Magma Holdings, Inc. v. Au-Yeung
2:20-cv-00406
D. Nev.Mar 16, 2020Background
- Plaintiffs Magma Holding, Inc. and Meta Lab, Inc. (wholly owned subsidiaries of Moti) allege defendant Ka Tat “Karter” Au‑Yeung was a senior operative with signatory and administrator access to company bank accounts, e‑commerce platforms (Shopify, BigCommerce), GoDaddy domains (eightvape.com, eightcig.com), and the company Google G Suite.
- Plaintiffs allege Karter made multiple unauthorized transfers (including $150,000, another $150,000, and transfers aggregating $6.15 million to his personal account) beginning January 6, 2020, and later moved additional funds and caused Wells Fargo to freeze accounts, depriving plaintiffs of access to over $9 million.
- Plaintiffs allege Karter seized or transferred control of domain registrations and e‑commerce accounts, instructed Shopify and BigCommerce that he owned certain domains, and retained "super admin" control over Google G Suite, effectively blocking plaintiffs from operating their online stores that account for 100% of sales.
- Plaintiffs also allege misappropriation of confidential business data (Shopify product and customer databases) downloaded by a Magma employee at Karter’s direction, and that Karter breached a Confidential Information and Invention Assignment Agreement and other duties.
- Plaintiffs sought an ex parte temporary restraining order (TRO) and preliminary injunction to (1) enjoin use/disclosure of trade secrets, (2) freeze and return $6.15 million, (3) bar further transfers from plaintiffs’ Wells Fargo accounts, (4) prohibit Karter from representing himself as an authorized company representative to vendors, and (5) require return of passwords and materials.
- The court granted the ex parte TRO, finding plaintiffs showed likelihood of success on multiple claims and irreparable harm; it enjoined Karter from specified acts, ordered return of confidential information/passwords, and required Karter to deposit $6.15 million with the Clerk within five business days.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Unauthorized transfers / asset dissipation | Karter transferred millions without board authorization; funds must be frozen/returned to preserve status quo. | Karter refused to reverse transfers and sought a buy‑out; he has asserted ownership/control in communications. | TRO granted: enjoined further transfers; ordered Karter to deposit $6.15M with the Clerk to restore status quo. |
| Control of domains and e‑commerce platforms | Karter retains admin access to GoDaddy, Shopify, BigCommerce and can disable or divert sites that generate 100% of sales. | Karter claimed he registered domains and asserted ownership to third‑party vendors. | TRO granted: enjoined Karter from holding himself out as authorized representative or interfering with Eightvape.com and Eightcig.com. |
| Misappropriation of confidential information / trade secrets | Plaintiffs allege large downloads of product/customer data and claim Karter (via agent) will use it to compete—violations of DTSA and CFAA. | Implicitly disputed ownership/use; no substantive opposing filing in record. | Court found plaintiffs likely to succeed on DTSA, CFAA, and misappropriation claims and enjoined use/disclosure of confidential information. |
| Ex parte TRO standard / irreparable harm | Immediate relief necessary because Karter’s control threatens imminent and irreparable business harm and loss of goodwill. | (No effective opposition presented; defendant had not appeared.) | Court found Rule 65(b) met, irreparable harm demonstrated, and Winter factors satisfied; issued TRO and set preliminary injunction hearing. |
Key Cases Cited
- Reno Air Racing Ass'n v. McCord, 452 F.3d 1126 (9th Cir. 2006) (ex parte TROs should be limited to preserving the status quo pending a hearing)
- Granny Goose Foods, Inc. v. Brotherhood of Teamsters, 415 U.S. 423 (U.S. 1974) (purpose and limits of temporary restraining orders)
- Stuhlbarg Int'l Sales Co. v. John D. Brush & Co., Inc., 240 F.3d 832 (9th Cir. 2001) (TRO and preliminary injunction analyses are substantially identical)
- Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7 (U.S. 2008) (four‑factor framework for preliminary injunctions)
- Wells Fargo & Co. v. ABD Ins. & Fin. Servs., Inc., 758 F.3d 1069 (9th Cir. 2014) (citing Winter and discussing preliminary injunction standards)
- Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1127 (9th Cir. 2011) (serious questions test remains viable as an alternative to a likelihood‑of‑success showing)