Judgment Creditors Beware: Certain Orders on Third Party Subpoena Duces Tecum’s are Appealable

In judgment debtor proceedings, judgment creditors are given wide latitude to inquire about a judgment debtor’s property, assets, and business affairs.  But what if a judgment creditor serves a subpoena duces tecum on a third party who refuses to produce any documents, even after a motion to compel is granted?  Can the third party appeal the order on a motion to compel in a judgment collection proceeding?  Or is the third party required to produce the responsive documents or be subject to contempt if he refuses to comply?

According to the California Court of Appeal, an order compelling the production of documents at a debtor examination is appealable.  (Macaluso v. Superior Court (Cal. Ct. App., Sept. 18, 2013) 2013 WL 5229819.)

In Macaluso, judgment creditor Lennar Homes of California (Lennar) obtained a $50 million dollar judgment against Mr. Marsh, and thereafter served a subpoena duces tecum requiring third party, attorney Mr. Macaluso, to produce documents and testify at a judgment debtor proceeding in relation to the Marsh collections.  (Id. at *1.)  Even though Mr. Macaluso attended the debtor examination proceeding, he did not produce any documents.  His attorneys objected to the production of the documents on the grounds of attorney-client and work product privilege, as well as an invasion of privacy rights.  (Id. at *1-2.)

Thereafter Lennar later brought a motion to compel, which was granted by the trial court, and Mr. Macaluso timely filed a notice of appeal.  Lennar asserted that the order was nonappealable and moved to enforce the order, to which the trial court agreed.  After the trial court set a hearing for an order to show cause re contempt for Macaluso’s refusal to comply with the court’s order, Mr. Macaluso filed a writ petition.  (Id. at *2.)

The Court of Appeal acknowledged that if the motion to compel order was an appealable order under California Code of Civil Procedure section 904.1(a)(2), all further proceedings in the trial court would be stayed and the trial court would be divested of jurisdiction to hold a order to show cause re contempt hearing.  Thus, the issue presented to the appellate court was whether a motion to compel a post-judgment order was appealable under section 904.1(a)(2).

As the California Supreme Court has stated, “not every postjudgment order that follows a final appealable judgment is appealable. To be appealable, a postjudgment order must satisfy two additional requirements.”  (Id. at *2 [quoting Lakin v. Watkins Associated Industries (1993) 6 Cal.4th 644, 651].)  The first requirement is “that the issues raised by the appeal from the order from those arising from an appeal of the judgment.”  (Lakin, supra, 6 Cal.4th at 651.)  The second requirement is that ” ‘the order must either affect the judgment or relate to it by enforcing it or staying its execution.’ ”  (Id. at 651-652 [citation omitted].)

In Macaluso the court determined that only the second requirement was at issue.  Looking for guidance in another California case, Dana Point Safe Harbor Collective v. Superior Court (2010) 51 Cal.4th 1, the California Supreme Court determined that court order which required compliance with a legislative subpoena was appealable “because there was no issue left for future consideration except the fact of compliance or noncompliance with the terms of the order.”  (Macaluso, supra, 2013 WL at *3.)  “[A]s a general test . . where no issue is left for future consideration except the fact of compliance or noncompliance with the terms of the first decree, that decree is final, but where anything further in the nature of judicial action on the part of the court is essential to a final determination of the rights of the parties, the decree is interlocutory.”  (Id. at *3 [quoting Dana Point, supra, 51 Cal.4th at 5].)

Because the order in Macaluso was a final determination that overruled Mr. Macaluso’s objections and left no issue for further consideration except for compliance with the terms of the order, the order was appealable.  (Macaluso, 2013 WL *4.)

Lennar argued that because the motion to compel was a discovery motion, it was not appealable.  (Id. at *4.)  The court disagreed.  “Because the subpoena here did not seek to compel a party to a pending action to make evidentiary disclosures, but was instead a subpoena issued to a previously uninvolved third party for purely investigative purposes, we remain convinced the order here was an appealable order under the rationale of Dana Point.”  (Id. [emphasis in original].)

As a judgment creditor it is important to consider how valuable third party subpoena’s and debtor examinations are before spending the money on pursuing them.  If it is possible that a third party investigation may not be as lucrative as examining the actual debtor himself, perhaps you should consider avoiding the pursuit of third party examinations and subpoena’s so you are not spending additional money filing motions to compel and challenging third party appeals, instead of collecting on the judgment itself.