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Nelson v. Levy

United States District Court, N.D. California

May 23, 2017

LESLEE A. NELSON, et al., Plaintiffs,
RAYAH LEVY, et al., Defendants.



         Before the Court is plaintiffs' Motion for Preliminary Injunction, filed November 23, 2016. The matter came on regularly for hearing on March 17, 2017. D. Gill Sperlein of the Law Office of D. Gill Sperlein and Abraham M. George of the Law Office of Abraham George, P.C. appeared on behalf of plaintiffs Leslee A. Nelson (“Nelson”) and Nancy Barth (“Barth”). Mark A. Pruner of the Law Office of Mark A. Pruner appeared on behalf of defendants Rayah Levy (“Levy”) and Rachel Rayah Levy International, Inc. (“RRLI”) (collectively, “Levy Defendants”). Andrew D. Winghart of Winghart Law Group appeared on behalf of defendant Jessica Jacobson (“Jacobson”).

         At the hearing, the Court afforded the Levy Defendants the opportunity to file a surreply to address issues raised by plaintiffs for the first time in their reply, and, on April 4, 2017, the Levy Defendants submitted additional declarations as to those issues.

         The Court, having considered the papers filed by the parties, as well as the arguments of counsel at the hearing, rules as follows.


         In the operative complaint, plaintiffs' Second Amended Complaint (“SAC”), plaintiffs allege the following:

         Levy is a “co-founder” and the “Chief Executive Officer” of RRLI, (SAC ¶ 15), which “does business as ArtéQuesta” (id. ¶ 19). Jacobson is “an art collector who teamed up with [Levy] ¶ 2008 to co-found ArtéQuesta” (id. ¶ 17) and “was the Chief Creative Officer of ArtéQuesta until at least the end of 2013” (id. ¶ 21). “Defendants hold themselves out to the public . . . as a museum, investment advisors, and well-connected art experts, who are able to assist individuals, families, companies, and institutions build investment quality art collections.” (Id. ¶ 31.)

         Barth “first met [Levy] in August of 2013” (id. ¶ 47), at which time Levy “described herself to Barth as [an] investment advisor and an art expert in Jewish art” (id. ¶ 49) and “told Barth that most of ArtéQuesta's clients had no prior experience in art investments, but that they nonetheless had made substantial profits in art investments made through [] ArtéQuesta” (id. ¶ 50). Based on these and other representations, Barth “agreed to purchase” art from ArtéQuesta and wired “$370, 000” to the bank account specified by Levy. (See id. ¶¶ 52-53.) “Shortly thereafter, Barth received through the mail ‘Certificates of Fine Art Evaluation'” that “indicated the artwork she had purchased had more than tripled in value.'' (Id. ¶ 54). “In Autumn 2013, after further solicitations, ” Barth, “[b]ased on the additional assurances and the incredible success of her initial investment, . . . purchased two additional artworks . . . for a total of $50, 000.” (Id. ¶ 56.)

         Nelson “first met [Levy] in September 2014” (id. ¶ 59) and Levy represented herself to Nelson “as an art investment advisor, ” telling Nelson that “investing in art - specifically the art that [Levy] and ArtéQuesta had identified and selected for clients, would be a safer and more profitable investment than a portfolio of stocks and bonds” (id. ¶ 61) and ArtéQuesta's art “was a remarkable, enduring investment that could only go up in value as she had made so much money for so many of her clients” (id. ¶ 62). Based on these and other representations, “Nelson decided to make an initial investment of $300, 000” and wired that sum to an RRLI account on November 20, 2014 (see id. ¶¶ 68-69), after which she also “received certificates of fine art authenticity claiming that the artwork had more than doubled in value” (id. ¶ 73). Plaintiffs later discovered that “five of the six pieces [Nelson] purchased belonged to . . . Barth.” (See id. ¶ 71.) Such sale, however, was “not made on behalf of Barth, ” who was “never informed . . . of the sale.” (Id. ¶ 72.)

         Plaintiffs allege that Levy's representations to plaintiffs as to the value of the art was “knowingly and materially false, ” that the art was only “worth approximately 10% to 20% of what [p]laintiffs paid for it” (id. ¶ 162), and that “Levy and/or Jacobson made the [certificate] values up from thin air” (id. ¶ 55). In support thereof, they allege that Nelson, who at some point “insisted that ArtéQuesta deliver the artwork to her, ” hired two appraisers, one of whom “valued the collection for which Nelson had paid $300, 000 at a mere $30, 000” and the other “appraised it at even less: $17, 000.” (See id. ¶ 74.) Nelson later “sold the collection through an estate liquidation company for a mere $11, 781, ” and Barth “never received any money or artwork.” (See id.)

         Based thereon, plaintiffs assert four Causes of Action, titled, respectively: “Violation of RICO - § 1962(c) (Against All Defendants), ” “Conspiracy to violate RICO - 18 U.S.C. § 1962(d) (Against all Defendants), ” “Fraud: Intentional Misrepresentation (Against All Defendants), ” and “Breach of Oral Contract (Against Defendants Rayah Levy, and RRLI, Inc.)”[1] In addition to damages, plaintiffs seek “injunctive relief in the form of a constructive trust” as to “[p]laintiffs' funds used to purchase artwork, as well as any artwork or other assets purchased with those funds.” (Id. at 44:16-20.)

         By the instant motion, plaintiffs seek a preliminary injunction “to freeze [d]efendants' assets in order to ensure that the illicit profits remain available so that the Court will have the ability to order the equitable relief of a constructive trust.” (Mot. at 2:11-13.) In particular, plaintiffs ask the Court to enjoin defendants from (1) “selling, moving, transferring, or dissipating any artwork currently in their possession or control”; (2) “selling moving, transferring, or dissipating illicit profits earned from the art investment funds obtained from [plaintiffs] or any funds or assets purchased with said illicit profits”; and (3) “selling, transferring, or encumbering any real property in which any [d]efendant holds an interest.” (Pl.'s Proposed Order, at 2:20-3:2.)


         A preliminary injunction is “an extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such relief.” See Winter v. Nat. Res. Def. Council, 555 U.S. 7, 22 (2008). “A plaintiff seeking a preliminary injunction must establish that” (1) “he is likely to succeed on the merits, ” (2) “he is likely to suffer irreparable harm in the absence of preliminary relief, ” (3) “the balance of equities tips in his favor, ” and (4) “an injunction is in the public interest.” Id. at 20.

         In the alternative, a plaintiff may establish, rather than a likelihood of success on the merits, “that serious questions going to the merits were raised, ” provided such plaintiff also establishes a likelihood of irreparable harm, “a balance of hardships that tips sharply toward the plaintiff, ” and the injunction is in the public interest. See All. for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1135 (9th Cir. 2011). A “serious question” is “one as to which the moving ...

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