Bryant et al v. Matvieshen, No. 1:2012cv00572 - Document 67 (E.D. Cal. 2012)
Court Description: ORDER DENYING 63 Motion for Temporary Restraining Order signed by Chief Judge Anthony W. Ishii on 10/12/2012. (Jessen, A)
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Bryant et al v. Matvieshen Doc. 67 1 2 3 4 5 6 7 IN THE UNITED STATES DISTRICT COURT FOR THE 8 EASTERN DISTRICT OF CALIFORNIA 9 10 11 12 13 14 15 CHARLES L. BRYANT and JACK DELIDDO, 1:12-CV-00572 AWI SKO ) ) Plaintiffs, ) v. ) ) MICHAEL MATVIESHEN and DOES 1 ) through 25, inclusive, ) ) Defendants. ) ____________________________________) ORDER RE: MOTION FOR TEMPORARY RESTRAINING ORDER (Doc. 63) 16 17 18 19 I. History 20 The factual background of this case is complex. There are four active complaints: the 21 original, two counterclaims, and a counterclaim to a counterclaim These complaints appear to 22 contain some inconsistent facts. 23 In 2009, Jack Deliddo (“Deliddo”) formed Rooftop Energy, LLC (“Rooftop”), a company 24 specializing in large scale commercial solar projects. Doc. 4, Complaint, ¶ 8. Shortly thereafter, 25 Deliddo sold a 51% interest in Rooftop to Charles Bryant (“Bryant”). Doc. 4, Complaint, ¶ 9. 26 Plaintiffs entered into discussions with Michael Matvieshen (“Matvieshen”) regarding assistance 27 with obtaining solar panels and financing for various large-scale projects, including projects with 28 General Motors (“GM”). Matvieshen already owned a number of corporations involved with Dockets.Justia.com 1 solar/electric projects, among them ICP Solar Technologies, Inc. (“ICP”), a subsidiary of Epod 2 Solar, Inc. (“Epod”). In 2010, Matvieshen offered to purchase Rooftop from Bryant and Deliddo 3 in exchange for cash and stock in ICP. Doc. 4, Complaint, ¶ 13. The parties contemplated that 4 ICP would fulfill the GM projects initiated by Rooftop. Doc. 4, Complaint, ¶ 13. In August 5 2010, Bryant and Deliddo agreed to a sale of 100% of their membership interests in Rooftop to 6 ICP for $3 Million in vested cash payouts, a 20% stock interest in ICP, and 7 employment/consulting agreements (“Rooftop Agreement”). Doc. 6, Part 2, Ex. A; Doc. 4, 8 Complaint, ¶ 13; Doc. 6, Part 7, Deliddo Declaration, ¶ 6; Doc. 6, Part 1, Bryant Declaration, ¶ 9. 9 Bryant and Deliddo, however, never received the cash payment promised, and ICP turned out to 10 have cash flow problems, making it a poor candidate for the potential GM projects. Doc. 4, 11 Complaint, ¶ 14. Bryant and Deliddo became 10% shareholders in ICP. Doc. 6, Part 1, Bryant 12 Delcaration, ¶ 28. 13 Matvieshen represented to Bryant and Deliddo that Sunlogics, Inc. (“Sunlogics INC), a 14 Canadian corporation which was controlled by Matvieshen, was in a better position than ICP to 15 pursue the business strategies and GM projects initiated by Rooftop. Doc. 4, Complaint, ¶ 16. At 16 that time, Matvieshen was 100% owner of Sunlogics INC. Doc. 62, Counterclaim, ¶9. Bryant 17 and Deliddo agreed to allow Matvieshen to transfer Rooftop from ICP to Sunlogics INC, and for 18 their consulting contracts to be assigned to Sunlogics INC, in exchange for a 30% interest each in 19 Sunlogics INC. Doc. 4, Complaint, ¶ 16; Doc. 6, Part 7, Deliddo Declaration, ¶¶ 7-8; Doc. 6, Part 20 1, Bryant Declaration, ¶¶ 9-11. On September 14, 2010, Deliddo was made a member of the 21 Board of Directors of Sunlogics INC. Doc. 4, Complaint, ¶ 20. The parties restructured the 22 companies in January 2011, agreeing that Sunlogics, Plc (“Sunlogics PLC”) would become the 23 parent of Sunlogics INC which was the parent of Rooftop. Doc. 62, Counterclaim, ¶¶ 10 and 12. 24 Sunlogics PLC is a British company, created in July 2010 whose shares are traded on the 25 Frankfurt stock exchange. Doc. 4, Complaint, ¶ 17. Bryant, Deliddo, and Matveshen became 26 members of the Board of Directors of Sunlogics PLC. Doc. 62, Counterclaim, ¶ 12. In 2011, 27 Rooftop’s name was officially changed to Sunlogics Energy Solutions, LLC. Doc. 62, 28 Counterclaim, ¶ 9. 2 1 In November 2010, Matvieshen discussed with Bryant and Deliddo the possibility of 2 Sunlogics INC acquiring Salamon Group, Inc. (“Salamon”), a publically traded company 3 incorporated in Nevada. Doc. 62, Counterclaim, ¶ 14. Salamon was a solar power syndication 4 (which appears to be a form of financing) company. Doc. 63, Part 1, Bryant Declaration, ¶ 32. It 5 is unclear whether Bryant and Deliddo gave Matvieshen permission to go forward with the 6 transaction or if they had any ownership interest of Sunlogics INC at that time. Doc. 63, 6:16-18. 7 In November 2010, there were 26 million shares of Salamon. Matvieshen arranged for Sunlogics 8 INC to purchase 16 million shares from Space Globe Technologies, Inc. (“Spaceglobe”). Doc. 9 62, Counterclaim, ¶15. Bryant asserts that Matvieshen was purchasing Salamon for the 10 Matvieshen, Bryant, and Deliddo group. Sunlogics INC used funds from Rooftop to pay 11 Spaceglobe. Doc. 6, Part 1, Bryant Declaration, ¶ 12. Though 16 million shares were purchased, 12 only 9 million shares were officially transferred. Doc. 62, Counterclaim, ¶ 17. These shares were 13 transferred to Matvieshen personally instead of Sunlogics INC or Bryant and Deliddo; the 9 14 million shares are in Matvieshen’s name. Doc. 62, Counterclaim, ¶¶ 18-20. Apparently, control 15 over the remainder of Salamon shares (approximately 7 or 8 million) is disputed, with those 16 shares still in the name of Spaceglobe. Doc. 4, Complaint, ¶24. The nature of that dispute is 17 unknown and it is not exactly clear how that dispute affects this case. Matvieshen took control of 18 Salamon by December 2010 and completed a reverse merger with Sunlogics Power Fund 19 Management, Inc. (“Powerfund”). Doc. 62, Counterclaim, ¶ 21. Matvieshen created Powerfund 20 in July 2010. Doc. 4, Complaint, ¶ 17. Powerfund is a Canadian corporation. Doc. 62, 21 Counterclaim, ¶ 3. As payment for Powerfund, Matvieshen had an additional 20 million shares 22 of Salamon and 20 million shares of Salamon warrants created and given to himself. Doc. 62, 23 Counterclaim, ¶ 21. Thus, it is estimated that Matvieshen had 29 million shares of Salamon in 24 his name, out of a total of 46 million shares in early 2011. On May 2, 2011, Sunlogics INC and 25 Powerfund signed a right of first refusal agreement. Doc. 62, Counterclaim, ¶24. Salamon 26 currently claims to have the rights of first offer to purchase GM projects from Sunlogics INC. 27 Doc. 4, Complaint, ¶ 25; Doc. 62, Counterclaim, ¶26. 28 To effectuate the division of ownership in these companies, Matvieshen, Bryant, and 3 1 Deliddo signed an agreement on December 10, 2010 (“MJC Agreement”). Doc. 4, pages 51-53 of 2 54. Among other things, the MJC Agreement provides that Matvieshen was “the directing 3 shareholder” of Sunlogics PLC and Salamon. Doc. 4, Ex. A, ¶ 1. The MJC Agreement further 4 provides that Matvieshen was “holding shares in trust” for Bryant and Deliddo, and that 5 Matvieshen “agrees to transfer 60% of such ownership interests held by [Matvieshen], 30% to 6 [Deliddo] and 30% to [Bryant]” in Sunlogics PLC and Salamon. Doc. 4, Ex. A, ¶ 1. The MJC 7 Agreement also provides that Matvieshen will have a 40% interest and Bryant and Deliddo will 8 each have a 30% interest “in any and all companies in which they participate together presently 9 or in the future. . ..” Doc. 4, Ex. A, ¶ 2. The MJC Agreement stated that “Although the stock 10 ownership will be 30%-30%-40% as between [Deliddo, Bryant, and Matvieshen], as to each of 11 the entities, the parties agree that the voting rights for any entity in which (sic) as between the 12 parties will be as follows: [Matvieshen] 50%, [Bryant] 25%, [Deliddo] 25%. The parties agree to 13 vote their stock in accordance with this agreement.” Doc. 4, Ex. A, ¶ 3. The MJC Agreement 14 expressly contemplated that Matvieshen, Bryant, and Deliddo would not be the sole owners of 15 these companies. The ownership and voting ratios applied to the portion of these companies they 16 owned. Of note, the MJC Agreement referred to “Salamon Group, Inc. or Sunlogics Power Fund 17 Management Inc.” suggesting that the merger between Salamon and Powerfund had already 18 taken place by the time the MJC Agreement was signed. 19 Meanwhile separate from the dealings described above, in October 2010, Sunlogics INC 20 (then controlled by Matvieshen) entered into a merger agreement with Phoenix Solar Holdings, 21 Inc.1 (“Phoenix”), collection of affiliated companies; the agreement was completed on June 10, 22 2011. Doc. 62, Counterclaim, ¶ 11. With all of the mergers, the companies headed by Sunlogics 23 PLC was becoming a vertically integrated solar energy development company. It is assumed, 24 Matvieshen controlled Sunlogics INC, Sunlogics PLC, Powerfund, and Salamon (after the 25 purchase from Spaceglobe) in some manner. It is not clear what titles Matvieshen held at these 26 companies in the time frame at issue. The merger between Sunlogics INC and PLC with Phoenix 27 1 28 Phoenix Solar Holdings is called both an Inc. and a Corp. See Doc. 62, Counterclaim, ¶ 11; Doc. 4, Complaint, ¶ 28. The court assumes that these terms are referring to the same entity. 4 1 was accomplished through some form of share exchange. Doc. 62, Counterclaim, ¶ 11. While 2 Sunlogics PLC and Salamon are publically traded companies, it is unclear whether shares for 3 Sunlogics INC or Powerfund exist. Notwithstanding the MJC Agreement (which explicitly 4 covered ownership of Sunlogics PLC and Salamon), all relevant shares were held by Matvieshen 5 through June 2011 to complete the merger with Phoenix. Doc. 4, Complaint, ¶ 29. At the time of 6 the merger, there were a total of 32 million shares in Sunlogics PLC of which 16.5 million were 7 subject to the MJC Agreement. Doc. 4, Complaint, ¶ 34. Additionally, 9 million shares were set 8 aside to be used to buy certain of Epod and ICP’s assets; Matvieshen represented to Bryant and 9 Deliddo that any excess shares from the 9 million would be reallocated among themselves using 10 11 the 30-30-40 formula. Doc. 4, Complaint, ¶ 35. During the time this merger was pending, Bryant, Deliddo, and Matvieshen agreed to the 12 formation of two offshore companies, Millennium Trends International, Inc., a Bahamas 13 company (“Millennium”), and Maverick Ventures SA, a Swiss company (“Maverick”), that 14 would also be subject to the MJC Agreement. Doc. 4, Complaint, ¶ 30; Doc. 6, Part 7, Deliddo 15 Declaration, ¶ 16; Doc. 6, Part 1, Bryant Declaration, ¶¶ 18, 25. Some of Bryant’s and Deliddo’s 16 shares in Sunlogics PLC under the MJC Agreement were held by Millenium and/or Maverick. 17 Doc. 4, Complaint, ¶ 36. In July 2011, GM invested $7,500,000 in Sunlogics PLC in exchange 18 for 14% of the company. Doc. 6, Part 1, Bryant Declaration, ¶ 27. There was a non-dilution 19 agreement so additional shares were issued to Bryant, Deliddo, and Matvishen. Doc. 4, 20 Complaint, 14:23-25. The total number of shares in Sunlogics PLC becomes unclear at this 21 point. Bryant and Deliddo have only received 2,446,415 shares of Sunlogics PLC though each is 22 entitled to 7,986,978 shares. Doc. 4, Complaint, ¶ 38. 23 On June 10, 2011, Matveshen and Sunlogics INC signed an employment agreement 24 (“Employment Agreement”). Doc. 63, Part 9, Ex A. In September 2011, Matvieshen approached 25 the Board of Directors of Sunlogics PLC with a proposal to purchase Arise Solar Technologies, 26 Inc. (“Arise”); the Sunlogics PLC Board denied the request. Doc. 62, Counterclaim, ¶ 28. 27 Matvieshen had Salamon purchase Arise, using more than $200,000 from Sunlogics INC’s bank 28 accounts. Doc. 62, Counterclaim, ¶ 28. On November 17, 2011, the Board of Directors of 5 1 Sunlogics PLC called a special meeting an confronted Matvieshen about his purchase of Arise. 2 Doc. 62, Counterclaim, ¶ 29. Matvieshen was also confronted about his attempts to buy 3 additional companies, Revergy and Energy Conversion Devices, after the Board of Directors told 4 him to concentrate on existing operations and not new acquisitions. Doc. 63, Part 8, Day 5 Declaration, ¶ 13. At the meeting, Matvieshen resigned from his positions as CEO, Director, and 6 Chairman of the Board of Sunlogics PLC and Sunlogics INC. Doc. 22, Part 2, Matvieshen 7 Declaration, ¶10. Matvieshen continued to control Salamon and its subsidiary, Powerfund. 8 While before, Salamon was only involved in the syndication step, Salamon began to undertake 9 whole solar projects. Doc. 63, Part 1, Bryant Declaration, ¶ 32. 10 Through January 2012, Matvieshen continued to make promises regarding the 11 adjustments and to reassure Bryant and Deliddo of his intent to complete the promised transfers 12 of shares. Doc. 6, Part 1, Bryant Declaration, ¶¶ 13, 33; Doc. 6, Part 3, Ex. M. However, in 13 March 2012, Matvieshen refused to transfer the shares and began making threats to transfer the 14 shares to other parties. Doc. 6, Part 1, Bryant Declaration, ¶¶ 33-40. The various share transfers 15 appear to have been undertaken through a company called Computershare. Doc. 4, Complaint, ¶ 16 37. Matvieshen continues to control Salamon and Sunlogics PLC stock that, under the MJC 17 Agreement, belongs to Bryant and Deliddo. Matvieshen also holds Salamon stock that belongs 18 to Sunlogics PLC. After Matvieshen resigned from Sunlogics INC and PLC, Salamon 19 announced that it was buying Sunlogics PLC stock from Millenium. Doc. 4, Complaint, ¶41. 20 This would be stock subject to the MJC Agreement. 21 Bryant and Deliddo first filed suit against Matvieshen on April 10, 2012, in the Superior 22 Court for the State of California, County of Fresno. Doc. 4, Complaint. The case was removed 23 on April 12, 2012. Bryant and Deliddo filed a motion for a temporary restraining order, which 24 was granted on April 27, 2012 (“First TRO”) ordering in relevant part: 25 26 27 28 Defendant Michael Matvieshen, his agents, servants, employees, assignees, attorneys and all those acting in concert or participation with him are RESTRAINED AND ENJOINED from taking any actions to sell, transfer, hypothecate or encumber or take any action that would devalue in any manner the shares of common stock of Sunlogics Plc (“Sunlogics”) a United Kingdom corporation, Salamon Group, Inc. (“Salamon”) a Nevada corporation, Millennium Trends, Inc. (“Millennium”), a Bahamas corporation, or Maverick Group, Inc. (“Maverick’) a Swiss corporation, at issue in this case. Without limitation, this 6 1 specifically extends to entering into any definitive agreement for the transfer of stock from Millennium or Maverick. 2 3 Doc. 7, Original TRO, 7:26-8:7. The goal of the First TRO was to protect Bryant’s and 4 Deliddo’s ownership interests under the MJC Agreement. A preliminary injunction hearing was 5 held on May 10, 2012. After considering the arguments of the parties, the court indicated that a 6 preliminary injunction was appropriate. Up through that point, the parties had been arguing in 7 terms of percentages; they had not indicated the exact number of shares of Sunlogics PLC or 8 Salamon that constituted the 30-30-40 covered by the MJC Agreement. The parties were ordered 9 to meet and confer to come up with language for the preliminary injunction which would be more 10 11 specific. At the May 10, 2012 hearing, it was determined that the First TRO had to be modified in 12 three ways. First, the language “or take any action that would devalue in any manner” was 13 eliminated. Matvieshen remained the CEO/head of Salamon, Millennium, and Maverick. He 14 had to make business decisions which might affect the value of these companies. As the First 15 TRO was limited to preserving Bryant’s and Deliddo’s ownership interests and not intended to 16 interfere withe Matvieshen’s flexibility in running the companies, the language was deleted. 17 Second, the First TRO prohibited Matvieshen from selling any of the specified stock, even his 18 own 40%. The restrictions on Matvieshen’s 40% interest were lifted. Third, the court clarified 19 that the restrictions do not apply to Sunlogics PLC or Salamon stock owned by Epod or ICP (the 20 up to 9,000,000 shares given to those companies in exchange for assets transferred to Sunlogics 21 PLC). The terms of the First TRO, with these three modifications, constitute the Second TRO, 22 effective May 10, 2012. 23 Bryant and Deliddo moved to have the Second TRO modified. Doc. 20. Salamon 24 scheduled a general shareholders meeting on May 30, 2012 for the purpose of issuing 250 million 25 shares of additional stock and to create a new preferred class of stock with 200 times the voting 26 power of common stock and to change Salamon’s name to “Sunlogics Powerfund Inc.” Doc. 20, 27 Part 4, Bryant Declaration, ¶¶ 9-10; Doc, 20, Part 3, Brief, 3:13. Bryant and Deliddo also 28 outlined numerous transfers of Sunlogics PLC stock held by Matvieshen, Epod , and ICP that 7 1 were subject to the MJC Agreement: 2 on April 30, 2012, MATVIESHEN initiated share transfers of Sunlogics Plc stock, including the transfer of (a) 3,728,342 shares of Sunlogics Plc stock held by MATVIESHEN personally to Salamon Group, Inc.; (b) 7,500,000 shares of Sunlogics Plc stock purportedly held by Epod Ventures, Inc. to Salamon Group, Inc.; (c) 2,000,000 shares of Sunlogics Plc stock purportedly held by 531682 BC Ltd1 to Shari Matvieshen (Defendant MATVIESHEN’s wife); (d) 225,000 shares of Sunlogics Plc stock purportedly held by ICP Solar Technologies, Inc. to Ryan Husch2, 250,000 shares to Denis Husch, and 100,000 shares to Nicholas Husch; and (e) 925,000 shares of Sunlogics Plc stock purportedly held by ICP Solar Technologies, Inc. to Salamon Group, Inc....The transfer from MATVIESHEN to Salamon is a clear violation of the TRO and the other transfers demonstrate a clear propensity of MATVIESHEN to violate court orders. 3 4 5 6 7 8 Doc. 20, Part 3, Brief, 2:15-3:3. Bryant and Deliddo sought an order preventing Matvieshen 9 from voting any of his Salamon stock, prohibiting the issuance of 250 million shares of new 10 common stock, prohibiting the creation of preferred stock, prohibiting any name changes, and 11 stopping the transfer of the Sunlogics PLC stock. A hearing was held on May 29, 2012. 12 Bryant’s and Deliddo’s requests were largely denied. The Second TRO was only modified to 13 ensure that Bryant and Deliddo were able to vote their combined 50% interest under the MJC 14 even if the shares were currently in the hands of Matvieshen (“Third TRO”). Doc. 25. The court 15 did not order any stop to or interference with the shareholders meeting scheduled for May 30, 16 2012. Nevertheless, there is no indication that meeting ever took place. Doc. 63, Part 1, Bryant 17 Declaration, ¶34. As far as can be determined, there are still only 46 million shares of Salamon 18 stock.2 19 The parties were ordered to meet and confer regarding language for a preliminary 20 injunction. The order was issued June 8, 2012 (“First PI”), and stated that Matvieshen (and those 21 in concert with him) were enjoined from transferring, selling, hypothercating, encumbering, or 22 cancelling certain stock or warrants that he held in Salamon and Sunlogics PLC and Millenium 23 held in Sunlogics PLC. Doc. 30. For Salamon, the First PI covers ownership of the 20 million 24 2 25 26 27 28 There are conflicting statements as to how many shares of Salamon are outstanding. The court assumes there are 46 million (26 million before the purchase from Spaceglobe plus 20 million Matvieshen issued to himself). Doc. 62, Counterclaim, ¶¶ 15 and 21. Bryant now claims there are 42 million shares. Doc. 63, Part 1, Bryant Declaration, ¶ 33. However, he earlier claimed there were 40 million shares. Doc. 6, Part 1, Bryant Declaration, ¶ 36(f). For now, the court will assume that there are 46 million and treating the 20 million warrants separately. The court does note that in filing with the SEC, Matvieshen reported the creation of 40 million new shares of stock. Doc. 63, Part 14, Ex. E. 8 1 shares and 20 million warrants Matvieshen had issued to himself. The First PI specifically deals 2 with 12 million shares of Salamon (60% of the 20 million); it does not deal with the 16 million 3 shares Sunlogics INC purchased from Spaceglobe. For Sunlogics PLC, the First PI covers 4 ownership of 2,481,073 shares held by Matvieshen and 5.5 million shares held by Millenium. As 5 stated before, Bryant and Deliddo have only received 2,446,415 shares of Sunlogics PLC though 6 each is entitled to 7,986,978 shares. Doc. 4, Complaint, ¶ 38. 7 Meanwhile, additional parties have entered the litigation. Matvieshen filed suit against 8 Bryant, Deliddo, GM, Tenor Opportunity Master Fund, Ltd., GLG North American Opportunity 9 Fund, and Atlas Investment Fund. Doc. 32. On May 9, 2012, Matvieshen filed suit against 10 Sunlogics INC and PLC Doc. 17. Matvieshen seeks to enforce an indemnification provision in 11 his Employment Agreement. In response to the claim for indemnification, on September 28, 12 2012, Sunlogics INC and PLC filed a counterclaim. Doc. 62. This counterclaim forms the basis 13 for the present motion for a TRO. Doc. 63. Daystar Solar Technologies, Inc. (“Daystar”), is a 14 Delaware corporation with its corporate headquarters in Milpitas, California. On August 23, 15 2012, Daystar made a tender offer for a majority interest in Salamon. Doc. 62, Counterclaim, 16 ¶34. Daystar offered to exchange one share of Daystar stock for every six shares of Salamon. If 17 shareholders owning more than 50% of the common shares in Salamon agreed, the exchange 18 would go forward. Sunlogics INC and Sunlogics PLC filed suit against Matvieshen, Salamon, 19 Powerfund, and Daystar. They allege, among other things, that Daystar is working with 20 Matvieshen to keep Sunlogics INC and PLC from gaining control of the 9 million shares of 21 Salamon stock that was purchased from Spaceglobe but is still in Matvieshen’s name. 22 Bryant, Deliddo, Sunlogics INC, and Sunlogics PLC (“Sunlogics Group”) are all 23 represented by the same attorney and seek a wide ranging TRO against Matvieshen, Salamon, 24 Powerfund, and Daystar. Whereas the prior TROs and First PI dealt with the interests of Bryant 25 and Deliddo under the MJC Agreement, the present motion also deals with SUNLOGICS Inc’s 26 and PLC’s interests in Salamon under the initial purchase of 16 million shares from Spaceglobe. 27 Of particular note, the Sunlogics Group asks that Salamon itself be put into receivership. Since 28 the filing of the motion for TRO, on October 2, 2012, Daystar has announced that it was no 9 1 longer seeking to make a tender offer for a majority of Salamon at this time. See 2 http://money.cnn.com/news/newsfeeds/articles/globenewswire/10006971.htm. 3 4 5 II. Legal Standards The substantive standard for granting a temporary restraining order is the same as the 6 standard for entering a preliminary injunction. Bronco Wine Co. v. U.S. Dep't of Treasury, 997 7 F.Supp. 1309, 1313 (E.D. Cal. 1996); Lockheed Missile & Space Co. v. Hughes Aircraft Co., 8 887 F.Supp. 1320, 1323 (N.D. Cal. 1995). A plaintiff seeking a preliminary injunction must 9 establish: (1) that he is likely to succeed on the merits, (2) that he is likely to suffer irreparable 10 harm in the absence of preliminary relief, (3) that the balance of equities tips in his favor, and (4) 11 that an injunction is in the public interest. Winter v. Natural Res. Def. Council, Inc., 129 S.Ct. 12 365, 374 (2008); Park Vill. Apt. Tenants Ass'n v. Mortimer Howard Trust, 636 F.3d 1150, 1160 13 (9th Cir. 2011). “Injunctive relief...must be tailored to remedy the specific harm alleged.” Park 14 Vill., 636 F.3d at 1160. 15 16 17 18 III. Discussion A. Daystar’s Tender Offer for Salamon The Sunlogics Group seeks “to enjoin SALAMON and [Daystar] from moving forward 19 with any vehicle for combining SALAMON and DAYSTAR, including but not limited to a 20 tender offer for the shares of SALAMON.” Doc. 63, 2:5-7. However, since Daystar is no longer 21 making a tender offer, there is no imminence to the harm. 22 To be clear, the Preliminary Injunction specifically states, “Defendant Michael 23 Matvieshen, his agents, servants, employees, assignees, attorneys, and all those acting in concert 24 or participation with him are RESTRAINED AND ENJOINED from taking any of the following 25 actions: (a) Transfering, selling, hypothecating, encumbering, or canceling any of the following 26 shares of stock and/or warrants: (i) 8,505,119 shares of Salamon Group, Inc. stock held by 27 Michael Matvieshen individually; (ii) 20,000,000 warrants of Salamon Group, Inc. held by 28 Michael Matvieshen individually; (iii) Any additional shares of Salamon Group, Inc. that 10 1 Michael Matvieshen may acquire while this order is in effect, up to an additional 3,494,881 2 shares (for a total of 12 Million shares maximum of Salamon Group, Inc. affected under this 3 order).” Doc. 30, 2:7-19. Though Matvieshen has some voting rights over those shares, he may 4 not sell or exchange any of those shares. Exchanging those shares for Daystar stock would be a 5 clear violation of the Preliminary Injunction. 6 7 B. Matvieshen’s Control of Salamon Shares 8 9 While the First PI froze 12 million shares in Salamon held by Matvieshen that arguably belongs to Bryand and Deliddo under the MJC Agreement, the Sunlogics Group now seeks to 10 protect the ownership interests of Sunlogics INC and PLC. That interest must be traced back to 11 Sunlogics INC’s initial purchase of 16 million shares of Salamon from Spaceglobe, of which 9 12 million were actually transferred. 13 The Sunlogics Group asserts “In or about late November 2010, the Salamon SPA was 14 fully executed by MATVIESHEN on behalf of INC, and by John Salamon for 15 Spaceglobe....MATVIESHEN disbursed funds from INC’s bank account to pay for the 16 transaction, including transactions costs, as well as $77,000 to pay for the first approximately 9 17 million shares of SALAMON delivered by Spaceglobe....MATVIESHEN represented to Bryant 18 and Deliddo that a change had been made in the transaction so the Salamon SPA was closed 19 subject to the 40-30-30 MJC Agreement rather than an acquisition by INC; however, 20 MATVIESHEN never transferred any SALAMON shares to BRYANT or DELIDDO pursuant to 21 the MJC Agreement, nor did MATVIESHEN transfer any shares to INC.” Doc. 62, 22 Counterclaim, ¶¶ 16-17 and 19. “[I]t is the position of SUNLOGICS PLC and SUNLOGICS 23 INC. that SUNLOGICS INC. is entitled to a controlling interest in SALAMON. The 24 SUNLOGICS PLC Board is also aware that BRYANT and DELIDDO have a claim to the same 25 shares.” Doc. 63, Part 8, Day Declaration, ¶ 21. Sunlogics INC seeks to have all 9 million shares 26 frozen. 27 28 Bryant states “Around November 2010, MATVIESHEN requested permission from me and DELIDDO to acquire SALAMON, presumably for [tax credit] deals. We agreed that 11 1 POWERFUND and SALAMON would both be a part of our 40-30-30 agreement although it was 2 originally contemplated that SALAMON would be a subsidiary of SUNLOGICS INC....In 3 November 2011, when I asked why the shares that had already been delivered were not 4 transferred out of Spaceglobe’s name and reissued pursuant to the MJC Agreement, Harold 5 Schneider [Matvieshen’s assistant] responded to my emails indicating that MATVIESHEN was 6 going to transfer shares into my name and into DELIDDO’s name.” Doc. 63, Part 1, Bryant 7 Declaration, ¶¶ 7 and 13. That is, Bryant asserts that Matvieshen purchased Salamon from 8 Spaceglobe for Matvieshen, Bryant, and Deliddo, not Sunlogics INC. Under this theory, the 9 court should freeze 60% of the 9 million shares under the MJC Agreement. 10 The written agreement for the purchase of Salamon is ambiguous. An original agreement 11 signed November 12, 2010 specified that Sunlogics INC was the purchaser. Doc. 63, Part 5, Ex. 12 E., pages 3-4 of 5. However, on December 7, 2010, an amended agreement made both Sunlogics 13 INC and Matvieshen purchasers of Salamon; it was signed by Matvieshen on behalf of Sunlogics 14 INC and John Salamon on behalf of Spaceglobe. Doc. 63, Part 6, pages 6-7 of 7. Bryant and 15 Sunlogics INC are making conflicting claims on the 9 million shares. It is not clear who owns 16 them (Sunlogics INC vs. Matvieshen, Bryant, and Deliddo). The different ownership claims 17 would give rise to substantively different injunctions. No temporary restraining order can be 18 granted on this evidence. Further, it would appear that Bryant’s and Deliddo’s interests are 19 adverse to Sunlogics INC’s and PLC’s interests in this case. 20 21 C. Non-Compete Employment Clause 22 Sunlogics INC and PLC state “MATVIESHEN’s Employment Agreement with 23 INC...provides that MATVIESHEN cannot compete with INC during his employment and for a 24 period of two (2) years thereafter....After November 2011 and despite his Employment 25 Agreement, MATVIESHEN continued his involvements as a Director and as the CEO of both 26 SALAMON and POWERFUND.” Doc. 62, 38:19-27. The employment agreement reads “It is 27 agreed that the Employee shall not, directly or indirectly during his employment and for two 28 years thereafter, compete directly or indirectly with the Company in his individual capacity or as 12 1 a proprietor, employee, agent, consultant, director, officer, partner or a five-percent shareholder 2 of any business or other entity which is (x) engaged in the development, sale, marketing, 3 manufacture or installation of any type of product sold, developed, marketed, manufactured or 4 installed by the Company during the Employee’s employment with the Company, including solar 5 charging stations, ground mount solar installations, rooftop solar installations or (y) is in direct 6 competition or that would be in direct competitions with the business of the Company as that 7 business exists and is conducted during the Employee’s employment with the Company.” Doc. 8 63, Part 9, Ex. A, 8. The Sunlogics Group asserts that Matvieshen’s employment by Salamon 9 and Powerfund violates the non-compete clause and so seek to “enjoin[] Matvieshen from acting 10 as a Director or Officer/CEO of Salamon or [Powerfund].” Doc. 63, 7:18-20 and 11:4-19. The 11 Sunlogics Group has provided no legal authority concerning preliminary injunctive relief on this 12 claim. 13 On the merits of the claim, there is confusion as to what law should apply. In the relevant 14 complaint, Sunlogics INC and PLC allege “breach of contract” without stating what 15 jurisdiction’s laws apply. Doc. 62, Counterclaim, 61:16-63:3. In briefing for the TRO on this 16 issue, the Sunlogics Group cites to California case law for defining breach of contract and 17 Canadian case law for enforcement of non-compete clauses. The court is not certain as to 18 whether Sunlogics INC and PLC are bringing a California or Canadian claim. Under California 19 law, “Except as provided in this chapter, every contract by which anyone is restrained from 20 engaging in a lawful profession, trade, or business of any kind is to that extent void.” Cal. Bus. & 21 Prof. Code § 16600. “The two exception are: where the party sought to be restrained has sold a 22 business to, or has been in a partnership with, the party seeking the restraint.” Robinson v. 23 Jardine Ins. Brokers Int’l, 856 F. Supp. 554, 558 (N.D. Cal. 1994). “Section 16600 has 24 specifically been held to invalidate employment contracts which prohibit an employee from 25 working for a competitor when the employment has terminated, unless necessary to protect the 26 employer’s trade secrets.” Metro Traffic Control, Inc. v. Shadow Traffic Network, 22 Cal. App. 27 4th 853, 859 (Cal. App. 2d Dist. 1994), citing Muggill v. Reuben H. Donnelley Corp., 62 Cal. 2d 28 239, 242 (Cal. 1965). the current Chairman of the Board of directors of Sunlogics PLC states 13 1 “MATVIESHEN, as a Director and CEO, had the highest levels of access to confidential, 2 proprietary, and commercially sensitive information and has shown no hesitation in using it 3 against SUNLOGICS PLC and SUNLOGICS INC in precisely the manner the non-compettion 4 provision was designed to prevent and beyond.” Doc. 63, Part 8, Day Declaration, ¶ 10. 5 However, there is no description of how Matvieshen has been using Sunlogics INC’s and PLC’s 6 trade secrets, only a claim that “The threat of harm is underscored by MATVIESHEN’s 7 successive breaches of his fiduciary duties to INC and PLC (and SALAMON) of such magnitude 8 that it resulted in the PLC Board demanding MATVIESHEN’s resignation.” Doc. 63, 28:20-23. 9 The Sunlogics Group has not yet shown how the non-competition clause in the employment 10 contract is consistent with California law. There is no likelihood of success on the merits. 11 12 13 D. Trademark Infringement Sunlogics INC and PLC allege that Salamon and Powerfund are violating federal 14 trademark law by “(a) use of the ‘Sunlogics’ tradename and marks; (b) use of the Sunlogics 15 Logo; and (c) representations that SALAMON or POWERFUND is a ‘project-acquiring partner 16 of PLC,’ all displayed on the SALAMON and POWERFUND joint website at 17 sunlogicspower.com.” Doc. 62, 55:18-21. They also allege violations of California’s unfair 18 competition law based on the same facts. Doc. 62, 50:3-51:20. The Sunlogics Group now seeks 19 “to enjoin SALAMON and its wholly-owned subsidiary POWERFUND from (i) engaging in 20 unfair competition against PLC or INC by utilizing PLC and INC’s tradename and logo 21 trademarks protected by common law rights or (ii) otherwise misleading consumers by false 22 advertising on the SALAMON/POWERFUND website or in any other type of advertising or 23 publication by SALAMON or POWERFUND, including representations that PLC or INC is a 24 ‘partner’ of SALAMON or POWERFUND.” Doc. 63, 1:25-2:2. 25 “To prevail on its claim of trademark infringement, the State must prove: (1) that it has a 26 protectible ownership interest in the mark; and (2) that the defendant’s use of the mark is likely 27 to cause consumer confusion, thereby infringing upon the State’s rights to the mark.” Department 28 of Parks and Recreation v. Bazaar Del Mundo, Inc., 448 F.3d 1118, 1124 (9th Cir. 2006). “[I]n 14 1 order to show a probability of success in the causes of action for trademark infringement, false 2 designation of origin and unfair competition, [parties] need show that a likelihood of confusion 3 exists.” Sardi’s Restaurant Corp. v. Sardie, 755 F.2d 719, 723 (9th Cir. 1985), citations omitted. 4 For common law misappropriation under California’s unfair competition law, “It is normally 5 invoked in an effort to protect something of value that is not covered either by patent or copyright 6 law on the one hand, or by traditional doctrines of unfair competition, such as trade secret theft or 7 breach of confidential relationship, on the other. The cause of action has three elements: (1) the 8 plaintiff has invested substantial time and money in development of its ‘property’; (2) the 9 defendant has appropriated the property at little or no cost; and (3) the plaintiff has been injured 10 by the defendant’s conduct.” Balboa Ins. Co. v. Trans Global Equities, 218 Cal. App. 3d 1327, 11 1342 (Cal. App. 3d Dist. 1990), citations omitted. The injury the Sunlogics Group identifies is 12 consumer confusion. Doc. 63, 32:1-3. “The legal framework used to analyze these [state unfair 13 competition] claims is substantially the same as the framework used to evaluate Lanham Act 14 claims under federal law.” E.S.S. Entertainment 2000, Inc. v. Rock Star Videos, Inc., 444 15 F.Supp.2d 1012, 1049 (C.D. Cal. 2006), citations omitted; Aurora World, Inc. v. Ty Inc., 719 16 F.Supp.2d 1115, 1143-44 (C.D. Cal. 2009) (“the test for...statutory and common law unfair 17 competition claims...is materially the same as the test for the Lanham Act”). 18 First, Sunlogics INC and PLC have to establish a protectible ownership interest in the 19 marks. There are a few different elements to be analyzed. The Sunlogics Group argues the 20 “general copying of the ‘look and feel’ of the INC website separately constitutes a violation of 21 common law protections relating to trade dress because a website’s total ‘look and feel can 22 constitute a protectable trade dress.” Doc. 62, 31:17-19. In order to state a trade dress claim for 23 website design, the Sunlogics Group needs to clearly define the specific elements that constitute 24 the trade dress; a general description of the site is insufficient. See Sleep Science Partners v. 25 Lieberman, 2010 WL 1881770, *3 (N.D. Cal. 2010) (“Although it has cataloged several 26 components of its website, Plaintiff has not clearly articulated which of them constitute its 27 purported trade dress”). The briefing points to no such clear definition and so the Sunlogics 28 Group has not established a protectible ownership interest in their website design. 15 1 The Sunlogics Group seeks exclusive use of the word “Sunlogics” and an image of a 2 yellow diamond which resembles solar panels they term the “Sunlogics Logo.” Doc. 62, 32:5-6. 3 These marks are not registered; the Sunlogics Group seeks protection under common law 4 trademark protection. “[T]he party claiming ownership must have been the first to actually use 5 the mark in the sale of goods or services.” Sengoku Works Ltd. v. RMC Int’l, Ltd., 96 F.3d 1217, 6 1219 (9th Cir. 1996). The Sunlogics Group asserts “SUNLOGICS has been building good will 7 in its name and the Sunlogics Logo since 2010 in the field of solar development.” Doc. 63, 33:8- 8 9. However, The Sunlogics Group admits that “ MATVIESHEN attempted to have SALAMON 9 change its name to ‘Sunlogics Power Fund Management, Inc.” in May 2012.” Doc. 63, 9:25-26. 10 The MJC Agreement, signed December 21, 2010, references the “Salamon Group, Inc. or 11 Sunlogics Power Fund Management Inc.” Doc. 4, page 51 of 54. The Sunlogics Group has not 12 argued that they were the first to use the term “Sunlogics” in this commercial field. Bryant notes 13 that Powerfund is only “the subsidiary for Canadian projects.” Doc. 63, Part 1, Bryant 14 Declaration, ¶ 35. It is unclear if the Sunlogics Group is seeking to claim first use in the United 15 States as a distinct market. Given that the right to use the very name “Sunlogics” itself is in 16 question, consideration of the associated yellow diamond image is deferred as it would appear to 17 be bound with that question. 18 19 20 E. Receivership The Sunlogics Group also seeks to have Salamon put into receivership. Salamon has 21 only just been named a party in this litigation. Doc. 62, Counterclaim. Salamon has not yet made 22 an appearance in this case. All other requests for injunctive relief in this motion are being denied 23 as the Sunlogics Group has not shown a clear likelihood of success on the merits on many of the 24 requests. The Sunlogics Group appears to have many different causes of action against 25 Matvieshen and his associated companies. The temporary restraining order requests in this 26 motion are very broad but inchoate. 27 28 A receivership under Fed. Rule Civ. Proc. 66 is a drastic form of injunctive relief. See Canada 16 1 Life Assur. Co. v. LaPeter, 563 F.3d 837, 845 (9th Cir. 2009) (“the appointment of a receiver is 2 an ‘extraordinary remedy’ under federal law”). The process of receivership would be better 3 determined through a preliminary injunction rather than a TRO.3 It is questionable that there 4 would even be enough time to set up a receiver given a TRO’s short duration. 5 6 IV. Order 7 Bryant’s, Deliddo’s, Sunlogics INC’s, and Sunlogics PLC’s request for a temporary 8 restraining order is DENIED. 9 10 IT IS SO ORDERED. 11 12 Dated: 0m8i78 October 12, 2012 CHIEF UNITED STATES DISTRICT JUDGE 13 14 15 16 17 18 19 20 21 22 23 24 25 26 3 27 28 Most of the requests for TRO relief contained in this motion would benefit from the fuller development of a motion for preliminary injunction. The extra time might allow for clearer briefing focused on the specific causes of action asserted and case law discussing preliminary injunctive relief granted (and denied) under those factual circumstances. 17
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