Case: Optronic Techs., Inc. v. Celestron Acquisition, LLC - 2DCA revives plaintiff’s fraudulent-transfer claim based on conspiracy and/or aiding-and-abetting theory of liability

Certified for Partial Publication: 2/10/2025

Docket

Case Overview:

Procedural posture: Appeal from the superior court’s order sustaining defendant’s demurrer without leave to amend

Plaintiff-appellant: Optronic Technologies, Inc. (Orion)

Defendant-respondent: Celestron Acquisition, LLC

Second District Court of Appeal, Division Four case no.: B330798

Appeal from: Los Angeles Superior Court (Fruin, J.)

Advocates: J. Noah Hagey, Matthew Borden, and Kory DeClark for Optronic; Christopher Frost, Joshua Stambaugh, and Nicholas Lauber for Celestron

Facts:

Antitrust Litigation

California-based Optronic Technologies, Inc., d/b/a Orion Telescopes & Binoculars (Orion) sued Chinese telescope manufacturer Ningbo Sunny and its subsidiaries for antitrust violations. Orion alleged that Ningbo Sunny and the other defendants colluded and conspired with third-party telescope manufacturers in China to fix prices, control and restrict output, and divide the $200 million market for manufacturing and distribution of recreational telescopes and components sold in the United States.

Orion’s federal antitrust complaint alleged that there were unnamed “settling parties” who participated in the alleged antitrust conduct but had settled and resolved Orion’s claims. On appeal, Orion alleged that these settling parties included Celestron Acquisition, LLC (Celestron).

In November 2019, a jury ruled in Orion’s favor in the antitrust action. The federal district court entered a judgment in favor of Orion for $54 million, which included treble damages.

Under Federal Rule of Civil Procedure 62(a), Orion could not enforce the judgment for 30 days. The stay of the execution of the judgment was set to expire on January 5, 2020.

Before judgment was entered, Orion moved for a restraining order to bar Ningbo Sunny from removing assets, including accounts receivable, from the United States.

On December 10, 2019, Ningbo Sunny filed a declaration by its president that stated, in part, that “Ningbo will not transfer any of its cash or other assets located in the United States to a location outside of the United States other than in the ordinary course of business while post-trial motions and appeals remain pending.”

The district court denied Orion’s application for a restraining order.

Celestron had received inventory from Ningbo Sunny throughout 2019 and owed Ningbo Sunny a “substantial” sum for that inventory. Celestron paid Ningbo Sunny on a “net 100” basis, meaning Celestron paid for any inventory within 100 days of receiving the invoice for the inventory.

On January 2, 2020, Celestron paid Ningbo Sunny $4,184,057.70 for outstanding invoices. On January 13, 2020, Orion served Celestron with a notice of levy under writ of execution. On January 17, 2020, the district court issued an order assigning all of Ningbo Sunny’s Celestron-based accounts receivable to Orion.

When Orion discovered Celestron’s January 2 payment, Orion moved for sanctions against Ningbo Sunny in the federal district court. Orion noted that under the Ningbo Sunny-Celestron payment terms, payment for invoices from October or later was due no earlier than mid-January 2020. In seeking sanctions, Orion introduced an email dated January 1, 2020 from Ningbo Sunny to Celestron, in which Ningbo Sunny asked Celestron to “pay as much payment as possible this week.” The federal district court granted Orion’s motion for sanctions in March 2020.

This Litigation

In November 2022, Orion filed a complaint against Celestron. Orion alleged that “Celestron made early payment of the accounts receivable to Ningbo Sunny outside the ordinary course of business, knowing that Ningbo Sunny had avoided an injunction that would have prevented such a transfer by making a fraudulent representation under oath to the District Court that it would not make such transfers.”

Orion asserted two claims against Celestron. Orion’s first claim was for actual fraudulent transfer under the Uniform Voidable Transactions Act, Civil Code § 3439.04(a). Orion claimed that Celestron was directly liable for fraudulent transfer and vicariously liable for aiding, abetting, and conspiring in the wrongful conduct alleged in the complaint. Orion’s second claim was for tortious interference.

Celestron filed a demurrer, a motion to strike portions of the complaint, and a special motion to strike under the anti-SLAPP statute, Code of Civil Procedure § 425.16.

The superior court sustained Celestron’s demurrer without leave to amend. For the UTVA claim, the superior court stated that the statute did not “apply to Celestron’s payment of a business debt it owed” to Ningbo Sunny. The superior court reasoned that the only transfer that the UTVA makes voidable is one that a debtor owes to a creditor, but that Orion was not Celestron’s creditor. The superior court did not address Orion’s conspiracy or aiding-and-abetting theories of fraudulent-transfer liability.

The superior court stated that counsel had stipulated that Celestron’s motion to strike and anti-SLAPP motion were withdrawn. The superior court concluded the proceedings. Orion filed a notice of appeal.

Questions:

(1)

Did Orion plead a viable fraudulent-transfer claim against Celestron on a theory of direct liability—that Celestron could be liable under the UTVA either as a “debtor” or as a “person for whose benefit the transfer was made”?

(2)

Did Orion plead a viable fraudulent-transfer claim against Celestron on a theory of vicarious liability—that Celestron could be liable as a coconspirator or an aider and abettor to Ningbo Sunny’s fraudulent transfer?

Answers:

(1)

No, on the properly pleaded factual allegations here, Celestron could not be liable under the UTVA as a “debtor” or as a “person for whose benefit the transfer was made.”

Under the UTVA, a “transfer made or obligation incurred by a debtor is voidable as to a creditor, whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation” with “actual intent to hinder, delay, or defraud any creditor of the debtor.”

The Second District Court of Appeal found no authority holding that a debtor’s debtor (Celestron) could be considered the creditor’s (Orion’s) debtor for purposes of the UTVA. The Court was “not persuaded that Celestron, a stranger to the judgment between Orion and Ningbo Sunny, became Orion’s debtor because Ningbo Sunny was Orion’s debtor.”

The Court rejected Orion’s argument that Celestron could be directly liable for fraudulent transfer because Celestron was a transfer beneficiary under the UTVA. The UTVA allows a creditor to “recover judgment for the value of the asset transferred,” and the “judgment may be entered against” the “first transferee of the asset or the person for whose benefit the transfer was made.” Civil Code § 3439.08(b)(1)(A).

Transfer beneficiary status depends on three factors: (1) whether the beneficiary actually received the benefit; (2) whether the benefit is quantifiable; and (3) whether the benefit is accessible to the beneficiary.

Celestron claimed that it did not “receive” the transfer—Celestron paid Ningbo Sunny. Celestron said that any payment-derived “benefit” in its business relationship with Ningbo Sunny was not quantifiable or subject to disgorgement. The Court agreed with Celestron.

(2)

Yes, Orion’s complaint adequately stated a claim for conspiracy and/or aiding and abetting a fraudulent transfer. Orion alleged that Celestron and Ningbo Sunny arranged and completed the transfer outside the course of ordinary business for the purpose of thwarding Orion’s efforts to collect on its judgment against Ningbo Sunny. Orion alleged that Celestron was aware of Orion’s judgment and Ningbo Sunny’s president’s declaration about not transferring assets out of the United States. Orion alleged that Celestron “directly participated in a scheme to orchestrate the Fraudulent Transfer,” and was “separately liable because” Celestron “aided and abetted and conspired in the wrongful conduct.” The Court found that these allegations were sufficient to state a claim.

The Court rejected Celestron’s argument that Orion had not adequately alleged damages. Celestron argued that because Orion already had a judgment against Ningbo Sunny, recovering the roughly $4.2 million from Celestron would constitute a prohibited double recovery. The Court noted that Orion sought declaratory relief, costs, and the attorney fees Orion incurred in attempting to recover the transferred assets. The Court continued: “Damages claims such as costs of suit may ‘fall within the scope of recoverable tort damages and satisfy the damage element for a fraudulent transfer claim for purposes of demurrer.’” (Citation omitted.)

Outcome:

The Second District Court of Appeal, Division Four reversed the judgment of the superior court and remanded. The Second District Court of Appeal directed the superior court to enter a new order overruling Celestron’s demurrer on the fraudulent-transfer claim and sustaining the demurrer on the tortious-interference claim.

Justice Collins authored the opinion, joined by Justices Currey and Zukin.

Links:

Westlaw: 2025 WL 444853