Judge: Wesley L. Hsu, Case: 22PSCV01156, Date: 2023-04-13 Tentative Ruling

Case Number: 22PSCV01156    Hearing Date: April 13, 2023    Dept: L

Plaintiff Michael Inclan’s, individually and derivatively on behalf of A.A. & M. Auto Group, LLC Motion for an Order to Show Cause Re Contempt Against Defendant Albert Garcia is GRANTED [see below].

Background   

Plaintiff Michael Inclan, individually and derivatively on behalf of A.A. & M. Auto Group, LLC (“Plaintiff”) alleges as follows: A.A. & M. Auto Group, LLC dba Al’s Automotive (“Company”) was organized for the purpose of operating an automotive repair and services in El Monte for customers in the community and under a contract with Enterprise- Rent-A-Car (“Enterprise”). Albert Garcia (“Albert”) is Company’s majority member and holds a 60% interest in same; Albert’s brother, Andrew Garcia (“Andrew”), and Plaintiff each hold a 20% interest. Albert has been using Company funds to pay his own personal expenses, has failed and refused to purchase Worker’s Compensation Insurance and has failed to pay all local, state, and federal taxes for the Company. Plaintiff presented a letter to Albert on September 19, 2022, demanding therein that Albert return the funds he took from the Company; in response, Albert changed all the passwords, blocked Plaintiff from accessing the Auto Integrate portal used by Company to process vehicles needing repair from Enterprise and suspended Plaintiff from work without pay pending an “ongoing investigation” with Enterprise. Plaintiff seeks an involuntary dissolution of Company.

On October 4, 2022, Plaintiff filed a complaint, asserting causes of action against Albert, Company and Does 1-100 for:

1.      Breach of Fiduciary Duty

2.      Breach of Contract

3.      Fraud

4.      Accounting

5.      Conversion

6.      Involuntary Dissolution

7.      Member Derivative Action

On December 6, 2022, an Order to Show Cause Re Preliminary Injunction was granted.

A Case Management Conference and Hearing on Motion for an Order to Show Cause Re: Contempt are set for April 13, 2023.

Legal Standard

“The following acts or omissions in respect to a court of justice, or proceedings therein, are contempts of the authority of the court:. . . (5) Disobedience of any lawful judgment, order, or process of the court.” (Code Civ. Proc., § 1209, subd. (a)(5).)

“When the contempt is not committed in the immediate view and presence of the court, or of the judge at chambers, an affidavit shall be presented to the court or judge of the facts constituting the contempt, or a statement of the facts by the referees or arbitrators, or other judicial officers.” (Code Civ. Proc., § 1211, subd. (a).)

“The facts essential to jurisdiction for a contempt proceeding are (1) the making of the order; (2) knowledge of the order; (3) ability of the respondent to render compliance; (4) wilful disobedience of the order.” (In re Liu (1969) 273 Cal.App.2d 135, 140 [internal quotation marks and citation omitted].)

“When the contempt is not committed in the immediate view and presence of the court or judge, a warrant of attachment may be issued to bring the person charged to answer, or, without a previous arrest, a warrant of commitment may, upon notice, or upon an order to show cause, be granted; and no warrant of commitment can be issued without such previous attachment to answer, or such notice or order to show cause.” (Code Civ. Proc., § 1212.)

Discussion

Plaintiff moves the court for an order requiring Albert to show cause as for civil contempt for Albert’s failure to comply with this court’s October 7, 2022 and January 6, 2023 orders.

The court determines that the charging affidavit is sufficient to issue an Order to Show Cause Re: Contempt. On October 7, 2022, Judge Peter Hernandez granted Plaintiff’s ex parte application for a temporary restraining order and scheduled an Order to Show Cause Re: Preliminary Injunction for December 6, 2022; the “Order on Ex Parte Application for Temporary Restraining Order and Order to Show Cause re Preliminary Injunction” filed October 10, 2022 provided, in relevant part, as follows:

            “IT IS HEREBY ORDERED:

1.      That a Temporary Restraining Order is issued enjoining Defendant,

ALBERT GARCIA, as an individual, and as a member of A. A. & M. AUTO

GROUP, LLC, a California Limited Liability Company dba AL’S

AUTOMOTIVE, from utilizing, removing or otherwise accessing any corporate

funds from the company bank account maintained at EastWest Bank ending in

7685 for any reason is granted. . .

2.      That the unanimous consent by all members of A. A. & M. Auto Group,

LLC, a California Limited Liability Company dba Al’s Automotive is required

for all expenses paid on behalf of and for the company from the company bank

account maintained at EastWest Bank ending in 7685 . . .” (Cosgrove Decl., ¶ 3,

Exh. 1.)

Notwithstanding the above, Albert continued to use the EastWest Bank account ending in 7685 in October and November 2022 and continued to unilaterally use the Company funds held in same without Plaintiff’s knowledge or consent of the members. (Inclan Decl., ¶¶ 6-7, Exh. 2.) Plaintiff was in the shop daily and made himself available so that Albert could seek unanimous consent for the payment of Company expenses and also informed Albert that he would be happy to give his consent via email so there was  something in writing showing his consent; however, Albert never sought Plaintiff’s approval. (Id., ¶ 7.)

On November 21, 2022, Plaintiff’s counsel Lauren R. Cosgrove (“Cosgrove”) sent a letter to Albert’s counsel, Omero Banuelos (“Banuelos”) to inform Banuelos of Albert’s violation of the court’s October 7, 2022 order. (Cosgrove Decl., ¶ 6, Exh. 3.) Cosgrove did not hear from Banuelos until November 22, 2022, when Banuelos filed his clients’ opposition to the Order to Show Cause Re: Preliminary Injunction. (Id., ¶ 7.)

On December 6, 2022, the court granted the Order to Show Cause Re: Preliminary Injunction. On January 6, 2023, the “Order Granting Plaintiff’s Motion for Preliminary Injunction” was filed; said order provided, in relevant part, as follows:

“IT IS ORDERED that during the pendency of this action the above-named

defendants, and each of them, and their officers, agents, employees,

representatives, and all persons acting in concert or participating with them, are

enjoined and restrained from engaging in, committing, or performing, directly or indirectly, by any means whatsoever, any of the following acts:

1. That a preliminary injunction is issued enjoining Defendant, ALBERT GARCIA,

as an individual, and as a member of A. A. & M. AUTO GROUP, LLC, a

California Limited Liability Company dba AL’S AUTOMOTIVE, from utilizing, removing or otherwise accessing any corporate funds from the company bank

account maintained at EastWest Bank ending in 7685 for any reason.

2. That the unanimous consent by all members of A. A. & M. Auto Group, LLC, a California Limited Liability Company dba Al’s Automotive is required for all

expenses paid on behalf of and for the company from the company bank account maintained at EastWest Bank ending in 7685.” (Id., ¶ 8, Exh. 4.)

After the December 6, 2022 hearing, Plaintiff discovered that Albert continued using Company money to unilaterally pay Company expenses, without his knowledge or consent. (Inclan Decl., ¶ 8, Exh. 5.) Albert began sending Plaintiff vague daily expense and labor reports showing payments towards expenses the Company had already paid for. (Id., ¶ 9). Over the next several weeks, Albert’s reports became more vague and Albert still refused to seek Plaintiff’s refusal before using Company funds to pay Company expenses. (Id., ¶ 10.) On or around December 2022, Plaintiff told Albert that he could not approve the daily expense and labor reports because Albert was providing him with expenses that had already paid; as such, there was nothing for Plaintiff to approve. (Id., ¶ 11.) Plaintiff also spoke with both other members of the Company in an attempt to obtain and encourage unanimous consent for all Company expenses, but he was ignored and his efforts were rebuffed. (Id., ¶ 12). Albert has also changed the username and password on all Company documents, invoices and Company emails so that Plaintiff is unable to access the Company’s financial information and only able to discover the extent to which Albert has violated the court’s orders one month after the fact, when Plaintiff is able to access the Company’s online banking statements. (Id.)

Cosgrove informed Banuelos on several occasions that Albert was violating the court’s orders but received no meaningful response from Banuelos. (Cosgrove Decl., ¶¶ 10 and 12.) Albert has apparently increased his weekly draw from $900.00 to $1,300.00 (Inclan Decl., ¶ 14, Exh. 6). Further, Plaintiff has learned from the January 2023 Company bank statement that Albert used Company funds to make donations towards his family members’ high school sports teams. (Id., ¶ 15, Exh. 6.)

Albert, in opposition, claims that the bank records reflect that, while expenses were made on behalf of the Company, they were non-discretionary. This is irrelevant to Albert’s violation of the court’s orders. Albert further argues that Plaintiff has violated the court’s orders by taking allegedly unauthorized draws of $700.00. Again, this is irrelevant to Albert’s violation of the court’s orders.

The motion, then, is granted. The court sets an Order to Show Cause Re: Contempt for May 24, 2023, at 10:00 a.m. Live testimony will be taken. Plaintiff’s request for attorney’s fees and costs for the filing of this motion is continued to the same date and time.