Superior Court of California 

County of Los Angeles – West District 

Beverly Hills Courthouse / Department 205 

 

 

 

BACKGROUND 

This case arises from a dispute between co-owners of a California limited liability company called Pocketbook.  Pocketbook is engaged in the business of personnel recruitment, placement, and staffing.  (Dolin Decl., ¶ 3.)  Plaintiff Brittany Dolin and Defendant Nicole Musselman-Dayan each respectively hold fifty percent (50%) membership interest in Pocketbook.  (Id. ¶¶ 7-8.)  

Throughout Pocketbook’s existence, Plaintiff has, at all relevant times, been Pocketbook’s primary day-to-day operator and lead business generator, overseeing the majority of the Company’s business.  (Dolin Decl., ¶ 20.)  Defendant, meanwhile, has played a more limited role, handling discrete financial and back-office tasks, including managing the company’s payments to employees and vendors, overseeing its real estate (leasing) affairs, working (at times with third party professionals) to prepare Company financials, and ensuring the timely preparation of yearly taxes and payments for insurance. (Id.)  

As a result of Plaintiff’s more active role in the Company, the parties agreed that Plaintiff would be entitled to a monthly salary and payment of commissions on a monthly basis based on the revenue Plaintiff generates for the business. (Id. ¶¶ 24-26 & Exh. 2.)  And, in fact, until a dispute arose between the parties earlier this year, Plaintiff was regularly paid these wages on a monthly basis. (Id. ¶ 110 & Exh. 12.)  

Around 2017, Defendant informed Plaintiff she would be playing an even lesser role in the company while she focused on having and raising her children.  Accordingly, she represented to Plaintiff at that time that she would continue to contribute to the Company in other ways. (Dolin Decl., ¶¶ 22-23.)  Specifically, Defendant represented that she would continue to provide Pocketbook with office space in which to operate at little to no charge in the building that she and her husband’s company (7906 Santa Monica, LLC) owned, located at 7906-7914 Santa Monica Blvd., in West Hollywood, California (the “Building”). (Id.)   

Indeed, during Pocketbook’s initial tenancy in the Building, Defendant signed leases in her own name (rather than under Pocketbook’s name) and had leases prepared for $1.00 in rent per month. (Id. ¶¶ 62-69.)  Later, while Mrs. Dayan signed leases in the name of Pocketbook, save for discrete limited exceptions in which Mrs. Dayan unilaterally and without consulting Plaintiff made small payments, Pocketbook was not charged for rent by 7906 Santa Monica, LLC, and Defendant did not pay rent from Pocketbook’s accounts. (Id. at ¶¶ 69-70.)  

Further confirming this arrangement, no rent obligation is referenced in any of the financial statements Defendant prepared, and at all times, Defendant continually represented to Plaintiff that Pocketbook’s tenancy at the Building would be free of charge or virtually free of charge as Defendant’s contribution to Pocketbook. (Id. ¶¶ 62, 70-71, 94.)  

Notwithstanding, in 2020, unbeknownst to Plaintiff, Defendant and her husband conspired in a fraudulent lease scheme (against their prospective lender), which would later have a detrimental effect on Pocketbook. Specifically, in 2020, Defendant and her husband, through their limited liability company, 7906 Santa Monica, LLC, sought to refinance the Building in which Pocketbook had long been a tenant.  Around that time, the parties already had several discussions about expanding into a larger space in the Building, based on Pocketbook’s growing workforce.  (Dolin Decl., ¶ 74.)  Defendant represented that she would handle the move and at all relevant times, Plaintiff understood that Defendant’s representations that Pocketbook would be charged no to minimal rent, as Defendant’s contribution to the Company, was continuing. (Id. ¶ 73.) Additionally, as Defendant was primarily responsible for Pocketbook’s leases, Plaintiff’s focus was elsewhere, on the day-to-day operations of the company. (Id. at ¶ 78.)  

Unbeknownst to Plaintiff at the time, the Dayans conspired to have Pocketbook enter a lease in 2020 that reflected not only an illusory rate, but took steps to create the false appearance that Pocketbook was a normal third party lessee, in order to maximize loan proceeds on their refinance of the Building, and secure more favorable loan terms from their lender. (Dolin Decl., ¶¶ 88-91.)  Such actions included Defendant having the signatory name on the proposed lease agreement changed from her name to Plaintiff’s name; asking Plaintiff to sign the Lease Agreement; and making payments from Pocketbook’s account to 7906 LLC, without Plaintiff’s knowledge, for backdated rent to create the impression that Pocketbook historically paid rent for the space it occupied in the Building, when in reality it did not. (Id. ¶¶ 79-84, 92.)   

However, once 7906 LLC secured the refinance, Pocketbook’s non-payment of rent resumed, and 7906 LLC failed to issue a single demand for rent. (Dolin Decl., ¶ 94.)  For years after 2020, including even after Pocketbook vacated the office space in August 2021, no mention whatsoever was made of any rent obligation due to 7906 Santa Monica LLC, that is, until a dispute arose between the parties in 2024 following Defendant’s demand to be paid for her interest in Pocketbook.  (Dolin Decl., ¶ 99.)  

In late 2023, Defendant approached Plaintiff and expressed her desire to be bought out of her membership interest in Pocketbook. (Dolin Decl., ¶¶ 29, 36.)  From the outset of these discussions, Defendant was outwardly hostile and circumspect. (Id. at ¶ 40.)  Defendant would not disclose any price she had in mind for a buyout and tacitly threatened Plaintiff that she intended to pursue “a formal action” if the resolution of the negotiations was not to her liking. (Id. ¶¶ 38, 41 & Exh. 3.)  Meanwhile, Defendant began unilaterally issuing herself checks from Pocketbook for purported salary and other payments, without consulting with Plaintiff or seeking Plaintiff’s approval. (Id. at ¶¶ 31-33 & Exh. 14.)   

The buyout discussions broke down in February 2024. (Dolin Decl., ¶ 49.)  As Defendant had no means to force a sale of her interests (through the company’s Operating Agreement or California law), she resorted to coercion and extortion.  Specifically, the property manager for 7906 Santa Monica LLC emailed the parties to state that Pocketbook owed the entity more than $228,000 in unpaid rent. (Id. ¶ 49 & Exh. 4.)  7906 Santa Monica LLC then filed a Complaint against Pocketbook in Los Angeles Superior Court for unpaid rent and immediately moved ex parte for a writ of attachment to try and freeze all money in Pocketbook’s operating account, which would have effectively left Pocketbook without any ability to pay its ordinary business expenses, including the salaries of its nine employees. (Id. at ¶ 113.)  The writ was denied, prompting Defendant’s Counsel to threaten Pocketbook’s Counsel, and insist they withdraw, in hopes of causing Pocketbook to default in the action. (Id. ¶¶ 114-117.)  When Pocketbook’s Counsel refused, Defendant informed counsel she would not agree to pay counsel’s legal fees.   

Defendant also used the lease claim as a basis to deny Plaintiff her salary and commissions, even though Defendant was herself receiving reimbursements and a salary.  (Dolin Decl. ¶¶ 52, 119.)  Defendant refused to make payments to Plaintiff solely as leverage, improperly wielding her position with Pocketbook and her access to Pocketbook’s funds to pressure Plaintiff to agree to a buyout deal to Defendant’s liking.  On these facts, Plaintiff has now filed a complaint for judicial dissolution of Pocketbook.   

This hearing is on Plaintiff’s motion for preliminary injunction, seeking the appointment of a receiver to oversee and manage the finances of Pocketbook pending resolution of the dissolution action.  The grounds for the motion are that: (1) Plaintiff has a likelihood of prevailing on her dissolution claim as dissolution is authorized under Corp. Code §17707.03 where, as here, it is reasonably necessary to protect the rights and interests of Plaintiff as Defendant has engaged in mismanagement, abuse of authority, self-dealing and fraud; (2) Plaintiff will suffer irreparable harm if a temporary restraining order is not issued because she will continue to be denied her wages which she requires to pay her living expenses; (3) the balance of hardships weighs in favor of Plaintiff as there is no harm to Defendant by having a receiver oversee the payments of Pocketbook’s normal obligations; and (4) an injunction will preserve the status quo as Plaintiff has regularly received payment of her monthly salary and commissions in the normal course of business, and during the same period, Defendant has expressly acknowledged she does not take a salary or commission and is not entitled to one based on the limited work she does for the Company. 

Defendant agrees there has been such a breakdown between Plaintiff and Defendant such that management of Pocketbook is “deadlocked or subject to internal dissension,” which supports the dissolution of Pocketbook.  Defendant also agrees that a receiver should be appointed, but that it should be a neutral receiver as opposed to Plaintiff’s “hand-picked” receiver.  Defendant maintains that she in fact proposed to stipulate to the dissolution and appointment of a receiver, but her proposal was rejected by Plaintiff.   

LEGAL STANDARD 

In determining whether to issue a preliminary injunction, the trial court considers two factors: (1) the reasonable probability that the plaintiff will prevail on the merits at trial; and (2) a balancing of the “irreparable harm” that the plaintiff is likely to sustain if the injunction is denied compared to the harm that the defendant is likely to suffer if the court grants a preliminary injunction.  (Code Civ. Proc. §526(a); 14859 Moorpark Homeowner’s Assn. v. VRT Corp. (1998) 63 Cal.App.4th 1396, 1402; Pillsbury, Madison & Sutro v. Schectman (1997) 55 Cal.App.4th 1279, 1283. 

The court must consider both factors.  The two factors are a sliding scale – the stronger the showing of probability of prevailing, the lesser showing is required for irreparable harm.  (Butt v. State 4 Cal.4th at 678.)  The plaintiff must make some showing of each factor. (Jessen v. Keystone Savings & Loan Assn. (1983) 142 Cal.App.3d 454, 459.)  A court may not issue a preliminary injunction if the plaintiff cannot possibly prevail on the merits even if a strong showing of irreparable harm has been made.  (Butt v. State (1992) 4 Cal.4th 668, 677-78.) 

The court’s ruling on a preliminary injunction is not an adjudication of the merits, is not a trial, and does not require a statement of decision.  (Cohen v. Board of Supervisors (1985) 40 Cal.3d 277, 286; People v. Landlords Professional Services, Inc. (1986) 178 Cal.App.3d 68, 70-71.)  The Court is not required to state its reasons for granting or denying a preliminary injunction; a cursory statement is sufficient. (City of Los Altos v. Barnes (1992) 3 Cal.App.4th 1193, 1198.)¿ 

DISCUSSION 

Plaintiff argues there is a reasonable probability she will prevail on her dissolution action because such actions are allowed by Corp. Code § 17707.03 under circumstances present here.  The Court agrees.    

Corp. Code § 17707.03 states, in relevant part, “Pursuant to an action filed by any manager or by any member or members of a limited liability company, a court of competent jurisdiction may decree the dissolution of a limited liability company whenever any of the events specified in subdivision (b) occurs.”  

The events described subdivision (b) include when: “(1) It is not reasonably practicable to carry on the business in conformity with the articles of organization or operating agreement. (2) Dissolution is reasonably necessary for the protection of the rights or interests of the complaining members. (3) The business of the limited liability company has been abandoned. (4) The management of the limited liability company is deadlocked or subject to internal dissension. (5) Those in control of the limited liability company have been guilty of, or have knowingly countenanced, persistent and pervasive fraud, mismanagement, or abuse of authority.” (Corp. Code § 17707.03, subd. (b).)  

All but one of these events are present here.  First, it is not reasonably practicable for the parties to be able to carry on the business of Pocketbook together, given the parties no longer trust or even talk to one another.  Second, Plaintiff requires dissolution to protect her rights, including to be able to earn a living wage.  Third, the management of Pocketbook, as between the parties, is subject to internal dissension.  Fourth, there is substantial evidence Defendant is guilty of fraud, mismanagement, self-dealing and abuse of authority injuring Pocketbook’s interests.  There is, therefore, a strong showing that Plaintiff will prevail on her dissolution claim.  Indeed, Defendant agrees that a dissolution is necessary here.     

Plaintiff next argues that there is irreparable harm if preliminary injunction is not issued because she will continue to be denied her wages, which she requires to pay her monthly expenses and defend herself form Defendant’s actions.  Pocketbook will also have no counsel to defend itself in an action currently being prosecuted by the Dayans, subjecting Pocketbook to substantial monetary damages that would cause an irreparable harm to Plaintiff, as a co-owner of Pocketbook.  Under these circumstances, money damages only at a later date would not afford adequate relief.  Indeed, Plaintiff claims she may be compelled to give in to Defendant’s demands well-before any resolution of this action without the requested relief, given Plaintiff will not have the resources to mount a defense and Defendant’s actions are continuing to deplete the assets of Pocketbook, of which Plaintiff is a 50% member.  On these facts, the Court concludes Plaintiff has also made a strong showing of irreparable harm. 

Plaintiff also argues that the balance of hardships tips in her favor.  The Court agrees.  The relative hardships of the parties if an injunction is granted or denied is one of the most important factors to which courts should look in determining whether to grant injunctive relief. (See, e.g., Transcentury Properties, Inc. v. State of Cal. (1974) 41 Cal.App.3d 835, 843 (1974).) “In the last analysis, the trial court must determine which party is the more likely to be injured by the exercise of its discretion and it must then be exercised in favor of that party.”  (Cont’l Baking Co., 68 Cal. 2d at 528.)  Here, the irreparable harm described above is weighed against the minimal risk to Defendant, in having a receiver oversee the operating accounts of Pocketbook to ensure that payments are made based on legitimate obligations.  The receiver will determine whether Plaintiff is entitled to the salary and wages she seeks, whether Defendant has improperly withdrawn funds to which she is not entitled, and whether Pocketbook’s counsel should be paid for work in defending Pocketbook against claims brought by Defendant’s company. 

Plaintiff further argues that the injunction will preserve the status quo as the Company has long paid for Plaintiff’s salary and commissions and legal work by its counsel.  Again, the Court agrees.  The “status quo” is the “last actual peaceable, uncontested status which preceded the pending controversy.” (Voorhies v. Greene (1983) 139 Cal.App.3d 989, 995 (1983).)  Here, a receiver will preserve the status quo by enabling the Company to continue its normal operations (as it was before the parties’ dispute) while the dissolution action is resolved. 

The Court turns now to Plaintiff’s request for a receiver, which Defendant does not oppose.  California law authorizes the appointment of a receiver in any pending case which it is necessary to preserve the property or rights of any party. (Code Civ. Proc. § 564, subds. (a)-(b).)  To that end, courts recognize that where dissensions deadlocks a corporation or frustrates its purposes, or, where its business cannot be honestly or properly managed, appointment of a receiver is appropriate.  (Misita v. Distillers Corps. (1942) 54 Cal.App.2d 244, 250-51.)  Evidence of breaches of corporate trust, mismanagement, and waste support the appointment of a receiver here.  (Id. at 251.)  Indeed, “it is well settled that a court of equity has inherent power to appoint a temporary receiver for a solvent, going corporation, at the insistence of stockholders, on the ground of fraud or gross mismanagement, or where there are such dissensions in its governing body as to make it impossible for the corporation to carry on its business to advantage.” (Id. at 252.)  And a court also has the power to appoint a receiver on its own motion, where necessary to accomplish some judicial objective.  (McCarthy v. Poulsen (1985) 173 Cal.App.3d 1212, 1219 (1985); see also Gold v. Gold, 114 Cal.App.4th 791, 804-05 (2003) (“The powers granted to the superior court include the appointment of a receiver upon the filing of a complaint for dissolution of the corporation.”) (citations omitted).)  

All of the requisite conditions for the appointment of a receiver exist here.  There is such a conflict between the co-owners of Pocketbook that it is impossible for the company to carry on its normal business.  There is also evidence of fraud or gross mismanagement by one of the members of the company, that appointment of a receiver is necessary to preserve the property and rights of the other member.   

As to the selection of the receiver, the parties are to meet and confer and provide the Court with the name of a mutually agreed upon receiver within 10 days of this Order.  If the parties cannot agree, the parties will submit a list of two receivers each within 10 days, and the Court will pick from the list.  The parties will be charged equally for the receiver’s fees and costs.   

The Court turns now to the amount of bond to be posted by Plaintiff.  Plaintiff submits that she should only be required to post a nominal bond of $1000 because there is little risk of prejudice to Defendant stemming from an improper award of injunctive relief.  The Court agrees.  As the injunction merely appoints a neutral receiver to oversee the management of Pocketbook’s accounts, there is no risk to Defendant, assuming the amounts she has withdrawn and the amounts she has withheld paying are legitimate and proper.  Indeed, Defendant does not object to the nominal bond of $1,000.  In light of the foregoing, the Court orders Plaintiff to post a bond of $1,000 with respect to her request for appointment of a receiver (Code Civ. Proc. § 566), and a preliminary injunction (Code Civ. Proc. §529).  

CONCLUSION 

Based on the foregoing, the Court GRANTS IN PART and DENIES IN PART Plaintiff’s motion for preliminary injunction and for appointment of receiver.     

IT IS SO ORDERED. 

 

DATED:  October 17, 2024 ___________________________ 

Edward B. Moreton, Jr. 

Judge of the Superior Court