CCSAC, Inc. v. Pacific Banking Corp
3:20-cv-02102
N.D. Cal.Apr 8, 2020Background
- Plaintiffs CCSAC, Inc. and CANN Distributors, Inc. deposited >$2.8 million with Pacific Banking Corp. (PBC) under Capital Management Agreements.
- Plaintiffs allege PBC failed to execute directions and unilaterally transferred plaintiffs’ funds to GRN Funds, LLC, an entity controlled by PBC CEO Justin Costello.
- Plaintiffs sued for breach of contract, fraud, negligence, injunctive relief, and declaratory relief, and moved ex parte for a temporary restraining order (TRO) to preserve the deposits.
- Plaintiffs submitted affidavits showing a risk that PBC would immediately divert remaining funds and certified multiple, unsuccessful attempts to give notice to defendants.
- The court found plaintiffs satisfied Rule 65(b)’s exigency and notice excusal requirements, issued an ex parte TRO restraining defendants and associates from using/transferring the funds and from altering records, and waived a bond.
- TRO effective April 8, 2020 through April 22, 2020; preliminary injunction hearing set for April 22, 2020; defendants may seek modification/dissolution on two days’ notice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether ex parte TRO may issue under Rule 65(b) | Immediate, irreparable harm: PBC likely to divert remaining $2.8M; notice impracticable after repeated attempts | No timely opposition; defendants could not be located for hearing | Court granted ex parte TRO; found affidavits show imminent irreparable harm and notice excused under Rule 65(b) and McCord |
| Scope of injunctive relief | Enjoin use, transfer, or reduction of plaintiffs’ deposits and preservation of transaction records | No opposition presented; no negotiated narrower scope | Court enjoined defendants/agents from using/transferring funds and from deleting or altering deposit/transaction records |
| Requirement of bond under Rule 65(c) | Bond should be excused given public-interest/pecuniary circumstances and to avoid prejudicing plaintiffs | Not argued due to lack of notice | Court waived bond requirement (citing Jorgensen and Barahona-Gomez) |
| Timing and procedure for preliminary injunction / service | Prompt preliminary injunction hearing and continued service efforts | Defendants not served/located yet | Court set telephonic preliminary injunction hearing for April 22, 2020, ordered plaintiffs to file motion by April 13, 2020, and to continue service efforts; allowed defendants to move to modify/dissolve on two days’ notice |
Key Cases Cited
- Reno Air Racing Ass'n v. McCord, 452 F.3d 1126 (9th Cir. 2006) (standards for ex parte TROs and when notice may be excused)
- Granny Goose Foods, Inc. v. Brotherhood of Teamsters, 415 U.S. 423 (1974) (ex parte TROs limited to preserving status quo until a hearing)
- Jorgensen v. Cassiday, 320 F.3d 906 (9th Cir. 2003) (discussing circumstances where bond may be excused)
- Barahona-Gomez v. Reno, 167 F.3d 1228 (9th Cir. 1999) (permitting waiver of bond in certain preliminary relief contexts)