Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_08-cv-00276/USCOURTS-azd-2_08-cv-00276-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Breach of Contract

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IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Az Holding, LLC, a North Dakota limited

liability company, 

Plaintiff, 

vs.

Thomas C. Frederick and Christine J.

Cobb, husband and wife; RBW

Consultants, Inc., an Arizona corporation;

and Bumaro, LLC, an Arizona limited

liability company,

Defendants. _________________________________

Thomas C. Frederick and Christine J.

Cobb, husband and wife; RBW

Consultants, Inc., an Arizona corporation;

Bumaro, L.L.C., an Arizona limited

liability company,

Counterclaimants,

vs.

Az Holdings, L.L.C., a North Dakota

limited liability company,

Counterdefendant.

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No. CV-08-0276-PHX-LOA

ORDER

This matter arises on Plaintiff Az Holding, L.L.C.’s (“Plaintiff” or “Az

Holding”) Application for Preliminary Injunctive Relief and Declaratory Relief, filed on

January 7, 2009. (docket # 61-62) Plaintiff requests the Court set an expedited evidentiary

hearing and “enter an Order and Judgment (1) granting specific performance compelling

Case 2:08-cv-00276-LOA Document 77 Filed 02/26/09 Page 1 of 7
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Defendants to convey certain real property to Plaintiff pursuant to Paragraph 25 of the

parties’ Lease Agreement, and (2) declaring that [Plaintiff] is entitled to receive a credit

against the purchase price of $2,085,000 to be paid for the real property, in an amount equal

to the sum of each of the monthly rental payments that [Plaintiff] has paid to [Bumaro,

L.L.C.] in and since November 2008.” (Id. at 1-3) 

Defendants/Counterclaimants Thomas C. Frederick, Christine J. Cobb, RBW

Consultants, Inc. and Bumaro, LLC (collectively “Defendants”) oppose Plaintiff’s

Application.

The Court has considered the parties’ Joint Verified Jurisdictional Statement,

docket # 74, and concludes there is complete diversity and this District Court has subjectmatter jurisdiction over this action pursuant to 28 U.S.C. § 1332.

After considering the parties’ briefings and the relevant case law, the Court will

deny Plaintiff Az Holding’s Application.

BACKGROUND

This lawsuit arises out of the sale of a business and disputes over purchase

documents including a lease with an option to purchase real property located on North 21st

Avenue in Phoenix where Plaintiff, as a tenant and the buyer, operates its business. (docket

# 62 at 1; docket # 65 at 2) This lawsuit was filed on February 12, 2008. An Amended

Complaint was filed on November 17, 2008, asserting claims for specific performance

(Count I), for breach of the implied covenant of good faith and fair dealing (Count II), and

for declaratory relief pursuant to 28 U.S.C. § 2201 et seq. (Count III), “arising out of

Defendants’ failure and refusal to sell the [subject] real property . . . in Phoenix, as B[umaro],

LLC is obligated to do pursuant to Paragraph 25 of the parties’ Lease Agreement.” (docket

# 62 at 7) 

Because it makes a significant rental payment every month, Plaintiff “notified

Defendants in writing that beginning with the rental payment for November 2008, all future

rental payments of $30,000 (the amount of the monthly rental payments required under the

Lease Agreement) would be sent to Defendants ‘under protest.’ AZ Holding advised that it

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 It appears that the two prior scheduling orders, docket ## 26, 29, were related solely to

Plaintiff’s first request for an evidentiary hearing and preliminary injunctive relief. (docket

# 8) The docket reflects an inconsistent history of the parties’ reaching an agreement on

Plaintiff’s request for a TRO and preliminary injunctive relief, the unraveling of that

agreement and then obtaining a stay of the case so that the parties could participate in private

mediation which clearly was not successful. (docket # 13)

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would request an Order from the Court that all rental payments submitted to Defendants in

and since November 2008 would be credited in favor of AZ Holding against the purchase

price of $2,085,000 for the Property.” (Id. at 6)

Defendants acknowledge Plaintiff made the cash payment of $3,309,607.00

at closing, but contend Plaintiff has “failed to make the January, 2009 payment . . .

committed multiple breaches of the Lease, has entirely failed to make the additional payment

of $155,000.00 due under paragraph 2.5 of the Asset Purchase Agreement, refuses to release

the $100,000.00 that was due to be paid to [Defendants] on June 15, 2008, and is now

refusing to pay the $800,000.00 in Additional Lease Consideration that was slated to come

to the sellers by way of the lease payments.” (docket # 65 at 3) Defendants’ counterclaim

alleges “Breach of the Lease Agreement, Breach of the Asset Purchase Agreement and

seek[s] Declaratory Judgment to determine the enforceability of the Non-Competition

Agreement, and to determine whether [Plaintiff] is obligated to pay the $800,000.00 in

Additional Lease Consideration to Defendants in the event the Property is sold.” (Id. at 4)

Defendants “also contend, by way of affirmative defense, that Plaintiff has unclean hands

which bars it from obtaining equitable relief” and there is “a significant threshold legal issue

that must be briefed and resolved well before trial is set to begin; namely, whether Plaintiff’s

claims are barred by the statute of frauds.” (Id.) 

Although this lawsuit was filed over a year ago and the parties submitted their

Joint Proposed Case Management Plan, docket # 56, on November 24, 2008, the parties have

not yet held their Rule 16 scheduling conference.1

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LEGAL STANDARD

“A preliminary injunction is an extraordinary remedy never awarded as of

right. In each case, courts must balance the competing claims of injury and consider the

effect of granting or withholding the requested relief, paying particular regard to the public

consequences.” Winter v. Natural Resources Defense Council, Inc., U.S. , 129 S.Ct.

365, 367 (2008) (citing Weinberger v. Romero-Barcelo, 456 U.S. 305, 312 (1982); Dorman

v. Salen Inn, Inc., 422 U.S. 922, 931 (1975) (stating that the standard to be applied by the

district court in determining whether to grant injunctive relief is “stringent.”) “The purpose

of a preliminary injunction is to preserve rights pending resolution of the merits of the case

by the trial.” E. & J. Gallo Winery v. Andina Licores S.A., 446 F.3d 984, 990 (9th Cir. 2006)

(citing Big Country Foods, 868 F.2d at 1087)).

Before Winter, to obtain a preliminary injunction in the Ninth Circuit, movant

was required to establish “either (1) a likelihood of success on the merits and the possibility

of irreparable injury, or (2) the existence of serious questions going to the merits and the

balance of hardships tipping in the moving party’s favor.” Warsoldier v. Woodford, 418 F.3d

989, 993-94 (9th Cir. 2005) (emphasis added); Big Country Foods v. Board of Education of

the Anchorage School District, 868 F.2d 1085, 1088 (9th Cir. 1989) (finding injunctive relief

inappropriate where movant claimed that absence of injunctive relief would result in the loss

of “a major source of income for a small company” but record was devoid of evidence of

loss of profit) (citing United States v. Odessa Union Warehouse Co-op, 833 F.2d 172, 174

(9th Cir. 1987)). In Winter, however, the Supreme Court found the Ninth Circuit’s

“possibility” standard was “too lenient” and held that a party seeking preliminary injunctive

relief must establish that irreparable injury is likely in the absence of an injunction. Winter,

129 S.Ct. at 375.

In Big Country Foods, the Ninth Circuit stated that “[t]hese formulations are

not different tests, but represent two points on a sliding scale in which the degree of

irreparable harm increases as the probability of success of the merits decreases.” 868 F.2d

at 1088 (citations omitted); Mayweathers v. Hickman, 2008 WL 4206822, * 7 (S.D. Cal.

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2008). Indeed, the most significant factor is the potential threat of irreparable harm to movant

absent injunctive relief. Balsley v. San Jose Development Corp., 1995 WL 108207, * 3 (N.D.

Cal. 1995) (denying injunctive relief because plaintiffs had adequate remedy at law);

Rondeau v. Mosinee Paper Corp., 422 U.S. 49, 57 (1975) (stating that an injunction should

not issue absent substantial evidence of impending irreparable harm and lack of an adequate

remedy at law.) The court evaluates the nature of irreparable harm by determining whether

a jury could compensate movant with damages at law. Balsley, 1995 WL 108207 at * 3.

Where the court finds that monetary damages are appropriate, a preliminary injunction is not

appropriate. Balsley, 1995 WL 108207, * 3. 

In light of Winter, to obtain the extraordinary relief of an injunction prior to

trial, movant must establish the following factors: 1) movant is likely to succeed on the

merits at trial; 2) it will likely suffer irreparable harm if preliminary relief is not granted; 3)

the balance of the hardships tips in movant’s favor; and 4) a preliminary injunction will not

be contrary to the public interest. Winter, 129 S.Ct. at 375; FMC Corp. v. United States, 3

F.3d 424, 427 (Fed. Cir. 1993) (citations omitted). Movant bears the burden of proof on each

of these factors. Masurek v. Armstrong, 520 U.S. 968, 972 (1997) (a preliminary injunction

is “an extraordinary and drastic remedy, one that should not be granted unless the movant,

by a clear showing, carries the burden of persuasion.”) (emphasis added); Los Angeles

Memorial Coliseum Commission v. National Football League, 634 F.2d 1197, 1203 (9th Cir.

1980). 

DISCUSSION

Even assuming Plaintiff has established that “serious questions are raised,”

Plaintiff fails to clearly establish (1) it will likely succeed on the merits at trial, and (2) that

it will likely sustain irreparable injury in the absence of injunctive relief at this time, Winter,

129 S.Ct. at 375, and the “balance of hardships tips sharply in [Plaintiff’s] favor.” Big

Country Foods, 868 F.2d at 1088. Plaintiff has made no colorable showing of irreparable

harm other than economic injury which alone does not support a finding of irreparable harm.

Rent-A-Center, Inc. v. Canyon Television and Appliance Rental, Inc., 944 F.2d 597, 603 (9th

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Cir. 1991) (stating that economic injury alone does not support a finding of irreparable

harm). In fact, if Plaintiff prevails in this litigation, it will have suffered no economic harm

at all because the Court, as Plaintiff has already advised Defendants, could apply all rental

payments paid by Plaintiff after Defendants’ alleged breach of contract to the purchase price

of the building.

It is also quite apparent that there are likely questions of fact for jury resolution

on, at least, the contract claim and counterclaim and, as Defendants contend, there exists “a

significant threshold legal issue” involving the statute of frauds. Assuming without deciding

that Arizona law applies in this case, questions of fact for the trier of fact likely exist

regarding: (1) which party breached the contract first and whether that breach was material,

RAJI (Civil) 4th, Contract 9; FDIC v. Air Fla. Sys., Inc. 822 F.2d 833, 840 (9th Cir. 1987); (2)

whether the terms of the contract were established with sufficient specificity such that the

obligations involved may be ascertained, Savoca Masonry Company, Inc. v. Homes and Son

Construction Company, Inc., 112 Ariz. 392, 542 P.2d 817, 819 (1975); and (3) whether a

promise should be implied in fact. “Where reasonable minds may draw different conclusions

or inferences from undisputed evidentiary facts, a question of fact is presented.” Wagenseller

v. Scottsdale Mem. Hosp., 147 Ariz. 370, 383, 710 P.2d 1025, 1038 (Ariz. 1985). There may

also be issues related to anticipatory breach of contract. RAJI (Civil) 4th, Contract 14.

Plaintiff is either requesting two trials on identical disputed issues, the first

before the Rule 16 scheduling conference has been held or, as Defendants charge, Plaintiff’s

request is truly one “for an expedited trial on the merits of Plaintiff s claim.” (docket # 65 at

5) The Court is not inclined to do either, especially since this litigation has been pending for

over a year; formal discovery on all issues has not yet been authorized, much less completed;

and, at least, one important issue of law must be resolved prior to trial.

Accordingly,

IT IS ORDERED that Plaintiff Az Holding, L.L.C.’s Application for

Preliminary Injunctive Relief and Declaratory Relief, docket # 61-62, is DENIED.

IT IS FURTHER ORDERED that Plaintiff Az Holding, L.L.C.’s Motion for

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Status Conference, docket # 75, is DENIED. An Amended Joint Proposed Case Management

Plan will be required if the issues have changed or new issues have arisen since the filing of

the Amended Complaint and Counterclaim. A Rule 16 scheduling order will be issued

shortly.

DATED this 26th day of February, 2009.

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