Three Amigos Holdings, Inc. v. Maxben Holdings, LLC

Background

Three Amigos Holdings, Inc. obtained a judgment against Maxben Holdings, LLC after alleging that Maxben failed to repay a loan. On December 14, 2023, the court granted Three Amigos’s motion for summary judgment and entered judgment for $511,797.50. The court later entered a separate $38,000 judgment for attorneys’ fees based on the parties’ stipulation. Maxben had not paid either judgment.

Three Amigos then requested a turnover order, which is an order requiring a judgment debtor to transfer property that can be used to satisfy a judgment. It identified several entities and an investment account that it asserted were owned or controlled by Maxben or Idin Dalpour, Maxben’s sole member. Three Amigos sought funds from those sources or, if the funds were insufficient, the transfer of ownership interests in the entities.

Court’s Analysis

Under Federal Rule of Civil Procedure 69(a)(1), collection proceedings must follow the law of the state where the federal court is located. Three Amigos relied on New York Civil Practice Law and Rules § 5225(a) and (b). Under § 5225(a), a judgment creditor must establish that the judgment debtor possesses or controls money or other personal property in which the debtor has an interest and that the property can be used to satisfy the judgment.

Maxben admitted that it held ownership interests in six entities: Cornelia Street Investors, LLC; CHS Investors, LLC; 1222 St. Paul Management, LLC; SD Texas I, LLC; SD Texas II, LLC; and PJA Capital Fund I, LLC. The court referred to these as the “Six Entities.”

Three Amigos also sought turnover of interests that it asserted were held by Dalpour, arguing that Dalpour was Maxben’s alter ego. To pierce the corporate veil under New York law, a party generally must show both that one party dominated the corporation and that the domination was used to commit a fraud or other wrong that injured the plaintiff. The court held that Three Amigos had not shown the required fraud or wrongdoing. The court also explained that, even under the alternative standard discussed by Three Amigos, Three Amigos had not shown that Maxben’s separate identity was so disregarded that it primarily conducted Dalpour’s business instead of its own.

Disposition

The court granted in part Three Amigos’s May 15, 2024 motion for a turnover order. It ordered Maxben to turn over its ownership interests in the Six Entities to Three Amigos by June 7, 2024. The opinion did not order turnover of the interests that Three Amigos attributed to Dalpour. The court denied Three Amigos’s motion for attorneys’ fees without prejudice to renewal after the turnover proceedings concluded.