Judge: Mark A. Young, Case: 24SMCV00126, Date: 2024-01-23 Tentative Ruling

Case Number: 24SMCV00126    Hearing Date: January 23, 2024    Dept: M

The Court has considered Plaintiff Reza Faramand’s parte application for a temporary restraining order and order to show cause re preliminary injunction along with Defendant’s opposition and Defendant’s January 22, 2024, supplemental opposition.  As set forth below, the ex parte application is GRANTED, in part, pursuant to Code of Civil Procedure sections 526(a)(1)-(4) and 527(c)(1).  The TRO will remain in effect at least until the Court hears Plaintiff’s motion for preliminary injunction, which will be heard on March 7, 2024, at 8:30 a.m.

Defendant submitted 51 objections to the declaration of Reza Farazamand.  The Court sustains objections nos. 3, 5, 6, 8, 10, 12, 15, 16, 22-24, 26, 29, 33, 34, and 41-48.  The remaining objections are overruled.

The purpose of a preliminary injunction is to preserve the status quo pending final resolution upon a trial. (See Scaringe v. J.C.C. Enterprises, Inc. (1988) 205 Cal.App.3d 1536.)  Relief requires the use of competent evidence to create a sufficient factual showing on the grounds for relief. (See, e.g., ReadyLink Healthcare v. Cotton (2005) 126 Cal.App.4th 1006, 1016; Ancora-Citronelle Corp. v. Green (1974) 41 Cal.App.3d 146, 150.) The burden of proof is on the plaintiff as moving party. (O’Connell v. Superior Court (2006) 141 Cal.App.4th 1452, 1481.) A plaintiff seeking injunctive relief must show the absence of an adequate damages remedy at law. (Code Civ. Proc. § 526(4); Thayer Plymouth Center, Inc. v. Chrysler Motors (1967) 255 Cal.App.2d 300, 307.)

The trial court considers two factors in determining whether to issue a preliminary injunction: (1) the likelihood the plaintiff will prevail on the merits of its case at trial, and (2) the interim harm the plaintiff is likely to sustain if the injunction is denied as compared to the harm the defendant is likely to suffer if the court grants a preliminary injunction. (Code Civ. Proc. § 526(a); Husain v. McDonald’s Corp. (2012) 205 Cal.App.4th 860, 866-67.) The balancing of harm between the parties “involves consideration of such things as the inadequacy of other remedies, the degree of irreparable harm, and the necessity of preserving the status quo.” (Husain, supra, 205 Cal.App.4th at 867.) Thus, a preliminary injunction may not issue without some showing of potential entitlement to such relief.  (Doe v. Wilson (1997) 57 Cal.App.4th 296, 304 (“The trial court abuses its discretion in granting such a preliminary injunction when “there is no likelihood” that the movants will prevail on the merits of their claims for relief.”)) 

              In his application, Plaintiff seeks the following:

1.  Enjoin Defendant from performing actions on behalf of the Corporation without obtaining the prior written consent and/or authorization of Plaintiff in his capacity as an equal shareholder of the Corporation, and a director of the Corporation.

2.  Enjoin Defendant from utilizing or appropriating any assets owned by the Corporation, including but not limited to any business credit cards, for any purpose that is not necessary to fulfill Corporation business, without prior written authorization from Plaintiff in his capacity as an equal shareholder of the Corporation, and a director of the Corporation.

3.  Enjoin Defendant from withholding any Corporation records or documents from Plaintiff.

4.  Enjoin Defendant from withholding or reducing compensation to Plaintiff for his performance of duties for the Corporation, without prior written authorization from Plaintiff in his capacity as an equal shareholder of the Corporation, and a director of the Corporation.

5.  Enjoin Defendant from deactivating, or otherwise preventing the use of, Plaintiff’s company credit cards, without prior written authorization from Plaintiff in his capacity as an equal shareholder of the Corporation, and a director of the Corporation.

6.  Enjoin Defendant from engaging in communications or dealings with vendors or other third parties who have a business relationship with the Corporation in an effort to gain a prospective advantage over the Corporation or interfere with the business relations between the Corporation and such vendor and/or third party without the knowledge, and consent of Plaintiff.

7.  Enjoin the Defendant from hiring, firing, laying off employees, or altering employees' working hours without obtaining the Plaintiff's consent.

8.  Require Defendant to file an amended Statement of Information with the California Secretary of State which accurately lists the titles of the Plaintiff and the Defendant; and

9.  Enjoin the Defendant from acting in any manner, whether by affirmative action or omission thereof, that may cause employees to believe that the Plaintiff lacks authority in the Corporation.

The purpose of any TRO is to maintain the status quo of the litigation.  The Court concurs that the TRO request is based upon Defendant’s alleged breaches of his fiduciary duties, which are set forth in the first and second causes of action.  Both those causes of action, however, seek monetary damages only.  There is only one cause of action in the complaint in which Plaintiff seeks any declaratory relief, which is the sixth cause of action.  The only relief sought in the TRO rationally related to the sixth cause of action is Plaintiff’s request to inspect the corporate records.  (Comp., ¶ 62.)

By way of background, Plaintiff Farazmand and Defendant Joubin Hanaie are both 50% shareholders of Intelifi Inc.  (Farazmand Decl., ¶ 4.)  Plaintiff served as Chief Executive Officer, while Defendant served as Chief Financial Officer.  (Id. ¶¶ 5-6.)  The corporation has no bylaws, shareholder agreement or other written governing instruments.  (¶ 7.)  As the Chief Executive Officer, Plaintiff has been the individual primarily overseeing and supervising the day-to-day operations of the Corporation. (¶ 8.). As Chief Financial Officer, Defendant has been responsible for overseeing the financial aspects of the Corporation, including but not limited to, maintaining financial records, financial planning, ensuring legal compliance in financial matters, and supervising all finances. (¶ 9.)  In opposition, Defendant presents evidence that Farazmand and Hanaie were co-CEO’s.  (See Opp., Exhs. 2-3.)

Plaintiff is entitled to access and review all corporate records, including all accounting software.  Defendant is denying Plaintiff this access and as such, Plaintiff will likely prevail on this cause of action.  (Farazmand Decl., ¶ 22.)  Defendant is ordered to provide full access to financial documents, including all accounting software.  This does not mean that Plaintiff has access to the original Quickbook file or accounting software, but that a copy of these and other records by provided to Plaintiff.  That is the only portion of Plaintiff’s TRO that is being granted by the Court.

As to the other requests, Plaintiff’s complaint makes clear that monetary damages would be sufficient. Moreover, the foundation for many of these requests was based upon evidence that was subject to the Court sustaining Defendant’s objections.  In addition, evidence submitted in Defendant’s supplemental opposition demonstrates that Plaintiff is unlikely to prevail on several of these claims/issues, including nonpayment of the company’s debts and credit cards.  (See Hanaie Suppl. Decl., ¶¶ 2, 7, 10.)  The Court further agrees that Plaintiff has failed to establish the company’s ability to pay salaries and other corporate debts.

Finally, in his initial opposition, Defendant argued that the Court did not have jurisdiction over him because he was not served with the summons and complaint.  Pursuant to California Rules of Court, rule 3.1150, service of the complaint is not a prerequisite.  Rule 3.1150(a) permits an application for an OSC against a party that has not appeared, if it is served in the same manner as a summons and complaint.  That did not occur here, yet by filing an opposition and making an appearance, Defendant has waived that requirement.  The “general rule is that one who has been notified to attend a certain proceeding and does do so, cannot be heard to complain of alleged insufficiency of the notice; it has in such instance served its purpose. This rule applies to one who appears in a lawsuit after defective service of process upon him [citation], to one who responds to a notice of motion without adequate notice [citation].”  (De Luca v. Board of Supervisors (1955) 134 Cal.App.2d 606, 609.)

The Court set an OSC re Preliminary Injunction for March 7, 2024 at 8:30 a.m. Any opposition shall be filed by February 22, 2024 and any reply brief by February 29, 2024.  Plaintiff to give notice via overnight mail and email service.