2013-00151724-CU-MC

CA Military Dept vs. The CA State Military Museum Foundation

Nature of Proceeding: Motion for Preliminary Injunction

Filed By: Killeen, John W.

The Order to Show Cause is DISCHARGED, the temporary restraining order is
DISSOLVED, and Plaintiff California Military Department’s (“Department”) motion for
preliminary injunction is DENIED as follows:

This is an action for declaratory relief, injunctive relief and an accounting. The
Department alleges it uses taxpayer funds to pay Defendant The California State
Military Museum Foundation (“Foundation”) to operate the Department’s museum.
The museum is the State’s repository for military artifacts, equipment, documents,
photographs and other materials relating to California and its National Guard. The
Department is a state agency, and the Foundation is a non-profit, public benefit
corporation.

The basis for the relationship between the Department and the Foundation is statutory.
Section 179 of the California Military and Veterans Code provides, in relevant part:

“(b) The Adjutant General shall enter into an operating agreement with
the California State Military Museum Foundation, formerly known as the
California National Guard Historical Society, an existing California
nonprofit public benefit corporation that is tax exempt under Section 501
(c)(3) of the Internal Revenue Code. Under the operating agreement with
the Adjutant General, the foundation shall operate the California State
Military Museum and Resource Center in coordination with the California
State Military Reserve’s California Center for Military History. The
foundation shall develop, administer, interpret, and manage museum
historical programs and related public services, and acquire and manage
funding for museum programs and services.

[…]

(g)(1) The Adjutant General or the California State Military Museum
Foundation may solicit, receive, and administer donations of funds or
property for the support and improvement of the museum. Any grants or
donations received may be expended or used for museum purposes.

The Department and the Foundation contractually supplement terms of their
relationship. (See Compl., Exh. A.) The operative contract contemplates the
Foundations’ ownership of some museum property. The Foundation has operated the museum for more than 40 years.

Through the Adjutant General, the Department directed its Inspector General to
inspect museum facilities in September 2013. The point of the inspection allegedly
was to assess the sufficiency of controls over incoming and outgoing federal and state
property, determine if inventories were being conducted properly, determine if
operating procedures were in compliance with applicable regulations, and determine if
sensitive items were properly secured and inventoried in accordance with applicable
legal rules. (See Moving Memo. at 2:22-3:10.) The Department alleges that the
Foundation prevented the Inspector General from performing these tasks. According
to the Department, in the course of barring the Inspector General, the Foundation
claimed that it owns most of the property in the museum.

The Foundation counters that the plan was for it to conduct a joint inventory of
museum properties with the Department. (See Nielsen Decl., ¶ 2.) The Foundation
asserts that the Department unilaterally halted the joint inventory and apologized for
doing do. (See Palumbo Decl., ¶¶ 8-10.) This lawsuit followed.

The Department alleges the Foundation is soliciting and accepting donations on behalf
of the taxpayer-funded museum but is asserting that donated items become property
of the Foundation. The Department further alleges that pistols, rifles, machine guns
and anti-tank weapons are among the donated items. In its First Cause of Action for
Declaratory Relief, the Department prays for declarations of the following rights/duties:

“a. The Department and the Adjutant General possess title, command,
and control of all Museum property, which includes but is not limited to all
artifacts donated to the Museum by third parties and all weapons and
vehicles in the Museum’s possession.

b. ‘Foundation property’ be clearly delineated as consisting only of
property used for the administrative work of the Foundation, and that
‘Foundation property’ not consist of any artifacts donated to the Museum
by third parties or artifacts purchased using money donated by third
parties.

c. The Department and the Adjutant General possess title, command,
and control of all Museum finances, which includes but is not limited to
the possession, acquisition, and disbursement of Museum funds, as well
as all financial records relating to Museum operations.

d. The Adjutant General possesses the authority to designate General
James Gabrielli as a voting member of the Foundation’s Board of
Directors.”

(Compl., ¶ 29.)

On September 30, 2013, the Honorable Steven H. Rodda entered an order temporarily
restraining the Foundation from interfering with the Inspector General’s investigation,
prohibiting the Foundation from concealing or transferring museum property, and
making any museum property unavailable to the Inspector General. The Foundation
did not oppose the part of the TRO aimed at enabling the Inspector General to perform
the investigation. Judge Rodda denied other relief that the Department had sought by way of a TRO.

Given the nature of the items being donated, its allegation that the Foundation does
not acquire ownership of any museum items, and its allegation that the Foundation has
obstructed the Inspector General, the Department now moves for an interim order
enjoining the Foundation as follows:

a. Requiring the Foundation and its agents, employees, members, and
associates to allow the Department full and unrestricted permanent
access to all property on every Museum installation, including but not
limited for the purpose of accounting for all the Museum’s historical
artifacts;

b. Preventing the Foundation and its agents, employees, members, and
associates from interfering with any investigation, inspection, audit, or
inventory of the Department’s Inspector General;

c. Preventing the Foundation and its agents, employees, members, and
associates from selling, concealing, transferring, or otherwise disposing
of any Museum or foundation property or making any Museum or
Foundation property unavailable for inspection by the inspector general
without the permission of the Department;

d. Preventing the Foundation and its agents, employees, members, and
associates from interfering with any action taken by the Department or
the Adjutant General to acquire, store, maintain or dispose of any
Museum property;

e. Requiring the Foundation and its agents, employees, members, and
associates to allow the Department full and unrestricted access to all
records and property of the Museum;

f. Preventing the Foundation and its agents, employees, members, and
associates from dispersing, concealing, or otherwise dissipating any
funds of the Museum without permission of the Department.

g. Requiring the Foundation to comply with all provisions of Military and
Veterans Code Section 179 and the Memorandum of Agreement, and all
regulations incorporated therein.

In deciding whether to enter a preliminary injunction, the court must evaluate two
interrelated factors: (1) the likelihood that the applicant will prevail on the merits at trial,
and (2) the interim harm that the applicant will likely suffer if preliminary relief is not
granted, as compared to the likely harm that the opposing party will suffer if the
preliminary injunction issues. (See, e.g., Langford v. Superior Court (Gates) (1987) 43
Cal.3d 21, 28.) One of these two factors may be accorded greater weight than the
other depending on the applicant’s showing. (See Commons Cause v. Bd. of
Supervisors (1989) 49 Cal.3d 432, 447.)

First, the court notes that there is little if any evidence of imminent, irreparable injury
warranting interim injunctive relief. (See CCP § 526 [enumerating grounds upon which
injunctive relief generally may be granted]; see also Korean Philadelphia Presbyterian
Church v. California Presbytery (2000) 77 Cal.App.4th 1069, 1084, [“An injunction
cannot issue in a vacuum based on the proponents’ fears about something that may
happen in the future.[..i]t must be supported by actual evidence that there is a realistic
prospect that the party enjoined intends to engage in the prohibited activity”].) The
Department argues that, because the Foundation is charged with the care of firearms,
the present motion presents a public-safety exigency. The evidence tends to show,
however, that museum firearms and other artifacts are inspected daily, secured,
maintained and inventoried pursuant to applicable regulations, and, in the case of
firearms, rendered inoperable. (See Palumbo Opp. Decl. of 10/31/13, ¶¶ 11-20.) In
addition, there is no evidence of recent unlawful uses of museum firearms. (See id.,
¶¶ 1, 8 [no security threats at the museum since at least February 2009]; id. ¶ 9
[Inspector Generals’ physical security inspection of October 2013 did not disclose any
security deficiencies].)

Similarly, the Department contends that the Foundation is misleading the public by
soliciting donations without disclosing that donated items will become property of the
Foundation. (See Sebby Decl., 6.) Yet, assuming that the Department’s contention
has merit, there is no evident imminent and irreparable injury to the Department if this
issue is resolved at trial or other final disposition. In other words, if the donations are
property of the Department, then any transfers of property or related orders can be
made in the normal course of the litigation.

The Department also suggests that a preliminary injunction is needed to prevent the
Foundation from concealing or transferring any property the title to which is disputed.
Yet, the Department essentially speculates that concealments and transfers of this
kind have taken place or are about to take place. The fact that there is a dispute over
ownership of museum property does not persuade the court that the Foundation plans
to sell or otherwise transfer museum property to subvert any prospective judicial
determination, if any, that title to museum property rests with the Department.

The court also notes the Department’s contention that the Foundation has failed to
perform required audits. There is some evidence that the Foundation is currently
completing an audit, (Palumbo Opp. Decl. of 10/31/13, ¶ 10), but even if the
Foundation were in dereliction of its auditing duties, the court is not persuaded that
such a failure necessitates an interim order requiring the Foundation to perform any
audit before this matter proceeds to trial or other disposition.

The court agrees with the Department that it is reasonably likely to prevail on the
merits. (Note, however, that the parties’ current contract appears to contemplate the
Foundation’s ownership of some historical property.) However, there is almost a
complete absence of evidence that it will suffer any interim harm if the court does not
enter the requested preliminary injunction. In contrast, the court agrees that entry of
such an injunction is likely to burden the Foundation in its operation of the museum.
Thus, the court concludes that that balance of equities tip in the Foundation’s favor,
and that the motion should be denied.

Although the instant case appears to present a genuine dispute over property rights, it
does not present any exigency or other basis upon which to grant preliminary
injunctive relief.

The court need not rule and does not rule on the Department’s objections to evidence.
The court has only relied on admissible evidence in making its ruling.