Judge: Stephen I. Goorvitch, Case: 23STCV17767, Date: 2024-05-01 Tentative Ruling
Case Number: 23STCV17767 Hearing Date: May 1, 2024 Dept: 82
Michael Rubin, et
al. v. Jack Rubin & Sons, Inc.
Case No.
23STCV17767
Motion for
Appointment of a Receiver
On
September 13, 2023, Plaintiffs Michael Rubin and Staci Rubin (collectively,
“Plaintiffs”) filed this action against Jack Rubin & Sons, Inc. (“JRS”) and
Bruce Rubin, among others. Plaintiff
Michael Rubin and his father, Defendant Bruce Rubin, are the sole shareholders
of JRS. A dispute arose, and before this
action was filed, the parties attended mediation, where they reached a
preliminary settlement agreement. Per
the terms of the agreement, the company would purchase Michael Rubin’s interest
in JRS. Plaintiffs allege that
Defendants have breached the buyout settlement agreement.
Plaintiffs
filed an ex parte application for a receiver over JRS, which the court
(Beckloff, J.) treated as a noticed motion.
On November 17, 2023, the parties submitted a stipulation to continue
the hearing on Plaintiffs’ motion for appointment of a receiver. The parties advised the court that they had
selected three evaluators to perform a valuation of JRS, which would commence
shortly. The court held a hearing on
March 8, 2024, and found that “a full-purpose receive for JRS is unnecessary
here. From the court’s perspective, the
issue is how to best effectuate the evaluation process to facilities the
parties’ completion of the [buyout settlement agreement].” (Court’s Order, dated March 8, 2024, at 3.) The court contemplated a limited receiver for
the purpose of producing valuation records to the appraisers. However, the court found:
[T]he 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.)
(Court’s Order, dated March 8, 2024, at 3.) The court ordered the parties to address
whether all necessary data has been provided to the appraisers and related
issues. (Ibid.) The court ordered:
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.
(Court’s Order, dated March 8, 2024, at 4.) The parties did not comply with Judge
Beckloff’s order. Instead, Defendants’
counsel filed a status report on April 24, 2024; Plaintiff’s counsel filed a
status report on April 26, 2024; and Defendants’ counsel filed another status
report on April 30, 2024.
As an
initial matter, Defendants argue that the court should deny this motion because
the parties’ settlement agreement purportedly provides the settlement judge “exclusive
jurisdiction to decide all disputes and issues arising from the parties’
settlement.” (See Defendants’ Supplement
to Status Report, dated April 30, 2024, p. 4:7-8.) The settlement agreement merely states: “Dispute
Resolution Process: Hon. Roy L. Paul will decide any dispute / issue that the
parties cannot agree on; his decision will be binding.” (Declaration of Anita Wu, dated February 26,
2024, § 5.) The scope of this provision
is unclear. It is unclear whether Judge
Paul merely has authority to resolve any dispute over a term of the agreement
or whether his authority extends to appointing a receiver to effectuate the
valuation. The court notes that Judge
Beckloff previously suggested that he may appoint a limited receiver, suggesting
this provision of the parties’ settlement agreement does not apply to this
dispute.
Reaching
the merits, Defendants’ valuation expert, Thomas J. Reck, submitted a
supplemental declaration, dated April 24, 2024, stating that there are
discrepancies between the internal records and the tax records for 2018 to
2021. (Supplemental Declaration of
Thomas J. Reck, ¶ 12.) However, he
states: “Other than the reconciliation issues for 2018-2021 (which I do not
believe would be assisted or resolved by the appointment of a receiver), the few
document requests which have not been completed to [Plaintiff’s valuation
expert’s] satisfaction should be easily resolvable without the need for court
intervention.” (Id., ¶ 25.) Not only does Reck admit that there are
documents which have not yet been provided, he articulates no deadline for
doing so. Plaintiffs’ expert, Kyle
Andersen of JS Held, identifies this as a problem: “JS Held insisted on the valuators
reaching a date specific where all documents would be produced. Multiple times in multiple ways, Mr. Reck
opposed a date specific.” (Declaration
of Kyle Andersen, ¶ 38.) Andersen
states: “[T]he valuators do not have the requisite records needed to make a
fair valuation. The valuators have asked
repeatedly for records that are customarily kept by a business and are
generally easily accessible.” (Id., ¶
40.) For example, according to Plaintiff’s
counsel, Plaintiffs and JS Held have not received financial records for the
year 2023. (Declaration of Mark S. Eisenberg,
¶ 7.) According to Plaintiff’s counsel,
JRS has produced “some but not all of JRS’s financial records, from the period
2016 through 2022.” (Ibid.)
The court
notes that an inordinate amount of time has passed without a resolution. The parties signed the settlement agreement
on March 9, 2023. The agreement provided
that “[a]ppraisals [shall] be completed within 60 days unless information is
requested that cannot be provided within that timeframe.” (Declaration of Anita Wu, dated February 26,
2024, § 1.) It is approximately one year
past the deadline, and Defendants articulate no good cause for this delay.
OPTION
#1
Based
upon the foregoing, the court orders as follows:
1. Good cause having been shown, the court
grants Plaintiff’s motion for a receiver.
The role of the receiver is limited to gathering and producing valuation
records to the three valuation experts.
2. The parties shall meet-and-confer concerning
the identity of an appropriate receiver.
3. If the parties agree on a receiver,
they shall file a stipulation and proposed order. If the parties do not agree on a receiver,
they shall each file a list of up to three receivers who might be appropriate. If the parties fail to do so, the court will
select a receiver.
4. Plaintiff’s counsel shall provide notice
and file proof of service with the court.
OPTION
#2
Based upon
the foregoing, the court orders as follows:
1. JRS shall provide all remaining
documents requested by JS Held and/or CBIZ on or before __________, 2024. If JRS is unable to do so, Mr. Reck or JRS’s person
most qualified shall provide a declaration that complies with Code of Civil
Procedure section 2031.230
2. A representative of JS Held (and, if
necessary, CBIZ) shall file a declaration on or before _______, 2024. The declaration shall state in clear and concise
language what requested documents have not been produced by JRS.
3. The hearing on Plaintiff’s motion is
continued to _________, 2024, at 9:30 a.m.
4. Plaintiff’s counsel shall provide
notice and file proof of service with the court.