21st Century Financial Services, LLC v. Manchester Financial Bank
255 F. Supp. 3d 1012
| S.D. Cal. | 2017Background
- 21st Century Financial Services (Plaintiff) obtained an arbitration award against Manchester Financial Bank (the Bank) for unpaid fees; the award was confirmed in Texas and registered in this Court for enforcement.
- The Bank never became operational or capitalized; pre-formation expenses were funded by Manchester Financial Group, L.P. (MFG, LP). MFG, LP issued checks to 21st Century signed by Richard Gibbons (president of Manchester Financial Group, Inc.).
- 21st Century seeks to amend the judgment under Cal. Code Civ. Proc. § 187 to add Manchester Financial Group, Inc. (Manchester, Inc.) as an additional judgment debtor, alleging a single-enterprise/alter-ego theory tying the Bank, MFG, LP, and Manchester, Inc.
- Manchester, Inc. opposes; the court reviewed deposition evidence, corporate records, and a Manchester Financial Group website printout (Ex. 41).
- The court found plaintiff’s proofs relied heavily on evidence about MFG, LP (not Manchester, Inc.), included ambiguous deposition testimony invited by plaintiff’s counsel, and reflected gaps in discovery specific to Manchester, Inc.
- Because plaintiff failed to prove both (1) that Manchester, Inc. was the Bank’s alter ego and (2) that Manchester, Inc. controlled the prior arbitration/litigation (a due-process requirement), the court denied the motion to add Manchester, Inc. as a judgment debtor.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Manchester, Inc. is the Bank's alter ego (single-enterprise theory) | Manchester, Inc. was part of a "Manchester Financial Group" single enterprise; common control, shared personnel, payments and communications show unity of interest and conduct | Evidence shows MFG, LP (not Manchester, Inc.) funded and acted for the Bank; partnership and agent activity do not erase separate corporate/partnership identities; plaintiff mischaracterizes testimony | Denied — plaintiff failed to prove by a preponderance that Manchester, Inc. was the Bank's alter ego; most disputed acts were by MFG, LP and cannot simply be imputed to Manchester, Inc. |
| Whether Manchester, Inc. controlled the prior arbitration/litigation (due-process requirement) | Notices, briefs, and involvement of shared counsel and contacts show Manchester, Inc. had notice and effectively controlled defense | Contacts and funding evidence point to MFG, LP; Manchester, Inc. did not hire or control counsel or mount an evidence-based defense; adding it would violate due process since underlying proceedings were uncontested as to it | Denied — plaintiff did not show Manchester, Inc. controlled the litigation; adding it would violate due process (no evidence of active defense by Manchester, Inc.). |
Key Cases Cited
- Katzir’s Floor and Home Design, Inc. v. M-MLS.com, 394 F.3d 1143 (9th Cir. 2004) (approving use of Cal. Code Civ. Proc. § 187 in federal post-judgment proceedings and requiring alter-ego proof)
- In re Levander, 180 F.3d 1114 (9th Cir. 1999) (California law governs merits of § 187 motions in federal enforcement proceedings)
- Toho-Towa Co. v. Morgan Creek Prods., 217 Cal.App.4th 1096 (Cal. Ct. App. 2013) (explaining alter-ego / single-enterprise factors and strict application)
- NEC Electronics Inc. v. Hurt, 208 Cal.App.3d 772 (Cal. Ct. App. 1989) (due-process limitation where corporate defendant did not meaningfully defend and an alter-ego was later added)
- Wolf Metals Inc. v. Rand Pacific Sales, Inc., 4 Cal.App.5th 698 (Cal. Ct. App. 2016) (reaffirming due-process concerns when adding alter-egos after uncontested judgments)
- Motores de Mexicali v. Superior Court, 51 Cal.2d 172 (Cal. 1958) (constitutional due-process rule limiting addition of parties to default/uncontested judgments)
- United States v. Galletti, 541 U.S. 114 (U.S. 2004) (partnership maintains separate identity from general partners)