Judge Gail Killefer, Case 21STCV43979 2023-03-13 Tentative Ruling

MOVING PARTIES: Defendants, Linghan “Hank” Cao and Ideal International Investment, Inc. dba Ideal Logistics

OPPOSING PARTIES: Plaintiffs, Yue Ma, Lihong Zhao, Sunny West Coast Co., and Hua Ming Technology Co.

MOTION: Defendants’ Demurrer to Third Amended Complaint; Defendants’ Motion to Strike Portions of Third Amended Complaint

TENTATIVE: Moving Defendants’ demurrer is sustained as to the fourth cause of action, and otherwise overruled. Defendants’ motion is also granted as to requests no. 2-6, and otherwise denied. Plaintiffs have 30 days leave to amend. Moving Defendants are to give notice.

This is a breach of contract, fiduciary duty, and corporate dissolution action arising out of investments made by Plaintiffs Yue Ma (“Ma”), Lihong Zhao (“Zhao”), Sunny West Coast Co. (“Sunny”), and Hua Ming Technology Co. (“HM Tech”), into Defendant Ideal International Investment, Inc. dba Ideal Logistics (“Ideal”), a trucking and logistics business.

Plaintiffs allege Ideal also operates several subsidiaries, Defendants E&C Logistics, H&L Logistics, ZW Logistics, JPI Express, Inc., and Ohana Logistics, Inc. (collectively “Subsidiaries”). Plaintiffs allege Defendant Linghan “Hank” Cao (“Cao”) is the majority shareholder of Ideal, and Defendants Hweisan Liu (“Liu”), Jun Pan (“Pan”) and Xiubin Cao (“Cao”) are also involved in the operation of the business.

Plaintiffs allege the Subsidiaries are undercapitalized and shells of Ideal and Cao. Plaintiffs further allege Ideal was to operate until October 13, 2021 pursuant to an agreement between the parties, when the parties could decide to continue or dissolve the business. Plaintiffs allege in late September or early October 2021, Cao offered to buy out Plaintiffs’ shares at an unreasonable rate in exchange for 25% of the equipment used.

On October 19, 2021, Plaintiffs allege Cao had a discussion with Ma’s husband regarding a disputed $650,000 payment, when Cao took out a firearm and threated to kill Ma’s husband and his entire family. Plaintiffs then allege that in November 2021, Cao sold off, used, transferred, or otherwise disposed of Ideal’s corporate assets into Cao’s other businesses. Plaintiffs allege Cao continues to operate Ideal’s business in Atlanta. Plaintiffs bring derivative claims as shareholders and individual causes of action.

Plaintiffs’ Complaint alleges five causes of action: (1) breach of contract (derivatively) (2) breach of fiduciary duty (derivatively), (3) conversion (derivatively), (4) violation of Business & Professions Code § 17200 (derivatively), and (5) involuntary dissolution of corporation (individually).

On December 20, 2021, Plaintiffs filed the First Amended Complaint (“FAC”). The FAC alleges the same five causes of action.

On March 11, 2022, Plaintiffs filed the Second Amended Complaint (“SAC”). The SAC alleges the same five causes of action, but amends to include individual claims for the first cause of action.

On June 7, 2022, the court sustained Defendants’ demurrer to the SAC. On July 7, 2022, Plaintiffs filed the operative Third Amended Complaint (“TAC”).

On September 27, 2022, the court stayed this action and the two instant motions pending resolution of the criminal matter. The criminal matter having been resolved, the court now hears the parties’ motions.

Defendants Ideal and Cao (“Moving Defendants”) now demur to the TAC’s fourth and fifth causes of action. Defendant additionally moves to strike portions of the TAC. Plaintiffs oppose both motions.

Plaintiffs also move for a preliminary injunction against Ideal and Cao, enjoining them from transferring funds or assets away from Ideal. Defendants oppose the motion.

Moving Defendants request judicial notice of the following in support of its demurrer:

Moving Defendants’ request is granted. The existence and legal significance of these documents are proper matters for judicial notice. (Evid. Code § 452(d), (h).)

A demurrer is an objection to a pleading, the grounds for which are apparent from either the face of the complaint or a matter of which the court may take judicial notice. (CCP § 430.30(a); see also Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) The purpose of a demurrer is to challenge the sufficiency of a pleading “by raising questions of law.” (Postley v. Harvey (1984) 153 Cal.App.3d 280, 286.) The court “treat[s] the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. . . .” (Berkley v. Dowds (2007) 152 Cal.App.4th 518, 525.) “In the construction of a pleading, for the purpose of determining its effect, its allegations must be liberally construed, with a view to substantial justice between the parties.” (CCP § 452; see also Stevens v. Sup. Ct. (1999) 75 Cal.App.4th 594, 601.) “When a court evaluates a complaint, the plaintiff is entitled to reasonable inferences from the facts pled.” (Duval v. Board of Trustees (2001) 93 Cal.App.4th 902, 906.)

The general rule is that the plaintiff need only allege ultimate facts, not evidentiary facts. (Doe v. City of Los Angeles (2007) 42 Cal.4th 531, 550.) “All that is required of a plaintiff, as a matter of pleading, even as against a special demurrer, is that his complaint set forth the essential facts of the case with reasonable precision and with sufficient particularity to acquaint the defendant with the nature, source and extent of his cause of action.” (Rannard v. Lockheed Aircraft Corp. (1945) 26 Cal.2d 149, 156-157.) “[D]emurrers for uncertainty are disfavored and are granted only if the pleading is so incomprehensible that a defendant cannot reasonably respond.” (Mahan v. Charles W. Chan Ins. Agency, Inc. (2017) 14 Cal.App.5th 841, 848, fn. 3, citing Lickiss v. Fin. Indus. Regulatory Auth. (2012) 208 Cal.App.4th 1125, 1135.) In addition, even where a complaint is in some respects uncertain, courts strictly construe a demurrer for uncertainty “because ambiguities can be clarified under modern discovery procedures.” (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616.)

Demurrers do not lie as to only parts of causes of action where some valid claim is alleged but “must dispose of an entire cause of action to be sustained.” (Poizner v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 119.) “Generally it is an abuse of discretion to sustain a demurrer without leave to amend if there is any reasonable possibility that the defect can be cured by amendment.” (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349.)

A. Fourth Cause of Action: Violation of Business and Professions Code section 17200

Business & Professions Code § 17200 (“UCL”) prohibits “unfair competition,” which is defined to include “any unlawful, unfair or fraudulent business act or practice” and “unfair, deceptive, untrue or misleading advertising” and any act prohibited by Business & Professions Code § 17500. Business and Professions Code § 17500 prohibits false or misleading statements in connection with the disposal of property or performance of services. A cause of action under the UCL must be stated with “reasonable particularity.” (Gutierrez v. Carmax Auto Superstores California (2018) 19 Cal.App.5th 1234, 1261.)

The UCL prohibits: (1) unlawful conduct; (2) unfair business acts or practices; (3) fraudulent business acts or practices; (4) unfair, deceptive, untrue or misleading advertising; and (5) any act prohibited under sections 17500-77.5.¿ UCL actions based on “unlawful” conduct may be based on violations of other statutes.¿ (See¿Klein v. Chevron U.S.A., Inc. (2012) 202 Cal.App.4th 1342, 1383.)

Moving Defendants contend that the fourth cause of action is insufficiently pled because the new allegations “merely point to an alleged breach of contract... in their attempt to establish a UCL violation,” and in addition, “Plaintiffs’ alleged injuries would constitute damages, which the UCL does not allow.” (Demurrer, 7-8, 10.) Defendants further correctly contend “that an alleged breach of contract, without more, cannot be a predicate for UCL liability as a matter of law” and “a UCLA claim cannot be founded solely upon a violation of common law principles.” (Dem., 8-10; citing Puentes v. Wells Fargo Home Mortgage, Inc. (2008) 160 Cal.App.4th 638, 644–645; Textron Financial Corp. v. National Union Fire Ins. Co. of Pittsburgh (2004) 118 Cal.App.4th 1061, 1072.)

In opposition, Plaintiffs contend the fourth cause of action is sufficiently pled first because the UCL does not require “particularized fact pleading” and as the fourth cause of action incorporates the statutory violations Plaintiffs claim against Defendants here. (Opposition, 3-4.) The court notes Plaintiffs’ TAC incorporates these allegations statutory violations in the fourth cause of action. (TAC ¶ 65.) Plaintiffs point to Corp. Code §§ 309 and 2001 as alleged statutory violations of fiduciary duties the TAC alleges against Defendants. (Opp., 4-6.) Further, Plaintiffs correctly explain that the TAC asks for restitution of all property belonging to Ideal and for injunctive relief, as allowed in a UCL claim. (Opp., 6; TAC ¶ 71.) However, this court notes the same paragraph 71 of the TAC requests punitive damages, which are not recoverable in a UCL claim. (Id.)

In reply, Defendants contend the UCL claim is insufficiently pled as it is “predicated upon their allegations for breaches of contract and fiduciary duty,” and that “there can be no UCL violation for Defendants’ alleged refusal to contract with Plaintiffs, or refusal to contract on Plaintiffs’ terms.” (Reply, 3-4.) Here, the court notes that Plaintiffs’ claims of conversion, breach of contract and fiduciary duty against Defendants are not mere refusals to contract, but allege a specific undertaking by Defendants to breach duties or responsibilities owed to Plaintiffs as their contracting counterparts. In order to avoid obfuscating this court’s analysis of the fourth cause of action, the court now disregards this argument as it applies incorrect reasoning.

Defendants further contend the fourth cause of action fails to seek restitution through sufficient allegations as “Plaintiffs have not alleged that they gave any money or property to Defendants subject to restitution, or that Defendants obtained any other money or property in which they have an ownership interest.” (Id.) The court disagrees. As the TAC alleges, Defendant Cao has interfered with assets belong to Ideal, as this derivative UCL claim alleges, and Plaintiffs bring this claim on behalf of Ideal for restitution of those monies and property. (See TAC ¶¶ 38-45, 56, 61-62, 67-68.) Therefore, the court finds Plaintiffs have sufficiently requested restitutionary relief for properties and monies in which they have an ownership interest, as stakeholders of Ideal and on behalf of Ideal.

However, Plaintiffs’ request for punitive damages as part of the UCL claim is unrecoverable, and therefore, the fourth cause of action entirely is insufficiently pled. While Plaintiffs have pled sufficient allegations to sustain their UCL claim, their request for relief is not allowed under the UCL, which precludes the fourth cause of action from surviving this demurrer on the pleadings.

As such, Moving Defendants’ demurrer is sustained with respect to the fourth cause of action. Plaintiffs are granted leave to amend the fourth cause of action to remove the request for punitive damages, and all other non-restitutionary damages.

To state a claim for dissolution, a plaintiff must be (1) one-half or more of the directors in office, (2) a shareholder holding shares which represent no less than 33 and 1/3 percent of the total number of outstanding shares, common, shares, or equity of the corporation, or any shareholder of a close corporation, (3) a shareholder if the ground for dissolution is that the period for which the corporation was formed has terminated without extension, or (4) any other person authorized in the articles.¿ (Corp. Code¿§¿1800(a)(1)-(4).)

The grounds for involuntary dissolution are (1) the corporation has abandoned its business for over one year, (2) the corporation has an even number of shareholders who are equally divided and cannot agree as to the management of affairs such that the business can no longer be conducted to advantage or there is danger that the property or business will be impaired or lost and the holders of the voting shares are so divided they cannot elect a board with an uneven number, (3) there is internal dissention and two or more factions of shareholders so deadlocked the corporation cannot conduct its business to the advantage of the shareholders or the shareholders fail at two consecutive meetings at which all voting power is exercised to elect successors to directors whose terms have expired or would expire upon election of successors, (4) those in control of the corporation are guilty of or have knowingly countenanced persistent and pervasive fraud, mismanagement, or abuse of authority or persistent unfairness toward any shareholder or the corporation’s property is being misapplied or wasted by the directors or officers, (5) a corporation with 35 or fewer shareholders when liquidation is reasonably necessary to protect the rights or interests of the complaining shareholder, or (6) the period for which the corporation was formed has terminated without extension.¿(Corp. Code¿§¿1800(b)(1)-(6).)

Moving Defendants again contend that the fifth cause of action is insufficiently pled because the TAC again “does not allege how or why its directors are deadlocked; how or why its shareholders are deadlocked; that Cao (or any third party) engaged in persistent and pervasive fraud, mismanagement, abuse of authority, or unfairness; that Cao engaged in any misconduct against the minority shareholders; that the minority shareholders were withheld dividends; or that Cao barred the minority shareholders from membership on the board of directors or denied them access to corporate books or records.” (Demurrer, 20-22.)

Here, Plaintiffs’ opposition again contends the TAC has shown sufficient allegations to support a claim for dissolution under subsections (b)(4-6). (Opposition, 7-9.) Plaintiffs contend they have sufficiently alleged internal dissension has taken place following a breakdown in communications, and that this “deadlocked” shareholder relationship necessitates involuntary dissolution. (Id.; TAC ¶¶ 43-45.)

In reply, Defendants contend the TAC only alleges relief under subsection (b)(4) and “Plaintiffs do not allege Mr. Cao (or any third party) engaged in persistent and pervasive fraud, mismanagement, abuse or authority, or unfairness— and the failure to do so is fatal to their involuntary dissolution claim.” (Reply, 5.) Defendants further contend “[p]erhaps Plaintiffs cannot overcome dismissal by relying on facts or theories they did not plead... Plaintiffs cannot overcome dismissal by relying on facts or theories they did not plead.” (Id.)

The court is not persuaded by Defendants’ claims, as paragraph 74 of the TAC explicitly states:

“The grounds for involuntary dissolution are that those in control (Defendants), are engaging in mismanagement or abuse of authority or persistent unfairness toward shareholders; there is internal dissension and two or more factions of shareholders in the corporation are so deadlocked, and that the period for which the corporation was formed has terminated without extension of such period. (Corporations Code (b)(3), (4), and (6).)” (TAC ¶74.)

The court finds the fifth cause of action is sufficiently pled. As discussed above, the TAC now alleges persistent and/or pervasive conduct of Defendants it seeks relief from under subsection (b)(3,4, 6). Plaintiffs include allegations regarding internal dissension and mismanagement of funds which are sufficient to support a claim for involuntary dissolution under Corp. Code¿§¿1800.

For these reasons, Moving Defendants’ demurrer to the fifth cause of action is overruled.

Moving Defendants’ demurrer is sustained as to the fourth cause of action, and otherwise overruled. Plaintiffs have 30 days leave to amend. Moving Defendants are to give notice.

CCP § 436 provides: “the court may, upon a motion made pursuant to Section 435, or at any time in its discretion, and upon terms it deems proper: (a) Strike out any irrelevant, false, or improper matter inserted in any pleading. (b) Strike out all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court.” The grounds for a motion to strike must “appear on the face of the challenged pleading or from any matter of which the court is required to take judicial notice.” (CCP § 437.)

Motions to strike are used to challenge defects in the pleadings not subject to demurrer. (Ferraro v. Camarlinghi (2008) 161 Cal.App.4th 509, 529 [recognizing that an objection that the complaint failed to state facts sufficient to constitute a cause of action is ground for a general demurrer, not a motion to strike.].) Any party may move to strike the whole or any part of a pleading within the time allotted to respond to the pleading. (CCP § 435(b)(1).) The allegations of a complaint “must be liberally construed, with a view to substantial justice between the parties.” (CCP § 452.) The court “read[s] allegations of a pleading subject to a motion to strike as a whole, all parts in their context, and assume[s] their truth.” (Clauson v. Sup. Ct. (1998) 67 Cal.App.4th 1253, 1255.)

Here, Moving Defendants contend the “allegations that Cao pulled a gun on Plaintiff Yue Mae have nothing to do with the fulcrum of the operative complaint,” as this is “a purported derivative lawsuit." (Motion, 5-6.)

In opposition, Plaintiffs contend Paragraph 44 of the TAC is a “material fact” “because personal conflicts among shareholders are the cause of the Deadlock within Ideal.” (Opp., 5-6.) As such, Plaintiffs contend the paragraph provides necessary context regarding internal dissension, supports the claim for involuntary dissolution, and speaks to the parties’ conduct. (Id.)

The court agrees. As paragraph 44 is not immaterial and as the relevant portion provides needed context regarding the dissension between the parties, Moving Defendants’ motion is denied as to paragraph 44.

Plaintiff may recover damages “in an action from breach “not arising from contract” if Plaintiff proves by clear and convincing evidence that Defendant acted with malice, oppression, or fraud. (Civ. Code, § 3294(a).) “Malice means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.”¿ (Civ. Code, § 3294(c)(1).)¿ “Oppression’ means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person's rights.”¿ (Civ. Code, § 3294(c)(2).)¿ “Fraud means an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.”¿ (Civ. Code, § 3294(c)(3).)¿¿A¿plaintiff’s “conclusory characterization of defendant’s conduct as intentional, willful and fraudulent is a patently insufficient statement of ‘oppression, fraud,¿or malice, express or implied,¿within the meaning of section 3294.”¿ (Brousseau v. Jarrett¿(1977) 73 Cal.App.3d 864.)¿

Moving Defendants contend that the TAC improperly seeks punitive damages for their breach of contract claim regarding paragraph 53 of the TAC. (Motion, 6.) Defendants further contend the remaining claims also do not support a claim for punitive damages as they fail to show oppression, malice, or fraud on the part of Defendants. (Motion, 7.) “Plaintiffs have not even come close to providing specific facts that would fall under these definitions, which require despicable, intentional acts. Plaintiffs’ conclusory assertions that Defendants engaged in oppression, malice, or fraud are entirely insufficient.” (Id.)

In opposition, Plaintiffs first contend conversion and breaches of fiduciary duty support claims for punitive damages. (Opp., 3.) Plaintiffs then contend the allegations of the TAC show Cao had duties to the other shareholders which were not “fulfilled,” and his conduct was contrary to his duties as a fiduciary in that “it caused injury to Ideal and the other shareholders.” (Opp., 4-5.)

The court finds that the TAC is insufficiently pled to support allegations of punitive damages. As explained above, the court agrees with Defendants that the TAC’s conclusory language regarding Defendants’ conduct, as well as their intentions in alleging acting against Plaintiff, are insufficient to support claims for punitive damages on the basis of malicious or oppressive conduct. These allegations do not sufficiently allege that Defendants acted with oppression, malice or fraud for purposes of a motion to strike.

The remaining request no. 6 relates to Plaintiffs’ request for attorney fees. “Unless a contract or statute provides otherwise, each party to a lawsuit must pay its own attorney fees.” (Kangarlou v. Progressive Title Co., Inc. (2005) 128 Cal.App.4th 1174, 1178; CCP § 1021.) Here, the TAC does not cite to any contract or statutory language which it contends entitles Plaintiffs to plead a claim for attorney fees in connection with any causes of action.

Here, the Defendants contend the investment agreement does not include an attorneys’ fees provision, and “Plaintiffs have not alleged why they are entitled to attorneys’ fees” pursuant to section 1021. (Motion, 8.)

In opposition, Plaintiffs contend attorney fees are recoverable under derivative actions, but fail to show why Plaintiffs themselves are entitled to attorney fees under these circumstances. (Opp., 3; citing Fletcher vs. A.J. Industries, Inc. (1968) 266 Cal.App.2d 313, 322.)

However, in reply, Defendants correctly explain plaintiffs in derivative actions are entitled to attorney fees “only where the derivative plaintiff’s efforts resulted in a monetary recovery for, or otherwise conferred a substantial benefit on, the corporation. ... But Plaintiffs have not plead any facts showing how their lawsuit would confer a substantial benefit on the corporation, or how it would result in a monetary recovery for the corporation.” (Reply, 5; citing Cziraki v. Thunder Cats, Inc. (2003) 111 Cal.App.4th 552, 557-558.)

The court agrees. For these reasons, Defendants’ motion is granted as to request no. 6.

Defendants’ motion is granted as to requests no. 2-6, and otherwise denied. Plaintiffs are granted 30 days leave to amend. Defendants are to give notice.

2. Minute Order dated June 7, 2022, regarding Defendants’ demurrer and motion to strike.

Plaintiffs’ request is granted. The existence and legal significance of these documents are proper matters for judicial notice. (Evid. Code § 452(d), (h).)

CCP § 527(a) provides: “[a] preliminary injunction may be granted at any time before judgment upon a verified complaint, or upon affidavits if the complaint in the one case, or the affidavits in the other, show satisfactorily that sufficient grounds exist therefor.” “The purpose of a preliminary injunction is to preserve the status quo pending final resolution upon a trial.” (Grothe v. Cortlandt Corp. (1992) 11 Cal.App.4th 1313, 1316.)

“The ultimate questions on a motion for a preliminary injunction are (1) whether the plaintiff is ‘likely to suffer greater injury from a denial of the injunction than the defendants are likely to suffer from its grant,’ and (2) whether there is ‘a reasonable probability that the plaintiffs will prevail on the merits.’ ” (Huong Que, Inc. v. Luu (2007) 150 Cal.App.4th 400, 408.) The moving party’s likelihood of suffering injury and probability of prevailing are considered on a sliding scale. (King v. Meese (1987) 43 Cal.3d 1217. “That is, 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. This is especially true when the requested injunction maintains, rather than alters, the status quo.” (Id. at 1227.) “In thus balancing the respective equities of the parties, the court must determine whether, pending a trial on the merits, the defendant should or should not be restrained from exercising the right claimed by it.” (Tahoe Keys Prop. Owners' Assn. v. State Water Resources Control Bd. (1994) 23 Cal.App.4th 1459, 1471.)

“The decision to grant a preliminary injunction rests in the sound discretion of the trial court . . . before the trial court can exercise its discretion the applicant must make a prima facie showing of entitlement to injunctive relief. The applicant must demonstrate a real threat of immediate and irreparable injury.” (Triple A Machine Shop, Inc. v. State of California (1989) 213 Cal.App.3d 131, 138.) “[A]n injunction is an unusual or extraordinary equitable remedy which will not be granted if the remedy at law (usually damages) will adequately compensate the injured plaintiff,” and the party seeking injunctive relief bears the burden to prove its absence. (Dep’t of Fish & Game v. AndersonCottonwood Irrigation Dist. (1992) 8 Cal.App.4th 1554, 1564-1565.)

Plaintiffs first explain the parties entered into a written investment agreement, regarding investments made in Ideal, and “that the corporation was to run for a period of three (3) years [until] October 13, 2021.” (Motion, 2-5, Exh. 1.) Plaintiffs contend the agreement was not continued past the agreed upon end date, and Cao’s threats resulted in a breaking down of “negotiations related to dissolution of Ideal.” (Id.) They contend Cao has been disposing of Ideal’s assets after a breakdown in communications, without shareholder approval, and Plaintiffs themselves have seen Ideal’s equipment being loaded onto vehicles for shipment. (Id.)

Plaintiffs thereby contend they are likely to prevail on their breach of contract claims as the agreement’s provisions clearly state Ideal was supposed to dissolve on the expiration date, that expiration date has now past, and Ideal and Cao continue business operations in defiance of the contractual language. (Motion, 4-7.) Plaintiffs further explain that a clear reading of the contract shows the agreement created a clear expiration date requiring the dissolution of Ideal, which cannot be muddied by deliberations regarding a “tentative” three-year operating period. (Motion, 7.)

In opposition, Defendants contend that the motion must be denied because Plaintiffs have failed to demonstrate a likelihood of success on its claims. (Opposition, 4-8.) According to Defendants, Plaintiffs have failed to demonstrate a likelihood of success because Plaintiffs’ derivative claims in the earlier FAC failed as a matter of law for lack of standing, and Plaintiffs’ UCL and involuntary dissolution claims failed to show unlawful and/or unfair conduct, and cause of dissolution respectively. (Id.)

Here, Defendants’ arguments regarding earlier pleadings in Plaintiffs’ derivative claims are disregarded as they were heard and deliberated by this court in an earlier demurrer. Further, based on the analysis in the instant demurrer above, the court finds the pleadings of the TAC do show a likelihood of succeeding on their claims.

Thus, the court agrees with Plaintiffs and finds that Plaintiffs have been able to demonstrate a likelihood of success on their claims. The moving and reply papers include evidence of how Plaintiffs expect to prevail on its causes of action, namely their breach of contract claim, and includes specific language from the parties’ agreement in support of their claims.

Plaintiffs contend that the court must issue a preliminary injunction because Defendants continue to move Ideal’s equipment “from Ideal’s property to other locations, never to be seen again. Some of this equipment include: [sic] forklifts, and semi-truck heads.” (Motion, 8-10.) Plaintiffs further contend Cao’s possession “of all accounting records, financial documents, and related documents of Ideal” make it “near impossible to determine the value, status, and worth of Ideal and its assets” for Plaintiffs without these documents. (Id.) Plaintiffs further claim monetary judgment “is insufficient to remedy the situation because the monetary judgment would likely be against Ideal, which will be stripped of assets, and likely bankrupted.” (Id.) Plaintiffs also contend that a judgment against Cao will be similarly ineffective since “plaintiffs do not know where the assets are, and” “would not be able to conduct a judgment debtor’s exam, since it requires personal service,” which Plaintiffs have attempted to effectuate upon Cao “a whopping eleven times.” (Id.)

Lastly, Plaintiffs contend a balance of the equities supports the granting of this motion since Plaintiffs only seek to prevent the transfer of assets out of Ideal and “Defendants are not expected to suffer any harm from stopper the improper transfer of assets and equipment out of Ideal’s possession.” (Id.)

In opposition, Defendants contend that the motion must be denied because Plaintiffs have failed to submit “any admissible evidence regarding the supposed difficulty they would encounter if they were to enforce judgment,” and “sending forklifts and other unspecified equipment from Ideal’s warehouse in California to another warehouse in a different state does not prove anything regarding supposed irreparable harm to Plaintiffs.” (Opp., 8-9.) Defendants contend Plaintiffs’ motion “effectively seeks to have Ideal shut down” when Ideal has “existing contracts with a number of companies—several of which are publicly traded—that rely on Ideal to move its goods throughout the country.” (Id.)

In reply, Plaintiffs contend that Cao and Ideal have admitted that the agreement to continue Ideal was not extended, and allowing Ideal to operate to allow Defendants “to ignore contract law, because of an ‘irreparable harm.’” (Reply, 4-5.) Plaintiffs further contend that greater harm will be caused to them by denial of this motion since it “is unknown where these assets are going, or if they will ever be returned. The transferred assets will require tracing, and/or chasing down where the assets or cash were transferred, causing a multiplicity of lawsuits.” (Id.)

The court agrees with Plaintiffs and finds they have demonstrated that denying their request for preliminary injunction will result in greater interim harm than the harm felt by Defendants, as the agreement between the parties specifically provided for the dissolution of Ideal and that is the only harm Defendants allege will occur. Plaintiffs’ motion provides analysis regarding the irreparable harm they may suffer in losing track of assets and equipment, which may be transferred to unknown parties and locations, necessitating inefficient lawsuits and a waste of judicial resources to track down. In response, Defendants merely contend Plaintiffs should not be allowed to ask that assets and documents remain within the corporation during the interim. This is insufficient.

[1] Moving Defendants submit a declaration from their counsel, Kevin J. Cole (“Cole”), to demonstrate its compliance with statutory meet and confer requirements. Cole attests that on August 3, 2022, the parties met and conferred regarding the arguments raised in this demurrer but were unable to reach an agreement. (Cole Decl. ¶ 5.) The Cole Declaration is sufficient for purposes of CCP §§ 430.41 and 435.5.