Douglas A. Bagby is an attorney who represented clients in the Los Angeles, California area, primarily in family law and general litigation. Joseph Daniel Davis:is a Pasadena/Los Angeles, California attorney whose practice included personal injury and products liability. He has also been involved in toxic tort, legal malpractice, and medical malpractice work. This new published appellate case arises from a long-running dispute between these two Southern California attorneys.
The conflict began in July 2013 when Bagby was involved in a motor vehicle collision in which he lost one leg below the knee. He hired Davis to represent him in a personal injury action, which went to trial in June 2016 and resulted in a jury verdict of more than $5 million in Bagby’s favor. In May 2017, Bagby sued Davis for breach of contract and malpractice. Davis defaulted, then successfully moved to set aside the default. Bagby petitioned for a writ of mandate, which the Court of Appeal granted, ordering the trial court to reinstate the default. (Bagby v. Superior Court (Apr. 16, 2018) B287188 [nonpub. opn.].)
On remand, the trial court entered judgment for $27 million, but Davis appealed, arguing Bagby was limited to the $5 million demanded in his complaint. The Court of Appeal agreed and reversed, directing the trial court to let Bagby choose between accepting a $5 million default judgment or vacating the default and filing an amended complaint. (Bagby v. Davis (Jan. 24, 2020) B294081 [nonpub. opn.].) Bagby chose the $5 million default judgment, which was entered in July 2020.
Bagby then attempted to enforce the judgment by seeking an order for sale of a residence Davis owned in Indian Wells and an order directing Davis to repatriate $3.5 million he had transferred to a limited liability company located in Nevis. The trial court denied those requests, and the Court of Appeal affirmed, explaining that the Indian Wells property sale had to be pursued in Riverside County and that unwinding the transfer required a separate fraudulent transfer action. (Bagby v. Davis (Dec. 13, 2022) B320533 [nonpub. opn.].) There was also a related appeal involving property in Idaho, which the Idaho Supreme Court resolved in 2023. (Bagby v. Davis (2023) 173 Idaho 903.)
In early 2023, Bagby obtained a writ of execution and sought to levy on two Individual Retirement Accounts belonging to Davis, held by LPL Financial Holdings Inc. The funds in those IRAs originated from an insurance policy held in a pension and profit-sharing plan established by Davis’s former law firm, Davis & Thomas. The insurance policy had been cashed out and the proceeds rolled over into the IRAs.
Davis filed a claim of exemption, arguing the IRAs could not be collected upon for two reasons: first, because he had moved to Florida and Florida exemption law should govern; and second, because the IRAs were funded by proceeds traceable to exempt sources – specifically, an unmatured life insurance policy and a private retirement plan – both of which are exempt under California law.
The trial court held multiple hearings and issued several tentative rulings. Initially, the court considered applying Florida law but ultimately concluded that a claim of exemption must be determined under the law of the forum state – California – regardless of where the judgment debtor resides. The court relied on In re Marriage of DeLotel (1977) 73 Cal.App.3d 21, which held that exemption laws govern the remedies available in each state’s courts rather than creating substantive rights that follow the debtor.
The Court of Appeal affirmed the trial court’s order in its entirety in this new published case of Bagby v. Davis -B333649 (February 2026). The court addressed Davis’s arguments in four categories: jurisdiction, choice of law, the merits under California law, and taxes.
Jurisdiction. Davis argued the trial court lacked jurisdiction because the IRA funds were physically located in South Carolina. The court rejected this, explaining that funds held in an account are intangible and have no physical location; they are deemed to be wherever personal jurisdiction exists over the custodian of the account, citing Pacific Decision Sciences Corp. v. Superior Court (2004) 121 Cal.App.4th 1100, 1107- 1108. Since Davis never challenged California’s personal jurisdiction over LPL Financial, the funds were properly subject to the court’s jurisdiction.
Choice of Law.The court held that claims of exemption are governed by the law of the forum state, directly following In re Marriage of DeLotel. That case established that exemption laws do not create substantive defenses but instead govern the remedies available in each state’s courts. Davis’s attempt to distinguish DeLotel on its facts was unpersuasive.
California Law – Life Insurance Exemption.The court addressed whether the proceeds from a voluntarily surrendered life insurance policy retain the exemption granted to unmatured policies under Code of Civil Procedure section 704.100, subdivision (a). The court held they do not. It reasoned that the purpose of the unmatured policy exemption is to prevent creditors from forcing a debtor to surrender a policy for its cash value, thereby preserving the policy as a source of future support. When the debtor voluntarily surrenders the policy, that protective purpose is fulfilled. The court further reasoned that treating a surrendered policy as still unmatured would produce an absurd result: there would be no loan value to collect and no procedural mechanism to collect it, effectively rendering the statutory provisions allowing partial collection a nullity, contrary to Tuolumne Jobs & Small Business Alliance v. Superior Court (2014) 59 Cal.4th 1029, 1037. Instead, the court held that a voluntarily surrendered policy should be treated as matured, meaning the funds are exempt only to the extent they are reasonably necessary for the debtor’s support under section 704.100, subdivision (c). Davis made no attempt to prove the funds were necessary for his support.
California Law – Private Retirement Plan Exemption. The court found that Davis failed to prove the pension and profit-sharing plan qualified as a “private retirement plan” under Code of Civil Procedure section 704.115. While there is no statutory definition of the term, case law establishes that such a plan must be principally designed and used for retirement purposes, citing O’Brien v. AMBS Diagnostics, LLC (2019) 38 Cal.App.5th 553, 560 and Yaesu Electronics Corp. v. Tamura (1994) 28 Cal.App.4th 8, 13-14. The evidence showed that Davis controlled the plan, its sole asset was a single insurance policy, and he had borrowed heavily against it without explanation and allowed substantial interest to accumulate. None of this indicated a plan designed and used for retirement.
California Law – IRA Exemption. The court noted that IRAs are exempt under section 704.115, subdivision (e) only to the extent the funds are necessary to support the debtor in retirement, taking into account all available resources. Since Davis was already retired and reported income exceeding $500,000 per year, and since he offered no evidence that the IRA funds were necessary for his support, the exemption did not apply.
Taxes.Davis argued for the first time on appeal that the trial court should have allowed him to hold back funds to pay taxes and penalties on the IRA withdrawal, as contemplated by section 704.115, subdivision (e)(3). The court held this argument was forfeited because Davis never raised it below, again citing Delta Stewardship Council Cases (2020) 48 Cal.App.5th 1014, 1074.