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

Filing 15

ORDER by Judge Claudia Wilken DENYING WITHOUT PREJUDICE PLAINTIFFS 5 APPLICATION FOR A TEMPORARY RESTRAINING ORDER. (ndr, COURT STAFF) (Filed on 2/7/2014)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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United States District Court
For the Northern District of California

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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

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“the likelihood of success is such that serious questions going to
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the merits were raised and the balance of hardships tips sharply

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in plaintiff’s favor,” so long as the plaintiff demonstrates

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irreparable harm and shows that the injunction is in the public

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interest.

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1127, 1131 (9th Cir. 2011) (citation and internal quotation and

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editing marks omitted).

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notice to the adverse party unless “(1) it clearly appears from

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specific facts shown by affidavit or by the verified complaint

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that immediate and irreparable injury, loss, or damage will result

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United States District Court
For the Northern District of California

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to the applicant before the adverse party or that party’s attorney

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can be heard in opposition, and (2) the applicant’s attorney

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certifies to the court in writing any efforts made to give notice

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and the reasons why it should not be required.”

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65(b).

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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

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in the marketing of fruits and vegetables in interstate and

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foreign commerce” and to provide “a code of fair play” to “aid

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traders in enforcing their contracts.”

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1984, PACA was amended to include a provision creating a statutory

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trust on all produce-related assets, including the produce itself,

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or any proceeds from the sale thereof, to be held by the purchaser

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in favor of the seller.

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Sound Commodities Inc., 307 F.3d 1220, 1224 (9th Cir. 2002).

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trust must be maintained for the benefit of the seller until full

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payment has been made.

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49 C.F.R. § 45735-01.

In

Middle Mountain Land & Produce Inc. v.
The

Id.

Plaintiff asserts that it sold perishable agricultural

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commodities to Defendants from 2008 to 2013.

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However, in 2013, Defendants stopped paying for produce they
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Chong Decl. ¶ 4.

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ordered and received.

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unpaid balance is $6,021.00.

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contacted Defendants on several occasions to attempt to collect

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the unpaid balance, to no avail.

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acknowledges that Defendants are still operating the restaurant at

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their known address and receiving produce from other vendors.

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¶ 11.

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of their debt to Plaintiff alone suggests that Defendants are

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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

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profit margins, and instead are likely turning to PACA trust

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funds.

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experience, this situation inevitably leads to liquidation of the

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entity maintaining the PACA trust, rendering recovery impossible.

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Id. ¶ 12.

Id.

Plaintiff’s president, Mr. Chong, asserts that in his

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Plaintiff has not demonstrated that a TRO is warranted.

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While Plaintiff has demonstrated a likelihood that Defendants are

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delinquent in payments subject to a PACA trust, Plaintiff has not

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shown that an immediate dissipation of trust assets will occur,

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and as a result has not demonstrated there is a significant threat

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of irreparable injury.

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Wallau Enterprises, Inc., 2010 WL 4704040, at *3 (N.D. Cal.).

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That Defendants are in arrears alone does not necessarily indicate

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that trust assets are being depleted, especially without any

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additional evidence of Defendants’ financial situation or risk of

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liquidation.

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Plaintiff’s ex parte application without notice to Defendants.

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Plaintiff argues that giving Defendants advance warning would give

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Defendants time to dissipate trust assets.

Id.

Fresh & Best Produce, Inc. v. Michael F.

Further, there is no justification for granting

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But Plaintiff provides

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no facts to support this conclusory statement.

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Inc. v. Fresh ‘N Healthy, Inc., 2008 WL 115009, at *1 (N.D. Cal.).

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Imposing a TRO that will potentially affect all Defendants’

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assets,1 without giving Defendants notice or opportunity to be

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heard, poses an unreasonable risk of harm to Defendants.

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See ASA Farms,

Accordingly, the Court DENIES Plaintiff’s ex parte

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application for a TRO without prejudice to a renewed application

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with either a sufficient showing of the danger of immediate

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dissipation of the trust or notice to Defendants.

Otherwise, the

United States District Court
For the Northern District of California

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Court shall hear the preliminary injunction motion on February 27,

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2013, at 2:00 PM.

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later than February 10, 2014.

Defendants may file a response no

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later than February 21, 2014.

No replies will be permitted.

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Plaintiff’s request to consolidate trial on the merits with the

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preliminary injunction hearing is DENIED.

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Plaintiff shall serve notice on Defendants no

IT IS SO ORDERED.

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Dated:

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2/7/2014

CLAUDIA WILKEN
United States District Judge

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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”).
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