Judge: Curtis A. Kin, Case: 24STCV30176, Date: 2024-12-17 Tentative Ruling

Case Number: 24STCV30176    Hearing Date: December 17, 2024    Dept: 86

ORDER TO SHOW CAUSE RE: APPOINTMENT OF RECEIVER OR PROVISIONAL DIRECTOR

PLAINTIFF’S EX PARTE APPLICATION RE: (1) OSC Re: CONTEMPTS; AND (2) TRO AND OSC Re: PRELIMINIARY INJUNCTION

Date:               12/17/24 (1:30 PM)

Case:                           Elijah Funk v. Alexander Ross et al. (24STCV30176) 

TENTATIVE RULING:

On 11/26/24, after a hearing, the Court (Hon. James C. Chalfant) DENIED Plaintiffs’ Ex Parte Application for Temporary Restraining Order and Order to Show Cause Why Preliminary Injunction Should Not be Issued, filed 11/22/24 (“11/22/24 Application”).  During that same hearing, the Court issued an Order to Show Cause re: Appointment of Receiver or Provisional Director. Judge Chalfant ordered the parties to meet and confer on the issue prior to filing of their cross-briefs on the issue. (Clough Decl. ¶ 2 & Ex. A at 18:26-28; 19:27-20:1.)

In their cross-briefs, the parties object to appointment of a receiver at this time. (Pl. Brief at 13:1-14:17; Def. Brief at 10:11-15.) However, both plaintiff Elijah Funk and defendant Alexander Ross agree to the appointment of Alexandre Zyngier as provisional director. (Clough Decl. ¶ 6; Seddigh Decl. ¶ 24.) Nonetheless, the parties have not been able to agree on a stipulation or proposed Order to effectuate appointment of the agreed upon provisional director. (Clough Decl. ¶ 6; Seddigh Decl. ¶ 24.)

To the extent that the parties wish to insert orders beyond the scope of the appointment of a provisional director, such as ordering an accounting of the $500,000 that plaintiff purportedly blocked defendant from accessing, imposition of a maximum limit for withdrawals from bank accounts, allowance of $15,000 in monthly distributions to each party, and ratification of a catch-up distribution (see Def. Brief at 8:23-10:5), this is beyond the scope of appointment of a provisional director. The appointment of a provisional director is for the purpose of overcoming the impasse resulting from an “even number of directors who are equally divided and cannot agree as to the management” of the business’s affairs. (Corp. Code § 308(a).)  It would appear to the Court that a straightforward Order appointing Alexander Zyngier as a provisional director would suffice, as his appointment would break the impasse and allow the company to proceed with operations, including decisions regarding accounting and distribution and use of company funds.

As for plaintiffs’ Ex Parte Application, filed 12/16/24, it is DENIED in all respects.  The request for a TRO and OSC Re: Preliminary Injunction is essentially a request for reconsideration of the 11/22/24 Application previously denied by Judge Chalfant.  The only new fact for consideration by the Court is the 12/4/24 transfer of $50,000 from a Haunted Wagon Chase Bank account, which defendant Ross claims was a “catch-up contribution that I am owed.”  (12/16/24 Funk Decl. ¶ 46 & Ex. 31; 12/16/24 Ross Decl. ¶ 15.)  That is insufficient to warrant revisiting Judge Chalfant’s determination that a TRO and Preliminary Injunction were not warranted.  Indeed, it is hard to ignore that plaintiffs previously sought, among other things, to enjoin defendant Ross from “paying himself any distributions . . . without written prior approval form the pertinent Board” (11/22/24 Application at 2), which Judge Chalfant declined to do. Moreover, with the appointment of a provisional director to allow for operating decisions to be made, the requested injunctive relief seems all the more unwarranted.

Lastly, insofar as plaintiffs wish to pursue their contention that the 12/4/24 transfer of $50,000 should be found by this Court to constitute contempt of the Court’s 11/26/24 Order, there appears to be no good reason why such relief should not be obtained by way of a Noticed Motion.  To initiate contempt proceedings on an ex parte basis, plaintiffs must make an affirmative factual showing of irreparable harm, immediate danger, or other basis warranting a finding of contempt on such expedited basis.  (See Cal. Rules of Court, rule 3.1202(c).)  Plaintiffs fail to do so here.