Case Name: Grail Semiconductor, Inc. v. Mitsubishi Electric & Electronics USA, Inc.
Case No.: 2007-1-CV-098590

Currently before the Court is the motion by third party Mishcon de Reya New York, LLP (“Mishcon”), a law firm, for an order vacating the dismissal of this action and rendering judgment against defendant Mitsubishi Electric & Electronics USA, Inc. (“Mitsubishi”) for the value of its purported lien.

Plaintiff Grail Semiconductor, Inc. (“Grail”) filed this lawsuit against Mitsubishi in 2007, asserting causes of action for misappropriation of trade secrets, unfair competition, breach of contract, and related claims. Mishcon represented Grail in the action between August 2010 and July 2011.

The case proceeded to trial in 2012 on a single remaining cause of action for breach of contract. The jury returned a verdict in favor of Grail in the amount of nearly $124 million, and judgment was entered thereon. Dissatisfied with the trial court’s rulings on certain post-trial matters, both parties filed appeals.

On May 28, 2013, during the pendency of the appeals, Mishcon filed and served a Notice of Lien in this case pursuant to Code of Civil Procedure section 708.410 as a means to enforce a money judgment it obtained against Grail for recovery of fees and costs. The judgment was entered in federal district court in New York in the amount of $2,110,000. Prior to filing the Notice of Lien, Mishcon registered the judgment in federal district court in California.

The Sixth District Court of Appeal subsequently issued a decision affirming the trial court’s orders, including an order granting new trial on the issue of damages, in April 2014. The new trial was scheduled to commence on October 26, 2015. Shortly before the trial date, Grail and Mitsubishi entered into a settlement agreement and Grail dismissed the case with prejudice on October 16. Unaware of the same, Mishcon thereafter filed a second Notice of Lien on October 27, 2015, identifying the amount due on the judgment at that time as $1,943,657.56.

After discovering the settlement and dismissal, Mishcon filed the instant motion and accompanying request for judicial notice on November 18, 2015. Mishcon seeks an order vacating the dismissal under Code of Civil Procedure section 473, subdivision (b) on the ground that it was improperly and mistakenly entered without its consent or court order as required by Code of Civil Procedure section 708.440, subdivision (a). Mishcon additionally requests that judgment be rendered against Mitsubishi pursuant to Code of Civil Procedure section 708.470, subdivision (c) in the amount of the lien, plus costs and interest, because the settlement monies paid to Grail were subject to a lien.

The hearing on the motion was originally set for January 12, 2016, but was continued to February 11 by stipulated order entered in December 2015. Grail thereafter filed for bankruptcy, and then filed a Notice of Stay of Proceedings in this case on January 13, 2016. Mitsubishi filed an opposition to Mishcon’s motion on January 29, noting therein that an order granting the motion would violate the automatic stay. Mishcon filed reply papers on February 4, and insisted that Grail’s bankruptcy case did not stay this proceeding. Mishcon nevertheless filed a motion in the bankruptcy case for relief from the automatic stay, and the Court consequently continued the hearing on Mishcon’s motion to await the bankruptcy court’s ruling. On April 7, the bankruptcy court issued an order granting Mishcon’s motion for relief from stay. Next, on April 22, Mishcon filed a notice that the stay was terminated, as well as a supplemental request for judicial notice and second declaration of its counsel. Lastly, Mitsubishi filed a response on April 25. Grail did not file any opposition papers.

I. Requests for Judicial Notice

Mishcon filed an initial and supplemental request for judicial notice in support of its motion. In the initial request, Mishcon asks for judicial notice of various records from this case and federal district court proceedings. In the supplemental request, it asks for judicial notice of the bankruptcy court’s order granting relief from stay and “[f]indings of fact and conclusions of law” reflected in the transcript from the hearing on that motion.

All of the records in question are court records, and Evidence Code section 452, subdivision (d) provides that a court may take judicial notice of records of any court of this state or the United States. With that said, a precondition to taking judicial notice is that the matter is relevant to an issue under review. (People ex rel. Lockyer v. Shamrock Foods Co. (2000) 24 Cal.4th 415, 422, fn. 2; see also Jordache Enterprises, Inc. v. Brobeck, Phleger & Harrison (1998) 18 Cal.4th 739, 748, fn. 6 [declining to take judicial notice of materials that are not “necessary, helpful, or relevant”].) Here, all of the subject court records bear some relevance to Mishcon’s motion, with the exception of the bankruptcy court’s underlying reasoning for granting Mishcon’s motion for relief from stay. The bankruptcy court’s findings or rationale for issuing its order simply are not relevant or necessary to the resolution of the instant motion.

Accordingly, the initial request for judicial notice is GRANTED in its entirety; the supplemental request for judicial notice is GRANTED as to the order granting relief from stay; and the supplemental request for judicial notice is DENIED as to the “[f]indings of fact and conclusion of law” stated in the transcript from the bankruptcy case.

II. Motion to Vacate Dismissal and for Judgment

Mishcon’s motion is predicated on provisions of California’s Enforcement of Judgments Law (“EJL”). “The EJL is a comprehensive statutory scheme for the enforcement of civil judgments in California.” (Grayson Services, Inc. v. Wells Fargo Bank (2011) 199 Cal.App.4th 563, 569.) “The EJL is contained in title 9 of part 2 of the Code of Civil Procedure. It consists of five divisions, beginning at Code of Civil Procedure section 680.010 and ending at section 724.260.” (Id. at p. 566, fn. 1.)

The first provision of the EJL relied upon by Mishcon, relating to its request to vacate the dismissal, is section 708.440, subdivision (a), which provides in pertinent part that, unless the judgment creditor’s money judgment is first satisfied or the lien is released, no dismissal or settlement of a pending action may be entered into by or on behalf of the judgment debtor without the written consent of the judgment creditor or authorization by court order obtained by the judgment debtor as provided in subdivision (b).

The second provision of the EJL relied upon by Mishcon, pertaining to its request for entry of judgment against Mitsubishi, is section 708.470, subdivision (c), which provides that “[i]f the court determines that a party (other than the judgment debtor) having notice of the lien created under this article…has paid an amount to the judgment debtor that was subject to the lien, the court shall render judgment against the party in an amount equal to the lesser of the following: (1) The value of the judgment debtor’s interest in the property or the amount paid the judgment debtor. (2) The amount of the judgment creditor’s lien created under this article.” For purposes of this section, the judgment creditor is deemed a party. (Code Civ. Proc., § 708.430, subd. (b).)

Sections 708.440 and 708.470 are both contained in article 5 of chapter 6 of division 2 of the EJL, which governs liens in a pending action. More particularly, article 5 addresses liens obtained under section 708.410. That statute permits “[a] judgment creditor who has a money judgment” to obtain a lien on any cause of action asserted by a judgment debtor in a pending action and on the rights of the judgment debtor to any money or property under a subsequent judgment procured in the action. (Code Civ. Proc., § 708.410, subd. (a); see also Waltrip v. Kimberlin (2008) 164 Cal.App.4th 517, 530-531.) Thus, the applicability of the subject statutes is necessarily dependent upon the existence, in the first instance, of a lien obtained in accordance with section 708.410. To obtain such a lien, “the judgment creditor shall file a notice of lien and an abstract or certified copy of the judgment creditor’s money judgment in the pending action.” (Code Civ. Proc., § 708.410, subd. (b).) Furthermore, the judgment creditor must promptly serve the same on all parties personally or by mail. (Code Civ. Proc., § 708.410, subd. (c).)

Mishcon presents evidence that in 2013, during the pendency of the action, it filed a Notice of Lien and attached thereto a certified copy of the judgment entered in federal district court in New York, and promptly served the notice on the parties. Mishcon also emphasizes that the judgment was registered in a federal district court in California. Mishcon concludes that a lien was created under section 708.410. In opposition, Mitsubishi argues that Mishcon did not obtain an enforceable lien because the subject judgment was not entered by a California court.

To support its position, Mitsubishi focuses on relevant definitional provisions of the EJL. A “judgment creditor” is defined in section 680.240 as “the person in whose favor a judgment is rendered, and a “money judgment is defined in section 608.270 as “that part of a judgment that requires the payment of money.” The term “judgment” is a critical component of those definitions, and that term is separately defined in section 608.230 as “a judgment, order, or decree entered in a court of this state.” (Emphasis added.)

The subject judgment was not entered in a court of this state; instead, it was entered by a federal district court in New York. While the judgment was registered in a federal district court located in California, no authority has been cited for the proposition that such registration would qualify the judgment as one entered in a court of California. If the statutory definition of the term “judgment” referenced a judgment, order or decree entered in “a court in this state,” it would be reasonable to conclude that judgments entered in both California state courts and federal courts located in California are covered. (See Roston v. Edwards (1982) 127 Cal.App.3d 842, 848.) The Legislature, however, chose the language “court of this state,” which would appear to include only California state courts. (See Ibid. [holding that “court of this state in the vexatious litigant statute refers only to California state courts and not federal courts sitting in California]; see also Evid. Code, § 452, subd. (d) [stating that a court may take judicial notice of records “of any court of this state” or “any court record of the United States”].)

In reply, Mishcon insists that it has a valid lien under section 708.410, citing federal law in support.
First, Mishcon cites 28 U.S.C. § 1962, which states: “Every judgment rendered by a district court within a State shall be a lien on the property located in such State in the same manner, to the same extent and under the same conditions as a judgment of a court of general jurisdiction in such State. … Whenever the law of any State requires a judgment of a State court to be registered, recorded, docketed or indexed, or any other act to be cone, in a particular manner, or in a certain office or county or parish before such lien attaches, such requirements shall apply only if the law of such State authorizes the judgment of a court of the United States to be registered, recorded, docketed, indexed or otherwise conformed to rules and requirements relating to judgments of the courts of the State.” “The main purpose of 28 U.S.C. § 1962 is merely to conform with congressional policy that execution of federal judgments be done according to state law.” (In re McDonell (B.A.P. 9th Cir. 1996) 204 B.R. 976, 980.) Consistent therewith, Federal Rules of Civil Procedure, rule 69 – which is also cited by Mishcon – provides that “[a] money judgment is enforced by a writ of execution, unless the court directs otherwise” and “[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.”

These federal provisions do not aid Mishcon. Section 1962 and rule 69 apparently pertain to executing a judgment in federal court proceedings. Mishcon cites no legal authority holding that federal statutes and rules of procedure pertaining to the execution of a judgment apply to proceedings in California courts, let alone lien proceedings under section 708.410, et seq.

Next, Mishcon cites 28 U.S.C. § 1963, which provides: “A judgment in an action for the recovery of money or property entered in any…district court…may be registered by filing a certified copy of the judgment in any other district…when the judgment has become final by appeal or expiration of the time for appeal or when ordered by the court that entered the judgment for good cause shown. … A judgment so registered shall have the same effect as a judgment of the district court of the district where registered and may be enforced in a like manner.” (Emphasis added.) Section 1963 “provides for the registration of one federal district court’s money judgment in another federal district court as the precursor to enforcement of the original judgment in the latter court.” (Home Port Rentals, Inc. v. International Yachting Group, Inc. (5th Cir. 2001) 252 F.3d 399, 404.) Here, Mishcon is not seeking to enforce its judgment in the federal court where registration occurs; instead, it is attempting to enforce the judgment in a California court. Mishcon does not cite any legal authority holding or suggesting that the registration of a federal district court judgment in a federal district court in California would have the effect of creating a judgment “entered in a court of this state.”

In consideration of the foregoing, Mishcon failed to demonstrate the existence of a valid or enforceable lien for purposes herein. Mishcon’s motion is therefore DENIED in its entirety.