Presenting a live 90-minute webinar with interactive Q&A Enforcing Judgments: Strategies for Locating and Recovering Corporate Assets Leveraging Alter Ego Liability, Piercing the Corporate Veil, Reverse Piercing and Fraudulent Conveyance Theories TUESDAY, NOVEMBER 3, 2015 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Matthew S. Kenefick, Partner, Jeffer Mangels Butler & Mitchell , San Francisco Daniel A. Fass, Klapper & Fass , White Plains, N.Y . David Seth Hill, Halling & Cayo , Milwaukee The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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Post-Judgment Discovery Matthew S. Kenefick
Sources of Information Sub Rosa: • Internal Materials • Informal Discovery Formal Discovery: • Third Party • Debtor 6
Internal Materials Credit Applications Financial Statements Cancelled Checks Invoices Tax Reporting Materials Use for internal analysis and to determine third- party information sources -- sub rosa 7
Informal Discovery Private Investigators Witness Interviews Online Searches (social media) UCC Filings Send funds and trace Use for internal analysis and to determine third- party information sources -- sub rosa 8
Third Party Discovery Subpoena practice Banks, business affiliates, employers • Documents vs. testimony/Third-Party Examination • Centralized location for service -- Department of Business Oversight Witness Interviews Federal vs. State Notice Requirements CCP 1985.3 Issues Out of State Subpoena Practice Follow-up Subpoenas 9
Discovery From Debtor OEX • 1 year lien created by service • 1x every 4 months Written Discovery Reliability Issues Strategic Aspects • Lose surprise, might intimidate into payment or force into Bankruptcy 10
Best Practices Move quickly Check own files Be precise in requests Use element of surprise Create liens by service of OEX Follow up discovery Focus on info from third-parties who lack an interest in dispute 11
Executing a Judgment 12
Execution Methods Levy writ of execution Receiver Charging Orders Lien Creation 13
Writ of Execution Levy on standard banks Levy receivables • Keeper/Till-Tap Real property interests • Stock cooperatives Personal property Items in Third Party possession Wage garnishment – special procedures Combine service with subpoenas – follow money 14
Receivership Collect funds ( e.g ., rents) Marshall assets Parked funds (IRS, bonds etc.) Expensive – better for larger/difficult situations 15
Other Execution Issues Charging Orders (partnership/LLC) • Lien created by service of motion • Foreclose partnership/LLC interest Create liens • JL-1; Abstract of Judgment, Pending Action Assert leverage • CADL suspension; Contractor’s license Wary of Bankruptcy Third-Party Claims for Transfers • UFTA, Successor liability, Alter-Ego 16
Matthew S. Kenefick Jeffer Mangels Butler & Mitchell, LLP (415) 398-8080 msk@jmbm.com www.jmbm.com 17
ENFORCING JUDGMENTS: STRATEGIES FOR LOCATING AND RECOVERING CORPORATE ASSETS Piercing the corporate veil; alter ego theory; reverse piercing Presented by: DANIEL A. FASS, ESQ. Klapper & Fass 170 Hamilton Avenue White Plains, NY 10601 Tel. No. 914.287.6466 Email: dfass@klapperfass.com Web: www.collectionsnewyork.com
OVERVIEW Presentation Limited Primarily to New York Law and a case study which brings together all of the elements Finding Corporate Assets By Undoing Fraudulent Transfers (F/T) and Veil Piercing Requires Skills That All Good Collection Attorneys Need: Being “Jim Rockford” - Good P.I. Instincts Being a Forensic Accountant Knowing Corporate Law Willing to tough it out - time intensive, complex and frustrating Pursuing F/T and Veil Piercing case brings together at least four bodies of law: 19
• Debtor-Creditor Law • Common Law • Corporate Law • Bankruptcy Law 20
PROCEDURAL TOOLS AND DEFINITIONS Article 52 of New York’s Civil Practice Law and Rules (“CPLR”) tells you how to use the state court to enforce a judgment Article 52 also tells you what kinds of assets are covered by its enforcement procedures Article 52 does not tell you what is a fraudulent transfer, or what is veil piercing or when someone is the alter- ego of the debtor 21
CPLR § 5201 (b) defines property subject to enforcement: A money judgment may be enforced against any property which could be assigned or transferred, whether it consists of a present or future right or interest and whether or not it is vested, unless it is exempt from application to the satisfaction of the judgment . Broad and covers most “plain vanilla” assets; but what about something like a trade name? Trade name could be important if it is the only asset a debtor has See Chocolate Singles case: Victoria Graphics, Inc. v. Priorities Publications, Inc. , 167 Misc.2d 607 (Civ. Ct. Queens Co. 1996) – trademark assignable if assignee in same or similar business as assignor 22
What about a debtor’s “book of business”? See Mitchell v. Lyons Professional Services, Inc. , 09 Civ. 1587 (EDNY, Decided June 8, 2015) – Customer accounts were property of debtor, subject to fraudulent transfer claim In NY, creditor who is trying to retrieve assets debtor has transferred to another person or who wants to go behind the façade of the corporation to hold an officer, director or shareholder liable, must start a new proceeding commonly referred to as a “turnover” proceeding, using the special proceeding mechanism provided by CPLR Article 4 23
See CPLR § 5225 (b): Property not in the possession of judgment debtor. Upon a special proceeding commenced by the judgment creditor, against a person in possession or custody of money or other personal property in which the judgment debtor has an interest, or against a person who is a transferee of money or other personal property from the judgment debtor, where it is shown that the judgment debtor is entitled to the possession of such property or that the judgment creditor's rights to the property are superior to those of the transferee, the court shall require such person to pay the money, or so much of it as is sufficient to satisfy the judgment … 24
What if you obtained a judgment in federal court? Federal Court has power to enforce it owns judgments. Kashi v. Gratsos , 712 F.Supp. 23, 25-26 (S.D.N.Y. 1989) Fed. R. Civ. P. 65 provides that federal court can use state judgment enforcement procedures. Mitchell v. Lyons Professional Services, Inc. , 727 F.Supp.2d 120 (E.D.N.Y. 2010) (turnover order also available to assert piercing corporate veil and alter- ego theories of liability) A new proceeding not required, move by Order to Show Cause in the district court where judgment obtained Diversity and venue issues arise where a transferee is out of that jurisdiction Certain cases, including veil piercing and alter-ego are not considered enforcement of judgment and require new action. See Epperson v. Entertainment Express, Inc ., 242 F.3d 100 (2d Cir.2001) (district courts lack ancillary jurisdiction over claims of alter ego liability and veil-piercing, that raise an independent controversy with a new party in an effort to shift liability). 25
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