Judge Stephen I. Goorvitch, Case Number: 24STCV03450, Date: 2025-03-25 Tentative Ruling

Judge: Stephen I. Goorvitch, Case: 24STCV03450, Date: 2025-03-25 Tentative Ruling

THE COURT WILL NOT BE CALLING THIS MATTER.

THE HEARING WILL BE TAKEN OFF-CALENDAR AND THIS ORDER WILL ISSUE.

Plaintiffs filed an ex parte application for appointment of a provisional director pursuant to Corporations Code section 308(a). Defendants oppose the ex parte application. The court decides this ex parte application in chambers, without a hearing, per Code of Civil Procedure section 166(a)(1).

As an initial matter, ex parte applications are reserved for exigent circumstances. Accordingly, an ex parte application must be accompanied by “an affirmative factual showing in a declaration containing competent testimony based on personal knowledge of irreparable harm, immediate danger, or any other statutory basis for granting relief ex parte.” (Cal. Rules Court rule 3.1202(c).) Plaintiffs articulate no facts suggesting that appointment of a provisional director is so urgent that they could not have filed a noticed motion. Indeed, Plaintiffs’ concern is that the 35 restaurants at issue will lose over $1 million in 2025. There is no evidence that these losses will bankrupt the parties’ joint business venture within the time it would take to hear a noticed motion. Therefore, the ex parte application is denied on this basis alone.[1]

Plaintiffs’ ex parte application is also denied on the merits. California Corporations Code section 308 states in relevant part:

If a corporation has an even number of directors who are equally divided and cannot agree as to the management of its affairs, so that its business can no longer be conducted to advantage or so that there is danger that its property and business will be impaired or lost, the superior court of the proper county may, notwithstanding any provisions of the articles or bylaws and whether or not an action is pending for an involuntary winding up or dissolution of the corporation, appoint a provisional director pursuant to this section.

(Corp. Code § 308(a).) Plaintiffs do not satisfy this requirement. The parties have agreed on all aspects of the sale of the 35 restaurants except for one decision:

1. Whether the proceeds of the sale should be distributed equally to the parties in accordance with their ownership interests, per Corporations Code section 2004 and because the parties will incur tax liabilities upon the sale, as argued by Defendants; or

2. Whether the proceeds should be held in escrow until the litigation has concluded, as argued by Plaintiffs, in the event they prevail in the litigation, in which case they would be entitled to all of the proceeds.

This is not the type of deadlock warranting a provisional director, at least, not at this stage (and certainly not by way of ex parte application). The court is not convinced that the parties have explored all potential resolutions or that the situation is as dire as portrayed by Plaintiffs. For example, it is unclear why Plaintiffs cannot agree to distribute the proceeds of the sale equally and why Defendants cannot agree to permit Plaintiffs to amend their complaint to seek these damages in the litigation, i.e., in the event they obtain specific performance.

1. The court decides this ex parte application in chambers, without a hearing, per Code of Civil Procedure section 166(a)(1).

3. The court denies Plaintiffs’ ex parte application for a provisional director without prejudice to filing a noticed motion if Plaintiffs develop a sufficient factual record to support the motion.

4. The court orders the parties to meet-and-confer on whether they can resolve this dispute by agreeing to distribute the proceeds of the sale equally and stipulating that Plaintiffs may amend the complaint to recover these damages in the litigation.

[1] Defendants reference “a 53-paragraph declaration from Plaintiff Gill attaching over two hundred pages of exhibits.” This declaration was never filed with the court and does not appear on the docket.