Egelhoff v. Bojkovsky CA4/3

Filed 8/17/15 Egelhoff v. Bojkovsky CA4/3
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
LAURIE EGELHOFF,
Plaintiff and Appellant, G050885
v. (Super. Ct. No. INC1207926)
SIMON BOJKOVSKY et al., OPINION
Defendants and Respondents.
Appeal from an order of the Superior Court of Orange County, Harold W.
Hopp, Judge. Affirmed.
Joshua R. Furman Law Corp. and Joshua R. Furman, for Plaintiff and
Appellant.
Law Office of James M. Graff-Radford and James M. Graff-Radford for
Defendants and Respondents Simon Bojkovsky and Allison Bojkovsky.
Rhona S. Kauffman for Defendant and Appellant Simon Bojkovsky.
Law Office of Rodney Lee Soda and Rodney Lee Soda for Defendant and
Respondent Allison Bojkovsky.
Law Office of Michael A. Kruppe, Michael A. Kruppe and Christian D.
Molloy for Defendant and Respondent Pacific Lightwave.
* * *
This case is a shareholder derivative lawsuit alleging the controlling
shareholders, who also control the board of directors, are looting the company. Plaintiff
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Dale Egelhoff is the minority shareholder. He appeals from an order denying a motion
for a preliminary injunction that would have prevented Simon and Allison Bojkovsky
(defendants and controlling shareholders) from using funds of the company, Pacific
Lightwave, “to enrich themselves, directly or indirectly,” and would have appointed a
receiver “to approve all expenditures of [Pacific Lightwave] and to ensure that said
expenditures are solely for the proper and usual business expenses of [Pacific
Lightwave].” The court found Egelhoff had failed to demonstrate irreparable harm and
that the proposed injunction would be too difficult to administer. On appeal, Egelhoff
claims the court employed the wrong legal standard, and, in any event, the ruling was an
abuse of discretion on the evidence before the court.
We affirm. The trial court correctly applied the irreparable-harm standard,
and the court’s finding that the alleged monetary losses are not irreparable harm was
within the court’s discretion.
FACTS
We begin with the observation that the issuance of a preliminary injunction
must be based on declarations or a verified complaint. (Code Civ. Proc., § 527, subd.
1
During the pendency of this appeal, Dale Egelhoff passed away. Laurie
Egelhoff substituted in as the personal representative of his estate.
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(a).) Here, the complaint was not verified, and the declarations provide a meager factual
record. In his appellate brief, Egelhoff attempted to fill in some of those gaps with
factual assertions that have no accompanying record citations. We will not consider
those assertions. What follows is what we can glean from the evidence properly before
the trial court.
Pacific Lightwave is in the business of providing internet, phone service, IT
service, network infrastructure, and WiFi hot spots. Defendants Simon and Allison
Bojkovsky each own one-third of the shares of Pacific Lightwave and are directors. In
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his complaint, Egelhoff claims to own one-half of the shares of the company. Under
circumstances not revealed by the record, defendants had previously sued Egelhoff and
obtained a preliminary injunction preventing him from utilizing Pacific Lightwave’s
“customer information, core equipment configuration file, and passwords.” Egelhoff was
also ordered not to contact Pacific Lightwave’s customers or compete with Pacific
Lightwave for those customers. As part of that same lawsuit, defendants successfully
petitioned the court to appoint a provisional director.
Egelhoff filed this action as a derivative suit against defendants. Among
the allegations were that defendants “have used the debit cards for [Pacific Lightwave’s]
business checking account to go on shopping sprees” in an amount totaling at least
$150,000. On the day Egelhoff filed the complaint, he also filed an ex parte application
for a temporary restraining order and an order to show cause re: preliminary injunction.
He sought an order “restraining Defendants . . . from using any funds of [Pacific
Lightwave] to enrich themselves, directly or indirectly.” Additionally, he sought an order
to show cause for a similar preliminary injunction and also for “the appointment of a
receiver or referee to approve all expenditures of [Pacific Lightwave] and to ensure that
said expenditures are solely for the proper and usual business expenses of PLW.”
2
Plainly, there is a dispute about ownership, but the record does not reveal
the nature of the dispute.
3
The evidence Egelhoff proffered consisted of 188 pages of bank records
Egelhoff’s attorney had obtained in connection with the other litigation. The bank
records span from January to September of 2012, and list the debits to the account during
that time period. They contain a large number of purchases at clothing retailers such as
MyHabit.com and Gilt Groupe; an even larger number of transactions at Amazon.com (it
appears to be several purchases per day for the entire time period); and a smaller number
of purchases at retailers such as HauteLook, Juicy Couture, Abercrombie.com, Saks
Direct, and Zappos.com. Egelhoff himself did not provide a declaration, and thus the
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only evidence in support of the application was the bank records.
The trial court (not the same judge handling the other litigation) issued a
temporary restraining order preventing defendants from “expending any funds of Pacific
Lightwave.” (Italics added.)
In response, defendants submitted declarations stating they had been given
no notice of the temporary restraining order hearing. Allison Bojkovsky declared, “I
have not to my understanding used or misused any corporate funds and fully dispute the
allegations asserted . . . . I would disclose that there have been a number of fraudulent
charges that have been reported to the bank and for which the bank is investigating and,
as a result has cancelled various cards associated with certain account or accounts.”
Similarly, Simon Bojkovsky declared, “I am not aware of any facts that would necessitate
a receiver being brought into this litigation, however, my wife and I are currently dealing
with the bank looking into what appears to be a third party fraudulently using debit or
credit card numbers and an open file is pending.”
The case was ultimately transferred to the trial judge handling the other
litigation to adjudicate the order to show cause re: preliminary injunction. The court
3
Egelhoff’s counsel submitted a declaration filled largely with argument,
and without any personal knowledge of the facts, except that he had obtained the bank
records in the course of discovery in the other lawsuit.
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declined to issue a preliminary injunction and dissolved the temporary restraining order.
The court expressed its rationale as follows: “I think this would be way too hard to
administer, and also I think there has not been a showing of irreparable harm.” Egelhoff
timely appealed.
DISCUSSION
Egelhoff’s first argument is that the court “did not engage in the proper
analysis to determine if there could be irreparable harm or not, or if the need to
demonstrate irreparable harm was partially or completely mitigated.” “[I]f the trial court
had properly examined whether Egelhoff had a likelihood of success on the merits, a
sufficiently conclusive finding could permit a presumption of irreparable injury.”
“As its name suggests, a preliminary injunction is an order that is sought by
a plaintiff prior to a full adjudication of the merits of its claim. [Citation.] To obtain a
preliminary injunction, a plaintiff ordinarily is required to present evidence of the
irreparable injury or interim harm that it will suffer if an injunction is not issued pending
an adjudication of the merits. [Citation.] [¶] Past California decisions further establish
that, as a general matter, the question whether a preliminary injunction should be granted
involves two interrelated factors: (1) the likelihood that the plaintiff will prevail on the
merits, and (2) the relative balance of harms that is likely to result from the granting or
denial of interim injunctive relief.” (White v. Davis (2003) 30 Cal. 4th 528, 554.) “We
review an order granting a preliminary injunction under an abuse of discretion standard.”
(People ex rel. Gallo v. Acuna (1997) 14 Cal. 4th 1090, 1109.)
Egelhoff’s contention seems to be that his argument on the merits was so
strong as to require the court to presume irreparable injury as a matter of law. (See Jay
Bharat Developers, Inc. v. Minidis (2008) 167 Cal. App. 4th 437, 444 [“Based upon
respondents’ showing of likelihood of success on its claims, we conclude that the trial
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court could presume irreparable injury”].) Although Egelhoff has cited cases permitting
the court to presume irreparable injury on a sufficiently strong showing on the merits, he
has not cited any case that required the court to presume irreparable harm as a matter of
law.
Egelhoff’s showing was insufficient to require the court to presume
irreparable injury. The bank records certainly raise serious questions about whether
someone has been using the company bank account to fund personal transactions, but
they leave just as many questions unanswered. For example, were defendants involved in
the purchases at all? Defendants suggest the purchases may have been a result of third-
party fraud. Were the purchases being paid back using personal funds? The majority of
the charges on the statements are from Amazon.com. Were those business related or not?
Was this the company’s only account or just one of many? How do these charges
compare to the overall revenue of the business? Ultimately, although Egelhoff had one
good piece of evidence, he did not persuasively prove he would win on the merits, and
thus the court was correct to consider whether Egelhoff had demonstrated irreparable
harm.
Next Egelhoff contends he did prove irreparable harm and the court abused
its discretion in finding otherwise.
“‘[A]n injunction is an unusual or extraordinary equitable remedy which
will not be granted if the remedy at law (usually damages) will adequately compensate
the injured plaintiff.’” (Department of Fish & Game v. Anderson-Cottonwood Irrigation
Dist. (1992) 8 Cal. App. 4th 1554, 1565.) Here, Egelhoff has shown nothing more than
Pacific Lightwave may suffer monetary damages. While it is true that, as Egelhoff points
out, “insolvency or the inability to otherwise pay money damages is a classic type of
irreparable harm” (California Retail Portfolio Fund GMBH & Co. KG v. Hopkins Real
Estate Group (2011) 193 Cal. App. 4th 849, 857), Egelhoff offered no evidence at all
concerning defendants’ ability to pay damages. Since there was no evidence of
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insolvency, the court was within its discretion in finding Egelhoff did not prove
irreparable harm.
DISPOSITION
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The order is affirmed. Defendants shall recover their costs on appeal.
IKOLA, J.
WE CONCUR:
RYLAARSDAM, ACTING P. J.
MOORE, J.
4
Egelhoff filed a motion to strike Pacific Lightwave’s brief on the ground
that “a nominal defendant corporation generally may not defend a derivative action filed
on its behalf.” (Patrick v. Alacer Corp. (2008) 167 Cal. App. 4th 995, 1005.) We deny
the motion. Unlike the typical derivative situation where the company only stands to
benefit from a money judgment, here Egelhoff sought an injunction that arguably could
have disrupted the business operations of Pacific Lightwave to its detriment.
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