The Litigation Practice Group P.C.
8:23-bk-10571
Bankr. C.D. Cal.Aug 27, 2024Background
- LPG (The Litigation Practice Group, P.C.) filed Chapter 11 on March 20, 2023; widespread allegations and evidence presented to the Court portrayed prepetition commingling, misappropriation of client funds, and possibly a Ponzi-like operation.
- Richard A. Marshack was appointed Chapter 11 Trustee on May 8, 2023; he filed an adversary complaint alleging Diab and affiliated entities (including Phoenix and initially Greyson) received fraudulent transfers.
- The Court entered an ex parte TRO/lockout (May 26, 2023), amended June 2, and after a hearing issued a Preliminary Injunction (June 23, 2023) authorizing lockout and seizure/control of certain data, email accounts, cloud storage, and related assets to preserve estate property.
- Greyson Law Center PC, and principals Phuong ("Jayde") Trinh and Han Trinh, were shown by the record to have deep operational ties to LPG and to have participated in client-file transfers to entities like Phoenix/Oakstone while simultaneously working for Greyson.
- Greyson moved (Dec. 6, 2023) to vacate the TRO/preliminary injunction as to Greyson and to order return of seized items (computers, Microsoft/OneDrive data, emails, domain), arguing the injunction was improperly premised on a false alter-ego allegation; Trustee opposed.
- The Court held an evidentiary-record review and hearing, found Greyson’s evidence and witness credibility lacking, concluded the injunction was not predicated on an alter-ego misrepresentation but on Greyson’s intimate involvement with LPG and fraudulent transfers, and denied the motion in full except to require return of Greyson’s public website/domain under monitoring conditions.
Issues
| Issue | Plaintiff's Argument (Greyson) | Defendant's Argument (Trustee/Marshack) | Held |
|---|---|---|---|
| Whether the May 26, 2023 TRO should be vacated | TRO was superseded/misobtained as to Greyson because it relied on a false alter-ego allegation | TRO was superseded by the later Preliminary Injunction; no grounds to vacate after injunction | Denied — TRO was superseded by the Preliminary Injunction; Greyson gave no basis to vacate it post-injunction |
| Whether the Preliminary Injunction should be vacated or modified | Injunction as to Greyson is invalid because it was obtained via misrepresentation and exceeded authority (invoking FRCP 60(b)(3)) | No significant change in law/facts; injunction properly issued based on record showing Greyson’s role; interlocutory order not subject to Rule 60(b) relief | Denied — Greyson failed to show a significant change or fraud warranting dissolution; Rule 60(b) inapplicable to interlocutory injunction |
| Whether issuing a preliminary injunction was improper in a fraudulent-transfer adversary | Injunction was unnecessary in fraudulent-transfer context and atypical (Greyson stresses rarity) | Ninth Circuit and bankruptcy law permit injunctions and asset freezes when equitable relief is sought and fraudulent transfers alleged | Denied — court has authority to enjoin asset access in fraudulent-transfer adversaries; injunction appropriate here |
| Whether seized property must be returned (computers; Microsoft/email data; domain/website) | Seized items either belonged to Greyson personally or were paid for with non-LPG funds and thus exceed injunction scope | Evidence shows commingling and transfers from LPG; Trustee lawfully seized estate-related data/accounts under injunction | Partially granted: court refused return of computers, Microsoft account, and email accounts (Greyson did not prove separate ownership); ordered return of public domain/website only, subject to Trustee monitoring and conditions |
Key Cases Cited
- Flynt Distrib. Co. v. Harvey, 734 F.2d 1389 (9th Cir. 1984) (preliminary injunctions may rest on affidavits and even some otherwise inadmissible evidence to prevent irreparable harm)
- Johnson v. Couturier, 572 F.3d 1067 (9th Cir. 2009) (district court may rely on the record and equitable considerations when issuing injunctions)
- Rubin v. Pringle (In re Focus Media Inc.), 387 F.3d 1077 (9th Cir. 2004) (preliminary injunctions available in adversary proceedings alleging fraudulent conveyances)
- Grupo Mexicano De Desarrollo v. Alliance Bond Fund, Inc., 527 U.S. 308 (1999) (scope of equitable relief and asset-freeze authority addressed)
- Credit Suisse First Bos. Corp. v. Grunwald, 400 F.3d 1119 (9th Cir. 2005) (district court retains discretion to reconsider interlocutory orders for new circumstances)
- Karnoski v. Trump, 926 F.3d 1180 (9th Cir. 2019) (party seeking modification of an injunction bears burden to show significant change in facts or law)
- Prudential Real Est. Affiliates, Inc. v. PPR Realty, 204 F.3d 867 (9th Cir. 2000) (Rule 60(b) addresses relief from final judgments; interlocutory orders are governed by court's inherent power)
- Sys. Fed'n No. 91 v. Wright, 364 U.S. 642 (1961) (district courts have broad authority to modify or overturn interlocutory orders)