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Estakhrian v. Obenstine

United States District Court, C.D. California

June 20, 2017

JAMES ESTAKHRIAN and ABDI NAZIRI, on behalf of themselves and all others similarly situated, Plaintiffs,
v.
MARK OBENSTINE, Defendants.

          PRELIMINARY INJUNCTION RE COMMUNICATIONS WITH CLASS MEMBERS

          FERNANDO M. OLGUIN UNITED STATES DISTRICT JUDGE.

         Having reviewed and considered all the briefing filed with respect to Plaintiffs' Ex Parte Application for Temporary Restraining Order and Order to Show Cause Why a Preliminary Injunction Should not Issue (Dkt. 523, “Application”), and the evidentiary hearing held on June 15, 2017, [1] the court concludes as follows.

         BACKGROUND

         The instant matter arises out of a class action that was litigated in Nevada state court, Daniel Watt, v. Nevada Property 1, LLC, , Case No. A582541 (“Nevada litigation”). (See Dkt. 373, Second Amended Class Action Complaint (“SAC”) at ¶ 20). On February 11, 2009, plaintiffs filed a class action complaint for breach of contract regarding the purchase of condominium units in what became the Cosmopolitan Hotel, located in Las Vegas, Nevada. (See id.). The Nevada litigation eventually settled in 2010. (See id. at ¶ 32).

         On April 22, 2011, plaintiff James Estakhrian (“Estakhrian”), on behalf of himself and all others similarly situated, filed this action against various law firms and attorneys, including defendant Mark Obenstine (“Obenstine”), the sole remaining defendant in this action. (See Dkt. 1, Complaint at ¶¶ 17-20). On October 27, 2015, the operative complaint was filed, adding Abdi Naziri (“Naziri”) as a named plaintiff (collectively, Estakhrian and Naziri are referred to as “plaintiffs”). (See Dkt. 373, SAC). Plaintiffs assert causes of action for professional malpractice, breach of fiduciary duty, fraud, violations of California Business & Professions Code §§ 17200, et seq., violations of the California Consumers Legal Remedies Act, California Civil Code §§ 1750, et seq., and breach of contract. (See id. at ¶¶ 51-77).

         On February 4, 2017, the court granted plaintiffs' motion for class certification. (See Dkt. 500, Court's Order of February 4, 2017, at 32-33). On February 21, 2017, Obenstine, proceeding pro se, filed a petition for permission to appeal the court's class certification order pursuant to Rule 23(f) of the Federal Rules of Civil Procedure. (See Estakhrian v. Obenstine, No. CV 17-80026 (9th Cir.), Dkt. 1, Petition for Permission to Appeal). On May 17, 2017, the Ninth Circuit denied Obenstine's petition. (See id., Dkt. 8, Court's Order of May 17, 2017, at 1). On May 26, 2017, “[i]n light of the Ninth Circuit Court of Appeal's Order denying defendant Mark Obenstine's amended petition for permission to appeal the court's order granting class certification, and in an effort to get this matter to trial, ” (Dkt. 519, Court's Order of May 26, 2017, at 1), the court set this matter for trial on June 22, 2017. (See id. at 6). The court later vacated the trial date pending notice to the class pursuant to Rule 23(c)(2) of the Federal Rules of Civil Procedure. (See Dkt. 522, Court's Order of June 6, 2017, at 1).

         Although two classes had been certified on February 4, 2017, and the Ninth Circuit refused to grant Obenstine leave to challenge the court's certification order on May 17, 2017, Obenstine, on May 31, 2017, sent an email to 700[2] class members offering to settle the action for $1, 000 to the first 263 class members that responded to the email and requested a settlement agreement.[3](See Dkt. 523-2, Declaration of Nance F. Becker [] (“Becker Decl.”) at Exh. A). The subject line of Obenstine's email states, “Settlement Offer for $1, 000 for Purchasers of Units at the Cosmopolitan Resort Casino, ” (id. at ECF 13160), and provides that it constitutes a “confidential settlement communication” pursuant to Rule 408 of the Federal Rules of Evidence. (Id. at ECF 13160 & 13164). The email states that Obenstine is “willing to offer $1, 000.00 per Cosmopolitan unit to the first 263 purchasers who sign [his] settlement agreement, ” (id. at ECF 13160), and stresses that the settlement offer is “only available to the first 263 purchasers who accept [his] offer, ” because Obenstine “is not in a position to offer [] more money, ” and in fact, “the money being offered to [class members] is money [he] borrowed from family and friends.” (Id. at ECF 13161). Obenstine explains that, “in his professional opinion, ” he “only need[s] 263 purchasers to accept [his] settlement offer to end this lawsuit.” (Id. at ECF 13162).

         Obenstine's email asserts that plaintiffs, in their “desperat[ion] to move forward with [their] lawsuit, ” raised a “last-minute new theory” that “is subject to automatic exclusion, ” and is “legally frivolous and destined to fail.” (Dkt. 523-2, Becker Decl., Exh. A at ECF 13161). Obenstine contends that, “in his professional opinion, ” (id. at ECF 13162), “purchasers who are not residents of California will not be able to recover any money from [him] even if [he] lose[s] since [plaintiffs'] damages theory is predicated on a California statute that can not be applied extra-territorially.” (Id.).

         According to Obenstine, he wants to “do everything possible to end this lawsuit and thus the pain it has caused [Obenstine] and [his] family both emotionally and financially[.]”[4] (I d . at ECF 13161). Obenstine claims that he has “spent millions of dollars in defense of the fees [he] earned, ” which has “forced [him] to prepare to liquidate assets and [his] retirement account to pay [his] monthly bills[, ]” (id. at ECF 13162), and that he is “prepared to spend every last dollar in [his] possession to defend against this lawsuit due to [his] unwillingness to ever give [plaintiffs] and his attorneys a single dollar.” (Id.).

         Finally, Obenstine asserts that on June 30, 2017, he “will file a lawsuit against Mr. Estakhrian and his attorneys to recover the money [he] was forced to spend to defend against his lawsuit.” (Dkt. 523-2, Becker Decl., Exh. A at ECF 13162). According to Obenstine, “[o]nce [he] file[s] this lawsuit, [he] do[es] not believe the attorneys representing [Estakhrian] will be allowed to continue representing him and thus he will be forced to find new counsel or dismiss this lawsuit.” (Id. at ECF 13163). “Given the frivolousness of [the] lawsuit, [Obenstine] do[es] not think any reputable attorney will agree to represent [Estakhrian] once [Obenstine] remove[s] [Estakhrian's] attorneys for attempted extortion.” (Id.). Obenstine concludes the email by telling class members that “[i]f [they] would like to review a formal copy of [his] settlement agreement, ” (Dkt. 523-2, Becker Decl., Exh. A at ECF 13163), they should respond to his email and type “[s]end me a formal agreement to review.” (Id.).

         During the evidentiary hearing, Obenstine testified that approximately 60 to 65 class members requested a copy of the settlement agreement. Obenstine sent responsive emails confirming receipt and further responded that he would send the settlement agreement within a week or two. Obenstine also testified that he hired an assistant[5] who called approximately 40 class members to gauge their interest in separately settling their case with Obenstine. According to Obenstine, of the 40 class members contacted by telephone, one class member requested a copy of the settlement agreement. Although Obenstine has drafted the settlement agreement, he had not, as of the date of the evidentiary hearing, sent a copy of that agreement to any class member. Finally, Obenstine testified that he has not entered into any individual settlement agreement with any class member since the filing of the lawsuit.

         Plaintiffs first learned of Obenstine's email on June 5, 2017, from a class member. (See Dkt. 523-2, Becker Decl. at ¶ 2). That class member was “very reluctant to forward” the email to class counsel “because Obenstine had titled it a ‘Confidential Settlement Communication, '” (id. at ¶ 3), and because Obenstine stated that he “‘will' file a lawsuit against Mr. Estakhrian and his attorneys.” (Id.). “The class member concluded that if [the class member] forwarded the email, Obenstine might sue [the class member] as well.” (Id.).

         LEGAL STANDARD

         Rule 65 provides courts with the authority to issue temporary restraining orders and preliminary injunctions. Fed.R.Civ.P. 65(a) & (b). The purpose of a preliminary injunction is to preserve the status quo and the rights of the parties until a final judgment on the merits can be rendered, see U.S. Philips Corp. v. KBC Bank N.V., 590 F.3d 1091, 1094 (9th Cir. 2010), while the purpose of a temporary restraining order is to preserve the status quo before a preliminary injunction hearing may be held. See Wahoo Int'l., Inc. v. Phix Doctor, Inc., 2014 WL 2106482, *2 (S.D. Cal. 2014). The standards for a temporary restraining order and a preliminary injunction are the same. See Stuhlbarg Int'l Sales Co. v. John D. Brush & Co., 240 F.3d 832, 839 n. 7 (9th Cir. 2001); Rowe v. Naiman, 2014 WL 1686521, *2 (C.D. Cal. 2014) (“The standard for issuing a temporary restraining order is identical to the standard for issuing a preliminary injunction.”).

         “A preliminary injunction is an extraordinary remedy never awarded as of right.” Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 24, 129 S.Ct. 365, 376 (2008). “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.” Id. at 20, 129 S.Ct. at 374; Garcia v. Google, Inc., 786 F.3d 733, 740 (9th Cir. 2015) (en banc) (same). The Ninth Circuit also employs a “sliding scale” formulation of the preliminary injunction test under which an injunction could be issued where, for instance, “the likelihood of success is such that serious questions going to the merits [are] raised and the balance of hardships tips sharply in plaintiff's favor[, ]” Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1131 (9th Cir. 2011) (internal quotation marks and brackets omitted), provided the other elements of the Winter test are met. See Angelotti Chiropractic, Inc. v. Baker, 791 F.3d 1075, 1081 (9th Cir. 2015) ...


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