Judge Margaret L. Oldendorf, Case Number: 23AHCP00068, Date: 2023-12-21 Tentative Ruling

Judge: Margaret L. Oldendorf, Case: 23AHCP00068, Date: 2023-12-21 Tentative Ruling

Coco Tran (Coco) alleges that she is a co-owner of a soft drink company called Bubblecrush, along with Defendant Brandon Luong Trinh (Trinh). Defendant Lily Tran (Lily) is Trinh’s spouse. The Complaint alleges that Defendant Jaatee LLC is Trinh’s alter ego. Coco alleges that while she was on vacation, she left the business in the hands of Defendant Trinh and subsequently, Trinh refused to provide her with financial records of the business and otherwise did not treat her as a co-owner of the business.

The complaint alleges six causes of action: (1)Theft, (2) Breach of Partnership Agreement, (3) Breach of Covenant of Good Faith and Fair Dealing, (4) Conversion, (5) Breach of Fiduciary Duties and (6) Partition Sale.[1]

Plaintiff Coco Tran filed the instant motion for preliminary injunction on December 6, 2023. Defendants filed their opposition December 13, 2023. Coco filed a reply December 18, 2023.

Coco seeks an injunction preventing Defendants from transferring, selling, liquidating, disposing of business assets and equipment that belong to Bubble Crush as well as preventing Defendants from terminating the existing credit card merchant accounts, e-payment accounts, and third-party service or delivery providers. She also seeks a mandatory injunction allowing her to take over the day-to-day operation of Bubble Crush from December 1, 2023.

(1) When it appears by the complaint that the plaintiff is entitled to the relief demanded, and the relief, or any part thereof, consists in restraining the commission or continuance of the act complained of, either for a limited period or perpetually.

(2) When it appears by the complaint or affidavits that the commission or continuance of some act during the litigation would produce waste, or great or irreparable injury, to a party to the action.

(3) When it appears, during the litigation, that a party to the action is doing, or threatens, or is about to do, or is procuring or suffering to be done, some act in violation of the rights of another party to the action respecting the subject of the action, and tending to render the judgment ineffectual.

(5) Where it would be extremely difficult to ascertain the amount of compensation which would afford adequate relief.

(6) Where the restraint is necessary to prevent a multiplicity of judicial proceedings.

In support of her motion for preliminary injunction, Coco offers her own declaration. (Coco Declaration) She declares that she and Trinh took over Bubblecrush in April 2022 and she then went on vacation that July. (Coco Decl. ¶¶ 5, 6, 7.) She declares that Trinh provided “scant” financial records of Bubblecrush when she asked in July. (Coco Decl. ¶ 7.) She also avers that Trinh changed the locks in July of 2022, preventing her from entering. (Coco Decl. ¶ 23.) She subsequently declares that this was the start of a pattern of cutting her out of the business. She details that “[upon] seeing me coming into the business, TRINH and TRAN would dump all the pre-mixed syrups in front of me and then directed all the employees to leave from the business, while there were customers waiting” (Coco Decl. ¶ 8 ) and “TRINH commenced to send emails asking [Coco] to contribute additional funds claiming the business lacked the operating funds. (Coco Decl. ¶ 10.) It is the claim of business debts and lack of operational funds that is at issue, as Coco is seeking a preliminary injunction to prevent the sale of Bubblecrush equipment. Coco declares that Trinh emailed her that the business and its assets must be sold to cover the debts. (Coco Decl. ¶¶ 13-15, referencing Exh. 2.) Coco declares that she visited the business on December 4 and found it empty. (Coco Decl. ¶ 15.)

Attached as Exhibits 1 and 2 to the Motion are unauthenticated emails between Plaintiff and Defendants. (Motion Exhs. 1 and 2.) These emails appear to provide a history of Trinh requesting money for operating expenses as well as maintaining that the business is in debt. The emails also provide a history of the disagreement between the parties, namely, that Trinh would like to be reimbursed for loans/operating expenses and that Coco was allegedly locked out of the store.

Attached as Exh. 5 to the Motion (also not authenticated) are Bubblecrush’s financial statements from March 2022 to December 2022. (Motion Exh. 5.) What becomes clear is that expenses are high in comparison to income each month. Also included in Exh. 5 is Bubblecrush’s Form 1065 (partnership return) for the 2022 year. Again, it seems that the business has more expenses overall than profit.

Attached as Exhibits 1, 2 and 3 to the Opposition are emails between Defendant Trinh and Plaintiff Coco. (Opposition Exhs. 1, 2, 3.) These emails indicate that Trinh requested money to pay for operating costs from Plaintiff. The emails also detail multiple requests for Coco to come in and work at the Bubblecrush store they co-owned. Trinh’s emails also attach copies of checks he made out to the business, as loans for some of the operating expenses.

Attached to the opposition are two declarations by Defendant Trinh. The first concerns the income tax discrepancy; and the second is a general declaration regarding the history of the parties’ dispute. In pertinent part, Trinh declares that the tax discrepancy between the financial statements and the Form 1065 was a mistake as the tax preparer did not use the correct background information for the form. (Trinh Decl. Regarding Income Tax Discrepancy ¶¶ 6-8.) Trinh declares that he is in the process of fixing the mistake. (Id. at ¶ 8.) He declares that he provided Coco with these forms and information. (Id. at ¶ 9.)

Additionally, he declares that Coco was not involved in the business and did not work at the Bubblecrush location that they co-owned. (Trinh Decl. In Support of Opposition ¶ 3.) He declares that he asked Coco to come and work at the location, as they were not making money due to Covid and a nearby mass shooting. The business was not doing well. (Id. at ¶¶ 4-5.) He declares that he did not suspend Coco’s access to the business accounts or financial records. (Id. at ¶ 6.) He declares that he sent her pay stubs, receipts and invoices. (Id.) He additionally declares that when he informed Coco of the financial straits of the business, she told him to shut it down because it was not making money. (Id. at ¶ 9, see Exh. 1.) He declares that he was forced to shut down due to the financial condition of the business. (Id.)

A prohibitory injunction requests the Court intervene to maintain the status quo. Here, Coco is asking for a prohibitory injunction preventing Defendants from selling business assets and closing Bubblecrush accounts with delivery food services.

The burden is higher for a mandatory injunction because the moving party is asking the Court to disturb the status quo. (See Shoemaker v. County of Los Angeles (1995) 37 Cal.App.4th 618, 625.) Here, Coco is also requesting a mandatory injunction to put her in charge of Bubblecrush’s day-to-day management.

“ ‘[A] preliminary injunction is an order that is sought by a plaintiff prior to a full adjudication of the merits of its claim.’ (White v. Davis (2003) 30 Cal.4th 528, 554, 133 Cal.Rptr.2d 648, 68 P.3d 74, italics omitted.) ‘To obtain a preliminary injunction, a plaintiff ordinarily is required to present evidence of the irreparable injury or interim harm that it will suffer if an injunction is not issued pending an adjudication of the merits.’ (Ibid.)

“Trial courts ‘ “ ‘evaluate two interrelated factors when deciding whether or not to issue a preliminary injunction. The first is the likelihood that the plaintiff will prevail on the merits at trial. The second is the interim harm that the plaintiff is likely to sustain if the injunction were denied as compared to the harm that the defendant is likely to suffer if the preliminary injunction were issued.’ ” ’ (ITV Gurney Holding Inc. v. Gurney (2017) 18 Cal.App.5th 22, 28–29, 226 Cal.Rptr.3d 496 (ITV Gurney).)” Amgen, Inc. v. Health Care Services (2020) 47 Cal.App.5th 716, 731.

Coco urges that she is likely to prevail on the merits as she has evidence that Defendant Trinh breached his fiduciary duties to the partnership. (Motion, p. 4: 12-16.) In support, Coco cites Section 16403 of the Corporation Code, which provides that partners in a business must maintain records, and give each other access to the records of the business; and Section 16404, which provides that partners in a business owe each other fiduciary duties. (Corp. Code §§ 16403(a), 16403(c)(1)-(2) and 16404.) She additionally cites Leff v. Gunter for a definition of the fiduciary relationship business partners owe one another. (Leff v. Gunter (1983) 33 Cal.3d 508, 514.)

Coco urges that Defendants have not maintained records of the business, nor given her access to the records. (Coco Decl. ¶¶ 7, 8, 23.) Coco’s statements are contradicted in substantial part by the evidence proffered by Defendants, however. Coco also declares that she has not been given financial records of Bubblecrush nor that they exist. (Coco Decl. ¶ 23.) This conclusion is largely unsupported.

Coco also urges that Defendant Trinh has breached his fiduciary duties to her with respect to the reported financial information she has been given. (Coco Decl. ¶ 23.) In particular, Coco cites discrepancies between the financial statements of the business and the Partnership Return Form 1065 Trinh provided to the IRS for the business. (Motion, p. 5: 8-12.)

In opposition, Defendants urge that the discrepancies between the financial documents Coco references were due to inadvertence on their part. (Opposition, p. 4: 19-23.) Defendants urge that they met with their tax preparer to remedy the discrepancy on the tax forms, and are in process of amending the returns. (Opposition p.5: 5.) Defendants do not directly address Coco’s argument that business records were not maintained. However, Defendants urge that the documents Coco attaches to her motion were timely provided to her upon her request. (Opposition, p.5: 16-18.) To the extent that the documents themselves are records maintained by one of the partners, it does not seem that there was an utter lack of record-keeping. To the extent that Defendants urge they provided Coco with these records, this is in contention. Defendants also urge that they provided other financial records to Coco.

In reply, Coco urges that she was not provided with any business records. (Reply p. 3: 1-2.) However, she does not clarify why this was the case. To the extent that the Court considers this argument, it is insufficient. Indeed, she concedes in her reply Declaration that she received some financial records from Trinh. (Reply, p. 4:18-19.) The Court cannot determine whether or not the records were complete; but notes that there is competing evidence on both sides (as well as some records).

Coco has also not presented sufficient evidence regarding a threatened, or impending, piecemeal sale of the business.

In sum, Coco has failed to present sufficient evidence of a likelihood of prevailing on the merits of her claims. Defendants have presented declarations and emails evidencing that they in fact sent Coco business records, and that the tax discrepancy was inadvertent. To the extent that Coco is urging a prohibitory injunction on the basis of not being given records and the tax discrepancy, Coco has not shown that she is likely to prevail. To the extent that Coco is arguing for a mandatory injunction based on being excluded from the business, the Court notes that this is in dispute based on the relatively scant evidence provided. As the business is apparently already shut down, the Court notes that the mandatory injunction requests a not-insignificant disturbance to the status quo. Such a disturbance is not supported by the evidence.

Coco urges that irreparable harm will occur if the preliminary injunction does not issue; but she has not adequately shown what the potential interim harm will be. (Motion, p.6: 5-8.) Coco apparently desires to sell the business and all equipment together. However, her evidence is insufficient to show that Defendants disagree with this approach; or what the financial harm would be if the business is sold in a more piecemeal fashion. For example, she does not clarify (with admissible evidence) how much money she expects to lose nor anything else that would occur if a preliminary injunction is not issued. To the extent that Coco is urging that some amount of interim harm would befall her, the nature and amount of this harm is not clear.

[1] In the prayer of the Complaint, Coco seeks various forms of monetary damages. She does not specifically request relief in the form of an injunction, or an accounting.