Dealer Computer Services, Inc. v. Monarch Ford, et al.

Filing 12

ORDER TO DENY TRO signed by District Judge Lawrence J. O'Neill on December 5, 2012. (Docs. 3,10) (Munoz, I)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE EASTERN DISTRICT OF CALIFORNIA

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DEALER COMPUTER SERVICE,
INC.,

CASE NO. CV F 12-1970 LJO SKO
(Docs. 3,10.)

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Plaintiff,
vs.

ORDER TO DENY TRO

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MONARCH FORD, et al.,
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Defendants.
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/
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INTRODUCTION

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Plaintiff Dealer Computer Services, Inc. (“DCS”) seeks an ex parte temporary restraining order

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(“TRO”) to prohibit defendant Monarch Ford’s sale of assets. DCS’ papers raise several concerns

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discussed below to warrant denial of a TRO.

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JURISDICTION AND POWER TO ACT

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DCS seeks to invoke this Court’s diversity jurisdiction. Although diversity jurisdiction may

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exist, an issue arises as to the scope and proper exercise of this Court’s powers given the parties’ pending

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arbitration.

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Arbitration is a way to resolve disputes “that the parties have agreed to submit to arbitration.”

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First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943, 115 S.Ct. 1920 (1995). Arbitration clauses

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limit a court’s power: “Our role is strictly limited to determining arbitrability and enforcing agreements

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to arbitrate, leaving the merits of the claim and any defenses to the arbitrator.” Republic of Nicaragua

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v. Standard Fruit Co., 937 F.2d 469, 479 (9th Cir. 1991), cert. denied, 503 U.S. 919, 112 S.Ct. 1294
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(1992); see Muh v. Newberger, Loeb & Co., Inc., 540 F.2d 970, 972 (9th Cir. 1976) (If the parties have

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agreed to arbitrate, “the entire controversy must be referred to the arbitrator, including the validity of the

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contract.”) A contractually based arbitration “can be brought to conclusion entirely extrajudicially, and

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. . . the judiciary’s supervision is limited to confirming, vacating, or correcting any resultant award.”

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Jordan-Lyon Productions, Ltd. v. Cineplex Odeon Corp., 29 Cal.App.4th 1459, 1468, 35 Cal.Rptr.2d

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200, 205 (1994); Brock v. Kaiser Foundation Hospitals, 10 Cal.App.4th 1790, 1806, 13 Cal.Rptr.2d 678

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(1992).

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Moreover, the Federal Arbitration Act, 9 U.S.C. §§ 1, et seq., “leaves no place for the exercise

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of discretion by a district court, but instead mandates that district courts shall direct the parties to

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proceed to arbitration on issues as to which an arbitration agreement has been signed.” Dean Witter

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Reynolds, Inc. v. Byrd, 470 U.S. 213, 218, 105 S.Ct. 1238, 1241 (1985)

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The parties’ arbitration is contractually based. This Court is bound to defer to the arbitration but

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is authorized “to issue equitable relief in aid of arbitration.” Toyo Tire Holdings Of Americas Inc. v.

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Continental Tire North, 609 F.3d 975, 980 (9th Cir. 2010). A “district court may issue interim injunctive

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relief on arbitrable claims if interim relief is necessary to preserve the status quo and the meaningfulness

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of the arbitration process—provided, of course, that the requirements for granting injunctive relief are

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otherwise satisfied.” Toyo Tire Holdings, 609 F.3d at 980.

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DCS fails to demonstrate that its requested TRO is necessary to preserve the status quo and

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meaningfulness of the arbitration process. As discussed below, DCS does not satisfy TRO requirements.

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The gist of DCS’ requested TRO is to attempt to quarantine a potential source of recovery if it prevails

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in arbitration without first exhausting legal remedies. As such, this Court is unpersuaded that arbitration

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is not the proper forum for DCS to seek its requested injunctive relief, especially given the lack of

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analysis of governing arbitration rules and Court need to foster the arbitration process.

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Moreover, DCS asks this Court for the provisional remedy of attachment and relies on California

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Code of Civil Procedure section 1281.8(b). However, the statute fails to invoke this Court’s jurisdiction

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or powers in that it references a “court in the county in which an arbitration proceeding is pending, or

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if an arbitration proceeding has not commenced, in any proper court.” Since the arbitration proceeds in

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Texas, this Court is not in the county or federal district where the arbitration proceeds.
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Notice

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This Court is further concerned about inadequacy of notice to Monarch Ford and defendant PHC,

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Inc. The record reveals that the defense arbitration counsel was not provided notice. See F.R.Civ.P.

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65(b)(B).

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TRO Standards And Factors

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F.R.Civ.P. 65(b) permits a TRO “only if . . . specific facts in an affidavit or a verified complaint

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clearly show that immediate and irreparable injury, loss, or damage will result to the movant before the

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adverse party can be heard in opposition.” F.R.Civ.P. 65(b)’s requirements are “stringent,” and

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temporary restraining orders that are granted ex parte are to be “restricted to serving their underlying

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purpose of preserving the status quo and preventing irreparable harm just so long as is necessary to hold

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a hearing, and no longer.” Granny Goose Foods, Inc. v. Brotherhood of Teamsters, 415 U.S. 423,

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438-39, 94 S.Ct. 1113 (1974); Reno Air Racing Ass’n v. McCord, 452 F.3d 1126, 1131 (9th Cir. 2006).

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Injunctive relief is an “extraordinary remedy, never awarded as of right.” Winter v. Nat'l Res. Def.

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Council, Inc., 555 U.S. 7, 24, 129 S.Ct. 365 (2008). As such, a court may grant such relief only “upon

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a clear showing that the plaintiff is entitled to such relief.” Winter, 555 U.S. at 22, 129 S.Ct. 365. To

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prevail, the moving party must show: (1) a likelihood of success on the merits; (2) a likelihood that the

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moving party will suffer irreparable harm absent preliminary injunctive relief; (3) that the balance of

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equities tips in the moving party's favor; and (4) that preliminary injunctive relief is in the public interest.

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Winter, 555 U.S. at 22, 129 S.Ct. 365. In considering the four factors, the Court “must balance the

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competing claims of injury and must consider the effect on each party of the granting or withholding of

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the requested relief.” Winter, 555 U.S. at 24,129 S.Ct. at 376 (quoting Amoco Co. v. Vill. of Gambell,

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Alaska, 480 U.S. 531 542 (1987)); Indep. Living Ctr. of S. Cal., Inc. v. Maxwell-Jolly, 572 F.3d 644, 651

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(9th Cir. 2009).

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DCS provides insufficient information to demonstrate its likely success on the merits. As noted

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above, there was questions whether this Court is empowered to issue requested provisional relief.

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Moreover, DCS merely gives an overview of its claims and asks this Court to agree that DCS is likely

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to recover a $1 million arbitration award. DCS offers no meaningful analysis of its projected success

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or calculation of alleged damages.
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In addition, DCS fails to demonstrate that monetary relief is an insufficient remedy to require the

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extraordinary remedy which its requested TRO seeks. “Preliminary injunctive relief is available only

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if plaintiffs ‘demonstrate that irreparable injury is likely in the absence of an injunction.’” Johnson v.

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Couturier, 572 F.3d 1067, 1081 (9th Cir. 2009) (quoting Winter, 129 S.Ct. at 375) (noting that the

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Supreme Court in Winter rejected the Ninth Circuit’s “possibility of irreparable harm” test). “[T]o

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demonstrate irreparable harm the plaintiff must demonstrate potential harm which cannot be redressed

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by a legal or an equitable remedy following a trial. The preliminary injunction must be the only way of

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protecting the plaintiff from harm.” Campbell Soup Co. v. ConAgra, Inc., 977 F.2d 86, 91 (3rd

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Cir.1992); see e.g., Weinberger v. Romero–Barcelo, 456 U.S. 305, 102 S.Ct. 1798 (1982).

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For injunctive relief, “[i]t is usually enough if the plaintiff shows that its legal remedies are

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inadequate.” Ross-Simons of Warwick, Inc. v. Baccarat, Inc., 102 F.3d 12, 18 (1st Cir.1996); see

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Weinberger v. Romero–Barcelo, 456 U.S. at 312, 102 S.Ct. at 1803. “If the plaintiff suffers a substantial

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injury that is not accurately measurable or adequately compensable by money damages, irreparable harm

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is a natural sequel.” Ross-Simons, 102 F.3d at 18. “Inadequate remedy at law does not mean wholly

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ineffectual; rather, the remedy must be seriously deficient as compared to the harm suffered.”

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Foodcomm Intern. v. Barry, 328 F.3d 300, 304 (7th 2003).

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“Typically, monetary harm does not constitute irreparable harm.” Cal Pharmacists Ass’n v.

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Maxwell-Jolly, 563 F.3d 847, 851 (9th Cir. 2009). “Economic damages are not traditionally considered

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irreparable because the injury can later be remedied by a damage award.” Cal Pharmacists, 563 F.3d

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at 852 (italics in original).

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In the arbitration, DCS seeks economic damages which have yet to be awarded. Those damages

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remain available to DCS if it succeeds. This Court is unable to presuppose DCS’ success and attempt

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to guarantee it a ready source of recovery.

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CONCLUSION AND ORDER

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For the reasons discussed above, this Court DENIES DCS a TRO.

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IT IS SO ORDERED.

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Dated:
66h44d

December 5, 2012

/s/ Lawrence J. O'Neill
UNITED STATES DISTRICT JUDGE

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