Judge: Mitchell L. Beckloff, Case: 23STCV17767, Date: 2024-03-08 Tentative Ruling
Case Number: 23STCV17767 Hearing Date: March 8, 2024 Dept: 86
RUBIN v. RUBIN
Case No. 23STCV17767
Hearing Date: March
8, 2024
[TENTATIVE] ORDER CONTINUING HEARING ON MOTION TO
APPOINT A RECIEVER
On September 13,
2023, Plaintiffs, Michael Rubin and Staci Rubin, in their individual capacities
and as trustees of a trust, brought an ex parte application seeking various
orders, including the appointment of a receiver to enforce a shareholders’
buyout settlement agreement (BOSA) for Jack Rubin & Sons, Inc. (JRS).[1] Plaintiff Michael Rubin
and Defendant Bruce Rubin are the sole shareholders of JRS—the shares are owned
2/3 by Plaintiff Michael Rubin and 1/3 by Defendant Bruce Rubin.
The minute order from
the unreported ex parte hearing on September 14, 2023 reflects:
After extensive discussion with the
court, the parties meet and confer. The parties agree and the court orders:
Appraisers/Evaluators will be put into Jack Rubin & Sons, Inc. The
Appraiser/Evaluators shall have reasonable access to all books and records
without delay. The Appraisers/Evaluators shall be selected (as set forth in the
parties’ settlement agreement) within 14 days from today’s date. Absent
agreement of all JRS directors, including Michael Rubin, no expenditures will
be made by Jack Rubin & Sons outside the ordinary course of business
pending completion of the buyout. Inventory in an annualized amount up to $10
million is considered an expense in the ordinary course of business. Net
proceeds of the sale of Silver State is subject to this provision. Large
expenditures for those items discussed at the July 26, 2023 board meeting (such
as a new testing bed) are not considered expenses in the ordinary course of
business.
At the conclusion of
the court’s ex parte hearing, the court set Plaintiffs’ motion for the
appointment of a receiver for hearing on November 22, 2023. The orders made
that day remain in full force and effect.
On November 17, 2023,
the parties submitted a stipulation to continue the hearing on Plaintiffs’
motion for the appointment of a receiver. The parties advised the court that
the parties had selected three evaluators to perform an evaluation of JRS, and
the evaluation was about to commence. The BASO dictated the terms of the
valuation of JRS.
The court continued
the matter to today’s date and ordered the parties advise the court if they
intended to go forward with the motion no later than February 20, 2024. On that
date, the parties advised the court’s clerk the matter would be proceeding.
Evidentiary
Objections
Defendants’
evidentiary objection to the March 1, 2024 declaration of Lynton Kotzin is
sustained. (Objection 1.)
Defendants’
evidentiary objections to the declaration of Christopher Luna (Objections 2
through 6) are sustained on various grounds, including argument, foundation and
speculation.
Defendants’
evidentiary objections to the declaration of Michael Rubin (Objections 7
through 14) are sustained on various grounds, including foundation, argument,
secondary evidence rule and hearsay.
Defendants’ objection
to the court considering new material raised in the reply declaration is
sustained. “The salutary rule is that
points raised in a reply brief for the first time will not be considered unless
good cause is shown for the failure to present them before.” (Balboa Ins.
Co. v. Aguirre (1983) 149 Cal.App.3d 1002, 1010; see also Regency
Outdoor Advertising v. Carolina Lances, Inc. (1995) 31 Cal.App.4th 1323, 1333.) Plaintiffs do not suggest
good cause of belatedly raising the arguments in their reply papers.
The court finds,
however, the arguments alleging Defendants have delayed the evaluation process
are properly before the court as rebuttal. (The arguments, however, are
unsupported as a factual matter based on the evidentiary objections.)
Additional Requests
by Plaintiffs
In addition to the
appointment of a receiver (or a special master) “to oversee and enforce the
BOSA to completion,” Plaintiffs argue in their reply papers that the court
“order JRS to pay [Plaintiff] Michael Rubin an initial payment of $2 million (a
modest portion of what he is entitled to) . . . .” They also request the court “order
JRS to provide complete and accurate records and responses to the valuation
appraisers within ten (10) days.”
Appointment of a
Receiver
Defendants contend:
Plaintiffs’ Motion asks this Court to
appoint a receiver and issue injunctive relief, but wholly fails to make the
required showing justifying the drastic and extraordinary relief requested
therein. Since the September 14, 2023 hearing on the issues raised by this
Motion, Defendants have continued to work diligently and in good faith to
complete the buyout contemplated by the parties’ March 9, 2023 [BASO]. Indeed,
the appraisal process is now ongoing and is expected to be completed within one
month of this submission. Plaintiffs’ requested relief is unwarranted,
unnecessary and unjustified. For all of the same reasons that Plaintiffs’
requested relief was denied when requested on an ex parte basis, as well as the
additional reasons detailed herein, Plaintiffs’ Motion should be denied.
(Opposition 1:8-16 [emphasis added].)
They also contend the
evaluators were not retained until November 20, 2023 based on delays of Plaintiffs. (Opposition 7:23-24.)
In response,
Plaintiffs argue “defendants have not done anything that even remotely
resembles prompt or diligent behavior, beginning with their failure to produce
complete and accurate records to the hired appraisers.” (Reply 2:26-27.)
While there is a
dispute concerning JRS’s production of documents necessary for the evaluation,
the only admissible evidence before the court is that provided by Defendants.
That evidence suggests as of February 26, 2024, “all of the information that
has been requested by the Appraisers has been provided by the Company, to the
extent it exists and can be accessed by the Company and/or its current
accountant” (Reck Decl., ¶ 9) “with the possible exception of only one or two
minor items.” (Opposition 8:22-23.)
Given the parties’
agreement of September 14, 2023 and the court’s order thereon (as memorialized
in the court’s minute order of that date), the court finds a full-purpose
receiver for JRS is unnecessary here. From the court’s perspective, the issue
is how to best effectuate the evaluation process to facilitate the parties’
completion of the BOSA.
The court requests the
parties address:
· Is it Defendants’
position all data requested in the evaluators’ initial data request—to the
extent it is available—has been provided to the evaluators?
· To the extent the
data is not available—because it does not exist or cannot be retrieved—what to
the evaluators suggest, if anything, should be done to complete the
evaluations?
· To the extent any
data is missing, why does JRS need more than 10 days to provide that data to
the evaluators?
· The court is included
to order the parties instruct the evaluators to participate in a face-to-face
(or video conference) meet and confer to review the data requested and the data
provided. The meet and confer should result in an agreed upon master list of
data that has been provided in full and the extent to which the data is
insufficient for some reason or has not been provided because it does not
exist. It seems to the court the starting place must be the data that is
available, the data that has been provided, and the extent to which the
evaluators can complete their assignments.
· Should the court
install a limited purpose receiver solely for the purpose of facilitating the production
of records and/or the terms of the BOSA?
Based on the
foregoing, the court is inclined to continue the hearing on this motion to
April 19, 2024 at 9:30 a.m. No further briefing shall be submitted on the pending
motion as the matter is completely briefed.
No later than April 12,
2024, the parties shall submit a joint report providing the master data list to
be compiled by the evaluators, any efforts to obtain missing data, and how the
evaluators propose to proceed if there is no further data that can be provided.
Finally, this matter
is before Department 86 for the purposes of a receiver only. Given that the
date first scheduled for a case management conference in this matter was
December 11, 2023, all requests for ex parte relief (other than those
pertaining to the receivership) are properly directed to Department 72. (See
Los Angeles County Court Rules, Rule 2.8.)
[1] Plaintiffs also
sought a temporary restraining order and preliminary injunction “prohibiting
defendants from further delaying defendants’ performance of the BOSA and
preventing defendants from committing ongoing waste and dissipation of JRS’s
funds in their attempt to avoid paying plaintiff Michael Rubin, a majority
shareholder of JRS.” In addition, Plaintiffs sought a temporary restraining order
and preliminary injunction “prohibiting defendants from their continued and
unjustified withholding of plaintiff Michael Rubin’s monthly shareholder
distributions, without any legal or factual basis, leaving Michael with no
income.”