Penson & Company, LLC v. Cloudstyle Store

Background

Penson previously sought an order under Federal Rule of Civil Procedure 69(a)(1) and California Code of Civil Procedure section 708.510(a) assigning to Penson any rights Cloudstyle had to disbursements from an Amazon Payments account for seller ID ABVOXG9QD52NV. The court initially denied the request because Penson had not established that Cloudstyle had a right to the account, which was registered to Yun Duan. Penson later filed a renewed motion for assignment, which the court granted on November 28, 2023.

Yu-Hao Yao, the only attorney who had appeared for Cloudstyle, moved to withdraw as counsel on November 30, 2023. Yun Duan then moved to stay, meaning temporarily pause, enforcement of the November 28 assignment order. The court stated that it had jurisdiction under 28 U.S.C. § 1331.

Motion to Withdraw as Counsel

The court explained that counsel may withdraw only after the court grants permission and required notice has been given. It considered the reasons for withdrawal, possible prejudice to other litigants, harm to the administration of justice, and possible delay.

Yao’s motion stated that Glacier Law LLP would continue to represent the defendants, but Yao did not provide the court with a reason for seeking withdrawal. Penson’s counsel objected, stating that its agreement not to oppose withdrawal had been based on the belief that another Glacier attorney would continue representing both Yun Duan and Cloudstyle. That attorney later stated that Glacier would not represent any entity named Cloudstyle. The court found that granting withdrawal could leave Cloudstyle without counsel and could delay a case that was nearly resolved.

The court denied Yao’s motion to withdraw as counsel. It stated that if another Glacier attorney enters an appearance for Cloudstyle, the parties may file a notice substituting counsel.

Motion to Stay

The court applied the four factors from Nken v. Holder because Yun Duan filed a timely appeal after submitting the motion to stay. Those factors are: likely success on the merits, irreparable injury without a stay, harm to other parties, and the public interest.

On likely success, Yun Duan argued that Penson had not provided admissible evidence establishing its right to the funds and had not shown that the restrained funds came from sales of the accused products. The court rejected both arguments at this stage. It relied on its prior conclusion that section 708.510 has a relatively low evidentiary standard and that Penson’s emails were sufficient. It also concluded that Penson did not need to show that the funds came from sales of the accused products because Penson was entitled to an amount satisfying the default judgment. The court found that Yun Duan had not shown a likelihood of success.

The court found that the irreparable-injury factor weighed slightly in Yun Duan’s favor because enforcement might harm Yun Duan’s business. But it found that Yun Duan had not shown that granting a stay would avoid substantial injury to Penson, which had been awarded damages. On the public-interest factor, the court concluded that Yun Duan had received a full and fair opportunity to be heard and that the public interest did not favor stopping enforcement of the assignment order.

Ruling

Judge Jon S. Tigar denied Yu-Hao Yao’s motion to withdraw as counsel and denied Yun Duan’s motion to stay the assignment order.