Preview
Electronically FILED by Superior Court of California, County of Los Angeles on 09/08/2020 11:41 PM Sherri R. Carter, Executive Officer/Clerk of Court, by M. Wong,Deputy Clerk
RoseAnn Frazee, State Bar No. 262516
Law Office of Kevin S. Avery
155 North Lake Avenue, 8" Floor
Pasadena, CA 91101
Telephone: (626) 993-6688
Facsimile: (626) 993-6690
E-Maih roseann@frazeelawgroup.corn
Attorney for Plaintiffs
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF LOS ANGELES
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NORTH CENTRAL JUDICIAL DISTRICT
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13 LU SUN and LIN ZHAO, doing business ) Case No. 20GDCV00585
as YI Kebab k Bar, )
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Plaintiffs, ) PLAINTIFFS'PPLICATION FOR
15 PRELIMINARY INJUNCTION;
vs. 3 PLAINTIFFS'EMORANDUM OF
16 POINTS AND AUTHORITIES IN
3 SUPPORT OF APPLICATION FOR
17 MELISSA M. SUI AND JINXUE SUI, ) PRELIMINARY IN JUNCTION
)
18 Defendants. ) Hearing Date: September 21, 2020
Department: E
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) Ti: 2:0)0 p.m.
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[Declaration of Plaintiffs and Request for
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Judicial Notice Filed Concurrently
22 ) herewith]
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PLAINTIFFS'PPLICATION FOR PRELIMINARY INJUNCTION;
MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT
TO: DEFENDANTS, by and through their attorneys
2 PLEASE TAKE NOTICE that on September 21, 2020, at 2:00 p.m., in Department E,
3 of the Los Angeles Superior Court, Glendale Courthouse, 600 East Broadway, Glendale, CA
4 91206, the Plaintiffs will be heard on the Order to Show why a preliminary injunction should not
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issue ordering the Defendants to pay the expenses for the Business such as rent, utilities and
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employees from thc SBA funds rcccivcd under thc U.S. CARES Act which funds werc
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transferred lrom the Business checking account to their personal hank account or transfer the
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remaining SBA funds hack to the Business checking account AND from destroying the Business
10 by prcvcnting Plaintiffs from entering and operating thc Business and by terminating scrviccs of
11 water, electricity and gas for the Business.
12 This application is made pursuant to the provisions of Code of Civil Procedure 527 on
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the ground that Defendants, former partner or member of LLC Business, have misappropriated
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the SBA funds and have threatened to destroy ihe Business.
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This application is based upon the Memorandum in Support attached hereto and the
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Declaration of RoseAnn Frazee and the Request for Judicial Notice filed concurrently herewith.
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DATED this 8'" day of September, 2020.
Respectfully submitted,
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LAW OFFICE OF KEVIN S. AVERY
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koseAnn Frazee rJ
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Attorney for Plaintiffs
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PLAINTIFFS'PPLICATION FOR PRELIMINARY INJUNCTION;
MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT
MEMORANDUM OF POINTS AND AUTHORITIES
I. INTRODUCTION
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The underlying action seeks to prevent the theft of a business. Plaintiffs Lu Sun and Lin
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Zhao, doing business as YI Kebab & Bar (the "Business" ), trusted their former business partner,
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Melissa Sui, to transfer all business assets when Defendants sold their share of the Business to
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Plaintiffs. Nevertheless, Defendants fraudulently did not perform that promise and her and her
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husband, Jinxue Sui (" Defendants" ), retained authority to sign on the business checking account
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with Chase Bank after the Business was sold to the Plaintiffs and took other measures to thwart
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the Business. The Plaintiffs are not English speakers, so they depended on Defendants and
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wanted to maintain an amicable relationship with Defendants to assist them in the transfer.
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Unfortunately, Defendants took advantage of having signatory rights to the Business
checking account and n'ansferred $ 67,500 to their own personal checking account leaving the
Business with no money to pay utilities, rent or their employees. Plaintiffs had secured a loan in
the amount of $ 67,500 from the Small Business Association ("SBA") under the U.S. Payroll
17 Protection Program ("PPP") which loan proceeds had been deposited into the Business checking
18 account the same day that Defendants transferred the funds to their personal account.
19 Defendants have refused to return the $ 67,500 in loan proceeds to the Business checking
20 account. Because the Plaintiffs did not have the funds to pay rent, utilities and other expenses
and the Business was shut down due to COVID-19, the Defendants have threatened to prevent
Plaintiffs from entering and operating the Business (their only source of income) and threatened
to terminate the water, electricity and gas for the Business.
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PLAINTIFFS'PPLICATION FOR PRELIMINARY INIUNCTION;
MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT
II. STATEMENT OF FACTS
On or about January 30, 2019, Plaintiffs, as purchasers, and Defendants, as sellers,
entered into a Contract in which Defendants sold "her" (their) share or percentage in the
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company to Plaintiffs for $ 100,000, with payments to start on July I, 2019, in the amount of
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$ 5,000 per month, based on the profit/loss adjustments, and to pay the credit card balance as of
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November 30, 2019. Defendants promised to transfer all assets, licenses and permits to
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Plaintiffs, including any and all interest in the YI BBQ LLC within two weeks. See Request for
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Judicial Notice, Attachments A and B.
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Plaintiffs assumed the 100% ownership of the Business in applying for liquor license and
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any other permits necessary to operate the Business. The California Secretary of State,
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Statement of Information, filed on February 15, 2019, indicates that Lu Sun is the CEO of YI
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BBQ LLC. (See Request for Judicial Notice, Exhibit C.) However, because the Plaintiff Lu Sun
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speaks only Mandarin and Lin Zhao speaks very limited English, they left some of the
administrative functions to Melissa Sui. IMelissa Sui was listed as Agent for Service of Process
on the California, Secretary of State, Statement of Information filed on February 15, 2019, and
17 the parties did not change the Commercial Lease Agreement with the landlord, Dandan Liu, or
Ig the Business checking accounts to exclude Defendants. The Business checking account
19 signatories are Plaintiffs and Defendants. Unbeknown to the Plaintiffs, Defendant Melissa Sui
20 filed a California Statement of Information claiming that she was the CEO on August 9, 2019.
21 (See Request for Judicial Notice, Exhibit F.)
22 On March 19, 2020, via Executive Order N-60-20, the Governor of California ordered a
shutdown of the Business because of COVID-19, and the Business had to close. Plaintiffs have
since re-opened the Business on a limited basis.
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After the Coronavirus Air, Relief, and Economic Security Act ("CARES Act") was
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signed into law on March 27, 2020, Plaintiff Lu Sun, with her husband, Lin Zhao's assistance,
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applied for the SBA loan provided through the CARES Act to handle employees paychecks,
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PLAINTIFFS'PPLICATION FOR PRELIMINARY INJUNCTION;
MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT
1 rental expenses and other expenses of the Business and signed a contract for the repayment of
2 the SBA loan.
The SBA loan funds in the amount of $ 2,000 was deposited into the Business bank
account on June 23, 2020, and the $ 65,500 was deposited on July 1, 2020.
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On July 1, 2020, the Defendants transferred $ 2,000.00 and $ 65,500.00 to their own
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checking account without securing Plaintiffs'ermission nor advising Plaintiffs of their doing
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so. On the same day of the SBA deposit of funds, Attorney Jack Cheng demanded payment of
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the outstanding debt owed to Defendants. See Declaration of Plaintiffs, )~I9-10, Exhibits B and
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C.)
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IIL ARGUMENT
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A. LEGAL STANDARD FOR PRELIMINARY INJUNCTION.
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California Code of Civil Procedure FI 527 provides that, "a preliminary injunction may be
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granted at any time before judgment upon a verified complaint, or upon affidavits if the
complaint in one case, or the affidavits in the other, show satisfactorily that sufficient grounds
18 exist therefor." The general purpose of a preliminary injunction is to preserve the status quo
until the merits of the action are determined, and in doing so, the court considers who will bear
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the greater injury should the preliminary injunction be granted and whether a reasonable
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probability exists that the plaintiff will prevail. (State Bd. of Barber Examiners v. Star (1970) 8
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Cal.App.3d 736)
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Plaintilyseek a preliminary injunction ordering the Del'endants to pay the expenses for
the Business such as rent, utilities and employees fiom the SBA funds received under the U.S.
26 CAIRNS Act which funds werc transferred from the Business checking account to their personal
bank account or transler the remaining SBA l'unds back to the Business checking account AND
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PLAINTIFFS'PPLICATION FOR PRELIMINARY INJUNCTION;
MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT
C
from destroying the Business by preventing Plaintiffs from entering and operating the Business
and by terminating services of water, electricity and gas for the Business.
Section 527 authorizes the Court to issue an injunction prior to trial "if sufficient grounds
'exist therefor." (Cal. Code Civ. P. $ 527) These grounds include circumstances where a party
may suffer great or irreparable injury or whether pecuniary compensation would fail to provide
adequate relief (Cal. Code Civ. P. ) 526(a)(2), (4)(c)(l).) The decision to grant a preliminary
injunction rests in the sound discretion of the Court. (Continental Baking Co. v. Katz (19680 68
Cal.2d 512, 527.) In exercising its discretion, the Court must consider two factors: (I) whether
10 there is a reasonable probability that plaintiff will prevail on the merits at trial, and (2) whether
the denial of the injunction would cause plaintiff more harm than the defendant would suffer if
12 the injunction were granted, and then "exercise its discretion 'in favor of the party most likely to
13
be injured.'" (Robbins v. Sup. Ct. (1985) 38 Cal.3d 199, 206; see also People v. Acuna (1997)
14
14 Cal.4 1090, 1109.)
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16 B. PLAINTIFFS WILL IMMINENTLY SUFFER GRAVE AND
17 IRREPARABLE HARM IN THE ABSENCE OF RELIEF
18 The theft of one's business assets are unquestionably irreparable harm. Without access
19 to the SBA funds to pay rent, buy products and pay employees, Plaintiffs are unable to fully run
20 their Business. The Court in Dinzlev v. Buckner (1909) 11 Cal.App. 181, underscored in its
21 holding that destruction of a business is a harm that cannot be redressed without injunctive relief
22
(Id. at 183.) The California Supreme Court in Anderson v. Souza (1952) 38 Cal.2d 825, 834
23
stated that, "the term 'irreparable injury'uthorizing the interposition of a court of equity by
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way of injunction means that species of damages, whether great or small, that ought not to be
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submitted to on the one hand or inflicted on the other." Use by Defendants of the Business SBA
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funds for their own gain and to the detriment of Plaintiffs is a species of damage, "that ought to
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not be submitted to on the one hand or inflicted on the other."
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PLAINTIFFS'PPLICATION FOR PRELIMINARY INJUNCTION;
MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT
This case is remarkably similar to the case in Wind v. Herbert (1960) 186 Cal.App. 2d
276, where the Court affirmed the granting of a preliminary injunction against the defendants
after it was alleged that the defendant husband failed to comply with the requirements of
partnership's finance account, moved the partnership's bank accounts without notifying
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plaintiffs, charged against the partnership's funds unverified and unexplained charges, and
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charged personal expenses to the partnership. The Court goes on to note that, "the concept of
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'irreparable injury'hich authorizes the interposition of a court of equity by way of injunction
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does not concern itself entirely with injury beyond the possibility of repair or beyond possible
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compensation in damages." (Id. at 285.) Without a preliminary injunction, Defendants will
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continue to use the SBA funds for their own personal use and deprive the Business of the
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resources it needs to survive.
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Conversely, Defendants will suffer no undue harm should they be restrained from using
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or disposing of the SBA funds. Defendants'ossession of the misappropriated SBA funds
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forms no basis for them to use or dispose of said property, as it was converted to their personal
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use in bad faith. The imminent and irreparable harm to Plaintiffs tips the scales of equity steeply
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in Plaintiffs'avor.
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19 C. PLAINTIFFS ARE MORE LIKELY THAN NOT TO SUCCEED ON THK
20 MERITS.
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Plaintiffs have alleged the following causes of action against Defendants in the First
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Amended Complaint: Conversion, Intentional Interference with Contractual Relations, Unjust
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Enrichment, Fraudulent Deceit, and Breach of Fiduciary Duty. Also, see Request for Judicial
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Notice, First Amended Complaint attached thereto. Plaintiffs have more than sufficient
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evidence to establish Plaintiffs are more likely than not to succeed on all causes of action, as set
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forth below.
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PLAINTIFFS'PPLICATION FOR PRELIMINARY INIUNCTION;
MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT
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1. Conversion
Conversion is any act of dominion wrongfully exerted over another's personal property.
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There must exist an actual interference with one's ownership or right of possession. (Fischer v.
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Machado (1996) 50 Cal.App.4" 1069, 1073; Weiss v. Marcus (1975) 51 Cal.App.3d 590, 599.)
6 Defendants'ransfer of the SBA funds from the Business Checking account to the
Defendants'ersonal
account interferes with Plaintiffs'se of the SBA funds earmarked for the Business.
(See Declaration of Plaintiffs. r10 and Exhibits "B" and "C" attached thereto.")
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2. Intentional Interference with Contractual Relations
12 The Plaintiffs signed a contract with the SBA to receive funds under the CARES Act and
13 promised to use the funds for specific purposes in the Business, e.g., payroll and rent.
14 Defendants'onversion of those SBA funds to their own personal use intentionally interfered
15 with Plaintiffs'ontractual relations with the SBA. Plaintiffs'ttorney advised the
Defendants'ttorney
of the SBA contract and to return the money to the Business checking account, which
they have refused to do. (See Declaration of Plaintiffs, $ 8-13, Exhibits "B" and "C" attached
thereto.")
19 "The elements which a plaintiff must plead to state the cause of action for intentional
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interference with contractual relations are (1) a valid conuact between plaintiff and a third party;
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(2) defendant's knowledge of this contract; (3) defendant's intentional acts designed to induce a
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breach or disruption of the contractual relationship; (4) actual breach or disruption of the
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contractual relationship; and (5) resulting damage." (Pacific Gas & Electric Co. v. Bear Stearns
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& Co. (1990) 50 Cal.3d 1118, 1126)
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"Plaintiff need not allege an actual or inevitable breach of contract in order to state a
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claim for disruption of contractual relations. We have recognized that interference with the
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plaintiff's performance may give rise to a claim for interference with contractual relations if
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PLAINTIFFS'PPLICATION FOR PRELIMINARY INJUNCTION;
MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT
plaintiff's performance is made more costly or more burdensome. (Pacific Gas & Electric Co. v.
Bear Stearns & Co. (1990) 50 Cal.3d at p. 1129)
3. Uniust Enrichment
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The purpose of the Business SBA funds was for business purposes only. In transferring
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the SBA funds to their own personal checking accounts for their own personal benefits, they,
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therefore, became unjustly enriched. The elements of a claim for unjust enrichment include:
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receipt of a benefit and unjust retention of the benefit at the expense of another. (Peterson v.
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Cellco Partnershio (2008) 164 Cal.App.4'" 1583)
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"As expressed by some authorities, the obligation to do justice rests upon all persons,
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natural and artificial; if one obtains the money or property of others without authority, the law,
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independently of express contract, will compel restitution or compensation." (Luckv Auto
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Sunnlv v. Turner (1966) 244 Cal.App.2d 872)
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4. Fraudulent Deceit
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17 On or about January 30, 2019, Defendants falsely and fraudulently, and with intent to
18 deceive and defraud Plaintiffs, represented to Plaintiffs that if they signed the Contract, attached
19 hereto as Exhibit "A" to the First Amended Complaint (See Request for Judicial Notice" ), that
20 the Plaintiffs would have 100 percent interest in the Business and that they would convey all
21 interest in the Business to the Plaintiffs within two weeks. Because Plaintiff Lu Sun speaks only
22 Mandarin and Lin Zhao speaks very limited English, they believed the false representations and
23 acted upon those false representations in performing the duties of operating the Business.
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Plaintiff filed the Statement of Information with the Secretary of State showing the Change of
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Ownership. Plaintiffs also had prepared and signed an LLC Operating Agreement. (See
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Declaration of Plaintiffs, tt5, Exhibit "A" thereof.) Nevertheless, on or about August 9, 2019,
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Defendant Melissa Sui filed a Statement of Information with the Secretary of State claiming that
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PLAINTIFFS'PPLICATION FOR PRELIMINARY INJUNCTION;
MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT
0
she was the CEO of YI BBQ LLC after she had sold her interest in the LLC. (See Request
for Judicial Notice, First Amended Complaint, Exhibit "F".)
5. Breach of Fiduciarv Dutv
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Plaintiff Lu Sun speaks only Mandarin and Plaintiff Lin Zhao speaks very limited
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English, Plaintiffs relied in good faith trust in Defendants. Defendants breached the fiduciary
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duty of care and loyalty to the Plaintiffs (whether a partner of a partnership or a member of the
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LLC) in attempting to destroy the Business by threatening to prevent Plaintiffs from entering
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and operating the Business and by terminating services of water, electricity and gas for the
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Business and from taking the SBA funds from the Business Account to their own personal
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account. (See Declaration of Plantiffs, tt8-13, Exhibits "B" and "'C" attaclted thereto.")
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"A fiduciary relationship is " 'any relation existing between parties to a transaction
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wherein one of the parties is in duty bound to act with the utmost good faith for the benefit of
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the other party. Such a relation ordinarily arises where a confidence is reposed by one person in
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the integrity of another, and in such a relation the party in whom the confidence is reposed, if he
17 voluntarily accepts or assumes to accept the confidence, can take no advantage from his acts
18 relating to the interest of the other party without the latter's knowledge or consent....' " (Wolf
19 v. Sunerior Court (2003) 107 Cal.App.4'" 25, 29, internal citations omitted.)
20 "[E]xamples of relationships that impose a fiduciary obligation to act on behalf of and for the
21 benefit of another are 'a joint venture, a partnership, or an agency.'ut, '[tjhose categories are
22 merely illustrative of fiduciary relationships in which fiduciary duties are imposed by law.'
23 (Cleveland v. Johnson (2012) 209 Cal.App.4'" 1315, 1339)
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PLAINTIFFS'PPLICATION FOR PRELIMINARY INJUNCTION;
MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT
IV. CONCLUSION
For the foregoing reasons, a preliminary injunction should be issued ordering the
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Defendants to pay the expenses for the Business such as rent, utilities and employees from the
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S13A funds received under the II.S. CARl',S Act or transfer the remaining SBA funds not yet
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used back to the Business checking account AND from destroying the Business by preventing
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Plaintiffs from cntcring and operating thc Business and by terminating services of water,
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clcctricity and gas for thc Business.
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DATED: September 8, 2020 LAW OFFICE OF KEVIN AVERY
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RosdAnn Frazee
13 Attorney for Plaintiffs
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PLAINTIFFS'PPLICATION FOR PRELIMINARY INJUNCTION;
MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT
Preview
Electronically FILED by Superior Court of California, County of Los Angeles on 09/08/2020 11:41 PM Sherri R. Carter, Executive Officer/Clerk of Court, by M. Wong,Deputy Clerk RoseAnn Frazee, State Bar No. 262516 Law Office of Kevin S. Avery 155 North Lake Avenue, 8" Floor Pasadena, CA 91101 Telephone: (626) 993-6688 Facsimile: (626) 993-6690 E-Maih roseann@frazeelawgroup.corn Attorney for Plaintiffs SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF LOS ANGELES 10 NORTH CENTRAL JUDICIAL DISTRICT 12 13 LU SUN and LIN ZHAO, doing business ) Case No. 20GDCV00585 as YI Kebab k Bar, ) 14 ) Plaintiffs, ) PLAINTIFFS'PPLICATION FOR 15 PRELIMINARY INJUNCTION; vs. 3 PLAINTIFFS'EMORANDUM OF 16 POINTS AND AUTHORITIES IN 3 SUPPORT OF APPLICATION FOR 17 MELISSA M. SUI AND JINXUE SUI, ) PRELIMINARY IN JUNCTION ) 18 Defendants. ) Hearing Date: September 21, 2020 Department: E 19 20 ) Ti: 2:0)0 p.m. ) [Declaration of Plaintiffs and Request for 21 ) Judicial Notice Filed Concurrently 22 ) herewith] ) 23 ) 24 25 26 27 28 PLAINTIFFS'PPLICATION FOR PRELIMINARY INJUNCTION; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT TO: DEFENDANTS, by and through their attorneys 2 PLEASE TAKE NOTICE that on September 21, 2020, at 2:00 p.m., in Department E, 3 of the Los Angeles Superior Court, Glendale Courthouse, 600 East Broadway, Glendale, CA 4 91206, the Plaintiffs will be heard on the Order to Show why a preliminary injunction should not 5 issue ordering the Defendants to pay the expenses for the Business such as rent, utilities and 6 employees from thc SBA funds rcccivcd under thc U.S. CARES Act which funds werc 7 transferred lrom the Business checking account to their personal hank account or transfer the 8 remaining SBA funds hack to the Business checking account AND from destroying the Business 10 by prcvcnting Plaintiffs from entering and operating thc Business and by terminating scrviccs of 11 water, electricity and gas for the Business. 12 This application is made pursuant to the provisions of Code of Civil Procedure 527 on 13 the ground that Defendants, former partner or member of LLC Business, have misappropriated 14 the SBA funds and have threatened to destroy ihe Business. 15 This application is based upon the Memorandum in Support attached hereto and the 16 I7 Declaration of RoseAnn Frazee and the Request for Judicial Notice filed concurrently herewith. 18 I 9 DATED this 8'" day of September, 2020. Respectfully submitted, 20 21 LAW OFFICE OF KEVIN S. AVERY 22 23 koseAnn Frazee rJ 24 Attorney for Plaintiffs 25 26 27 28 PLAINTIFFS'PPLICATION FOR PRELIMINARY INJUNCTION; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT MEMORANDUM OF POINTS AND AUTHORITIES I. INTRODUCTION 4 The underlying action seeks to prevent the theft of a business. Plaintiffs Lu Sun and Lin 5 Zhao, doing business as YI Kebab & Bar (the "Business" ), trusted their former business partner, 6 Melissa Sui, to transfer all business assets when Defendants sold their share of the Business to 7 Plaintiffs. Nevertheless, Defendants fraudulently did not perform that promise and her and her 8 husband, Jinxue Sui (" Defendants" ), retained authority to sign on the business checking account 9 with Chase Bank after the Business was sold to the Plaintiffs and took other measures to thwart 10 the Business. The Plaintiffs are not English speakers, so they depended on Defendants and 11 wanted to maintain an amicable relationship with Defendants to assist them in the transfer. 12 Unfortunately, Defendants took advantage of having signatory rights to the Business checking account and n'ansferred $ 67,500 to their own personal checking account leaving the Business with no money to pay utilities, rent or their employees. Plaintiffs had secured a loan in the amount of $ 67,500 from the Small Business Association ("SBA") under the U.S. Payroll 17 Protection Program ("PPP") which loan proceeds had been deposited into the Business checking 18 account the same day that Defendants transferred the funds to their personal account. 19 Defendants have refused to return the $ 67,500 in loan proceeds to the Business checking 20 account. Because the Plaintiffs did not have the funds to pay rent, utilities and other expenses and the Business was shut down due to COVID-19, the Defendants have threatened to prevent Plaintiffs from entering and operating the Business (their only source of income) and threatened to terminate the water, electricity and gas for the Business. 24 25 26 27 28 PLAINTIFFS'PPLICATION FOR PRELIMINARY INIUNCTION; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT II. STATEMENT OF FACTS On or about January 30, 2019, Plaintiffs, as purchasers, and Defendants, as sellers, entered into a Contract in which Defendants sold "her" (their) share or percentage in the 4 company to Plaintiffs for $ 100,000, with payments to start on July I, 2019, in the amount of 5 $ 5,000 per month, based on the profit/loss adjustments, and to pay the credit card balance as of 6 November 30, 2019. Defendants promised to transfer all assets, licenses and permits to 7 Plaintiffs, including any and all interest in the YI BBQ LLC within two weeks. See Request for 8 Judicial Notice, Attachments A and B. 9 Plaintiffs assumed the 100% ownership of the Business in applying for liquor license and 10 any other permits necessary to operate the Business. The California Secretary of State, 11 Statement of Information, filed on February 15, 2019, indicates that Lu Sun is the CEO of YI 12 BBQ LLC. (See Request for Judicial Notice, Exhibit C.) However, because the Plaintiff Lu Sun 13 speaks only Mandarin and Lin Zhao speaks very limited English, they left some of the administrative functions to Melissa Sui. IMelissa Sui was listed as Agent for Service of Process on the California, Secretary of State, Statement of Information filed on February 15, 2019, and 17 the parties did not change the Commercial Lease Agreement with the landlord, Dandan Liu, or Ig the Business checking accounts to exclude Defendants. The Business checking account 19 signatories are Plaintiffs and Defendants. Unbeknown to the Plaintiffs, Defendant Melissa Sui 20 filed a California Statement of Information claiming that she was the CEO on August 9, 2019. 21 (See Request for Judicial Notice, Exhibit F.) 22 On March 19, 2020, via Executive Order N-60-20, the Governor of California ordered a shutdown of the Business because of COVID-19, and the Business had to close. Plaintiffs have since re-opened the Business on a limited basis. 25 After the Coronavirus Air, Relief, and Economic Security Act ("CARES Act") was 26 signed into law on March 27, 2020, Plaintiff Lu Sun, with her husband, Lin Zhao's assistance, 27 applied for the SBA loan provided through the CARES Act to handle employees paychecks, 28 PLAINTIFFS'PPLICATION FOR PRELIMINARY INJUNCTION; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT 1 rental expenses and other expenses of the Business and signed a contract for the repayment of 2 the SBA loan. The SBA loan funds in the amount of $ 2,000 was deposited into the Business bank account on June 23, 2020, and the $ 65,500 was deposited on July 1, 2020. 5 On July 1, 2020, the Defendants transferred $ 2,000.00 and $ 65,500.00 to their own 6 checking account without securing Plaintiffs'ermission nor advising Plaintiffs of their doing 7 so. On the same day of the SBA deposit of funds, Attorney Jack Cheng demanded payment of 8 the outstanding debt owed to Defendants. See Declaration of Plaintiffs, )~I9-10, Exhibits B and 9 C.) 10 IIL ARGUMENT 12 13 A. LEGAL STANDARD FOR PRELIMINARY INJUNCTION. 14 California Code of Civil Procedure FI 527 provides that, "a preliminary injunction may be 15 granted at any time before judgment upon a verified complaint, or upon affidavits if the complaint in one case, or the affidavits in the other, show satisfactorily that sufficient grounds 18 exist therefor." The general purpose of a preliminary injunction is to preserve the status quo until the merits of the action are determined, and in doing so, the court considers who will bear 20 the greater injury should the preliminary injunction be granted and whether a reasonable 21 probability exists that the plaintiff will prevail. (State Bd. of Barber Examiners v. Star (1970) 8 22 Cal.App.3d 736) 23 24 Plaintilyseek a preliminary injunction ordering the Del'endants to pay the expenses for the Business such as rent, utilities and employees fiom the SBA funds received under the U.S. 26 CAIRNS Act which funds werc transferred from the Business checking account to their personal bank account or transler the remaining SBA l'unds back to the Business checking account AND 28 PLAINTIFFS'PPLICATION FOR PRELIMINARY INJUNCTION; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT C from destroying the Business by preventing Plaintiffs from entering and operating the Business and by terminating services of water, electricity and gas for the Business. Section 527 authorizes the Court to issue an injunction prior to trial "if sufficient grounds 'exist therefor." (Cal. Code Civ. P. $ 527) These grounds include circumstances where a party may suffer great or irreparable injury or whether pecuniary compensation would fail to provide adequate relief (Cal. Code Civ. P. ) 526(a)(2), (4)(c)(l).) The decision to grant a preliminary injunction rests in the sound discretion of the Court. (Continental Baking Co. v. Katz (19680 68 Cal.2d 512, 527.) In exercising its discretion, the Court must consider two factors: (I) whether 10 there is a reasonable probability that plaintiff will prevail on the merits at trial, and (2) whether the denial of the injunction would cause plaintiff more harm than the defendant would suffer if 12 the injunction were granted, and then "exercise its discretion 'in favor of the party most likely to 13 be injured.'" (Robbins v. Sup. Ct. (1985) 38 Cal.3d 199, 206; see also People v. Acuna (1997) 14 14 Cal.4 1090, 1109.) 15 16 B. PLAINTIFFS WILL IMMINENTLY SUFFER GRAVE AND 17 IRREPARABLE HARM IN THE ABSENCE OF RELIEF 18 The theft of one's business assets are unquestionably irreparable harm. Without access 19 to the SBA funds to pay rent, buy products and pay employees, Plaintiffs are unable to fully run 20 their Business. The Court in Dinzlev v. Buckner (1909) 11 Cal.App. 181, underscored in its 21 holding that destruction of a business is a harm that cannot be redressed without injunctive relief 22 (Id. at 183.) The California Supreme Court in Anderson v. Souza (1952) 38 Cal.2d 825, 834 23 stated that, "the term 'irreparable injury'uthorizing the interposition of a court of equity by 24 way of injunction means that species of damages, whether great or small, that ought not to be 25 submitted to on the one hand or inflicted on the other." Use by Defendants of the Business SBA 26 funds for their own gain and to the detriment of Plaintiffs is a species of damage, "that ought to 27 not be submitted to on the one hand or inflicted on the other." 28 PLAINTIFFS'PPLICATION FOR PRELIMINARY INJUNCTION; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT This case is remarkably similar to the case in Wind v. Herbert (1960) 186 Cal.App. 2d 276, where the Court affirmed the granting of a preliminary injunction against the defendants after it was alleged that the defendant husband failed to comply with the requirements of partnership's finance account, moved the partnership's bank accounts without notifying 5 plaintiffs, charged against the partnership's funds unverified and unexplained charges, and 6 charged personal expenses to the partnership. The Court goes on to note that, "the concept of 7 'irreparable injury'hich authorizes the interposition of a court of equity by way of injunction 8 does not concern itself entirely with injury beyond the possibility of repair or beyond possible 9 compensation in damages." (Id. at 285.) Without a preliminary injunction, Defendants will 10 continue to use the SBA funds for their own personal use and deprive the Business of the 11 resources it needs to survive. 12 Conversely, Defendants will suffer no undue harm should they be restrained from using 13 or disposing of the SBA funds. Defendants'ossession of the misappropriated SBA funds 14 forms no basis for them to use or dispose of said property, as it was converted to their personal 15 use in bad faith. The imminent and irreparable harm to Plaintiffs tips the scales of equity steeply 16 in Plaintiffs'avor. 17 18 19 C. PLAINTIFFS ARE MORE LIKELY THAN NOT TO SUCCEED ON THK 20 MERITS. 21 Plaintiffs have alleged the following causes of action against Defendants in the First 22 Amended Complaint: Conversion, Intentional Interference with Contractual Relations, Unjust 23 Enrichment, Fraudulent Deceit, and Breach of Fiduciary Duty. Also, see Request for Judicial 24 Notice, First Amended Complaint attached thereto. Plaintiffs have more than sufficient 25 evidence to establish Plaintiffs are more likely than not to succeed on all causes of action, as set 26 forth below. 27 28 PLAINTIFFS'PPLICATION FOR PRELIMINARY INIUNCTION; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT '7 1. Conversion Conversion is any act of dominion wrongfully exerted over another's personal property. 4 There must exist an actual interference with one's ownership or right of possession. (Fischer v. 5 Machado (1996) 50 Cal.App.4" 1069, 1073; Weiss v. Marcus (1975) 51 Cal.App.3d 590, 599.) 6 Defendants'ransfer of the SBA funds from the Business Checking account to the Defendants'ersonal account interferes with Plaintiffs'se of the SBA funds earmarked for the Business. (See Declaration of Plaintiffs. r10 and Exhibits "B" and "C" attached thereto.") 9 10 2. Intentional Interference with Contractual Relations 12 The Plaintiffs signed a contract with the SBA to receive funds under the CARES Act and 13 promised to use the funds for specific purposes in the Business, e.g., payroll and rent. 14 Defendants'onversion of those SBA funds to their own personal use intentionally interfered 15 with Plaintiffs'ontractual relations with the SBA. Plaintiffs'ttorney advised the Defendants'ttorney of the SBA contract and to return the money to the Business checking account, which they have refused to do. (See Declaration of Plaintiffs, $ 8-13, Exhibits "B" and "C" attached thereto.") 19 "The elements which a plaintiff must plead to state the cause of action for intentional 20 interference with contractual relations are (1) a valid conuact between plaintiff and a third party; 21 (2) defendant's knowledge of this contract; (3) defendant's intentional acts designed to induce a 22 breach or disruption of the contractual relationship; (4) actual breach or disruption of the 23 contractual relationship; and (5) resulting damage." (Pacific Gas & Electric Co. v. Bear Stearns 24 & Co. (1990) 50 Cal.3d 1118, 1126) 25 "Plaintiff need not allege an actual or inevitable breach of contract in order to state a 26 claim for disruption of contractual relations. We have recognized that interference with the 27 plaintiff's performance may give rise to a claim for interference with contractual relations if 28 PLAINTIFFS'PPLICATION FOR PRELIMINARY INJUNCTION; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT plaintiff's performance is made more costly or more burdensome. (Pacific Gas & Electric Co. v. Bear Stearns & Co. (1990) 50 Cal.3d at p. 1129) 3. Uniust Enrichment 5 The purpose of the Business SBA funds was for business purposes only. In transferring 6 the SBA funds to their own personal checking accounts for their own personal benefits, they, 7 therefore, became unjustly enriched. The elements of a claim for unjust enrichment include: 8 receipt of a benefit and unjust retention of the benefit at the expense of another. (Peterson v. 9 Cellco Partnershio (2008) 164 Cal.App.4'" 1583) 10 "As expressed by some authorities, the obligation to do justice rests upon all persons, 11 natural and artificial; if one obtains the money or property of others without authority, the law, 12 independently of express contract, will compel restitution or compensation." (Luckv Auto 13 Sunnlv v. Turner (1966) 244 Cal.App.2d 872) 14 15 4. Fraudulent Deceit 16 17 On or about January 30, 2019, Defendants falsely and fraudulently, and with intent to 18 deceive and defraud Plaintiffs, represented to Plaintiffs that if they signed the Contract, attached 19 hereto as Exhibit "A" to the First Amended Complaint (See Request for Judicial Notice" ), that 20 the Plaintiffs would have 100 percent interest in the Business and that they would convey all 21 interest in the Business to the Plaintiffs within two weeks. Because Plaintiff Lu Sun speaks only 22 Mandarin and Lin Zhao speaks very limited English, they believed the false representations and 23 acted upon those false representations in performing the duties of operating the Business. 24 Plaintiff filed the Statement of Information with the Secretary of State showing the Change of 25 Ownership. Plaintiffs also had prepared and signed an LLC Operating Agreement. (See 26 Declaration of Plaintiffs, tt5, Exhibit "A" thereof.) Nevertheless, on or about August 9, 2019, 27 Defendant Melissa Sui filed a Statement of Information with the Secretary of State claiming that 28 PLAINTIFFS'PPLICATION FOR PRELIMINARY INJUNCTION; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT 0 she was the CEO of YI BBQ LLC after she had sold her interest in the LLC. (See Request for Judicial Notice, First Amended Complaint, Exhibit "F".) 5. Breach of Fiduciarv Dutv 5 Plaintiff Lu Sun speaks only Mandarin and Plaintiff Lin Zhao speaks very limited 6 English, Plaintiffs relied in good faith trust in Defendants. Defendants breached the fiduciary 7 duty of care and loyalty to the Plaintiffs (whether a partner of a partnership or a member of the 8 LLC) in attempting to destroy the Business by threatening to prevent Plaintiffs from entering 9 and operating the Business and by terminating services of water, electricity and gas for the 10 Business and from taking the SBA funds from the Business Account to their own personal 11 account. (See Declaration of Plantiffs, tt8-13, Exhibits "B" and "'C" attaclted thereto.") 12 "A fiduciary relationship is " 'any relation existing between parties to a transaction 13 wherein one of the parties is in duty bound to act with the utmost good faith for the benefit of 14 the other party. Such a relation ordinarily arises where a confidence is reposed by one person in 15 16 the integrity of another, and in such a relation the party in whom the confidence is reposed, if he 17 voluntarily accepts or assumes to accept the confidence, can take no advantage from his acts 18 relating to the interest of the other party without the latter's knowledge or consent....' " (Wolf 19 v. Sunerior Court (2003) 107 Cal.App.4'" 25, 29, internal citations omitted.) 20 "[E]xamples of relationships that impose a fiduciary obligation to act on behalf of and for the 21 benefit of another are 'a joint venture, a partnership, or an agency.'ut, '[tjhose categories are 22 merely illustrative of fiduciary relationships in which fiduciary duties are imposed by law.' 23 (Cleveland v. Johnson (2012) 209 Cal.App.4'" 1315, 1339) 24 25 26 27 PLAINTIFFS'PPLICATION FOR PRELIMINARY INJUNCTION; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT IV. CONCLUSION For the foregoing reasons, a preliminary injunction should be issued ordering the 3 Defendants to pay the expenses for the Business such as rent, utilities and employees from the 4 S13A funds received under the II.S. CARl',S Act or transfer the remaining SBA funds not yet 5 used back to the Business checking account AND from destroying the Business by preventing 6 Plaintiffs from cntcring and operating thc Business and by terminating services of water, 7 clcctricity and gas for thc Business. 8 9 DATED: September 8, 2020 LAW OFFICE OF KEVIN AVERY 10 12 RosdAnn Frazee 13 Attorney for Plaintiffs 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PLAINTIFFS'PPLICATION FOR PRELIMINARY INJUNCTION; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT