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.”