Adding an alter ego as a judgment debtor in Federal Court is the topic of this blog post.
This blog post will discuss adding an alter ego as a judgment debtor in Federal Court in the State of California which is within the jurisdiction of the Ninth Circuit Court of Appeals although the basic principles would apply in another state that allows amending a judgment to add an alter ego as a judgment debtor.
Statutory authorization for adding an alter ego as a judgment debtor in Federal Court.
Adding an alter ego as a judgment debtor in Federal Court is authorized by Federal Rule of Civil Procedure 69(a) if the requirements are met.
Rule 69(a) of the Federal Rules of Civil Procedure states in pertinent part that, “(a) In General.
(1) Money Judgment; Applicable Procedure. A money judgment is enforced by a writ of execution, unless the court directs otherwise. The procedure on execution—and in proceedings supplementary to and in aid of judgment or execution—must accord with the procedure of the state where the court is located, but a federal statute governs to the extent it applies.”
Thus a judgment debtor may be added to a judgment under the alter ego liability theory only if state law allows for the procedure.
The Ninth Circuit Court of Appeals has stated that the federal courts may permit judgment creditors to amend the judgment to add as a judgment debtor a nonparty alter ego if the forum state’s law allows such amendment.
The laws of some states do in fact allow for such an amendment. In the State of California for example, this procedure is authorized under Code of Civil Procedure section 187. The alter ego liability theory is the most common reason to request amendment of a judgment although successor corporation liability can also be used in appropriate situations.
The alter ego liability theory essentially argues that an identity exists between the new party and the original party, whose participation in the trial leading to the judgment represented the newly added party.
Amending a judgment to add a judgment debtor is a powerful tool if used in the appropriate types of situations.
An excellent example of such a situation would be a case where a professional corporation is owned by one person who then proceeds to drain the assets of the corporation by alleging they are “loan repayments” to the individual and sole shareholder before dissolving the corporation. Then under an almost identical name they continue to practice their profession at the same location as the dissolved professional corporation. When examined under oath at a judgment debtor examination they fail to produce any corporate minutes or resolutions regarding the alleged loans.
Another example of a good situation might be that of a successor corporation who continues the same exact business as the predecessor except for the name.
Code of Civil Procedure section 187 states that, “When jurisdiction is, by the Constitution or this Code, or by any other statute, conferred on a Court or judicial officer, all the means necessary to carry it into effect are also given; and in the exercise of this jurisdiction, if the course of proceeding be not specifically pointed out by this Code or the statute, any suitable process or mode of proceeding may be adopted which may appear most conformable to the spirit of this Code.”
Numerous decisions of the California Courts of Appeal have stated that Code of Civil Procedure section 187 allows a trial court to amend a judgment to add judgment debtors. The rationale used is that amending a judgment to add an alter ego as a judgment debtor does not result in the addition of a new defendant but merely inserts the correct name of the real defendant.
And a recent decision from a California Court of Appeal states that great liberality is encouraged in the allowance of amendments brought pursuant to Code of Civil Procedure section 187. That same California Court of Appeal also stated there is no requirement for an evidentiary hearing, a noticed motion is all that is required.
Sample motion for order adding an alter ego as a judgment debtor in Federal Court for sale.
Attorneys or parties who would like to view a portion of a sample 13 page motion to amend a judgment in United States District Court containing brief instructions, a memorandum of points and authorities with citations to case law and statutory authority, sample declaration and proof of service sold by the author can see below.
The author of this blog post, Stan Burman, has collected California judgments since 1992, and is a freelance paralegal that has worked in California and Federal litigation since 1995 and created over 300 sample legal documents for sale.
For licensed attorneys and law firms that need assistance with any California or Federal litigation matters, Mr. Burman is available on a freelance basis. Mr. Burman may be contacted by e-mail at DivParalgl@yahoo.com for more information. He accepts payments through PayPal which means that you can pay using most credit or debit cards.
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Please note that the author of this blog post, Stan Burman is NOT an attorney and as such is unable to provide any specific legal advice. The author is NOT engaged in providing any legal, financial, or other professional services, and any information contained in this blog post is NOT intended to constitute legal advice.
The materials and information contained in this blog post have been prepared by Stan Burman for informational purposes only and are not legal advice. Transmission of the information contained in this blog post is not intended to create, and receipt does not constitute, any business relationship between the author and any readers. Readers should not act upon this information without seeking professional counsel.