Hultman v. Mattson et al

Filing 48

ORDER DENYING PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION by Judge Jon S. Tigar denying 19 Ex Parte Application. (dms, COURT STAFF) (Filed on 7/8/2024)

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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 CHARLENE HULTMAN, 7 Plaintiff, 8 v. 9 KENNETH W. MATTSON, et al., 10 Defendants. 11 United States District Court Northern District of California Case No. 24-cv-03381-JST ORDER DENYING PLAINTIFF’S MOTION FOR PRELIMINARY INJUNCTION Re: ECF No. 19 12 13 Before the Court is Plaintiff Charlene Hultman’s motion for a preliminary injunction. ECF 14 No. 19. The Court finds this matter suitable for resolution without oral argument, see Fed. R. Civ. 15 P. 78(b); Civil L.R. 7-1(b), and will deny the motion. 16 I. 17 BACKGROUND Charlene Hultman, a 79-year-old widow, alleges that Defendant Kenneth W. Mattson, 18 acting on behalf of Defendant LeFever Mattson, Inc. (“LM”), fraudulently persuaded her and her 19 late husband to invest in two real estate investments: (1) $380,000 in Defendant Divi Divi Tree, 20 LP (“Divi”), of which she alleges LM is the general partner, in 2011; and (2) $420,000 in 21 Defendant Specialty Properties Partners, LP, of which she alleges Defendant KS Mattson Partners, 22 LP, is the general partner, in 2013. She alleges that she received monthly distributions from both 23 of these investments from the time she invested until April 2024. She also alleges that she 24 received a statement from non-party Pacific Premier Trust, the holder of her investment in 25 Specialty Properties, that the value of that investment was $355,215.63 as of March 31, 2024. She 26 alleges that she received a statement from non-party Madison Trust, the holder of her investment 27 in Divi, that the value of that investment was $605,240.65 as of March 31, 2024, but that Madison 28 Trust informed her on May 9, 2024, that the balance of her account there had fallen to $458.92. 1 Hultman filed this lawsuit seeking monetary damages, including the return of her 2 investments in Divi and Specialty Properties and punitive damages. Her complaint, ECF No. 1, 3 asserts the following claims against Mattson, KS Mattson, and LM: securities fraud in violation of 4 Section 10(b) of the Securities Exchange Act of 1934 and Securities Exchange Commission Rule 5 10b-5; financial abuse of an elder in violation of California Welfare and Institutions Code Section 6 15610.30; fraud; breach of fiduciary duty; and conversion. Her complaint alleges two additional 7 claims against all Defendants, including Divi and Specialty Properties: constructive trust and 8 declaratory relief. Hultman moved for a temporary restraining order and order to show cause as to why a United States District Court Northern District of California 9 10 preliminary injunction should not issue. ECF No. 19. The Court denied the request for a 11 temporary restraining order but issued the requested order to show cause. ECF No. 20. 12 Mattson and KS Mattson agreed to Hultman’s request for a preliminary injunction, and the 13 Court approved their stipulation with Hultman to enjoin these Defendants “from taking any action 14 to sell or transfer any ownership interest of Plaintiff in Divi Divi Tree, LP or Specialty Properties 15 Partners, LP without further order of this Court.” ECF No. 35. LM and Divi oppose Hultman’s request for preliminary injunctive relief. They argue that 16 17 “Mattson’s unauthorized self-dealing may have harmed Plaintiff,” but that they “were not aware of 18 and did not participate in Mattson’s malfeasance.” ECF No. 36 at 18. They further assert that 19 Hultman never owned any interest in Divi, and that any distributions she purportedly received 20 from Divi “were made, if at all, by Mattson or some other entity he controlled, and not by Divi.” 21 Id. at 10. LM and Divi also state that they have no affiliation with Specialty Properties. Id. Hultman has filed a proof of service on Specialty Properties, ECF No. 24, but Specialty 22 23 Properties has not yet appeared or filed any response to Hultman’s motion. 24 II. JURISDICTION The Court has federal question jurisdiction under 28 U.S.C. § 1331.1 25 26 27 28 LM and Divi have stated an intent to file a motion asking the Court to dismiss Hultman’s federal claim and to decline to exercise supplemental jurisdiction over her state law claims. ECF No. 40 at 6. The Court expresses no view as to whether it would exercise supplemental jurisdiction if the federal claim were dismissed. 2 1 1 III. Injunctive relief is “an extraordinary remedy that may only be awarded upon a clear 2 United States District Court Northern District of California LEGAL STANDARD 3 showing that the plaintiff is entitled to such relief.” Winter v. Nat. Res. Def. Council, 555 U.S. 7, 4 22 (2008). To obtain preliminary injunctive relief, a plaintiff “must establish that he is likely to 5 succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary 6 relief, that the balance of equities tips in his favor, and that an injunction is in the public interest.” 7 Id. at 20. A court may “balance the elements” of this test, “so long as a certain threshold showing 8 is made on each factor.” Leiva-Perez v. Holder, 640 F.3d 962, 966 (9th Cir. 2011) (per curiam). 9 Thus, for example, “serious questions going to the merits and a balance of hardships that tips 10 sharply towards the plaintiff can support issuance of a preliminary injunction, so long as the 11 plaintiff also shows that there is a likelihood of irreparable injury and that the injunction is in the 12 public interest.” All. for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1135 (9th Cir. 2011) 13 (quotation marks omitted). 14 IV. 15 DISCUSSION The Court will deny Hultman’s motion because she has not made the required showing 16 that she is likely to suffer irreparable harm in the absence of the preliminary injunctive relief she 17 seeks. Hultman does not contend that she suffered anything other than economic harm, and 18 “monetary injury is not normally considered irreparable.” Los Angeles Mem’l Coliseum Comm’n 19 v. Nat’l Football League, 634 F.2d 1197, 1202 (9th Cir. 1980); 20 Hultman is correct that economic harm may be considered irreparable under certain 21 circumstances, but none of those circumstances is present here. For example, Hultman does not 22 argue that sovereign immunity, or any other legal doctrine, would bar her from recovering 23 monetary damages from any Defendant in this case. See Idaho v. Coeur d’Alene Tribe, 794 F.3d 24 1039, 1046 (9th Cir. 2015). Nor does she contend that Defendants have “engaged in a pattern of 25 secreting or dissipating assets to avoid judgment.” In re Est. of Ferdinand Marcos, Hum. Rts. 26 Litig., 25 F.3d 1467, 1480 (9th Cir. 1994). Similarly, this is not a case where Defendants have 27 themselves indicated an inability to satisfy a judgment against them. See Johnson v. Couturier, 28 572 F.3d 1067, 1081 (9th Cir. 2009). 3 A plaintiff can also show irreparable harm by “establish[ing] that money damages will be United States District Court Northern District of California 1 2 an inadequate remedy due to impending insolvency of the defendant.” In re Est. of Ferdinand 3 Marcos, 25 F.3d at 1480. But Hultman’s contentions fall below that standard. She argues that 4 there are likely to be many claims against Defendants based on allegations similar to the fraud she 5 alleges, but she presents no argument or evidence regarding the likelihood of any Defendant’s 6 inability to pay money judgments—let alone the level of solvency of LM and Divi, the two 7 Defendants who oppose her motion. Indeed, her briefs stop short of arguing such likelihood, 8 instead referring only to a “real possibility that Defendants will be unable to satisfy a money 9 judgment to Plaintiff.” ECF No. 45 at 15 (reply brief); see also ECF No. 19-1 at 16 (arguing the 10 same, and noting that the possibility exists particularly as to Mattson, a Defendant who has already 11 agreed to the preliminary injunctive relief Hultman seeks). Following Winter, 555 U.S. at 22, a 12 plaintiff “must establish that irreparable harm is likely, not just possible, in order to obtain a 13 preliminary injunction.” All. for the Wild Rockies, 632 F.3d at 1131 (emphasis in original). 14 Hultman’s arguments regarding possible harm are therefore insufficient. CONCLUSION 15 16 Because Hultman has not established a likelihood of irreparable harm, her motion for a 17 preliminary injunction is denied. The Court need not and does not reach the parties’ remaining 18 arguments.2 Notwithstanding this conclusion, the injunction agreed to by Mattson and KS 19 Mattson and entered as an order of the Court remains in effect. ECF No. 35. IT IS SO ORDERED. 20 21 Dated: July 8, 2024 ______________________________________ JON S. TIGAR United States District Judge 22 23 24 25 26 27 28 Hultman’s motion for a temporary restraining order also requested permission to conduct expedited discovery. ECF No. 19-1 at 17–18. LM and Divi have taken the position that discovery should be stayed under the Private Securities Litigation Reform Act of 1995 because they intend to file a motion to dismiss Hultman’s federal securities claim. ECF No. 40 at 9 (citing 15 U.S.C. § 78-u4(b)(3)(B)). At the June 25, 2024 case management conference, the parties agreed to meet and confer regarding discovery while continuing with the preliminary injunction briefing as scheduled. The Court makes no rulings at this time regarding discovery. 4 2

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