Judge: Melvin D. Sandvig, Case: 25CHCV00429, Date: 2025-05-27 Tentative Ruling

Case Number: 25CHCV00429    Hearing Date: May 27, 2025    Dept: F47

Dept. F47

Date: 5/27/25

Case #25CHCV00429

PRELIMINARY INJUNCTION

Motion filed on 4/1/25.   Amended Notice of Motion filed on 4/7/25.

MOVING PARTY: Plaintiff Contemporary Services Corporation

RESPONDING PARTY: Defendant Promerio, Inc. dba California Payroll

NOTICE: ok

RELIEF REQUESTED: A mandatory preliminary injunction requiring Defendant Promerio, Inc. dba California Payroll to immediately deliver to Plaintiff Contemporary Service Corporation (CSC) all CSC Data which consists of payroll and timekeeping records of CSC and its related entities from April 2018 – May 2024 (CSC Data), more specifically a series of CSV (Charaters Separated Values) files containing the CSC Data.

RULING: The motion is denied as set forth below. 

SUMMARY OF ACTION & PROCEDURAL HISTORY

This action arises out of the termination of a Tax Services Agreement (TSA) entered into by Plaintiff Contemporary Services Corporation (CSC or Plaintiff) and Defendant Promerio, Inc. dba California Payroll (Defendant) in July of 2016.  (Complaint ¶¶6, 13).  During the course of the TSA, Defendant provided payroll services, timekeeping software, and provided tax administration services for CSC and its related entities.  (Villiers-Furze Decl. ¶3).  In performing these services Defendant acquired, maintained, stored and retained all CSC information including employee personal identifying information, all hours of work for each employee (including regular hours, overtime, and double-time), pay rates, meal periods, start and end of shifts, all-time records, length of employment and all other payroll and tax related information for all employees of CSC and related entities.  (Id. ¶4; Solorzano Decl. ¶3, Ex.A, Section 1).

Regarding ownership of CSA’s information, the TSA provides:

“During the term of this Agreement, California Payroll shall save and retain information provided by Client [CSC] (‘Client Information’). Client Information shall at all times remain the property of Client [CSC], provided however, California Payroll shall have the right to retain a copy of Client Information. Upon termination of this Agreement, (i) Client shall have a period of thirty (30) days to download and save any or all Client Information, and (ii) California Payroll may continue, but shall have no obligation, to store a copy of Client Information.”

(Solorzano Decl. ¶5, Ex., Section 13).

On or about 3/4/24, CSC provided Defendant with ninety (90) days written notice of its intent to terminate the TSA, pursuant to Section 9 of the TSA.  (Villiers-Furze Decl. ¶6; Solorzano Decl. ¶¶4, 6, Ex.A, Section 9).  Therefore, the effective date of the termination of the TSA was 6/3/24.  (Villiers-Furze Decl. ¶6).  Within 30 days of the termination, CSC attempted to download all of the CSC Data, but was unsuccessful.  (Villiers-Furze Decl. ¶7).  CSC contends that various CSC employees familiar with Defendant’s payroll and timekeeping software attempted multiple times to export or download the CSC Data without success.  (Villiers-Furze Decl. ¶7).

CSC then enlisted the assistance of its new payroll provider, Paylocity, to provide technical assistance with exporting or downloading the CSC Data.  (Villiers-Furze Decl. ¶8).  CSC claims that it was still unable to export or download its data.  Id.  Therefore, CSC requested Defendant’s     assistance to provide it with the CSC Data.  (Id. ¶¶9-10).  On or about 8/15/24, Defendant responded to CSC’s request and provided CSC with a Statement of Work (SOW-0301) which contained a quote for the additional work of providing CSC with CSC Data.  (Id. ¶11).  CSC responded by refusing to pay what it contends is an exorbitant fee and pointed out several line items in the SOW that it believes are gross overcharges, and bear no resemblance to the fees previously paid while under the TSA.  Id.  The parties could not come to an agreement and CSC retained counsel.  (Id. ¶12).  

On 1/24/25, after CSC and Defendant discussed the SOW and clarified the scope of work, Defendant sent a revised quote in excess of $189,000.00 to provide all CSC Data.  (Wilson Decl. ¶¶8-11, Ex.A).  CSC claims that within that quote Defendant asserted that the cost to provide CSV files containing all CSC Data would cost no more than $17,600.  (Id. ¶12).  CSC’s expert  believes the services to export the CSV files and provide them to CSC is a simple and straightforward project which should not cost more than $17,600.  Id. 

On 2/5/25, CSC filed this action against Defendant for: (1) Breach of Contract – Specific Performance, (2) Breach of Implied Covenant of Good Faith and Fair Dealing, (3) Breach of Fiduciary Duty; and (4) Declaratory Relief.  On 2/6/25, CSC served Defendant with the summons and complaint.  On 3/4/25, Defendant filed and served a motion/petition to compel arbitration which is set for hearing on 7/31/25.  On 4/1/25, CSC filed and served the instant motion seeking a mandatory preliminary injunction requiring Defendant to immediately deliver to CSC all CSC Data which consists of payroll and timekeeping records of CSC and its related entities from April 2018 – May 2024 (CSC Data), more specifically a series of CSV (Charaters Separated Values) files containing the CSC Data.  The instant motion was originally scheduled for hearing on 7/21/25.  On 4/3/25, CSC rescheduled the hearing on the instant motion to 5/27/25.  On 4/7/25, CSC filed and served an amended notice of motion for preliminary injunction.  Defendant has opposed the motion and CSC has filed a reply to the opposition. 

ANALYSIS

CSC’s evidentiary objections, numbers 1-4, to the declaration of Henry Lonsdale are overruled. 

Defenant’s argument that the instant motion is improper because the matter is subject to arbitration is without merit.  While Defendant filed and served its petition/motion to compel arbitration before CSC filed and served the instant motion, Defendant did not make a separate motion to stay the action pending the resolution of the motion.  See CCP 1281.4.  Rather, Defendant included the request in the memorandum of points and authorities filed in support of the petition/motion to compel arbitration which is not scheduled for hearing until 7/31/25.  (See Defendant’s Ps&As filed 3/4/25, p.1:25-26).  Notably, the request is not included in the notice of the petition/motion.  (See Notice filed 3/4/25).  Regardless, CCP 1281.8(b) allows for the filing of a motion for provisional relief by a party to an arbitration agreement if an arbitration proceeding has not commenced on the ground that the award to which the applicant may be entitled may be rendered ineffectual without provisional relief. 

As such, Defendant’s request that the hearing on the instant motion be continued to be heard in conjunction with the motion to compel arbitration is denied.

A court may grant a preliminary injunction when: (1) 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, or (3) when it appears, during the litigation, that a party to the action is doing, or threatens… 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.  CCP 536(a)(1)-(3).   

In ruling on a request for a preliminary injunction, the Court must consider two interrelated factors: (1) the likelihood that the party seeking the injunction will prevail on the merits at trial and (2) the interim harm to that party if the relief is denied versus the harm to the responding party if the relief is granted.  See Integrated Dynamic Solutions, Inc. (2016) 6 CA5th 1178, 1183.  If the denial of an injunction would result in great harm to the plaintiff and the defendant would likely suffer little harm if it were granted, it is an abuse of discretion to fail to grant the preliminary injunction.  Robbins (1985) 38 C3d 199, 205; See also Butt (1992) 4 C4th 668, 678.  However, the trial court may not issue an injunction, regardless of the amount of interim harm, “unless there is some possibility” that the plaintiff will ultimately prevail on the merits of the claim.  Jamison (2016) 4 CA5th 356, 362; Association of Orange County Deputy Sheriffs (2013) 217 CA4th 29, 49; Yu (2011) 196 CA4th 779, 787.

Generally, preliminary injunctions are designed to preserve the status quo pending a determination of the merits of the action.  See Law School Admission Council, Inc. (2014) 222 CA4th 1265, 1280.  However, a court may also issue a preliminary injunction that “mandates an affirmative act that changes the status quo.”  Oiye (2012) 211 CA4th 1036, 1047-1048; Integrated Dynamic Solutions, Inc., supra at 1184.

Defendant does not dispute that CSC’s Data is CSC’s property to which CSC is entitled.  (See Opposition, p.4:17-18).  In fact, Defendant states that although it has already provided the information to CSC, it will “provide Plaintiff an additional copy of their employee payroll data.”  (See Opposition, p.3:17-19).  Specifically, Defendant states that “[a] copy of the payroll records for all pay records will be provided on a secure hard disk prior to the hearing on this motion. A copy of the Payroll Register for each year will be provided. These industry standard reports contain the exact information CSC is requesting, just not in the costly format that Plaintiff is seeking.”  (See Opposition, p.3:18-21; Lonsdale Decl. ¶¶6-7).

Despite conceding that “the TSA does not consider how Defendant should return the data,” CSC contends that the above offer by Defendant is insufficient because CSC wants its “data in the form of CSV files.”  (See Reply, p.5:18, p.2:9-18).  CSC has not shown that it would be unable to extract its “raw data” from the information Defendant has indicated that it has already, and will again, provide to CSC. 

While CSC’s expert is of the opinion that CSC’s “request for their client data in CSV format is a straightforward and simple request” and Defendant’s quote for performing such work is excessive, Defendant’s Chief Executive Officer states that “[c]reating a file output with the exact specification requested by CSC requires “specialized programming” and “[t]he change to CSV format would still require additional programming expenses” which Defendant offered to provide at what Defendant claims is “industry standard in order to cover the costs incurred.”  (Compare Wilson Decl. ¶12; Lonsdale Decl. ¶7).

Notably, neither CSC’s complaint nor the motion make a direct claim that Defendant did anything to prevent CSC from downloading and saving CSC’s Client Information as provided for in the TSA.  Rather, the complaint alleges that Defendant failed to “provide” CSC with the CSC data and the motion makes vague statements regarding Defendant’s software failing when CSC attempted to download the information.  (See Complaint ¶¶14-15, 18; Villiers-Furze Decl. ¶¶7-10).

There is admittedly nothing in the contract between the parties which requires Defendant to provide the data to CSC in the form of CSV files as CSC now demands.  Additionally, Defendant has indicated that it will, again, provide to CSC reports which contain the information/data CSC is requesting, just not in the format of CSV files.  Further, CSC indicates that it is willing to pay Defendant for its services of providing the data in the format of CSV files, just not the amount Defendant has requested.  (See Reply, p.4:13-14).  If the TSA required Defendant to provide CSC with its data in the format of CSV files, CSC would seemingly not be willing to pay anything for such services.  It appears that CSC is improperly attempting to force Defendant to perform a service not provided for in the agreement between the parties at a price CSC deems to be reasonable. 

Based on the foregoing, CSC has failed to establish it has a likelihood of prevailing on the merits of its claims at trial.  Additionally, if Defendant is forced to provide the data to CSC in the format CSC desires, Defendant is at risk of losing over $170,000.00 for its services.  Even if CSC posts an undertaking in the amount of $17,600, which it claims is the reasonable value of the services it wants Defendant to perform, such amount is at least $171,400 less than the at least $189,000 Defendant demanded for such services.  As such, once Plaintiff obtained the data in the format it desires, it could dismiss the action forcing Defendant to incur the time and expense of filing suit to recoup its costs for providing the service.     

CONCLUSION

The request for a preliminary injunction is denied.  The Court finds that Defendant has no obligation to provide CSC with CSC’s Data, which consists of payroll and timekeeping records of CSC and its related entities from April 2018 – May 2024, in a series of CSV (Charaters Separated Values) files containing the CSC Data.

However, the Court orders Defendant to comply with its offer made in the opposition to “provide Plaintiff an additional copy of their employee payroll data” by providing a copy of the payroll records for all pay records, including a copy of the Payroll Register for each year, on a secure hard disk, if Defendant has not already done so before the hearing.  (See Opposition, p.3:17-21; Lonsdale Decl. ¶¶6-7).