Just a couple of quick thoughts about today's opinion from the Court of Appeal, which affirms the addition of a judgment debtor but remands to see if the wife is an innocent spouse who should't be added:
(1) I think the opinion should add the word "allegedly" before its discussion of the separation agreement stuff. The wrongdoing husband owned 50% of an LLC -- the one added as a judgment debtor -- and his wife owned the other 50%. The trial court found that the wife's interest in the LLC could be included in the debt (since it was community property), but the Court of Appeal wasn't so sure. The panel said that since the parties separated in 1996, and all the fraud happened thereafter -- and didn't actively involve the wife -- maybe she's an innocent spouse and in the interests of justice her interest in the LLC shouldn't be attached.
Maybe. But the Court of Appeal repeatedly refers to their separation agreement, the fact that they lived apart since then, and all this other stuff as an established fact. Maybe it is; I can't find the decision below. But the trial court allowed the wife's interest to be attached, so I'm not at all certain that the trial court made a factual finding on any of those factual points recited by the Court of Appeal. And there's certainly reason to suspect that, uh, maybe those facts are not true; in particular, the fact that the parties allegedly separated in 1996, yet continued to own a boatload of companies together, didn't actually file for divorce until 2019 -- after the fraud judgment was entered and collection efforts began -- etc. etc.
There's a problem sometimes when the appellate court makes a statement of fact that supports its decision and then remands, and then the party that originally lost below says: "Law of the case! You can't dispute that fact any longer, since the Court of Appeal found it was true" even though what the Court of Appeal really meant so say was that one party said it was true and it might well be true. So you gotta be careful about that.
And maybe the opinion is here, and maybe it's not. Just be careful.
(2) Justice Yegan's opinion makes a joke in the first paragraph. Or a funny reference or whatever. He says: "Blizzard Energy, Inc. [] invested in a tire pyrolysis project in Kansas. A Kansas jury returned a $3.825 million fraud judgment in favor of respondent and against appellant Bernd Schaefers (Schaefers). We are not in Kansas anymore. The fraud judgment was entered in California. The instant appeal flows from the California trial court’s decision to add a judgment debtor pursuant to the “outside reverse veil piercing” doctrine."
Thank you, Dorothy. I admittedly smiled. But I was also thinking that the Kansas courts themselves gotta be really tired of that one. (According to Westlaw, that line's in twenty different opinions, and 70-plus law review articles and the like.)
(3) I made a quick search to find out more about the underlying fraudster, Bernd Shaeffers. Among other things, he was apparently a producer on the the 1984 film version of The NeverEnding Story -- or at least the names, which aren't totally common, are the same; I'm not actually vouching for whether they're the same person or not. Regardless, the reference to that movie reminded me of my favorite lawyer joke from The Simpsons. (Homer wants to file a false advertising suit against an all-you-can-eat seafood place that eventually kicked him out for eating too much, and here's what his classic boob of a lawyer says.) Classic.
