Judge Gregory Keosian, Case Number: 20STCV01095, Date: 2023-07-10 Tentative Ruling

Judge: Gregory Keosian, Case: 20STCV01095, Date: 2023-07-10 Tentative Ruling

Case Number: 20STCV01095 Hearing Date: July 10, 2023 Dept: 61

Judgment Creditor Zachary Werner’s Motion for Enforcement of Shareholder Rights is GRANTED in part, and Judgment Debtors Joseph Rubin, individually and as trustee of The Licht 2018 Irrevocable Trust, are directed to make available to Judgment Creditor the following materials: Coachella Lighthouse LLC’s bank statements, credit card statements, general ledgers, and financial statements, as well as the documents identified in paragraph 5 of the declaration of Joshua Kreisman, as well as the letter of intent sent to the prospective buyer of Coachella Lighthouse, LLC. The motion is DENIED with respect to Judgment Creditor’s request for an injunction and special master.

Judgment Creditor to provide notice.

I. MOTION TO ENFORCE SHAREHOLDER RIGHTS

Judgment Creditor Zachary Werner (Werner) moves for two separate forms of relief, addressed to separate alleged misconduct on the part of judgment creditor Joseph Rubin, individually and as trustee of the Lich 2018 Irrevocable Trust (Rubin). First, Werner contends that Rubin has commenced efforts to sell the company underling this dispute, Coachella Lighthouse, LLC (Company), without notifying Werner. (Motion at pp. 2–5.) Second, Werner contends that Rubin has not abided by his promise, ratified in a court order of April 4, 2023, to allow inspection of Company books and records by April 30, 2023, because, despite allowing inspection of various boxes of documents on April 18, 2023, several categories of documents, including the Company’s general ledger, annual balance sheets and income statements, bank statements, tax returns, and others. (Motion at pp. 7–12.)

Rubin in opposition contends that in March 2023, he engaged in preliminary discussions with Hightimes Holding Corp. for the sale of the Company, and have entered into a non-binding letter of intent to sell the Company for more than ten times the amount of judgment. (Opposition at p. 4; Rubin Decl. ¶ 6.) No sale agreement has yet been reached and no money has changed hands. (Rubin Decl. ¶ 6.) Rubin contends that he has responded to the inquiries of Werner’s agent concerning the sale, while said agent has engaged in contacts with the potential buyer potentially troubling the deal. (Rubin Decl. ¶ 4.) Rubin further contends that the Company’s records were made available, and were made available for a second inspection on June 27 and 28, 2023. (Rubin Decl. ¶ 8.) Rubin argues that there is no legal or factual basis to appoint a special master or receiver to oversee the sale, or to subject the sale to injunctive conditions. (Opposition at pp. 8–9.) Rubin further argues that he ought not to be made to produce the letter of intent for the sale of the property, as such a letter is not a book or record of the Company under Corporations Code § 17704.10 and 17701.13. (Opposition at p. 10.)

The present motion is somewhat procedurally confused, at least with respect to Werner’s request for a special master. Werner relies, initially, upon Code of Civil Procedure § 845, which relates to the appointment of special masters in actions relating to groundwater rights. Rubin notes this in opposition, so Werner in reply cites Code of Civil Procedure § 639, relating to the appointment of “referees,” i.e. “the sending of a pending action or proceeding, or some issue raised therein” to a judicially appointed figures “for hearing, determination, and report back to the court.” (Jovine v. FHP, Inc. (1998) 64 Cal.App.4th 1506, 1521.) But no referee is required here, even on Werner’s own terms, as Werner identifies no disputed issue or accounting that may not be tried just as well before the court as before a referee. The purpose of the motion, rather. is to take the potential sale out of Rubin’s hands and put it in the control of a special appointee, i.e. a receiver. But such relief is inappropriate absent a showing that “the judgment debtor has frustrated the judgment creditor's collection efforts through obfuscation or through otherwise contumacious conduct that has rendered feckless the panoply of less intrusive mechanisms for enforcing a money judgment.” (Medipro Medical Staffing LLC v. Certified Nursing Registry, Inc. (2021) 60 Cal.App.5th 622, 628.) But no such showing has been made here. Rubin has, indeed, complied with the payment schedule agreed to by the parties at the April 4, 2023 hearing, with payments totaling of $75,062.33.. (Rubin Decl. ¶ 7.) Werner has therefore not demonstrated the need for a receiver, or any order affecting the potential sale.

Werner has demonstrated entitlement to some relief, however, pursuant to the April 4, 2023 order’s provisions regarding the production of books and records. Werner presents evidence that, even after the later inspections of the documents contained in the boxes produced by Rubin, several key documents “relat[ing] to the internal affairs of the limited liability company” were not produced, despite assurances that they were in Rubin’s possession, including bank statements, credit card statements, general ledgers, financial statements, and others. (Kreisman Decl. ¶¶ 3, 5; Corp. Code § 17701.13, subd. (d)(7).) Rubin in opposition does not contend that these documents were provided, and does not articulate a basis for failing to provide them. Rubin only argues that he need not produce the letter of intent for the prospective sale, reasoning that it does not relate to the “internal affairs” of the Company. (Opposition at p. 10; Corp. Code § 17701.13, subd. (d)(7).) But the production of the letter of intent is relevant to the preservation of Werner’s interest in the judgment, which may potentially be satisfied from the proceeds Rubin receives from any such sale. Documents related to the sale may be obtained to identify sources from Werner’s judgment may be satisfied.

Accordingly, the motion is GRANTED as to Werner’s request for books and records from Rubin, and DENIED as to Werner’s request for the appointment of a special master and associated injunctive relief concerning the sale of the Company.