Textron Financial Corporation v. Gallegos

Filing 245

ORDER Granting in Part and Denying in Part #225 Ex Parte Motion. A hearing on this matter will be held on 10/24/2017 at 02:00 PM in Courtroom 5C before Magistrate Judge Andrew G. Schopler. Since this order obviates the need to seal the ex parte motion, the #241 motion to seal is denied as moot. Signed by Judge Larry Alan Burns on 10/19/2017. (lrf)

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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF CALIFORNIA
TEXTRON FINANCIAL CORP.,

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CASE NO. 15cv1678-LAB (AGS)
Plaintiff,

vs.

ORDER GRANTING IN PART AND
DENYING IN PART EX PARTE MOTION

MICHAEL S. GALLEGOS,
Defendant.

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The Court issued an Assignment Order in August that said: “Gallegos shall not cause

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or encourage any entity listed in the attached Appendix to make a payment . . . to any

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intermediary so that another may ultimately make a payment . . . for Gallegos’s personal

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expenses. [Dkt. 216.] One of those 400 entities is Charleston Hotel Management

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Corporation. And Spe Lo has presented evidence that Charleston deposited $200,000 into

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a bank account controlled by Patricia Tenorio. Tenorio used that money to pay Gallegos’s

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personal expenses. Then she filed a declaration in this court stating none of the money

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came from a Gallegos-controlled entity. Charleston is owned by Gallegos.

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Spe Lo has now filed an ex parte motion asking the Court to issue emergency relief

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to help it collect on a $22 million judgment from Michael Gallegos. Spe Lo argues that given

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Gallegos’s violation of the Assignment Order – and long history of evading payment – the

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Court should appoint a temporary receiver, order Gallegos to turnover stock certificates to

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a U.S. Marshal, and enjoin Tenorio from moving money out of the relevant accounts—

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without providing Gallegos, Tenorio, or any of the entities an opportunity to be heard.

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Courts may issue temporary restraining orders without notice when the applicant

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shows “immediate and irreparable injury” will result and sufficiently explains why notice

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shouldn’t be required. Fed. R. Civ. P. 65(b). Ex parte orders without notice are only proper

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in “a very narrow band of cases” where “notice to the defendant would render fruitless the

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further prosecution of the action.” Reno Air Racing Ass'n., Inc. v. McCord, 452 F.3d 1126,

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1131 (9th Cir. 2006).

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Spe Lo’s allegations are serious and, if true, Gallegos faces serious consequences

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for his noncompliance with previous court orders. But the Court doesn’t agree that

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Gallegos’s latest maneuver to avoid collection has created an emergency that necessitates

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the Court entering the many injunctive remedies requested without notice. For example,

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“appointing a receiver is an extraordinary equitable remedy, which should be applied with

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caution.” Canada Life Assur. Co. v. LaPeter, 563 F.3d 837, 844 (9th Cir. 2009). While

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appointing a receiver may ultimately be necessary, the Court finds that it’s not appropriate

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without giving Gallegos notice and an opportunity to be heard.

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The hearing shall take place within five days. Since Judge Schopler has great

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familiarity with the facts, and has handled several hearings in the case already, counsel and

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Michael Gallegos shall appear before Judge Schopler in Courtroom 5C, 221 West

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Broadway, San Diego CA, on October 24 at 2:00 pm, and shall be prepared to respond to

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the following issues:

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1. Why the Court shouldn’t hold Gallegos in contempt for violating the Assignment Order.

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2. Why the Court shouldn’t order appointment of a receiver.

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3. Why the Court shouldn’t order Gallegos to turnover stock certificates for American

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Property Management Corporation, Charleston Hotel Management Corporation, Santa

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Fe Picacho Hotel Management Corporation, and Union City Hotel Management

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Corporation.

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4. Why the Court shouldn’t restrain Patricia Tenorio from moving any funds that originated

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from Gallegos from the Southwest Bank Accounts ending in x0150 or x2562.
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Although the Court declines to grant the full temporary injunctive relief sought by Spe

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Lo, the Court finds that some ex parte relief against Gallegos is in order to prevent immediate

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and irreparable damage before Tuesday’s hearing. Fed. R. Civ. P. 65. Relying on the ex

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parte materials submitted by Spe Lo, the Court finds by a clear preponderance of evidence

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that Gallegos has likely violated the Assignment Order, has possibly suborned perjury, and

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has engaged in a pattern of behavior that suggests he may try to move assets before the

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hearing on Tuesday. Spe Lo’s allegations, and the evidence offered in support, suggest that

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efforts to restrain Gallegos are likely to succeed on the merits, that the equities tip in Spe

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Lo’s favor, and that restraining Gallegos is in the public interest. Winter v. Nat. Res. Def.

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Council, Inc., 555 U.S. 7, 20 (2008). Ex parte relief is also appropriate since the order is

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“narrow in scope and brief in its duration” Matter of Vuitton et Fils S.A., 606 F.2d 1, 5 (2d

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Cir. 1979) (ordering ex parte restraining order); Fed. R. Civ. P. 65(d). The Court therefore

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restrains Gallegos and any person acting on his behalf from taking the following actions

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pending the Tuesday hearing:

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1. Gallegos is restrained from moving any funds in or out of the Southwest Capital Bank

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Accounts identified in Spe Lo’s motion (x0150 and x2562);

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2. Gallegos is restrained from moving any of his stock in American Property Management

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Corporation, Charleston Hotel Management Corporation, Santa Fe Picacho Hotel

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Management Corporation, and Union City Hotel Management Corporation; and

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3. Gallegos is restrained from moving any funds from any accounts owned in whole or part

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by the entities in the appendix to the Assignment Order. That includes Manzano Hotel

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Investment LLC and Tunica Hotel Investment LLC.

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Since this order obviates the need to seal the ex parte motion, the motion to seal is

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denied as moot. Judge Schopler may recommend that any portion of this order should be

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retained or modified after hearing from the parties and their counsel at the Tuesday hearing.

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IT IS SO ORDERED.
Dated: October 19, 2017
HONORABLE LARRY ALAN BURNS
United States District Judge

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