Michael Papuc prevails on appeal. California Court of Appeal affirms Charging Order against Partnership Interest which is Extended to Interest in Successor Corporation

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Michael Papuc prevails on appeal. California Court of Appeal affirms Charging Order against Partnership Interest which is Extended to Interest in Successor Corporation

Michael Papuc prevails on appeal. California Court of Appeal affirms Charging Order against Partnership Interest which is Extended to Interest in Successor Corporation

Attorney Michael Papuc prevailed on appeal on behalf of his clients, Phillips, Spallas & Angstadt, LLP, in obtaining a Charging Order against Attorney Shahab Fotouhi's interest in his former partnership, which was extended to Mr. Fotouhi's interest in a successor corporation. The Phillips law firm is now able to collect 15% of the corporation's net profits, to pay a judgment of $2.4 million obtained by the Phillips firm against Mr. Fotouhi. See Phillips, Spallas & Angstadt, LLP v. Fotouhi (2011) 197 Cal.App.4th 1132, 1134.    California law permits charging orders against partnership interests. (Cal. Corp. Code, sec. 16504(a).) This is the first published appellate court decision in California to extend a charging order against a partnership interest to a successor corporate interest.

The case arises out of a break-up of a partnership, formerly known as Phillips, Spallas & Fotouhi, LLP. Mr. Fotouhi left the partnership with two insurance company clients. (197 Cal.App.4th at 1135.) A lawsuit followed, and a $2.4 million arbitration award was entered against Mr. Fotouhi in May, 2005. (197 Cal.App.4th at 1135.) Mr. Fotouhi filed for bankruptcy protection on August 29, 2005.    (197 Cal.App.4th at 1135.) The Phillips firm filed an adversarial complaint. Michael Papuc went to trial on behalf of the Phillips firm, and obtained a denial of discharge on grounds of failure of Mr. Fotouhi to disclose the proper value of his interest in his partnership, failure to disclose income he was receiving from another law firm, and failure to disclose his interest in a Limited Liability Company which owned property in Santa Maria. (See Findings of Fact, Opinion, Conclusions of Law, U.S. Bankruptcy Court, Northern Diistrict of California, Adversarial Case No. 05-4487 AN, Phillips, Spallas & Angstadt, LLP v. Fotouhi, filed December 18, 2007 by Chief Bankruptcy Judge Randall J. Newsom, p. 20.)

Judgement was entered on the $2.4 million arbitration award in June, 2009. (197 Cal.App.4th at 1137.) Mr. Papuc thereafter obtained a charging order against Mr. Fotouhi's interest in his law firm partnership, which was extended to his interest in the law firm corporation as a mere continuation of the partnership. (197 Cal.App.4th at 1138.) The partnership stopped doing business shortly after collection efforts began, and the corporation was created under a similar name, with the same locations, clients, and staff. (197 Cal.App.4th 1136-1137.) There was no prior case law in California extending a charging order of a partnership interest to an interest in a successor corporation. For more information see San Francisco Superior Court case no. 504215. See Phillips, Spallas & Angstadt v. Fotouhi (2011) 197 Cal.App. 4th 1132, 1134-1138. See Findings of Fact, Opinion, Conclusions of Law, U.S. Bankruptcy Court, Northern Diistrict of California, Adversarial Case No. 05-4487 AN, Phillips, Spallas & Angstadt, LLP v. Fotouhi, filed December 18, 2007 by Chief Bankruptcy Judge Randall J. Newsom.

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Michael Papuc
Mpapuc@aol.com
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