Opinion
CASE NO. C14-5093 BHS
04-10-2014
JEAN PIERRE REY and ILZE SILARASA, Plaintiffs, v. MICHEL REY, et al., Defendants.
ORDER DENYING PLAINTIFFS'
MOTION TO APPOINT A
RECEIVER AND REQUIRING
DEFENDANTS TO SHOW
CAUSE
This matter comes before the Court on Plaintiffs Jean Pierre Rey and Ilze Silarasa's ("Plaintiffs") motion to appoint a receiver (Dkt. 19). The Court has considered the pleadings filed in support of and in opposition to the motion and the remainder of the file and hereby denies the motion for the reasons stated herein.
I. PROCEDURAL HISTORY
On January 31, 2014, Plaintiffs filed a complaint against Defendants Michel Rey, Renee Rey, US Investment Group Corporation, US Growing Investments, Inc., Visitrade, Inc., Builders Surplus Northwest, Inc., and Nevawa, Inc. (collectively "Defendants"). Dkt. 1. Plaintiffs assert numerous causes of actions based on alleged breach of contract and alleged abuse of a power of attorney. Id.
On March 13, 2014, Plaintiffs filed a motion for appointment of a receiver for the Defendant corporations and for the personal property in the possession of the individual Defendants. Dkt. 19. On, March 24, 2014, Defendants responded. Dkt. 27. On March 28, 2014, Plaintiffs replied. Dkt. 37.
II. FACTUAL BACKGROUND
This matter involves numerous business dealings between two brothers, Plaintiff Jean Pierre Rey and Defendant Michel Rey. Jean Pierre alleges that Michel has made secret transfers of money and assets to various corporations. See, e.g., Dkt. 14 at 4-6. On the other hand, Michel Rey alleges that Jean Pierre knew of all of the transfers and transactions and that Jean Pierrre has only become interested in the Defendant corporations' dealings and assets after experiencing severe financial difficulties in late 2013. See, e.g., Dkt. 27 at 3-7.
III. DISCUSSION
Federal law governs appointment of a receiver when the federal court's jurisdiction is based on diversity. Canada Life Assurance Co. v. LaPeter, 563 F.3d 837, 842-843 (9th Cir. 2009). The court has "broad discretion" to appoint a receiver, based on a "host of relevant factors." Id. at 845. The factors include, but are not limited to:
(1) whether [the party] seeking appointment has a valid claim; (2) whether there is fraudulent conduct or the probability of fraudulent conduct by the defendant; (3) whether the property is in imminent danger of being lost, concealed, injured, diminished in value or squandered; (4) whether legal remedies are inadequate; (5) whether the harm to plaintiff by denial of theId. at 844 (citations and quotations omitted). "[N]o one factor is dispositive." Id. at 845. "[A]ppointing a 'receiver is an extraordinary equitable remedy,' which should be applied with caution." Id. (quoting Aviation Supply Corp. v. R.S.B.I. Aerospace, Inc., 999 F.2d 314, 316 (8th Cir. 1993)).
appointment would outweigh injury to the party opposing appointment; (6) the plaintiff's probable success in the action and the possibility of irreparable injury to plaintiff's interest in the property; and (7) whether [the] plaintiff's interests sought to be protected will in fact be well served by the receivership.
In this case, Plaintiffs have failed to show that appointing a receiver is necessary or appropriate. This matter involves numerous questions of facts with vastly divergent stories regarding the parties' relationships and business dealings. A review of Plaintiffs' proposed order shows the extent of the findings of fact the Court would have to make in order to grant relief at this early stage of the proceeding. The Court would essentially be forced to adopt Plaintiffs' version of events over Defendants', which is extraordinary and inappropriate now. Moreover, Plaintiffs have failed to show that any property is in imminent danger of being lost or squandered. Therefore, the Court denies Plaintiffs' motion to appoint a receiver.
Defendants, however, have conceded that less drastic remedies are appropriate. Specifically, Defendants assert that they
are prepared to comply with the following conditions: (i) Defendants will provide Plaintiffs with monthly expense reports certified by Michel Rey and Bryan Luque; (ii) Defendants will not dispose of any of the properties held by the corporations without prior court approval; (iii) there would be no distributions from the corporations to Michel Rey beyond his normal salary of $4,000 per month; (iv) there would be an allowance for attorneys' fees for this matter with the aggregate amount showing in the financialDkt. 27 at 11. The Court finds that these conditions may be appropriate as protection for Plaintiffs' concerns regarding the corporations or personal property while this matter proceeds. Therefore, the Court requests that Defendants show cause, if any they may have, why the Court should not enter an order requiring that these conditions be imposed. If Defendants have no objections to these conditions, the parties may meet and confer and file a stipulated motion. Regardless, Defendants are required to file either a response or a stipulated motion no later than May 2, 2014.
statements; and (v) the parties would be able to revisit the preceding conditions at any time.
IV. ORDER
Therefore, it is hereby ORDERED that Plaintiffs' motion to appoint a receiver (Dkt. 19) is DENIED and Defendants must SHOW CAUSE or otherwise respond no later than May 2, 2014.
______________________
BENJAMIN H. SETTLE
United States District Judge