Judge: Christopher K. Lui, Case: 24STCV05063, Date: 2024-08-13 Tentative Ruling
Case Number: 24STCV05063 Hearing Date: August 13, 2024 Dept: 76
Plaintiff Fire District alleges that Defendant Fire Foundation has breached an Agreement by distributing funds to charities and for programs outside of the County of Los Angeles and/or not for the benefit of the Fire District.
Plaintiff Consolidated Fire Protection District of Los Angeles County moves for the issuance of a preliminary injunction.
TENTATIVE RULING
Plaintiff Consolidated Fire Protection District of Los Angeles County’s motion for a preliminary injunction is GRANTED, with the modification that Defendant will be given a budget of 10% of the current balance, i.e., $210,000, to complete the dissolution process, which includes payment of attorney’s fees. Defendant will be required to present an accounting of these expenditures later in the litigation.
ANALYSIS
Motion For Preliminary
Injunction
Plaintiff’s Evidentiary Objections
Declaration
of Stacy Mungo Flanigan
No. 1: OVERRULED. Sufficient foundation/authentication.
No. 2: OVERRULED. Sufficient foundation/authentication; goes
to weight; not hearsay; does not violate secondary evidence rule to the extent testimony
does not describe contents of documents. (Cal. Evid. § 1521(b).)
No. 3: OVERRULED. Sufficient foundation.
No. 4: OVERRULED as to statements by Oliva, Executive Support
Division Manager for the Fire District—authorized admission of party opponent (Evid.
Code, § 1222); otherwise, SUSTAINED as to statements by Flanigan—not an admission
by party opponent.
No. 5: OVERRULED. Sufficient foundation;
No. 6: OVERRULED. Sufficient foundation; hearsay exception as
to statements by Fire Chief Osby—authorized admission (Evid. Code, § 1222); otherwise,
SUSTAINED as to statements by Flanigan—not an admission by party opponent.
No. 7: OVERRULED. Not hearsay; does not violate secondary evidence rule to the extent
testimony does not describe contents of documents. (Evid. Code § 1521(b).)
No. 8: OVERRULED. Sufficient foundation; goes to weight.
No. 9: SUSTAINED. Improper legal opinion of lay witness.
No. 10: SUSTAINED. Hearsay, not admission by party opponent.
No. 11: OVERR4ULED. Sufficient foundation; does not violate secondary
evidence rule to the extent testimony does not describe contents of documents. (Evid.
Code § 1521(b).)
No. 12: SUSTAINED. Insufficient foundation for amount of earmarked
funds.
No. 13: SUSTAINED. Violates secondary evidence rule. (Evid. Code,
§ 1521(b); 1523(a).)
No. 14: SUSTAINED. Lack of foundation.
No. 15: OVERRULED. Sufficient foundation.
No. 16: OVERRULED. Sufficient foundation.
No. 17: OVERRULED. Not hearsay, not being offered for hearsay
purposes.
No. 18: SUSTAINED. Hearsay, not an admission by party opponent.
No. 19: SUSTAINED. Hearsay, not an admission by party opponent.
No. 20: SUSTAINED. Hearsay, not an admission by party opponent.
No. 21: SUSTAINED. Hearsay, not subject to an exception; violates
secondary evidence rule. (Evid. Code, § 1521(b); 1523(a).)
No. 22: SUSTAINED. Hearsay, not an admission by party opponent.
No. 23: SUSTAINED. Hearsay, not an admission by party opponent.
No. 24: SUSTAINED. Hearsay, not an admission by party opponent.
No. 25: OVERRULED. Sufficient foundation; goes to weight.
No. 26: SUSTAINED. Lack of foundation.
No. 27: OVERRULED. Document was attached.
No. 28: OVERRULED. Document was attached.
No. 29: OVERRULED. Sufficient foundation.
No. 30: OVERRULED. Sufficient foundation.
No. 31: OVERRULED. Sufficient foundation; not hearsay.
No. 32: OVERRULED. Sufficient foundation; not hearsay.
No. 33: OVERRULED. Sufficient foundation; not hearsay; does not
violate secondary evidence rule to the extent testimony does not describe contents
of documents. (Evid. Code § 1521(b).)
No. 34: OVERRULED. Sufficient
foundation; does not violate secondary evidence rule to the extent testimony does
not describe contents of documents. (Evid. Code § 1521(b).)
No. 35: SUSTAINED. Lack of foundation as to Fire District’s access.
No. 36: SUSTAINED. Violates secondary evidence rule. (Evid. Code,
§ 1521(b); 1523(a).)
No. 37: OVERRULED. Sufficient foundation.
Declaration
of Neil C. Erickson
No. 1: SUSTAINED. Hearsay, not an admission by party opponent.
No. 2: SUSTAINED. Hearsay, not an admission by party opponent.
No. 3: SUSTAINED. Hearsay, not an admission by party opponent.
No. 4: SUSTAINED. Hearsay, not an admission by party opponent.
No. 5: OVERRULED. Relevant.
No. 6: OVERRULED. Relevant.
No. 7: OVERRULED. Relevant.
No. 8: SUSTAINED. Hearsay as to the contents of the bank statements;
no foundation for hearsay exception laid.
No. 9: SUSTAINED. Hearsay, not an admission by party opponent.
No. 10: SUSTAINED. Hearsay, not an admission by party opponent.
Declaration
of Daryl Osby
No. 1: SUSTAINED. Violates secondary evidence rule. (Evid. Code,
§ 1521(b); 1523(a).); Defendant did not submit the document.
No. 2: SUSTAINED. Violates secondary evidence rule. (Evid. Code,
§ 1521(b); 1523(a).); Defendant did not submit the document.
No. 3: SUSTAINED. Violates secondary evidence rule. (Evid. Code,
§ 1521(b); 1523(a).); Defendant did not submit the document.
No. 4: SUSTAINED. Improper legal opinion by lay witness.
No. 5: SUSTAINED. Improper legal opinion by lay witness.
No. 6: SUSTAINED. Improper legal opinion by lay witness.
No. 7: SUSTAINED. Lack of foundation.
No. 8: SUSTAINED. Hearsay, not an admission by party opponent.
No. 9: SUSTAINED. Lack of foundation.
No. 10: SUSTAINED. Lack of foundation.
No. 11: SUSTAINED. Improper legal opinion of lay witness.
No. 12: SUSTAINED. Hearsay.
No. 13: SUSTAINED. Hearsay.
No. 14: SUSTAINED. Hearsay, not an admission by party opponent.
No. 15: SUSTAINED. Lack of foundation; improper legal opinion
by lay witness.
No. 16: SUSTAINED. Improper legal opinion by lay witness.
No. 17: SUSTAINED as to statements by foundation—hearsay, not
an admission by party opponent; OVERRULED as to modest donations coming in—sufficient
foundation; goes to weight.
No. 18: SUSTAINED. Lack of donation.
No. 19: SUSTAINED. Lack of foundation.
Defendant’s Evidentiary Objections
Declaration
of Candie Roosjen
No. 1: SUSTAINED as to being informed—lack of foundation; SUSTAINED
as to contents of website (which are authenticated by the Lam declaration)—violates
secondary evidence rule. (Evid. Code, § 1521(b); 1523(a).)
No. 2: SUSTAINED. Lack of foundation—a declaration made on information
and belief has no evidentiary value. (Goodman
v. Citizens Life & Casualty Ins. Co. (1967) 253 Cal.App.2d 807, 820.)
No. 3: OVERRULED. Sufficient foundation; document
was attached; permissible legal conclusion by attorney; not hearsay—being offered
to show notice. (Evans v. Hood Corp. (2016) 5 Cal.App.5th 1022, 1043-44.)
No. 4: OVERRULED. Sufficient foundation; document
was attached; hearsay exception—authorized admission by party opponent. (Evid. Code,
§ 1222.)
No. 5: SUSTAINED as to being informed—lack of foundation; SUSTAINED
as to contents of website (which are authenticated by the Lam declaration)—violates
secondary evidence rule. (Evid. Code, § 1521(b); 1523(a).)
No. 6: OVERRULED. Sufficient foundation; document was attached.
No. 7: OVERRULED. Sufficient foundation; document was attached; hearsay
exception—authorized admission by party opponent. (Evid. Code, § 1222.)
No. 8: OVERRULED. Permissible legal conclusion by attorney; not
hearsay—being offered to show notice.
(Evans v. Hood Corp. (2016) 5 Cal.App.5th 1022, 1043-44.)
No. 9: OVERRULED.
Hearsay exception—authorized admission by party opponent. (Evid. Code, § 1222);
Not improper legal conclusion.
No. 10: OVERRULED as to statements by Nowicki. Hearsay exception—authorized
admission by party opponent. (Evid. Code, § 1222); Not improper legal conclusion.
No. 11: OVERRULED
as to statements by Nowicki. Hearsay exception—authorized admission by party opponent.
(Evid. Code, § 1222); Not improper legal conclusion. Permissible legal
conclusion by counsel.
No. 12: SUSTAINED. Violates secondary evidence rule. (Evid. Code,
§ 1521(b); 1523(a).); Document not attached.
No. 13: SUSTAINED. Violates secondary evidence rule. (Evid. Code,
§ 1521(b); 1523(a).); Document not attached.
No. 14: OVERRULED. Document was attached; not hearsay; permissible
legal conclusion of counsel.
No. 15: OVERRULED
as to statements by Erickson. Hearsay exception—authorized admission by party opponent.
(Evid. Code, § 1222); Not improper legal conclusion.
Declaration
of Leonard Singbiel
No. 1: OVERRULED. Relevant; document was attached.
No. 2: OVERRULED. Relevant; document was attached.
No. 3: OVERRULED. Relevant; document was attached.
No. 4: OVERRULED. Relevant; document was attached.
No. 5: OVERRULED. Relevant; document was attached.
Declaration
of Vanessa Lam
No. 1: OVERRULED. Sufficient foundation, authentication; document
is attached.
No. 2: OVERRULED. Sufficient foundation, authentication; document
is attached.
No. 3: SUSTAINED as to flyers being mailed—a declaration made
on information and belief has no evidentiary value. (Goodman v. Citizens Life & Casualty Ins.
Co. (1967) 253 Cal.App.2d 807, 820.)
OVERRULED as to Exhibit 8; document is attached.
Declaration
of Heidi Oliva
No. 1: OVERRULED. Objections asserted are not applicable.
No. 2: OVERRULED. Hearsay exception—authorized admission by party
opponent. (Evid. Code, § 1222).
No. 3: SUSTAINED as to reason for resignation—speculation.
No. 4: SUSTAINED. Violates secondary evidence rule. (Evid. Code,
§ 1521(b); 1523(a).) Document not attached.
Declaration
of James Kross
No. 1: SUSTAINED as to Osby statements. Hearsay, not being offered
against declarant.
No. 2: OVERRULED. Not hearsay statement.
No. 3: OVERRULED. Not oral testimony of contents of a document.
Declaration
of Jennifer L. Meeker
No. 1: OVERRULED. Documents were attached; permissible legal
opinion of counsel.
Declaration
of Jason Stempinski
No. 1: SUSTAINED. Improper legal conclusion.
No. 2: SUSTAINED. Lack of foundation.
No. 3: OVERRULED. Hearsay exception—authorized admission by a
party opponent. (Evid. Code, § 1222.)
Request For Judicial Notice
Plaintiff’s
request that the Court take judicial notice of Defendant Los Angeles County Fire
Department Foundation’s (the “Fire Foundation”) certified Articles of Incorporation
filed with the California Secretary of State is GRANTED. The Court may take judicial notice of a business
entity’s corporate status as reflected in the Secretary of State’s records. (Gamet v. Blanchard (2001) 91 Cal.App.4th
1276, 1286; Pedus Bldg. Servs. v.
Allen (2002) 96 Cal.App.4th 152, 156 n.2.)
Discussion
Plaintiff Consolidated Fire Protection
District of Los Angeles County moves for the issuance of a preliminary injunction.
Requirements
For Issuance Of A Preliminary Injunction
“In determining whether to issue
a preliminary injunction, the trial court considers two related factors: (1) the
likelihood that the plaintiff will prevail on the merits of its case at trial, and
(2) the interim harm that the plaintiff is likely to sustain if the injunction is
denied as compared to the harm that the defendant is likely to suffer if the court
grants a preliminary injunction.” (14859 Moorpark Homeowner’s Assn. v. VRT Corp. (1998) 63 Cal.App.4th 1396, 1402
[74 Cal. Rptr. 2d 712].) “The latter factor involves consideration of such things
as the inadequacy of other remedies, the degree of irreparable harm, and the necessity
of preserving the status quo.” (Abrams v. St. John’s Hospital & Health Center (1994) 25 Cal.App.4th 628, 636
[30 Cal. Rptr. 2d 603].)
“The determination whether to
issue a preliminary injunction requires the trial court to exercise its discretion
by considering and weighing ‘“two interrelated factors,” specifically, the likelihood that plaintiffs will prevail on the
merits at trial, and the comparative harm to be suffered by plaintiffs if
the injunction does not issue against the harm to be suffered by defendants … if
it does.’” (Right
Site Coalition v. Los Angeles Unified School Dist. (2008) 160 Cal.App.4th 336, 338
[72 Cal. Rptr. 3d 678].) “The more likely it is that plaintiffs will ultimately prevail, the
less severe must be the harm that they allege will occur if the injunction does
not issue. [Citation.] Further, ‘if the party seeking the injunction can make a sufficiently
strong showing of [*1351] likelihood of success on the merits, the trial
court has discretion to issue the injunction notwithstanding that party’s inability
to show that the balance of harms tips in his [or her] favor.’” (Id. at pp. 338–339.)
The determination of whether to grant a preliminary injunction generally
rests in the sound discretion of the trial court. (14859 Moorpark Homeowner’s Assn. v. VRT Corp, supra, 63 Cal.App.4th at p. 1402.) “‘Discretion
is abused when a court exceeds the bounds of reason or contravenes uncontradicted
evidence.’” (Id. at p. 1402.)
. . .
B. Balancing of Harms Favor Take Me
Home
A trial court’s
decision on a motion for a preliminary injunction “‘does not amount to an adjudication
of the ultimate rights in controversy. It merely determines that the court, balancing
the respective equities of the parties, concludes that, pending a trial on the merits,
the defendant should or that he should not be restrained from exercising the right
claimed by him [or her].’ [Citations.] The
general purpose of such an injunction is the preservation of the status quo until
a final determination of the merits of the action. [*1353]
[Citations.] Thus, the
court examines all of the material before it in order to consider ‘whether a greater injury will result to the defendant
from granting the injunction than to the plaintiff from refusing it … .’ [Citations.]
In making that determination the court will consider the probability of the plaintiff’s
ultimately prevailing in the case and, it has been said, will deny a preliminary injunction unless
there is a reasonable probability that
plaintiff will be successful in the assertion of his rights. [Citations.] … ‘In
the last analysis, the trial court must determine which party is the more likely
to be injured by the exercise of its discretion [citation] and it must then be exercised
in favor of that party [citation].’” (Continental Baking Co. v. Katz (1968) 68 Cal.2d 512, 528 [67 Cal.
Rptr. 761, 439 P.2d 889].)
(Take Me Home Rescue v. Luri (2012) 208 Cal.App.4th 1342,
1350-53.)
“A trial court may not grant a preliminary
injunction, regardless of the balance of interim harm, unless there is some possibility
that the plaintiff would ultimately prevail on the merits of the claim. [Citation.]”
(Hunt v. Superior Court (1999) 21 Cal.4th
984, 999.)
1. Re: The likelihood that the plaintiff will prevail on the merits of its
case at trial.
Plaintiff seeks the issuance of the following
preliminary injunction, ordering that Defendant be restrained from doing any of
the following until this matter has been fully adjudicated:
• Directly or indirectly causing the Fire Foundation to disburse and
donate any funds currently held in its bank account(s);
• Directly or indirectly causing the Fire Foundation to transfer money
out of its bank accounts or to make any payment for any purpose;
• Using a credit card or line of credit for any expenditure; and
• Directly or indirectly causing or allowing the removal or transfer
of any asset owned by the Fire Foundation.
The Complaint sets forth causes of action for breach of contract, breach
of the implied covenant of good faith and fair dealing, unjust enrichment, constructive
trust, accounting, and unfair business practices under Bus. & Prof. Code, §
17200 et seq.
The Complaint alleges in pertinent part as follows:
1. For nearly a decade, the Fire
District and Fire Foundation worked symbiotically to promote the programs and mission
of the Fire District. Funds and non-monetary
donations that would normally go directly to the Fire District were rerouted to
the Fire Foundation under the belief that every dollar received by the Fire Foundation
would eventually be used for the benefit of the Fire District, which ultimately
provided a benefit to the citizens of the county of Los Angeles. For the last several years, the Fire Foundation
used the Fire District’s name, likeness, seal, and images to solicit donations,
always asserting that any donations received would be used for the benefit of
the Fire District.
2. Through a series of events, the
Fire District has recently learned that the Fire Foundation no longer wants to
support the Fire District and instead wants to use the approximately $3,000,000
that it has accumulated over the last several years in ways that will not benefit
the Fire District. The Fire Foundation
informed the Fire District that it intends to dissolve and dissipate its money
in a way that will not benefit the Fire District, leaving the Fire District with
virtually no recourse against the Fire Foundation. The Fire District seeks judicial intervention
to ensure the funds currently held by the Fire Foundation are utilized for the
purposes the Fire Foundation told the Fire District, donors, third party collaborators,
and the public it would use the funds – namely for the benefit of the Fire District
and the citizens of the county of Los Angeles.
(Complaint, ¶¶ 1, 2 [bold emphasis added].)
Interpretation of a contract is “solely a judicial
function … unless the interpretation turns upon the credibility of extrinsic evidence.”
(Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 865 [44 Cal. Rptr.
767, 402 P.2d 839].) “A contract must be so interpreted as to give effect to the
mutual intention of the parties as it existed at the time of contracting” (Civ.
Code, § 1636), and terms may be explained by course of performance (Code Civ. Proc.,
§ 1856, subd. (c)).
(Oh v. Teachers Ins. & Annuity
Assn. of America (2020) 53 Cal.App.5th 71, 84.)
Plaintiff
fails to cite actual contractual language whereby Defendant is required to send
100% of the funds it collects to Plaintiff. The primary purpose of the Agreement
appears to be providing educational opportunities to citizens of the County, and
other services which the District Fire Chief deems necessary. Defendant had the
option, but not obligation, to solicit public donations. However, these donations
were to support obligations in the Agreement, in consultation with the District.
Moreover, the Foundation’s use of County time, material or resources for social
media was to be authorized by the District Fire Chief.
In
this regard, the Agreement, Defendant’s Exhibit 4, provides in pertinent part:
FOUNDATION agrees to provide the following to the
DISTRICT:
a. FOUNDATION
will provide educational opportunities (i.e. community outreach and emergency
preparedness programs, programs, training programs, etc.) to the citizens of Los
Angeles County and other services as deemed necessary by the DISTRICT
Fire Chief.
b. FOUNDATION will make provision for the use of
its programs and any technologies developed in collaboration with DISTRICT.
c. FOUNDATION
may solicit donations, including but not limited to, equipment, monetary,
advertising, and other related sources, from private entities and apply for grants
to support the obligations within this foundation agreement, in consultation
with the DISTRICT.
d. FOUNDATION will represent the DISTRICT and/or
DISTRICT Fire Chief at professional associations as mutually agreed upon as resources
are available.
e. FOUNDATION will provide goodwill to the DISTRICT.
f. FOUNDATION
will not use County time, materials, or resources to engage in social media activities,
unless otherwise authorized by the DISTRICT Fire Chief.
g. FOUNDATION shall satisfactorily provide the following
information and/or reports to the DISTRICT:
i. Upon DISTRICT’s request, submit annually to DISTRICT
the Annual Reporting Form for Foundation Activities.
ii. Upon written request for not less than 30 days
notice, FOUNDATION will make available to DISTRICT and the Los Angeles County Auditor-Controller
their compiled financial statements.
iii. FOUNDATION will provide an account of the tangible/intangible
benefits provided to DISTRICT in a narrative form that describes the programs/services
provided.
iv. Upon request, FOUNDATION shall produce documentation
illustrating costs incurred by the DISTRICT on behalf of the FOUNDATION.
v. Upon written request no less than 30 days, the
FOUNDATION will disclose to potential donors the types of items, activities and
programs for which contributions or donations will be used.
vi. FOUNDATION will maintain secure tax-exempt status
and any required business license(s) if it solicits monetary donations from the
public.
(Def’s Exh. 4, Agreement, Page 2 [bold emphasis
and underlining added].)
Moreover,
Plaintiff alleges that Defendant made representations to the public that funds collected
by Defendant would be used for purposes related to the Fire District. The Complaint
alleges:
25. The Fire Foundation
made clear that the funds and donations it raised would be used to support and benefit
the Fire District. The Fire Foundation routinely
used the Fire District’s name, likeness, seal, and/or images, including images
of Fire District fire trucks, uniformed personnel, Fire District helicopters, and
other County of Los Angeles official images to ensure that the public understood
the purpose of Fire Foundation’s efforts to secure donations and funds. Notably,
the Fire Foundation’s communications and website were devoid of references that
any donations or proceeds would be used to benefit any entity other than the Fire
District.
26. The current
President /Executive Director (“President”) of the Fire Foundation explained the
relationship between the Fire Foundation and Fire District, when she described the
Fire Foundation as an “intermediary” and further explained that “[t]he amount collected
is required to be accounted for, reported to the Auditor-Controller and gifted back
to the Fire Department. We [Fire Foundation]
are just a facilitator.”
27. The Fire Foundation
maintained a website where the Fire Foundation, among other things, solicited
and accepted donations to benefit the Fire District; sold Fire District-related
merchandise; highlighted the Fire District’s needs, programs, and accomplishments;
and demonstrated the ways in which donations and proceeds secured by the Fire Foundation
benefitted the Fire District.
28. On the
donation page of the Fire Foundation’s website, donors were informed that the “[Fire
Foundation] was formed to turn your donations into equipment and education that
saves lives” and that the Fire Foundation “is the official 501(c)(3) tax exempt,
non-profit organization of the Los Angeles County Fire Department.”
29. The Fire
Foundation’s website contained numerous photographs of Fire District personnel,
property, and programs and indicated that donations would “Make an Impact” by contributing
to “Station Needs”, “Lifesaving Equipment,” and “Wildlife Support.”
30. The Fire
Foundation sold merchandise from an online store found on its website and used the
County of Los Angeles and the Fire District’s name, likeness, seal, and/or images
on the merchandise with the promise to consumers that proceeds of the sale would
benefit the Fire District.
31. In addition
to the statements on the Fire Foundation’s website, numerous other communications
from the Fire Foundation to the public and to donors expressed that all funds paid
to the Fire Foundation would be used to support the Fire District’s purpose and
mission.
32. The Fire
Foundation’s social media page featured videos and photos of Fire District
personnel at work, images of the Fire District logo and stated, “All donations have
been critical for equipment and supplies in our department.”
33. The Fire
Foundation also solicited on television programming series by seeking donations
at the conclusion of each episode and stating, “The LA County Fire Department Foundation
is focused on supporting LA County Fire Fighters and programs. Donations have supported critical equipment purchases,
lifesaving wildfire education programs, diversity conferences and many other regional
fire related needs.”
34. `Similarly,
flyers issued by the Fire Foundation and displaying the Fire Foundation Employer
Identification Number (“EIN”) as recently as December of 2023 stated, Your donation
is considered 100% Tax-Deductible” and clearly indicated the purpose of the Fire
Foundation as follows:
The mission of [Fire Foundation] is simple,
we have the backs of our LA County Firefighters. Our firefighters put their lives on the line to
protect and serve our community. They answer
the call in times of crisis and work tirelessly to keep us safe. However, their job is not an easy one. Donate
today to make an impact that can save lives! The [Fire Foundation] provides the
equipment our fire fighters need to respond to the many threats we face here in
the County. Your generosity allows our charitable
foundation to give back by supporting life-saving programs such as Sirens of Silence,
Fire Safety Town, Junior Lifeguard Program, READY! SET! GO!, and Peer Support.
35. The specific
programs listed in the flyer (Sirens of Silence; Fire Safety Town; Junior Lifeguard
Program; READY! SET! GO!; and Peer Support) are programs created, contemplated,
and/or overseen by the Fire District in furtherance of the Fire District’s purpose
and mission. Starting in 2015, Fire Safety
Town was a program proposed to plan, construct and operate facilities designed specifically
for fire and life safety training for school aged children, targeting kindergarten
through 5th grade. It appears that for the last nine years, the program never developed
beyond the initial planning stage.
. . .
39. The Fire Foundation’s
fundraising efforts for the benefit of the Fire District resulted in the Fire Foundation
successfully raising millions of dollars a year in “gifts, grants, and contributions”,
according to publicly available tax records.
The Fire Foundation received:
(i.) $1,381,736
in 2019; (ii.) $2,772,690 in 2020; (iii.) $2,058,147 in 2021; and (iv.) $1,560,804
in 2022. The same tax records reflect that
the Fire Foundation held net assets of: (i.) $1,512,468 at end of year 2019; (ii.)
$3,267,693 at end of year 2020; (iii.) $3,728,873 at end of year 2021; and (iv.)
$3,533,708 at end of year 2022. Further,
the same tax records reflect that the Fire Foundation held money with donor restrictions,
including (i.) $150,463 in 2019; (ii.) $570,689 in 2020; (iii.) $548,969 in 2021;
and (iv.) $570,689 in 2022. The Fire District
has sought and continues to seek information from the Fire Foundation regarding
the gifts, grants, and contributions it received in 2023, as well as more detailed
information about the above figures.
Plaintiff has submitted evidence in support
of the foregoing. (See Pltf’s Exhs. 5 – 8.)
Given
the foregoing, Plaintiff has demonstrated a likelihood of prevailing on the merits of its case at trial. Defendant’s
arguments regarding the course of performance of the contract does not undermine
the fact that Defendant used an express association with Plaintiff to obtain funds
from the public, and using such funds for purposes unrelated to Plaintiff would
be an unfair business practice.
Nevertheless, injury in fact is “not a
substantial or insurmountable hurdle”; it suffices “to ‘“allege[] some specific,
‘identifiable trifle’ of injury.” ‘ “ (Ibid.) “If a party has alleged or
proven a personal, individualized loss of money or property in any nontrivial amount,
he or she has also alleged or proven injury in fact.” (Id. at p. 325.)
Finally, “Proposition 64 requires that
a plaintiff’s economic injury come ‘as a result of’ the unfair competition … . [Citations.]
‘The phrase “as a result of” in its plain and ordinary sense means “caused by” and
requires a showing of a causal connection or reliance … .’ “ (Kwikset, supra,
51 Cal.4th at p. 326.)
(Animal Legal Defense Fund v. LT
Napa Partners LLC (2015) 234 Cal. App. 4th 1270, 1279.)
Of course, the issue at trial would be
to what extent Defendant collection public donations that were not given to fund
Plaintiff’s programs. (See Declaration of Stacy Mungo Flanigan, ¶¶ 3 – 7.) The preliminary
injunction, however, would preserve the status quo until that issue is determined.
“The general purpose of such an injunction is the preservation of
the status quo until a final determination of the merits of the action. (Citations
omitted.)”(Continental Baking Co. v. Katz (1968) 68 Cal. 2d 512, 528.)
2.
Re: The interim harm that
the plaintiff is likely to sustain if the injunction is denied as compared to the
harm that the defendant is likely to suffer if the court grants a preliminary injunction.
Code of Civil Procedure section 526, first subdivision
3, authorizes a preliminary injunction “[when] it appears, during the litigation,
that a party to the action is doing, or threatens, or is about to do, . . . some
act in violation of the rights of another party to the action respecting the subject
of the action, and tending to render the judgment ineffectual; . . .”
[*136] An injunction against disposing of property is
proper if disposal would render the final judgment ineffectual. ( Wilkins v.
Oken (1958) 157 Cal.App.2d 603, 606-607 [321 P.2d 876].) Thus, in a case similar
to the one before us, a preliminary injunction was granted to restrain the disposal
of property pending the result of an accounting. ( Raisch v. Warren
(1912) 18 Cal.App. 655, 667 [124 P. 95].) To paraphrase Justice Cardozo, if “[a]
constructive trust is the [voice] through which the conscience of equity finds expression,” then a court can surely prevent the stifling of that voice
before it has a chance to be heard.
In
order to create a constructive trust there must be an existing res (property or
some interest in the property). ( Calistoga Civic Club v. City of Calistoga
(1983) 143 Cal.App.3d 111, 116 [191 Cal.Rptr. 571]; see also Elliott v.
Elliott, supra, 231 Cal.App.2d at p. 209; Angelus Securities Corp. v.
Luton, supra, 47 Cal.App.2d at p. 268.) Clearly, the equitable remedy of constructive
trust would be ineffectual if the trustee were permitted to defeat recovery by wrongfully
permitting the res to be dissipated. Similarly, the remedy of constructive trust
is defeated if plaintiffs are unable to trace the trust property into its succeeding
transfigurements. (Walsh v. Majors (1935) 4 Cal.2d 384, 399 [49 P.2d
598]; Efron v. Kalmanovitz, supra, 249 Cal.App.2d at pp. 195-196;
5 Scott on Trusts, supra, § 521.3, pp. 3657-3659.)
The
purpose of the injunction in this case was not to lessen the difficulty of determining
damages. (Cf. Voorhies v. Greene (1983) 139 Cal.App.3d 989, 997 [189
Cal.Rptr. 132].) Its purpose was to restrain the Steinberg Group from dissipating
the profit from the sale of Disney stock and, thereby, destroying plaintiffs’ equitable
remedy of constructive trust. (Cf. Steinmeyer v. Warner Cons. Corp.
(1974) 42 Cal.App.3d 515, 520 [116 Cal.Rptr. 57].) As discussed below, the trial
court had sufficient evidence to believe dissipation of the profit was already occurring.
Thus, absent injunctive relief, plaintiffs would be left with a “naked claim for
damages . . . to be obtained through an action at law.” ( Lathrop v. Bampton
(1866) 31 Cal. 17, 23.) Instead of obtaining the income the fund could have earned
if invested, plaintiffs would be entitled only to simple interest at the legal rate
of 7 percent per annum. (See Civ. Code, § 2262: “If a trustee omits to invest trust
moneys . . . he must pay simple interest thereon, if such omission is negligent
merely, and compound interest if it is willful.”; and see Lynch v. John
M. Redfield Foundation (1970) 9 Cal.App.3d 293, 302 [88 Cal.Rptr. 86, 51 A.L.R.3d
1284].)
(Heckmann v. Ahmanson (1985)
168 Cal.App.3d 119, 135-36.)
Here, if the preliminary injunction is denied, Plaintiff will
suffer harm in the form of dissipation of the funds which form the basis of the
accounting and constructive trust remedies Plaintiff requests. This appears to be
a certainty, as Defendant has already indicated that it will not remit all funds
collection to Plaintiff. (See Mungo Declaration, On the other hand, if the
requested preliminary injunction is granted, it would be to hasten the end of Defendant,
which appears to be inevitable given Defendant is in the winding-down process. (See Declaration of Candace Roosjen, ¶ 16.)
The balance of the equities favors Plaintiff, but the requested
injunction appears to be overbroad. The Court intends to allow Defendant to access
funds to complete the dissolution process, but Defendant will have to budget its
expenditures from the amount.
Defendant represents that the current balance of funds held by the Foundation is approximately $2.1 million. (Flanigan Decl., ¶ 44.)
The Court will tentatively grant the requested injunction, with the modification that Defendant will be given a budget of 10% of the current balance, i.e., $210,000, to complete the dissolution process, which includes payment of attorney’s fees. Defendant may not distribute funds to other nonprofit organizations unaffiliated with the Fire District and the County pending this lawsuit. Defendant will be required to present an accounting of these expenditures later in the litigation. The parties may present oral argument as to why a greater or lesser amount is warranted.
3. Re: Bond.
Code of Civil Procedure § 529, subdivision (b)(3), and§ 995.220 exempt public entities, including the Fire District, from undertaking requirement in connection with injunctive relief.
Conclusion
The motion for a preliminary injunction is GRANTED, with the
modification that Defendant will be given a budget of 10% of the current balance,
i.e., $210,000, to complete the winding down process, which includes payment of
attorney’s fees. Defendant may not distribute funds to other nonprofit organizations
unaffiliated with the Fire District and the County pending this lawsuit. Defendant
will be required to present an accounting of these expenditures later in the litigation.