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1 Marshall E. Bluestone, Esq. (SBN 151632)
BLUESTONE FAIRCLOTH & OLSON, LLP
2 1825 4th Street
Santa Rosa, CA 95404
3 Telephone: 707-526-4250
Facsimile: 707-526-0347
4 inarshall@bfolegal.com
5 Attorneys for The Duggan Family Limited Partnership,
a California Limited Partnership
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8 SUPERIOR COURT OF THE STATE OF CALIFORNIA
9 COUNTY OF SONOMA
10 SEAN DUGGAN, an individual, on his own Case No. SCV-268905
behalf and derivatively on behalf of the Duggan
11 Family Limited Partnership; DECLARATION OF MARSHALL E.
BLUESTONE IN SUPPORT OF OPPOSITION
12 Plaintiffs, TO PLAINTIFF’S EX PARTE APPLICATION
FOR (1) APPOINTMENT OF RECEIVER; AND
13 v. (2) PRELIMINARY INJUNCTION
14 LYNN DUGGAN, an individual; and DOES 1 Date: June 21, 2022
through 25, inclusive, Time: 10:00 a.m.
15 Dept.: 17
Defendants,
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[UNLIMITED CIVIL]
17 -and-
ASSIGNED FOR ALL PURPOSES:
18 THE DUGGAN FAMILY LIMITED
PARTNERSHIP, a California Limited Judge: Bradford DeMeo
19 Partnership, KELLY MOFFAT, an individual, Department: 17
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Nominal Defendants.
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23 I, Marshall E. Bluestone, declare:
24 1. I am an attorney at law licensed to practice in the State of California. I am a member of
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Bluestone Faircloth & Olson, LLP, counsel for defendant The Duggan Family Limited Partnership, a
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California Limited Partnership. I have personal knowledge of the following and am competent to testify
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thereto.
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SCV-268905: Declaration of Marshall E. Bluestone In Opposition of Plaintiff s Ex Parte Application 1
1 2. On May 3, 2022, Counsel for Plaintiff Sean Duggan filed a motion 1 requesting the Court
2 to (1) Appoint a Receiver over the Duggan Family Limited Partnership, a California limited partnership
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(“LP”), and (2) An injunction to prevent the Managing Partners from selling the Lakeside Shopping
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Center (Comer of Montgomery Drive and Summerfield Road). Attached as Exhibit A is a true and
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correct copy of the email notice. The motion was opposed by the other two members of the LP,
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7 Defendants Lynn Duggan and Kelly Moffat, Sean Duggan’s father and sister.
8 3. After full briefing on the issues, the Court denied Plaintiffs motion on May 19, 2022. A
9 true and correct copy of the Court’s May19, 2022, Order is attached hereto as Exhibit B.
10 4. On June 17, 2022, 1 received an email from Plaintiff’s Counsel notifying all Defendants
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that Plaintiff once again would be seeking an ex parte order for the identical relief: (1 ) Appointment of a
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Receiver and (2) An Injunction. Attached as Exhibit C is a true and correct copy of the email notice.
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This notice is almost identical to the notice provided to Defendants before the Court denied Plaintiffs
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15 motion as set forth in Exhibit A.
16 5. In Exhibit C. Plaintiff cites “two grounds” for bringing this second motion within a month
17 and a half to appoint a receiver and have an injunction issued. First, Plaintiff states, “Sean Duggan
18 recently learned through his own investigation that the GP [general partner- Lynn Duggan] . . . has
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placed the DFLP Property under contract for sale, . . .” and that the GP will be “sold without due
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authorization of authority,” claiming that alleged breaches by the GP require him to forfeit his GP
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interest and therefore, he does not have authority to sell assets of the LP. However, Plaintiff did not just
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23 discover the property was for sale. In the prior motion, the “GP,” Sean’s father Lynn Duggan, provided a
24 declaration to the Court that stated that he had the Property under contract for sale and identified the
25 buyer. (See Request for Judicial Notice, Supplemental Declaration of Sean Duggan dated May 13, 2022,
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In Opposition to Appointment of Receiver and Issuance of Injunction, 12.) Plaintiff and the Court were
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1 The original notice was for ex parte application, but by stipulation the parties agreed on a noticed
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motion on shortened time.
SCV -268905: Declaration of Marshall E. Bluestone In Opposition of Plaintiff s Ex Parte Application 2
1 both informed that the Property was under contract for sale. (See Order, Ex. B, 5:1.) In fact, because of
2 Plaintiff s motion, a provision was put in the purchase and sales contract making the sale contingent on
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the outcome of Plaintiff s motion which was also disclosed to the Plaintiff and the Court in Lynn
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Duggan’s Supplemental Declaration. (See Supp. Duggan Decl., f 3., Order, Ex. B, 5:1.)
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6. Second, Plaintiff has already argued to the Court that the GP was without authorization to
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7 sell the Property and therefore, a receiver must be appointed. (See Plaintiffs Reply to Defendants’
8 Opposition [dated May 13, 2022], 5:18-19 [“Lynn Duggan is no longer authorized under the Partnership
9 Agreement, as amended, to agree to sell the Property”].) The Court fully understood Plaintiffs position
10 and rejected it as the Court recited Plaintiffs argument in its Order, noting “Plaintiff asserts Defendant
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Duggan should no longer be acting as the Managing General Partner and as such should not have the
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authority to sell Partnership Property. [Emphasis added].” -
(Ex. B, Order, 6:19 20.) Finally, at oral
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argument, Plaintiffs counsel argued extensively that Lynn Duggan, the GP, is no longer authorized to sell the
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Property because of claimed breaches and the Court rejected this entire argument. This is the same argument
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16 as in the first motion and essentially a motion for reconsideration that is untimely and not based upon new
17 facts or law.
18 7. Similarly, Plaintiff states “having recently received the partnership tax returns” ( Ex. A, second
19 to last paragraph ), he is aware of improper distributions. In his current ex parte notice, Plaintiff states
20 “having just recently received the partnership tax returns,” he is now aware of improper distributions. (Ex. C,
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second to last paragraph.) Again, this is the identical argument that was made in front of the Court when the
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motion was denied. Furthermore, Plaintiff extensively argued the improper distributions in both the moving
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and reply papers and the Court rejected the argument. (See Plaintiffs Moving Papers, dated May 3, 2022, p.
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5 [heading: “g. Subsequent and Pre-Pandemic Distributions Improperly Calculated.”]; Plaintiffs Reply, p. 6;
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26 Ex. B Court Order, 6:19-26.) Once again, the identical argument, based upon identical facts and the Court
27 has already rejected these facts, law and argument. This is simply a motion for reconsideration that is
28 untimely and not based upon new law or facts.
SCV-268905: Declaration of Marshall E. Bluestone In Opposition of Plaintiff s Ex Parte Application 3
1 8. Finally, in a meet and confer telephone call between all counsel, I inquired what new facts
2 were present that were not present before the first motion for a receiver. Plaintiffs counsel informed us
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that the new fact was that Plaintiffs counsel had sent a letter to the new buyer of the property after the
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Court’s ruling informing the buyer of the pending litigation and Plaintiffs position that the GP has no
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authority to sell. First, this is not a new fact or law, but just the same argument that Plaintiff made in the
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7 first motion. Second, this ‘new’ fact is a creation of Plaintiff by serving a letter on the buyer of the
8 property . This is not a new fact relevant to the motion. If this were enough to create a new fact, then
9 every motion filed by a losing party could be “revived” by a letter to opposing party or a third party as a
10 “new” fact and the Courts would be hearing the identical motions over and over. This is not the law nor
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should it be.
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I declare under penalty of perjury under the laws of the State of California that the foregoing is
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true and correct.
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15 Executed this 20th day of June, 2022, at Santa Rosa, California.
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tarshall E. Bluestone
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SCV -268905: Declaration of Marshall E. Bluestone In ODDOsition of Plaintiff s Ex Parte Application 4
Exhibit A
.
From: chenjoy @gtlaw com .
Sent: Friday, June 17, 2022 10:38 AM
.
To: AOIsen@ nheh com; Marshall Bluestone ;
MShklovsky @andersonzeigler.com
Cc: mccurdyl@gtlaw com .
Subject: Duggan v .Duggan - Ex Parte Application - Meet and Confer
Counsel,
Please be advised that, based on new and recently-learned facts, Plaintiff Sean Duggan intends to file an
ex parte application in Department 17 of the Sonoma County Superior Court, on Tuesday, June 21, 2022
for review at 10:30 a.m. The ex parte application will seek an order:
1 . Appointing a receiver ("Receiver") to take possession of the books and records of the
Partnership, including with respect to that certain real property described in the Complaint
("Property") and, in doing so, to assume control of the Partnership;
2 . Empowering and authorizing the Receiver to review and analyze the propriety of Partnership
transactions in the last ten years, including but not limited to distribution decisions, and loan
repayments, and to report to the Court regarding the same;
3. Empowering, authorizing and requiring the Receiver to review the terms of any proposed sale of
the Property and to make a recommendation thereon to the Parties;
4 . To show cause, pursuant to California Rules of Court 3.1150 and 3.1176, and California Code of
Civil Procedure § 527(d), why the appointment of the Receiver should not be confirmed and the
Temporary Restraining Order (the "TRO") requested herein converted into a preliminary
injunction on substantially the same terms as the TRO, made returnable no later than 15 days
from the date of issuance thereof; and
5 . Issuing a TRO in aid of the Receiver as follows:
a. requiring Defendant LYNN DUGGAN, as General Partner ("GP") of the Duggan Family
Limited Partnership ("DFLP" or "the Partnership") and all those acting in concert with,
for or on his behalf (collectively, "the GP") to turn over, and to prevent the GP from
denying, interfering with or preventing the Receiver's access to, the Property as well as
all books, records and accounts relating to the Property and the Partnership;
b. enjoining the GP, his agents, servants and employees, and all persons acting under, in
concert with, through or for any of them from:
i. interfering with or hindering, in any way whatsoever, the Receiver, or his
agents, officers, employees and servants, in the performance of any duties
incident thereto;
ii. transferring, concealing, destroying, defacing, or altering any of the instruments,
documents, books, records, or other writings relating to the Partnership or
Property, or any portion thereof; or
.
iii selling, disposing of, transferring, encumbering, distributing, or otherwise
alienating or hypothecating any assets of the DFLP, except that the Partnership
may use cash on hand and/or proceeds from the sale of stocks and bonds on an
as-need basis to pay administration expenses without further order of the
Court; notwithstanding the foregoing, neither the Parties nor the Court are
approving such payments, all of which shall be subject to review in the ordinary
course.
6. Approving, pursuant to California Rule of Court 3.1178 and California Code of Civil Procedure §§
529, 566(b) and 567(b), an undertaking by each of the applicant and the Receiver in the amount
of $2,500.
This application will be presented on an ex parte basis on two grounds. First, Sean Duggan recently
learned through his own investigation that the GP, who is no longer in a position to take such action, has
placed the DFLP Property under contract for sale, presumably at the same or similar dramatically-
reduced price previewed previously, done without agreement of, or even notice to, the limited partners;
the terms of the pending sale have not been disclosed. Thus, without oversight and the Court'
intervention, the Property will be lost, sold without due authorization of authority . Whether the tactic
is being used in the hopes of ending the litigation, or to obtain a quick payout, a receiver is appropriate
here to oversee any sale, ensure that the Partnership obtains full and fair value for the Property and to
ensure that the partner interests are thereby protected.
Second, having just recently received the partnership tax returns, it is apparent that, in fact, the
Partnership is failing to properly account for and allocate the partnership points in the manner required
by the Partnership Agreement Amendment following the defaults discussed herein, resulting in
improperly calculated distributions as discussed further herein. And (additionally and separately ), the
tax returns demonstrate that Plaintiff (and all Limited Partners) has not received the distributions to
which he is entitled per the tax return, even leaving aside the incorrect partnership point allocation.
Indeed, this has been going on back to at least 2011.
Please note that, per the rules of court, a hearing will not take place on this matter on June 21, 2022
(unless otherwise ordered by the Court). Also pursuant to the rules of court, please advise if you will
oppose the ex parte application; and if so, please advise when you are available to meet and confer on
Monday.
Best,
Joy
Joy Chen
Associate
Greenberg Traurig, LLP
1840 Century Park East | Suite 1900 | Los Angeles, CA 90067-2121
T +1 310.586.7706 | F +1 310.586.7800
cheniov@atlaw.com | www.atlaw.com | View GT Biography
9GreenbergTraurig
If you are not an intended recipient of confidential and privileged information in this email, please
delete it, notify us immediately at postmaster @ gtlaw.com. and do not use or disseminate the
information.
Exhibit B
F I L E D
THE HONORABLE ARTHUR A. WICK SUPERIOR COURT OF CALIFORNIA
COUNTY OF SONOMA
1 SUPERIOR COURT OF CALIFORNIA
COUNTY OF SONOMA MAY 19 2022
2 3035 Cleveland Avenue
^
Santa Rosa, CA 95403 BY.
3 Telephone: (707) 521 6725 - De tyClerk
4
5
6 SUPERIOR COURT OF CALIFORNIA, COUNTY OF SONOMA
7
8
9
SEAN DUGGAN, an individual, on his own
behalf and derivatively on behalf of the
Case No. -
SCV 268905
Duggan Family Limited Partnership, ORDER AFTER HEARING
10 MAY 18, 2022
Plaintiff,
11
vs.
12
LYNN DUGGAN, an individual; and DOES 1
13 through 25, inclusive,
14 Defendants,
15 -and-
16 THE DUGGAN FAMILY LIMITED
PARTNERSHIP, a California Limited
17 Partnership; KELLY MOFFAT, an individual,
18 Nominal Defendants.
19
20 This matter came before the court on May 18, 2022 in Department 17, via zoom, before
21 The Honorable Arthur Wick. Counsels Lisa McCurdy and Joy Chen appeared on behalf of
22 Plaintiff Sean Duggan, who was present. Counsel Anne Olsen appeared on behalf of Defendant
23 Lynn Duggan. Counsel Marshall Bluestone appeared on behalf of Defendant The Duggan
24 Family Limited Partnership. Counsel Michael Shklovsky appeared on behalf of Defendant Kelly
25 Moffat.
26 Motion to Appoint Receiver and for Preliminary Injunction is DENIED.
27 //
28 //
Facts and History
2 On July 27, 2021, Sean Duggan (“Plaintiff ’) filed this action alleging breach of contract
3 and breach of fiduciary duty by Lynn Duggan (“Defendant Duggan”) and, as a nominal
4 defendant, The Duggan Family Limited Partnership (“DFLP” or the “Partnership”).
5 On July 29, 2021, Plaintiff filed the presently operative First Amended Complaint
6 (‘TAC”) requesting declaratory relief and alleging breach of contract and breach of fiduciary
7 duty by Defendant Duggan and, as nominal defendants, the Partnership and Kelly Moffat
8 (“Defendant Moffat”) (collectively “Defendants”) .
9 The Partnership was formed in November 1997 by the Agreement of Limited Partnership
10 -
(“Agreement”). After the original co General Partners passed away Defendant Duggan became
11 General Partner, and the Limited Partners were Plaintiff, Defendant Duggan, and Defendant
12 Moffat (collectively “Partners”). The Partnership owns property located at 530, 535, 551, 554,
13 567, 569, 573, and 585 Summerfield Road in Santa Rosa, California (“Partnership Property”). As
14 the Managing General Partner Defendant Duggan receives a monthly management fee of
15 $2,000.00.
16 In February 2014, the Partners entered into the First Amendment to the Agreement
17 (“Amendment”) to allow Defendant Duggan to secure a loan from the Partnership. The Partners
18 agreed to approve the Partnership borrowing a $510,000.00 loan (“Bank Loan”), which was
19 secured by the Partnership Property. The Partnership obtained the Bank Loan and then loaned
20 $510,000.00 to Defendant Duggan (“General Partner Loan”). Each loan was evidenced by a
21 Promissory Note. Defendant Duggan setup a monthly automatic payment to the Partnership of
22 $2,921.38 to be used for payment of the Bank Loan by having the Partnership deduct the
23 payment directly from his partnership distributions.
24 In March 2020, due to the COVID pandemic, the Partnership temporarily ceased
25 partnership distributions. At this time, Plaintiff and Defendant Duggan discussed how Defendant
26 Duggan would make the total monthly General Partner Loan payment to the Partnership.
27 Defendant Duggan stated he would make the payment by having the Partnership deduct his
28 $2,000.00 monthly management fee and paying the Partnership $921.38 by personal check,
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which Plaintiff agreed “should work.”
2 In February 2021, the Partnership’s bookkeeper, C. Edward Turner, discovered an error
3 in the Partnership’s financials in which it debited $5,788.78 from Defendant Duggan’s capital
4 account as payment toward the loan. Mr. Turner informed Defendant Duggan, who prior to this
5 time was unaware of the error, and who reimbursed the Partnership $5,788.78.
6 In January 2021, Defendant Duggan and Defendant Moffat entered into an agreement
7 where Defendant Duggan sold 1% of his General Partner interest to Defendant Moffat for
8 $125,000.00. Plaintiff objected by sending a Notice of Default to Defendant Duggan and
9 Defendant Moffat. Defendant Duggan and Defendant Moffat did not move forward with the sale
10 at that time.
11 In May 2021, Defendant Duggan and Defendant Moffat finalized Defendant Moffat’s
12 purchase of 1% of Defendant Duggan’s General Partner interest to for $125,000.00. Plaintiff
13 again objected by informing Defendant Duggan and Defendant Moffat he believed the
14 transaction was a breach of the Amendment.
15 On July 21, 2021, Plaintiffs attorney was informed the loan had been paid in full.
16 Defendant Moffat refinanced her home and used the funds to pay the loan in full.
17 On May 13, 2022, Defendant Duggan and Defendant Moffat, on behalf of the
18 Partnership, entered a fully executed Purchase Agreement and Escrow Instruction with Epic
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Ventures Holding Inc. (“Buyer”) for the Partnership Property. It is an all cash offer. Under the
20 Purchase Agreement, the parties provided for the contingency of the outcome of this hearing, by
21 allowing that Buyer the option to cancel the Purchase Agreement.
22
23 Motion
24 Plaintiff moves the court to (1) appoint a receiver for the Partnership and (2) issue a
25 preliminary injunction pending the resolution of this action to protect the Partnership and its
26
27 //
28 //
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1 Appointment of Receiver
2 Plaintiff requests the court appoint a receiver “to take possession of the real property at
3 issue, to exercise control and authority over the rents and profits (as well as the books and
4 records)” of the Partnership and “to review the terms of any proposed sale of the Property to
5 make a recommendation thereon.” (Plaintiffs Memorandum of Points and Authorities (“P’s
6 MP&A”), p. 2:3 7.) -
7 Plaintiff contends a receiver should be appointed, first, because Defendant Duggan is
8 “now attempting to sell the DFLP Property at a dramatically -reduced price of $10.5 million,
9 down from $13 million, done without the agreement of, or even notice to, the limited partners”
10 and, second, because distributions made by the Partnership have been improperly calculated. (P’s
11 MP&A, p . - -
11:23 25; 12:3 6.) Plaintiff maintains that Defendant Duggan should no longer be in
12 the position of General Partner due to his breaches of the Agreement. (Plaintiffs Reply in
13 Support of Motion for Receiver (“Reply”), p. 1:6 8.) -
14 The court may appoint a receiver “[i]n an action ... between partners or others jointly
15 owning or interested in any property or fund, on the application of the plaintiff, or of any party
16 whose right to or interest in the property or fund, or the proceeds of the property or fund, is
17 probable, and where it is shown that the property or fund is in danger of being lost, removed, or
18 materially injured” or “[i]n all other cases where necessary to preserve the property or rights of
19 any party.” (Code Civ. Proc. § 564, subd. (b)(1); (b)(9).)
20 The appointment of a receiver is a provisional equitable remedy. (Southern California
21 Sunbelt Developers, Inc. v. Banyan Limited Partnership (2017) 8 Cal.App.5th 910, 925.) To
22 appoint a receiver under section 564, subdivision (b)(1), the trial court must determine whether
23 the “property or fund is in danger of being lost, removed, or materially injured.” Ordinarily, if
24 there is any other remedy besides appointment of a receiver, and the other remedy is less severe
25 in its results and will adequately protect the rights of the parties, court should not appoint
26 receiver. -
( Alhambra Shumway Mines, Inc. v. Alhambra Gold Mine Corp. (1953) 116
27 Cal.App.2d 869, 873.) However, the availability of other remedies does not, in and of itself,
28 preclude the appoint of a receiver. ( Sibert v. Shaver (1952) 113 Cal.App.2d 19, 21 ) Rather, a .
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1 court must consider the availability and efficacy of other remedies in determining whether to
2 employ the extraordinary remedy of a receivership. ( City and County of San Francisco v. Daley
3 (1993) 16 Cal.App.4th 734, 745 ) .
4
5 Sale of Property bv General Partner
6 Here, Plaintiffs current interest in the disposition of the Partnership Property is due to his
7 status as a Limited Partner in the Partnership. Pursuant to the Agreement, as a Limited Partner he
8 is not responsible for the management of the Partnership,1 but rather is expressly prohibited from
9 taking part in the management activities of the Partnership.2 Pursuant to the Agreement the
10 Managing General Partners] is authorized “(e) [t]o lease, sell, exchange, pledge, encumber or
11 grant an option for the sale of all or any portion of the real and personal property of the
12 Partnership, at such rental, price or amount for each, and upon such other terms, as the Managing
13 General Partners deem proper.” (Plaintiff Decl., Exhibit A, § 2.2.) Therefore, here, Defendant
14 Duggan as the Managing General Partner is authorized to sell Partnership Property if he is not
15 doing so in breach of his fiduciary obligations to the Partnership or in breach of the Agreement.
16 However, Plaintiff asserts that appointment of a receiver is necessary because his interest
17 in the Partnership Property is in danger of being lost, removed, or materially injured through a
18 sale of the Partnership Property. This is based on Plaintiffs statement that the Partnership
19 Property is worth $13 million and that the Partnership Property is in the process of being sold for
20 $9.5 million.
21 First, Plaintiffs interest in the Partnership Property is not at risk of being “lost” or
22 “removed” because if the Property were to be sold, he would receive proceeds of the sale that he
23 is entitled to subject to his interest in the Partnership. Therefore, the remaining analysis in this
24 subsection addresses whether his interest is in danger of being “materially injured.”
25 Plaintiff provided the court with no evidence to support his statement that the Property is
26
1 “The Managing General Partners shall be responsible for the administration and management of the Partnership.”
27 (Plaintiff Decl., Exhibit A, § 2.1 .)
2 “No Limited Partner, as such, shall take part in the management activities of the Partnership. Except as otherwise
28 specifically provided, all management responsibility is vested in the Managing General Partners.” (Plaintiff Decl.,
Exhibit A, § 7.2.)
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1 currently worth $13 million. In contrast, Defendants provided the court with evidence as to how
2 they arrived at the current valuation of the Partnership Property. (See Turner Declr., HJ12 14; -
3 Geisberg Declr.; Defendant Duggan Supplemental Declr., Tf2; Defendant Duggan Declr., fflfl 1 -
4 17.) Defendants provided the court with several factors, supported by declarations, that they used
5 to reach the current Partnership Property valuation including, the age of the Partnership Property,
6 environmental concerns related to the Partnership Property, and the viability of tenants of the
7 Partnership Property’s businesses, which have been severely impacted by the COVID 19 -
8 pandemic, and potential tax implications for tenants from any potential sale of the Partnership
9 Property. Additionally, Defendants are currently working with the Buyer who intends to
10 purchase the Partnership Property for $9.5 million.
11 Therefore, while Plaintiff and Defendants may disagree on the current value of the
12 Partnership Property, any such disagreement does not equate to a finding that Plaintiffs interest
13 in the Partnership Property requires the oversight of a receiver to be preserved or that it would be
14 materially injured by a sale of the Partnership Property for less than $13 million, as Plaintiff has
15 not provided any evidence that a higher valuation for the Partnership Property accurate or
16 obtainable.
17
18 Breaches bv Managing General Partner
19 Alternatively, Plaintiff asserts Defendant Duggan should no longer be acting as the
20 Managing General Partner and as such should not have the authority to sell Partnership Property.
21 Plaintiff alleges Defendant Duggan forfeited his General Partner interest because, among other
22 reasons, he made improper distributions which have resulted in a material breach of the
23 Agreement and improperly entered an agreement for the sale of 1% of his General Partner
24 interest to Defendant Moffat which has resulted in a material breach of the Amendment, which
25 Plaintiff alleges requires appointment of a receiver. The merits of Plaintiffs allegations have yet
26 to be determined.
27 However, for the purpose of determining if appointment of a receiver is appropriate the
28 court need not decide on the merits of Plaintiff’s allegations. The court notes Plaintiffs interest
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is in the Partnership and that he does not possess an individual interest in the Partnership
2 Property. Therefore, considering Plaintiffs allegations and evidence before the court, the
3 allegations do not alter the court’s analysis because, aside from the dispute as to valuation and
4 nature of the Partnership Property, Plaintiff has provided no evidence as to why sale of the
5 Partnership Property for $9.5 million would be harmful to the Partnership such that appointing of
6 a receiver is required. Additionally, if successful on the merits of the underlying action, Plaintiff
7 has other remedies available to him.
8 Accordingly, the court DENIES Plaintiffs request to appoint a receiver.
9
10 Preliminary Injunction
11 Plaintiff requests the court grant a preliminary injunction pending resolution of this
12 -
action. (P’s MP&A, p. 2:7 8.) The court may grant a preliminary injunction “at any time before
13 judgment upon a verified complaint, or upon affidavits if the complaint in the one case, or the
14 affidavits in the other, show satisfactorily that sufficient grounds exist therefor.” (Code of Civ.
15 Proc. § 527 subd. (a).)
16 Code of Civil Procedure section 526(a) sets forth when an injunction may be granted.
17 Plaintiff asserts an injunction should be granted here pursuant to Code of Civil Procedure section
18 526(a)(2), which states an injunction may be granted when “it appears by the complaint or
19 affidavits that the commission or continuance of some act during the litigation would produce
20 waste, or great or irreparable injury, to a party to the action.”
21 Courts consider two interrelated questions in deciding whether to issue a preliminary
22 injunction: “1) are the plaintiffs] likely to suffer greater injury from a denial of the injunction
23 than the defendants are likely to suffer from its grant; and 2) is there a reasonable probability that
24 the plaintiffs will prevail on the merits....” ( White v. Davis (2003) 30 Cal.4th 528, 554.) If by
25 balancing the respective equities of the parties, the court concludes that, pending a trial on the
26 merits, the defendant should be restrained from exercising the right claimed by him then the
27 court may issue a preliminary injunction. ( Robbins v. Superior Court (1985) 38 Cal.3d 199, 206;
28 see also White v. Davis (2003) 30 Cal.4th 528, 554.)
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1 In Lenard v. Edmonds (1957) 151 Cal.App.2d 764, 769, the court issued a preliminary
2 injunction when it was alleged that the defendant was threatening to sell property which was the
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basis of the action and threatening to transfer the third party notes given in partial payment for
4 the property. ( Ibid. ) There, the court stated that if the acts were allowed to be completed
5 defendant might render himself unable to pay the judgment, if one were secured, and deprive
6 plaintiffs not only of the fruits of the judgment but also of the property at issue. ( Ibid. ) This
7 matter is distinguishable from Lenard because while the Partnership is in the process of selling
8 the Partnership Property, there does not appear to be a risk that Plaintiff will not receive proceeds
9 from the sale based on his interest in the Partnership like there was in Lenard.
10 As addressed above, by not issuing a preliminary injunction Plaintiff will allegedly suffer
11 the harm of the sale of the Partnership Property at what he asserts is a reduced value,3 however,
12 he will still receive proceeds from the sale based on his interest in the Partnership. In contrast,
13 the Purchase Agreement for sale of the Partnership Property includes a clause allowing Buyer to
14 terminate the Purchase Agreement based on the outcome of this motion. As such, issuing a
15 preliminary injunction would certainly harm Defendants as it would permit Buyer to terminate
16 the Purchase Agreement for the sale of the Partnership Property and the Partnership would lose
17 the funds from the sale, a sale which the Partnership has been attempting in some form for
18 multiple years.
19 Therefore, the court finds Plaintiff is not likely to suffer greater injury from a denial of
20 the injunction than Defendants are to suffer from its grant. Further, while there is a possibility
21 Plaintiff could prevail on the merits of the FAC, based on the remedies available to Plaintiff if he
22 were to succeed on the merits, the balancing of equities of the parties does not favor granting a
23 preliminary injunction.
24 Accordingly, based on the evidence before the court at this time, the court DENIES the
25 request for a preliminary injunction .
26 //
27 the Property is worth $ 13 million. However, as addressed above, Plaintiff provides the court with
3 Plaintiff asserts
no evidence thatthe Partnership Property is currently valued is $ 13 million while Defendants provide several factors
28 related to how they reached the current Partnership Property value of $9.5 million, which is what the Partnership
Property is currently under contract for.
-8-
1 Additional Arguments Presented in Plaintiff’s Reply
2 Plaintiff sets forth a new evidence and argument in his Reply. In his Reply, Plaintiff
3 asserts, in support of his argument that Defendant Duggan has breached his fiduciary duty to the
4 Partnership, that the management company for the Partnership Property has a conflict of interest.
5 Whether to accept new evidence with the reply is vested in the court’s sound discretion.
6 .
( Carbajal v. CWPSC, Inc. (2016) 245 Cal.App 4th 227, 241 ) .
7 The general rule of motion practice that “ ‘[p]oints raised for the first time in a reply brief
8 will ordinarily not be considered, because such consideration would deprive the respondent of an
9 opportunity to counter the argument.’ ” { Jay v. Mahaffey (2013) 218 Cal.App.4th 1522, 1537 -
10 1538; see also People v. Superior Court of Los Angeles County (2015) 234 Cal.App.4th 1360,
11 1384 [“raising arguments for the first time in a reply brief is unfair to the other parties, who lack
12 an opportunity to respond”].)
13 Here, in Plaintiffs original motion he makes no mention of the alleged conflict of
14 interest. As such, Defendants have not had an opportunity to respond, and this argument will not
15 be considered by the court. However, even if the court were to consider the new evidence it
16 would not impact the outcome of this motion.
17
18 Conclusion
19 Accordingly, the court DENIES the motion.
20
21 IT IS SO ORDERED.
22
23 Dated: May 19, 2022.
ARTHUR A. WICK
24 Superior Court Judge
25
26
27
28
-9-
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SCV 268905
PROOF OF SERVICE BY MAIL
I certify that I am an employee of the Superior Court of California, County of Sonoma,
and that my business address is 600 Administration Dr., Room -
107 J, Santa Rosa, California,
95403; that I am not a party to this case; that I am over the age of 18; that I am readily familiar
with this office's practice for collection and processing of correspondence for mailing with the
United States Postal Service; and that on the date shown below I placed a true copy of
ORDER AFTER HEARING MAY 18, 2022
in an envelope, sealed and addressed as shown below, for collection and mailing at Santa Rosa,
California, first class, postage fully prepaid, following ordinary
Preview
1 Marshall E. Bluestone, Esq. (SBN 151632) BLUESTONE FAIRCLOTH & OLSON, LLP 2 1825 4th Street Santa Rosa, CA 95404 3 Telephone: 707-526-4250 Facsimile: 707-526-0347 4 inarshall@bfolegal.com 5 Attorneys for The Duggan Family Limited Partnership, a California Limited Partnership 6 7 8 SUPERIOR COURT OF THE STATE OF CALIFORNIA 9 COUNTY OF SONOMA 10 SEAN DUGGAN, an individual, on his own Case No. SCV-268905 behalf and derivatively on behalf of the Duggan 11 Family Limited Partnership; DECLARATION OF MARSHALL E. BLUESTONE IN SUPPORT OF OPPOSITION 12 Plaintiffs, TO PLAINTIFF’S EX PARTE APPLICATION FOR (1) APPOINTMENT OF RECEIVER; AND 13 v. (2) PRELIMINARY INJUNCTION 14 LYNN DUGGAN, an individual; and DOES 1 Date: June 21, 2022 through 25, inclusive, Time: 10:00 a.m. 15 Dept.: 17 Defendants, 16 [UNLIMITED CIVIL] 17 -and- ASSIGNED FOR ALL PURPOSES: 18 THE DUGGAN FAMILY LIMITED PARTNERSHIP, a California Limited Judge: Bradford DeMeo 19 Partnership, KELLY MOFFAT, an individual, Department: 17 20 Nominal Defendants. 21 22 23 I, Marshall E. Bluestone, declare: 24 1. I am an attorney at law licensed to practice in the State of California. I am a member of 25 Bluestone Faircloth & Olson, LLP, counsel for defendant The Duggan Family Limited Partnership, a 26 California Limited Partnership. I have personal knowledge of the following and am competent to testify 27 thereto. 28 SCV-268905: Declaration of Marshall E. Bluestone In Opposition of Plaintiff s Ex Parte Application 1 1 2. On May 3, 2022, Counsel for Plaintiff Sean Duggan filed a motion 1 requesting the Court 2 to (1) Appoint a Receiver over the Duggan Family Limited Partnership, a California limited partnership 3 (“LP”), and (2) An injunction to prevent the Managing Partners from selling the Lakeside Shopping 4 Center (Comer of Montgomery Drive and Summerfield Road). Attached as Exhibit A is a true and 5 correct copy of the email notice. The motion was opposed by the other two members of the LP, 6 7 Defendants Lynn Duggan and Kelly Moffat, Sean Duggan’s father and sister. 8 3. After full briefing on the issues, the Court denied Plaintiffs motion on May 19, 2022. A 9 true and correct copy of the Court’s May19, 2022, Order is attached hereto as Exhibit B. 10 4. On June 17, 2022, 1 received an email from Plaintiff’s Counsel notifying all Defendants 11 that Plaintiff once again would be seeking an ex parte order for the identical relief: (1 ) Appointment of a 12 Receiver and (2) An Injunction. Attached as Exhibit C is a true and correct copy of the email notice. 13 This notice is almost identical to the notice provided to Defendants before the Court denied Plaintiffs 14 15 motion as set forth in Exhibit A. 16 5. In Exhibit C. Plaintiff cites “two grounds” for bringing this second motion within a month 17 and a half to appoint a receiver and have an injunction issued. First, Plaintiff states, “Sean Duggan 18 recently learned through his own investigation that the GP [general partner- Lynn Duggan] . . . has 19 placed the DFLP Property under contract for sale, . . .” and that the GP will be “sold without due 20 authorization of authority,” claiming that alleged breaches by the GP require him to forfeit his GP 21 interest and therefore, he does not have authority to sell assets of the LP. However, Plaintiff did not just 22 23 discover the property was for sale. In the prior motion, the “GP,” Sean’s father Lynn Duggan, provided a 24 declaration to the Court that stated that he had the Property under contract for sale and identified the 25 buyer. (See Request for Judicial Notice, Supplemental Declaration of Sean Duggan dated May 13, 2022, 26 In Opposition to Appointment of Receiver and Issuance of Injunction, 12.) Plaintiff and the Court were 27 1 The original notice was for ex parte application, but by stipulation the parties agreed on a noticed 28 motion on shortened time. SCV -268905: Declaration of Marshall E. Bluestone In Opposition of Plaintiff s Ex Parte Application 2 1 both informed that the Property was under contract for sale. (See Order, Ex. B, 5:1.) In fact, because of 2 Plaintiff s motion, a provision was put in the purchase and sales contract making the sale contingent on 3 the outcome of Plaintiff s motion which was also disclosed to the Plaintiff and the Court in Lynn 4 Duggan’s Supplemental Declaration. (See Supp. Duggan Decl., f 3., Order, Ex. B, 5:1.) 5 6. Second, Plaintiff has already argued to the Court that the GP was without authorization to 6 7 sell the Property and therefore, a receiver must be appointed. (See Plaintiffs Reply to Defendants’ 8 Opposition [dated May 13, 2022], 5:18-19 [“Lynn Duggan is no longer authorized under the Partnership 9 Agreement, as amended, to agree to sell the Property”].) The Court fully understood Plaintiffs position 10 and rejected it as the Court recited Plaintiffs argument in its Order, noting “Plaintiff asserts Defendant 11 Duggan should no longer be acting as the Managing General Partner and as such should not have the 12 authority to sell Partnership Property. [Emphasis added].” - (Ex. B, Order, 6:19 20.) Finally, at oral 13 argument, Plaintiffs counsel argued extensively that Lynn Duggan, the GP, is no longer authorized to sell the 14 Property because of claimed breaches and the Court rejected this entire argument. This is the same argument 15 16 as in the first motion and essentially a motion for reconsideration that is untimely and not based upon new 17 facts or law. 18 7. Similarly, Plaintiff states “having recently received the partnership tax returns” ( Ex. A, second 19 to last paragraph ), he is aware of improper distributions. In his current ex parte notice, Plaintiff states 20 “having just recently received the partnership tax returns,” he is now aware of improper distributions. (Ex. C, 21 second to last paragraph.) Again, this is the identical argument that was made in front of the Court when the 22 motion was denied. Furthermore, Plaintiff extensively argued the improper distributions in both the moving 23 and reply papers and the Court rejected the argument. (See Plaintiffs Moving Papers, dated May 3, 2022, p. 24 5 [heading: “g. Subsequent and Pre-Pandemic Distributions Improperly Calculated.”]; Plaintiffs Reply, p. 6; 25 26 Ex. B Court Order, 6:19-26.) Once again, the identical argument, based upon identical facts and the Court 27 has already rejected these facts, law and argument. This is simply a motion for reconsideration that is 28 untimely and not based upon new law or facts. SCV-268905: Declaration of Marshall E. Bluestone In Opposition of Plaintiff s Ex Parte Application 3 1 8. Finally, in a meet and confer telephone call between all counsel, I inquired what new facts 2 were present that were not present before the first motion for a receiver. Plaintiffs counsel informed us 3 that the new fact was that Plaintiffs counsel had sent a letter to the new buyer of the property after the 4 Court’s ruling informing the buyer of the pending litigation and Plaintiffs position that the GP has no 5 authority to sell. First, this is not a new fact or law, but just the same argument that Plaintiff made in the 6 7 first motion. Second, this ‘new’ fact is a creation of Plaintiff by serving a letter on the buyer of the 8 property . This is not a new fact relevant to the motion. If this were enough to create a new fact, then 9 every motion filed by a losing party could be “revived” by a letter to opposing party or a third party as a 10 “new” fact and the Courts would be hearing the identical motions over and over. This is not the law nor 11 should it be. 12 I declare under penalty of perjury under the laws of the State of California that the foregoing is 13 true and correct. 14 15 Executed this 20th day of June, 2022, at Santa Rosa, California. 16 17 18 tarshall E. Bluestone 19 20 21 22 23 24 25 26 27 28 SCV -268905: Declaration of Marshall E. Bluestone In ODDOsition of Plaintiff s Ex Parte Application 4 Exhibit A . From: chenjoy @gtlaw com . Sent: Friday, June 17, 2022 10:38 AM . To: AOIsen@ nheh com; Marshall Bluestone ; MShklovsky @andersonzeigler.com Cc: mccurdyl@gtlaw com . Subject: Duggan v .Duggan - Ex Parte Application - Meet and Confer Counsel, Please be advised that, based on new and recently-learned facts, Plaintiff Sean Duggan intends to file an ex parte application in Department 17 of the Sonoma County Superior Court, on Tuesday, June 21, 2022 for review at 10:30 a.m. The ex parte application will seek an order: 1 . Appointing a receiver ("Receiver") to take possession of the books and records of the Partnership, including with respect to that certain real property described in the Complaint ("Property") and, in doing so, to assume control of the Partnership; 2 . Empowering and authorizing the Receiver to review and analyze the propriety of Partnership transactions in the last ten years, including but not limited to distribution decisions, and loan repayments, and to report to the Court regarding the same; 3. Empowering, authorizing and requiring the Receiver to review the terms of any proposed sale of the Property and to make a recommendation thereon to the Parties; 4 . To show cause, pursuant to California Rules of Court 3.1150 and 3.1176, and California Code of Civil Procedure § 527(d), why the appointment of the Receiver should not be confirmed and the Temporary Restraining Order (the "TRO") requested herein converted into a preliminary injunction on substantially the same terms as the TRO, made returnable no later than 15 days from the date of issuance thereof; and 5 . Issuing a TRO in aid of the Receiver as follows: a. requiring Defendant LYNN DUGGAN, as General Partner ("GP") of the Duggan Family Limited Partnership ("DFLP" or "the Partnership") and all those acting in concert with, for or on his behalf (collectively, "the GP") to turn over, and to prevent the GP from denying, interfering with or preventing the Receiver's access to, the Property as well as all books, records and accounts relating to the Property and the Partnership; b. enjoining the GP, his agents, servants and employees, and all persons acting under, in concert with, through or for any of them from: i. interfering with or hindering, in any way whatsoever, the Receiver, or his agents, officers, employees and servants, in the performance of any duties incident thereto; ii. transferring, concealing, destroying, defacing, or altering any of the instruments, documents, books, records, or other writings relating to the Partnership or Property, or any portion thereof; or . iii selling, disposing of, transferring, encumbering, distributing, or otherwise alienating or hypothecating any assets of the DFLP, except that the Partnership may use cash on hand and/or proceeds from the sale of stocks and bonds on an as-need basis to pay administration expenses without further order of the Court; notwithstanding the foregoing, neither the Parties nor the Court are approving such payments, all of which shall be subject to review in the ordinary course. 6. Approving, pursuant to California Rule of Court 3.1178 and California Code of Civil Procedure §§ 529, 566(b) and 567(b), an undertaking by each of the applicant and the Receiver in the amount of $2,500. This application will be presented on an ex parte basis on two grounds. First, Sean Duggan recently learned through his own investigation that the GP, who is no longer in a position to take such action, has placed the DFLP Property under contract for sale, presumably at the same or similar dramatically- reduced price previewed previously, done without agreement of, or even notice to, the limited partners; the terms of the pending sale have not been disclosed. Thus, without oversight and the Court' intervention, the Property will be lost, sold without due authorization of authority . Whether the tactic is being used in the hopes of ending the litigation, or to obtain a quick payout, a receiver is appropriate here to oversee any sale, ensure that the Partnership obtains full and fair value for the Property and to ensure that the partner interests are thereby protected. Second, having just recently received the partnership tax returns, it is apparent that, in fact, the Partnership is failing to properly account for and allocate the partnership points in the manner required by the Partnership Agreement Amendment following the defaults discussed herein, resulting in improperly calculated distributions as discussed further herein. And (additionally and separately ), the tax returns demonstrate that Plaintiff (and all Limited Partners) has not received the distributions to which he is entitled per the tax return, even leaving aside the incorrect partnership point allocation. Indeed, this has been going on back to at least 2011. Please note that, per the rules of court, a hearing will not take place on this matter on June 21, 2022 (unless otherwise ordered by the Court). Also pursuant to the rules of court, please advise if you will oppose the ex parte application; and if so, please advise when you are available to meet and confer on Monday. Best, Joy Joy Chen Associate Greenberg Traurig, LLP 1840 Century Park East | Suite 1900 | Los Angeles, CA 90067-2121 T +1 310.586.7706 | F +1 310.586.7800 cheniov@atlaw.com | www.atlaw.com | View GT Biography 9GreenbergTraurig If you are not an intended recipient of confidential and privileged information in this email, please delete it, notify us immediately at postmaster @ gtlaw.com. and do not use or disseminate the information. Exhibit B F I L E D THE HONORABLE ARTHUR A. WICK SUPERIOR COURT OF CALIFORNIA COUNTY OF SONOMA 1 SUPERIOR COURT OF CALIFORNIA COUNTY OF SONOMA MAY 19 2022 2 3035 Cleveland Avenue ^ Santa Rosa, CA 95403 BY. 3 Telephone: (707) 521 6725 - De tyClerk 4 5 6 SUPERIOR COURT OF CALIFORNIA, COUNTY OF SONOMA 7 8 9 SEAN DUGGAN, an individual, on his own behalf and derivatively on behalf of the Case No. - SCV 268905 Duggan Family Limited Partnership, ORDER AFTER HEARING 10 MAY 18, 2022 Plaintiff, 11 vs. 12 LYNN DUGGAN, an individual; and DOES 1 13 through 25, inclusive, 14 Defendants, 15 -and- 16 THE DUGGAN FAMILY LIMITED PARTNERSHIP, a California Limited 17 Partnership; KELLY MOFFAT, an individual, 18 Nominal Defendants. 19 20 This matter came before the court on May 18, 2022 in Department 17, via zoom, before 21 The Honorable Arthur Wick. Counsels Lisa McCurdy and Joy Chen appeared on behalf of 22 Plaintiff Sean Duggan, who was present. Counsel Anne Olsen appeared on behalf of Defendant 23 Lynn Duggan. Counsel Marshall Bluestone appeared on behalf of Defendant The Duggan 24 Family Limited Partnership. Counsel Michael Shklovsky appeared on behalf of Defendant Kelly 25 Moffat. 26 Motion to Appoint Receiver and for Preliminary Injunction is DENIED. 27 // 28 // Facts and History 2 On July 27, 2021, Sean Duggan (“Plaintiff ’) filed this action alleging breach of contract 3 and breach of fiduciary duty by Lynn Duggan (“Defendant Duggan”) and, as a nominal 4 defendant, The Duggan Family Limited Partnership (“DFLP” or the “Partnership”). 5 On July 29, 2021, Plaintiff filed the presently operative First Amended Complaint 6 (‘TAC”) requesting declaratory relief and alleging breach of contract and breach of fiduciary 7 duty by Defendant Duggan and, as nominal defendants, the Partnership and Kelly Moffat 8 (“Defendant Moffat”) (collectively “Defendants”) . 9 The Partnership was formed in November 1997 by the Agreement of Limited Partnership 10 - (“Agreement”). After the original co General Partners passed away Defendant Duggan became 11 General Partner, and the Limited Partners were Plaintiff, Defendant Duggan, and Defendant 12 Moffat (collectively “Partners”). The Partnership owns property located at 530, 535, 551, 554, 13 567, 569, 573, and 585 Summerfield Road in Santa Rosa, California (“Partnership Property”). As 14 the Managing General Partner Defendant Duggan receives a monthly management fee of 15 $2,000.00. 16 In February 2014, the Partners entered into the First Amendment to the Agreement 17 (“Amendment”) to allow Defendant Duggan to secure a loan from the Partnership. The Partners 18 agreed to approve the Partnership borrowing a $510,000.00 loan (“Bank Loan”), which was 19 secured by the Partnership Property. The Partnership obtained the Bank Loan and then loaned 20 $510,000.00 to Defendant Duggan (“General Partner Loan”). Each loan was evidenced by a 21 Promissory Note. Defendant Duggan setup a monthly automatic payment to the Partnership of 22 $2,921.38 to be used for payment of the Bank Loan by having the Partnership deduct the 23 payment directly from his partnership distributions. 24 In March 2020, due to the COVID pandemic, the Partnership temporarily ceased 25 partnership distributions. At this time, Plaintiff and Defendant Duggan discussed how Defendant 26 Duggan would make the total monthly General Partner Loan payment to the Partnership. 27 Defendant Duggan stated he would make the payment by having the Partnership deduct his 28 $2,000.00 monthly management fee and paying the Partnership $921.38 by personal check, -2- which Plaintiff agreed “should work.” 2 In February 2021, the Partnership’s bookkeeper, C. Edward Turner, discovered an error 3 in the Partnership’s financials in which it debited $5,788.78 from Defendant Duggan’s capital 4 account as payment toward the loan. Mr. Turner informed Defendant Duggan, who prior to this 5 time was unaware of the error, and who reimbursed the Partnership $5,788.78. 6 In January 2021, Defendant Duggan and Defendant Moffat entered into an agreement 7 where Defendant Duggan sold 1% of his General Partner interest to Defendant Moffat for 8 $125,000.00. Plaintiff objected by sending a Notice of Default to Defendant Duggan and 9 Defendant Moffat. Defendant Duggan and Defendant Moffat did not move forward with the sale 10 at that time. 11 In May 2021, Defendant Duggan and Defendant Moffat finalized Defendant Moffat’s 12 purchase of 1% of Defendant Duggan’s General Partner interest to for $125,000.00. Plaintiff 13 again objected by informing Defendant Duggan and Defendant Moffat he believed the 14 transaction was a breach of the Amendment. 15 On July 21, 2021, Plaintiffs attorney was informed the loan had been paid in full. 16 Defendant Moffat refinanced her home and used the funds to pay the loan in full. 17 On May 13, 2022, Defendant Duggan and Defendant Moffat, on behalf of the 18 Partnership, entered a fully executed Purchase Agreement and Escrow Instruction with Epic 19 - Ventures Holding Inc. (“Buyer”) for the Partnership Property. It is an all cash offer. Under the 20 Purchase Agreement, the parties provided for the contingency of the outcome of this hearing, by 21 allowing that Buyer the option to cancel the Purchase Agreement. 22 23 Motion 24 Plaintiff moves the court to (1) appoint a receiver for the Partnership and (2) issue a 25 preliminary injunction pending the resolution of this action to protect the Partnership and its 26 27 // 28 // -3- 1 Appointment of Receiver 2 Plaintiff requests the court appoint a receiver “to take possession of the real property at 3 issue, to exercise control and authority over the rents and profits (as well as the books and 4 records)” of the Partnership and “to review the terms of any proposed sale of the Property to 5 make a recommendation thereon.” (Plaintiffs Memorandum of Points and Authorities (“P’s 6 MP&A”), p. 2:3 7.) - 7 Plaintiff contends a receiver should be appointed, first, because Defendant Duggan is 8 “now attempting to sell the DFLP Property at a dramatically -reduced price of $10.5 million, 9 down from $13 million, done without the agreement of, or even notice to, the limited partners” 10 and, second, because distributions made by the Partnership have been improperly calculated. (P’s 11 MP&A, p . - - 11:23 25; 12:3 6.) Plaintiff maintains that Defendant Duggan should no longer be in 12 the position of General Partner due to his breaches of the Agreement. (Plaintiffs Reply in 13 Support of Motion for Receiver (“Reply”), p. 1:6 8.) - 14 The court may appoint a receiver “[i]n an action ... between partners or others jointly 15 owning or interested in any property or fund, on the application of the plaintiff, or of any party 16 whose right to or interest in the property or fund, or the proceeds of the property or fund, is 17 probable, and where it is shown that the property or fund is in danger of being lost, removed, or 18 materially injured” or “[i]n all other cases where necessary to preserve the property or rights of 19 any party.” (Code Civ. Proc. § 564, subd. (b)(1); (b)(9).) 20 The appointment of a receiver is a provisional equitable remedy. (Southern California 21 Sunbelt Developers, Inc. v. Banyan Limited Partnership (2017) 8 Cal.App.5th 910, 925.) To 22 appoint a receiver under section 564, subdivision (b)(1), the trial court must determine whether 23 the “property or fund is in danger of being lost, removed, or materially injured.” Ordinarily, if 24 there is any other remedy besides appointment of a receiver, and the other remedy is less severe 25 in its results and will adequately protect the rights of the parties, court should not appoint 26 receiver. - ( Alhambra Shumway Mines, Inc. v. Alhambra Gold Mine Corp. (1953) 116 27 Cal.App.2d 869, 873.) However, the availability of other remedies does not, in and of itself, 28 preclude the appoint of a receiver. ( Sibert v. Shaver (1952) 113 Cal.App.2d 19, 21 ) Rather, a . -4- 1 court must consider the availability and efficacy of other remedies in determining whether to 2 employ the extraordinary remedy of a receivership. ( City and County of San Francisco v. Daley 3 (1993) 16 Cal.App.4th 734, 745 ) . 4 5 Sale of Property bv General Partner 6 Here, Plaintiffs current interest in the disposition of the Partnership Property is due to his 7 status as a Limited Partner in the Partnership. Pursuant to the Agreement, as a Limited Partner he 8 is not responsible for the management of the Partnership,1 but rather is expressly prohibited from 9 taking part in the management activities of the Partnership.2 Pursuant to the Agreement the 10 Managing General Partners] is authorized “(e) [t]o lease, sell, exchange, pledge, encumber or 11 grant an option for the sale of all or any portion of the real and personal property of the 12 Partnership, at such rental, price or amount for each, and upon such other terms, as the Managing 13 General Partners deem proper.” (Plaintiff Decl., Exhibit A, § 2.2.) Therefore, here, Defendant 14 Duggan as the Managing General Partner is authorized to sell Partnership Property if he is not 15 doing so in breach of his fiduciary obligations to the Partnership or in breach of the Agreement. 16 However, Plaintiff asserts that appointment of a receiver is necessary because his interest 17 in the Partnership Property is in danger of being lost, removed, or materially injured through a 18 sale of the Partnership Property. This is based on Plaintiffs statement that the Partnership 19 Property is worth $13 million and that the Partnership Property is in the process of being sold for 20 $9.5 million. 21 First, Plaintiffs interest in the Partnership Property is not at risk of being “lost” or 22 “removed” because if the Property were to be sold, he would receive proceeds of the sale that he 23 is entitled to subject to his interest in the Partnership. Therefore, the remaining analysis in this 24 subsection addresses whether his interest is in danger of being “materially injured.” 25 Plaintiff provided the court with no evidence to support his statement that the Property is 26 1 “The Managing General Partners shall be responsible for the administration and management of the Partnership.” 27 (Plaintiff Decl., Exhibit A, § 2.1 .) 2 “No Limited Partner, as such, shall take part in the management activities of the Partnership. Except as otherwise 28 specifically provided, all management responsibility is vested in the Managing General Partners.” (Plaintiff Decl., Exhibit A, § 7.2.) -5- 1 currently worth $13 million. In contrast, Defendants provided the court with evidence as to how 2 they arrived at the current valuation of the Partnership Property. (See Turner Declr., HJ12 14; - 3 Geisberg Declr.; Defendant Duggan Supplemental Declr., Tf2; Defendant Duggan Declr., fflfl 1 - 4 17.) Defendants provided the court with several factors, supported by declarations, that they used 5 to reach the current Partnership Property valuation including, the age of the Partnership Property, 6 environmental concerns related to the Partnership Property, and the viability of tenants of the 7 Partnership Property’s businesses, which have been severely impacted by the COVID 19 - 8 pandemic, and potential tax implications for tenants from any potential sale of the Partnership 9 Property. Additionally, Defendants are currently working with the Buyer who intends to 10 purchase the Partnership Property for $9.5 million. 11 Therefore, while Plaintiff and Defendants may disagree on the current value of the 12 Partnership Property, any such disagreement does not equate to a finding that Plaintiffs interest 13 in the Partnership Property requires the oversight of a receiver to be preserved or that it would be 14 materially injured by a sale of the Partnership Property for less than $13 million, as Plaintiff has 15 not provided any evidence that a higher valuation for the Partnership Property accurate or 16 obtainable. 17 18 Breaches bv Managing General Partner 19 Alternatively, Plaintiff asserts Defendant Duggan should no longer be acting as the 20 Managing General Partner and as such should not have the authority to sell Partnership Property. 21 Plaintiff alleges Defendant Duggan forfeited his General Partner interest because, among other 22 reasons, he made improper distributions which have resulted in a material breach of the 23 Agreement and improperly entered an agreement for the sale of 1% of his General Partner 24 interest to Defendant Moffat which has resulted in a material breach of the Amendment, which 25 Plaintiff alleges requires appointment of a receiver. The merits of Plaintiffs allegations have yet 26 to be determined. 27 However, for the purpose of determining if appointment of a receiver is appropriate the 28 court need not decide on the merits of Plaintiff’s allegations. The court notes Plaintiffs interest -6- is in the Partnership and that he does not possess an individual interest in the Partnership 2 Property. Therefore, considering Plaintiffs allegations and evidence before the court, the 3 allegations do not alter the court’s analysis because, aside from the dispute as to valuation and 4 nature of the Partnership Property, Plaintiff has provided no evidence as to why sale of the 5 Partnership Property for $9.5 million would be harmful to the Partnership such that appointing of 6 a receiver is required. Additionally, if successful on the merits of the underlying action, Plaintiff 7 has other remedies available to him. 8 Accordingly, the court DENIES Plaintiffs request to appoint a receiver. 9 10 Preliminary Injunction 11 Plaintiff requests the court grant a preliminary injunction pending resolution of this 12 - action. (P’s MP&A, p. 2:7 8.) The court may grant a preliminary injunction “at any time before 13 judgment upon a verified complaint, or upon affidavits if the complaint in the one case, or the 14 affidavits in the other, show satisfactorily that sufficient grounds exist therefor.” (Code of Civ. 15 Proc. § 527 subd. (a).) 16 Code of Civil Procedure section 526(a) sets forth when an injunction may be granted. 17 Plaintiff asserts an injunction should be granted here pursuant to Code of Civil Procedure section 18 526(a)(2), which states an injunction may be granted when “it appears by the complaint or 19 affidavits that the commission or continuance of some act during the litigation would produce 20 waste, or great or irreparable injury, to a party to the action.” 21 Courts consider two interrelated questions in deciding whether to issue a preliminary 22 injunction: “1) are the plaintiffs] likely to suffer greater injury from a denial of the injunction 23 than the defendants are likely to suffer from its grant; and 2) is there a reasonable probability that 24 the plaintiffs will prevail on the merits....” ( White v. Davis (2003) 30 Cal.4th 528, 554.) If by 25 balancing the respective equities of the parties, the court concludes that, pending a trial on the 26 merits, the defendant should be restrained from exercising the right claimed by him then the 27 court may issue a preliminary injunction. ( Robbins v. Superior Court (1985) 38 Cal.3d 199, 206; 28 see also White v. Davis (2003) 30 Cal.4th 528, 554.) -7- 1 In Lenard v. Edmonds (1957) 151 Cal.App.2d 764, 769, the court issued a preliminary 2 injunction when it was alleged that the defendant was threatening to sell property which was the 3 - basis of the action and threatening to transfer the third party notes given in partial payment for 4 the property. ( Ibid. ) There, the court stated that if the acts were allowed to be completed 5 defendant might render himself unable to pay the judgment, if one were secured, and deprive 6 plaintiffs not only of the fruits of the judgment but also of the property at issue. ( Ibid. ) This 7 matter is distinguishable from Lenard because while the Partnership is in the process of selling 8 the Partnership Property, there does not appear to be a risk that Plaintiff will not receive proceeds 9 from the sale based on his interest in the Partnership like there was in Lenard. 10 As addressed above, by not issuing a preliminary injunction Plaintiff will allegedly suffer 11 the harm of the sale of the Partnership Property at what he asserts is a reduced value,3 however, 12 he will still receive proceeds from the sale based on his interest in the Partnership. In contrast, 13 the Purchase Agreement for sale of the Partnership Property includes a clause allowing Buyer to 14 terminate the Purchase Agreement based on the outcome of this motion. As such, issuing a 15 preliminary injunction would certainly harm Defendants as it would permit Buyer to terminate 16 the Purchase Agreement for the sale of the Partnership Property and the Partnership would lose 17 the funds from the sale, a sale which the Partnership has been attempting in some form for 18 multiple years. 19 Therefore, the court finds Plaintiff is not likely to suffer greater injury from a denial of 20 the injunction than Defendants are to suffer from its grant. Further, while there is a possibility 21 Plaintiff could prevail on the merits of the FAC, based on the remedies available to Plaintiff if he 22 were to succeed on the merits, the balancing of equities of the parties does not favor granting a 23 preliminary injunction. 24 Accordingly, based on the evidence before the court at this time, the court DENIES the 25 request for a preliminary injunction . 26 // 27 the Property is worth $ 13 million. However, as addressed above, Plaintiff provides the court with 3 Plaintiff asserts no evidence thatthe Partnership Property is currently valued is $ 13 million while Defendants provide several factors 28 related to how they reached the current Partnership Property value of $9.5 million, which is what the Partnership Property is currently under contract for. -8- 1 Additional Arguments Presented in Plaintiff’s Reply 2 Plaintiff sets forth a new evidence and argument in his Reply. In his Reply, Plaintiff 3 asserts, in support of his argument that Defendant Duggan has breached his fiduciary duty to the 4 Partnership, that the management company for the Partnership Property has a conflict of interest. 5 Whether to accept new evidence with the reply is vested in the court’s sound discretion. 6 . ( Carbajal v. CWPSC, Inc. (2016) 245 Cal.App 4th 227, 241 ) . 7 The general rule of motion practice that “ ‘[p]oints raised for the first time in a reply brief 8 will ordinarily not be considered, because such consideration would deprive the respondent of an 9 opportunity to counter the argument.’ ” { Jay v. Mahaffey (2013) 218 Cal.App.4th 1522, 1537 - 10 1538; see also People v. Superior Court of Los Angeles County (2015) 234 Cal.App.4th 1360, 11 1384 [“raising arguments for the first time in a reply brief is unfair to the other parties, who lack 12 an opportunity to respond”].) 13 Here, in Plaintiffs original motion he makes no mention of the alleged conflict of 14 interest. As such, Defendants have not had an opportunity to respond, and this argument will not 15 be considered by the court. However, even if the court were to consider the new evidence it 16 would not impact the outcome of this motion. 17 18 Conclusion 19 Accordingly, the court DENIES the motion. 20 21 IT IS SO ORDERED. 22 23 Dated: May 19, 2022. ARTHUR A. WICK 24 Superior Court Judge 25 26 27 28 -9- - SCV 268905 PROOF OF SERVICE BY MAIL I certify that I am an employee of the Superior Court of California, County of Sonoma, and that my business address is 600 Administration Dr., Room - 107 J, Santa Rosa, California, 95403; that I am not a party to this case; that I am over the age of 18; that I am readily familiar with this office's practice for collection and processing of correspondence for mailing with the United States Postal Service; and that on the date shown below I placed a true copy of ORDER AFTER HEARING MAY 18, 2022 in an envelope, sealed and addressed as shown below, for collection and mailing at Santa Rosa, California, first class, postage fully prepaid, following ordinary