A California appellate court ruled that a group of defendants were liable for $829,041 in damages to an injured worker for engaging in a series of fraudulent transfers to prevent collection on his judgment against his uninsured employer.
Case: Mehta v. Activor Corp., No. B276151, 03/20/2018, unpublished.
Facts: Mahavir Mehta worked for the Activor Corp. He suffered serious injuries in a 12-foot fall from a ladder while at work in September 2007.
Chanda Zaveri was the sole shareholder in Activor, which did not have workers’ compensation insurance coverage for Mehta. He filed a civil suit against Activor and Zaveri.
The lawsuit resulted in a judgment against Activor in the amount of $184,850.22. The judgment included economic damages of $40,000, noneconomic damages of $15,000 and $129,850.22 in attorney fees.
Mehta later secured a writ of execution and collected $55,000 from Activor.
Meanwhile, Activor began transferring its assets to Zaveri and two other corporations she controlled.
Activor filed for bankruptcy protection and failed to identify more than $900,000 in accounts receivable.
Procedural history: Mehta filed suit against Activor, Zaveri and Zaveri’s other companies, asserting that the defendants had fraudulently been transferring assets to prevent him from collecting on the judgment.
After a bench trial, Los Angeles County Superior Court Judge Ernest Hiroshige entered judgment against all the defendants, finding them jointly and severally liable to Mehta for compensatory damages of $207,760.35, and punitive damages of $621,781.05.
Analysis: The 2nd District Court of Appeal rejected the defendants’ argument that Mehta did not have legal standing to sue them for the unpaid attorney fee award in the original suit against Activor.
The court said it is well-established that when there is no dispute between plaintiff and his attorneys, a judgment for attorney fees belongs to the plaintiff, not the attorney.
The court also said there was no authority to support the defense argument that punitive damages are not recoverable in fraudulent transfer actions. The court instead determined that punitive damages can be awarded in fraudulent transfer actions, as a matter of law.
The court went on to say that the defendants bore the burden of providing a complete record of the trial proceedings for the court to review, and that they had failed to submit copies of much of the trial evidence and pleadings.
Based on the incomplete record, the court said it could not determine whether sufficient evidence supported the trial judge’s ruling.
Since the deficit record was a problem of the defendants’ own making, the court said it would treat them as having forfeited their challenge to the sufficiency of evidence that supported the trial judge’s ruling.
However, the court said, Activor could not be held liable for the damages awarded by Hiroshige because they were for the unpaid balance of the prior judgment against the company.
The court said that holding Activor liable for the damage award would effectively be holding it liable twice for the same judgment, so the company could not be included as a liable party for the damages awarded in the fraudulent transfer action.
Disposition: Affirmed as modified.
To read the decision, click here.
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