Chong's Produce, Inc. v. Polani Financials & Investment Corporation, a California Corporation et al

Filing 15


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1 IN THE UNITED STATES DISTRICT COURT 2 FOR THE NORTHERN DISTRICT OF CALIFORNIA 3 4 5 6 7 8 9 United States District Court For the Northern District of California 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 No. C 14-00497 CW CHONG’S PRODUCE, INC., Plaintiff, v. POLANI FINANCIALS & INVESTMENT CORPORATION, a California corporation, and PRABHAKAR POLANI, ORDER DENYING WITHOUT PREJUDICE PLAINTIFF’S APPLICATION FOR A TEMPORARY RESTRAINING ORDER (Docket No. 5) Defendants. ________________________________/ On February 5, 2014, Plaintiff Chong’s Produce, Inc. filed ex parte for a temporary restraining order against Defendants Polani Financials & Investment Corporation dba Shalimar Restaurant and Prabhakar Polani. Plaintiff seeks a TRO to preserve its beneficial interest in the statutory trust created under the Perishable Agricultural Commodities Act of 1930 (PACA), 7 U.S.C. §§ 499a-499t, as amended. For the reasons stated below, the Court DENIES WITHOUT PREJUDICE Plaintiff’s application for TRO. To qualify for a temporary restraining order, the moving party must demonstrate “(1) a likelihood of success on the merits; (2) a significant threat of irreparable injury; (3) that the balance of hardships favors the applicant; and (4) whether any public interest favors granting an injunction.” Raich v. Ashcroft, 352 F.3d 1222, 1227 (9th Cir. 2003); see also Winter v. Natural Res. Def. Council, Inc., 129 S. Ct. 365, 374 (2008). Alternatively, a temporary restraining order could issue where 27 “the likelihood of success is such that serious questions going to 28 the merits were raised and the balance of hardships tips sharply 2 in plaintiff’s favor,” so long as the plaintiff demonstrates 3 irreparable harm and shows that the injunction is in the public 4 interest. 5 1127, 1131 (9th Cir. 2011) (citation and internal quotation and 6 editing marks omitted). 7 notice to the adverse party unless “(1) it clearly appears from 8 specific facts shown by affidavit or by the verified complaint 9 that immediate and irreparable injury, loss, or damage will result 10 United States District Court For the Northern District of California 1 to the applicant before the adverse party or that party’s attorney 11 can be heard in opposition, and (2) the applicant’s attorney 12 certifies to the court in writing any efforts made to give notice 13 and the reasons why it should not be required.” 14 65(b). 15 Alliance for the Wild Rockies v. Cottrell, 632 F.3d Further, a TRO may not be issued without Fed. R. Civ. P. PACA was enacted to “suppress unfair and fraudulent practices 16 in the marketing of fruits and vegetables in interstate and 17 foreign commerce” and to provide “a code of fair play” to “aid 18 traders in enforcing their contracts.” 19 1984, PACA was amended to include a provision creating a statutory 20 trust on all produce-related assets, including the produce itself, 21 or any proceeds from the sale thereof, to be held by the purchaser 22 in favor of the seller. 23 Sound Commodities Inc., 307 F.3d 1220, 1224 (9th Cir. 2002). 24 trust must be maintained for the benefit of the seller until full 25 payment has been made. 26 49 C.F.R. § 45735-01. In Middle Mountain Land & Produce Inc. v. The Id. Plaintiff asserts that it sold perishable agricultural 27 commodities to Defendants from 2008 to 2013. 28 However, in 2013, Defendants stopped paying for produce they 2 Chong Decl. ¶ 4. 1 ordered and received. 2 unpaid balance is $6,021.00. 3 contacted Defendants on several occasions to attempt to collect 4 the unpaid balance, to no avail. 5 acknowledges that Defendants are still operating the restaurant at 6 their known address and receiving produce from other vendors. 7 ¶ 11. 8 of their debt to Plaintiff alone suggests that Defendants are 9 unable to satisfy their debt and operating expenses out of their Id.; Chong Decl., Ex. B. Chong Decl. ¶ 4. Id. ¶ 10. The outstanding Plaintiff Plaintiff Id. Nevertheless, Plaintiff argues that Defendants’ nonpayment United States District Court For the Northern District of California 10 profit margins, and instead are likely turning to PACA trust 11 funds. 12 experience, this situation inevitably leads to liquidation of the 13 entity maintaining the PACA trust, rendering recovery impossible. 14 Id. ¶ 12. Id. Plaintiff’s president, Mr. Chong, asserts that in his 15 Plaintiff has not demonstrated that a TRO is warranted. 16 While Plaintiff has demonstrated a likelihood that Defendants are 17 delinquent in payments subject to a PACA trust, Plaintiff has not 18 shown that an immediate dissipation of trust assets will occur, 19 and as a result has not demonstrated there is a significant threat 20 of irreparable injury. 21 Wallau Enterprises, Inc., 2010 WL 4704040, at *3 (N.D. Cal.). 22 That Defendants are in arrears alone does not necessarily indicate 23 that trust assets are being depleted, especially without any 24 additional evidence of Defendants’ financial situation or risk of 25 liquidation. 26 Plaintiff’s ex parte application without notice to Defendants. 27 Plaintiff argues that giving Defendants advance warning would give 28 Defendants time to dissipate trust assets. Id. Fresh & Best Produce, Inc. v. Michael F. Further, there is no justification for granting 3 But Plaintiff provides 1 no facts to support this conclusory statement. 2 Inc. v. Fresh ‘N Healthy, Inc., 2008 WL 115009, at *1 (N.D. Cal.). 3 Imposing a TRO that will potentially affect all Defendants’ 4 assets,1 without giving Defendants notice or opportunity to be 5 heard, poses an unreasonable risk of harm to Defendants. 6 See ASA Farms, Accordingly, the Court DENIES Plaintiff’s ex parte 7 application for a TRO without prejudice to a renewed application 8 with either a sufficient showing of the danger of immediate 9 dissipation of the trust or notice to Defendants. Otherwise, the United States District Court For the Northern District of California 10 Court shall hear the preliminary injunction motion on February 27, 11 2013, at 2:00 PM. 12 later than February 10, 2014. Defendants may file a response no 13 later than February 21, 2014. No replies will be permitted. 14 Plaintiff’s request to consolidate trial on the merits with the 15 preliminary injunction hearing is DENIED. 16 Plaintiff shall serve notice on Defendants no IT IS SO ORDERED. 17 18 Dated: 19 2/7/2014 CLAUDIA WILKEN United States District Judge 20 21 22 23 24 25 26 27 28 1 See Docket No. 5-3 (proposed order requesting a TRO that would enjoin “all of the assets of Defendant” unless they “can prove to this Court that a particular asset is not derived from perishable agricultural commodities”). 4

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