Gracelight Community Health v. Queenscare, et al. 

PLAINTIFF’S MOTION FOR PRELIMINARY INJUNCTION

 

MOVING PARTY: Plaintiff Gracelight Community Health

RESPONDING PARTY(S): Defendants Queenscare and Q-Hollywood, LLC

STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS:

Plaintiff Gracelight Community Health brings this action for breach of contract against Defendants Queenscare and Q-Hollywood, LLC. Plaintiff and Defendants are former partners in the operation of a charitable health clinic located at 4618 Fountain Avenue, Los Angeles, CA 90029. Plaintiff leases the property from Defendants. Following a breakdown in the parties’ relationship, they entered into a Memorandum of Understanding (“MOU”) to facilitate a dissolution of the partnership, which includes an extension of the lease term. Plaintiff alleges that Defendants have breached the MOU by failing to extend the lease.

Plaintiff now moves for a preliminary injunction enjoining Defendants from terminating Plaintiff’s lease. Defendants opposed. 

TENTATIVE RULING:

Plaintiff’s Motion for a Preliminary Injunction is GRANTED.

Absent any future material breach of the subject lease by Plaintiff, Defendants are enjoined from terminating Plaintiff’s lease until trial on the merits or December 31, 2025, whichever comes first. 

Plaintiff to submit a proposed Preliminary Injunction Order which is consistent with this ruling.

Moving party is ordered to give notice, unless waived.

DISCUSSION:

Motion for Preliminary Injunction

I. Objections to Evidence

Plaintiff has submitted objections to evidence. This court is unaware of any legal authority which requires a court to rule on evidentiary objections on a motion, except as to a motion for summary motion/adjudication (CCP § 437c (q)) or a special motion to strike (CCP § 425.16 (b)(2)); see also, Sweetwater Union High School Dist. v. Gilbane Building Co. (2019) 6 Cal.5th 931, 947-949.)

As such, the court respectfully declines to rule on these objections.  The court is well aware of the rules of evidence, and to how much weight, if any, should be given to any of the proposed evidence.   

II. Legal Standard

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.) The status quo has been defined to mean the last actual peaceable, uncontested status which preceded the pending controversy. (14859 Moorpark Homeowner’s Assn. v. VRT Corp. (1998) 63 Cal.App.4th 1396. 1402.) Preliminary injunctive 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.) Injunctive relief may be granted based on a verified complaint only if it contains sufficient evidentiary, not ultimate, facts. (See Code Civ. Proc. § 527(a).) 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 decision to grant a preliminary injunction generally lies within the sound discretion of the trial court and will not be disturbed on appeal absent an abuse of discretion. (Thornton v. Carlson (1992) 4 Cal.App.4th 1249, 1255.) 

 

A preliminary injunction ordinarily cannot take effect unless and until the plaintiff provides an undertaking for damages which the enjoined defendant may sustain by reason of the injunction if the court finally decides that the plaintiff was not entitled to the injunction. (See Code Civ. Proc. § 529(a); Cal. Rules of Court, rule 3.1150(f); City of South San Francisco v. Cypress Lawn Cemetery Assn. (1992) 11 Cal.App.4th 916, 920.) 

III. Analysis

A. Likelihood of Success on the Merits

To prevail on a breach of contract claim, Plaintiff must establish “(1) the existence of the contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages to the plaintiff.” (D'Arrigo Bros. of California v. United Farmworkers of Am. (2014) 224 Cal. App. 4th 790, 800.)

As an initial matter, there is no dispute that Defendants breached the MOU by failing to “cause Landlord” to amend the lease to extend the lease term. Specifically, under the MOU, Defendant covenanted that it “shall cause Landlord to amend the Lease to delete Section 2(b) in its entirety and substitute” the lease with the following language stating:

“Section 2 (b) Term of Lease. The initial term of this Lease shall be for a period of fifty two (52) months, commencing on September 1, 2021 and expiring December 31, 2025 (the “Initial Term”, unless sooner terminated pursuant to any provision hereof. This Lease will thereafter automatically renew for consecutive terms of twelve (12) months (the “Renewal Term(s)”) unless one party gives written notice to the other party of its intent not to renew the Lease at least ninety (90) days prior to expiration of the Term then in effect (the Initial Term and all Renewal Terms is sometimes referred to herein collectively as, the “Term”).”

(P’s Exh. 4, p. 5, ¶ 5(b).)  [FN 1]

Landlord has not signed the lease and is therefore in breach of the MOU. To excuse this breach, Defendants argue Plaintiff cannot prevail because Plaintiff also defaulted under the MOU, which default precludes Plaintiff from enforcing the MOU or any right to the lease amendment contained therein. 

Defendant contends Plaintiff breached the MOU in two ways: First, by failing to “make available and protect QueensCare’s employee financial and medical data… through a joint account with a third party HR and payroll company;” and second, by failing to “assist QueensCare in the process of acquiring, in its own name, licenses previously designated to Gracelight for the operation of mobile healthcare facilities…” (Opp. 9: 6-12.) Each of these are addressed in turn. 

1. Employee Data

First, Defendants contend that Plaintiff breached the MOU by failing to “make available and protect QueensCare’s employee financial and medical data, which preseparation was managed by Ms. Perard in her capacity as Chief Administrative Officer of QueensCare (prior to her selection by Gracelight as its CEO) through a joint account with a third party HR and payroll company.” 

In relevant part, the MOU provides:

Prior to the Termination Date, the parties agree to promptly exchange employee records, including but not limited to personnel files, workers compensation files, retirement plan information, and any other relevant employee benefit plan documents, tax filings, and other administrative agency filings (“Employee Records”) as necessary. Further, the parties agree to continue to provide additional Employee Records to the other party related to past employees of one or both parties following the Termination Date, as requested by the other party, as necessary or appropriate to carry out their respective obligations under applicable law, this MOU or the Partnership Agreement, and/or for the purposes of administering their respective employee benefit plans, programs and policies. Each party agrees to keep confidential any such confidential information contained in such Employee Records for so long as such Employee Records are retained by a party. Each party shall only use data contained in such Employee Records for permitted purposes. To the extent that QHC continues to possess the ability to directly access Employee Records that exclusively pertain to QueensCare, QHC shall not, and shall ensure that its employees shall not, willfully access any such QueensCare Employee Records unless specifically permitted by QueensCare and/or the applicable employee.

(P’s Exh. 4, p. 2, ¶ 1(b).)

The parties’ dealings regarding employee data is largely detailed in the Declaration of Araksi Simidyan, Queenscare’s Director of Administration. (See Simidyan Decl. ¶¶ 1-14; see also Hines Decl. ¶ 20.) Simidyan explains that Queenscare had an ongoing problem accessing the data in the Paycom database because Plaintiff controlled access the account. (Id.) It required cooperation between Paycom, Plaintiff and Defendant so that Defendant could access the records. (Id.) 

But there is little evidence that Plaintiff failed to comply with its obligations regarding employment records. To the contrary, the evidence suggests that Plaintiff complied or attempted to comply with its employee data obligations. (Perard Decl. ¶¶ 19-27.) To the extent there were any hiccups in transferring or accessing data, it was because of the sensitive nature of the data and technical issues on Paycom’s end—not any intentional interference by Plaintiff. Moreover, it largely appears that Defendants have access to all employee data that might have been missing. 

Considering the evidence, Plaintiff has established that it complied with its obligations regarding employee data under the MOU. (See D'Arrigo Bros., supra, 224 Cal. App. 4th at 800 [breach of contract requires “plaintiff's performance”].)

2. Licenses

Next, Defendants argue Plaintiff breached the MOU by failing to “assist QueensCare in the process of acquiring, in its own name, licenses previously designated to Gracelight for the operation of mobile healthcare facilities, which post-separation would be operated by QueensCare alone.” 

In relevant part, the MOU provides:

QHC agrees to continue to provide licensure for these healthcare programs until such time as QueensCare or its affiliate obtains the necessary licenses and authorities to operate such programs under QueensCare’s or its affiliate’s name, but in no event later than December 31, 2025.

Should QHC breach any commitments to support QueensCare’s efforts to obtain its licenses as set forth herein, or breach any other term of this MOU, then QueensCare shall have the right, upon giving of the notice required in the Lease (as referenced and defined in Section 5 of this MOU), to declare the Lease to be in default and to take such actions as it deems appropriate and consistent with the remedies set forth in the Lease and to immediately suspend performing its obligations under Section 5 of this MOU.

 (P’s Exh. 4, p. 3, ¶ 2.) 

The problem with Defendants’ argument is that the MOU does not require Plaintiff to assist in the transfer of the licenses.   By its plain terms, Plaintiff only agreed to provide licensure until QueensCare obtained its own licenses and to “support QueensCare’s efforts to obtain its licenses…” (P’s Exh. 4, p. 3, ¶ 2.) And the evidence hardly establishes that Plaintiff has not “supported” those efforts. (See Sesay Decl. ¶¶ 1-11; Hines Decl. ¶¶ 18-19.) 

Plaintiff provided a letter to the California Department of Health noting it was the licensee of three facilities and stated it “support[ed] Queenscare Health Alliance’s application for new licenses (not the transfer of licenses) for these facilities.” (P’s Exh. 10.) This came after Defendants insisted that a transfer was necessary and attempted to include language to that effect in a draft letter to the Department. 

On this evidence, Plaintiff has established that it performed all of its obligations under the MOU. Therefore, for purposes of the preliminary injunction, Plaintiff has produced evidence to establish all elements of its breach of contract claim. Therefore, there exists a high likelihood of success on the merits. 

B. Balance of the Harms

Next, the court will balance the harm to Plaintiff if the motion were not granted with the harm to Defendants if the motion were granted.  Here, if the preliminary injunction is denied, Plaintiff faces extreme and potentially irreparable harm, as the termination of the Lease would extinguish Gracelight’s interest in the Property. 

The property at 4618 Fountain Avenue is unique given its large size and location “directly across the street from Hollywood Presbyterian Hospital.” (Perard Decl. ¶¶ 3, 4, 6.) “The proximity to the hospital allows efficient and speedy movement for doctors between the hospital and health center and enables Gracelight to quickly address medical emergencies that arise in the health center.” (Id. ¶ 6.) Additionally, the property already maintains the necessary licenses for the services offered there. (Id. ¶ 8.) If the lease is terminated in the immediate future, it is unlikely Plaintiff can obtain new licenses in time without an interruption in service to its patients. (Id. ¶ 8.) This would prejudice Plaintiff and the thousands of patients it serves.

On the other hand, Defendants’ harm is less if the preliminary injunction is granted. Indeed, Defendants have not identified any harm in their opposition. At most, Defendant will be unable to recover the property until the end of the lease term contained in the MOU. But, in light of the fact that Plaintiff has apparently complied with its obligations under the MOU, this is exactly what Defendants agreed to. 

Thus, considering a balance of the harms, this court concludes the balance shifts in favor of granting the motion for a preliminary injunction. 

Accordingly, Plaintiff’s Motion for a Preliminary Injunction is GRANTED. 

Absent any future material breach of the subject lease by Plaintiff, Defendants are enjoined from terminating Plaintiff’s lease until trial on the merits or December 31, 2025, whichever comes first. In other words, so long as the Plaintiff does not commit a material breach of the subject lease in the future (such a failure to pay rent, material breach of covenant, etc.), the Defendants may not declare a forfeiture of the lease during the pendency of this action, or the lease expressly allows otherwise during the current term of this lease, which expires potentially on December 31, 2025.

IT IS SO ORDERED.

Dated:   October 15, 2024 ___________________________________