Case Number: 19STCV13924 Hearing Date: June 18, 2019 Dept: 85

Inhance Digital Corporation v. Maziar Farzam, et al., 19STCV13924

Tentative decision on (1) motion to seal: denied; (2) application for preliminary injunction: granted in part

Cross-Complainant Maziar Farzam (“Farzam”) applies for a preliminary injunction against Cross-Defendants Penn Arthur (“Arthur”) and Ari Kaplan (“Kaplan”), as well as Inhance Digital Corporation (“Inhance” or “the Company”) as a nominal Cross-Defendant.

The court has read and considered the moving papers, opposition,[1] and reply,[2] and renders the following tentative decision.

A. Statement of the Case

1. Complaint

Plaintiff and Cross-Defendant Inhance filed its Complaint on April 22, 2019, alleging causes of action for (1) breach of fiduciary duties, (2) breach of contract, (3) interference with prospective economic relations and, (4) accounting. The Complaint alleges in pertinent part as follows.

After years of working together, the founders of Inhance, Arthur and Farzam are no longer able to do business together for the benefit of the company. In conjunction with the company’s Chief Financial Officer, Kaplan, Arthur made the decision to terminate Farzam as the company’s President and Secretary. To that end, the two have executed shareholders’ resolutions and notified Farzam of their intent.

The catalyst for the dispute with Farzam arose from his insistence that his wife, Michelle Farzam (“Michelle”) be employed by and continue to work for Inhance. Farzam has become autocratic, angry, volatile, and threatening in recent years, creating a culture of fear and hostile work environment. While working at Inhance, Michelle engaged in volatile behavior that was detrimental to Inhance’s culture. She was condescending towards Arthur and consistently undermined his authority. She also berated, ridiculed, and harassed Inhance’s employees regularly, creating a hostile work environment and inducing several employees to quit.

A consultant hired to evaluate Inhance’s company culture confirmed that Michelle’s presence was highly detrimental to the company, and Farzam conceded and reduced the amount of time Michelle spent at the office. Despite this, Inhance has lost many valued employees and had its business disrupted, despite Arthur’s best efforts to resolve the situation.

In February 2019, Michelle began coming to the office every day once again, against Arthur’s wishes. Arthur sent Farzam an email and letter objecting, which induced Farzam to begin a campaign to take over operations of the company to the exclusion of Arthur. Farzam has since made several decisions to that effect, including cutting off Kaplan’s access to Inhance’s bank accounts and attempting to fire Kaplan.

Farzam and Michelle have also expended inordinate amounts of expenses charged to the company over the years, including trips to various locales with luxury accommodations. Farzam also insisted on paying Michelle a salary that is unreasonable and disproportionate to her contributions to the company.

Arthur’s attempts to terminate Michelle have caused Farzam to also begin behaving in an increasingly volatile and abusive manner. Farzam has on various occasions berated and verbally abused Inhance employees, on some occasions threatening physical harm. Farzam’s behavior has been detrimental to Inhance in the form of lost employees and a damaged reputation within the industry.

2. Cross-Complaint

Cross-Complainant Farzam filed his Cross-Complaint on April 29, 2019, alleging causes of action for (1) fraud, (2) breach of written contract, (3) breach of implied covenant of good faith and fair dealing, (4) breach of fiduciary duty (on behalf of Farzam against Arthur), (5) breach of fiduciary duty (on behalf of Inhance against Arthur), (6) breach of fiduciary duty (on behalf of Farzam against Arthur and Kaplan), (7) conversion (on behalf of Farzam), (8) conversion (on behalf of Inhance), (9) accounting, (10) declaratory relief, (11) injunctive relief[3], (12) appointment of receiver, and (13) judicial dissolution. The Cross-Complaint alleges in pertinent part as follows.

Farzam has learned that Arthur and Kaplan have looted Inhance and fraudulently misclassified hundreds of thousands of dollars of these funds as various company expenses. When Farzam discovered this malfeasance and terminated Kaplan, Kaplan and Arthur joined forces and purported to amend the bylaws with the intent to ultimately remove Farzam as President. Arthur also locked Farzam out of Inhance and cut off his access to Inhance’s bank account.

Though Arthur’s position requires him to travel for work, in recent years his travel has become excessive such that he has little to no involvement in the actual operations of Inhance. Arthur does not take a salary but rather a $15,000 dividend twice a month. He has also recently begun taking additional funds to pay his personal expenses. Arthur’s spending appears wildly disproportionate with the income he grosses in shareholder dividends, based on his ownership of expensive cars and his frequent personal trips.

On April 15, 2019, Farzam discovered evidence that Kaplan had been fraudulently entering his own personal expenses as company expenses and was paying off personal credit card debt with company funds. Farzam promptly terminated Kaplan, which prompted Arthur to lock Farzam and Michelle out of the company by cutting off their network access. Farzam’s further investigation revealed that Arthur was also using company expenses to pay off personal credit cards, in excess of $50,000. Further forensic investigation revealed that Arthur and Kaplan have collectively looted in excess of $613,508 of the Inhance’s funds, which represents a substantial misappropriation of funds and assets carrying likely adverse tax consequences for Inhance.

3. Course of Proceedings

On April 26, 2019, Judge Beckloff, sitting in Department 86, denied Plaintiff Inhance’s ex parte application for a temporary restraining order (“TRO”) and order to show cause re: preliminary injunction (“OSC”) seeking to restrain Farzam from coming to the office, accessing Inhance’s books and records, or representing himself as an officer of the Company. Judge Beckloff made alternative orders which would be considered by this court on April 30, 2019.

On April 30, 2019, the court denied Farzam’s ex parte application for appointment of a receiver. The court also clarified the continued ex parte application for a TRO/OSC. The parties agreed to a number of mutual restraints which were ordered by the court. The court noted that the only remaining issue for the OSC is an injunction against payments of any kind to Arthur and Kaplan. The parties subsequently stipulated to continue the hearing to the instant date.

B. Motion to Seal

Inhance seeks to seal the Financial Declaration of Arthur in Support of the Opposition to OSC re: preliminary injunction.

1. Applicable Law

CRC Rules 2.550 and 2.551 set forth the standards and procedures for sealing court records.

The rules are derived from the holding in NBC Subsidiary (KNBC-TV), Inc. v. Superior Court, (1999) 20 Cal.4th 1178. Unless confidentiality is required by law, court records are presumed to be open. CRC 2.550(c).

A court may order records sealed only if it expressly finds all of the following: (1) there exists an overriding interest that overcomes the right of public access to the record; (2) the overriding interest supports sealing the record; (3) a substantial probability exists that the overriding interest will be prejudiced if the record is not sealed; (4) the proposed sealing is narrowly tailored; and (5) no less restrictive means exist to achieve the overriding interest. CRC 2.550(d).

As to procedures, CRC 2.551(b) provides: (1) a party requesting that a record be filed under seal must file a noticed motion for an order sealing the record. The motion must be accompanied by a memorandum of points and authorities and a declaration containing facts sufficient to justify the sealing; (2) the party requesting that a record be filed under seal must lodge it with the court under (d) when the motion is made, unless good cause exists for not lodging it. Pending the determination of the motion, the lodged record will be conditionally under seal; (3) if necessary to prevent disclosure, the motion, any opposition, and any supporting documents must be filed in a public redacted version and lodged in a complete version conditionally under seal; (4) if the court denies the motion to seal, the clerk must return the lodged record to the submitting party and must not place it in the case file.

A record filed publicly in the court must not disclose material contained in a record that is sealed, conditionally under seal, or subject to a pending motion to seal. CRC 2.551(c).

The party requesting that a record be filed under seal must put it in a manila envelope or other appropriate container, seal the envelope or container, and lodge it with the court. CRC 2.551(d)(1). The envelope or container lodged with the court must be labeled “CONDITIONALLY UNDER SEAL.” CRC 2.551(d)(2). The party submitting the lodged record must affix to the envelope or container a cover sheet that: (i) contains all the information required on a caption page under rule 201; and (ii) states that the enclosed record is subject to a motion to file the record under seal. CRC 2.551(d)(3).

Upon receipt of a record lodged under this rule, the clerk must endorse the affixed cover sheet with the date of its receipt and must retain but not file the record unless the court orders it filed. CRC 243.2(d)(4).

The Advisory Committee Comment to Rule 2.550 provides that the rules recognize the First Amendment Right of Access to documents used at trial or as a basis of adjudication, but do not apply to records that courts must keep confidential by law.

Before sealing a record, a court must find an “overriding interest” that support the sealing. KNBC-TV, supra, 20 Cal.4th at 1217-1218.

Under appropriate circumstances, such interests may include protection of minor victims of sex crimes from further trauma and embarrassment; privacy interests of a prospective juror during individual voir dire; protection of witnesses from embarrassment or intimidation so extreme that it would traumatize them or render them unable to testify; of trade secrets, protection of information within the attorney-client privilege, and enforcement of binding contractual obligations not to disclose; safeguarding national security, ensuring the anonymity of juvenile offenders in juvenile court; and ensuring the fair administration of justice, and preservation of confidential investigative information. Id. at 1222, fn. 46.

The leading case with respect to sealing orders under CRC 243.1 et seq. is Universal City Studios, Inc. v. Superior Court, (2003) 110 Cal.App.4th 1273.

To determine whether records should be sealed, the court must hold a hearing and expressly find that (i) there exists an overriding interest supporting closure and/or sealing; (ii) there is a substantial probability that the interest will be prejudiced absent closure and/or sealing; (iii) the proposed closure and/or sealing is narrowly tailored to serve the overriding interest; and (iv) there is no less restrictive means of achieving the overriding interest. Universal City Studios, supra, 110 Cal.App.4th at 1279.

2. Analysis

Inhance notes that the Arthur declaration provides an extremely detailed account of his spending in a typical month, including high personal expenses. Arthur Seal Decl. ¶ 2. Arthur asserts that the declaration should be sealed as he has a constitutional right to privacy. Arthur Seal Decl. ¶3. Arthur also argues that Inhance could be irreparably damaged if any of its customers were to decline to do business based on the information regarding his financials. Arthur Seal Decl. ¶4.

The privacy argument is untenable. Arthur has a privacy right and need not submit a declaration in support of Inhance’s opposition at all. But when he voluntarily does so, he comes into court, a public forum, where embarrassing information and humiliating details must be aired as a matter of course. No privacy right protects against the unsealed submission of information such as personal finances or even general health information. A declaration may be sealed only if it would reveal specific information which could cause financial harm or other real damage.

The financial harm to Arthur and Inhance also is untenable. The declaration provides no specific account numbers or other personal information from which Arthur’s identity could be stolen. For damage to Inhance, Plaintiff must show how Arthur’s financial information could be linked to Inhance so that a competitor would obtain advantage. Inhance has not done so.

Paragraphs 3 through 5 refer to Arthur’s family, their health, and the expenses he incurs supporting each family member. There is no overriding interest in sealing these statements. While Arthur includes details about his family members’ health issues, mere embarrassment is insufficient to justify sealing. None of the information would financially harm Inhance or Arthur.

Paragraph 6 details Arthur’s personal credit card debt. Arthur provides no rationale for why this should be sealed other than a speculative argument that Inhance could lose customers who may decline to deal with the Company based on Arthur’s financials. This is insufficient to justify sealing.

Paragraphs 7 and 8 detail Arthur’s payments for his house and cars. There is no overriding interest supporting sealing, and no showing of financial harm to Inhance or Arthur.

Paragraphs 9 through 12 detail Arthur’s assertion that he cannot go without compensation for his services to Inhance; he will be subject to foreclosure on his assets without payment. Arthur also details his total outstanding debts and obligations and provides a summary of his monthly expenses. Ex. 1. Arthur provides no overriding interest justifying sealing of this information other than his speculation that Inhance might lose customers as a result of knowledge of his financials. Again, this speculation is insufficient and mere embarrassment is insufficient to justify sealing.

3. Conclusion

Arthur’s application to seal the Financial Declaration of Penn Arthur is denied. Inhance may either elect to withdraw the declaration or allow it to be filed unsealed. The court will discuss the matter with counsel at the hearing.

C. Preliminary Injunction

Cross-Plaintiff Farzam seeks a preliminary injunction restraining Inhance from making payments of any kind to Cross-Defendants Arthur and Kaplan.

1. Applicable Law

An injunction is a writ or order requiring a person to refrain from a particular act; it may be granted by the court in which the action is brought, or by a judge thereof; and when granted by a judge, it may be enforced as an order of the court. CCP §525. An injunction may be more completely defined as a writ or order commanding a person either to perform or to refrain from performing a particular act. See Comfort v. Comfort, (1941) 17 Cal.2d 736, 741. McDowell v. Watson, (1997) 59 Cal.App.4th 1155, 1160.[4] It is an equitable remedy available generally in the protection or to prevent the invasion of a legal right. Meridian, Ltd. v. City and County of San Francisco, et al., (1939) 13 Cal.2d 424.

The purpose of a preliminary injunction is to preserve the status quo pending final resolution upon a trial. See Scaringe v. J.C.C. Enterprises, Inc., (1988) 205 Cal.App.3d 1536. Grothe v. Cortlandt Corp., (1992) 11 Cal.App.4th 1313, 1316; Major v. Miraverde Homeowners Assn., (1992) 7 Cal.App.4th 618, 623. The status quo has been defined to mean the last actual peaceable, uncontested status which preceded the pending controversy. Voorhies v. Greene (1983) 139 Cal.App.3d 989, 995, quoting United Railroads v. Superior Court, (1916) 172 Cal. 80, 87. 14859 Moorpark Homeowner’s Assn. v. VRT Corp., (1998) 63 Cal.App.4th 1396. 1402.

A preliminary injunction is issued after hearing on a noticed motion. The complaint normally must plead injunctive relief. CCP §526(a)(1)-(2).[5] Preliminary injunctive relief requires the use of competent evidence to create a sufficient factual showing on the grounds for relief. See e.g. Ancora-Citronelle Corp. v. Green, (1974) 41 Cal.App.3d 146, 150. Injunctive relief may be granted based on a verified complaint only if it contains sufficient evidentiary, not ultimate, facts. See CCP §527(a). For this reason, a pleading alone rarely suffices. Weil & Brown, California Procedure Before Trial, 9:579, 9(ll)-21 (The Rutter Group 2007). The burden of proof is on the plaintiff as moving party. O’Connell v. Superior Court, (2006) 141 Cal.App.4th 1452, 1481.

A plaintiff seeking injunctive relief must show the absence of an adequate damages remedy at law. CCP §526(4); Thayer Plymouth Center, Inc. v. Chrysler Motors, (1967) 255 Cal.App.2d 300, 307; Department of Fish & Game v. Anderson-Cottonwood Irrigation Dist., (1992) 8 Cal.App.4th 1554, 1565. The concept of “inadequacy of the legal remedy” or “inadequacy of damages” dates from the time of the early courts of chancery, the idea being that an injunction is an unusual or extraordinary equitable remedy which will not be granted if the remedy at law (usually damages) will adequately compensate the injured plaintiff. Department of Fish & Game v. Anderson-Cottonwood Irrigation Dist., (1992) 8 Cal.App.4th 1554, 1565.

In determining whether to issue a preliminary injunction, the trial court considers two factors: (1) the reasonable probability that the plaintiff will prevail on the merits at trial (CCP §526(a)(1)), and (2) a balancing of the “irreparable harm” that the plaintiff is likely to sustain if the injunction is denied as compared to the harm that the defendant is likely to suffer if the court grants a preliminary injunction. CCP §526(a)(2); 14859 Moorpark Homeowner’s Assn. v. VRT Corp., (1998) 63 Cal.App.4th 1396. 1402; Pillsbury, Madison & Sutro v. Schectman, (1997) 55 Cal.App.4th 1279, 1283; Davenport v. Blue Cross of California, (1997) 52 Cal.App.4th 435, 446; Abrams v. St. Johns Hospital, (1994) 25 Cal.App.4th 628, 636. Thus, a preliminary injunction may not issue without some showing of potential entitlement to such relief. Doe v. Wilson, (1997) 57 Cal.App.4th 296, 304. The decision to grant a preliminary injunction generally lies within the sound discretion of the trial court and will not be disturbed on appeal absent an abuse of discretion. Thornton v. Carlson, (1992) 4 Cal.App.4th 1249, 1255.

A preliminary injunction ordinarily cannot take effect unless and until the plaintiff provides an undertaking for damages which the enjoined defendant may sustain by reason of the injunction if the court finally decides that the plaintiff was not entitled to the injunction. See CCP §529(a); City of South San Francisco v. Cypress Lawn Cemetery Assn., (1992) 11 Cal.App.4th 916, 920.

2. Statement of Facts

a. Cross-Complainant’s Evidence

Inhance is a digital marketing company which averages about $17 million in annual revenues. Farzam Decl. ¶3. Farzam is the co-founder of Inance, owns 48% of its outstanding shares, and is a member of the Board of Directors. Farzam Decl. ¶4, Ex. A. Farzam is the President, Secretary, and interim Chief Operating Officer (“COO”) of Inhance. Farzam Decl. ¶4. Prior to April 23, 2019, Farzam oversaw the day-to-day management of Inhance. Farzam Decl. ¶4. Farzam also is the number one salesperson at the business. Farzam Decl. ¶5.

Arthur is the other member of the Board of Directors and owns 48% of the outstanding shares of Inhance. Farzam Decl. ¶8, Ex. A. Arthur is the Chief Executive Officer (“CEO”) of Inhance and is primarly responsible for sales. Farzam Decl. ¶8. Arthur’s job requires him to travel for work, although there is an expectation that he work from the office and attend weekly meetings. Over the past few years, Arthur’s travel has become excessive such that he is rarely in the office and has little to no involvement in the actual operations of Inhance. Farzam Decl. ¶8.

Arthur does not take a salary with Inhance. Instead he takes a $15,000 “draw” or dividend twice a month. Farzam estimates Arthur grosses approximately $360,000 in income from the Company, although Farzam recently learned Arthur has taken additional sums from the Company, without consent, to pay his personal expenses and these expenses were disguised on the Company’s accounting records as Company expenses. Farzam Decl. ¶9.

Arthur’s wife does not work. He has three children, two of whom are grown adults, and all live with him in a condominium in West Hollywood. Arthur, his wife, and two of his children drive expensive cars. Arthur frequents high end restaurants and takes frequent personal trips. Arthur travels more than is necessary for business and rare makes appearances at Inhance. Arthur started a scotch and whiskey collection. Arthur has confided in Farzam certain facts indicating he has trouble managing his money and has a personal tax liability of $300,000 to the IRS as of 2016. Farzam Decl. ¶9

In 2015, Arthur and Farzam agreed to exit the industry and sell the Company. They agreed to attempt to maximize their return by working to increase Inhance’s value, and hired Kaplan for his experience in mergers and acquisitions. Farzam Decl. ¶15. Kaplan is a certified public accountant (“CPA”). Kaplan was given the title of CFO of Inhance. Kaplan holds 4% of the outstanding shares of the Company. Farzam Decl. ¶10, Ex. A.

Between 2015 and 2018, Inhance failed to secure a viable agreement from any potential buyers and began struggling to pay its employees. This resulted in a $3.5 million IRS tax liability, and tax liens assessed against Farzam and Arthur for the trust portion of the liability, which is comprised of employee withholdings that had not been paid to the IRS. Farzam Decl. ¶17. As a result, Farzam is now personally liable for ensuring approximately half of the $3.5 million owed to the IRS is paid in in full. In addition, the Company’s former bank, Montecito Bank & Trust called its $1.2 million line-of-credit against the Company because Inhance ran a recurring deficit. Farzam Decl. ¶¶ 15-17. On March 29, 2019, Inhance entered in to an agreement with the IRS to make payments on its $3.5 million in tax liability. Farzam Decl. ¶23, Ex. E.

Farzam and Michelle personally loaned the Company $324,623.44 to cover various shortfalls between 2015 and 2018. In addition, they accumulated $31,709.21 in business expenses, which they allowed the Company to postpone payment on out of concern for the well-being Company. To this day, these expenses remain unreimbursed. Farzam Decl. ¶18.

In December 18, 2018, Michelle alerted Farzam that Kaplan was using his personal credit card to book another employee’s travel expenses, which Farzam thought was unusual. Farzam Decl. ¶21. Farzam decided to assume COO duties to oversee Kaplan and his departments. Farzam Decl. ¶22. After several weeks, he noticed serious management problems throughout the Company and notified Arthur of these issues. Farzam Decl. ¶22, Ex. D.

On March 30, 2019, Farzam and Arthur met at Dupar’s to discuss Kaplan’s termination for failure to improve the Company’s finances or valuation. Farzam also raised his concerns about the usage of personal credit cards for Company expenses. Arthur responded he had charged some things on his personal credit card that he should not have, but he disagreed with Farzam’s suggestion to hire a controller to review and approve travel and to control costs. Farzam Decl. ¶24.

Farzam continued to have disagreements with Arthur about the direction of the Company. On April 3, 2019, in response to Farzam’s suggestion that Inhance terminate Kaplan, Arthur stated that Kaplan was not the source of the Company problems. He told Farzam to buy him out of the Company. Farzam Decl. ¶25.

On April 4, 2019, Kaplan sent Farzam a message indicating he was taking a weekend trip with his wife. He also defended his use of his personal American Express credit card, despite the fact that Farzam had not previously discussed the matter of his credit card use with him. Farzam Decl. ¶ 26, Ex. F. Farzam later learned that Kaplan logged into the Company’s QuickBooks and changed ledger entries for quarterly overpayments related to his American Express credit card. Farzam Decl. ¶27, Ex. N.

Farzam consulted with the Company’s employment counsel, who in turn hired a forensic consultant to investigate Kaplan’s financial dealings. On April 15, 2019, the forensic accountant submitted evidence showing that Kaplan fraudulently entered his personal expenses as Company expenses and confirmed that Kaplan was paying off his personal credit card every month with Company funds. Farzam Decl. ¶28. Company counsel communicated with both Farzam and Arthur regarding the findings. Farzam Decl. ¶28, Ex. G.

Farzam terminated Kaplan from his position with Inhance on April 15, 2019. Farzam Decl. ¶29. The same day, Farzam held a Company meeting and advised that an investigation was taking place into financial abuse at the Company. Farzam Decl. ¶29, Ex. H. Farzam then notified Inhance’s business banker that all wire transfers from Inhance’s bank account would require approval from Farzam and Arthur. Farzam copied the correspondence to Arthur. Farzam Decl. ¶30, Ex. F.

On the same day, unbeknownst to Farzam, Arthur and Kaplan purported to enter into a corporate resolution in which they claimed to amend the by-laws to appoint and elect a third director of the Company named Brandon Becker (“Becker”). Farzam Decl. ¶31, Ex. J. Becker is a close friend of Arthur. Farzam Decl. ¶32. Farzam would never have agreed to allow Becker to be part of the Company due to his belief that Becker was prosecuted by the Federal Trade Commission (“FTC”) for credit card laundering and illegal factoring of credit card transactions. Farzam Decl. ¶32, Ex. K.

On April 22, 2019, Farzam learned that his email account had been compromised and was being read by Donald Shrum, the IT Manager. Farzam Decl. ¶33.

Subsequent to his firing, Kaplan retained legal counsel, who sent a letter to Farzam on April 19, 2019 accusing him of exceeding his authority, breaching his fiduciary duty to the Company, and of creating a hostile work environment at Inhance. Farzam Decl. ¶34. Inhance’s counsel prepared a response letter, which was distributed to both Arthur and Farzam and which identified Kaplan’s embezzlement of company funds and his improper taking of Company property. Farzam Decl. ¶34, Ex. L.

On April 23, 2019, Arthur locked Farzam and his wife, Michelle, out of the Company, cutting off their Company network access, in reliance upon a invalid corporate resolution adopted by Kaplan and Arthur. Arthur cut off Farzam’s ability to view the Company’s bank account balances so that he could not verify whether further embezzlement was taking place. Farzam Decl. ¶35.

Farzam has since learned that Arthur, like Kaplan, has used Company funds to pay off his personal credit cards, which in turn pay for exorbitant personal expenditures, including payments for luxury vehicles and luxury lodgings, totaling $271,965. Farzam Decl. ¶36, Ex. M; Connelly Decl. ¶4.

On April 23, 2019, Arthur purported to notice a special meeting of the board of directors to terminate Farzam on Thursday, April 25, 2019, despite lacking the authority to do so. Farzam Decl. ¶35. The same day, the Company’s forensic accountant issued a preliminary report outlining Kaplan’s illicit activities by causing the Company to pay $361,410.16 of his personal expenses. Farzam Decl. ¶38, Ex. N; see Connelly Decl. ¶5.

Farzam thereafter noticed a special meeting of the Board with the intent to offer a resolution that the Company hire an independent third party to conduct a forensic examination of the Company’s books and records. Farzam Decl. ¶38, Exs. N, O.

After Arthur initiated his lawsuit against Farzam, Farzam learned that Arthur terminated the Company’s employment counsel who had hired the forensic accountant. Farzam Decl. ¶41.

Farzam never agreed to retain the law firm of Julander, Brown & Bollard, which is illegitimately acting on behalf of Inhance and in the interest of Arthur, not the Company. Farzam Decl. ¶42.

Farzam retained David B. Connelly (“Connelly”) to investigate matters pertaining to Inhance. Connelly has examined the preliminary investigation report containing the findings of the previous forensic investigation into Arthur and Kaplan. Connelly Decl. ¶2.

The investigation is ongoing but has thus far identified significant misappropriations by both Arthur and Kaplan, arising from their inappropriate use of their credit card accounts. Arthur and Kaplan’s subject charges to their cards were paid by Inhance, and generally charged as expenses of the corporation. Connelly Decl. ¶3.

With respect to Arthur, Connelly has identified personal transactions totaling at least `$271,965, that were charged to Arthur’s various credit card accounts during the period from March 2017 through March 2019. Connelly’s understanding is that the transactions were inappropriate personal expenses, corroborated by Connelly’s review of QuickBooks records and transaction descriptions. These transactions included airfare and lodging in Hawaii and Mammoth Lakes (family vacations), Paris, Amsterdam, and Rio de Janeiro, as well as repeated charges for Scotch whiskey that exceeded $10,000. Connelly Decl. ¶4, Schedules. 1, 2.

Connelly has been able to corroborate the previous investigation’s conclusion that suggest that Kaplan misappropriated funds totaling $341,543 from Inhance. Connelly Decl. ¶5, Exs. 2, 3.

Collectively, these inappropriate transactions total at least $613,508 during the past two years and represent substantial misappropriations of Inhance funds/assets. These diversions of corporate funds for the benefit of Arthur and Kaplan likely have adverse tax consequences to the corporation. Connelly Decl. ¶6.

b. Cross-Defendant’s Evidence[6]

Inhance was originally organized in 1997 by Arthur and Farzam. Arthur Decl. ¶3. The chasm between Arthur and Farzam followed after Farzam insisted that his wife work at the Company and receive compensation even when she was not working. Arthur Decl. ¶5.

After Arthur insisted that Kaplan be given a chance to defend himself, Farzam fired Kaplan against Arthur’s wishes. Farzam unilaterally terminated Kaplan. Arthur Decl. ¶6.

On April 18, 2019, Arthur and Kaplan amended the bylaws to add a tie breaking director, appointing Becker as an independent director. Arthur Decl. ¶6, Ex. 3; Julander Decl. ¶¶ 5, 6.

Since April 23, 2019, Arthur has investigated the allegations regarding Kaplan’s misappropriation of company funds through improper credit card reimbursements. Arthur Decl. ¶7. He has secured Kaplan’s voluntary suspension, and, contrary to Farzam’s assertion, Kaplan has not utilized his credentials to access the Company’s QuickBooks. Arthur Decl. ¶¶ 7-8, Ex. 4. Arthur is committed to terminating Kaplan, if appropriate, in a way that does not bring potential liability to the company for a wrongful termination lawsuit. Arthur Decl. ¶9.

Over the last decade, Arthur has taken issue with Farzam’s opulence, funded by a $105,000 salary that Farzam insisted Inhance pay Michelle. Farzam and Michelle have owned expensive cars and taken numerous vacations to various foreign locales. They have also spent inordinate amounts of money in expenses charged to Inhance. Expenditures include luxury accommodations and first-class travel. Arthur Decl. ¶¶ 11-12.

Arthur has made loans to the Company in April 2018 and February 2019 which have not been repaid. Arthur Decl. ¶13. Farzam has made no loans to the Company that have not been repaid. Arthur Decl. ¶13.

Farzam has been charging monthly loan obligations to the Company on a loan he took out on his house to pay personal taxes, a total of approximately $20,270.52 in such payments. Arthur Decl. ¶13. Farzam took another $55,961.79 in December 2018 to pay personal taxes. Arthur Decl. ¶13.

These actions by Farzam contributed to Arthur’s decision to amend the bylaws and appoint Becker. The resolutions are not unlawful due to Kaplan’s participation because Kaplan is not a controller of Inhance and does not own more than 50% of the voting power. Arthur Decl. ¶¶ 14-15, Exs. 3, 7.

On April 23, 2019, Arthur and Becker gave notice of the meeting of the board schedule for April 26, 2019. Becker and Arthur attended the meeting but Farzam did not. Becker and Arthur voted to terminate Farzam from his position at Inhance. Farzam is no longer an employee of Inhance but remains a minority shareholder. Arthur Decl. ¶¶16-17, Exs. 7, 8, 9; Julander Decl. ¶¶ 7-8.

At the direction of the court, Arthur discussed with Farzam the circumstances under which the parties can work together going forward. Farzam’s continued presence at Inhance will not work for the Company. All but one of Inhance’s executive team objected to Farzam returning to the Company. Farzam has been a toxic presence at the Company for some time and bringing him back is not in Inhance’s interests. Arthur Decl. ¶18; Julander Decl. ¶9.

Inhance has offered to pay Farzam $15,000 every two weeks until a mediation with the parties can be conducted in July. Inhance offered those payments as an advance against a future sale of the company and a purchase of Farzam’s interest, but also agreed that the characterization of those funds could be the subject of negotiation at the mediation. During this timeframe, Inhance offered to keep Farzam affiliated with the company as a consultant who would be available to Arthur to assist with client issues. Also during this time, further litigation activities would be put on hold pending the outcome of the mediation. Julander Decl. ¶9.

In response, Farzam countered that both he and Arthur would be paid $15,000 every two weeks as independent contractor Sales Agents, subject to funds being available. As a Sales Agent, Farzam further proposed that he be permitted to work on his client accounts without restriction and “be permitted to access, use, and rely upon Inhance’s creative directors and executive producers chosen by Farzam, and any subordinate employees under the creative directors’ and executive producers’ supervision.” Under his proposal, Farzam would have access to Inhance’s facilities on an as-needed basis and he would be restored to his email account, the Salesforce CRM and full access to QuickBooks. Farzam proposed that he and Arthur would both attend three identified trade shows and that all expenses would be reimbursed subject to the other’s approval. Farzam’s proposal was that he would return to the company as a sales agent with full access to the company’s employees, records and resources. Julander Decl. ¶10, Ex. 3.

On May 3, 2019, Inhance provided Farzam with read-only access to the bank accounts and QuickBooks accounting records. Arthur Decl. ¶19.

Contrary to Farzam’s statements to the court, Arthur did not, and has not, fired the attorney’s that Farzam hired to look into Kaplan’s financial activities. Julander Decl. ¶3, Ex. 2.

Farzam’s presence is not required for the success of the Company. Arthur continues to be the primary business developer for Inhance. His accounts generate an average of $8 million per year in revenue. Arthur flies about 250,000 miles every year from his sales activities. Arthur Decl. ¶25. Arthur has consistently originated more business than Farzam. Arthur Decl. ¶20.

Inhance has many projects set to debut at the Paris Airshow and Farzam has no involvement with any of these projects. Hendrie Decl. ¶4; Bluestein Decl. ¶6. Farzam previously behaved inappropriately at prior shows and his attendance at the Paris Air Show will be detrimental and possibly damaging to Inhance. Hendrie Decl. ¶¶ 4-7.

Inhance will benefit from Farzam’s continued absence and can continue its work on its projects without Farzam’s presence. Yates Decl. ¶2; Leland Decl. ¶6; Nelson Decl. ¶5; Hendrie Decl. ¶3; Bluestein Decl. ¶¶ 3-5.

Inhance has a plan for each of Farzam’s accounts going forward. Arthur Decl. ¶21-22. Farzam’s allegations that Inhance has failed to pay some of its payroll tax obligations are groundless. Inhance’s payroll taxes and IRS installment payments are all current. Arthur Decl. ¶¶ 23.

In removing Farzam and Michelle as employees of Inhance, Arthur has taken on an increased work load and works over 70 hours per week conducting various activities on Inhance’s behalf. This includes working with the Finance, Marketing, Production, and Creative departments, among others. Arthur Decl. ¶24. Inhance regularly pays its sales staff a 5% commission. Inhance employs two full-time salespeople, one with a $150,000 base salary with 5% commission, and the other with a $150,000 draw against 5% commissions. On that basis Arthur would be expected to earn $400,000 from his sales activities. Arthur Decl. ¶26.

On May 4, 2019, the Board of Directors passed a resolution to grant Arthur a salary for his continuing work at Inhance equal to his prior compensation with net payments of $15,000 every two weeks for a period of six months during which tie the Board will retain a third-party compensation expert who will recommend any future compensation going forward. Becker and Arthur voted in favor of the resolution and Farzam voted against it. Arthur Decl. ¶27, Ex. 4.

Arthur asked Peter Stephan (“Stephan”), a CPA and managing partner of SST CPAS, Inc., to examine the Company’s ledger and other books and records to provide an opinion as to whether Inhance will be able to pay Arthur $15,000 net salary every two weeks while still keeping its payroll, tax and vendor obligations current. After examining the general ledger and other books and records of the company, Stephan opines that Inhance can easily meet this objective given the parameters that certain obligations will be eliminated going forward and also assuming that certain nonrecurring charges are indeed nonrecurring. Stephan Decl. ¶¶ 1, 4-5.

Stephan used the Company’s general ledger for the year 2018 and the most recent first quarter of 2019 as indicative of the company’s expected performance going forward. From the company’s actual outflows, Stephan added back the nonrecurring obligations and charges to normalize with the Company’s expected outflows. Stephan assumed that the draw, salary and expense obligations of Farzam, Michelle, and Kaplan, will not be continuing. Stephan Decl. ¶5, Exs. 1, 2. In addition, Stephan noted that penalties in 2018 amounting to $383,632 were not significantly recurring in 2019. For the year 2018, there was free cash flow after adjustment for nonrecurring expenses of $1,675,781. For the first quarter of 2019 there was free cash flow after adjustment for nonrecurring expenses of $384,147. Stephan Decl. ¶5, Exs. 1, 2.

c. Reply Evidence

After the April 30, 2019 hearing, counsel for Inhance, Dirk Julander (“Julander”) informed counsel for Farzam, Christopher Reeder (“Reeder”), that Arthur had unilaterally noticed the Board meeting of May 4, 2019. Julander did not notify Reeder that he planned to attend the meeting, and Reeder would have objected had he known, as counsel’s presence was not appropriate. Reeder Decl. ¶4.

On May 10, Julander’s office transmitted to Reeder a copy of the purported resolutions adopted at the meeting. Reeder responded by letter informing Julander that the resolutions did not accurately reflect those presented at the meeting or the conduct of the directors and Julander, as reflected by the meeting minutes. Reeder Decl. ¶¶ 5-6, Exs. 3, 4.

Subsequent discussions between Julander and Reeder in attempting to negotiate a settlement were unsuccessful. Julander rejected Reeder’s proposal and did not provide a counter-proposal. Reeder Decl. ¶7.

After noticing an unexplained increase in the Company’s payroll, Farzam, through Reeder, made a shareholder demand for relevant documentation regarding Inhance’s payroll for the last three months. Inhance is required to make this information available. Reeder Decl. ¶8, Ex. 5. Julander’s office responded that he was unable to comply with the demand because Julander was on vacation. Reeder Decl. ¶9, Ex. 6.

As of April 24, 2019, Inhance owed the IRS $171,563.53 in past due payroll tax obligations from April 3, 2019 and April 17, 2019. Farzam[7] Reply Decl. ¶3. Rather than direct funds toward the Company’s outstanding tax obligations, Arthur caused Inhance to pay his personal credit card him on April 24, 2019 in the amount of $65,419.12 and again on April 25, 2019 in the amount of $33,635.08. Farzam Reply Decl. ¶4, Ex. 2.

Farzam attend the Board of Directors meeting on May 4, 2019, and immediately prepared minutes of the discussions after leaving the meeting. Farzam transmitted the meeting minutes to Arthur on May 6, 2019 but never received a response. Farzam Reply Decl. ¶6, Ex. 3.

At the meeting, Julander spoke with Farzam about matters relating to this litigation without Farzam’s attorney being present, including by arguing with Farzam about the propriety of Arthur continuing to receive dividends from Inhance. Farzam Reply Decl. ¶7. Also at the meeting, Arthur attempted to reinstate his biweekly $15,000 shareholder dividend compensation over Farzam’s objections. When Farzam advised Arthur that he was forbidden from doing so due to Inhance’s financial status and relevant corporations law for California and Delaware, Arthur recharacterized his dividend as a salary. Arthur and Becker voted to reinstate the payments over Farzam’s objections. Farzam Reply Decl. ¶8, Ex. 3.

Despite the court order, Arthur and Julander refused to discuss with Farzam his role in the Company moving forward. Instead, they purported to pass a Board Resolution requiring Farzam to negotiate his role directly with the court. Farzam Reply Decl. ¶9.

Farzam received a copy of the resolutions with regard to the meeting, but these resolutions contradict the minutes Farzam prepared and what actually occurred at the meeting. Farzam Reply Decl. ¶10.

Since April 30, 2019, Farzam has monitored Inhance’s Wells Fargo account and QuickBooks, consistent with the court’s order. The records reflect that on May 10, 2019, Inhance made a payment of $40,721.16 to Arthur’s personal credit card account. Farzam Reply Decl. ¶11, Exs. 5, 6.

From 2016 through 2018, Inhance failed to pay employment taxes to the IRS resulting in its $3.5 million present installment obligation and Agreement with the IRS. Connelly’s review of the Agreement that Arthur executed with the IRS on March 29, 2019 revealed the following: (i) Inhance owed the IRS $3,536,918 in unpaid employment taxes as of March 25, 2019, for the quarters March 2016 through March 2018; and (ii) Inhance’s monthly installment payments of $30,000 were to commence May 28, 2019, with subsequent monthly payments increasing to $50,000 on November 28, 2019, and further increasing to $100,000 on May 28, 2021. The terms of the Agreement require Inhance to file all federal tax returns and pay federal taxes owed on time while the Agreement is in effect. Further, the IRS can terminate the Agreement, and collect the entire amount owed, including seizure of the company or its assets, if Inhance does not pay any other federal tax debt when due, or make the agreed upon monthly installment payments. Connelly Reply Decl. ¶7, Ex. A.

As of May 10, 2019, Inhance owed the IRS approximately $84,098.46 in payroll tax obligations, which were due on April 17, 2019 and over $85,000 in payroll tax obligations, which were due on May 1, 2019. Farzam Reply Decl. ¶12.

On May 23, 2019, Inhance’s payroll, which does not include payroll taxes, appears to have increased to $235,892.31 from the last payroll on May 9, 2019 in the amount of $212,884.09. Farzam Reply Decl. ¶14, Ex. 8.

On May 28, 2019, Arthur’s company debit card was used for a $103.00 cash withdrawal at an ATM at the LAX Terminal. Arthur also used the Company’s ATM card to withdraw $43.00 at LAX on May 6, 2019. Farzam Reply Decl. ¶15, Ex. 9.

Inhance has made significant payments for (i) Arthur’s personal credit card account 0-95001 of $65,419.12 on April 24, 2019 and $40,721.16 on May 10, 2019, and (ii) Penn Arthur’s Inhance business account 9-11005 of $33,635.08 on April 25, 2019 and its $22,670.52 payment on May 29, 2019 was also apparently for such account. These payments were identified during Connelly’s recent review of transaction statements for Inhance’s Wells Fargo main checking account 1056448580 and the corresponding QuickBooks records. Connelly Reply Decl. ¶5; Farzam Reply Decl. ¶16, Ex. 10.

Due to continuing cash shortfalls, Inhance has failed to make the requisite timely employment tax payments in 2019, thereby serving to jeopardize its $3.5 million Agreement with the IRS. Specifically, Inhance did not turnover/pay its federal employment taxes on time for the following payroll dates: (i) March 29, 2019 – $87,059 due IRS by April 3, 2019, for first post-Agreement payroll, was not paid until April 25, 2019; (ii) April 12, 2019 – $84,098 due IRS by April 17, 2019 was apparently not paid until May 12, 2019; and (iii) April 26, 2019 – $87,753 due IRS by May 1, 2019 was not paid until May 7, 2019. Similarly, Inhance did not turnover/pay its state employment taxes on a timely basis for those payroll dates. Connelly Reply Decl. ¶8.

Contrary to Stephan’s conclusions, the QuickBooks accounting records report net shortfalls in cash, for both the year ended December 31, 2018 and the three months ended March 31, 2019. The net cash decrease for 2018 reported in Inhance’s QuickBooks records did not agree with the two different annual change in cash totals reported in the SST report for such period. Connelly Reply Decl. ¶9.

Stephan’s analysis did not include adjustments for significant events adversely affecting Inhance’s future cash flows, resulting in substantial overstatements of his determined “free cash flow” available to compensate Arthur on a go forward basis. Connelly Reply Decl. ¶10. Specifically, the analysis did not account for (1) the devastating impact on the Company should the IRS terminate the Installment Agreement; or (2) any adjustments for Inhance’s loss of future sales revenue previously generated by Farzam. Connelly Decl. ¶¶ 11-12, Exs. A, B.

Inhance has sustained annual losses and maintained negative retained earnings balances and is insolvent. Accordingly, Delaware General Corporation Law section 170(a) and California Corporations Code §500 prohibit the issuance of dividends. Connelly Reply Decl. ¶¶ 17-19, Ex. E.

In violation of the court’s order enjoining any payments to Arthur or Kaplan until further order of the court, Inhance has made significant payments to Arthur’s accounts after the April 30, 2019 hearing. Connelly Reply Decl. ¶22, Ex. G.

3. Analysis

Cross-Defendant Farzam applies for a preliminary injunction enjoining Inhance from issuing any payments of any kind, including dividends, draws, salaries, and expense reimbursements, to Arthur and Kaplan.

The court need not address the issues of Kaplan’s termination, improper expense reimbursement by Arthur and Kaplan, Farzam’s termination, the addition of Becker as a director, or Farzam’s access to Inhance’s records. Nor does the court need to address the adequacy of the court-ordered May 7, 2019 board meeting and the resolutions that resulted from it, or the viability of the Company without Farzam’s sales effort — the parties present conflicting evidence on this issue – except as it bears on payments to Arthur.

The only issue that remains unresolved is payment to Arthur for his services. Kaplan is no longer a Company officer and is entitled to no payments. Nor does Kaplan oppose, or Inhance on his behalf. Arthur does not personally oppose, although Inhance does so for him.

a. Probability of Success

Arthur’s position is simple. He previously received a $15,000 draw every two weeks. Now, he has an increased work load of over 70 hours per week. Arthur Decl. ¶24. Inhance pays its sales staff a 5% commission and $150,000 salary or draw. If he were a salesman, Arthur would expect to earn $400,000 from his sales activities. Arthur Decl. ¶26. The Board of Directors supports paying Arthur because it passed a resolution to grant him a salary of $15,000 every two weeks for a period of six months until the Board retains a compensation expert who will recommend any future compensation.

Arthur asserts that Inhance continues to be profitable despite Farzam’s absence. Opp. at 10. Arthur argues that without the financial burden of paying Farzam’s draw and expenses ($390,00), his wife’s salary and tax burden ($109,000), and Kaplan’s salary and tax burden ($274,176), Inhance is easily able to pay Arthur while still having sufficient income to meet its obligations. Stephan Decl. ¶4, Ex.2. Opp. at 10-11.

Farzam argues that Inhance is not financially able to continue making payments to Arthur. Contrary to Stephan’s conclusions, the QuickBooks accounting records report net shortfalls in cash for both the year ended December 31, 2018 and the first quarter. Connelly Reply Decl. ¶9.

Due to continuing cash shortfalls, Inhance has failed to make timely employment tax payments in 2019, thereby serving to jeopardize its $3.5 million Agreement with the IRS. Specifically, Inhance made untimely payroll tax payments to the IRS for the following payroll dates: (i) $87,059 due by April 3, 2019 for first post-Agreement payroll, was not paid until April 25, 2019; (ii) $84,098 due by April 17, 2019 was apparently not paid until May 12, 2019; and (iii) $87,753 due by May 1, 2019 was not paid until May 7, 2019. Similarly, Inhance did not turnover/pay its state employment taxes on a timely basis for those payroll dates. Connelly Reply Decl. ¶8.

Inhance has sustained annual losses and maintained negative retained earnings balances and, under both Delaware and California law, the Company cannot issue dividends. Connelly Reply Decl. ¶¶ 17-19, Ex. E. Inhance’s expert, Stephan, did not include (1) the impact should the IRS terminate the Installment Agreement or (2) any adjustments for Inhance’s loss of future sales revenue previously generated by Farzam. Connelly Decl. ¶¶ 11-12, Exs. A, B.

Despite Farzam’s evidence, Arthur should be entitled to some compensation when working for the benefit of shareholders (himself, Farzam, and Kaplan). He previously received $15,000 every two weeks in draws and now is receiving nothing. He cannot be expected to continue working on the prospect of turning the Company around without compensation.

On the other hand, the Company’s priority must be payment of employees, payment of payroll taxes, and payment of back payroll taxes. Moreover, Arthur cannot be permitted to run expenses through the Company, either personal or business, without some supervision or concurrence of Farzam.

Additionally, Farzam presents evidence that Arthur has violated the TRO. Since the April 30, 2019 TRO, Inhance’s records reflect that Inhance made a payment of $40,721.16 for Arthur’s personal credit card account on May 10, 2019. Farzam Reply Decl. ¶11, Exs. 5, 6. Additionally, Arthur’s company debit card was used for a $103.00 cash withdrawal at an ATM at the LAX Terminal on May 28, 2019, and again for $43.00 at LAX on May 6, 2019. Farzam Reply Decl. ¶15, Ex. 9. These are serious issues, with the $40,721.16 payment as the most serious violation. Arthur is entitled to little compensation if he deliberately violated the court’s TRO, even if these payments were business related.

Farzam has shown a probability of success on his claim.

b. Balance of Hardships

In determining whether to issue a preliminary injunction, the second factor which a trial court examines is the interim harm that plaintiff is likely to sustain if the injunction is denied as compared to the harm that the defendant is likely to suffer if the court grants a preliminary injunction. Donahue Schriber Realty Group, Inc. v. Nu Creation Outreach, (2014) 232 Cal.App.4th 1171, 1177. This factor involves consideration of the inadequacy of other remedies, the degree of irreparable harm, and the necessity of preserving the status quo. Id.

Farzam has shown that Inhance is insolvent and at risk of having its assets seized and its shareholders exposed to legal action by the IRS if an injunction is not issued. Farzam has also provided evidence that Inhance continues to make payments to Arthur in violation of the court’s TRO, demonstrating that further improper payments are likely to occur without an injunction. Connelly Reply Decl. Ex. G; Farzam Reply Decl. Exs. 8-9. If an injunction is issued, Arthur will only suffer monetary harm.

The balance of hardships favors issuance of a preliminary injunction.

4. Conclusion

The preliminary injunction is granted in part. Inhance will be enjoined from issuing any payments of any kind, including, but not limited to, dividends, draws, salaries, or expense reimbursements to Arthur and Kaplan, with the exception of a salary to be determined by the court at hearing. Additionally, Arthur may not cause Inhance to pay (1) his business credit card, or any other employee’s credit card incurring an expense on Arthur’s behalf, or (2) his personal credit card, without Farzam’s initial review and approval of the expenses, or the Board of Directors’ decision overriding Farzam’s objection.

The court must require a bond supporting the preliminary injunction. The purpose of a bond is to cover the defendant’s damages from an improvidently issued injunction. CCP §529(a). In setting the bond, the court must assume that the preliminary injunction was wrongly issued. Abba Rubber Co. v. Seaquist, (“Abba“) (1991) 235 Cal.App.3d 1, 15. The attorney’s fees necessary to successfully procure a final decision dissolving the injunction also are damages that should be included in setting the bond. Abba, supra, 235 Cal.App.3d at 15-16. The greater the likelihood of the plaintiff prevailing, the less likely the preliminary injunction will have been wrongly issued, and that is a relevant factor for setting the bond. Oiye v. Fox, (2012) 211 Cal.App.4th 1036, 1062. Neither party discusses the matter of a bond. The court will discuss the bond amount with counsel at the hearing.

[1] Inhance failed to lodge its courtesy copy of its Appendix of Declarations and Exhibits with exhibit tabs. Inhance’s counsel is admonished to do so for all future courtesy copies.

[2] Farzam’s 15-page reply exceeds the ten-page limit of CRC 3.1113(d) by five pages. The court has exercised its discretion to read and consider only the first ten pages.

[3] Injunctive relief is a remedy, not a cause of action.

[4] The courts look to the substance of an injunction to determine whether it is prohibitory or mandatory. Agricultural Labor Relations Bd. v. Superior Court, (1983) 149 Cal.App.3d 709, 713. A mandatory injunction — one that mandates a party to affirmatively act, carries a heavy burden: “[t]he granting of a mandatory injunction pending trial is not permitted except in extreme cases where the right thereto is clearly established.” Teachers Ins. & Annuity Assoc. v. Furlotti, (1999) 70 Cal.App.4th 187, 1493.

[5] However, a court may issue an injunction to maintain the status quo without a cause of action in the complaint. CCP §526(a)(3).

[6] The court has ruled on Farzam’s objections to the Declaration of Dirk O. Julander, sustaining the first and overruling the second.

[7] Farzam’s Reply Declaration incorporates much of the information from his previous Declarations.