B2 Opportunity Fund, LLC v. Trabelsi et al
Judge Richard G. Stearns: ORDER entered granting 4 Motion for Preliminary Injunction. B2's motion for a preliminary injunction is ALLOWED. A signed preliminary injunction order will be filed with this opinion. (Attachments: # 1 Preliminary Injunction Order) (RGS, law1)
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
CIVIL ACTION NO. 17-10043-RGS
B2 OPPORTUNITY FUND, LLC
NISSIM TRABELSI ET AL.
ORDER ON PLAINTIFF’S MOTION FOR
A PRELIMINARY INJUNCTION
March 30, 2017
Plaintiff B2 Opportunity Fund, LLC, seeks a preliminary injunction
against defendant Nissim Trabelsi and a raft of affiliated entities.1 For the
following reasons, the court grants the preliminary injunction.
The Complaint’s central allegations against Trabelsi can be briefly
summarized. In February of 2016, B2 agreed to buy stock in Znergy, Inc.,
from Trabelsi. The stock purchase agreement prescribed that B2 would pay
In full, the defendants covered by this motion are Nissim Trabelsi,
individually and as trustee of the Mazzal Trust (also known as the Mazzal
Living Trust) and The Bany’s Living Trust; Aliza Trabelsi, Nissim’s wife,
individually and as trustee of The Bany’s Living Trust; Mazzal Holding Corp.,
a Massachusetts corporation; and Magnolia Road, LLC, a Massachusetts
limited liability company. For obvious reasons, the defendants are referred
to throughout as “Trabelsi.”
$315,000 for 45.8 million restricted shares held by Trabelsi and 9.5 million
additional free-trading shares held by “Shawn Telsi.” Trabelsi held out Telsi
as his brother-in-law, but Telsi was in fact Trabelsi acting under an adopted
name. Instead of transferring the shares as agreed, Trabelsi transferred 9.5
million of the 45.8 million restricted shares into Telsi’s name, and then
transferred those shares to B2’s assignees, representing them to be the freetrading shares.
Following this misdirection, the lawyers managing the
escrow account for the deal transferred the $315,000 purchase price to
Trabelsi.2 B2 alleges that, based on market transaction activity and the fact
that only about 12 million free-trading Znergy shares exist, Trabelsi then sold
a large proportion of the free-trading shares after news of the purchase
agreement lifted Znergy’s stock price. When B2 uncovered the deception in
March of 2016, Trabelsi allegedly engaged in a series of evasions designed to
obfuscate the nature of the fraud.
B2 filed this suit on January 10, 2017, and requested a preliminary
injunction just days later. B2’s Complaint lodges claims of securities fraud
and common-law fraud, conversion, violations of the Massachusetts
consumer protection statute, breach of contract, and unjust enrichment. It
B2 has also sued the lawyers in charge of the escrow account, but is
not seeking injunctive relief against them.
also seeks a declaratory judgment regarding ownership of the free-trading
shares and certain property in Taunton, as well as specific performance of
On February 6, 2017, B2 sought a temporary restraining order from
this court, asserting that market trading activity indicated that Trabelsi was
liquidating the free-trading shares still in his possession. That order was
granted after a hearing on February 10, 2017. The TRO enjoined Trabelsi
from alienating shares, disposing of the proceeds of sales of Znergy stock up
to an amount of $315,000, or destroying any records related to his transfer
of shares. Dkt. #29. The court also gave Trabelsi the option of posting a
bond in the amount of $315,000. Id. By agreement of the parties, the TRO
remained in force until Trabelsi answered and the court ruled on the
preliminary injunction request. Dkt. #42, 43.
B2 requests three alterations to the TRO. First, it asks that the court
increase the limitation on Trabelsi’s ability to dissipate sale proceeds of the
free-trading shares from $315,000 to $599,022, which represents B2’s best
estimate of the total proceeds Trabelsi has received from the sale of the freetrading shares to date. Second, B2 requests that the court forbid Trabelsi
from transferring a certain parcel of property in Taunton, Massachusetts, or
from alienating any proceeds he has received from a sale which has already
taken place. Finally, it asks not only for an extension of the document
preservation order, but also that the court permit expedited third-party
discovery and require Trabelsi to provide documentation of his sales of the
The court heard arguments on the motion on March 30, 2017.
A request for a preliminary injunction is evaluated under a familiar
four-part rubric: “trial courts must consider (1) the likelihood of success on
the merits; (2) the potential for irreparable harm if the injunction is denied;
(3) the balance of relevant impositions, i.e., the hardship to the nonmovant
if enjoined as contrasted with the hardship to the movant if no injunction
issues; and (4) the effect (if any) of the court's ruling on the public interest.”
Ross-Simons of Warwick, Inc. v. Baccarat, Inc., 102 F.3d 12, 15 (1st Cir.
B2 prevails on each of these factors. Without considering all of B2’s
counts, on this record B2 is likely to succeed on at least its securities fraud,
common-law fraud, and breach of contract claims. Trabelsi admitted, first
in his briefing on the TRO and subsequently in his answer to the Complaint,
that he sometimes uses the name Shawn Telsi in transactions. See Dkt. # 27,
Ex. A, ¶ 10; Defs.’ Answer, Dkt. #66, ¶ 8. Despite this admission, documents
attached to the Complaint indicate that Trabelsi repeatedly pretended that
Telsi was his brother-in-law and offered a series of excuses to explain why
Telsi was unable to effectuate the transfer of the free-trading shares. See Dkt.
#1, Exs. R, T, X. Trabelsi’s effort to induce B2’s reliance on representations
about “Shawn Telsi,” breach of the contract by transferring restricted shares
masquerading as free-trading shares, and deliberately deceptive behavior in
connection with the sale of securities demonstrates a likelihood of success on
B2 has also demonstrated irreparable harm. Typically, irreparable
harm is not present where money damages are sought, because a party can
always be compensated for monetary losses. See Ocean Spray Cranberries,
Inc. v. PepsiCo, Inc., 160 F.3d 58, 61 (1st Cir. 1998). Even if money damages
could make a plaintiff whole, however, irreparable harm exists “where there
is a strong indication that the defendant may dissipate or conceal assets.”
Micro Signal Research, Inc. v. Otus, 417 F.3d 28, 31 (1st Cir. 2005). Here,
B2 has presented evidence indicating that Trabelsi not only engaged in a
fraud with respect to the initial transfer of the free-trading shares, but has
also made substantial efforts to rid himself of shares still in his possession
after B2 sought injunctive relief. See Dkt. #16, Exs. A, B; Dkt. #23, Ex. A.;
Dkt. #70, Exs. A, B.
The balance of hardships also favors B2. The requested injunction
primarily targets proceeds from the sale of specific shares at issue in this suit,
and therefore merely requires Trabelsi not to dispose of gains which, for now,
appear ill-gotten. In addition, an injunction benefits B2 by preventing any
further dissipation of assets. Trabelsi has not identified any serious burden
to himself or any harm to the public interest from entering an injunction
respecting the free-trading shares.
The considerations outlined to this point support converting the TRO
currently in force into a preliminary injunction. They do not, however,
warrant the enhancements B2 requests.
First, under the purchase
agreement, B2 agreed to buy the free-trading shares for $315,000, so nothing
more is required to return B2 to its pre-breach position, which is all that
Second, there is no apparent reason to include the Taunton property in
the injunction. Neither B2 nor Znergy was entitled to the property under the
contract, and B2 has remedies at law for Trabelsi’s apparent breach of that
agreement. Finally, discovery regarding the disposition of the free-trading
shares can proceed in the normal course.
B2’s litigation interests are
sufficiently protected by Rule 37, the court’s inherent powers, and the terms
already present in the TRO, which strictly forbid Trabelsi from destroying
any records or other evidence relating to the free-trading shares.
The court will, however, make one alteration to the TRO to respond to
a request B2 made at the hearing on this motion. The court will specifically
enjoin Trabelsi in his capacity as an officer, manager, or director of Magnolia
Road LLC and Mazzal Holding Corp., two Massachusetts entities apparently
controlled solely by Trabelsi. See Compl. ¶¶ 13-14, 24-25.
B2’s motion for a preliminary injunction is ALLOWED. A signed
preliminary injunction order will be filed with this opinion.
/s/ Richard G. Stearns
UNITED STATES DISTRICT JUDGE
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