Judge: Stephen I. Goorvitch, Case: 22STCV17477, Date: 2022-08-29 Tentative Ruling

Case Number: 22STCV17477    Hearing Date: August 29, 2022    Dept: 39

Charles A. Mattera, et al. v. State of California, et al.

Case No. 22STCV17477

Motion for Preliminary Injunction

[TENTATIVE ORDER]

            The Court posts this tentative order on Friday, August 26, 2022, at approximately 11:30 a.m., in advance of the hearing on Monday, August 29, 2022, at 9:30 a.m.  The Court provides notice that if Plaintiffs’ counsel does not appear, he shall waive the right to be heard on this tentative order, which shall be adopted, and the case shall be dismissed without prejudice. 

            Plaintiff Charles A. Mattera (“Mattera”) and United Studios of Self-Defense, Inc. (the “Studio”) (collectively, “Plaintiffs”) filed this action against two sets of defendants.  First, Plaintiffs named the State of California, Department of Financial Protection and Innovation and certain employees (collectively, the “State of California” or the “State”).  Second, Plaintiffs named three individuals: Kristopher R. Rinehart (“Rinehart”), Tyler Martin (“Martin”), and Anthony L. Davis (“Davis”) (collectively, the “Individual Defendants”). 

            The basic facts appear to be undisputed: Mattera and the Studio are longtime licensors and franchisors of martial arts studios.  Plaintiffs have offered and sold two different business models within California, franchises, which are registered with the State in accordance with the California Franchise Investment Law (the “CFIL”), and licenses, which are not.  In January 2022, the State issued a citation alleging 184 violations of the CFIL and seeks disgorgement in excess of $2 million.  Administrative proceedings have begun, and the parties are conducting discovery.  The hearing was noticed for September 19, 2022, through October 14, 2022, but Plaintiffs have requested a continuance. 

            On May 26, 2022, Plaintiffs filed a civil complaint against the State and the Individual Defendants, and Plaintiffs filed a first amended complaint on June 10, 2022.  Plaintiffs seek two remedies against the State: (1) A declaration that the State has no authority to prosecute Plaintiffs under California Corporations Code section 31406; and (2) A temporary restraining order, as well as preliminary and permanent injunctions, prohibiting the State from proceeding with an administrative hearing. 

            Plaintiffs filed an ex parte application for a temporary restraining order, which the parties stipulated to treat as a noticed motion for a preliminary injunction.  The Court held a hearing on the motion on June 30, 2022, and denied the motion.  The Court found that Plaintiffs should have exhausted their administrative remedies and then sought a writ of administrative mandamus, per Code of Civil Procedure section 1094.5 and Government Code section 11523.  The Court also found that Plaintiffs had no legal authority for their causes of action against the State.

            Based upon the foregoing, the Court set the following hearings for August 29, 2022: (1) Order to show cause why this case should not be dismissed, based upon the Court’s order of June 30, 2022; (2) A case management conference; and (3) A motion to disqualify the Individual Defendants’ counsel.  On July 5, 2022, Plaintiffs dismissed the Individual Defendants with prejudice. 

            Plaintiffs have appealed the Court’s ruling on their motion for a preliminary injunction and argue that the Court must stay these proceedings under Code of Civil Procedure section 916(a).  Plaintiffs’ counsel cites Varian Medical Systems, Inc. v. Delfino (2005) 35 Cal.4th 180.  The Court is baffled by this citation because the case stands for the opposition proposition:

            [A]n appeal from the denial of a preliminary injunction does not stay further trial court proceedings on the merits.  Because the injunction amounts to a mere preliminary or interlocutory order to keep the subject of the litigation in status quo pending the determination of the action on the merits the affirmative or reversal of its denial does not and cannot eliminate the need for additional proceedings on the merits.  Section 916 therefore does not automatically stay such proceedings.

(Id., p. 965-966, citations and internal quotations omitted.)  Therefore, the Court is not required to stay this case. 

            The Court’s order of June 30, 2022, effectively resolves the case on the merits, because the Court found this action is untenable as a matter of law.  The Court found that Plaintiffs should have exhausted their administrative remedies and then sought a writ of administrative mandamus, per Code of Civil Procedure section 1094.5 and Government Code section 11523.  The Court also found that Plaintiffs had no legal authority for their causes of action against the State.  Therefore, the Court dismisses this case without prejudice to Plaintiffs seeking a writ of administrative mandamus or any other remedies following the conclusion of the administrative case.   

CONCLUSION AND ORDER

            The Court orders as follows:

            1.         The Court denies Plaintiffs’ request for a stay.

            2.         The Court dismisses this case without prejudice. 

            3.         The Court’s clerk shall provide notice and file proof of such with the Court.