Deem et al v. Baron et al
Filing
129
MEMORANDUM DECISION AND ORDER-granting 94 Motion for Preliminary Injunction. See Order for details. Signed by Judge David Sam on 1/11/18. (jmr)
UNITED STATES DISTRICT COURT
DISTRICT OF UTAH, CENTRAL DIVISION
DARRELL L. DEEM, et. al.,
MEMORANDUM DECISION
Plaintiffs,
AND ORDER
v.
2:15-CV-00755-DS
TRACEY BARON, et. al.,
Defendants.
District Judge David Sam
Before the court is Plaintiffs’ Renewed Motion for Preliminary Injunction. Plaintiffs
seek an order reflecting the following points:
•
The court’s approval is required for the sale or transfer of assets.
•
Defendants are enjoined from committing waste or otherwise substantially altering said
real estate in any way which would negatively impact its value without either the
agreement of counsel or leave of the court.
•
Defendants may not interfere with enforcement of the assignment of rents in the
possession of Plaintiffs with reference to the real estate.
•
Plaintiffs may have access to files, documents, surveys and work performed by 3J
Consulting relative to the 18901 Venture (Hill Top Project), and may use existing
documentation to preserve the value of said asset.
The Supreme Court has held that “[a] plaintiff seeking a preliminary injunction must
establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in
the absence of preliminary relief, that the balance of equities tips in his favor, and that an
injunction is in the public interest.” Winter v. Natural Resources Defense Council, Inc., 555 U.S.
7, 20 (2008). As described below, these four requirements are met in this case.
Plaintiffs are likely to succeed on the merits. They have provided extensive
documentation and analysis demonstrating that they have not been paid as agreed. Because the
evidence indicates that payments have not been made, Plaintiff’s have a good likelihood of
success.
There is a strong likelihood that Plaintiffs will suffer irreparable harm if Defendants sell
or lose their assets pending trial. Plaintiffs loaned money to the Defendants so that Defendants
could acquire distressed properties and make those properties rentable and profitable. Since these
are distressed properties to begin with, Plaintiffs are concerned that they may be lost to the banks
unless Plaintiffs are kept in the loop on their status with the banks. Plaintiffs state the following:
“We are not asking that Tracey make any payments. We are asking that we be given the
opportunity to negotiate with the bank and make payments ourselves if we determine it is
prudent to do so. Tracey is still fee [sic] to make payment on his own.” ECF No. 94 at 12.
Plaintiffs note that since Defendants have admitted that they don’t care whether the assets are
preserved, they cannot be harmed by an order allowing Plaintiffs to attempt to preserve them.
Mr. Baron has made threats in the past to waste or destroy the assets. Defendant argues
that those threats were made years ago in response to justifiable frustration and anger over being
cheated by Plaintiffs, but that his actions since then prove that he presents no danger to Plaintiffs.
If Mr. Baron has no plans to waste or destroy assets, then he should not object to an order
preventing him from doing so.
The contracts in question provide that a portion of all rents shall be paid to Plaintiffs.
Plaintiffs have not received most of these rents. They have provided the affidavit of one tenant
who states that he is aware of over $45,000.00 in rents being paid under the table on the property
he is renting. He states that Mr. Baron insisted that all payments be made in cash without any
receipts and that there be no written agreement. See Exhibit 11C, Affidavit of Ronald Stendahl,
attached to the Affidavit of David Law (ECF No. 94, Exhibit 1AAA). Plaintiffs sent a letter to
each property for which they have an assignment of rents, informing the occupant of the
assignment, but they soon learned that Mr. Baron was threatening the tenants with eviction if
they honored Plaintiffs’ assignments. See Exhibit 2E to the Affidavit of David Law (Exhibit
1AAA). Plaintiffs note that this is not just a question of monetary damages. “It is a question of
preserving the contractual basis for those damages. If the rents are not brought in, there are no
damages for not paying Plaintiffs their portion of such rents. The claim for damages can only
exist if the tenants remain in the properties.” ECF No. 94 at 13.
The most valuable project that the parties undertook was the development of what they
refer to as the 18901 Venture” which refers to 18901 Hill Top Road. This was a joint venture by
the parties and not simply a loan. See Exhibit 3A, Joint Venture Agreement with Notes and
Exhibit 8B Violations of 18901 Venture, both Exhibits to the Affidavit of David Law (Exhibit
1AAA). The Joint Venture Agreement contemplated that the Hill Top Road property would be
subdivided and sold, and Mr. Baron employed the engineering firm of 3J Consulting to draw
plans, obtain permits and perform other engineering projects. The contract with 3J Consulting is
in the sole name of Tracey Baron personally. He refuses to allow Plaintiffs access to the work
performed by 3J Consulting, and 3J Consulting refuses to proceed without his authorization.
While Plaintiffs acknowledge that the loss here is monetary, and that they could hire a different
engineer and do all of the work themselves, they also assert that trying to go back and repeat the
engineering work is likely to destroy the financial viability of the whole project.
While generally one pursuing a money action is not entitled to a preliminary injunction,
an exception is when movant’s cause of action is directed to a specific fund which is “the subject
of the action.” See Ma v. Lien, 198 A.D.2d 186, 604 N.Y.S.2d 84 (1993). Many cases hold that a
monetary damages claim directed at a specific fund is viable as an irreparable injury worthy of
an injunction because the property, not the value of the property, is the true subject of the action.
See ECF No. 94 at 15-16 for specific examples. This is the case here. There would clearly be
irreparable damage if the preliminary junction is not granted.
Defendants’ opposition to the Motion for Preliminary Injunction fails to address the
merits of the motion. Defendants base their opposition on two arguments: (1) that this motion
conflicts with pending bankruptcies, and (2) that Plaintiffs have no chance of success on the
merits.
Defendants summarily state that “[a]ll of the real estate subject to this lawsuit has been
placed into various Chapter 11 Bankruptcies.” ECF No. 114 at 1. Defendants object to
Plaintiffs’ request for an order from the court that would limit them, as Chapter 11 Debtors, from
dealing with their properties, particularly the handling of rents received therefrom. While the
court reaffirms its prior stance that this action does not affect properties that are currently in
Chapter 11 Bankruptcies, it appears that only one subject property is still in bankruptcy. The
Oregon Bankruptcy Court has granted relief from the automatic stay as to the Hill Top Project,
so that Plaintiffs can continue this litigation. And as for the other properties, Plaintiffs note that
all bankruptcies except one have been dismissed due to the misrepresentations and misreporting
of Tracey Baron. The Crimson Bankruptcy, the sole remaining bankruptcy, only held one
property of interest to Plaintiffs, so Plaintiffs have chosen to ignore it. If Defendants disagree
with this assessment, they are ordered to provide this court with proof that specific properties
are still in the Chapter Eleven Bankruptcies and subject to the stay, and thus not subject to this
order.
Defendants also argue that Plaintiffs cannot prevail on the merits. They argue, not that
Plaintiffs’ allegations are false, but rather, that Defendants’ Counter Claims are so strong that
they will overshadow Plaintiffs’ claims. As proof of the strength of their Counter Claims they
have provided only their actual Counter Claim, whereas Plaintiffs have provided hundreds of
pages of documentary evidence and affidavits. The weight of the evidence indicates that
Plaintiffs will likely succeed on the merits. But regardless, the equities balance in favor of
granting the motion. The four requests that Plaintiffs make in this motion are not one-sided.
Each of these orders is designed to preserve assets and maintain the status quo. This will help
whoever prevails in this matter, even the Defendants. Defendants maintain that Tracey Baron
has not harmed Plaintiffs and will not harm them, and that he continues to work hard to preserve
the assets as best he can. If this is true, he should not object to this order, which helps to protect
the assets pending the outcome of this case.
Finally, in a broad sense, it is in the public interest to allow Plaintiffs to prevent the
properties from being foreclosed upon or the business developments from failing. Promoting the
public’s interest in commerce has been held to be a legitimate benefit for purposes of preliminary
injunctions. Preliminary injunctions granted in merger and antitrust cases are examples of this.
United States v. Siemens Corp., 621 F.2d 499 (2d Cir. 1980); cv. FTC v. Weyerhaeuser Co., 665
F.2d 1072 (D.C. Cir. 1981),; United States v. Ingersoll-Rand, 218 F.Supp. 530 (W.D. Pa. 1963).
CONCLUSION
For the reasons stated above and in order to preserve the status quo and prevent waste
until this matter can be adjudicated, this court hereby grants the motion for preliminary
injunction and orders the following.
•
Defendants are enjoined from transferring any parcel of real estate named in the
agreements of the parties (expressly enumerated in the attachments to the Complaint)
without either the agreement of counsel or leave of court. Plaintiffs must also be notified
immediately of any potential involuntary transfer of the same real estate, and they are
hereby given leave to communicate with the banks or other proper parties in order to
take appropriate steps to avoid the involuntary transfer of the same.
•
Defendants are enjoined from committing waste or otherwise substantially altering said
real estate in any way which would negatively impact its value without either the
agreement of counsel or leave of the court.
•
Plaintiffs are permitted to enforce the assignment of rents in their possession without
interference from Defendants. Defendants are enjoined from interfering in any way,
including retaliatory efforts to evict tenants.
•
Plaintiffs shall be given access to files, documents, surveys and all work performed or in
the process of being performed or in the possession of the engineering firm of 3J
Consulting relative to the 18901 Venture (Hill Top Project). Plaintiffs are allowed to
use all existing documentation to perform any work needed to preserve the value of said
asset and the funds expended in furtherance thereof. Plaintiffs are not allowed to
alienate the property without court approval.
DATED this 11th day of January, 2018.
BY THE COURT:
DAVID SAM
United States District Judge
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