Odyssey Reinsurance Company obtained a $3.2 million default judgment on October 4, 2017, against Cal-Regent Insurance Services Corporation and Pacific Brokers Insurance Services ("PBIS") as a result of fraudulent transfers made between the two companies and the owner/officers of both companies, Richard and Diane Nagby. Cal-Regent underwrote a number of insurance risks which were subsequently reinsured by Odyssey. The two companies entered into a series of reinsurance agreements that required an annual "provisional commission" to be paid to Cal-Regent. The provisional commission was "adjusted" at year-end depending on the profitability of the business underwritten by Cal-Regent. After settlement of a lawsuit by another company involved in the transactions, it became clear that the amount of "return commissions" Cal-Regent would owe Odyssey due to the annual adjustments were likely to substantially increase. Recognizing this possibility, the Nagbys "embarked on a plan to strip Cal-Regent of assets."
Odyssey obtained a judgment against Cal-Regent in 2015 for $3.2 million to recover the amount of return commissions it was owed. The Nagbys, however, had previously formed PBIS and "caused Cal-Regent to transfer substantially all of its assets to PBIS." Three months after oral argument in Odyssey's initial action against Cal-Regent and three months before judgment was entered, the Nagby's "caused PBIS to sell substantially all of its assets to AmTrust for $5 million." AmTrust made an initial payment of $3 million which was distributed to the Nagbys. Odyssey filed the present action on March 21, 2017, alleging liability under California's Uniform Voidable Transactions Act and alter ego and successor liability law.
The court granted default judgments as well as preliminary injunctions against the Nagbys enjoining them from disposing of the AmTrust proceeds despite recognizing that such an injunction was an "extraordinary and drastic remedy." Because the Defendants defaulted on Odyssey's 2017 complaint, the "well-pleaded factual allegations of the complaint, except those relating to the amount of damages, [were] taken as true." The Court found that Odyssey had sufficiently pled facts to support each of its causes of action as well as sufficient evidence to support an award of the full amount prayed for, plus post-judgment interest running from the 2015 judgment. Odyssey Reinsurance Co. v. Nagby, Case No. 16-cv-03038 (S.D. Cal. Oct. 4, 2017).
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