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La Jolla Cove Investors, Inc., A v. Goconnect Limited

May 4, 2012

LA JOLLA COVE INVESTORS, INC., A
CALIFORNIA CORPORATION,
PLAINTIFF,
v.
GOCONNECT LIMITED, AN AUSTRALIAN CORPORATION, AND DOES 1--10, INCLUSIVE, DEFENDANT.



The opinion of the court was delivered by: Honorable Janis L. SammartinoUnited States District Judge

ORDER DENYING LA JOLLA COVE'S APPLICATION FOR PRELIMINARY INJUNCTION (ECF No. 35)

Presently before the Court is Plaintiff La Jolla Cove Investors, Inc.'s ("La Jolla Cove") renewed application for preliminary injunction. (Renewed Appl. Prelim. Inj., ECF No. 35) Also before the Court are Defendant GoConnect Limited's ("GoConnect") response in opposition, (Resp. in Opp'n, ECF No. 40), and La Jolla Cove's reply in support, (Reply in Supp., ECF No. 41). The Court heard oral argument on May 3, 2012, and the matter was thereafter taken under submission. Having considered the parties' arguments and the law, the Court DENIES La Jolla Cove's application.

BACKGROUND

1. Factual Background

The instant request for a preliminary injunction arises out of a dispute between La Jolla Cove, a San Diego--based investment fund, and GoConnect, an Australian-based global media communications company. (Second Amended Complaint ("SAC") ¶¶ 1--2, ECF No. 32) In December 2010, the parties entered into a funding agreement whereby La Jolla Cove loaned GoConnect a total of $1,250,000. (Id. ¶ 8) Pursuant to that agreement, La Jolla Cove had the option to convert the debt into common shares of GoConnect's stock. (Id. ¶ 9)

Between December 7, 2010, and April 13, 2011, GoConnect honored conversions and La Jolla Cove converted debt into approximately 30 million GoConnect shares (or, an amount equal to an aggregate principal amount of $675,887). (Id. ¶ 12); (Resp. in Opp'n 2, ECF No. 40) But, in June and September 2011, La Jolla Cove sought additional conversions, which GoConnect refused and continues to refuse to issue. (SAC ¶¶ 13--16, ECF No. 32) Hence the instant suit.

2. Procedural Background

La Jolla Cove filed its original complaint on August 23, 2011, (Compl., ECF No. 1), and a first amended complaint ("FAC") on January 6, 2012, (FAC, ECF No. 23). The FAC asserted claims for breach of contract, specific performance, and conversion. On January 10, 2012, La Jolla Cove filed an application for preliminary injunction, requesting "an order pending final determination of this action, directing GoConnect to deliver immediately at least 40,239,605 shares of GoConnect's common stock to La Jolla Cove . . . and to honor all future conversion requests." (Original Appl. Prelim. Inj. 1, ECF No. 24) Soon thereafter, GoConnect filed a motion for judgment on the pleadings as to the specific performance and conversion claims. (Mot. J. on Pleadings, ECF No. 28)

Before the Court issued a ruling as to either party's motion, however, the parties filed a joint stipulation for La Jolla Cove to file the operative SAC, which the Court granted. (Order, Feb. 24, 2012, ECF No. 33) The SAC dropped the specific performance and conversion claims, and so only the breach of contract claim remains. (SAC, ECF No. 32) Noting that an amended complaint supersedes any previous complaint, the Court denied the pending motions as moot, but permitted La Jolla Cove to refile its motion for a preliminary injunction, directing it to "address[] how the amendments impact the relief requested." (Order, Feb. 24, 2012, at 2, ECF No. 33)

La Jolla Cove filed its renewed application for preliminary injunction on February 29, 2012, again requesting "an order pending final determination of this action, directing GoConnect to deliver immediately at least 42,307,692 shares of GoConnect's common stock to La Jolla Cove . . . and to honor all future conversion requests." (Renewed Appl. Prelim. Inj. 1, ECF No. 35) GoConnect opposed on March 15, 2012, (Resp. in Opp'n, ECF No. 40), and La Jolla Cove replied on March 22, 2012, (Reply in Supp., ECF No. 41).

LEGAL STANDARD

A preliminary injunction is an equitable remedy aimed at preserving the status quo and at preventing the occurrence of irreparable harm during the course of litigation. See Fed. R. Civ. P. 65. "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., 555 U.S. 7, 20 (2008) (citing Munaf v. Geren, 553 U.S. 674, 689--90 (2008)); see also Am. Trucking Ass'ns, Inc. v. City of L.A., 559 F.3d 1046, 1052 (9th Cir. 2009).

A preliminary injunction is an "extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such relief." Winter, 555 U.S. at 22. This "clear showing" requires the plaintiff to show more than a mere "possibility" of irreparable harm; instead, he must "demonstrate that irreparable injury ...


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