2018-00246072-CU-FR

Oshima Sushi, Inc. vs. Kenny Le

Nature of Proceeding: OSC re: Preliminary Injunction

Filed By: McLaughlin, H. Vincent

Plaintiffs Oshima Sushi, Inc. (“OSI”) and Ming Le’s (“Ming”) application for a preliminary injunction as against defendant Kenny Le (“Kenny”) is GRANTED, as follows.

Kenny’s opposition papers were not timely filed in compliance with the court’s order dated 12/12/2018, specifying the opposition deadline as 12/31/2018.

Factual Background

This action arises from a dispute relating to the control of a restaurant owned by OSI on Natomas Crossing Drive.

Moving Papers. Ming claims to be the sole shareholder, officer and director of OSI following his brother Kenny’s sale of his 50% stock interest in OSI back in 2008 but curiously, Ming concedes corporate records continue to reflect Kenny’s “50% ownership” in OSI even after the sale. Plaintiffs now seek to enjoin Kenny from (1) representing himself as being an officer, director, employee or agent of OSI; (2) acting or purporting to act on behalf of OSI; (3) entering the restaurant or barring Ming from doing so; (4) controlling or transferring an assets of OSI; and (5) withholding or concealing any financial or operational information relating to OSI.

According to Ming, Kenny had virtually no involvement with OSI’s restaurant after 2008 but periodically demanded readmission to OSI, even threatening violence against Ming and stealing money. Then in October 2018, Kenny “shut down the restaurant for three days…and remov[ed] the point of sale computer system…” but Ming allowed Kenny to become the general manager of the restaurant. Ming thereafter planned to handle his administration duties from home but Kenny allegedly locked Ming out and failed to deposit proceeds into OSI accounts used to pay bills. This, along with other conduct, raised Ming’s concerns that Kenny was stealing from the business, vendors would not be paid and the restaurant would fail. Despite Kenny’s lack of cooperation, Ming agreed to make the sales tax payment due in November 2018 but Kenny had depleted the account beforehand with unnecessary withdrawals intended to leave Ming with

liability for same. Plaintiffs insist OSI has numerous other overdue bills with other payments coming due soon. On 12/10/2018 Ming terminated Kenny as the general manager but he has not ceded control over the restaurant.

Plaintiffs maintain they are likely to prevail on the merits of their causes of action for declaratory relief (i.e., that Ming is sole shareholder, officer and director of OSI), breach of fiduciary duty, fraud, conversion and intentional interference with prospective economic advantage particularly since Ming is OSI’s CEO and is therefore entitled to the corporate records which Kenny is improperly concealing regardless of whether he is still a shareholder, director or officer of OSI. But the 2008 stock sale agreement is “compelling evidence that Kenny relinquished his rights” relative to control over OSI, while plaintiffs have also submitted evidence that OSI has not been paying its bills when due, including sales taxes. Without the requested injunction, plaintiffs will suffer irreparable harm as a result of Kenny’s usurpation of control over OSI and engaging in conduct which will be difficult to undo later including the dissipation of corporate assets in violation of Kenny’s fiduciary obligations. Finally, plaintiffs insist they will suffer irreparable harm if the business goes under and proof of the damages related thereto will be difficult to prove, whereas Kenny will suffer no harm if Ming’s corporate rights are restored via injunctive relief since Kenny has no right to engage in the conduct described.

Opposition. Kenny opposes, arguing that prior to October 2018 he and Ming attempted to negotiate an agreement relating to the control and future sale of the restaurant but when that failed, Ming ceded management and control of OSI to Kenny. However, Ming later entered the restaurant at night and removed all corporate documents, checkbooks and financial records, the company laptop, etc. but Kenny has nevertheless continued restaurant operations and even increasing profits despite Ming leaving roughly $50,000 in unpaid bills and refusing to return corporate assets. Kenny then filed a “shareholder derivative” suit against Ming on 11/21/2018, shortly before the present action was commenced against Kenny.

The opposition contends plaintiffs are not entitled to an injunction since they cannot establish the requisite irreparable harm (i.e., a loss for which monetary damages will be insufficient). This is confirmed by plaintiffs’ own papers in which they offer only vague, unsupported statements about concerns over account balances, vendors not being paid, delinquent taxes, loss of revenues and other losses for which plaintiffs may be liable but such financial losses do not constitute “irreparable” harm which supports injunctive relief under Code of Civil Procedure §526. Moreover, the specter of such losses need not be considered since OSI has under Kenny’s management seen an increase in its profits and plaintiffs’ alleged concerns over unpaid bills is solely attributable to Ming’s admitted removal of the corporate records, computer and account information, which has interfered with Kenny’s ability to paying the bills. Still, Kenny has already made the outstanding tax payments which Ming should have paid prior to October 2018 and brought OSI’s vendor bills current. Finally, the opposition argues that granting the requested injunction will interfere with Kenny’s current existing right to run the restaurant and will in fact improperly alter the status quo.

Kenny further asserts that although the absence of “irreparable” harm alone mandates denial of this application, plaintiffs are also unlikely to prevail on the merits of their claims because there is a “genuine dispute” over who has a right to control and manage the restaurant. The opposition points out that Kenny’s 2018 “shareholder derivative” suit requires him to be a shareholder and his (unverified) complaint also

alleges Kenny is currently an officer (CFO and Vice President) as well as a director of OSI but most of the documentation to establish who are the shareholders, officers and directors has been improperly taken by Ming. However, Kenny says there is abundant evidence showing he remained a shareholder, officer and director well after the 2008 stock sale alleged in plaintiffs’ complaint, including OSI’s 2015 tax returns and 2011 worker compensation insurance policy which list Kenny as the vice president. In light of this evidence, the opposition insists “Plaintiffs cannot possibly show that they are likely to succeed on the merits.”

Objections to Evidence

Kenny (timely) filed no written objections to evidence.

Plaintiffs’ written objections to evidence are sustained except for objection Nos. 5-7, each of which is overruled.

Analysis

At the outset, “[T]he issuance of an injunction involves ‘…the exercise of a delicate power, requiring great caution and sound discretion, and rarely, if ever, should [it] be exercised in a doubtful case. [Citations.]’” (Paiva v. Nichols (2008) 168 Cal.App.4th 1007, 1021-1022 (citing Fleishman v. Sup. Court (2002) 102 Cal.App.4th 350, 355-356).) Among the factors to be considered when injunctive relief is sought is whether the moving party will, absent such relief, suffer great or irreparable harm for which pecuniary compensation would not afford adequate relief or where it would be extremely difficult to ascertain the amount of compensation which would afford adequate relief. (See, e.g., Code Civ. Proc. §526(a)(2), (4), (5); Jessen v. Keystone Sav. & Loan (1983) 142 Cal.App.3d 454, 457.) With this standard in mind, the court will now consider the facts of the present case.

Irreparable Harm. The opposition argues that plaintiffs’ moving papers have failed to demonstrate the existence of any genuine “irreparable” harm which will result if no injunctive relief is granted but this court disagrees, finding that plaintiffs have produced evidence (to which no objections were timely asserted) sufficient to establish the type of harm required by Code of Civil Procedure §526. Although the moving papers emphasize plaintiffs’ concern over what appears at first glance to be merely financial losses which could be easily compensated with an award of monetary damages, the reality is that plaintiffs are claiming that unless Kenny’s current course of conduct is enjoined, the restaurant is likely to be lost altogether. The loss of an ongoing business operation with its existing employees, customers and intangible good will is generally something which cannot be adequately compensated through an award of monetary damages but even if it could, the amount of damages needed to adequately compensate for such a loss is often very difficult to calculate given the number of variables that determine whether any business is successful or not. (See, e.g., Greenfield v. Board of City Planning (1935) 6 Cal.App.2d 515, 519 [“The destruction of one’s business is manifestly an irreparable injury” which supports issuance of injunction]; Bullock v. City & County of San Francisco (1990) 221 Cal.App.3d 1072, 1102-1103.) Accordingly, plaintiffs have met their burden of a showing the type of harm which supports the exercise of the court’s equitable power in the form of injunctive relief.

Likelihood of Success on the Merits. Plaintiffs have satisfied their burden on this

element as well. According to the moving papers, Kenny agreed in 2008 to sell all of his shares in OSI to Ming and a copy of the document purporting to memorialize this agreement was attached to Ming’s Declaration. Additionally, plaintiffs have proffered a copy of the “Statement of Information” which OSI recorded with the Secretary of State in 2008 and 2017, both of which identify Ming as the sole officer and director of OSI and neither of which lists Kenny in any capacity. Notably, no written objections to any of this evidence has been timely made and the court finds the opposition nowhere disputes the authenticity of such documents which, on their face, tend to establish that Ming has for many years been and currently remains the sole shareholder, officer and director of OSI.

The opposition’s purported documentary evidence that Kenny is currently a shareholder of OSI is patently insufficient to demonstrate plaintiffs are not likely to prevail on the merits of their claims against Kenny. The opposition’s reliance on the allegation in Kenny’s own “shareholder derivative” suit against Ming is misplaced since this unverified complaint does not constitute admissible evidence of any current ownership interest in OSI. Likewise, the unfiled version of OSI’s “Statement of Information” purporting to show Kenny as an officer and director in 2003 is of no legal consequence since it was admittedly not filed with the Secretary of State and since it was by its own terms prepared long before Kenny’s 2008 written agreement to sell his shares in OSI to Ming. The portion of OSI’s 2015 tax returns which purports to list Kenny as a 50% shareholder is of dubious significance in light of the uncontradicted sale of Kenny’s shares in 2008, the document is not properly authenticated, the entire tax return is not included, it remains unclear if this tax return was actually filed with the IRS and even if it were, it does not on its face tend to show Kenny is presently a shareholder in OSI. Finally, the worker compensation insurance policy referenced by the opposition which is claimed to list Kenny as the vice president was not actually attached to Kenny’s Declaration.

Based on the admissible evidence now before the court, plaintiffs have carried their burden of demonstrating a likelihood of prevailing on the merits of their claims against Kenny, who has not presented admissible evidence sufficient to support any of the contentions made in the opposition papers.

Conclusion

In light of the foregoing, the court holds that plaintiffs have satisfied their burden of producing evidence they are not only likely to suffer “irreparable” harm unless Kenny’s conduct is enjoined but also likely to prevail on the causes of action currently alleged against Kenny, whose position as general manager was terminated by Ming on 12/10/2018. Therefore, the court will exercise its equitable powers by granting a preliminary injunction prohibiting Kenny from (1) representing himself as being an officer, director, employee or agent of OSI; (2) acting or purporting to act on behalf of OSI; (3) entering the restaurant or barring Ming from doing so; (4) controlling or transferring an assets of OSI; and (5) withholding or concealing any financial or operational information relating to OSI.

Plaintiffs shall post no later than 1/25/2019 an injunction bond in the amount of

$10,000. In the event plaintiff fails to timely post the injunction bond, Kenny may file and serve an appropriate motion or application to modify, amend or vacate the preliminary injunction granted herein.

The OSC issued on 12/12/2018 is dissolved.

This minute order is effective immediately. No formal order or other notice is required. (Code Civ. Proc. §1019.5; CRC Rule 3.1312.)

Item 23 2018-00246072-CU-FR

Oshima Sushi, Inc. vs. Kenny Le

Nature of Proceeding: Motion to Appoint Receiver

Filed By: McLaughlin, H. Vincent

Plaintiffs Oshima Sushi, Inc. and Ming Le’s motion for appointment of receiver is DROPPED as moot in light of the tentative ruling granting plaintiffs’ concurrent application for preliminary injunction as against defendant Kenny Le.