K&K Orion, LLC , LLC v. Dyansys, Inc.

Background

In July 2021, the parties entered into a settlement agreement under which Dyansys agreed to pay the plaintiffs $350,000. The court entered a stipulated judgment reflecting that agreement and retained jurisdiction to enforce the settlement. The plaintiffs later sought enforcement because $160,000 remained unpaid.

After defense counsel learned that its only contact at Dyansys had died and that the company was defunct, counsel moved to withdraw. The court granted that request and gave Dyansys additional time to respond to the enforcement motion. The plaintiffs later submitted a proposed order that sought relief beyond the enforcement motion, including appointment of a receiver and permission to seek addition of Srini Nageshwar’s estate and Irmi Bloching as judgment debtors.

Motion to Enforce the Judgment

The court granted in part the motion to enforce the judgment. It held that the plaintiffs were entitled to $160,000 in liquidated damages for breach of the settlement agreement, plus interest. The court denied the other requested relief.

Attorneys’ Fees

The plaintiffs requested $21,953.90 in attorneys’ fees and costs related to enforcing the settlement. The court denied that request. The supporting invoices included work performed before the settlement agreement, and the amounts shown in the invoices were substantially less than the amount claimed. The plaintiffs also provided no documentation supporting an award of costs. The court noted that this was the plaintiffs’ second request for attorneys’ fees and that the earlier request had also lacked adequate evidentiary support.

Request to Alter the Judgment

The plaintiffs moved under Federal Rule of Civil Procedure 59(e) to alter the 2021 judgment. The court denied that motion. Rule 59(e) requires such a motion to be filed within 28 days after entry of judgment, but the plaintiffs filed their motion in October 2023, more than two years after the judgment was entered in July 2021. The court also stated that the plaintiffs had not shown any other basis for this extraordinary remedy.

Proposed Additional Judgment Debtors

The plaintiffs sought to add Nageshwar’s estate and Bloching as additional judgment debtors. Under Federal Rule of Civil Procedure 69(a), judgment creditors may use enforcement procedures available under the law of the state where the federal court sits. The relevant California procedure requires showing that the new party is the corporation’s alter ego and that the new party controlled the earlier litigation, giving that party an opportunity to litigate.

The court concluded that the record did not support adding either proposed judgment debtor. The evidence suggested that Bloching was unaware of Dyansys’s financial problems before Nageshwar’s death and had not controlled the 2021 litigation. Although the court found a stronger argument that Nageshwar had been Dyansys’s alter ego, it identified unresolved issues and inadequate factual and legal development. The court also found that the evidence did not establish the alleged improper intent or commingling of assets. The request to amend the judgment to add judgment debtors was therefore denied.

Disposition

The court granted in part the motion to enforce the judgment and ordered Dyansys to pay the plaintiffs $160,000 plus interest. It denied the motions for attorneys’ fees and to alter the judgment. The court also declined to exercise further jurisdiction over enforcement of the settlement, stating that the plaintiffs had received multiple opportunities to present clear, legally supported, and adequately documented requests.