Kyko Global, Inc et al v. Prithvi Information Solutions, Ltd et al

Filing 59

ORDER denying dfts' 22 Sealed Motion for TRO by Judge Marsha J. Pechman.(RS)

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Kyko Global, Inc et al v. Prithvi Information Solutions, Ltd et al Doc. 59 1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE 8 9 10 KYKO GLOBAL INC, 11 12 13 CASE NO. C13-1034-MJP Plaintiff, ORDER DENYING MOTION FOR TEMPORARY RESTRAINING ORDER v. PRITHVI INFORMATION SOLUTIONS LTD, et. al. 14 Defendants. 15 16 17 18 This matter comes before the Court on Defendants’ motion for a temporary restraining order. (Dkt. No. 22.) Having reviewed the motion, Plaintiff’s response (Dkt. No. 35), Defendants’ reply (Dkt. No. 39), and all related papers, the Court DENIES the motion because 19 Defendants fail to establish the necessary elements for a temporary restraining order. 20 Background 21 This case involves a dispute between Plaintiff Kyko and Defendant Prithvi Information 22 Services regarding the payment of factoring services. This Court previously issued a motion for 23 a temporary restraining order, finding it appears Defendants “have engaged in a pattern and 24 ORDER DENYING MOTION FOR TEMPORARY RESTRAINING ORDER- 1 Dockets.Justia.com 1 practice of creating fictitious entities for the appearance of imitating legitimate business 2 transactions and companies” and that “irreparable injury would result if the status quo is not 3 maintained.” (Dkt. No. 11.) In its Complaint, Kyko alleges Defendants owed it $18,000,000. 4 (Dkt. No. 1.) In June 2013, the parties notified the Court of a settlement before the TRO became 5 effective. 6 In their settlement agreement, Defendants agreed to pay $18,000,000 to Plaintiff in 7 exchange for dismissal of this case. Defendants also granted Plaintiff control over its bank 8 accounts to manage and control until the debt was satisfied. Pursuant to the settlement 9 agreement, Defendants signed confessions of judgment. The parties agreed that if Defendants 10 breached the settlement agreement, Plaintiff could file the confessions of judgment. 11 On July 31, 2013, Plaintiff notified Defendants they were in breach of the settlement 12 agreement and gave three days to cure or the confessions of judgment would be filed. . 13 Defendants now move for a temporary restraining order to prevent the filing of the 14 confessions of judgment. 15 Analysis 16 A. Legal Standard 17 The “standard for issuing a temporary restraining order is essentially the same as that for 18 issuing a preliminary injunction.” Beaty v. Brewer, 649 F.3d 1071, 1072 (9th Cir. 2011). “A 19 plaintiff seeking a preliminary injunction must establish [1] that he is likely to succeed on the 20 merits, [2] that he is likely to suffer irreparable harm in the absence of preliminary relief, [3] that 21 the balance of equities tips in his favor, and [4] that an injunction is in the public interest.” 22 Winter v. Natural Res. Defense Council, Inc., 555 U.S. 7, 21 (2008). A party can satisfy the first 23 and third elements of the test by raising serious questions going to the merits of its case and a 24 balance of hardships that tips sharply in its favor. Alliance for the Wild Rockies v. Cottrell, 632 ORDER DENYING MOTION FOR TEMPORARY RESTRAINING ORDER- 2 1 F.3d 1127, 1131. (9th Cir. 2011). The primary difference between a preliminary injunction and a 2 TRO, like the one at issue here, is that a court can issue a TRO without notice to the adverse 3 party. Fed.R.Civ.P. 65(b)(1)(A). 4 B. Defendants fail to establish elements for a TRO 5 1. Success on the merits 6 Defendants’ motion fails to show any chance of success on the merits of their argument to set 7 aside the settlement agreement. A likelihood of success on the merits “requires more than a 8 mere possibility that relief will be granted.” Nken v. Holder, 556 U.S. 418, 420 (2009). 9 Defendants’ arguments to set aside the settlement agreement are based on a strained and 10 illogical reading of that agreement. First, the settlement agreement was supported by 11 consideration: mutual promises are legally supported consideration. “Whether a contract is 12 supported by consideration is a question of law and may be properly determined by a court on 13 summary judgment.” Nationwide Mut. Fire Ins. Co. v. Watson, 120 Wn.2d 178, 195 (1992). 14 Consideration is defined as any “act, forbearance, creation, modification or destruction of a legal 15 relationship, or return promise given in exchange.” King v. Riveland, 125 Wn.2d 500, 505 16 (1994). Here, Plaintiff agreed to pay $18,000,000 in exchange for dismissal of the pending case. 17 Second, Defendants are unlikely to succeed in proving the contract illusory. Defendants 18 claim the contract term that provided Kyko retained “sole discretion” to determine if Defendants 19 had breached the settlement agreement and to file the confessions of judgment in court. (Dkt. 20 No. 22 at 8.) Defendants’ argument is based on an incorrect reading of the applicable law. In 21 Al-Safin v. Circuit City Stores, the Ninth Circuit interpreted Washington law as preventing an 22 employer for unilaterally modifying an arbitration provision after an employee executed the 23 agreement. 394 F.3d 1254 (9th Cir. 2005). That case does not stand for the proposition that it is 24 ORDER DENYING MOTION FOR TEMPORARY RESTRAINING ORDER- 3 1 unconscionable for a party to retain the authority to file a confession of judgment if it decides the 2 other party is in breach. And, the other cases cited by Defendants do not address Washington 3 law. Patton v. Cox, 276 F.3d 493, 495 (9th Cir. 2002) (Federal courts sitting in diversity “must 4 look to the forum state's choice of law rules to determine the controlling substantive law.”). 5 Third, Defendant’s are unlikely to succeed in showing the contract lacked mutual assent. As 6 Plaintiff persuasively argues, although the specific documents were not attached, the terms of the 7 agreement provided for such access and control. For example, the settlement agreement grants 8 Plaintiff access to bank information. If acquiring this bank information requires the execution of 9 a power of attorney, that document is a necessarily component of effecting the settlement 10 agreement’s terms. (Dkt. No. 35 at 12.) 11 Defendants fail to show they are likely to succeed on the merits. 12 2. Irreparable harm 13 Defendants’ motion for aTRO also fails because the injury Defendants allege—an inability to 14 pay their employees—is speculative. To support the entry of a preliminary injunction or 15 temporary restraining order, irreparable harm must be “likely, not just possible.” Alliance for the 16 Wild Rockies v. Cottrell, 632 F.3d 1127, 1131 (9th Cir. 2011). The Ninth Circuit has long held 17 that “speculative injury does not constitute irreparable injury.” Colorado River Indian Tribes v. 18 Parker, 776 F.2d 846, 849 (1985). Defendants do not explain how or why, if the confessions of 19 judgments signed by the individual defendants were filed, they would be unable to make its 20 payroll or that they would suffer a loss in market share. Further, economic injury alone does not 21 support a finding of irreparable harm because such an injury can be remedied by an award of 22 money damages. Rent-A-Center v. Canyon Television & Appliance Rental, Inc., 944 F.2d 597, 23 603 (9th Cir. 1991). Finally, it appears to this Court that if harm does result, the injury is self24 inflicted. Plaintiffs allege Defendants failed to pay $18,000,000 for factoring services by ORDER DENYING MOTION FOR TEMPORARY RESTRAINING ORDER- 4 1 creating fictitious companies. This Court has already found sufficient proof of such fraud as to 2 order a temporary restraining order. If these allegations are true, the filing of a confession of 3 judgment for monies unlawfully taken cannot constitute irreparable injury. 4 3. Balance of equities 5 The balance of equities does not favor Defendants. As discussed in the preceding section, 6 Defendants arguments as to the harm it would suffer if the confession of judgment were filed is 7 at best speculative. In contrast, Washington favors public acknowledgement of debts related to 8 litigation and are intended to resolve disputes among parties. RCW 4.60.040; Copeland Planned 9 Futures, Inc. v. Obenchain, 9 Wn. App. 32, 36, 510 P.2d 654 (1973). Defendants entered into a 10 settlement agreement and agreed to pay $18,000,000. Pursuant to that agreement, they signed 11 confessions of judgment and documented that debt. The balance of equities falls in favor of 12 Plaintiff’s ability to collect on that debt. 13 4. Public interest 14 Defendants also fail to establish a TRO is in the public’s interest. “The public interest 15 analysis for the issuance of a preliminary injunction requires [the court] to consider whether 16 there exists come critical public interest that would be injured by the grant of preliminary relief.” 17 Indep. Living Ctr. Of S. Cal., Inc. v. Maxwell-Jolly, 572 F.3d 644, 659 (9th Cir. 2009) vacated 18 and remanded on other grounds sub nom. Douglas v. Indep. Living Ctr. of S. Cal., Inc., 132 S. 19 Ct. 1204 (2012). Because this is a breach of contract case between two private parties, the public 20 interest is minimal here. The public has an interest in the enforcement of settlement agreements 21 and confessions of judgment being filed in open court. See RCW 4.60.010. 22 5. Bond 23 Because the Court finds no TRO should issue, it does not reach the issue of the proper 24 amount of a bond. ORDER DENYING MOTION FOR TEMPORARY RESTRAINING ORDER- 5 1 2 Conclusion Because Defendants have failed to show they are likely to succeed on the merits or they 3 would suffer irreparable injury absent injunctive relief, the Court DENIES the motion for a 4 temporary restraining order. 5 The clerk is ordered to provide copies of this order to all counsel. 6 Dated this 14th day of August, 2013. A 7 8 Marsha J. Pechman Chief United States District Judge 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 ORDER DENYING MOTION FOR TEMPORARY RESTRAINING ORDER- 6