Cadence Design Systems, Inc. v. Roger Viera ( 2020 )

FILED
NOT FOR PUBLICATION
NOV 20 2020
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
CADENCE DESIGN SYSTEMS, INC., a No. 19-16761
Delaware Corporation,
D.C. No. 4:17-cv-04732-PJH
Plaintiff-Appellant,
v. MEMORANDUM*
ROGER VIERA,
Respondent-Appellee,
and
POUNCE CONSULTING, INC., a
California Corporation; POUNCE
CONSULTING, S.A. DE C.V., a Mexican
Sociedad Anonima de Capital Variable,
Defendants.
Appeal from the United States District Court
for the Northern District of California
Phyllis J. Hamilton, Chief District Judge, Presiding
Submitted November 12, 2020**
Pasadena, California
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
Before: CHRISTEN and WATFORD, Circuit Judges, and ROSENTHAL,*** Chief
District Judge.
Plaintiff-appellant Cadence Design Systems, Inc. obtained a default
judgment in copyright litigation against defendants Pounce Consulting, Inc. (a
United States entity) and Pounce Consulting, S.A. DE C.V. (a Mexico entity).
Cadence moved to add respondent-appellee Roger Viera to the judgment pursuant
to Federal Rule of Civil Procedure 69(a). The district court denied the motion and
Cadence appeals. We have jurisdiction pursuant to 28 U.S.C. § 1291, and we
affirm.1
We have interpreted Rule 69(a) as “empower[ing] federal courts to rely on
state law to add judgment-debtors[.]” In re Levander, 180 F.3d 1114, 1120–21
(9th Cir. 1999). We review de novo the district court’s interpretation of state law
in a diversity case. Feldman v. Allstate Ins. Co., 322 F.3d 660, 665 (9th Cir. 2003).
Factual findings are reviewed for clear error. Katzir’s Floor & Home Design, Inc.
v. M-MLS.com, 394 F.3d 1143, 1148 (9th Cir. 2004).
California Code of Civil Procedure § 187 has been construed to provide
courts with the authority to amend a judgment to add additional judgment debtors.
***
The Honorable Lee H. Rosenthal, Chief United States District Judge
for the Southern District of Texas, sitting by designation.
1
We recount the facts only as necessary to resolve the issues on appeal.
2
Id. Section 187 gives courts “all the means necessary” to “carry . . . into effect”
their jurisdiction, and, depending on the circumstances, courts have amended
judgments to add alter ego defendants pursuant to § 187. NEC Elecs. Inc. v. Hurt,
256 Cal. Rptr. 441, 444 (Cal. Ct. App. 1989) (collecting cases). To satisfy due
process concerns, the judgment creditor must show by a preponderance of the
evidence that: (1) the new party is the alter ego of a named defendant; and (2) the
new party “controlled the litigation, thereby having had the opportunity to litigate.”
Katzir’s Floor, 394 F.3d at 1148 (quoting In re Levander, 180 F.3d at 1121);
Wollersheim v. Church of Scientology, 81 Cal. Rptr. 2d 896, 897 (Cal. Ct. App.
1999).
1. Viera argues California law does not permit a judgment creditor to
add an alter ego to a judgment entered by default, but we agree with the district
court that no such per se rule exists. California courts analyze this issue under the
two-part test described above. See, e.g., Motores De Mexicali, S. A. v. Superior
Court In & For Los Angeles Cty., 51 Cal. 2d 172, 173 (1958); NEC, 256 Cal. Rptr.
at 444; Wolf Metals Inc. v. Rand Pac. Sales, Inc., 209 Cal. Rptr. 3d 198, 202–03
(Cal. Ct. App. 2016). Sitting in diversity, we have interpreted § 187 the same way.
Katzir’s Floor, 394 F.3d at 1148.
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2. The district court’s finding that Viera did not control the parties’
litigation is supported by the record.2 Control may consist of “a combination of
factors, usually including the financing of the litigation, the hiring of attorneys, and
control over the course of the litigation.” NEC, 256 Cal. Rptr. at 446 (emphasis
added) (citation omitted). “It is not sufficient that [the alter ego] supplies the funds
for the prosecution or defense, that he appears as a witness or cooperates without
having control.” Minton v. Cavaney, 56 Cal. 2d 576, 581 (1961) (quotations and
citations omitted).
Here, Viera’s and Llera’s contradictory declarations are insufficient to show
Viera’s continued control by a preponderance of the evidence. Cadence also fails
to persuasively argue that Viera controlled the strategy to bring the motions to set
aside the default judgment and to quash service. The record indicates that Pounce
Mexico decided to stop funding the litigation due to financial pressure, and Pounce
USA’s counsel withdrew because of Pounce USA’s “prolonged failure to pay
fees.” Cadence’s request that the panel draw an inference from the timing of
Pounce USA’s default does not satisfy its burden. Cadence briefly argues Viera
personally financed the litigation, but Viera testified that Pounce Mexico was
2
Both elements of the two-part test must be met. Katzir’s Floor, 394
F.3d at 1148. Because the district court found Viera did not control the litigation,
it did not reach whether Viera was the alter ego of the Pounce entities.
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advancing funds for the litigation and that he “wasn’t making payments.” Finally,
communications between Viera and counsel for the Pounce entities about the legal
proceedings do not prove control. NEC, 256 Cal. Rptr. at 446 (“Surely every chief
executive officer of a corporation is cognizant of claims asserted against the
corporation.”).
3. We also agree with the district court that even if Viera controlled the
litigation, Cadence failed to show Viera acted with a diligence corresponding to the
risk of personal liability. Katzir’s Floor, 394 F.3d at 1150 (citing NEC, 256 Cal.
Rptr. at 444). Viera was not named as a party and Cadence did not show he was
motivated to intervene. NEC, 256 Cal. Rptr. at 445. Pounce Mexico’s actions to
defend its corporate assets by ceasing to fund the litigation to preserve capital may
have been different from actions Viera would take to defend his personal assets.
And by the time the April 2019 Pounce USA board meeting minutes mentioned
Viera retaining separate counsel, the magistrate judge had already recommended
that default judgment be entered.
4. Cadence argues the district court erred by faulting it for failing to raise
Viera’s liability when it filed a motion for entry of default in February 2019.
Rather than adding to or misunderstanding the test, the district court’s observation
aligns with Katzir’s Floor’s requirement that the proposed alter ego defendant
5
controlled the litigation and had the opportunity to litigate “in order to satisfy due
process concerns.” Katzir’s Floor, 394 F.3d at 1148 (citation omitted).
AFFIRMED.
Plaintiff-appellant to bear costs.
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