Last Thursday’s decision in Stoltenberg v. Ampton Investments Inc., case no. B235731 (2d. Dist. April 4, 2013) demonstrates the hazards of being unable to stay enforcement of a money judgment against you while your appeal is pending . . . and how much trouble you can get in for going too far in resisting those enforcement efforts. How much trouble? Well, is having your appeal dismissed enough trouble for ya?
Ampton had the misfortune of losing at trial and having a judgment of more than $8 million dollars entered against it. Ampton appealed, but did not post a bond to stay enforcement of the judgment. When the plaintiffs registered the California judgment in Ampton’s home state of New York and then subpoenaed financial records, Ampton ignored the subpoena. Plaintiffs asked the New York trial court to find Ampton in contempt. Ampton escaped contempt but was ordered to respond to the subpoena. When Ampton refused to do so, Plaintiffs again sought a contempt finding against Ampton, and that time they got it: Ampton was ordered to pay $500 in sanctions and to comply with the subpoena within 30 days or face further sanctions.
By now, you would think that Ampton might finally accept the reality that its own failure to stay enforcement of the judgment pending appeal carries consequences that it would have to live with, and comply with the contempt order. But . . . that’s not what Ampton did. When Ampton failed to comply with the New York contempt order, Plaintiffs moved to dismiss Ampton’s California appeal, arguing that Ampton’s disobedience of the New York trial court contempt order was sufficient to invoke the “disentitlement doctrine.” After much procedural wrangling (which makes for interesting reading but is unnecessary to cover here), Plaintiffs succeeded in getting Ampton’s appeal dismissed.
Let’s start with the court’s description of the disentitlement doctrine (citations omitted):
An appellate court has the inherent power, under the “disentitlement doctrine,” to dismiss an appeal by a party that refuses to comply with a lower court order. As the Supreme Court observed . . . “A party to an action cannot, with right or reason, ask the aid and assistance of a court in hearing his demands while he stands in an attitude of contempt to legal orders and processes of the courts of this state.
We recently explained the equitable rationale underlying the doctrine. “‘Dismissal is not “a penalty imposed as a punishment for criminal contempt. It is an exercise of a state court?s inherent power to use its processes to induce compliance” with a presumptively valid order’ . . . Appellate disentitlement “is not a jurisdictional doctrine, but a discretionary tool that may be applied when the balance of the equitable concerns make it a proper sanction . . . . “No formal judgment of contempt is required; an appellate court “may dismiss an appeal where there has been willful disobedience or obstructive tactics.” The doctrine “is based upon fundamental equity and is not to be frustrated by technicalities.”
The Court of Appeal has no problem finding the doctrine applicable here. After rejecting a few contentions that were squarely against precedent (why the heck were those arguments made?), the court addresses the one issue that had even a chance of succeeding: that Ampton’s appeal could not be dismissed under the disentitlement doctrine because Ampton disobeyed orders only of a court of foreign jurisdiction rather than orders from a California trial court.
It’s a valiant effort, but the Court of Appeal finds no reason to treat disobedience of foreign court orders any differently from those of California trial court for purposes of the disentitlement doctrine. The court first cites the “full faith and credit” clause of the federal constitution, but also notes a very practical reason for applying the disentitlement doctrine in these circumstances (citations and footnote omitted):
Had plaintiffs attempted to enforce the judgment in California by propounding postjudgment special interrogatories seeking defendants’ financial information, including information about assets defendants may have in New York, the disentitlement doctrine would have applied to any noncompliance with the California trial court?s orders compelling responses to those interrogatories. For purposes of the disentitlement doctrine, there is no meaningful distinction between New York trial court orders and California trial court orders related to enforcement of a California judgment. The orders of the New York court in issue were based solely on a California money judgment and were intended to aid in the enforcement of that judgment. Thus, by violating those orders, defendants are obstructing and frustrating the enforcement of a judgment of this state, while at the same time seeking relief concerned that judgment in this court. Under the well-established disentitlement doctrine, defendants are not entitled to the relief they seek on appeal.
UPDATE: Interestingly, the court stayed its dismissal for 30 days to allow Ampton to seek reinstatement of the appeal, but cautioning that it was not suggesting or implying how it would act on such a request. So, naturally, Ampton did so, but only at the last minute and not very well. Ampton filed an initial motion that provided only an unsworn account of Ampton’s purported compliance with the New York Subpoena, a “supplement” to that motion regarding further New York proceedings, a petition for rehearing and a “renewed” motion for reinstatement (this time supported by sworn declarations), and finally a “supplement” to the renewed motion, with a flurry of orders from the New York court, all for naught. The Court of Appeal found that Ampton failed to prove that it had ceased playing games:
Defendants have had two months since our initial opinion to provide us with a competent and unequivocal showing that they had complied fully with plaintiffs’ information subpoena and that the New York court had made an express finding of full compliance. Defendants and plaintiffs have both provided their versions of the oral proceedings before the court, but apparently those proceedings were “off the record.” Had the New York trial court, knowing of our deadline, considered our dismissal order inequitable, that court presumably would have acted upon the pending motions before it with respect to compliance with its orders. Moreover, it was defendants’ burden to provide us with an adequate record, and that would include a transcript of a proceeding “on the record” or a reasonable substitute for such a transcript. (See Cal. Rules of Court, rule 8.137.) Defendants have been making last-minute efforts to avoid the disentitlement doctrine, but these efforts are too little and too late.
If you are unable to stay the judgment pending appeal, use every legitimate means at your disposal to forestall enforcement (the requirements for many judgment enforcement proceedings are highly technical, and noncompliance by the judgment creditor can delay things for a while), or try to settle the case (though admittedly, an appeal without a stay of the judgment does not create a lot of leverage), but don’t play games with judgment enforcement. The best appellate argument in the world is worthless if the Court of Appeal dismisses your appeal under the disentitlement doctrine before it ever reaches the merits.