Unreported / Non-Citable
Background
Beginning in 2015, Dunken Weeks, PLLC (later Dunken Law Group, PLLC) raised $2 million from twelve investors through four loan tranches (TVM I–IV) to finance transvaginal mesh product liability litigation. The investors, including Paul Jerry Bolla and the Investor Defendants, entered into Note Purchase Agreements, Secured Promissory Notes, and Security Agreements in 2016. Their returns were to be distributed pro-rata from litigation proceeds administered by the Garretson Resolution Group, Inc. (GRG) under a 2018 Pelvic Mesh Services Retention Agreement. The GRG Agreement contained an anti-assignment clause requiring GRG's prior written consent for any assignment. By 2019, GRG held settlement proceeds but had not yet distributed investor returns.
In June 2019, before the notes' December 2020 maturity dates and while no monetary default existed, Bolla sued DLG and GRG in Contra Costa County Superior Court seeking the entire Fund for himself. This litigation halted GRG's distribution process. In May 2024, Bolla settled with DLG, obtaining a stipulated judgment of $2,435,923 and a purported assignment of DLG's rights under the GRG Agreement. GRG never consented to the assignment and declined to turn over the Fund. Bolla then domesticated the judgment in Ohio and initiated garnishment proceedings against the Fund held by GRG. GRG filed this federal interpleader action on March 23, 2026, and deposited $972,342.12 with the court on April 14, 2025. The court discharged GRG and dismissed Bolla's counterclaims, leaving cross-motions for summary judgment between Bolla and the Investor Defendants.
The Court’s Holding
The court held that Bolla's Assignment of Interest was void under the GRG Agreement's express anti-assignment clause because GRG never provided the required written consent. Even absent the clause, DLG could not assign rights greater than it possessed; DLG's interest in the Fund was subordinate to the investors' prior contractual claims for repayment of principal plus 16% interest, which had never been satisfied. The Stipulated Judgment bound only DLG and could not extinguish the Investor Defendants' pre-existing interests in the Fund. Bolla's argument that his garnishment lien took priority under California Commercial Code section 9317(a)(2)(A) failed because DLG never had rights in the collateral to grant a security interest, and the parties are co-investors governed by their 2016 loan documents, not competing lien creditors. The statute of limitations on a direct breach-of-contract claim against DLG does not govern competing claims to an interpleaded res.
Bolla's cross-claims were dismissed. His interference claim failed because the underlying Assignment was void, leaving no valid contract to disrupt. Unjust enrichment failed because the Investor Defendants' pro-rata recovery arises from valid 2016 contracts, not an unjust benefit; quasi-contract claims are displaced where express contracts govern. Contribution failed because the parties are not co-obligors on a joint debt but adverse claimants to an interpleaded fund. The common fund doctrine did not apply because Bolla's pre-default litigation froze the Fund for all investors rather than preserving it, and he sought the Fund for himself. The court exercised its equitable discretion to charge Bolla's pro-rata share with $53,645 in GRG's attorney's fees directly attributable to his conduct, and awarded GRG $4,815.95 in taxable costs after sustaining Bolla's objections to $571.64 in non-taxable items. The Fund is to be distributed pro-rata per the calculated percentages, subject to these fee and cost allocations.
Key Takeaways
- An anti-assignment clause requiring the non-assigning party's written consent renders a purported assignment void if consent is not obtained, regardless of the assignor's intent.
- An assignee cannot acquire rights greater than those held by the assignor; DLG's residual interest in the Fund was subject to the investors' prior contractual claims for principal and interest.
- A stipulated judgment between a debtor and one creditor cannot extinguish the pre-existing property interests of other creditors in the same fund.
- Co-investors in a litigation finance program governed by uniform loan documents share pro-rata priority; UCC Article 9 priority rules for competing lien creditors do not apply.
- The common fund doctrine requires the claimant's litigation to be the cause-in-fact of a benefit to others; litigation that freezes a fund and seeks to seize it for oneself does not qualify.
Why It Matters
This decision reinforces the enforceability of anti-assignment clauses in settlement administration agreements and clarifies that litigation finance investors' contractual rights to proceeds survive a lead plaintiff's attempt to capture the entire fund through settlement and assignment. The court's refusal to apply UCC Article 9 priority rules to co-investors under a common program preserves the primacy of the parties' bargain. The equitable apportionment of attorney's fees against the party whose litigation conduct necessitated the interpleader action provides a practical deterrent against strategic behavior that freezes distributions for all investors. The detailed pro-rata distribution methodology, including the deduction of fees attributable to a single claimant's conduct, offers a template for courts administering interpleader funds in multi-investor litigation finance disputes.