United States District Court, S.D. California
DANIEL J. SCHREIBER, individually and as Trustee of the Schreiber Living Trust, a California trust, Plaintiff,
REDHAWK HOLDINGS CORP., a Nevada corporation formerly known as Independence Energy Corp.;, Defendants.
WILLIAM Q. HAYES United States District Judge.
matter before the Court is the Ex Parte Application for
Temporary Restraining Order and Order to Show Cause RE:
Preliminary Injunction (ECF No. 16) filed by Plaintiff Daniel
Schreiber, individually and as Trustee of the Schreiber
Living Trust ("Plaintiff) on June 22, 2017.
April 24, 2017, Plaintiff initiated this action by filing the
Complaint (ECF No. 1). On June 5, 2017, Plaintiff filed proof
of summons returned executed for Defendants Felix C. Spizale,
Redhawk Holdings Corp., and Robert Rhune, Jr. (ECF Nos. 3,
5-6). On June 6, 2017, the parties filed a joint motion to
extend time for all Defendants to answer. (ECF No. 7). The
joint motion states that counsel for Defendants agreed to
accept service for Defendant RedHawk and the remaining
Defendants who had not yet been served in this matter.
Id. at 2. On June 8, 2017, the Court granted the
joint motion (ECF No. 8). On June 15, 2017, Plaintiff filed
proof of summons returned executed for Defendants Thomas J.
Concannon, Phillip Harris IV, Kav Hundle, G. Darcy Klug,
Redhawk Holdings Corp., and Andre F. Toce, Sr. (ECF Nos.
22, 2017, Plaintiff filed the Ex Parte Application for
Temporary Restraining Order and Order to Show Cause RE:
Preliminary Injunction (ECF No. 16). On June 22, 2017,
Defendants RedHawk Holdings Corp., Thomas J. Concannon, G.
Darcy Klug, Felix C. Spizale, Phillip Harris IV, Andre F.
Toce, Sr., Robert Rhyne, Jr., and Kav Hundle
("Defendants") filed a preliminary
opposition to the Ex Parte Application for Temporary
Restraining Order and Order to Show Cause RE: Preliminary
Injunction (ECF No. 17).
Allegations of the Complaint (ECF No. 1)
alleges that he "is a former Director and Chief
Executive Officer of RedHawk, a publicly traded company[,
]" and the Schreiber Living Trust "(the
'Trust') is the owner of common shares in RedHawk.
Schreiber is the Trustee of the Trust." (ECF No. 1 at
¶ 1). "Since on or around September 28, 2016,
RedHawk, by and through its officers and Board of Directors,
has sought to obstruct the Trust's sale of its shares in
RedHawk." Id. at ¶ 2. "[T]hese
efforts included an unfounded demand to RedHawk's
transfer agent to prohibit sales of Plaintiff s stock, delays
in filing required SEC forms and, more recently, the
termination of RedHawk's transfer agent."
was appointed as a Director to RedHawk's Board of
Directors on March 31, 2014. Schreiber was also the CEO of
RedHawk from February 27, 2015." Id. at ¶
18. "In a sale and purchase transaction dated March 31,
2014, the Trust was issued 57, 064, 608 shares of restricted
RedHawk stock." Id. at ¶ 19. "Due to
a strained personal and business relationship between Klug
and Schreiber . . . Schreiber was removed from the Board of
Directors on April 20, 2016, and resigned as CEO on July 5,
2016." Id. at¶20. "After Schreiber
was removed from his officer and director roles with RedHawk,
Schreiber sought to cut all ties with the company and began
selling the Trust's restricted shares of RedHawk."
Id. at ¶ 23.
Trust sought to sell its restricted stock to the public under
the registration exemption provisions of the Security and
Exchange Commission ('SEC') Rule 144[.]"
Id. at ¶ 24. "The general conditions of
Rule 144 .. . limit Plaintiff to selling one percent (1%) of
the total outstanding RedHawk shares every 90 days, which as
of December 31, 2016, totaled 361, 049, 027 shares; i.e.
Plaintiff can sell approximately 3.6 million shares every 90
days." Id. "Between September 2016 and
January 19, 2017, Plaintiff sold 3, 120, 000 shares of
RedHawk pursuant to the Rule 144 requirements . . . [d]ue to
RedHawk missing multiple SEC filing requirements, Plaintiff s
subsequent sales were delayed and the Trust has been
damaged." Id. at ¶ 25.
or about January 25, 2017, Plaintiff requested that
RedHawk's transfer agent, Continental Stock Transfer
& Trust Company ('Continental'), remove the
restrictive legend on an additional 1, 500, 000 of the
Trust's shares." Id. at ¶ 26.
Plaintiff alleges that "[o]n January 31, 2017, the CFO
of RedHawk, Klug, sent a letter requesting that Continental
'not permit or otherwise facilitate the transfer' of
RedHawk shares" and "reference[d] a lawsuit by
RedHawk and another entity . . . filed against Plaintiff in
the United States District Court for the for the Eastern
District of Louisiana[.]" Id. at ¶ 27.
"[O]n February 15, 2017, Continental notified Plaintiffs
counsel that Continental had received the issuer's
written consent to proceed with the requested sale transfer
of 1, 500, 000. Because the Rule 144 opinion letter extended
only until February 15, 2017, however, the transfer could not
be completed by that same day and Continental requested a
subsequent letter be issued." Id. at
¶¶ 31 -32. "In order for Plaintiff to receive
an updated Rule 144 opinion letter then, he needed to wait
until RedHawk filed its Form 10-Q. . . . RedHawk did not file
its updated 10-Q, however, until March 13, 2017, nearly a
month late." Id. at ¶¶ 33, 35.
RedHawk's intentional delays, when Plaintiff was finally
able to again request that the restrictive legend on the
Trust's shares be removed in March 2017, RedHawk
again delayed Plaintiffs sale by secretly
terminating its relationship with its transfer agent."
Id. at ¶ 36. "On April 6, 2017,
Continental informed Plaintiffs broker it was 'not
currently servicing' RedHawk as a transfer agent as its
services had been "suspended" by RedHawk. . . .
RedHawk did not notify the public that it was now operating
without a transfer agent. . . . Accordingly, RedHawk mislead
the investing public by its failure to file a Form 8-K
regarding this material change." Id. at
¶¶ 37, 39, 41.
April 13, 2017, counsel for Plaintiff demanded a response
from RedHawk regarding its transfer agent situation. As of
the date of filing this complaint, RedHawk has not
responded." Id. at ¶ 42. "To-date,
Plaintiff has been unable to transfer the Trust's shares
in RedHawk and has been damaged as a result."
Id. at ¶ 43. "[A]t a minimum,
Defendants' actions have caused Plaintiff to miss sales
of at least 7.2 million shares. From September 2016 through
the date of this complaint, RedHawk shares have traded
between one and two cents, meaning that Defendants'
actions have caused Plaintiff to lose sales between $72, 000
and $144, 000. Further, Defendants' actions have devalued
all of Plaintiffs outstanding 53, 944, 608 shares by delaying
or preventing their future sale at the earliest possible
date." Id. at ¶ 43.
Ex Parte Application for Temporary Restraining Order and
Order to Show Cause RE: Preliminary Injunction (ECF No.
requests the Court issue an order restraining Defendant
RedHawk "from blocking the transfer of Plaintiff s
common shares of RedHawk" and allowing Plaintiff
"to sell his shares to interested third-parties."
(ECF No. 16 at 2). Plaintiff contends that it continues to
suffer harm as the price of RedHawk's stock has declined
in value and Plaintiffs opportunity to sell his shares
"become scarcer." (ECF No. 16-1 at 4). Plaintiff
contends that on June 14, 2017, "RedHawk filed its Form
10-Q Quarterly Report with the [SEC]" which demonstrates
"a substantial decrease in the company's current and
total assets since 2016[, ] a net decrease in the
company's cash[, ]" and that RedHawk intends to sell
two real estate assets in 2017. Id. at 5. Plaintiff
further contends that "RedHawk's CFO [Defendant
Klug] recently made clear that RedHawk's refusal to
transfer Plaintiffs shares has nothing to do with any legal
objection to the transfer, but is instead contingent upon a
'global resolution' of disputed claims between the
contends that "[w]ithout an injunction preventing
RedHawk from further interfering with Plaintiffs right to
sell his shares, Plaintiff will be harmed irreparably because
RedHawk has explicitly made clear its intention to block
Plaintiffs transfer of shares while simultaneously selling
off the company's assets, leaving Plaintiff with no
remedy if and when he prevails at trial in this matter."
Id. at 6. Plaintiff contends that "[f]ormal
notice is not ...