("TRO") freezing certain assets "to prevent the dissipation of more than $109,000 that is currently being held at Wells Fargo Bank ... under the name FNBPay" ("Wells Fargo Account"). ECF No. 5 at 2. This account is alleged to be the vehicle for the alleged fraudulent transfers from S. Cohen. For good cause shown, the Court granted the TRO on December 7, 2011, granted Plaintiff's request for limited expedited discovery, and issued an Order to Show Cause ("OSC") setting a briefing schedule and hearing date on Plaintiff's motion for a preliminary injunction enjoining Defendants from disposing of funds held in the Wells Fargo Account. See ECF No. 16. The Court also requested supplemental briefing on whether this Court had personal jurisdiction over Defendants and whether venue in this district was proper. Defendants answered the OSC on December 20, 2011, and both sides submitted supplemental briefing on personal jurisdiction and venue. Defendants also filed a motion to dismiss for lack of jurisdiction and improper venue, or, in the alternative, a motion to transfer to the District of Arizona pursuant to 28 U.S.C. sec. 1404. On January 7, 2012, the Court denied Defendants' motion to dismiss or, in the alternative, to transfer. See ECF No. 68. Upon introduction of evidence that the Wells Fargo Account at issue had in fact been closed in August 2011 with a closing balance of $0.00, the Court denied Plaintiff's motion for a preliminary injunction for failure to show a risk of irreparable harm in the absence of an injunction, and likewise dissolved the previously issued TRO on January 7, 2011. See id. Defendant M. Cohen filed a motion for summary judgment on February 6, 2012. See ECF No. 72. On April 2, 2012, S. Cohen filed a motion to intervene. See ECF No. 93. On July 17, 2012, this Court denied the motion to intervene, and denied the motion for summary judgment under Federal Rule of Civil Procedure 56(d). In denying the motion for summary judgment, the Court noted that Plaintiff had not raised a genuine issue of material fact as to the existence of an actual transfer of funds, as required by the UFTA. However, because discovery had not yet closed, Plaintiff was entitled to complete discovery and attempt to oppose summary judgment on the basis of a fully developed record. ECF No. 142. At a case management conference held on July 19, 2012, the Court even extended the August 23, 2012 discovery deadline to October 4, 2012, to ensure that Plaintiff had sufficient opportunity to gather evidence to oppose summary judgment. See ECF No. 143. M. Cohen then filed his renewed motion for summary judgment on October 15, 2012. ECF No. 156. Plaintiff filed an opposition on October 29, 2012, ECF No. 158, and M. Cohen filed a reply on November 13, 2012. ECF No. 163.

II. DISCUSSION

A. Legal Standard

*3 Summary judgment is proper where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). A "genuine" dispute as to material facts exists only if there is sufficient evidence for a reasonable jury to return a verdict in favor of the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). On a motion for summary judgment, the Court draws all reasonable inferences in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

The moving party has the burden of demonstrating the absence of a genuine issue of fact for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). To meet its burden, "the moving party must either produce evidence negating an essential element of the nonmoving party's claim or defense or show that the nonmoving party does not have enough evidence of an essential element to carry its ultimate burden of persuasion at trial." Nissan Fire & Marine Ins. Co., Ltd. v. Fritz Companies, Inc., 210 F.3d 1099, 1102 (9th Cir.2000) (citation omitted). Once the moving party has satisfied its initial burden of production, the burden shifts to the nonmoving party to show that that there is a genuine issue of material fact. Id. at 1103. A party asserting that a fact is genuinely disputed must support that assertion by either citing to particular parts of the record or by showing that the materials cited by the moving party do not establish the absence of a genuine dispute. Fed.R.Civ.P. 56(c). The nonmovant must go beyond its pleadings "and by her own affidavits, or by the depositions, answers to interrogatories, and admissions on file, designate specific facts showing that there is a genuine issue for trial." Celotex, 477 U.S. at 324 (internal quotation marks and citation omitted). The nonmovant must submit sufficient evidence to establish a material factual dispute, but he need not show the issue will be resolved conclusively in his favor. Liberty Lobby, 477 U.S. at 248–49 (citation omitted).

B. Analysis

As in his previous motion, M. Cohen moves for summary judgment on the ground that Plaintiff has failed to establish an essential element of his UFTA claim, namely that a transfer of assets from S. Cohen to M. Cohen ever occurred. To prevail on his UFTA claims, Plaintiff has the burden of proving the elements of a fraudulent transfer by a preponderance of the evidence. In re 3dfx Interactive, Inc., 389 B.R. 842, 863–64 (Bankr.N.D.Cal.2008) (citing Whitehouse v. Six Corp., 40 Cal.App.4th 527, 604, 48 Cal.Rptr.2d 600 (1995)). The UFTA provides that a transfer is fraudulent as to a creditor if it is made with the actual intent to hinder, delay, or defraud any creditor of the debtor. Cal. Civ.Code sec. 3439.04(a)(1). In addition, a transfer is constructively fraudulent if it is made without the debtor receiving a reasonable equivalent value in exchange for the transfer at a time when the debtor was insolvent. Cal. Civ.Code sec. 3439.05. For a fraudulent transfer to occur, however, there must be a "transfer" of an "asset" as defined by the UFTA. Fidelity Nat'l Title Ins. Co. v. Schroeder, 179 Cal.App.4th 834, 841, 101 Cal.Rptr.3d 854 (2009). An "asset" includes any property of a debtor, except to the extent such property is encumbered by a valid lien. Cal. Civ.Code sec. 3439.01(a)(1). The UFTA defines "transfer" broadly as "every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset, and includes payment of money, release, lease, and creation of a lien or other encumbrance." Cal. Civ.Code sec. 3439.01(i).

*4 In ruling on M. Cohen's previous motion for summary judgment, this Court found that "the circumstantial evidence of connections between Defendants, S. Cohen, and the activity in the Wells Fargo Account, even considered in light of the litigation history between Plaintiff and S. Cohen, [was] insufficient to raise a genuine issue of material fact as to the existence of an actual transfer of funds." ECF No. 142 at 8. In opposing M. Cohen's renewed motion, Plaintiff has presented much of that same evidence again. For the reasons stated in this Court's previous Order denying summary judgment, the mere transfer in and out of the Wells Fargo Account of various sums during specific time periods, without evidence that S. Cohen deposited them, cannot establish the required transfer. Evidence of S. Cohen's pattern of using family members to hide assets cannot change that fact.

However, in opposing this renewed motion, Plaintiff has also produced some new evidence not presented in opposing the previous motion. In particular, Plaintiff has pointed to a series of transactions involving two companies, Baja Datacenter and Medicina Mexico, made through an account in M. Cohen's name on the online payment processing site Paypal. Plaintiff has also pointed to several other transactions involving Medicina Mexico but not involving the Paypal account, and to deposits to the Wells Fargo Account made by a man named Mario Saucido.2

As an initial matter, Plaintiff claims that any transfers not involving the Wells Fargo Account are outside the scope of what is alleged in the complaint, and therefore cannot form the basis for liability in this lawsuit. The Court need not decide whether the non-Wells Fargo transactions are within the boundaries of the claims stated in the complaint, because even if they are, Plaintiff has not raised a genuine issue of material fact as to whether any of these transactions were fraudulent transfers from S. Cohen to M. Cohen.

Specifically, Plaintiff has identified four types of deposits to the Paypal account that he alleges constitute transfers from S. Cohen to M. Cohen: (1) deposits from a credit card in S. Cohen's name totaling $22.55; (2) deposits from a credit card in the name of a company called Baja Datacenter totaling $845.00; (3) deposits from a company called Medicina Mexico totaling $25,359.48; and (4) deposits from Daniel Cohen totaling $1,960.00.

In addition to the Paypal transactions, Plaintiff claims that S. Cohen has transferred money to M. Cohen by using Medicina Mexico money to fund M. Cohen's legal defense in this matter, and by funding the purchase of domain names through Medicina Mexico. Finally, Plaintiff claims that funds transferred into the Wells Fargo account by a man named Mario Saucido were actually S. Cohen's funds, because Mario Saucido is "a business associate of S. Cohen's ." Opp'n at 20. Taking all the evidence in the light most favorable to Plaintiff, the Court finds that there is no genuine issue of material fact as to whether any of these transactions constituted a fraudulent transfer from S. Cohen to M. Cohen.

1. Deposits from S. Cohen's Credit Card

*5 Plaintiff first argues that three deposits into M. Cohen's Paypal account—one for $11.60, one for $4.00, and one for $6.95—constitute fraudulent transfers from S. Cohen to M. Cohen. Plaintiff has produced evidence that these three deposits were from a credit card held in S. Cohen's name. See Dillon Decl. at para. 17. Even assuming, as the Court must at summary judgment, that S. Cohen did, in fact, make these three deposits totaling $22.55 to M. Cohen's Paypal account, it does not raise a genuine issue of material fact as to whether S. Cohen made transfers "with actual intent to hinder, delay, or defraud any creditor." Cal. Civ.Code sec. 3439.04(a)(1). Plaintiff is seeking to enforce a judgment exceeding $65,000,000. The suggestion that S. Cohen would attempt to "hinder, delay, or defraud" plaintiff out of just over $20 by transferring it to his cousin's Paypal account, when he owed such a significant amount and has surely spent significantly more already in his attempts to participate in this litigation, simply is not credible. Summary judgment is appropriate where what dispute there may be is not genuine, that is, "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Liberty Lobby, 477 U.S. at 248. No reasonable jury could find by a preponderance of the evidence that a fraudulent transfer occurred in the form of these three small deposits on the basis of this record. Accordingly, the three small deposits from this Visa card to M. Cohen's Paypal account do not raise a genuine issue of material fact.

2. Deposits from Baja Datacenter

Plaintiff's second argument is that a series of small deposits totaling $845.00 from a credit card held in the name of Baja Datacenter constitute fraudulent transfers from S. Cohen to M. Cohen. To begin with, though more than the $22.55 amount transferred from the S. Cohen credit card discussed above, this amount is similarly negligible when compared with the amount of the judgment Plaintiff is seeking to enforce. It would again be illogical to contemplate the concealment of $845.00 to avoid payment of a judgment in the eight figures.

Moreover, a transfer from Baja Datacenter is not, on its own terms, a transfer from S. Cohen. A transfer made not by the debtor himself but by a company he owns or controls may be a transfer for UFTA purposes only if the company is the alter ego of the debtor. See Fleet Credit Corp. v. TML Bus Sales, Inc., 65 F.3d 119, 120 (9th Cir.1995) (noting with approval district court's determination that transferor company was alter ego of debtor, allowing creditor to reach transferred assets). To establish that a company is an individual's alter ego under California Law, a party must prove "there is such a unity of interest and ownership that the individuality of such corporation and the owner or owners of its stock has ceased." Mesler v. Bragg Mgmt. Co., 39 Cal.3d 290, 299, 216 Cal.Rptr. 443, 702 P.2d 601 (1985) (internal quotation marks and citation omitted). "Mere ownership of all the stock and control and management of a corporation by one or two individuals is not of itself sufficient to cause the courts to disregard the corporate entity." Meadows v. Emett & Chandler, 99 Cal.App.2d 496, 499, 222 P.2d 145 (1950).

*6 As an initial matter, Plaintiff has not pleaded that Baja Datacenter (or any other company) is an alter ego of S. Cohen. California Courts have found this fact alone can justify summary judgment on a claim that can only succeed on an alter ego theory. See Leek v. Cooper, 194 Cal.App.4th 399, 416, 125 Cal.Rptr.3d 56 (2011) (upholding trial court's grant of summary judgment where claim against corporation could succeed only on alter ego theory not pleaded in complaint).

Moreover, the evidence Plaintiff has adduced that Baja Datacenter is an alter ego of S. Cohen is not sufficient to raise a genuine issue of material fact. The evidence is as follows: (1) that S. Cohen once presented himself as Baja Datacenter's representative in negotiating domain name ownership, Dillon Decl. at para. 22; and (2) that the addresses used to register the domain namebajadatacenter.com and used as the billing address for the credit card in Baja Datacenter's name are also addresses for S. Cohen. See id. Even interpreted in the light most favorable to Plaintiff, these two facts simply cannot establish the "unity of interest" required to treat Baja Datacenter's actions as S. Cohen's actions. Thus, Baja Datacenter is not an alter ego of S. Cohen. Accordingly, there is no triable issue of fact as to whether the Baja Datacenter deposits were transfers from S. Cohen to M. Cohen.

3. Deposits from Medicina Mexico

Plaintiff's third argument concerns a more significant amount of money: deposits totaling $25,359.48 made to M. Cohen's Paypal account tied to a company called Medicina Mexico. As an initial matter, the evidence does not show that the relevant deposits were made by the company Medicina Mexico. See Dillon Decl. at para. 40. Rather, the deposits appear to be payments made to M. Cohen's Paypal account by customers making online purchases from Medicina Mexico, facilitated by a payment service called osCommerce22. Id. Plaintiff has argued that "$25,359.48 was deposited into M. Cohen's PayPal Account based on Medicina Mexico's online pharmacy sales." Dillon Decl. at para. 40; Opp'n at 7. But Plaintiff has not produced any evidence that the transfer came from Medicina Mexico or from S. Cohen, rather than from the customers who made the purchases. Transfers from third-party customers to M. Cohen are not transfers from S. Cohen for UFTA purposes.

Even if the payments had come directly from Medicina Mexico, they would not, on the evidence Plaintiff has adduced, constitute transfers from S. Cohen. Like Baja Datacenter, Medicina Mexico is a business, and thus transfers from Medicina Mexico do not constitute transfers from S. Cohen unless Plaintiff is able to establish that Medicina Mexico is merely an alter ego of S. Cohen. Plaintiff has presented evidence that 98% of Medicina Mexico is owned by Baja Datacenter. See Dillon Decl. at para. 29. As this Court has found that Baja Datacenter is not, on the evidence adduced, an alter ego of S. Cohen, Baja Datacenter's ownership of Medicina Mexico cannot establish any relationship between S. Cohen and Medicina Mexico. Even if it could, mere ownership is not sufficient to establish an alter ego. See Meadows, 99 Cal.App.2d at 499, 222 P.2d 145. This leaves only the 2% of Medicina Mexico, which Plaintiff claims is owned by S. Cohen. S. Cohen's ownership of 2% of Medicina Mexico cannot, even giving Plaintiff every possible benefit of the doubt, establish the "unity of interest" required to treat Medicina Mexico as an alter ego. Accordingly, the Court finds that there is no genuine issue of material fact as to whether the deposits allegedly for Medicina Mexico purchaces were transfers from S. Cohen to M. Cohen.

4. Non–Paypal Medicina Mexico transactions

*7 Beyond the Paypal account transfers, Plaintiff has also alleged that money from Medicina Mexico is funding M. Cohen's legal bills. This argument fails to establish a transfer for the same reason stated above: a transfer from Medicina Mexico is not a transfer from S. Cohen. Additionally, Plaintiff presents evidence that some domain names owned by Medicina Mexico were purchased using Baja Datacenter's and S. Cohen's credit cards. It is not clear how Plaintiff believes this constitutes a transfer from S. Cohen to M. Cohen, as it does not appear that M. Cohen received either funds or the domain names in these transactions. Thus, S. Cohen's funding of the purchase of domain names does not establish a genuine issue of material fact as to whether there was a transfer from S. Cohen to M. Cohen.

5. Transfers from Daniel Cohen

Plaintiff also argues that four transfers from Daniel Cohen, who is S. Cohen's son, to M. Cohen's Paypal account constitute transfers from S. Cohen to M. Cohen. Plaintiff has presented no evidence whatsoever that these transfers came from S. Cohen, rather than from Daniel Cohen. Accordingly, the Court finds that there is no genuine issue of material fact as to whether they were, in fact, transfers from S. Cohen.

6. Transfers from Mario Saucedo

Plaintiff claims that deposits to the Wells Fargo Account totaling $280.00, made by Mario Saucedo, are actually transfers from S. Cohen. Plaintiff's only evidence for this assumption is that Mario Saucedo had been making transfers to S. Cohen, and at some point stopped those transfers, and started making transfers to the Wells Fargo Account. Plaintiff has presented no evidence whatsoever to establish that the funds actually came from S. Cohen. The fact that Mario Saucedo made some transfers to S. Cohen does not establish that subsequent transfers to M. Cohen were actually being made by S. Cohen, rather than by Mario Saucedo. Moreover, Plaintiff has not presented any evidence aside from the bank transfers of the relationship between Mario Saucedo and S. Cohen or M. Cohen to substantiate his assertion that Mario Saucdeo is S. Cohen's business associate. Accordingly, these deposits cannot be transfers from S. Cohen for purposes of the UFTA.

In sum, Plaintiff has produced some evidence suggesting suspicious behavior on the part of S. Cohen and the various companies with which he appears to be involved. But as in Plaintiff's opposition to Defendants' previous summary judgment motion, Plaintiff has not adduced prima facie evidence of an actual fraudulent transfer of assets from S. Cohen to M. Cohen. To prevail under the UFTA, Plaintiff must prove that there was an actual transfer of assets from S. Cohen to M. Cohen, and that S. Cohen had actual or constructive intent to hinder, delay, or defraud Plaintiff. The only actual potential transfer of any kind Plaintiff has identified was for an amount so negligible in the context of the large judgment at issue here that there can be no genuine issue of fact concerning S. Cohen's intent in making that transfer.

*8 Moreover, Plaintiff has had multiple opportunities to produce evidence to substantiate his allegations of fraudulent transfers, and has repeatedly failed to do so. In particular, the Court denied Plaintiff's motion for a preliminary injunction when Plaintiff's allegations concerning the contents of the Wells Fargo Account made in seeking a temporary restraining order could not be substantiated. See ECF No. 68 at 18–19 (denying preliminary injunction). Further, rather than granting Defendants' first summary judgment motion when Plaintiff failed to produce evidence of fraudulent transfers, the Court allowed Plaintiff to complete additional discovery, and even extended the discovery deadline to ensure that Plaintiff had sufficient opportunity to marshal the evidence. See ECF Nos. 142 (denying summary judgment); 143 (extending discovery deadline). In opposing the present motion, rather than producing the necessary evidence to substantiate his original allegations about the Wells Fargo Account and FNB Pay, Plaintiff has resorted to a range of arguments he has never before presented, and which concern accounts and entities never mentioned in the Complaint or in any of his previous filings, a tactic which confirms that Plaintiff has not been able to locate any evidence to support his original claims.

Because Plaintiff has failed to meet his burden to raise a genuine issue of material fact as to whether there were actual fraudulent transfers to Defendants by S. Cohen, there can be no liability under California's Uniform Fraudulent Transfer Act. Though the Court is sympathetic to Plaintiff's desire to collect the remainder of his judgment, Plaintiff has demonstrated through repeated failure to prove his case that he simply does not have evidence of fraudulent transfers from S. Cohen to M. Cohen. Accordingly, M. Cohen's motion for summary judgment is GRANTED. The Clerk shall close the file.

IT IS SO ORDERED.

Footnotes

1

Defendant FNB Pay has not moved for summary judgment, and has not appeared in this litigation. Default was entered against FNB Pay on March 14, 2012. ECF No. 83.

2

Plaintiff has also discussed at length transfers made out of M. Cohen's Paypal and Wells Fargo accounts. Though this evidence may be relevant to intent, it cannot establish the prerequisite of a transfer from S. Cohen to M. Cohen.


= = = = = = = A S S E T P R O T E C T I O N = = = = = = = =

Posted by Jay D. Adkisson, a co-author along with Chris Riser of Asset Protection: Concepts & Strategies (McGraw-Hill 2003) with main website http://www.assetprotectionbook.com and blog at http://www.assetprotectionblog.com see also http://www.jayadkisson.com and http://www.risad.com

Join our LinkedIn Group on Asset Protection at http://www.linkedin.com/groups?mostPopular=&gid=3694878

Join our Twitter on Asset Protection at http://www.twitter.com/jay_adkisson

Get our RSS Feed on Asset Protection at http://assetprotectionbook.com/forum/feed
RISER ADKISSON LLP, 100 Bayview Circle, Suite 210, Newport Beach, CA 92660, Ph: 949-200-7284, Fax: 877-296-0678, jay --at-- risad.com - http://www.risad.com - http://www.jayadkisson.com - http://www.captiveinsurancecompanies.com - http://www.eaibook.com - http://www.calejl.com

Purchase our book "Asset Protection: Concepts and Strategies" at
http://www.amazon.com/gp/product/0071432167?ie=UTF8&tag=httpassetproc-20&linkCode=as2&camp=1789&creative=9325&creativeASIN=0071432167?
User avatar
Riser Adkisson LLP
Riser Adkisson LLP
 
Posts: 2132
Joined: Thu Nov 13, 2008 8:06 pm
Location: California, Georgia, North Carolina, Oklahoma, and Texas


Return to Fraudulent Transfers

Who is online

Users browsing this forum: Majestic-12 [Bot] and 2 guests