Judge Curtis A. Kin, Case Number: 23STCV23390, Date: 2023-11-02 Tentative Ruling

Plaintiffs Anatoly Krichevsky and Igor Finkelshteyn move for a right to attach order against defendant Gennadiy Kopytov in the amount of $419,323.20.

Plaintiffs Anatoly Krichevsky and Igor Finkelshteyn and defendant Gennadiy Kopytov, also known as Gena Kopytov, are the founding members of Warner Park Recovery Center, LLC (“WPRC”). (Compl. ¶¶ 7, 23.) Plaintiffs Krichevsky and Finkelshteyn each have a 25% interest in WPRC. (Compl. ¶¶ 7, 16(b), 17(b).) Defendant Kopytov has a 50% interest and acts as the Manager for WPRC. (Compl. ¶ 18(b).)

Kopytov allegedly seeks to have plaintiffs surrender their interests in WPRC for less than full value. (Compl. ¶¶ 31, 44.) On August 15, 2022, Michelman & Robinson (“Michelman Firm”), a law firm, sent a letter to plaintiffs, wherein it stated that it was retained by WPRC to investigate and pursue claims against plaintiffs. (Compl. ¶ 32.) The Michelman Firm demanded that plaintiffs transfer their membership interest to Kopytov for par value and enter into a no-payment settlement agreement and mutual release with Kopytov. (Compl. ¶ 33.)

As alleged by plaintiffs, Kopytov retained the Michelman Firm without obtaining plaintiffs’ approval. (Compl. ¶¶ 32-34.) Plaintiffs maintain that their consent was required under WPRC’s Operating Agreement before Kopytov could enter into any contract, including the agreement to retain the Michelman Firm. (Compl. ¶¶ 25, 34.)

In April 2023, the Michelman Firm filed a lawsuit in Los Angeles Superior Court, Case No. 23STCV08034, on behalf of WPRC against Krichevksy, as well as Krichevsky’s ex-wife, Larisa Krichevsky, in connection with alleged bad faith conduct toward WPRC. (Compl. ¶¶ 9, 36.) In that action, the Michelman Firm sought a temporary restraining order and preliminary injunction with respect to Krichevsky. (Compl. ¶ 37.) The Honorable James Chalfant ruled that Kopytov and the Michelman Firm lacked authority to cause WPRC to file suit against Krichevsky. (Compl. ¶ 38.) The Michelman Firm subsequently dismissed Krichevsky from the lawsuit. (Compl. ¶ 39.)

Kopytov caused WPRC to spend more than $180,000 to compensate Michelman. (Compl. ¶ 41.) To reduce the distributions to plaintiffs, Kopytov caused WPRC to stop depositing checks in a timely manner and asked patients to pay him directly instead of to WPRC. (Compl. ¶ 42.)

On September 5, 2023, plaintiffs initiated arbitration against, among others, Kopytov. (Compl. ¶ 21.) Plaintiffs filed the instant Complaint to obtain provisional relief. (Compl. ¶ 1.)

“A party to an arbitration agreement may file in the court in the county in which an arbitration proceeding is pending . . . an application for a provisional remedy in connection with an arbitrable controversy, but only upon the ground that the award to which the applicant may be entitled may be rendered ineffectual without provisional relief.” (CCP § 1281.8(b).) Such provisional relief may include a writ of attachment. (CPP § 1281.8(a)(1).)

The CCP provides that a plaintiff may “apply pursuant to this article for a right to attach order and a writ of attachment by filing an application for the order and writ with the court in which the action is brought.” (CCP § 484.010.) The application shall be executed under oath and must include: (1) a statement showing that the attachment is sought to secure the recovery on a claim upon which an attachment may be issued; (2) a statement of the amount to be secured by the attachment; (3) a statement that the attachment is not sought for a purpose other than the recovery on the claim upon which the attachment is based; (4) a statement that the applicant has no information or belief that the claim is discharged or that the prosecution of the action is stayed in a proceeding under the Bankruptcy Act (11 U.S.C. section 101 et seq.); and (5) a description of the property to be attached under the writ of attachment and a statement that the plaintiff is informed and believes that such property is subject to attachment. (CCP § 484.020.)

The application for a writ of attachment must be supported “by an affidavit showing that the plaintiff on the facts presented would be entitled to a judgment on the claim upon which the attachment is based.” (CCP § 484.030.)

The Court shall consider the showing made by the parties, as well as the pleadings and other papers in the record. (CCP § 484.090(a), (d).) The Court shall issue a right to attach order if it finds all of the following:

(1) The claim upon which the attachment is based is one upon which an attachment may be issued.

(2) The plaintiff has established the probable validity of the claim upon which the attachment is based.

(3) The attachment is not sought for a purpose other than the recovery on the claim upon which the attachment is based.

“The Attachment Law statutes are subject to strict construction….” (Epstein v. Abrams (1997) 57 Cal.App.4th 1159, 1168.)

The asserted basis for attachment is plaintiffs’ claim for breach of contract. Plaintiffs maintain that Kopytov breached Section 6.2 of the Operating Agreement by causing WPRC to file a lawsuit against Krichevsky and paying fees to the Michelman Firm without plaintiffs’ consent. (Compl. ¶ 53; Stone Decl. ¶ 3 & Ex. E; Krichevsky Decl. ¶¶ 4-9; Finkelshteyn Decl. ¶¶ 3-7.) Plaintiffs seek to attach $419,323.20, which is based on $180,036.51 paid to the Michelman Firm and $239,286.69 in defending against the lawsuit filed by the Michelman Firm. (Krichevsky Decl. ¶ 8 & Ex. C; Stone Decl. ¶ 10.)

At issue here is whether WPRC’s Operating Agreement allowed Kopytov as manager of WPRC to hire the Michelman Firm on WPRC’s behalf and, if so, to what extent.

An LLC’s operating agreement governs (1) relations among the members as members and between the members and the LLC, (2) the rights and duties of a person in the capacity of a manager, (3) the activities of the LLC and the conduct of those activities, and (4) the means and conditions for amending the operating agreement. (Corp. Code § 17701.10(a).) Except as provided in statutes governing mergers and conversions, the consent of all members of a manager-managed LLC is required for “any other act outside the ordinary course of the limited liability company’s activities.” (Corp. Code § 17704.07(c)(4)(B).)

Under the WPRC Operating Agreement (“Agreement”), plaintiffs Krichevsky and Finkelshteyn and defendant Kopytov are Members of WPRC. (Krichevsky Decl. ¶ 3 & Ex. A at § 1.8.) Section 6.1 of the Agreement, entitled “AUTHORITY OF MANAGERS,” states in relevant part:

Notwithstanding anything herein to the contrary, the Managers shall have the full and exclusive right, power and authority to manage the affairs of the Company, to make all decisions thereto, and to do or cause to be done any and all acts or things deemed by the Managers to be necessary, appropriate, or desirable to carry out or further the Business of the Company….

(Id. at § 6.1.) The only Manager at issue in the instant application is Kopytov. (Krichevsky Decl. ¶ 3; Compl. ¶ 7 [Krichevsky and Finkelshteyn not involved in day-to-day management of WPRC].)

Section 6.2 of the Agreement, entitled “LIMITATION OF AUTHORITY OF THE MANAGER,” states that “[t]he following actions shall require the unanimous consent of the Members” and lists a series of actions thereafter. (Krichevsky Decl. ¶ 3 & Ex. A at § 6.2.) Relevant here, subsection (c) of section 6.2 lists “incurring a contractual obligation or making capital expenditure” as an action requiring unanimous Member approval. (Id. at § 6.2(c).) Subsection (g) also lists “the incurring of any debt or the borrowing of any money not in the ordinary course of business” as such an action as well. (Id. at § 6.2(g).)

On its face, the provisions of the Agreement in sections 6.1 and 6.2 are ambiguous as to whether Kopytov as Manager had authority to hire the Michelman Firm. Section 6.1, which empowers the Manager to act on behalf of WPRC notwithstanding any other provisions of the Agreement, would appear to have permitted Kopytov to do so. That is, retaining an attorney to bring suit on behalf of the company arguably falls well within the Manager’s “full and exclusive right, power and authority” to do that which is “necessary, appropriate, or desirable to carry out or further the Business” of WPRC. (Krichevsky Decl. Ex. A at § 6.2(c).) But Section 6.2, which requires unanimous consent to incur a contractual obligation, make a capital expenditure, or incur any debt not in the ordinary course of business would also seem to limit Kopytov’s authority to have hired the Michelman Firm, as doing so arguably falls within each of those enumerated actions requiring unanimous consent. (Krichevsky Decl. Ex. A at § 6.2(g).)

Moreover, defendant Kopytov presents evidence that arguably demonstrates the parties’ understanding and agreement that certain contracts and obligations, including the hiring of an attorney, may be permissible actions by the Manager without unanimous Member consent. According to Kopytov, WPRC previously entered into a contractual obligation with Nexus to provide utilization review and billing services in exchange for 6.5% of WPRC’s earnings. (Kopytov Decl. ¶ 8.) Further, Kopytov avers that WPRC retained and paid an attorney to review that Nexus contract without unanimous approval of the Members. (Kopytov Decl. ¶ 9.)

Thus, given the ambiguity of the Agreement’s language, as well as evidence of actions by the Manager evidencing the parties’ understanding and/or agreement that the Manager may undertake certain contractual obligations without Member consent (notably including retention of an attorney), the Court cannot find that plaintiffs are able to establish the probable validity of their breach of contract claim for purposes of obtaining the requested writ of attachment. “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.” (CCP § 481.190.) Here, at this stage of the proceedings and based on this record, the Court cannot find it likely that plaintiff will necessarily prevail.

Contending that their victory is all but assured on their breach of contract claim, plaintiffs point to the June 15, 2023 ruling by Judge Chalfant in Warner Park Recovery Center, LLC v. Larisa Krichevsky, LASC Case No. 23STCV08034 (“Warner Park”) (Stone Decl. ¶¶ 3 & Ex. F [“Chalfant Ruling”]), which denied WPRC’s request for preliminary injunction. In their late-filed Reply,[1] plaintiffs also rely on Judge Kalra’s decision in that same case (Supp. Stone Decl. ¶ 3 & Ex. K [“Kalra Ruling”]), which granted Krichevsky’s motion to disqualify the Michelman Firm from representing WPRC in that matter. To begin with, “a written trial court ruling has no precedential value,” and thus neither the Chalfant Ruling nor the Kalra Ruling are binding in this case. (Santa Ana Hospital Medical Center v. Belshe (1997) 56 Cal.App.4th 819, 831.)

As for the persuasive value of my colleague’s prior decisions, the existence of these rulings, as well as their stated reasons therein, further counsels in favor of this Court’s finding that plaintiffs cannot show a likelihood of obtaining a judgment in their favor. In the Chalfant Ruling, Judge Chalfant read sections 6.1 and 6.2 of the Agreement to mean that certain “major decisions require the unanimous approval of all members.” (Stone Decl. Ex. F at 11.) Among those major decisions is “[t]he decision to retain counsel and sue a member” of the LLC, which “falls within Section 6.2” and “thus requires unanimous agreement from [WPRC] members, notwithstanding the manager’s business powers under Section 6.1.” (Stone Decl. Ex. F at 11.) By contrast, according to the Chalfant Ruling, Kopytov, as [WPRC]’s manager, would have the general authority to file suit against an employee or third part[y] unless such a lawsuit is not part of the ordinary course of business under Section 6.2.” (Stone Decl. Ex. F at 11.) Thus, if adopting the reasoning in the Chalfant Ruling, one might conclude Kopytov breached the Agreement when hiring the Michelman Firm to sue Anatoly Krichevsky in the Warner Park action but complied with the Agreement when hiring the firm to sue Larissa Krichevsky in that same action.

By contrast, the Kalra Ruling disqualified the Michelman Firm from representing WPRC in the Warner Park action altogether by finding the “contention that Section 6.1 gave Kopytov the authority to hire Michelman . . . misplaced.” (Supp. Stone Decl. Ex. K.)[2] In analyzing the Agreement, Judge Kalra notes Section 2 “specifically limits” the Manager’s power by requiring unanimous consent of the Members to “enter into contracts, make capital expenditures, or incur debts that are not in the ordinary course of business.” (Supp. Stone Decl. Ex. K.) Judge Kalra then concludes that “[r]etaining counsel to sue one of its members falls within Section 6.2 of the Operating Agreement and requires unanimous agreement . . .” (Supp. Stone Decl. Ex. K.) Based on a letter from the Michelman Firm indicating it was retained to bring suit against WPRC’s minority members, Judge Kalra found good cause to disqualify the Michelman Firm from the case. (Supp. Stone Decl. Ex. K.) The logical import of disqualifying the Michelman Firm from the entire case is that the Michelman Firm could also not be retained by WPRC to pursue claims against Larissa Krichevksy—a conclusion that would seemingly conflict with Judge Chalfant’s finding that the Agreement gives WPRC’s manager “general authority to file suit against an employee or third part[y] unless such a lawsuit is not part of the ordinary course of business.”[3] (Cf. Stone Decl. Ex. F at 11.)

In sum, as noted above, it is far from clear from the plain language of the Agreement whether hiring the Michelman Firm constituted a breach. Further, evidence of Kopytov hiring an attorney in the past without unanimous member consent makes the purported breach alleged by plaintiffs even less clear. Even further, the existence of two judicial rulings that are arguably inconsistent with one another and that do not completely support plaintiff’s interpretation of the Agreement (that hiring the Michelman Firm for any purpose violated the Agreement) muddies the water further. From all of this, the only thing that is actually clear to this Court is that plaintiffs cannot establish for purposes of obtaining an order for writ of attachment that they will likely procure a judgment in their favor. Perhaps they ultimately will, but plaintiffs have not proven with the instant application that it is the likely outcome at this time.

Lastly, the Court notes that arguably the Chalfant Ruling and Kalra Ruling could be read harmoniously for the proposition that the Agreement permitted Kopytov to hire Michelson to bring the Warner Park suit against Larissa Krichevsky and others but that having the firm sue Anatoly Krichevsky was a breach. Even if the Court were to agree with that more limited theory of liability for breach, the Court would nonetheless deny the instant application, because “an attachment may be issued only where the total amount of the claim or claims is a fixed or readily ascertainable amount.” (CCP § 483.010(a), emphasis added.) Here, the Warner Park lawsuit initiated by the Michelman Firm in WPRC’s name was filed against Krichevsky, Larisa Krichevsky, and Launch to Wellness Psychotherapy, Inc. (Stone Decl. ¶ 3 & Ex. E.) Only Krichevsky has been dismissed from the lawsuit. (Stone Decl. ¶ 5 & Ex. G.) To the extent that WPRC paid fees to the Michelman Firm to pursue claims against Larisa Krichevsky and Launch to Wellness Psychotherapy, Inc., such fees would not be breach of contract damages subject to attachment. Plaintiffs make no effort to apportion the fees paid to the Michelman Firm in prosecuting its claims against Larisa Krichevsky and Launch to Wellness Psychotherapy, Inc. (Krichevsky Decl. ¶ 8 & Ex. C.) As a result, the amount subject to attachment is not fixed or readily ascertainable.

[1] It is not clear plaintiffs were entitled to file a Reply Brief in support of an Application for Writ of Attachment at all, let alone a late one. (Cf. CCP § 484.010(e) [providing for opposition to be filed five court days prior to the hearing without mention of any opportunity for Reply].

[2] Exhibit K to the Supplemental Stone Declaration lacks page numbering. The Court also notes that Exhibit K includes only Judge Kalra’s Tentative Ruling, but there appears to be no dispute that Judge Kalra adopted his Tentative Ruling without any material changes. Also, according to the Kalra Ruling, the party moving for disqualification was Anatoly Krichevsky, but this Court notes that Anatoly Krichevsky had been dismissed from the suit in June 2023. (See Compl. ¶¶ 10-12.)

[3] In a footnote, the Kalra Ruling assumes but does not decide that Section 6.1 may provide the manager with authority to sue Larissa Krichevsky but nonetheless disqualifies the Michelman Firm from the entire case. (Supp. Stone Decl. Ex. K.)