SDVF, LLC v. Cozzia USA LLC

The Ninth Circuit Court of Appeals (the Court) in a published opinion held that the enforceability of a registered judgment relied on the viability of the underlying judgment.  If the underlying judgment was vacated, the registered judgment could not be enforced.  SDVF, LLC v. Cozzia USA LLC, ___ F. 4th ___, 2025 WL 911200 (9th Cir. March 26, 2025).  To view the opinion, click here.

Facts

In August 2018 Brookstone Holdings Corp. filed a chapter 11 bankruptcy in Delaware.  The confirmed plan of reorganization named META Advisors LLC (META)  as liquidating trustee with the power to sue parties for preferential or fraudulent transfers.  Cozzia USA (Cozzia) supplied goods for sale to Brookstone.   Meta filed an adversary case against Cozzia, alleging that payments made to it were preferential or post-petition.  Cozzia did not answer the complaint and in February 2021 the Delaware Bankruptcy Court (the Delaware Court) entered a default judgment against it for in excess of $300,000.  META assigned its rights under the default judgment to SDVF LLC.  SDVF filed a notice of META’s assignment of the judgment in the Central District of California (the Central District).  In September of 2023 SDVF “registered” the judgment in the Central District pursuant to 28 U.S.C. § 1963, which allowed it to enforce the judgment in that district.  SDFV never notified the Delaware Court of the assignment or the registration.

In the meantime, Cozzia had moved to set aside the default judgment in Delaware.  Because no notice of assignment had been given, META rather than SDFV opposed the motion.  In  November 2023 the Delaware Court granted the motion to vacate the judgment.  When the Central District Court learned of the vacation, it dismissed SDFV’s enforcement action.  SDFV appealed to the Court, asserting that a Ninth Circuit opinion, In re Estate of Ferdinand E. Marco Hum. Rts. Litig., 536 F. 3d 980, 989 (9th Cir. 2008), gave a registered judgment independent viability.  The Court disagreed and affirmed the dismissal.

Reasoning

Section 1963 provides that a “judgment in an action for the recovery of money or property entered in [federal court]…may be registered by filing a certified copy of the judgment in any other district…[and] 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 like manner.”  28 U.S.C. § 1963.  This statutory language refers to an existing final judgment.  The section merely sets a procedure to enforce that judgment in another district.  It follows that if the original judgment becomes unenforceable – as happened here when it was vacated – then the registered judgment cannot be enforced.

SDFV referenced language in Estate of Ferdinand E. Marcos which described registration as the “functional equivalent of obtaining a new judgment of the [registering] court.”  The Court observed that this language must be read in the factual context of those cases, referring to enforcement, not the creation of an independent judgment.  The Court had also clarified the meaning in a later case, Fidelity National Financial, Inc. v. Friedman,  935 F. 3d 696, 702 (9th Cir. 2019), where it held that registration did not change the amount due but only facilitated enforcement.  That opinion held that the rights of the registered judgment stemmed wholly from the original judgment.

Since the original judgment here was vacated and unenforceable, the Central District Court had no power to enforce it nor to modify what the Delaware Court had done when it vacated the judgment.  Dismissal was appropriate.

Author’s Comments

This holding seems obvious.  If the original judgment is gone, the registered judgment is also gone.  The Ninth Circuit published to assure that its earlier decisions did not imply otherwise.

[The Commercial Financial Newsletter is written by an ad hoc group of the California Lawyers Association (CLA) Business Law Section. This article was written by the Hon. Meredith Jury (U.S. Bankruptcy Judge, CD CA, ret.), a member of the ad hoc group. The opinions contained herein are strictly those of the author.].