DuFour et al v. Be, LLC et al, No. 3:2009cv03770 - Document 26 (N.D. Cal. 2009)
Court Description: ORDER granting in part 12 MOTION for Preliminary Injunction filed by Timothy DuFour, Kenneth Tanner. Signed by Judge Charles R. Breyer on December 7, 2009. (crblc2, COURT STAFF) (Filed on 12/7/2009)
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DuFour et al v. Be, LLC et al Doc. 26 1 2 3 4 5 6 7 8 IN THE UNITED STATES DISTRICT COURT 9 FOR THE NORTHERN DISTRICT OF CALIFORNIA United States District Court For the Northern District of California 10 11 12 ORDER GRANTING IN PART MOTION FOR PRELIMINARY INJUNCTION Plaintiff, 13 14 No. CV 09-3770 CRB TIMOTHY DUFOUR, et al., v. BE LLC, et al., 15 Defendant. / 16 Now pending before the Court is Plaintiffs’ motion for a preliminary injunction. 17 18 Plaintiffs seek the imposition of a constructive trust on all served defendants. However, 19 Plaintiffs have failed to establish the requisite irreparable harm as to all defendants except Be 20 LLC. Because there has been no showing of irreparable harm as to the other defendants, this 21 order will not analyze whether the other factors support issuance of an injunction against 22 those parties. As to Be LLC, however, all factors support issuance of an injunction. 23 I. 24 BACKGROUND According to its marketing, Be LLC provides “a unique collection of resources for 25 inspiring, developing, and enhancing the talent of young artists in the disciplines of acting, 26 modeling, dance, singing, writing, beauty competitions and word of mouth marketing.” Be 27 LLC solicits customers at shopping malls, where its representatives hand out promotional 28 materials to children. Be LLC markets its services through a promotional pamphlet and Dockets.Justia.com 1 through its website, gonnabe.com. Be LLC purports to provide “a proven game plan in 2 which the artist gets to work with top entertainment pros that will prepare them to be 3 evaluated by top agents, managers and casting directors . . . .” Be LLC acted as a go- 4 between, referring its customers to other companies, like defendant Dynamic Showcases, for 5 services like photography, showcases with agents and talent evaluators, and training in 6 singing, dancing, acting, and modeling. United States District Court For the Northern District of California 7 Plaintiffs entered into contracts with Be Productions on February 5, 2009 and March 8 7, 2009, respectively. According to evidence supplied by plaintiffs, they both made initial 9 payments, and had subsequent payments withdrawn from their bank accounts by defendant 10 Monterey. In May 2009, Be Productions “consolidated” its operations, closing down local 11 operations in several cities and assigning customers to My Talent Services. After this 12 change, Plaintiffs were no longer able to contact the talent director assigned to their children 13 and have not received services promised under their contracts. 14 Plaintiffs filed a class action complaint against Defendants, basing jurisdiction in this 15 Court on grounds of the Class Action Fairness Act and the existence of a federal claim. Two 16 individual defendants, Erik DeSando and Jacob Steinbeck, managers of Be LLC, have yet to 17 be served in this matter. 18 19 The Defendants in this action are: • Be LLC, the counterparty to Class members’ contracts, sometimes referred to as “Be Productions.” 20 21 • Erik DeSando, Be Production’s CEO. 22 • Barry Falck, Be Productions’ COO. 23 • Dynamic Showcases, a company to which Be LLC refers class members for auditions. 24 25 • Be UK, which operates the Gonnabe.com website. 26 • Monterey, a company that attempts to collect unpaid fees from class 27 members. 28 2 • 1 sums of money to Be LLC. 2 • 3 MTS, a company that took over certain of Be LLC’s operations when the latter company consolidated. 4 • 5 Vitaly Rashkovan, an individual who owns and operates MTS. On October 30, 2009, Plaintiff filed the instant motion for preliminary injunction 6 United States District Court For the Northern District of California Jacob Steinbeck and 1901 Co., who appear to have loaned significant 7 placing funds obtained by Defendants from Plaintiffs in a constructive trust. Plaintiffs claim 8 that a constructive trust is authorized under both the AFTSA and the UCL, that California 9 law generally allows for a constructive trust “where there is a wrongful acquisition or 10 detention of property,” and that “there is an urgency arising from the fact that Be LLC 11 appears to be financially unstable.” Defendants MTS and Rashkovan together, and 1901 Co., 12 have filed oppositions to Plaintiffs’ motion on substantially the same grounds. The other 13 defendants have not opposed the motion. 14 II. LEGAL STANDARD A preliminary injunction is “an extraordinary and drastic remedy, one that should not 15 16 be granted unless the movant, by a clear showing, carries the burden of persuasion.” 17 Mazurek v. Armstrong, 520 U.S. 968, 972 (1997). After the Supreme Court’s recent opinion 18 in Winter v. Natural Resources Defense Council, Inc., 129 S.Ct. 365 (2008), a party seeking 19 a preliminary injunction must show: “[1] that he is likely to succeed on the merits, [2] that he 20 is likely to suffer irreparable harm in the absence of preliminary relief, [3] that the balance of 21 equities tips in his favor, and [4] that an injunction is in the public interest.” Stormans, Inc. 22 v. Selecky, 571 F.3d 960, 978 (9th Cir. 2009) (citing Winter, 129 S.Ct. at 374). 23 II. 24 DISCUSSION This Court concludes that Plaintiffs have met their burden only as to Defendant Be 25 LLC. Because Plaintiffs’ motion clearly fails to establish the likelihood of irreparable harm 26 as to their claims against most defendants, that factor will be considered first. The remaining 27 factors, and their applicability to Be LLC, will be analyzed thereafter. 28 A. Irreparable Harm in the Absence of Preliminary Relief 3 1 2 to suffer irreparable harm in the absence of preliminary relief.” Stormans, 571 F.3d at 978. 3 A mere possibility of irreparable harm is insufficient to support issuance of an injunction. Id. 4 United States District Court For the Northern District of California The Ninth Circuit has recently clarified that a plaintiff must establish “that he is likely First, Plaintiffs contend that they need not show irreparable harm. They contend that 5 “irreparable harm and lack of adequate legal remedy are implied where there are grounds for 6 a constructive trust under Civil Code section 2224,” and cite to Heckmann v. Ahmanson, 168 7 Cal. App. 3d 119, 134 (1985). However, Plaintiffs seem to confuse the substantive 8 requirements of state law with the procedural requirements of the Federal Rules of Civil 9 Procedure. Heckmann does indeed explain that the relevant cause of action under California 10 law does not require an independent showing of irreparable harm, but this in no way 11 abrogates Rule 65 or the Supreme Court’s interpretation thereof.1 Federal law requires a 12 showing that irreparable harm is likely, and Plaintiffs must therefore make that showing in 13 order to obtain their injunction. 14 The only allegation of irreparable harm made by Plaintiffs is that Be LLC appears to 15 be bankrupt, and that relief is necessary now so that any remaining assets are not lost. In 16 support of this, Plaintiffs point to an e-mail in which Defendant DeSando, CEO of Be LLC, 17 explains that Be LLC has been taken over by a conservatorship and that “there is nothing 18 left.” The e-mail goes on to advise that customers “not waste your time trying to get money 19 from a company that is on the verge of bankrupcy [sic].” Plaintiffs also argue that Be LLC’s 20 failure to respond to their motion reflects that corporation’s financial insecurity. This 21 apparent lack of funds does indeed suggest that if Plaintiffs are forced to wait until the 22 conclusion of these proceedings before obtaining relief, there will be nothing left to satisfy a 23 judgment. While it is not clear at the present moment whether Be LLC retains funds to 24 satisfy a preliminarily imposed constructive trust, it is probable that Be LLC will be far less 25 likely to be able to satisfy a judgment a few months down the road. See Republic of the 26 Phillippines v. Marcos, 862 F.2d 1355 (9th Cir. 1988) (“A court has the power to issue a 27 1 28 Because Plaintiffs make no reference to Rule 64 in their papers, we do not address that Rule. Plaintiffs have moved only for a preliminary injunction opposed to some other form of preliminary relief, and therefore their motion must be analyzed under Rule 65. 4 1 preliminary injunction to prevent a defendant from dissipating assets in order to preserve the 2 possibility of equitable remedies.”). This Court therefore concludes that Plaintiffs have 3 established a likelihood of irreparable harm as to Be LLC. 4 However, because Plaintiffs have proffered no evidence as to irreparable harm with 5 regard to the other Defendants, this factor is not satisfied as to them. There is no evidence 6 that these other defendants are on similarly weak financial footing, and therefore no evidence 7 to support the conclusion that they will be unable to satisfy a judgment at the conclusion of 8 these proceedigns. Therefore, Plaintiffs are not entitled to preliminary relief against those 9 parties. United States District Court For the Northern District of California 10 11 The remainder of this Order will therefore address on the merits of Plaintiffs’ request than a constructive trust be imposed on Be LLC. 12 B. Likelihood of Success on the Merits 13 The central question in this case is whether Defendants violated California's 14 Advance-Fee Talent Service Act (“AFTSA”). Cal. Labor Code § 1701.4(a). In order for the 15 AFTSA to apply to Be LLC, it must first be determined that Be LLC is an advance fee talent 16 service. The AFTSA defines an advance fee talent service as follows: 17 “Advance-fee talent service” means a person who charges, attempts to charge, or 18 receives an advance fee from an artist for one or more of the following . . . : 19 (1) 20 engagements, or auditions for the artist. 21 (2) Managing or directing the development or advancement of the artist's career as an artist. 22 23 Procuring, offering, promising, or attempting to procure employment, (3) Career counseling, career consulting, vocational guidance, 24 aptitude testing, evaluation, or planning, in each case relating to the 25 preparation of the artist for employment as an artist. 26 Cal. Labor Code § 1701(b). 27 Based on the evidence attached to Plaintiffs’ motion for preliminary relief, Be LLC 28 does indeed qualify as an Advance-Fee Talent Service. Plaintiffs have shown that the 5 1 contracts at issue explain that Be LLC is “an entertainment company that offers a membership 2 comprised of resources, discounts and a support system designed to help individuals get 3 started on a pathway to success.” Tanner Decl. ¶ 3; DuFour Decl. ¶ 3. Be LLC's website 4 indicates that it gives “young artists the resources, services, experience and exposure that they 5 need in order to succeed in the entertainment industry.” Preston Decl. ¶ 4. The evidence also 6 shows that Be LLC charges Plaintiffs an advance fee. This evidence situations Be LLC 7 within AFTSA’s broad definition of an advance-fee talent service. 8 Because Be LLC has been shown to be an advance-fee talent service, California's 9 AFTSA applies and imposes certain requirements on all contracts between such a service and United States District Court For the Northern District of California 10 its clients. Section 1701.4 of the Labor Code requires that such a contract contain, inter alia, 11 “the representative executing the contract on behalf of the advance-fee talent service,” “[a] 12 description of the services to be performed, a statement when those services are to be 13 provided,” and “refund provisions if the described services are not provided according to the 14 contract.” Cal. Lab. Code § 1701.4. Section 1701.4(a)(4) also establishes certain contractual 15 terms that are to be included verbatim in any such contract between an artist and an 16 advance-fee talent service. According to the copies of contracts attached with Plaintiffs’ 17 moving papers, their contracts with Be LLC violated all these provisions of California Labor 18 Code § 1701.4. See DuFour Decl. ex. A. This Court therefore concludes that Plaintiffs have 19 established a likelihood of success as to Be LLC.2 20 This Court therefore concludes that Plaintiffs have established a likelihood of success 21 only against Be LLC. 22 C. Balance of Equities/Hardships 23 Granting Plaintiffs’ request for an injunction against Be LLC would not impose any 24 undue hardship on that Defendant. The constructive trust applies only to the moneys paid by 25 Plaintiffs to Be LLC. There is no apparent reason to conclude that the balance of equities tips 26 in Be’s favor. 27 2 28 Plaintiffs also pursue relief under California’s Unfair Competition statute. However, because the relief sought under both statutes is identical, and this Court has concluded that Plaintiffs have satisfied their burden as to the AFTSA claim, is it not necessary to reach the UCL claim. 6 1 D. Public Interest 2 According to Plaintiffs’ evidence, Be LLC systematically violated California law when 3 it entered into contractual relationships with thousands of residents of California. The public 4 certainly has an interest in making ensuring that companies that procure funds in violation of 5 state law are not permitted to use those funds for their own benefit. 6 III. CONCLUSION 7 This Court concludes that Plaintiffs have met their burden, entitling them to an 8 injunction. IT IS HEREBY ORDERED that: United States District Court For the Northern District of California 9 1. A constructive trust is imposed on those sums of money that were paid by Plaintiffs 10 to Be LLC according to the contracts between those parties. 11 2. No later than 14 days after receiving notice of this Order, Be LLC shall place those 12 funds into an interest-bearing fiduciary account maintained by an FDIC-insured 13 financial institution, and shall notify this Court of that action. 14 3. The bond for this injunction shall be set at $2,000 under Federal Rule of Civil 15 Procedure 65(c). 16 IT IS SO ORDERED. 17 18 CHARLES R. BREYER UNITED STATES DISTRICT JUDGE 19 Dated: December 7, 2009 20 21 22 23 24 25 26 27 28 G:\CRBALL\2009\3770\Injunction Order.wpd 7
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