ORDER ON PLAINTIFFS'
MOTION FOR TEMPORARY
RESTRAINING ORDER (Doc. No.6)
This case stems from a written agreement (the "MJC Agreement") entered into by Plaintiffs Charles L. Bryant and Jack Deliddo ("Plaintiffs"), residents of Stanislaus County, California; and Defendant Michael Matvieshen, a resident of British Columbia, Canada ("Defendant").*fn1 Plaintiffs allege causes of action for breach of contract, fraud, negligent misrepresentation, suppression of fact, promise made without intent to perform, conversion, constructive trust, declaratory relief, alter ego relief, and injunctive relief. Currently pending before the Court is Plaintiffs' exparte application for a temporary restraining order. For the reasons that follow, the Court will grant Plaintiffs' motion and set a briefing schedule for a preliminary injunction.
In 2009, Plaintiff Deliddo formed Rooftop Energy, LLC ("Rooftop"), a company specializing in large scale commercial solar projects. See Compl. ¶ 8. Shortly thereafter, Plaintiff Deliddo sold a 51% interest in Rooftop to Plaintiff Bryant. Id. ¶ 9. Plaintiffs entered into discussions with Defendant regarding assistance with obtaining solar panels and financing for various large-scale projects, including projects with General Motors ("GM"). In 2010, Defendant offered to purchase Rooftop in exchange for cash and stock in ICP Solar Technologies, Inc. ("ICP"), a corporation controlled by Defendant. Id. ¶ 13. The parties contemplated that ICP would fulfill the GM projects initiated by Rooftop. Id. Plaintiffs agreed to a sale of 100% of their membership interests in Rooftop to ICP for $3 Million in vested cash payouts, a 20% stock interest in ICP, and employment/consulting agreements (the "Rooftop Agreement"). Id., Declaration of Jack Deliddo ("Deliddo Decl.") ¶ 6; Declaration of Charles L. Bryant ("Bryant Decl.") ¶ 9, Ex. A. Plaintiffs, however, never received the cash payment promised, and ICP turned out to have cash flow problems, making it a poor candidate for the potential GM projects. Id. ¶ 14.
Defendant represented to Plaintiffs that Sunlogics, Inc., a Canadian corporation controlled by Defendant, was in a better position than ICP to pursue the business strategies and GM projects initiated by Rooftop. Id. ¶ 16. Plaintiffs agreed to allow Defendant to transfer Rooftop from ICP to Sunlogics, Inc., and for their consulting contracts to be assigned to Sunlogics, Inc., in exchange for a 30% interest for each Plaintiff in Sunlogics Inc. Id. 16; Bryant Decl. ¶¶ 9-11; Deliddo Decl. ¶¶ 7-8. Throughout this period, Defendant continued to confirm to Plaintiffs that the three of them were in business together, and that they would own all of the corporations in which they participated together 40-30-30, but that Defendant would be entitled to vote 50% of the stock and Plaintiffs would each vote 25%. See Compl. ¶ 19.
After developing and modifying a business plan, Plaintiffs and Defendant eventually executed the MJC Agreement, under which the parties agreed to the allocation of their respective ownership interests in various companies in which they agreed to participate and operate together. See Compl., Ex. A; Bryant Decl. ¶ 11, Ex. B; Deliddo Decl. ¶¶ 11, 14-15. Among other things, the MJC Agreement provides that Defendant was "the directing shareholder" of Sunlogics, Plc (the parent company of Sunlogics Inc.) and Salamon Group, Inc. ("Salamon"). See Compl., Ex. A ¶ 1. The MJC Agreement further provides that Defendant was "holding shares in trust" for Plaintiffs, and that Defendant "agrees to transfer 60% of such ownership interests held by [Defendant], 30% to [Deliddo] and 30% to [Bryant]" in Sunlogics, Plc ("Sunlogics") and Salamon. Id. The MJC Agreement also provides that Defendant will have a 40% interest and Plaintiffs will each have a 30% interest "in any and all companies in which they participate together presently or in the future. . .." Id. ¶ 2.
The Sunlogics and Salamon shares were supposed to be transferred to Plaintiffs at the time that a merger was closed between Sunlogics (and its subsidiaries) and Phoenix Solar Holdings Corp. See Compl. ¶ 28. However, Defendant transferred only a portion of the promised shares. See Compl. ¶ 38, Bryant Decl. ¶¶ 24-31; Deliddo Decl. ¶¶14-17. Defendant knew there was considerable pressure to close the merger quickly, and he offered numerous excuses why the shares should remain held beneficially subject to later adjustment between the individuals to comply with the MJC Agreement. See Compl. ¶¶ 29, 36.
During the time the merger was pending, Plaintiffs contend Defendant convinced them to agree to the formation of two offshore companies, Millennium Trends International, Inc., a Bahamas company ("Millennium"), and Maverick Ventures SA, a Swiss company ("Maverick"), that would also be subject to the MJC Agreement. See Compl., ¶ 30, Bryant Decl. ¶¶ 18, 25; Deliddo Decl. ¶ 16.
Through January 2012, Defendant continued to make promises regarding the adjustments and to reassure Plaintiffs of his intent to complete the promised transfers of shares. See Bryant Decl. ¶¶ 13, 33, Ex. M. However, in March 2012, after Defendant was no longer CEO of Sunlogics,*fn2 Defendant refused to transfer the shares and began making threats to transfer the shares to other parties. Id. ¶ 33-40.
On April 10, 2012, Plaintiffs filed a verified complaint and ex parte application for TRO and preliminary injunction in the Superior Court for the State of California, County of Fresno. A hearing on the TRO was set for April 12, 2012. On April 12, 2012, Defendant filed a Notice of Removal in this court. On April 25, 2012, Plaintiffs filed the instant ex parte application for a temporary restraining order ("TRO") and an order to show cause why a preliminary injunction should not issue.*fn3
As part of the TRO request, Plaintiffs submitted declarations that indicate inter alia: (1) the Sunlogics shares held by Defendant were originally subject to an Investor Rights Agreement that contained a lock-down provision; however, that provision expired on March 10, 2012, enabling Defendant to transfer the shares;*fn4 (2) Defendant recently issued a press release that Millennium has entered into a Memorandum of Understanding to sell Sunlogics shares to Salamon; (3) Millennium was purportedly formed on behalf of Defendant and Plaintiffs through a third party incorporator who was a close friend of Defendant, but Plaintiffs never received copies of the organizational documents for Millennium; (4) the third party incorporator recently informed Bryant that Defendant may be taking actions to have the Sunlogics shares held by Millennium transferred into Defendant's name; (5) there is a danger that Defendant is pledging or transferring Salamon shares beneficially owned by Plaintiffs to finance various material ventures not approved by Plaintiffs; (6) Plaintiffs recently discovered that the purchase of Salamon was financed through Sunlogics Inc. and Rooftop Energy, LLC, a subsidiary of Sunlogics Inc., and that Defendant created a last-minute amendment to the Purchase Agreement to add his own name individually such that Sunlogics Inc. and Rooftop Energy, LLC may have a claim to shares. See Bryant Decl.; Deliddo Decl.
Under Rule 65(b), a court may issue an ex parte temporary restraining order only if: (1) it clearly appears . . . that immediate and irreparable injury, loss, or damage will result to the applicant before the adverse party or that party's attorney can be heard in opposition, and (2) the applicant's attorney certifies to the court in writing the efforts, if any, which have been made to give the notice and the reasons supporting the claim that notice should not be required. Fed. R. Civ. Pro. 65(b); Reno Air Racing Ass'n v. McCord, 452 F.3d 1126, 1130 (9th Cir. 2006). Rule 65(b)'s requirements are "stringent," and temporary restraining orders that are granted ex parte are to be "restricted to serving their underlying purpose of preserving the status quo and preventing irreparable harm just so long as is necessary to hold a hearing, and no longer." Granny Goose Foods, Inc. v. Brotherhood of Teamsters, 415 U.S. 423, 438-39 (1974); McCord, 452 F.3d at 1131.
The substantive standard for granting a temporary restraining order is the same as the standard for entering a preliminary injunction. Bronco Wine Co. v. U.S. Dep't of Treasury, 997 F.Supp. 1309, 1313 (E.D. Cal. 1996); Lockheed Missile & Space Co. v. Hughes Aircraft Co., 887 F.Supp. 1320, 1323 (N.D. Cal. 1995). A plaintiff seeking a preliminary injunction must establish: (1) that he is likely to succeed on the merits, (2) that he is likely to suffer irreparable harm in the absence of preliminary relief, (3) that the balance of equities tips in his favor, and (4) that an injunction is in the public interest. Winter v. Natural Res. Def. Council, Inc., 129 S.Ct. 365, 374 (2008); Park Vill. Apt. Tenants ...