Opinion
D071146
09-29-2017
KERN BLUFF RESOURCES, LLC, Cross-complainant and Respondent, v. KENNETH R. HUDSON, Cross-defendant and Appellant.
Cate Legal Group and Allan Otis Cate for Cross-defendant and Appellant. Dawson & Ozanne and Brian C. Dawson for Cross-complainant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 37-2015-00014099-CU-FR-CTL) APPEAL from an order of the Superior Court of San Diego County, Randa Trapp, Judge. Affirmed. Cate Legal Group and Allan Otis Cate for Cross-defendant and Appellant. Dawson & Ozanne and Brian C. Dawson for Cross-complainant and Respondent.
Kenneth R. Hudson appeals from an order granting the application of Kern Bluff Resources, LLC (Kern) for a preliminary injunction. Among other things, the order determined that Hudson had been terminated as an officer and manager of Kern, enjoined him from accessing Kern's monies, assets or bank accounts or from acting in any position as a Kern officer or director, and compelled him to provide an accounting. Hudson contends the trial court's findings in support of its order misapplied Kern's operating agreement, and thus the court erred by ruling Kern established a likelihood of success on the merits and granting its application. We reject these contentions and affirm the order.
FACTUAL AND PROCEDURAL BACKGROUND
Hudson founded a company to extract oil from a tract of property and obtained investors for that purpose. In 2011, he and the investors formed Kern as a member-managed limited liability company (LLC), and appointed Hudson as Kern's president. Kern's operating agreement (section 6.1) authorizes members to "delegate authority, power and discretion to manage and control the business, property and affairs of the Company, and to make decisions regarding those matters and to perform any and all other acts or activities customary or incident to the management of the Company's business, property and affairs to the Officers of the Company or to an authorized agent, or third party or parties." The operating agreement (section 6.3) also authorizes the members to delegate all "necessary powers to the President or to an Authorized Agent to carry out the purposes and manage the business, property, and affairs of [Kern]" and when such a delegation occurs, the designated person or entity "shall be deemed to be fully authorized without the need for further written authorization . . . ." The operating agreement (section 6.4) states that Kern's president "shall, subject to the control of the Members, have the right, power and authority to engage in the general and active management of the business of the company . . . ."
In mid-2015, some investors commenced actions against Hudson. In April 2015, Hudson adopted a resolution stating "the President of the Company hereby authorizes and approves the Company's formation of a Board of Managers comprised of Members of the Company who shall serve as officers and who shall initially be comprised of four (4) Members, William Chiles, Wayne V. Woods, Kenneth R. Hudson, and Bryan Woods, whose signatures below constitute each Manager's express authorization and consent to serve on the Board of Managers and resolve the issues contemplated by this Consent and the affairs of the Company, including those contemplated by Section 6.3.1 of the Operating Agreement." The board of managers (the Board) was formed to give oversight and accountability regarding Kern's important operations and management decisions. Accordingly, the Board's members voted to have the Board approve all of Kern's major decisions.
Section 6.3.1 of the operating agreement states in part: "Powers and duties that may be delegated may include, without limitation, the power to do all things an Agent can do under a General Power of Attorney, including the following: (i) Acquire, purchase, renovate, improve, alter, rebuild, demolish, replace, and add to any real property and improvements located on the property, including but not limited to well bores and derricks, pipelines, storage tanks, utilities, roads that the Operating Company determines to be necessary or appropriate or in the interest of the business of the Company; (ii) Sell, exchange, lease, or otherwise dispose of all or any property and assets owned by the Company; (iii) Borrow money from any party including the Members and their Affiliates, issue evidences of indebtedness in connection therewith, refinance, increase the amount of, modify, amend, or change the terms of, or extend the time for the payment of any indebtedness or obligation of the Company, and secure such indebtedness by mortgage, deed of trust, pledge, security interest, or other lien on Company assets; (iv) Guarantee the payment of money or the performance of any contract or obligation of any Person; (v) Sue on, defend, or compromise any and all claims or liabilities in favor of or against the Company; submit any or all such claims or liabilities to arbitration; and confess a judgment against the Company in connection with any litigation in which the Company is involved; (vii) Retain legal counsel, auditors, accountants, engineers, and other professionals in connection with the Company business and pay therefore such remuneration as the Agent may determine; (viii) Open and close bank accounts, deposit, disburse and withdraw Company funds and pay and disburse the same to satisfy such obligations of the Company as and when the same are legally and properly due; and (viii) Cause the Company to engage in any transaction consistent with the Company's business plan."
In July 2015, Kern's members voted to approve Citadel Exploration, Inc.'s (Citadel) acquisition of substantially all of Kern's assets. At the same time, the members voted to ratify the Board's appointment and its authority to approve all of Kern's major decisions.
In an October 2015 special meeting, the Board—consisting of Hudson and the Woods brothers—unanimously agreed that Kern's president should be responsible for day-to-day operational decisions, with the advice and direction of the Board on major, material decisions affecting the company. It also unanimously approved paying six months of compensation to Hudson and his wife to end April 8, 2016; ratified that the Board had to have majority written consent on all Kern expenditures in excess of $2,500; approved funds to a special litigation committee to retain outside accountants or auditors to review Kern's books and records in response to the ongoing litigation; barred future issuance of LLC membership units without unanimous board member approval; and agreed to create a formal written proposal delineating the Board's power and authority so as to allow Kern to obtain insurance. The latter document, entitled "Board of Managers Proposed Authority," authorized a majority of the Board to make all decisions concerning the sale, disposition and management of Kern's assets, the employment of persons or entities for Kern's operation and management, and the purchase or acquisition of other assets, among other things. Hudson agreed to distribute Kern's bank statements and copies of all checks to the other Board members each month.
The minutes of the Board's October 8, 2015 special meeting were signed by Hudson, Bryan and Wayne Woods as the "undersigned, constituting all of the members of the Board of Managers of the Company . . . ." (Italics added.)
Despite Hudson's agreement to the conditions and restrictions from the October 2015 Board meeting, as of May 2016, he had failed to provide accounting and financial information to the Board and had hired a new accountant, delaying distribution of tax documents to members. Hudson had also agreed that K-1 tax forms would be ready by the end of January 2016, but they were not ready as of June 2016. The Board sought to address these issues with Hudson and hold a meeting to discuss certain issues, including his failure to communicate, the delay of tax documents, why Citadel shares had not been distributed to members and the status of the sale closing, and why expenditures over $2,500 were made without Board approval. Hudson responded that he would be introducing new members of the Board and special litigation committee.
Concerned about Hudson's nonresponse and his apparent belief he had unilateral authority to replace the Board and special litigation committee, the remaining Board members contacted the escrow company handling the Citadel/Kern purchase and discovered that escrow had closed and funds had been disbursed in May 2016. Hudson had not sought Board approval for the $1,900,900 closing, or the disbursement of $721,567 to Hudson, his wife and son, and $172,938 to Kern under Hudson's control.
Following this news, the Board noticed a special meeting for June 13, 2016, which Hudson declined to attend. On the same day the special meeting was set, both Hudson and Hudson's new counsel notified Kern's attorney, Blair Krueger, that he was terminated. At the June 13, 2016 meeting, the Woods brothers approved Hudson's and his wife's termination as Kern officers, employees or managers and appointed Bryan Woods as Kern's sole officer, chief executive manager, president and chairman. The next day, they informed Hudson and his wife of their termination. At about the same time, attorney Krueger learned that 6 million shares of Citadel stock had been issued to Kern in July 2015, and the hold on reissuance or transfer of the shares had expired in February 2016.
In response to the Board's notice of his termination and believing it to be an attempted takeover, Hudson noticed a special meeting of Kern's members, set for three days later at 5:00 p.m. on Saturday, June 18, 2016. The Board then reminded Hudson of his termination, and told him he still had not complied with its request to provide access to Kern's financial information. It also filed suit against Hudson on Kern's behalf, alleging in a verified cross-complaint that Hudson had breached his fiduciary duties in a number of ways, including by failing to timely complete Kern's tax returns; failing to distribute Citadel shares to Kern's members; failing to inform the Board or members of the Citadel closing or the use of sale proceeds; attempting to terminate attorney Krueger without Board approval; failing to communicate with the Board or Kern's attorney; purporting to unilaterally appoint persons to the Board or special litigation committee, distributing $721,567.07 to himself, his wife, and son without Board approval; controlling Kern's assets and bank accounts with no accountability to the members or Board; failing to provide required bank statements and financial information; stalling Kern's ability to obtain directors and officers insurance and the progress of the special litigation committee; and making expenditures of Kern funds in excess of $2,500 without informing the Board nor seeking Board-required approval. Kern sought an accounting, certain judicial declarations under Corporations Code section 709, and injunctive relief.
Further statutory references are to the Corporations Code.
Following the June 18, 2016 meeting, Hudson announced that Kern's members had voted to reaffirm he was still Kern's president, dissolve the Board, and terminate the Woods brothers for cause. He informed the Woods brothers they were no longer authorized to act on Kern's behalf. That month, Kern obtained a temporary restraining order against Hudson and the court set the matter for a preliminary injunction hearing. At the hearing, Hudson testified that he and his wife had continued to draw a salary from Kern after April 8, 2016.
In July 2016, Kern applied for a preliminary injunction to prevent Hudson from accessing or controlling Kern's bank accounts and assets, maintaining any position as a Kern officer or director following his termination or removal by the court, or voting in matters pertaining to Hudson's election to any position as a Kern officer, manager or director. It argued Hudson owed Kern fiduciary duties of fidelity, trust, loyalty and due care, but had ignored the Board's request for access to financial and banking information, distributed large amounts of cash from the Citadel escrow to himself and his family, and took possession of 6 million shares of Citadel stock that should have been distributed to Kern members. Kern repeated the allegations from its complaint as to Hudson's acts constituting a breach of his duties, and added that Hudson had also sought to terminate the Board and the special litigation committee. Kern presented declarations concerning the circumstances from Bryan Woods and attorney Krueger, as well as Citadel's counsel, who averred he was unaware of the Board's existence at the time of the Citadel/Kern sale's closing, or that as of October 2015, all of Kern's expenditures over $2,500 had to be approved in writing by a majority of the Board. Kern argued that in view of Hudson's actions, the Board and its members were concerned about Hudson's possible diversion of funds to unknown locations or for his personal use; that "[b]ased on the fact that Hudson concealed the escrow closing from the Board, has never issued the publicly traded Citadel shares to the [Kern] members, refuses to provide any detailed accounting of the sale proceeds' whereabouts and [Kern's] financial information, and (until the granting of a TRO) refused to turn over [Kern's] bank account information, there is a strong likelihood of irreparable harm to [Kern] unless the requested injunctive relief is granted at least until the litigation is resolved."
Hudson opposed the motion, arguing the Woods brothers only "purport[ed]" to act on Kern's behalf and had no authority to remove him or even file suit, but "engineered a coup" to eject him and "seize power." Hudson argued that under Kern's operating agreement, Kern's members terminated the Woods brothers, ratified termination of attorney Krueger, disbanded the Board, and confirmed Hudson's position as Kern's president. Hudson maintained he did not breach any fiduciary duties but rather gave the Woods brothers access to all financial information and kept them informed of all important developments including the closing of the Citadel escrow. Further, he argued he did not raid the escrow but was paid deferred salary and repaid for loans he made to keep Kern afloat. Hudson submitted his declaration recounting his decisionmaking concerning the Citadel escrow, retention of Kern's counsel, and creation of the Board. He stated he had created the Board under authority granted to him by Kern's operating agreement, and understood the Board was still under the control and supervision of the members, who merely ratified his decision to appoint the Woods brothers and Chiles as officers and members of the Board pursuant to his authority under the operating agreement "and nothing more." Hudson claimed he had objected to the Board's authority to employ, retain or engage persons to the extent it applied to officers or interfered with the authority of the president and Kern's members. According to Hudson, the Board took its actions without a quorum or without Kern's members' required consent, but the members had approved his own proposed resolutions at the June 18, 2016 meeting.
The trial court granted Kern's requested preliminary injunction. It found Kern's operating agreement permitted members to delegate all necessary management powers to the president, who could appoint other officers to serve at the pleasure of the members, and that both Hudson and Kern's members had ratified the Board's formation and its authority to approve all of the company's major decisions. It found that as of July 22, 2015, the Board managed Kern and that in October 2015 the Board agreed company expenditures over $2,500 required Board approval. It further found Wayne Woods had duly noticed a special meeting for the board at which they terminated Hudson and his wife and appointed Bryan Woods as Kern's sole officer, president and chairman, and as of June 18, 2015, Hudson was no longer Kern's president and lacked authority to call a membership meeting to vote to terminate the Woods brothers. After these factual findings, the court found Kern sufficiently demonstrated a likelihood of prevailing on its claim for breach of fiduciary duty: "After the Board was formed and vested with the power to approve all major decisions of the company, Hudson replaced the company accountant and attempted to terminate the company's legal counsel without Board approval. Although he remained in charge of the company's day to day activities, he failed to communicate with the Board and counsel. Further, after the sale of certain assets to Citadel, Hudson failed to inform the Board and members of the closing and made disbursements, including to himself, without Board approval and did not make any disbursements to members. After he was terminated as president and board member, he called [a] meeting in an attempt to fire the board when he had no authority to do so." The court ruled the balance of harm weighed in favor of Kern and its members, and enjoined Hudson and those working in connection with him from accessing any of Kern's monies, assets or bank accounts or acting in any position as a Kern officer or director. Finally, the court issued declarations that "Hudson has been terminated as an officer and manager from Kern, including any position he has held as employee, agent, officer, director, president or Board . . . member"; "The Board . . . as of the date of this Order shall be Bryan Woods and Wayne Woods and any provisional manager[s] appointed by the court"; and "Bryan Woods was duly appointed as a Kern officer, Chief Executive Manager and President and remains in that capacity as of the date of this order."
The court's order also compelled Hudson to do various thing, including providing the Board "immediate access to all its assets, including any shares or share certificates for Citadel . . . and the Kern financial, accounting and banking information"; "cooperate with the Board . . . and any banking or financial institutions to transfer authority of, and control over Kern's assets and bank accounts to the Board . . ."; and provide the Board a "full accounting of the sale proceeds resulting from the sale of Kern to Citadel . . . and to whom the monetary proceeds were distributed." It ordered any Kern membership interests issued by Hudson during the Citadel escrow period without the Board's approval returned to Kern and held in trust until a legal determination of their validity. The court ruled that Kern's request for relief under sections 709 and 304 was moot. We observe that when a preliminary injunction mandates affirmative acts, it is scrutinized more closely on appeal. (City of Corona v. AMG Outdoor Advertising Inc. (2016) 244 Cal.App.4th 291, 299.) But Hudson does not squarely challenge this aspect of the court's order or invoke this court's strict scrutiny.
Hudson filed this appeal.
DISCUSSION
I. Legal Principles and Standard of Review
"The general purpose of a preliminary injunction is to preserve the status quo pending a determination on the merits of the action." (SB Liberty, LLC v. Isla Verde Association, Inc. (2013) 217 Cal.App.4th 272, 280, citing Continental Baking Co. v. Katz (1968) 68 Cal.2d 512, 528.) "An appeal from the granting of a preliminary injunction ordinarily 'involves a very limited review of the trial court's exercise of discretion concerning two factors: (1) the likelihood that plaintiffs will ultimately prevail and (2) the interim harm plaintiffs will sustain if the preliminary injunction is denied compared to the interim harm defendant will suffer if the injunction is granted pending a final determination of the merits.' " (Carsten v. City of Del Mar (1992) 8 Cal.App.4th 1642, 1649; SB Liberty, at p. 280.) The court's determination must be " 'guided by a "mix" of the potential-merit and interim-harm factors; the greater the plaintiff's showing on one, the less must be shown on the other to support an injunction.' [Citation.] 'A trial court may not grant a preliminary injunction, regardless of the balance of interim harm, unless there is some possibility that the plaintiff would ultimately prevail on the merits of the claim.' " (SB Liberty, at p. 280, quoting Butt v. State of California (1992) 4 Cal.4th 668, 678.)
A trial court's decision to grant a preliminary injunction after evaluating the relevant factors rests in its sound discretion. (IT Corp. v. County of Imperial (1983) 35 Cal.3d 63, 69.) An abuse of such discretion will be found only when the court's ruling "exceed[s] the bounds of reason" by having no reasonable basis, or contravenes undisputed evidence. (Carsten v. City of Del Mar, supra, 8 Cal.App.4th at p. 1649; 14859 Moorpark Homeowner's Assn. v. VRT Corp. (1998) 63 Cal.App.4th 1396, 1402 (Moorpark).)
" 'In determining the validity of the injunction, we look at the evidence presented to the trial court to determine if there was substantial support for the trial court's determination that the plaintiff was entitled to the relief granted.' [Citation.] 'Where the evidence before the trial court was in conflict, we do not reweigh it or determine the credibility of witnesses on appeal. "[T]he trial court is the judge of the credibility of the affidavits filed in support of the application for preliminary injunction and it is that court's province to resolve conflicts." [Citation.] Our task is to ensure that the trial court's factual determinations, whether express or implied, are supported by substantial evidence. [Citation.] Thus, we interpret the facts in the light most favorable to the prevailing party and indulge in all reasonable inferences in support of the trial court's order.' " (Alliant Ins. Services, Inc. v. Gaddy (2008) 159 Cal.App.4th 1292, 1300; see also Moorpark, supra, 63 Cal.App.4th at pp. 1402-1403 [reviewing court will presume the trial court made appropriate factual findings in the absence of express findings and review the record for substantial evidence to support the rulings].)
Where a party's likelihood of success rests on an issue of pure law either because it involves a matter of statutory law or undisputed evidence, our review is de novo. (Moorpark, supra, 63 Cal.App.4th at p. 1403; SB Liberty, LLC v. Isla Verde Association, Inc., supra, 217 Cal.App.5th at p. 281.) We emphasize that the " 'granting or denial of a preliminary injunction does not amount to an adjudication of the ultimate rights in controversy' " (Continental Baking Co. v. Katz, supra, 68 Cal.2d at p. 528; SB Liberty, at p. 280) and our discussion should not be construed as addressing the merits of those issues.
II. The Trial Court Did Not Abuse its Discretion in Finding Kern Met the Standards for
Preliminary Injunctive Relief
In challenging the preliminary injunction order, Hudson begins by targeting one of the trial court's underlying factual findings: that the Board managed Kern as of July 22, 2015. Hudson argues that under California LLC law and the provisions of Kern's articles of incorporation and operating agreement, and due to irregularities in the Board's June 13, 2016 special meeting, the Board lacked authority to terminate him as Kern's president, and that, as a result, as its president he had authority to obtain the resolutions terminating the Woods brothers and dissolving the Board at the June 18, 2016 member meeting. According to Hudson, the fact he was alleged to have committed breaches of his fiduciary duty or acted with a conflict of interest did not permit the court to invalidate the actions of Kern's members, which should have been permitted to stand. Hudson further argues Kern did not demonstrate it could succeed on the merits of its breach of fiduciary duty claim. In part, Hudson asserts the court's findings "relate to the Board and Hudson's level of authority which . . . was not properly determined."
When Kern was formed in 2011, the LLC law in effect was the Beverly-Killea Limited Liability Company Act (former § 17000 et seq., repealed by Stats. 2012, ch. 419, § 19, p. 3991). That law was supplemented by the California Revised Uniform Limited Liability Company Act (the Revised Act; § 17701.01 et seq., added by Stats. 2012, ch. 419, § 20, pp. 3991-4048), which took effect on January 1, 2014. The Revised Act applies to all LLC's existing on or after January 1, 2014, and, with some exceptions, to acts and transactions taken by managers or members on or after that date. (§ 17713.04, subds. (a), (b).) Hudson appears to concede that the Revised Act governs Kern.
Kern responds that the trial court's order is supported by substantial evidence of Hudson's breaches of his duties of care and loyalty in various ways, including by purporting to unilaterally terminate Kern's counsel, the Board or the special litigation committee; concealing the Citadel closing and failing to distribute Citadel shares to Kern's members; distributing over $700,000 to himself and his family from the Citadel escrow without Board approval; failing to provide requested financial information; and continuing to pay himself and his family unauthorized salaries. It argues Hudson's abuses justified the court's conclusion that there was a strong likelihood of irreparable harm to Kern and its members absent preliminary injunctive relief, and that the balance of harm tipped in its and its members' favor. A. Hudson Has Not Shown Error in the Court's Preliminary Findings Concerning the Board's Authority
As a threshold matter, we observe that some of Hudson's arguments are not pertinent to the question at hand, which is whether Kern established a likelihood of success on the merits of its claim that Hudson breached his fiduciary duties as a Kern officer, manager or member by his conduct, including in taking or attempting to take various actions without required Board approval. That inquiry, at least in part, is dependent on whether, despite Kern being a member-managed LLC, the Board was validly granted authority and power to control Kern's expenditures and approve major decisions. Turning to that question, we first reject Hudson's contention the trial court was somehow without ability to make findings concerning the relative authority of the Board and Hudson so as to assess the merits of Kern's breach of fiduciary duty claim for purposes of preliminary injunctive relief.
For example, whether the Board properly removed Hudson as Kern's president after June 2016 is irrelevant to whether Hudson breached his fiduciary duties by failing in May 2016 to seek Board approval for the Citadel closing or disbursing funds from that transaction to himself and his family. And his related argument that the Board lacked a quorum in doing so is both unsupported by legal authority and contradicted by the record. It is undisputed that as of at least June 2016, Chiles was no longer a Board member. But the record indicates Chiles was no longer a member as of the end of July 2015, based on a July 25, 2015 email sent by Hudson. Additionally, the October 8, 2015 special meeting minutes indicate only Hudson and the Woods Brothers constituted the Board. On this record, the trial court could properly conclude that as of June 2016, there were only three Board members: Hudson and the Woods Brothers. --------
Hudson's challenge to the trial court's finding is premised on the notion that he as Kern's President could not divest the members of their management rights and the members did not amend the operating agreement to divest themselves of their authority, thus Kern's "governing structure" as a member-managed LLC was not changed. Hudson is correct to the extent he points out that under the Revised Act, members actively participate in management and control unless the articles of organization provide that management is vested in managers, and the operating agreement governs relations between the LLC members and the LLC. (§§ 17701.10, subd. (a)(1), 17704.07, subd. (a).) The Revised Act further provides that the operating agreement governs the "rights and duties under this title of a person in the capacity of manager." (§ 17701.10, subd. (a)(2).) But Hudson fails to appreciate that with exceptions he has not shown to be applicable here, the Revised Act sets forth default rules that govern "[t]o the extent the operating agreement does not otherwise provide for a matter . . . ." (§ 17701.10, subd. (b).) Here, Kern's operating agreement granted the members the power to "delegate authority, power and discretion to manage and control [Kern's] business, property and affairs" to officers, in this case, Hudson and the Woods brothers who constituted the Board of Managers. Hudson has not demonstrated that the Revised Act prevents members of a member-managed LLC from relinquishing their management authority to others, and we hold such an action relinquishing control is itself an exercise of the requisite right of control over the conduct of the LLC's business. (Accord, Moulin v. Der Zakarian (1961) 191 Cal.App.2d 184, 190 [" 'when persons jointly associated agree that management of the enterprise be entrusted to one of the group, there may nevertheless be a community of interest in view of the fact that the making of the agreement to relinquish control is itself an exercise of the requisite right to control' "]; Constans v. Ross (1951) 106 Cal.App.2d 381, 388-389 ["apportionment of duties does not preclude the existence of a partnership. One partner may be given the right of management"].) B. Substantial Evidence Supports the Court's Finding that Kern Demonstrated a Likelihood of Prevailing on the Merits
We additionally conclude substantial evidence supports the trial court's finding that Kern established a likelihood of prevailing on its claim that Hudson breached fiduciary duties owed to Kern and its members. " 'Whether a fiduciary duty exists is generally a question of law' " that we review de novo and " 'whether [a person] breached that duty . . . is a question of fact' " that we review for substantial evidence. (Green Valley Landowners Assn. v. City of Vallejo (2015) 241 Cal.App.4th 425, 441; Agam v. Gavra (2015) 236 Cal.App.4th 91, 113.) The Revised Act provides that both members and managers in LLC's owe duties of care and loyalty to the limited liability company and its members to account to the LLC, to hold as a trustee any profit or benefit derived in the conduct and winding up of the LLC's activities, to refrain from dealing with the LLC as or on behalf of another having an adverse interest, and to refrain from competing with the LLC. (§ 17704.09, subds. (a)-(c), (f).) They must discharge these duties to the LLC and exercise any rights with good faith and fair dealing. (§ 17704.09, subd. (d).) These fiduciary duties generally may not be altered by the operating agreement. (§ 17701.10, subd. (c)(4)-(5).)
Hudson does not dispute, and we conclude as a matter of law, that whether as a member or manager, he owed duties of loyalty, care, and to act with the obligation of good faith and fair dealing to Kern and its members. (§ 17704.09.) And Kern presented evidence that Hudson violated those duties to Kern's detriment: Kern's counsel Krueger averred in a supporting declaration that though Hudson provided a proposed Citadel escrow closing disbursement statement to him and the Board in July 2015, the Board did not agree to many of the line items and rejected them, and then learned much later that Citadel shares had been given to Hudson in July 2015. Hudson admitted in his opposing papers those shares had still not been distributed to members. Krueger averred that in May 2016, Hudson authorized hundreds of thousands of dollars to be dispersed to himself and his family, or to unknown and unverified places, without obtaining required Board authorization. Both Krueger and Bryan Woods stated that Hudson had concealed Kern's financial information and did not seek Board approval to write checks for legal fees, so the Board and members were unable to determine what Kern funds had been directed to Hudson's personal legal counsel since October 2015. They stated that the Hudsons refused to provide an accounting for their salaries, given that their employment had expired in April 2016, so the Board could not determine whether and to what extent they continued to pay themselves. Hudson then sought to make major decisions—replace Kern's Board member and special litigation committee—without Board approval. The evidence is sufficient to support the court's conclusion that Kern established a likelihood of prevailing on the merits. Hudson does not make a reasoned challenge to the evidence concerning the balance of harms, and he has not shown any basis to disturb the trial court's ruling that the balance of harm weighs in favor of Kern and its members.
Hudson's arguments to the contrary are unavailing. He simply maintains his actions taken as Kern's president to replace its CPA or fire its counsel were justified by Kern's needs or poor job performance, and he fully disclosed Kern's finances and circumstances regarding the Citadel transaction to the Board and all involved. But his assertions are contradicted by Kern's evidence and declarations, which the trial court credited. As we have stated, the trial court judges the credibility of the supporting affidavits; it is not our province to resolve conflicting evidence or reweigh credibility. (Alliant Ins. Services, Inc. v. Gaddy, supra, 159 Cal.App.4th at p. 1300.)
DISPOSITION
The order is affirmed.
O'ROURKE, J. WE CONCUR: McCONNELL, P. J. HUFFMAN, J.