AirTourist Holdings, LLC v. JP Morgan Chase NA

Background

The opinion addresses three related proceedings brought by AirTourist Holdings, Jason Chen, and Edgar Park, described as stockholders or former officers of Travana, Inc. Petitioners had obtained an arbitration award against, among others, Charles Mobus and Tan Xiangdong. A federal court in the Northern District of California later entered an amended judgment. Petitioners sought turnover orders—orders requiring banks to transfer funds belonging to judgment debtors—in connection with funds held at Citibank, JP Morgan Chase, and HSBC.

At a November 17, 2021 hearing, the court granted the turnover requests and denied petitioners’ requests for attorneys’ fees incurred in enforcing the judgment. Petitioners then moved for reconsideration of the fee ruling. Mobus opposed the motion in the Citibank proceeding; Tan did not appear or oppose the motions.

Reconsideration standard

The court explained that reconsideration is an extraordinary remedy granted sparingly. Under the rules and standards cited in the opinion, a party generally must identify an intervening change in controlling law, newly available evidence, or a clear error or manifest injustice. Reconsideration is not a vehicle for repeating arguments or taking a second opportunity to litigate issues already decided.

Court’s analysis

The petitioners argued that the court had overlooked alleged disobedience of the California judgment, possible willful disregard of a court order, and bad-faith conduct. The court rejected those arguments because they substantially repeated points made in the original briefing. It also stated that petitioners identified no new facts or change in controlling law. As to Tan, the court noted that petitioners had not previously argued that he acted in bad faith and could not properly raise that new argument in a reconsideration motion.

The court further stated that it had considered the factual materials previously submitted. It had exercised caution in using its inherent power to impose fees and had declined to find that Mobus or Tan acted in bad faith or willfully disobeyed a court order. The court said its earlier conclusion that there was no bad faith covered the alleged failure to comply with the Northern District of California judgment.

As an alternative, the court considered the merits of the fee arguments. It applied the general rule that each side ordinarily pays its own attorneys’ fees unless a statute or contract provides otherwise. A court may use its inherent power to award fees for bad faith or willful disobedience, but the court described the standard for doing so as demanding.

The arbitration award did not award fees. It quoted an arbitration agreement under which the prevailing party could potentially receive fees, but the arbitrators found that petitioners had succeeded on only a very small portion of their damages claims and decided to leave costs where they fell. The later judgment imposed liability and interest but did not require payment in a specified manner or on a specified schedule, and it did not direct the defendants to take a particular action. The court therefore declined to find willful noncompliance by either Mobus or Tan.

Regarding Mobus, petitioners argued that his $250,000 transfer to Benedetto Gartland & Co., Inc., a company he wholly owns, was a fraudulent transaction designed to evade the judgment. The court found the evidence insufficient to establish that the transaction was fraudulent. It noted that the transfer was made under a written agreement describing six purposes, and that Mobus maintained the transaction had been negotiated before the judgment and was necessary to continue operating the business that represented his principal source of income.

Regarding Tan, petitioners argued that his failure to pay the judgment showed bad faith and willful noncompliance. The court held that nonpayment alone was insufficient to justify shifting fees in the turnover proceedings. It also noted that Tan had not opposed the turnover requests and that the judgment against him was fully satisfied when the court issued the turnover order in the HSBC proceeding.

Disposition

Judge Alvin K. Hellerstein denied the petitioners’ motions for reconsideration. The court ordered that neither Tan nor Mobus was required to pay attorneys’ fees connected with petitioners’ efforts to enforce the judgment. The Clerk was directed to terminate the specified docket entries in all three proceedings.