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Shamitoff v. Richards

United States District Court, Ninth Circuit

January 17, 2014

GEOFFREY RICHARDS, Chapter 7 Trustee, ROBERT BROWN, Arbitrator for the American Arbitration Association, and THE AMERICAN ARBITRATION ASSOCIATION, Defendants.


MORRISON C. ENGLAND, Jr., District Judge.

On January 3, 2014, Plaintiffs Joel B. Shamitoff, Shamitoff Industries, Inc., Shamitoy Interactive and Universal Interactive, LLC[1] (collectively referred to as "Plaintiffs" or "Shamitoff" unless otherwise indicated) filed the instant action against Defendants Geoffrey Richards, Chapter 7 Trustee, Robert Brown, Arbitrator for the American Arbitration Association ("AAA") and the AAA itself (collectively "Defendants" unless noted otherwise). Plaintiffs' complaint seeks injunctive relief, and on the same day it was instituted Plaintiffs filed a concurrent Motion for Temporary Restraining Order ("TRO") asking that this Court enjoin the continuation of an arbitration held under the auspices of the AAA with Defendant Robert Brown presiding as arbitrator. The arbitration commenced on August 12, 2013, and five days of the proceedings had been completed by October of 2013. The final three days of the hearing were continued to November 25, 2013, so that Shamitoff could testify. After continuing the completion of the arbitration a second time on November 15, 2013, Mr. Brown denied Shamitoff's third request for a continuance on December 27, 2013. The instant complaint, filed a week later, on January 3, 2014, seeks to stop the final three days of the arbitration which remain scheduled to commence on January 8, 2014. Defendants filed their opposition to Plaintiffs' request for restraining order on January 5, 2014. For the reasons set forth below, Plaintiffs' Motion for TRO is DENIED.[2]


In February of 2005, Jacquelynn Namle Bird, together with her then financial advisor, John Lucero, entered into a number of so-called Retail Development Agreements ("RDAs") with Joel Shamitoff. Under the terms of those RDAs, Bird and Lucero acquired the opportunity to operate shopping mall kiosks that would sell toys, known as Snapables, that were allegedly developed by Shamitoff.[3] Bird and Lucero jointly signed a total of fourteen RDAs at a cost of some $14, 000.00 per kiosk. Despite numerous promises that the toys were coming from China, no product ever arrived. Shamitoff refused to return Bird's approximate $390, 000.00 investment in the kiosks.

Ms. Bird filed a state court lawsuit against Shamitoff in 2008, seeking damages, inter alia, for fraud and breach of contract. On May 8, 2009, at Shamitoff's request, the Sacramento Superior Court ordered that matter into arbitration pursuant to provisions contained in the RDA agreements which specified that any disputes be resolved through arbitration. On November 10, 2010, the day before the arbitration hearing was scheduled to commence, Lucero and the business he and Bird formed to manage the RDAs, the LB partnership, filed for bankruptcy protection under Chapter 7. Given those pending bankruptcy proceedings, the arbitration was stayed pursuant to 11 U.S.C. § 362. Thereafter, on or about May 24, 2011, Bird and her husband filed their own Chapter 13 bankruptcy proceeding in the Eastern District of California.[4]

Once Bird's bankruptcy proceeding was converted to a Chapter 7 proceeding on or about May 16, 2012, Shamitoff sought to remove the stayed state court action to bankruptcy court. The court-appointed Chapter 7 trustee, Geoffrey Richards, immediately moved to remand the case on grounds that the removal was untimely, and the case was subsequently remanded. Shamitoff argued that the removal had terminated any assignment of the case to arbitration, but the Superior Court disagreed.

In the meantime, on or about April 18, 2012, the Chapter 7 Trustee for the LB Partnership, John Roberts, petitioned the court to sell the assets held by the partnership; namely, the 14 RDAs. Universal Interactive, one of the businesses operated by Joel Shamitoff, purchased the RDAs from the LB Partnership's bankruptcy estate for a total sum of $7, 500.00. That sale was approved by United States Bankruptcy Judge Christopher M. Klein by order dated June 5, 2012.

Bird's Chapter 7 bankruptcy trustee ultimately decided to resume efforts to collect from Shamitoff pursuant to her previously filed state court lawsuit that had become an asset of her bankruptcy estate. After the AAA determined that the arbitration could resume, Shamitoff filed a motion for preliminary injunction to stay the arbitration, which the Sacramento County Superior Court denied by Minute Order dated April 4, 2012. That court pointed out that it had no jurisdiction to enjoin the arbitrator in a pending arbitration from resuming the arbitration proceedings. See Ex. D to Decl. of William L Dunbar in Support of Opp'n to TRO. Then, on October 5, 2012, Shamitoff moved to dismiss Bird's fraud lawsuit and remove it from arbitration on grounds that his purchase of the RDAs extinguished any cause of action in Bird's favor. The Sacramento Superior Court again found it had no jurisdiction to stop the arbitration. Id. at Ex. E. Shamitoff moved to reconsider that ruling which the court denied as improper, stating it would "not entertain further motions in this case except a motion to confirm, vacate, or correct the arbitration award" under California Code of Civil Procedure § 1285. Id. at Ex. F.

Apparently undaunted by the above admonition, Shamitoff filed yet another motion for preliminary injunction with the Sacramento Superior Court, which the court summarily denied on grounds it had "already made it abundantly clear in prior rulings that it [had] no jurisdiction to interfere in the AAA proceeding and... would entertain no other motion other than one to confirm, vacate or correct the arbitration award." Id. at Ex. G. While the court noted that Shamitoff had obtained a declaratory judgment in a Los Angeles County action that he and his entities owned the RDAs following their bankruptcy sale, and while Shamitoff argues, as he does here, that said judgment removes any basis for the arbitration, the court found it was up to the arbitrator, and not the court, to weigh the effect, if any, of the Los Angeles judgment. Finally, on July 10, 2013, the same day the court denied Shamitoff's second preliminary injunction request as discussed above, the Court further denied Shamitoff's request to transfer venue of the matter to Orange County.

Perhaps due to a lack of success in Sacramento, Plaintiff and Lucero filed a total of three different actions in Orange County, all in an apparent effort to keep the AAA arbitration from moving forward. In the first 2010 proceeding, filed by Lucero, the Orange County court denied Lucero's preliminary injunction request, reasoning that any stay issued on its part "would be a direct interference with the jurisdiction of the Sacramento County Superior Court." Id. at Ex. I. Shamitoff himself nonetheless filed two additional lawsuits in Orange County, both requesting similar injunctive relief.

As indicated above, despite this plethora of attempts to thwart the arbitration from moving forward, the AAA arbitrator, Robert Brown, scheduled the arbitration hearing to begin on August 12, 2013. After five days of testimony and evidence, the arbitrator rescheduled the remainder of the hearing at Shamitoff's request. After continuing the hearing twice, Brown denied Shamitoff's third continuance request, and some five days before the confirmed January 8, 2014 hearing date, Shamitoff instituted the present lawsuit.

Shamitoff, together with his business entities, allege that the ongoing arbitration proceedings violate their constitutional right to due process, as guaranteed by the Fifth and Fourteenth Amendments to the United States Constitution, because they seek to improperly seize the RDAs in contravention of the bankruptcy court's approval of their sale. According to Plaintiffs, given that sale, there is nothing to arbitrate and the arbitration proceedings are nothing more than an ill-conceived attempt to recover property they validly purchased. Defendant Richards, in opposing the TRO to stop the arbitration, points out that he has no interest in obtaining the RDAs themselves from Plaintiff, and instead wants to collect money damages from Plaintiffs for fraud because of Shamitoff's alleged misrepresentations about the Snapables project and the resulting RDAs.


The purpose of a temporary restraining order is to preserve the status quo pending the complete briefing and thorough consideration contemplated by full proceedings pursuant to a preliminary injunction. See Granny Goose Foods, Inc. v. Teamsters , 415 U.S. 423, 438-39 (1974) (temporary restraining orders "should 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"); see also Reno Air Racing Ass'n, Inc. ...

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