Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_17-cv-00824/USCOURTS-casd-3_17-cv-00824-0/pdf.json

Nature of Suit Code: 160
Nature of Suit: Stockholder's Suits
Cause of Action: 28:1332ss Diversity - Stockholders Suits

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FILED 

JUN 2 3 2017 

UNITED STATES DISTRICT COURT 

SOUTHERN DISTRICT OF CALIFORNIA 

DANIEL J. SCHREIBER, individually and as Trustee of the Schreiber Living Trust, a California trust, 

Plaintiff, 

V. 

REDHA WK HOLDINGS CORP., a 

Nevada corporation formerly known 

as Independence Energy Corp.; et. al., 

Defendants. 

CASE NO. 17cv824-WQH-BLM 

ORDER 

16 HA YES, Judge: 

17 The matter before the Court is the Ex Parte Application for Temporary 

18 Restraining Order and Order to Show Cause RE: Preliminary Injunction (ECF No. 16) 

19 filed by Plaintiff Daniel Schreiber, individually and as Trustee of the Schreiber Living 

20 Trust ("Plaintiff') on June 22, 201 7. 

21 On April 24, 2017, Plaintiff initiated this action by filing the Complaint (ECF 

22 No. 1). On June 5, 2017, Plaintiff filed proof of summons returned executed for 

23 Defendants Felix C. Spizale, Redhawk Holdings Corp., and Robert Rhune, Jr. (ECF 

24 Nos. 3, 5-6). On June 6, 201 7, the parties filed a joint motion to extend time for all 

25 Defendants to answer. (ECF No. 7). The joint motion states that counsel for 

26 Defendants agreed to accept service for Defendant RedHawk and the remaining 

27 Defendants who had not yet been served in this matter. Id. at 2. On June 8, 2017, the 

28 Court granted the joint motion (ECF No. 8). On June 15, 2017, Plaintiff filed proof of 

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1 summons returned executed for Defendants Thomas J. Concannon, Phillip Harris IV, 

2 Kav Hundle, G. Darcy Klug, Redhawk Holdings Corp., and Andre F. Toce, Sr. (ECF 

3 Nos. 9-14). 

4 On June 22, 2017, Plaintiff filed the Ex Parte Application for Temporary 

5 Restraining Order and Order to Show Cause RE: Preliminary Injunction (ECF No. 16). 

6 On June 22, 2017, Defendants RedHawk Holdings Corp., Thomas J. Concannon, G. 

7 Darcy Klug, Felix C. Spizale, Phillip Harris IV, Andre F. Toce, Sr., Robert Rhyne, Jr., 

8 and Kav Hundle ("Defendants") filed a preliminary opposition 1 to the Ex Parte 

9 Application for Temporary Restraining Order and Order to Show Cause RE: 

10 Preliminary Injunction (ECF No. 17). 

11 I. Allegations of the Complaint (ECF No. 1) 

12 Plaintiff alleges that he "is a former Director and Chief Executive Officer of 

13 RedHawk, a publicly traded company[,]" and the Schreiber Living Trust "(the 'Trust') 

14 is the owner of common shares in RedHawk. Schreiber is the Trustee of the Trust." 

15 (ECF No. 1 at if 1 ). "Since on or around September 28, 2016, RedHawk, by and 

16 through its officers and Board of Directors, has sought to obstruct the Trust's sale of 

17 its shares in RedHawk." Id. at if 2. "[T]hese efforts included an unfounded demand to 

18 RedHawk's transfer agent to prohibit sales of Plaintiff's stock, delays in filing required 

19 SEC forms and, more recently, the termination ofRedHawk's transfer agent." Id. 

20 "Schreiber was appointed as a Director to RedHawk's Board of Directors on 

21 March 31, 2014. Schreiber was also the CEO ofRedHawk from February 27, 2015." 

22 Id. at if 18. "In a sale and purchase transaction dated March 31, 2014, the Trust was 

23 issued 57,064,608 shares of restricted RedHawk stock." Id. at if 19. "Due to a strained 

24 personal and business relationship between Klug and Schreiber ... Schreiber was 

25 removed from the Board of Directors on April 20, 2016, and resigned as CEO on July 

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27 1 Defendants title this pleading a "Preliminary 0Rposition" because it "is based 

28 solely on byJsic] Plaintiffs counsef oral descr!J?tion oYthe nature of the application. Defendants id not receive or review any of Plaintiff's _papers in advance of their 

preparation of this preliminary opposition." (ECF No. 1Tat2 n.l). 

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1 5, 2016." Id. at if 20. "After Schreiber was removed from his officer and director roles 

2 with RedHawk, Schreiber sought to cut all ties with the company and began selling the 

3 Trust's restricted shares of RedHawk." Id. at if 23. 

4 "[T]he Trust sought to sell its restricted stock to the public under the registration 

5 exemption provisions of the Security and Exchange Commission ('SEC') Rule 144[.]" 

6 Id. at if 24. "The general conditions of Rule 144 ... limit Plaintiff to selling one 

7 percent ( 1 % ) of the total outstanding RedHawk shares every 90 days, which as of 

8 December 31, 2016, totaled 361,049,027 shares; i.e. Plaintiff can sell approximately 

9 3.6 million shares every 90 days." Id. "Between September 2016 and January 19, 

10 2017, Plaintiff sold 3,120,000 shares of RedHawk pursuant to the Rule 144 

11 requirements . . . [ d]ue to RedHawk missing multiple SEC filing requirements, 

12 Plaintiffs subsequent sales were delayed and the Trust has been damaged." Id. at if 25. 

13 "On or about January 25, 2017, Plaintiff requested that RedHawk's transfer 

14 agent, Continental Stock Transfer & Trust Company ('Continental'), remove the 

15 restrictive legend on an additional 1,500,000 of the Trust's shares." Id. at if 26. 

16 Plaintiff alleges that "[ o ]n January 31, 201 7, the CFO of RedHawk, Klug, sent a letter 

1 7 requesting that Continental 'not permit or otherwise facilitate the transfer' ofRedHawk 

18 shares" and "reference[ d] a lawsuit by RedHawk and another entity ... filed against 

19 Plaintiff in the United States District Court for the for the Eastern District of 

20 Louisiana[.]" Id. at if 27. "[O]n February 15, 2017, Continental notified Plaintiffs 

21 counsel that Continental had received the issuer's written consent to proceed with the 

22 requested sale transfer of 1,500,000. Because the Rule 144 opinion letter extended 

23 only until February 15, 2017, however, the transfer could not be completed by that 

24 same day and Continental requested a subsequent letter be issued." Id. at iii! 31-32. "In 

25 order for Plaintiff to receive an updated Rule 144 opinion letter then, he needed to wait 

26 until RedHawk filed its Form 10-Q .... RedHawk did not file its updated 10-Q, 

27 however, until March 13, 2017, nearly a month late." Id. at iii! 33, 35. 

28 "After RedHawk's intentional delays, when Plaintiff was finally able to again 

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1 request that the restrictive legend on the Trust's shares be removed in March 2017, 

2 RedHawk again delayed Plaintiff's sale by secretly terminating its relationship with its 

3 transfer agent." Id. at~ 36. "On April 6, 2017, Continental informed Plaintiff's broker 

4 it was 'not currently servicing' RedHawk as a transfer agent as its services had been 

5 "suspended" by RedHawk .... RedHawk did not notify the public that it was now 

6 operating without a transfer agent. ... Accordingly, RedHawk mislead the investing 

7 public by its failure to file a Form 8-Kregarding this material change." Id. at~~ 37, 39, 

8 41. 

9 "On April 13, 201 7, counsel for Plaintiff demanded a response from RedHawk 

10 regarding its transfer agent situation. As of the date of filing this complaint, RedHawk 

11 has not responded." Id. at~ 42. "To-date, Plaintiff has been unable to transfer the 

12 Trust's shares in RedHawk and has been damaged as a result." Id. at~ 43. "[A]t a 

13 minimum, Defendants' actions have caused Plaintiff to miss sales of at least 7 .2 million 

14 shares. From September 2016 through the date of this complaint, RedHawk shares 

15 have traded between one and two cents, meaning that Defendants' actions have caused 

16 Plaintiff to lose sales between $72,000 and $144,000. Further, Defendants' actions 

17 have devalued all of Plaintiff's outstanding 53,944,608 shares by delaying or 

18 preventing their future sale at the earliest possible date." Id. at~ 43. 

19 II. Ex Parte Application for Temporary Restraining Order and Order to Show 

20 Cause RE: Preliminary Injunction (ECF No. 16) 

21 Plaintiff requests the Court issue an order restraining Defendant RedHawk "from 

22 blocking the transfer of Plaintiff's common shares ofRedHawk" and allowing Plaintiff 

23 "to sell his shares to interested third-parties." (ECF No. 16 at 2). Plaintiff contends 

24 that it continues to suffer harm as the price ofRedHawk's stock has declined in value 

25 and Plaintiff's opportunity to sell his shares "become scarcer." (ECF No. 16-1 at 4). 

26 Plaintiff contends that on June 14, 2017, "RedHawk filed its Form 10-Q Quarterly 

27 Report with the [SEC]" which demonstrates "a substantial decrease in the company's 

28 current and total assets since 2016[,] a net decrease in the company's cash[,]" and that 

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1 RedHawk intends to sell two real estate assets in 201 7. Id. at 5. Plaintiff further 

2 contends that "RedHawk' s CFO [Defendant Klug] recently made clear that RedHawk' s 

3 refusal to transfer Plaintiffs shares has nothing to do with any legal objection to the 

4 transfer, but is instead contingent upon a' global resolution' of disputed claims between 

5 the parties." Id. 

6 Plaintiff contends that "[ w ]ithout an injunction preventing RedHawk from 

7 further interfering with Plaintiffs right to sell his shares, Plaintiff will be harmed 

8 irreparably because RedHawk has explicitly made clear its intention to block Plaintiffs 

9 transfer of shares while simultaneously selling off the company's assets, leaving 

10 Plaintiff with no remedy if and when he prevails at trial in this matter." Id. at 6. 

11 Plaintiff contends that "[f]ormal notice is not necessary in this case due to the 

12 impending harm Plaintiff will suffer ifthere is any delay." (ECF No. 16 at 2). 

13 In their preliminary opposition, Defendants contend that Plaintiffs request for 

14 injunctive relief improperly seeks to change the status quo of this action. Defendants 

15 contend that Plaintiff cannot demonstrate an irreparable injury or a non-monetary 

16 injury. (ECF No. 17 at 3). Defendants contend that Plaintiff has not demonstrated a 

1 7 substantial likelihood of success on the merits in this action, because Plaintiff is being 

18 sued in another action for failing to disclose a material fact at the time when Plaintiff 

19 "obtained shares of stock from RedHawk" that are at issue in this action. Id. 

20 Defendants further request the opportunity "to file a substantive opposition before any 

21 ruling is issued" on Plaintiffs Application, "unless the Court is inclined to summarily 

22 deny Plaintiffs [A]pplication[.]" Id. at 2. 

23 III. Analysis 

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A. Temporary Restraining Order 

Rule 65(b)(l) of the Federal Rules of Civil Procedure states that 

The court may issue a temporary restraining order without written or oral 

notice to the adverse party or its attorney only if: 

(A) specific facts m an affidavit or a verified complaint clearly show that immediate and irreRarable injury, loss, or 

damage will result to the movant before the adverse party 

can be heard in opposition; and 

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(B) the movant's attorney certifies in writing any efforts mad~ to give notice and the reasons why it sbouid not be 

reqmred. 

Fed. R. Civ. P. 65(b)(l). The Supreme Court has explained that "The stringent 4 

restrictions imposed by . . . Rule 65, on the availability of ex parte temporary 5 

restraining orders reflect the fact that our entire jurisprudence runs counter to the 

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notion of court action taken before reasonable notice and an opportunity to be heard 

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has been granted both sides of a dispute." Granny Goose Foods, Inc. v. Bhd. of 8 

Teamsters, 415 U.S. 423, 438-39 (1974). "Consistent with this overriding concern, 

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courts have recognized very few circumstances justifying the issuance of an ex parte 10 

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TRO. For example, an ex parte TRO may be appropriate where notice to the adverse 

party is impossible either because the identity of the adverse party is unknown or 

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because a known party cannot be located in time for a hearing." Reno Air Racing 13 

Ass 'n, Inc. v. McCord, 452 F .3d 1126, 1131 (9th Cir. 2006) (citation and quotation 14 

marks omitted). 

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In this case, Plaintiff has attached a declaration from its attorney stating that he 

informed Defendants' attorney by telephone on June 21, 2017 and by email on June 22, 

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2017 that Plaintiff "would be immediately proceeding via an ex parte application for 

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a temporary restraining order and an order to show cause why a preliminary injunction 19 

should not be issued." (ECF No. 16-3 at 2; Praskievicz Deel. at~ 3). Defendants 

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confirm that Plaintiffs attorney made efforts to provide Defendants with notice of the 

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Application. See ECF No. 17 at 2 n.1. The Court concludes that Plaintiff has satisfied 

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the notice requirement of Rule 65(b )( 1 )(B ). 23 

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However, Plaintiff has not set forth "specific facts" that "clearly show that 

immediate and irreparable injury, loss, or damage will result to the movant before the 

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adverse party can be heard in opposition[.]" Fed. R. Civ. P. 65(b )( 1)(A).2 Plaintiff has 

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2 In this case, Defendants filed a preliminary opposition to Plaintiffs Application (ECF No. 17) that Defendants contend was prepared before Defendants had a chance 

to review the Application. The Court concludes that Defendants have not been given 

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1 failed to set forth specific facts as to why the Court should grant Plaintiff the injunctive 

2 relief that it requests "before reasonable notice and an opportunity to be heard has been 

3 granted both sides of a dispute." Granny Goose, 415 U.S. at 439. See Zakar v. CHL 

4 Mortg. Pass Through Trust, No. 11CV457 JLS (WVG), 2011WL915293, at *2 (S.D. 

5 Cal. Mar. 8, 2011) (Sammartino, J.) (denying the plaintiffs' application for a temporary 

6 restraining order because the plaintiffs "failed to set forth specific facts in an affidavit 

7 or a verified complaint clearly showing that immediate and irreparable loss would 

8 result before the Defendants could be heard in opposition."). Because Plaintiff has 

9 failed to meet the requirement set forth in Rule 65(b )(1 )(A), Plaintiffs Application for 

10 a Temporary Restraining Order is DENIED. 

11 B. Preliminary Injunction 

12 Plaintiffs Application also includes a request for a preliminary injunction 

13 pursuant to Federal Rule of Civil Procedure 65(a). See ECF No. 16-1 at 6 ("Plaintiff 

14 requests this Court immediately enter a restraining order and preliminary injunction 

15 prohibiting RedHawk from further blocking Plaintiffs requested transfer of shares."). 

16 Rule 65(a) states that "The court may issue a preliminary injunction only on notice to 

17 the adverse party." Fed. R. Civ. P. 65(a)(l). Plaintiff has demonstrated that 

18 Defendants received notice of the Application. See ECF No. 16 at 4; 16-1at17; 16-2 

19 at 66; 16-3 at 6. Accordingly, Plaintiffs request for a preliminary injunction will be 

20 set for a hearing on August 3, 2017 at 2:00 PM in Courtroom 14B. Any formal 

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28 the full opportunity to be heard in opposition to Plaintiffs Application. Therefore, the 

Court treats Plaintiffs Application as an ex parte request for a temporary restraining order. 

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