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Active Way International Ltd. v. Smith Electric Vehicles Corp.

United States District Court, W.D. Missouri, St. Joseph Division

July 5, 2017




         This closed case is before the Court on Plaintiff Active Way International Limited's (“Active Way”)'s Motion for Creditor's Bill (doc. 6) and Application and Motion for Immediate Appointment of Limited Receiver (doc. 8). For the following reasons, Plaintiff's motions are DENIED without prejudice.

         I. Background

         Plaintiff is a citizen of a foreign country (doc. 1 ¶ 3); Plaintiff is incorporated in and has its principal place of business in Hong Kong. (Id. at ¶ 1.) Defendant is a citizen of the United States (id. at ¶ 3); Defendant is incorporated in Delaware and has its principal place of business in Missouri. (Id. at ¶ 2.) Plaintiff previously sued Defendant in a Hong Kong court for breach of a loan agreement (Id. at ¶ 5; see doc. 1-3) and on October 19, 2016, obtained a judgment awarding Plaintiff $1, 085, 327.88, with additional interest and costs (the “Judgment”) (doc. 1-1). Defendant did not appear or otherwise defend in the Hong Kong suit.

         Plaintiff commenced this action on November 28, 2016, by filing its Verified Petition to Register Foreign Country Judgment (the “Complaint”). (Doc. 1.) Plaintiff brings this action pursuant to the Court's diversity jurisdiction requesting that the Judgment be made a final judgment of this Court and that Plaintiff be allowed to enforce the Judgment in the same manner as any other judgment of this Court. (Id. at 2-4.) After Plaintiff was unable to serve the Complaint on Defendant at the addresses for its registered agent and its principal place of business (doc. 4), Defendant was served on December 9, 2016, via the Missouri Secretary of State's Office (doc. 5). Defendant failed to file a timely answer and failed to file any objection within thirty days of service. Thereafter, the Judgment became a final judgment of this Court in January 2017 in accordance with Missouri's Uniform Foreign Country Money-Judgments Recognition Act, Mo. Rev. Stat. § 511.778.[1] Upon the Judgment, a Writ of Execution was issued to the address of the defunct registered agent, and returned nulla bona (or unsatisfied). (Doc. 16.) The return noted that “[t]he address [provided] is an empty, guard shack type building. The only door was secure and it looked as though it had not been used in years.” (Id.)

         On February 23, 2017, Plaintiff filed the instant motions seeking equitable relief, and in particular, the appointment of a receiver to receive certain intangible property along with an order compelling Defendant to assign the property to said receiver. (Docs. 6, 8.) Plaintiff specifically seeks an order directing Defendant to assign certain intangible property to a limited receiver pursuant to the Missouri Commercial Receiver Act, Mo. Rev. Stat. § 515.510. Plaintiff defines the assets over which it seeks the appointment of a receiver by reference to a Contribution Agreement entered into on May 4, 2015, between Defendant and Orng EV Solutions, Inc. n/k/a Nohm Inc. (“Orng”). (Doc. 7 at 2-8.) As part of the Contribution Agreement, Defendant contributed a variety of intellectual properties to Orng, which was formed to manufacture and sell electric vehicles. Plaintiff describes Defendant's particular assets it seeks to reach in the following general categories: (1) Defendant's rights under the Contribution Agreement, (2) Defendant's claims under the Contribution Agreement, including any claims which were, or could have been asserted in an earlier action Defendant brought against FDG Electric Vehicles Limited (“FDG”), [2] Orng, and Plaintiff, previously pending in a Delaware state court (“Delaware lawsuit”), and (3) Defendant's intellectual property listed in the Contribution Agreement. Plaintiff requests that these intangible assets be subjected to satisfaction of the Judgment.

         The Court scheduled the instant motions for a hearing on April 10, 2017, and also issued its Order Regarding Agenda for April 10, 2017 Hearing (doc. 17) requesting that argument on the motions specifically address several concerns the Court had regarding the filings. The morning of the hearing, Joon Kim, Peter Christiansen, and Potomac Asset Management Company (“Proposed Intervenors”), filed a motion to intervene purporting to be other creditors of Defendant. (Docs. 19 and 20.) At the same time, Defendant filed a motion for leave to file a response to Plaintiff's motion for limited receiver out of time (doc. 22) together with its response brief to that effect (doc. 21). The Court granted Defendant leave to file its late response brief. (Docket Entry 24.) Counsel for Plaintiff, Defendant, and the Proposed Intervenors appeared and presented argument at the hearing. At the hearing's conclusion, the Court permitted Proposed Intervenors and Defendant to file post-hearing briefing addressing the concerns listed in the Court's Agenda (doc. 17) to which Plaintiff was permitted to file a reply. (Docs. 29, 30, 33.)

         II. Analysis

         A. Receivership Appointment

         Federal Rule of Civil Procedure 69 provides that “[a] money judgment is enforced by a writ of execution, unless the court directs otherwise.” Rule 69 goes on to state that “[t]he procedure on execution-and in proceedings supplementary to and in aid of judgment or execution-must accord with the procedure of the state where the court is located, but a federal statute governs to the extent it applies.” Specific to receivership appointments, Federal Rule of Civil Procedure 66 provides that “[t]hese rules govern an action in which the appointment of a receiver is sought[.]” See 3-26 Moore's Manual--Federal Practice and Procedure § 26.101 (2017) (a federal rule is considered a governing statute for the purpose of determining which law controls in execution of a judgment in federal court pursuant to federal rule 69). The Eighth Circuit has held that “[t]he appointment of a receiver in a diversity case is a procedural matter governed by federal law and federal equitable principles.” Aviation Supply Corp. v. R.S.B.I. Aerospace, Inc., 999 F.2d 314, 316 (8th Cir. 1993) (citing Fed.R.Civ.P. 66 and Advisory Committee's Note and 12 C. Wright & A. Miller, Federal Practice and Procedure § 2983) (other citations omitted); PNC Bank, Nat'l Assoc. v. Raintree Village Shopping Center, LLC, Case No. 4:13-cv-00940-HFS (W.D. Mo. Jan. 3, 2014) (doc. 26) (applying Aviation Supply factors and denying a motion to appoint receiver to sell real estate where creditor conducted no discovery, and offered no specific examples or theory of requisite misconduct such as fraud or diversion of assets); see Canada Life Assur. Co. v. LaPeter, 563 F.3d 837, 842-3 (9th Cir. 2009) (federal law governs the appointment of a receiver by a district court in a diversity case); Nat'l P'ship Inv. Corp. v. Nat'l Hous. Dev. Corp., 153 F.3d 1289, 1291-92 (11 Cir. 1998) (same); Sterling Sav. Bnk. v. Citadel Develop. Co., Inc., 656 F.Supp.2d 1248, 1253, 1258 (D. Or. 2009) (because appointment of a receiver is not a substantive right, a federal court acting in diversity must comply with Rule 66 even if state receivership law would produce a different result).

         During the April hearing, Plaintiff's Counsel represented that although he believed Plaintiff would be able to establish the Aviation Supply factors, Plaintiff does not have to comply with those factors because it seeks a remedy separate than a federal equitable receiver. (Doc. 28 at 11-12.) Rather, Plaintiff is specifically asking for a limited receiver as provided in the new Missouri Commercial Receivership Act. Despite Plaintiff's reliance on case authority from outside of this circuit, Aviation Supply instructs this Court to apply Rule 66 in determining whether to appoint a receiver in this case regardless of whether a state statute would produce a different result and Plaintiff has presented no argument or case authority to support that this case is somehow distinguishable. See e.g., U.S. Bank v. CB Settle Inn Ltd. P'ship, 827 F.Supp.2d 993 (S.D. Iowa 2011) (appointing receiver to manage real property and distinguishing Aviation Supply where parties' contract explicitly provided for the appointment of receiver upon default).

         According to Aviation Supply, “[a] receiver is an extraordinary equitable remedy that is only justified in extreme situations.” 999 F.2d at 316. The factors to be considered in determining if a receiver is warranted include:

(1) a valid claim by the party seeking the appointment;
(2) the probability that fraudulent conduct has occurred or will occur to ...

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