Moss v. McLucas et al

Filing 26

ORDER Denying 23 Ex Parte Application for TRO and Request to Conduct Limited Expedited Discovery. Signed by Judge Roger T. Benitez on 12/18/2012. (All non-registered users served via U.S. Mail Service)(knb)

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FILED

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DEC 1 8 2012

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CLERK, U.S. DISTRICT COURT

SOUTHERN DISTRICT OF:
BY

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L1FORNIA

DEPUTY

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UNITED STATES DISTRICT COURT

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SOUTHERN DISTRICT OF CALIFORNIA

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MARK MOSS, individually and on behalf of
the Mark S. and Ellen R. Moss Family Trust
and the Mark S. & Ellen R. Moss Charitable
Remainder Unitrust,

CASE NO. 12-CV-2368 BEN (KSC)

ORDER DENYING EX PARTE
APPLICATION FOR
TEMPORARY RESTRAINING
ORDER AND REQUEST TO
CONDUCT LIMITED EXPEDITED
DISCOVERY

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Plaintiff,

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vs.

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[Docket No. 23]

CHARLES J. MCLUCAS, et aI.,
Defendants.

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Presently before the Court is Plaintiff's Ex Parte Application for Temporary Restraining Order
and Limited Expedited Discovery Related Thereto. (Docket No. 23.) For the reasons stated below,
the Ex Parte Application is DENIED.

BACKGROUND
Plaintiff Mark Moss allegedly invested more than $1 million of his retirement funds in a
general investment with Kingsway Sales and Marketing, LLC and its successor, Kingsway Industries,
Inc. (collectively, "Kingsway") based on the advice and counsel of Defendant Charles McLucas,

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Plaintiff's long-time investment advisor and certified public accountant. (Compi. ~~ 16-19; Moss

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Decl. ~ 5.) Plaintiff alleges that McLucas used his position oftrust and confidence with Plaintiff to

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assure him that his investments in Kingsway were "lucrative." "safe," and "guaranteed." (Compi.

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12-CV-2368

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~~ 16~18;

Moss Decl. ~ 5.)

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McLucas allegedly knew that Defendant David Mahrt, the owner ofKingsway, and his family

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were using large amounts ofKings way' s working funds for personal use as well as seeking loans from

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new investors to payoffprevious investors and pay personal expenses. (CompL ~~ 31-32; Moss Decl.

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Moss Decl. ~ 7.)

7.) Plaintiff alleges that McLucas wrongfully received Plaintiff's investment funds. (Compl. ~ 32;

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On September 28, 2012, Plaintiff initiated the present action. The complaint asserts nine

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claims: (1) securities fraud pursuant to 15 U.S.C. § 78j and 17 C.F.R. § 240.l0b-5 against McLucas

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and Mahrt; (2) common law fraud and deceit against McLucas and Mahrt; (3) breach offiduciary duty

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against McLucas and Yosemite Capital Management; (4) professional negligence against McLucas

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and Yosemite Capital Management; (5) constructive fraud against McLucas and Yosemite Capital

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Management; (6) constructive trust against Yosemite Capital Management and Charitable Trust

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Administrators, Inc.; (7) conversion against McLucas and Mahrt; (8) violation of Califomi a Welfare

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& Institutions Code §§ 15600 et seq. against McLucas; and (9) violation of Business and Professions

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Code §§ 17200 et seq. against Mahrt and McLucas.

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McLucas is the president of Defendant Charitable Trust Administrators, Inc. ("CTAI").
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(McLucas Decl.

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CTAI, and currently, McLucas owns a 100% ownership interest in CTA!. (Id.

2.) From 2003 to September 2012, McLucas owned a 50% ownership interest in
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2, 14.) On

19 November 19,2012, Plaintiff received a bulk email from CTAI-the September 2012 Charitable
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Times Quarterly Newsletter. (Moss DecL ~ 10.) An article titled "Firm Announcement: Introducing

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Renaissance Administration," written by McLucas, stated that CTAI was transferring all of its

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charitable trust administration services to a third party, Renaissance Administration, LLC. (Id., Exh.

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3.) Plaintiff alleges that he "heard from other people who know McLucas that he sold his charitable

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trust administration business to Renaissance."

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investigation confirmed that McLucas sold CTAI to Renaissance. (Wisdom Decl. ~ 3; Wypychowski

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Decl. ~ 3.) According to Plaintiff, "[t ]he timing of the sale of CTAI is suspicious, and it appears that

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McLucas and CTAI are currently liquidating assets in order to avoid recovery by Dr. Moss." (Ex Parte

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Appl. at 3.)

(Id.

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10.)

Plaintiff alleges that subsequent

12-CV-2368

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Presently before the Court is Plaintiff s Ex Parte Application for Temporary Restraining Order

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and Limited Expedited Discovery Related Thereto. Plaintiff seeks a temporary restraining order

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enjoining McLucas and CTAI from directly or indirectly transferring, liquidating, encumbering,

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pledging, assigning, or otherwise disposing of any and all proceeds from the sale of CTAI to

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Renaissance.

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DISCUSSION

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I.

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To obtain a temporary restraining order ("TR0"), a plaintiff must demonstrate "that he is likely

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to succeed on the merits, that he is likely to suffer irreparable harm in the absence ofpreliminary relief,

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that the balance of equities tips in his favor, and that an injunction is in the public interest." Winter

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v. Natural Res. De! Council, Inc., 555 U.S. 7,20 (2008). An injunction is "an extraordinary remedy

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that may only be awarded upon a clear showing that the plaintiff is entitled to such relief." Id. at 21.

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The determination whether to grant an injunction is "an exercise of judicial discretion, and the

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propriety ofits issue is dependent upon the circumstances ofthe particular case." Nken v. Holder, 556

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U.S. 418, 433 (2009) (internal quotation marks omitted).

TEMPORARY RESTRAINING ORDER

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Plaintiffs request for a TRO is based on the premise that "[t]he timing ofthe sale ofCTAI is

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suspicious, and it appears that McLucas and CTAI are currently liquidating assets in order to avoid

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recovery by Dr. Moss." (Ex Parte Appl. at 3.) According to Plaintiff, CTAI is no longer conducting

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business because it has been completely sold to Renaissance. (See id. at 7.)

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Plaintiff, however, has not met his burden in establishing that McLucas and CTAI are

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liquidating assets to avoid recovery by Plaintiff. First, there is evidence that CTAI was not sold in its

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entirety and that it is still conducting business. McLucas testified that on September 20, 2012, "I sold

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only the internal tax preparation and trust administration components of CTAI to Renaissance

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Administration, LLC ... , but NOT the company itself." (McLucas Decl. , 13.) "CTAI was and

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remains a viable business entity that has not been sold to any third party." (Id. ,4.) The Charitable

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Times Quarterly Newsletter, which Plaintiff alleges alerted him to the sale of CTAI, confirms this.

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The Newsletter states:

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I [McLucas] am excited to announce some big changes in our firm that will be effective

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October 1, 2012. At that time, we will be transferring all of our charitable trust
administration services to Renaissance Administration, LLC. For our clients, you will
continue to receive the same high level of services that you have come to expect
through CTAI, at the same fee, with additional resources and service capabilities that
Renaissance offers.

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(Moss Decl., Exh. 3 (emphasis added).) The Newsletter is consistent with McLucas' testimony, in that

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it confirms that only the charitable trust administration services were sold to Renaissance and that

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CTAI remains a viable business entity. Although Plaintiff argues that he heard from other individuals
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who know McLucas that McLucas sold CTAI (id.

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10), the more reliable evidence indicates that

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CTAI was not sold in its entirety and is continuing its business operations.
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Second, there is evidence that McLucas still owns an interest in CTAI. McLucas testified,
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"[w]ith 50% ofthe proceeds from the Sale, I actually purchased back the other 50% ownership interest
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in CTAI that had previously belonged to HMWC partners. Not only did I not sell CTAI, but I now
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own ALL of it." (McLucas Decl.

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14.) This testimony is confirmed by the Newsletter, which

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emphasizes McLucas' continued role in CTAI:
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As for my continued role [after the sale], I will be available for face-to-face meetings
with charities and individuals to review proposals and answer questions when
establishing a charitable trust. For the past 17 years, my heart and passion for CTAI
has been to provide individuals and smaller non-profit organizations, churches and
fellow professionals with technical expertise and state-of-the-art illustrations and
proposals, in order to assist in establishing charitable trusts and other forms ofplanned
gifts. Transferring my administrative duties and responsibilities to Renaissance will
free my time to focus on those activities. Through my new association with
Renaissance, I will train and educate professionals and charities in new planned gifts
assisted by a strong team of highly professional industry experts.

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(Moss Decl., Exh. 3.) Although Plaintiff disputes this, the more reliable evidence indicates that

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McLucas still owns an interest in CTA!.

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Plaintiff has not met his burden in establishing that McLucas and CTAI are liquidating assets

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to avoid recovery by Plaintiff. As this issue is dispositive, the parties' remaining arguments need not

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be addressed. Plaintiff's request for a temporary restraining order is DENIED.

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II.

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A court may authorize expedited discovery where an applicant demonstrates good cause.

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Semitool, Inc. v. Tokyo Electron Am., Inc., 208 F.R.D. 273, 275 (N.D. Cal. 2002). Good cause exists

REQUEST FOR LIMITED EXPEDITED DISCOVERY

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lZ-CV-Z368

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"where the need for expedited discovery, in consideration ofthe administration ofjustice, outweighs

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the prejudice to the responding party." !d. at 276.

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Because Plaintiff has not met his burden for the issuance of a temporary restraining order, his
request for limited expedited discovery is DENIED.

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CONCLUSION
For the foregoing reasons, Plaintiffs Ex Parte Application for Temporary Restraining Order
and Limited Expedited Discovery Related Thereto is DENIED.

IT IS SO ORDERED.

1: DATED: December 1:2012
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