Judge Ralph C. Hofer, Case Number: 24NNCV03355, Date: 2024-09-13 Tentative Ruling

Plaintiff Pivot Collectibles LLC (Pivot) alleges that it is engaged in the business of procuring and selling collectible memorabilia, including trading cards, and that over time, plaintiff has procured trading cards featuring characters from the Marvel comic book, film, and television programs, which are manufactured, sold, supplied and/or distributed by defendant Upper Deck Company (Upper Deck). Plaintiff alleges that the Marvel trading cards come in two forms: (1) physical trading cards, only; and (2) e-Pack cards. The e-Pack cards are purchased digitally and are accessible in digital format to the buyer. Additionally, for each digital card purchased, defendant Upper Deck maintains an actual physical card which is kept by Upper Deck. At any time, the purchaser of a digital card may ask Upper Deck to

The complaint alleges that through approximately May of 2024, Pivot had acquired at least $5 million worth of Marvel trading cards (subject Marvel trading cards), which were kept by Pivot in a secure location. Pivot alleges that Pivot is physically located in the City of Los Angeles, and that also located at the same physical property is the business Jadeite Management LLC (Jadiete). Plaintiff alleges that from approximately May of 2022 through August of 2023, Jadiete employed defendant Akika Rosenbluth as an intern. Plaintiff alleges that on or about August 5, 2024, plaintiff discovered that after Mr. Rosenbluth’s internship ended, and perhaps subsequently, Mr. Rosenbluth stole approximately $750,000 worth of Marvel trading cards from the secure location where the cards were being stored, including both cards in physical forms and e-Pack cards.

Plaintiff alleges that Mr. Rosenbluth, through his internship, acquired access to plaintiff’s online Upper Deck account, through which he was able to sell plaintiff’s subject Marvel trading cards to buyers, which he did without plaintiff’s authorization, consent, knowledge, or awareness. Plaintiff alleges that some if not most of the e-Packs belonging to Pivot, which were stolen and then sold by Mr. Rosenbluth, have since been redeemed by the buyers for their physical copies through Upper Deck. Plaintiff alleges that once the physical copies of the cards are sent out to those who purchased e-Packs from Mr. Rosenbluth, the physical copies are impossible for Pivot to track down with the hope of recovering them.

The file shows that on August 27, 2024, the court heard an ex parte application for a temporary restraining order brought by plaintiff Pivot. The application was granted in part. The court ordered that as of the date of the order, August 27, 2024, Upper Deck could not permit anyone other than Pivot to redeem an e-Pack product currently held on Pivot’s e-Pack account for a physical copy of the card. A list of the 499 cards at issue is attached to the order. The court also ordered that Upper Deck has no obligation to trace or otherwise take action with respect to the 2,350 cards that have been moved out of Pivot’s e-pack account to third parties by defendant Rosenbluth. The court further set the hearing on the preliminary injunction for September 13, 2024, and set a briefing schedule.

Plaintiff Pivot seeks a preliminary injunction to enjoin defendant Upper Deck, its agents, servants, and assigns, from distributing, sending, selling, transferring or otherwise disseminating any physical copies of Upper Deck Marvel trading cards in Upper Deck’s possession which correspond to digital e-Pack cards owned by Pivot to anyone other than Pivot. Plaintiff submits a complete detailed list of the subject Marvel trading cards, attached as Exhibit 1 to a Declaration of Avi Oscherowitz, manager of Pivot, who states that the list includes all Marvel e-Pack cards belonging to Pivot which were stolen by Rosenbluth of which Oscherwitz is currently aware. [Oscherwitz Decl., para. 13, Ex. 1]. This list appears to be a substantially longer list than the list attached to the order granting in part the TRO, consisting of over 40 pages, with approximately 50 entries per page, which the court assumes is the 2,350 cards mentioned in the Temporary Restraining Order.

(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.

(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.

An application for a preliminary injunction is considered a motion procedure and must be supported by affidavits or declarations which provide evidentiary facts under CCP section 2009. CCP § 527(a) (“A preliminary injunction may be granted at any time before judgment upon a verified complaint, or upon affidavits if the complaint in the one case, or the affidavits in the other, show satisfactorily that sufficient grounds exist therefor.”) See also Ancora-Citronelle Corp. v. Green (1974) 41 Cal.App.3d 146, 149-150. The burden is on the party seeking injunctive relief “to show all elements necessary to support issuance of a preliminary injunction.” O’Connell v. Superior Court (2006) 141 Cal.App.4th 1452, 1481.

Granting or denying a preliminary injunction is within the sound discretion of the trial court and will be upheld on appeal absent an abuse of discretion. Jessen v. Keystone Savings & Loan Assn. (1983) 142 Cal.App.3d 454, 458. Such a remedy is intended to preserve the status quo until a full trial on a permanent injunction may be conducted.

Plaintiff argues that a preliminary injunction is necessary here because Pivot has been, and will, continue to suffer irreparable harm should injunctive relief not be provided. Plaintiff argues that this includes the permanent loss of unique, valuable, and irreplaceable property for which monetary damages will not suffice. Plaintiff’s manager, Avi Oscherowitz, states in his declaration:

12. The stolen Marvel Trading Cards are collectible memorabilia that can never be compensated fully monetarily as that also discounts the fact that the cards’ future value is not readily ascertainable, and Pivot can never be compensated for the cards’ long-term future value.”

“In deciding whether to issue a preliminary injunction, a court must weigh two ‘interrelated’ factors: (1) the likelihood that the moving party will ultimately prevail on the merits and (2) the relative interim harm to the parties from issuance or nonissuance of the injunction.”

The preliminary injunction is sought only as to defendant Upper Deck, and a noted above, the complaint in this matter alleges a single cause of action against this defendant for “Declaratory Relief, with Request for Temporary, Preliminary, and Permanent Injunctive Relief.” [RFJN, Ex. 1, Complaint, p. 5].

“Any person interested under a written instrument, excluding a will or a trust, or under a contract, or who desires a declaration of his or her rights or duties with respect to another, or in respect to, in, over or upon property,... may, in cases of actual controversy relating to the legal rights and duties of the respective parties, bring an original action or cross-complaint in the superior court for a declaration of his her rights and duties in the premises, including a determination of any question of construction or validity arising under the instrument or contract. He or she may ask for a declaration of rights or duties, either alone or with other relief; and the court may make a binding declaration of these rights or duties, whether or not further relief is or could be claimed at the time. The declaration may be either affirmative or negative in form and effect, and the declaration shall have the force of a final judgment. The declaration may be had before there has been any breach of the obligation in respect to which said declaration is sought.”

Plaintiff argues that it can establish each element of the declaratory relief cause of action as plaintiff is seeking a declaration of its rights to its property: the subject stolen physical cards; is seeking a declaration with respect to Upper Deck which is still in possession of a portion of the physical cards which correspond to the stolen e-Pack cards; and a controversy exists as Pivot has made a demand to Upper Deck to prevent any further dissemination of the physical cards rightfully owned by Pivot, which Upper Deck has refused to do.

Plaintiff cites as support for this argument the declaration of Pivot’s attorney, Elan N. Stone, specifically a letter written to Upper Deck on behalf of Pivot dated August 12, 2024, which encloses a police report filed concerning the theft of Pivot’s trading cards, and states:

“These cards are stolen property which The Upper Deck is on notice of. We therefore ask that you ensure that none of the stolen cards (detailed in Exhibit 1 to Pivot’s Complaint), including e-Pack cards, be further distributed, sold, transferred, or other [sic] disseminated to anyone other than Pivot.”

In any case, defendant Upper Deck in opposition argues that plaintiff Pivot has failed to meet its burden of showing a viable legal theory against Upper Deck under which it is likely to succeed. Defendant argues that at the TRO hearing, the court specifically asked Pivot to present its legal theory against Upper Deck and explain why it will prevail under that theory, but Pivot in the moving papers does not identify any right by Pivot to have the cards returned nor any obligation by Upper Deck to help Pivot accomplish this.

“One cannot analyze requested declaratory relief without evaluating the nature of the rights and duties that plaintiff is asserting, which must follow some recognized or cognizable legal theories, that are related to subjects and requests for relief that are properly before the court.”

Plaintiff in reply argues that reliance on Otay is misplaced, as the court of appeal in that case addressed a party’s standing to pursue a declaratory relief action under a codified “no direct action” rule in the Insurance Code. While the case primarily determined that the trial court had properly sustained a demurrer without leave to amend as to a cause of action for declaratory relief based on a determination that plaintiff was premature in claiming that an actual controversy existed, the court of appeal applied the foregoing analysis, among other standards and rules, and concluded that the complaint before it “does not state a cause of action that is appropriate for adjudication upon the undisputed facts plead.” Otay, at 567.

Defendant also cites Korean American Legal Advocacy Foundation v. City of Los Angeles (1994) 23 Cal.App.4th 376, 399, in which the Second District observed, “a cause of action must exist before injunctive relief may be granted.”

Defendant argues that rather than address the legal theory and specific rights and duties entitling Pivot to the return of the physical versions of the stolen e-Pack cards and why Pivot is likely to prevail, Pivot merely states the elements of a declaratory relief cause of action, and only goes so far as demonstrating there may be a controversy about its claim, but does not explain why Pivot will prevail.

Plaintiff does not explain its legal theory or what rights or duties the parties have with respect to each other under California law. It is not clear what Upper Deck is alleged to have done wrong, when it appears to have had no fault in the transactions facilitated by Rosenbluth with Pivot’s credentials. This presentation appears wholly insufficient to establish any probability of plaintiff prevailing on its claim on the merits in this context.

Plaintiff in the moving papers also briefly argues that Pivot is likely to prevail on its conversion cause of action “against Mr. Rosenbluth,” and sets forth the elements and facts supporting a conversion claim against defendant Rosenbluth. However, the conversion cause of action is not alleged against defendant Upper Deck, and plaintiff here seeks injunctive relief against defendant Upper Deck only, not against defendant Rosenbluth.

Plaintiff in an easily missed footnote in the moving papers seems to suggest that Upper Deck may be responsible for conversion. [See Order to Show Cause, p. 11, n.1]. This argument is also easily missed because the complaint does not allege the conversion cause of action against Upper Deck. Plaintiff then in the reply seems to more directly argue that Upper Deck can be responsible for conversion, arguing that Upper Deck has a duty under the law to return Pivot’s stolen property and may be found liable for conversion for failing to do so. It is troubling that this argument is only clearly raised for the first time in the reply papers, so that defendant has not had the opportunity to respond. It is also unclear why, if plaintiff believes in good faith, it can support such a claim against Upper Deck, plaintiff has not sought promptly to amend its complaint.

Plaintiff in the footnote and reply cites, without discussion, Plummer v. Day/Eisenberg, LLP (2010) 184 Cal.App.4th 38, with a nonexistent pinpoint cite, in which the court of appeal recognized that a conversion action could be based on a contractual agreement in a retention agreement for an attorney’s lien. It is not explained on what basis a conversion action could be maintained here, under contract, tort, or some other theory.

Defendant also argues in opposition that under California law, where a plaintiff has vested another with apparent authority to act on its behalf and that individual does so but exceeds his authority, down-stream innocent purchasers for value have stronger rights to the products than the plaintiff. Defendant argues that this is the case here, where defendant Rosenbluth, a former employee/intern, had access to Pivot’s e-Pack account and allegedly exceeded his authority by converting cards to his own use. Defendant argues that among the two innocent parties, Pivot and the third-party purchasers, Pivot must suffer the loss.

Defendant cites authority under which where negligence or other misconduct is established and contributed to a loss, an innocent purchaser taking a void instrument can find protection under Section 3543 and the doctrine of estoppel. Crittenden v. McCloud (1951) 106 Cal.App.2d 42, 50; see also Wutzke v. Bill Reid Painting Service, Inc. (1984) 151 Cal.App.3d 36, 44 (“It is settled that the doctrine of equitable estoppel may be invoked by an innocent purchaser, in spite of the fact that ordinarily a forged instrument cannot carry title. The owner of property cannot be divested thereof by a forged instrument, but his conduct ... may estop him from denying its validity.”(citations, quotations omitted)).

As defendant argues, misplaced confidence is one way to establish negligence under Civil Code section 3543. See, e.g., Reusche v. California Pacific Title Ins. Co. (1965) 231 Cal.App.2d 731, 738 (“Misplaced confidence has been held to be negligence within section 3543 and has resulted in the estoppel of a true owner from asserting title against an innocent party.”), citing Asp v. Lowry (1953) 117 Cal.App.2d 81, 85:

“Where a reasonable person would be led to believe … that she was the owner of the property, and where the innocent third party parts with value in reliance thereon, the third party should be protected where the true owner is guilty of misplaced confidence amounting to negligence. Misplaced confidence may be held to be negligence within the meaning of the maxim set forth in section 3543 of the Civil Code, that where one of two innocent persons must suffer by the act of a third, he, by whose negligence it happened, must be the sufferer. This is particularly so where the true owner is estopped to assert its title against the innocent third party.”

Defendant relies on J. G. Boswell Co. v. W. D. Felder & Co. (1951) 103 Cal.App.2d 767, 774, in which the court of appeal affirmed a judgment based on a jury verdict in favor of defendants on a conversion claim, where 29 bales of cotton were improperly transferred by a shipping clerk of plaintiff, a corporation in the business of buying, selling and shipping cotton, to a third party, and plaintiff later discovered that multiple bales of cotton were missing.

“The evidence shows that the plaintiff placed defendant Stuart in a position to commit the alleged conversion of the cotton here involved. Stuart was at all times the shipping clerk of plaintiff, had access to all the records, was permitted to sell cotton from plaintiff's yard and to retain for his own use loose cotton which he was permitted to sell in the usual channels of the cotton trade. Where, as here, an owner clothes another with the apparent title to or power of disposition over property, and an innocent third party has thereby been induced to deal with the apparent owner in reference thereto, the true owner is estopped from afterward asserting his title. (24 Cal.Jur., p. 1029.)

“... where an owner deposits his property with another and gives the depository such indicia of ownership that a reasonable man dealing with such agent is reasonably led to believe the agent is the owner of such property and parts with value in reliance thereon, the third person will be protected even though the true owner is guilty of no more than misplaced confidence.”

Moreover, the defendants are protected by the rule set forth in section 3543 of the Civil Code: “Where one of two innocent persons must suffer by the act of a third, he, by whose negligence it happened, must be the sufferer.” This rule has been applied to bona fide purchasers for value from those who have been clothed with the indicia of ownership. (Meadows v. Hampton Live Stock Com. Co., 55 Cal.App.2d 634, 636 [131 P.2d 591].) And in Brown v. Oxtoby, 45 Cal.App.2d 702, 708 [114 P.2d 622], it is said:

“Although the principal may not have actually authorized the particular fraudulent act, yet the principal is responsible for the fraud of the agent if he has entrusted to the agent a matter which puts the agent in a position to perpetrate the fraud complained of, while the agent is executing the agency transaction within the scope of his employment.”

Defendant argues that while the factual record is not well developed at this stage, Pivot by its own allegations indicates that it entrusted defendant Rosenbluth with access to the e-Pack Marvel trading cards, and Rosenbluth abused that trust by allegedly making unauthorized trades and sales from Pivot’s account.

Defendant argues that the alleged wrongful activity of Rosenbluth using the e-Pack account and selling trading cards was only possible if Rosenbluth had the log-in credentials or was using a device with the credentials already stored on it.

“8. I understand that the alleged conversion of the e-pack cards from the Mazelcards1 account at issue here occurred between December 2023 and March 2024. Upper Deck has access to the date and type of log in its customers make. There is an “auto” log in and a “full” log in. Auto means the device used to access the account has been used before and has log-in credentials saved on the device using a “remember me” option. Full means that the user had to manually enter the login credentials. Over the 12/30/23 to 3/2/24 time period, there were hundreds of instances of devices logging into the Mazelcards1 account. None of these logins were “full” where the user had to manually enter the username and password. All the relevant logins for Mazelcards1 over this period were “auto” meaning that the devices used to trade away the allegedly converted cards were devices that had previously logged into the Mazelcards1 account.

Defendant argues that this is a situation where Pivot put Rosenblum in a position to perpetuate the e-Pack transactions which it now seeks to unwind and claw back from third parties who have no reason to believe the transactions were illegitimate.

Plaintiff does not directly address the argument asserted by defendant that as between plaintiff and the innocent purchaser third parties who now claim ownership of the e-cards, and entitlement to physical cards on demand, the third parties would have the superior claim to ownership of the property.

“It is well established that we may only review the trial court's order granting a preliminary injunction for an abuse of discretion. ( Butt v. State of California (1992) 4 Cal. 4th 668, 678 [15 Cal. Rptr. 2d 480, 842 P.2d 1240]; accord, Common Cause v. Board of Supervisors (1989) 49 Cal. 3d 432, 447 [261 Cal. Rptr. 574, 777 P.2d 610] (Common Cause).) 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. (Ibid.) "A preliminary injunction may not issue without some showing of potential entitlement to such relief." (Ibid.)”

In addition, it does not appear that plaintiff has sufficiently established that a preliminary injunction is necessary here because Pivot will suffer irreparable harm should injunctive relief not be provided. Plaintiff argues that this includes the permanent loss of unique, valuable, and irreplaceable property for which monetary damages will not suffice. As noted above, plaintiff’s manager, Oscherowitz, describes the stolen trading cards as “extremely unique and extremely limited in production,” and “irreplaceable,” with a “future value” which is “not readily ascertainable.” [Oscherwitz Decl., paras. 11, 12].

This argument is not persuasive, as Pivot can seek monetary damages from defendant Rosenbluth, which is an effective remedy in this matter. The complaint expressly alleges that “Mr. Rosenbluth stole approximately $750,000 worth of Marvel Trading Cards.” [RFJN, Ex. 1, Complaint, para. 18]. It is difficult to believe that any future value of a collectible in a competitive market could not be effectively calculated.

As pointed out in the opposition, the existence of another effective judicial remedy, such as monetary damages, is grounds for denying a request for injunctive relief, as the party to whom that remedy is available has not suffered irreparable harm. Defendant cites to Simms v. NPCK Enterprises, Inc. (2003) 109 Cal.App.4th 233, 243, in which the court of appeal found that the trial court had erred in granting an injunction, since the claim and delivery law and a writ of possession thereunder provided a complete prejudgment remedy to recover possession of personal property. The court of appeal held, “The existence of another effective judicial remedy is grounds for denying injunctive relief.” Simms, at 243.

Finally, with respect to balancing the hardship to be faced by plaintiff if the injunction is not issued against the hardship to defendant if the injunction is issued, plaintiff argues that now that the e-Pack cards have been stolen and sold to others, anyone, including Rosenbluth and the buyers of the stolen cards, may easily request Upper Deck to sent them the physical copies, which is clearly irreparably harming plaintiff. [Oscherowitz Decl., paras. 9-12]. Plaintiff again argues that the cards are unique, so that plaintiff will be harmed without any recourse and the permanent loss of unique and irreplaceable property. Plaintiff argues that Upper Deck knew when it entered into the digital card business that theft was inevitable and it would have to deal with issues such as this one as part of the regular course of its business, and that Upper Deck has a duty under the law to ensure that Pivot’s stolen property cannot be further disseminated. Plaintiff has cited no evidence supporting this description of the digital card business and its risks, and no legal authority imposing a duty under the law on Upper Deck.

The court is cognizant of the fact that plaintiff is seeking by this motion action affecting multiple separate trades, as the list at Exhibit 1 is well over 40 pages long, with approximately 50 entries per page, and plaintiff had previously argued that the list of effected transactions was 2,350, a significant number.

Defendant in opposition argues that plaintiff’s harms can be addressed by a money damages award against the perpetrator of the theft, Rosenbluth, and that the relative balancing favors Upper Deck as well, which is being asked to be prevented from disseminating the physical cards in its possession corresponding to those owned by Pivot, and to effectively take hundreds of assets from its users. Defendant indicates that, although Defendant has no fault in this matter, it would be required to go through an involved process to identify the accounts and locate and remove the cards at issue.

The Declaration of Benjamin Swiderski, Vice President of E-Commerc at Upper Deck, and manager and overseer of its e-Pack platform, explains that there would be a process to identify all trades involved, filter and confirm, and that only after that is finished, Upper Deck could then query its database, in a process requiring an additional 20 hours or five days of developer time:

4. I understand that Plaintiff alleges that an intern or employee of the company traded cards from the Mazelcards1 e-pack account to third parties for compensation which he took for himself. To attempt to identify where those e-pack cards currently reside on Upper Deck’s e-pack platform (if anywhere), Upper Deck would need to take the following steps:

a. Identify all trades involving the Mazelcards1 account that include the products that were allegedly stolen from their account based on the date range identified in the Complaint (12/30/23 – 3/2/24). This would be all trades where Mazelcards1 was the trade initiator or counterparty.

e. With a confirmed list of cards at issue, Upper Deck can query its database using the unique identifier for each e-pack card. This will show the current location of the card if it remains on the e-pack platform. Upper Deck cannot take any action with respect to cards moved off the platform.

f. Make a record of the location for each e-pack card remaining on the platform to ensure that there is record of where the card may need to be returned. Upper Deck would also create a report containing all items, locations, and emails associated with the accounts currently holding the items. This will be used for contacting these users in the instance where the items are removed from their collections.

h. For the cards to be held in the neutral account, we would have to update the item database, specifically, updating the ownership data of the identified items. This will remove the items from the accounts in which they currently reside and move them to the neutral account.

5. Our team has looked into the time the above process would take. Once we have a confirmed list of impacted cards (i.e. once we complete step 4(d) above), it will take at least 20 hours of developer work which would take a minimum of 5 days given developer’s other necessary commitments.”

Defendant also argues that its burden, if the injunction were granted would also include defendant having to contact users in current possession of the cards. These users paid real consideration for the cards by paying money or trading cards of their own and would be rightly concerned about their property being removed from their account. In that situation, Upper Deck would be required to respond to, and to resolve, each of the concerns. Such a result would cause Upper Deck to suffer a tremendous reputational hit from clawing back cards from users who acquired the cards in good faith. The Swiderski Declaration indicates:

“6. If ordered to claw back the potentially stolen e-pack cards remaining on the e-pack platform, Upper Deck will also have to expend numerous hours discussing the issue with its customers who will lose access to cards in their e-pack accounts and naturally be frustrated and disappointed by the development. I expect this will hurt the e-pack brand and reputation which aims to provide a secure and final trading process to the users. If users suspect that the platform is compromised or that their trades might be unwound causing them to lose value and access to the physical versions of the cards they acquired, that is highly detrimental to the platform and the brand we have worked hard to build around it.

7. The trading card and collectibles industry is a small and close nit [sic] one. Word of Upper Deck’s removal of products from customer accounts is very likely to be discussed in relevant online and offline forums by Upper Deck’s current and potential customers. This, too, will negatively impact the brand and future value of the platform. Upper Deck’s goal is to have customers trust it to hold the digital and physical versions of their cards securely in a manner that allows them to take possession of the cards whenever they so choose.”

Plaintiff has failed to meet the burden of establishing the likelihood that the moving party will ultimately prevail on the merits. Plaintiff has also failed to establish it will suffer irreparable harm, as it appears monetary damages are an appropriate and complete remedy.

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