Judge Christian R. Gullon, Case Number: 23PSCV03497, Date: 2024-02-01 Tentative Ruling

Judge: Christian R. Gullon, Case: 23PSCV03497, Date: 2024-02-01 Tentative Ruling

PLAINTIFF APEX ENTERTAINMENT, INC.’S MOTION FOR PRELIMINARY INJUNCTION AND WRIT OF POSSESSION is DENIED as to injunctive relief BUT GRANTED as to writ of possession. Plaintiff is required to post an undertaking in an amount TBD at the hearing.

This is a contracts case. Plaintiff APEX ENTERTAINMENT, INC., an “Amazon Vendor who operates by selling … kitchen equipment for restaurants and other professional kitchens” (Complaint ¶5) alleges the following against Defendant MODERN BOUTIQUE INC., which operates as a warehouse for Apex’s storage and shipping (¶6): Starting in 2021, Plaintiff stored some of its inventory at Defendant’s warehouse for an agreed-upon rate of $1.70 per square foot. After Defendant mis-shipped some of Apex’s goods, the business relationship soured. Defendant retroactively tripled the storage fees and charged for overestimated square footage.[1] In 2023, Defendant made a demand letter for payment of the inflated charge(s) or else Defendant would auction off or dispose of Apex’s goods. (¶21.)

On November 9, 2021, Plaintiff filed suit for the following twelve (12) causes of action (COAs):

On December 4, 2023, Defendant filed an answer and a cross-complaint against Plaintiff. The cross-complaint is for 1 COA for breach of contract seeking compensatory damages of $502,295.12 for Plaintiff’s alleged failure to remit payment and adhere to the rate and charges.

On December 18, 2023, the court issued the following minute order Re: Hearing on Ex Parte Application: “Off the record, in Chambers: The Court reads and considers the moving papers and opposition. The Court having considered all filed documents, the moving papers, and opposition, now rules as follows: The Ex Parte Application Temporary Restraining Order filed by APEX ENTERTAINMENT, INC. on 12/13/2023 is Denied. The Court signs and files an Order Re: Plaintiff's Ex Parte Application for Temporary Restraining order and Order to Show Cause Re: Preliminary Injunction, which is incorporated into the Court file. On the Court's own motion, Hearing on Motion for Preliminary Injunction per Ex-Parte is scheduled for 02/01/2024 at 10:00 AM in Department O at Pomona Courthouse South. Plaintiff may file and serve a Supplemental Brief by January 11, 2024. Defendant may file and serve a Supplemental Opposition by January 18, 2024. Plaintiff may file a Reply Brief by January 25, 2024. Late submissions will not be considered by the Court.”

On January 18, 2024, Defendant filed its opposition to Plaintiff’s instant motion.

The purpose of a preliminary injunction is to preserve the status quo pending final resolution upon a trial. (See Scaringe v. J.C.C. Enterprises, Inc. (1988) 205 Cal.App.3d 1536.) The status quo has been defined to mean the last actual peaceable, uncontested status which preceded the pending controversy. (14859 Moorpark Homeowner’s Assn. v. VRT Corp. (1998) 63 Cal.App.4th 1396. 1402.) The burden of proof is on the plaintiff as moving party. (O’Connell v. Superior Court (2006) 141 Cal.App.4th 1452, 1481.) A plaintiff seeking injunctive relief must show the absence of an adequate damages remedy at law. (Code Civ. Proc. § 526(4); Thayer Plymouth Center, Inc. v. Chrysler Motors (1967) 255 Cal.App.2d 300, 307.)

The trial court considers two factors in determining whether to issue a preliminary injunction: (1) the likelihood the plaintiff will prevail on the merits of its case at trial,[3] and (2) the interim harm the plaintiff is likely to sustain if the injunction is denied as compared to the harm the defendant is likely to suffer if the court grants a preliminary injunction. (Code Civ. Proc. § 526(a); Husain v. McDonald’s Corp. (2012) 205 Cal.App.4th 860, 866-67.) The balancing of harm between the parties “involves consideration of such things as the inadequacy of other remedies, the degree of irreparable harm, and the necessity of preserving the status quo.” (Husain, supra, 205 Cal.App.4th at 867, emphasis added.) Thus, a preliminary injunction may not issue without some showing of potential entitlement to such relief. (Doe v. Wilson (1997) 57 Cal.App.4th 296, 304.)

The decision to grant a preliminary injunction generally lies within the sound discretion of the trial court and will not be disturbed on appeal absent an abuse of discretion. (Thornton v. Carlson (1992) 4 Cal.App.4th 1249, 1255.)

A preliminary injunction ordinarily cannot take effect unless and until the plaintiff provides an undertaking for damages which the enjoined defendant may sustain by reason of the injunction if the court finally decides that the plaintiff was not entitled to the injunction. (See Code Civ. Proc. § 529(a); Cal. Rules of Court, rule 3.1150(f); City of South San Francisco v. Cypress Lawn Cemetery Assn. (1992) 11 Cal.App.4th 916, 920.)

Plaintiff seeks an injunction to enjoin Defendant from the following “items”:

1. Selling, listing for sale, soliciting bids for, auctioning, marketing for sale, transferring, assigning, hypothecating, dissipating, wasting, tampering with, encumbering, disposing of, moving, or destroying Plaintiff APEX ENTERTAINMENT, INC.’s (“APEX”) goods or products in MODERN BOUTIQUE, INC.’s (“MB”) possession, custody or control

2. Enforcing or seeking to enforce a lien against Plaintiff pursuant to California Commercial Code §§ 7209 or 7210 or any other section or lien

3. Assessing charges and fees and rates against Plaintiff inconsistent with or greater than the parties’ pre-existing contract terms antedating the dispute

4. Failing to or refusing to fill and fulfill Plaintiff APEX’s customer orders with APEX’s goods and products in MB’s warehouse(s)

5. Release and return all of APEX’s goods and products in your possession and/or control to APEX immediately without compensation. (See Proposed Order filed on 1/19/24.)

As summarized by Plaintiff, “[t]he central issue in this PI and writ application is the preservation and recovery of Plaintiff APEX’s $650,000.00 worth of goods and products currently and wrongfully held hostage by Defendant.” (Motion pp. 5-6.) Should Plaintiff not receive its goods, Plaintiff loses its status among Amazon vendors and therefore loses current and future business opportunities with Amazon. (Motion p. 9, citing Supp. Shing Decl., ¶16.)[4]

Here, the court denies the motion for an injunctive relief for numerous reasons.

First, it appears the injunction as to items #1 and #2 (prohibit sale of goods/prevent lien) is moot because Defendant’s “do[] not oppose any restrictions on selling, listing for sale, etc. or other prohibitions against enforcing its warehousemen’s lien while the action is pending.” (Opp. p. 2:23-25, emphasis added.)[5] The Reply is silent as to this point.

Second, the evidence regarding the goods is unclear. According to Plaintiff, it stopped sending products to Defendant in or around March 2023, but Defendant still has “many” of Plaintiff’s products. (Motion p. 8, see also Supp. Shing Decl., ¶ 11.) It is unclear what percentage of this constitutes as Plaintiff’s total goods. Furthermore, it is unclear whether Plaintiff is continuing its operations as it stopped sending goods to Defendant and Plaintiff makes no mention of using a different warehouse. Thus, if Plaintiff has voluntarily ceased operations, then Plaintiff, not Defendant, has “close[d] its business.” (Motion p. 4:9-11.)

Third, as to return of the goods, Plaintiff avers bond is not necessary. Plaintiff in its motion argues that the goods within Defendant’s warehouse serve as “substantial security.” (Motion p. 17:10-17.) This statement suggests that Plaintiff does not need possession of the goods, which undermines the notion of any irreparable harm.

Fourth, as to item #3 (assessment charges), that matter does not permit injunctive relief. To the extent that Defendant is not contractually permitted to change the rate(s)/charges, pecuniary compensation would rectify that loss. (Syngenta Crop Prot., Inc. v. Helliker, 138 Cal. App. 4th 1135, 1167 (2006) (citing Intel Corp., 30 Cal. 4th at 1352) [“[T]o obtain an injunction a plaintiff ordinarily must show that the defendant's wrongful acts threaten to cause irreparable injury, meaning injury that cannot adequately be compensated in damages."].)[6]

Fifth, Plaintiff seeks a mandatory injunction by ordering Defendant to fulfill orders (i.e, specific performance).[7] Mandatory injunctions are scrutinized more closely for abuse of discretion. “The judicial resistance to injunctive relief increases when the attempt is made to compel the doing of affirmative acts. A preliminary mandatory injunction is rarely granted, and is subject to stricter review on appeal.' [Citation.] As our Supreme Court noted many years ago, `[t]he granting of a mandatory injunction pending the trial, and before the rights of the parties in the subject matter which the injunction is designed to affect have been definitely ascertained by the chancellor, is not permitted except in extreme cases where the right thereto is clearly established and it appears that irreparable injury will flow from its refusal. [Citations.]'" ( Board of Supervisors v. McMahon (1990) 219 Cal.App.3d 286, 295-296 [ 268 Cal.Rptr. 219], fn. omitted.) As noted by Defendant in opposition, ordering Defendant to fulfill operations would exacerbate the problems, opening the door to more issues. (Opp. p. 3.) The Reply does not address this concern.

Based on the foregoing—notably as Plaintiff seeks a mandatory injunction without an adequate showing nor is there a strong showing of irreparable harm due to unclear evidence—the motion for a preliminary injunction is DENIED.

A plaintiff must make a written application for a writ of possession. (Code Civ. Proc., § 512.010, subds. (a) & (b).) The application may be supported by declarations and/or a verified complaint. (Code Civ. Proc., § 516.030.) The declarations or complaint must set forth admissible evidence except where expressly permitted to be shown on information and belief. (Ibid.) The declaration supporting a writ possession application must set forth facts with particularity. (Ibid.) This means that the plaintiff must show evidentiary facts rather than the ultimate facts commonly found in pleadings. A recitation of conclusions without a foundation of evidentiary facts is insufficient. (See Rodes v. Shannon (1961) 194 Cai.App.2d 743, 749 [declaration containing conclusions inadequate for summary judgment]; Schessler v. Keck (1956) 138 Cal.App.2d 663, 669.)

The application must be executed under oath and include: (1) A showing of the basis of the plaintiffs claim and that the plaintiff is entitled to possession of the property claimed. If the plaintiffs claim is based on a written instrument, a copy of it must be attached; (2) A showing that the property is wrongfully detained by the defendant, how the defendant came into possession of it, and, the reasons for the detention based on the plaintiffs best knowledge, information, and belief; (3) A specific description of the property and statement of its value; (4) The location of the property according to the plaintiff's best knowledge, information, and belief. If the property, or some part of it, is within a private place which may have to be entered to take possession, a showing of probable cause to believe that the property is located there; and (5) A statement that the property has not been taken for (a) a tax, assessment, or fine, pursuant to a statute, or (b) an execution against the plaintiff's property.

The court may order issuance of a writ of possession if both of the following are found:

(1) The plaintiff has established the probable validity of the plaintiff's claim to possession of the property; and

(2) The undertaking requirements of Section 515.010 are satisfied. (Code Civ. Proc., § 512.060, subd. (a).)

“A claim has ‘probable validity’ where it is more likely than not that the plaintiff will obtain a judgment against the defendant on that claim.” (Code Civ. Proc., § 511.090.) This requires that the plaintiff establish a prima facie case; the writ shall not issue if the defendant shows a reasonable probability of a successful defense to the claim and delivery cause of action. (Witkin, California Procedure, (5th ed. 2008) § 261, p.208.) A defendant's claim of defect in the property is not a defense to the plaintiffs right to possess it. (RCA Service Co. v. Sup. Ct. (1982) 137 Cal.App.3d 1, 3.)

Here, as alluded to in footnote 3 supra, Plaintiff has as probable validity of prevailing on its claims. To the extent that Plaintiff opposes the writ, it but conclusively states otherwise, without evidence. (Opp. p. 3:5-10.)

According to Plaintiff it need not post an undertaking because under C.C.P. § 515.010(b), “a plaintiff need not post a bond in any amount if the party in possession has not demonstrated any ownership interest in the property in question” and as a bailor, Defendant does not have an ownership interest in the goods. (Reply p. 5, emphasis added.)

That, however, is an inaccurate recitation of the statute. The statute provides that the court shall waive the requirement of the plaintiff's undertaking “if the court finds that the defendant has no interest in the property.” (C.C.P. § 515.010(b), emphasis added.) The statute does not make a distinction between ownership interest and possessory interest. And the lien under Section 7-209 is possessory in nature. (See UCC section 7-209.) Thus, with a possessory interest in the goods, the exception to undertaking does not apply.

That then leaves the issue of the amount of undertaking. According to CCP section 515.010, the formula is as follows:

The undertaking shall be in an amount not less than twice the value of the defendant's interest in the property or in a greater amount. The value of the defendant's interest in the property is determined by the market value of the property less the amount due and owing on any conditional sales contract or security agreement and all liens and encumbrances on the property, and any other factors necessary to determine the defendant's interest in the property.

As the court does not have all the relevant numbers to determine the amount, the amount of undertaking is TBD at the hearing. The court requests the parties be prepared with a dollar amount supported by evidence.

Based on the foregoing, the writ of possession is GRANTED to permit Plaintiff to recover its goods (see Ex. 8 attached to Shing Decl.). Undertaking amount is TBD.

[1] Plaintiff alleges this based upon the allegation that the volume of goods Plaintiff has stored with Defendant has decreased significantly but Defendant nevertheless continues to assess the same square footage.

[2] According to the docket, the opposition was filed before the motion was filed. In reply, Plaintiff explains that it filed its moving paper on 1/11/24, but due to a clerical error in the e-filing system, the filing was later rejected. (Reply p. 5.) The court takes no issue with considering the motion as it was ultimately timely submitted based upon Defendant’s filing of an opposition after the 1/11/24 date.

[3] Whether the parties agreed to change the agreed-upon rate is the very purpose to be determined in the litigation. Thus, as this is a matter of contradicting interpretations of the parties’ agreement, notably an oral agreement (Complaint ¶33), for purposes of an injunction, Plaintiff has established a likelihood of success on the merits (i.e., the parties orally agreed that the $1.70 would not be subject to change under any circumstance).

[4] Additionally, in Reply, Plaintiff explains since the filing of Shing’s original declaration, Amazon changed its policy that would require stricter packaging requirements. Should Plaintiff not receive their goods to be redesigned, that would render 2554 units, or 42.5% of all of APEX’s units held by Defendant rendered nearly valueless. (Reply p. 4.)

[5] Regarding the lien, it is unclear whether there is an active lien because while one was issued, “Defendant subsequently withdrew that notice.” (Motion p. 15:2-3.)

[6] And Plaintiff has made no showing that it cannot afford to keep its business operating based upon a change in the rate(s)/charges.

[7] This is mandatory because it compels performance of an affirmative act that changes the position of the parties. (Code Civ. Proc., § 525; Kettenhofen v. Superior Court (1961) 55 Cal.2d 189, 191 [ 10 Cal.Rptr. 356, 358 P.2d 684]; 6 Witkin, Cal. Procedure (3d ed. 1985) Provisional Remedies, §§ 241-246, pp. 210-214.)