Judge: John J. Kralik, Case: 24NNCV04389, Date: 2025-04-18 Tentative Ruling
Case Number: 24NNCV04389 Hearing Date: April 18, 2025 Dept: NCB
North
Central District
|
DANIEL M.
SHAPIRO, TRUSTEE, et
al., Plaintiff, v. brian freeman, et al., Defendants. |
Case No.:
24NNCV04389 Hearing Date: April 18, 2025 [TENTATIVE]
order RE: MOTION FOR
PRELIMINARY INJUNCTION |
BACKGROUND
A.
Allegations and Procedural Background
On September 18, 2024. Plaintiffs Daniel
M. Shapiro, Trustee (“Shapiro”), Daniel M. Shapiro Attorney at Law Defined
Benefit Plan, and Rhoda S. Shapiro (“Plaintiffs”) filed the complaint against
Defendants Brian Freeman, Richard McCloskey, Tax & Financial Group
Insurance Agency, LLC, Tax and Financial Group Benefits Insurance, Inc., Cetera
Advisor Networks, LLC, Cetera Advisors, LLC, Minnesota Life Insurance Company,
Securian Financial Services, Inc., and Ruth A. Hallock.
On March 5, 2025, Plaintiffs dismissed
without prejudice the complaint as to Defendant Tax and Financial Group
Benefits Insurance, Inc. only.
On March 17, 2025, Plaintiffs filed the
First Amended Complaint (“FAC”) against Defendants Mr. Freeman, Mr. McCloskey,
Tax & Financial Group Insurance Agency, LLC (“T&FGIA”), Minesota Life,
SFS, and “Ruth A. Hallock (?)” for: (1) intentional misrepresentation including
omission of material; (2) negligent misrepresentation; (3) professional
liability; (4) breach of fiduciary duty; (5) breach of contract; (6) financial
abuse of elder; (7) violation of Penal Code, § 496(c); and (8) public
injunction for violation of unfair competition law.
Plaintiffs allege that they held a
$2,000,000.00 life insurance policy (“Policy”) with Defendant Minnesota Life
Insurance Company (“Minnesota Life”). Defendant Brian Freeman (“Freeman”) was
an agent for Minnesota Life. When Plaintiffs were 75 years old, Freeman falsely
told them that if they deposited $275,000.00 into their Policy, their premiums
would stabilize at $2,000.00 per month – $24,000.00 annually – until Plaintiffs
reached the age of 85. Instead, Plaintiffs allege that Freeman modified the
policy to require a $147,600.00 annual premium, which resulted in a broker
commission on a 15-year-old policy in excess of $100,000.00. Plaintiffs allege that the fraudulently
induced Policy modification also caused Plaintiffs to incur policy issuance and
policy surrender charges.
On March 17, 2025, Plaintiffs dismissed
without prejudice the complaint as to Defendants Securian Financial Services,
Inc., Cetera Advisor Networks, LLC, and Cetera Advisors, LLC.
B.
Relevant Background and Motion on Calendar
On November 4, 2024, Defendants
Minnesota Life, Securian Financial Services, Inc., and Ruth A. Hallock filed a
motion to compel arbitration of Plaintiffs’ claims through FINRA. On December 2, 2024, Defendants Richard
McCloskey, Tax & Financial Group Insurance Agency, LLC, Cetera Advisor
Networks, LLC (dismissed), and Cetera Advisors, LLC (dismissed) Defendants”
noticed their joinder to the motion to compel arbitration. Plaintiffs opposed the motion. On March 31, 2025, the Court granted the
motion to compel arbitration, ordering:
The
motion to compel arbitration is granted in part such that the matter shall be
subject to arbitration with respect to the 1st to 7th
causes of action. The motion is denied
in part as to the 8th cause of action for public injunction for UCL
violations. The entire case, including
the 8th cause of action, is stayed pending completion of binding
arbitration. The joinders to the motion
to compel arbitration are granted.
(3/21/25
Minute Order at p.2.)
On February 13,
2025, Plaintiff filed an ex parte application for OSC re Issuance of
Preliminary Injunction. On February 13,
2025, Defendants filed an opposition to the application. On February 14, 2025,
the Court granted the ex parte application and entered the following Order:
On February 14, 2025, Plaintiffs
Daniel M. Shapiro, Trustee, Daniel M. Shapiro Attorney at Law Defined Benefit
Plan and Rhoda S. Shapiro (collectively, “Plaintiffs”) appeared before
Department B of the Los Angeles Superior Court at 300 E. Olive Ave., Burbank,
CA 91502, for hearing on their Ex Parte Application to set an Order to Show
Cause why a Preliminary Injunction should not issue with respect to Defendants
Minnesota Life Insurance Company, Securian Financial Services, Inc., Tax &
Financial Group Insurance Agency, LLC, Cetera Advisor Networks, LLC, and Cetera
Advisors, LLC (collectively, “Defendants”) to do the following:
a) Enjoin Defendants from further
violations of California Insurance Code §§10509, et set, including §§10509.2,
10509.4, and 10509.6;
b) Order Defendants to advise their
California clients of all policy options that existed for their policy at the
time of any policy change over the past four (4) years, as well as the requirements
called for under Insurance Code §§ 10509 et seq., including 10509.2, 10509.4
and 10509.6, during the same time period;
c) Require that Defendants offer
rescission to any California clients for any policy change in the past four (4)
years resulting in imposition of surrender and policy issuance charges exceeding
the original policy schedule; and
d) Require that Defendants advise
such California customers that if they did not receive the disclosures called
for under Insurance Code §§ 10509.2 and 10509.6, that they may have legal
rights against Defendants.
After consideration of Plaintiff’s
Ex Parte Application, Defendants’ Opposition, as well as evidence filed in
support thereof, and other oral evidence and arguments, and FOR GOOD CAUSE APPEARING,
IT IS HEREBY ORDERED AS FOLLOWS:
The court orders that an OSC re
preliminary injunction be set for April 18, 2025 at 8:30 a.m. Defendants’ opposition, if any, shall be due
by April 7, 2025, and Plaintiffs’ Reply, if any, shall be due by April
14, 2025.
(2/14/25
Order.)
The
Court is not in receipt of an opposition brief to the motion for preliminary
injunction.
DISCUSSION
Plaintiff
seeks a preliminary injunction against Defendants. The requested preliminary injunction mirrors
the request for public injunction in the 8th cause of action
in the FAC at paragraph 154, subsections (a) to (d):
154. On behalf of the public,
Plaintiff is entitled to such a public injunction under Business &
Professions Code §§ 17203 to:
a. Enjoin Defendants from further
violations of California Insurance Code §§10509, et set, including §§10509.2,
10509.4, and 10509.6;
b. Order Defendants to advise their
California clients of all policy options that existed for their policy at the
time of any policy change over the past four (4) years, as well as the
requirements called for under Insurance Code §§ 10509 et seq., including
10509.2, 10509.4 and 10509.6, during the same time period;
c. Require that Defendants offer
rescission to any California clients for any policy change in the past four (4)
years resulting in imposition of surrender and policy issuance charges
exceeding the original policy schedule;
d. Require that Defendants advise
such California customers that if they did not receive the disclosures called
for under Insurance Code §§ 10509.2 and 10509.6, that they may have legal
rights against Defendants;
e. Order FREEMAN, MCCLOSKEY and TFG
to cease and desist representing themselves as having any expertise in tax
matters, including retirement or welfare benefit plans; and
f. Order FREEMAN, MCCLOSKEY, and
TFG from using any name, slogan or advertising containing or referencing any
“tax expertise”, “tax advice” or similar.
(FAC,
¶154.) The motion does not include
subsections (e) and (f).
As summarized above, the Court
granted the motion to compel arbitration and stayed the remainder of the
action, including the 8th cause of action for public
injunction. By way of this motion,
Plaintiff is essentially seeking entry of the public injunction, as opposed to
maintaining the status quo. At this
time, the Court declines to lift the stay and enter such an order.
Even if the Court were to consider
the requested relief, the Court would deny the motion. the requested relief is overbroad and
essentially seeks a mandatory injunction.
A prohibitory injunction requires a person to refrain from a particular
act, while a mandatory injunction compels performance of an affirmative act
that changes the position of the parties.
(Davenport v. Blue Cross of California (1997) 52 Cal.App.4th 435,
646-47.) A mandatory injunction is
rarely granted except in extreme cases where the right thereto is clearly
established. (Teachers Ins. & Annuity Ass’n v. Furlotti (1999) 70 Cal.App.4th
1487, 1493.) Three of the four requested
injunctive relief seeks an order requiring Defendants to affirmatively act by:
(b) advising their California clients of all policy options that existed over
the past 4 years; (c) offer rescission to California clients; and (d) advise
California customers that if they did not receive certain disclosure, they may
have legal rights against Defendants. Such
injunctive relief is not proper in the absence of immediate class-wide damage
and a finding of liability against Defendants in the first place.
If the Court were to grant this motion,
there would be nothing left to adjudicate on subsections (a) to (d) of the 8th
cause of action, as Defendants would essentially have already been ordered to
make disclosures and offer rescission to its California clients and
customers. Further, requiring Defendants
to prematurely make disclosures or offer rescission prior to finding any
violation of the Insurance Code would not directly affect the issues in this
case between Plaintiff Shapiro and Defendants. With respect to request (a), the Court also
declines to lift the stay to enter a preliminary injunction as the request to
enjoin Defendants from violating the Insurance Code is overly broad.
For these reasons, the motion for
preliminary injunction is taken off-calendar.
The action has been stayed pending arbitration and this includes
entering orders on the 8th cause of action for public
injunction.
CONCLUSION AND ORDER
Plaintiff’s
motion for a preliminary injunction is taken off calendar.
Plaintiffs
shall give notice of this order.
DATED: April 18,
2025 ___________________________
John
Kralik
Judge
of the Superior Court