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O'M and Associates, LLC v. Ozanne

November 2, 2010

O'M AND ASSOCIATES, LLC, AN ILLINOIS LIMITED LIABILITY COMPANY, D/B/A O'MALLEY AND ASSOCIATES; PRESERVE LIMITED CAPITAL, LLC, AN ILLINOIS LIMITED LIABILITY COMPANY; AND MBM SETTLEMENTS, LLC, AN ILLINOIS LIMITED LIABILITY COMPANY, PLAINTIFFS,
v.
BRENDAN K. OZANNE, BRIAN C. DAWSON, AND DAWSON & OZANNE, A CALIFORNIA GENERAL PARTNERSHIP, AS ESCROW AGENT; MATTHEW STOEN, INDIVIDUALLY AND AS MANAGER AND AGENT FOR KODIAK FAMILY, LLC, A NEVADA LIMITED LIABILITY COMPANY; KODIAK FAMILY, LLC, INDIVIDUALLY AND AS AGENT FOR XYZ CORPORATION, DEFENDANTS.



The opinion of the court was delivered by: Marilyn L. Huff, District Judge United States District Court

MEMORANDUM DECISION GRANTING TEMPORARY RESTRAINING ORDER

On October 13, 2010, Plaintiffs concurrently filed their complaint and a motion for temporary restraining order ("TRO"). (Doc. Nos. 1 & 4.) On October 14, 2010, the Court set a briefing schedule for the parties and a hearing date on the motion. (Doc. No. 6.) On October 20, 2010, Defendants filed their response in opposition to the TRO. (Doc. No. 16.) The Court held a hearing on this motion on October 22, 2010. Patrick Keeley appeared telephonically and Peter Haley appeared in person on behalf of Plaintiffs. David Veljovich specially appeared on behalf of Defendant Brendan K. Ozanne. After the hearing, the Court ordered supplemental briefing. (Doc. No. 22.) On October 27, 2010, Defendant Brendan K. Ozanne filed his supplemental brief. (Doc. No. 23.) On October 29, 2010, Plaintiffs filed their supplemental brief. (Doc. No. 24.) On November 2, 2010, the Court held another hearing on the motion. Patrick Keeley appeared in person and Scott Miller appeared telephonically on behalf of Plaintiffs. David Veljovich specially appeared on behalf of Defendant Brendan K. Ozanne. After due consideration, the Court grants a limited temporary restraining order.

Background

This action centers around a failed sale of life insurance policies (Compl. ¶ 1.) Plaintiffs are the sellers of the life insurance policies, with Plaintiff Matthew O'Malley acting as the seller's agent ("O'Malley"). (Id. ¶ 11.) Defendant Matt Stoen was the buyer's agent and manager for Defendant Kodiak Family, LLC ("Kodiak"). (Id. ¶ 7.) Kodiak in turn was the agent for the real buyer of the policies, XYZ Corporation ("XYZ"). (Id. ¶ 16.) Defendant Brendan Ozanne ("Ozanne") represented Kodiak and is alleged by Plaintiffs to be the escrow agent for the sale. (Id. ¶¶ 5, 15.) Ozanne is a partner for the general partnership Dawson and Ozanne. (Id. ¶ 6.)

Ozanne presented Plaintiffs with an offer to buy the life insurance polices on January 12, 2010, and O'Malley accepted the offer the following day. (Compl. ¶¶ 18-19.) The sale agreement called for the seller to deposit 3% of the purchase price of the policies in Dawson and Ozanne's Attorney Client Trust Account ("IOLTA"). (Compl. ¶ 22). Pursuant to the agreement, Plaintiffs transferred monies to the IOLTA account through fours separate transactions. (Id. ¶¶ 22, 23, 27.) Pursuant to an addendum to the sales agreement, Plaintiffs claim that this fee is a "break up" fee and is only non-refundable to them if the transaction does not close under one of three conditions: (1) if the seller is unable to provide required documentation prior to closing, (2) if the seller is unable to procure the signatures required to close the transaction, or (3) if the life insurance carriers contest the validity of any the policies. (Id. Ex. A1.) On the other hand, Defendants claim that the fees are for performing due diligence and no escrow instructions were ever completed. (Id. ¶ 24.)

The sales transaction did not close on May 31, 2010. (Compl. ¶ 37.) In mid-July, 2010, Ozanne provided Plaintiffs with a new buyer for the life insurance policies. (Id. ¶ 38.) No closing has occurred with a new buyer. (Id. ¶ 39.) Starting August 2010, Plaintiffs, through counsel, sent written demands to Defendants asking for return of their funds. No money has been returned to them to date. (Id. ¶ 40-45.)

Discussion

I. TRO -- Legal Standard

A temporary restraining order is generally reserved for an emergency circumstance where the rights of a party are in urgent need of protection. See Granny Goose Foods, Inc. v. Bhd. of Teamsters, 415 U.S. 423, 438-39 (1974). Apart from showing the necessity for immediate relief, applicants for a TRO must meet the same standards as for a preliminary injunction. See Stuhlbarg Int'l Sales Co., Inc. v. John D. Brush and Co., Inc., 240 F.3d 832, 839 n.7 (9th Cir. 2001). "A plaintiff seeking a preliminary injunction must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest." Winter v. Natural Res. Def. Council, Inc., 129 S.Ct. 365, 374 (2008); Marlyn Nutraceuticals, Inc, v. Mucos Pharma GmbH & Co., 571 F.3d 873, 877 (9th Cir. 2009). Alternatively, a plaintiff may be entitled to a preliminary injunction by establishing "the existence of serious questions going to the merits and that the balance of hardships tips sharply in his favor." Roe v. Anderson, 134 F.3d 1400, 1402 (9th Cir. 1998); see Stuhlbarg Int'l. Sales Co. v. John D. Brush & Co., 240 F.3d 832, 839-94 (9th Cir. 2001). These alternative formulations "represent two points on a sliding scale in which the required degree of irreparable harm increases as the probability of success decreases." Roe v. Anderson, 134 F.3d at 1402; see Clear Channel Outdoor Inc. v. City of Los Angeles, 340 F.3d 810, 813 (9th Cir. 2003). Thus, if "the balance of harm tips decidedly toward the plaintiff, then the plaintiff need not show as robust a likelihood of success on the merits." State of Alaska ex rel. Yukon Flats School Dist. v. Native Village of Venetie, 856 F.2d 1384, 1389 (9th Cir. 1988).

II. Likelihood of Success on the Merits / Serious Question Going to the Merits

The claims supporting the application for a temporary restraining order primarily center around breach of contract and breach of fiduciary duty relating to the funds that Plaintiffs deposited into Defendant Ozanne's IOLTA account. Plaintiffs and Defendants dispute the merits of these claims.

The original offer agreement stated that the seller or seller's agent was to deposit 3% of the purchase price upon acceptance of the offer and that:

"This fee is a 'break up' fee for my clients and my firm. Said fee shall be nonrefundable in the event that the Seller is unable to provide the appropriate supporting documentation and unable to procure the necessary signatures for a successful 'life settlement' transaction. It shall further be deemed non-refundable in the event that any of the life carriers identified above contest the validity of any of the policies listed above for any reason.

However, in the event the Buyer fails to perform their obligations, set forth below, this fee is refundable in its entirety, together with an interest rate of 6% per annum. Further, Kodiak Family, LLC agrees to refund this amount, via a credit in the full amount of the 'break up' fee at the time of the closing of the life settlement transactions as referenced above. Please be advised that Dawson & Ozanne, other than its role as Escrow Agent, is not responsible for the refund of such fees and this duty and responsibility shall be borne solely by Kodiak Family, LLC or its affiliates. Further, Dawson & Ozanne is informing Seller and Seller's Agent that it is not representing in any legal capacity, the rights of Seller or Seller's ...


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