Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_10-cv-02130/USCOURTS-casd-3_10-cv-02130-0/pdf.json

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

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

O’M AND ASSOCIATES, LLC, an

Illinois limited liability company, d/b/a

O’Malley and Associates; PRESERVE

CAPITAL, LLC, an Illinois limited

liability company; and MBM

SETTLEMENTS, LLC, an Illinois limited

liability company,

Plaintiffs,

CASE NO. 10-CV-2130 H (RBB)

MEMORANDUM DECISION

GRANTING LIMITED

TEMPORARY RESTRAINING

ORDER 

vs.

BRENDAN K. OZANNE, BRIAN C.

DAWSON, AND DAWSON &

OZANNE, a California general

partnership, as escrow agent; MATTHEW

STOEN, individually and as manager and

agent for KODIAK FAMILY, LLC, a

Nevada limited liability company;

KODIAK FAMILY, LLC, individually

and as agent for XYZ CORPORATION,

Defendants.

On October 13, 2010, Plaintiffs concurrently filed their complaint and a motion for

temporary restraining order (“TRO”). (Doc. Nos. 1 & 4.) On October 14, 2010, the Court set

a briefing schedule for the parties and a hearing date on the motion. (Doc. No. 6.) On October

20, 2010, Defendants filed their response in opposition to the TRO. (Doc. No. 16.) The Court

held a hearing on this motion on October 22, 2010. Patrick Keeley appeared telephonically

and Peter Haley appeared in person on behalf of Plaintiffs. David Veljovich specially

Case 3:10-cv-02130-AJB-MDD Document 37 Filed 11/02/10 Page 1 of 9
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appeared on behalf of Defendant Brendan K. Ozanne. After the hearing, the Court ordered

supplemental briefing. (Doc. No. 22.) On October 27, 2010, Defendant Brendan K. Ozanne

filed his supplemental brief. (Doc. No. 23.) On October 29, 2010, Plaintiffs filed their

supplemental brief. (Doc. No. 24.) On November 2, 2010, the Court held another hearing on

the motion. Patrick Keeley appeared in person and Scott Miller appeared telephonically on

behalf of Plaintiffs. David Veljovich specially appeared on behalf of Defendant Brendan K.

Ozanne. After due consideration, the Court grants a limited temporary restraining order. 

Background

This action centers around a failed sale of life insurance policies (Compl. ¶ 1.)

Plaintiffs are the sellers of the life insurance policies, with Plaintiff Matthew O’Malley acting

as the seller’s agent (“O’Malley”). (Id. ¶ 11.) Defendant Matt Stoen was the buyer’s agent

and manager for Defendant Kodiak Family, LLC (“Kodiak”). (Id. ¶ 7.) Kodiak in turn was

the agent for the real buyer of the policies, XYZ Corporation (“XYZ”). (Id. ¶ 16.) Defendant

Brendan Ozanne (“Ozanne”) represented Kodiak and is alleged by Plaintiffs to be the escrow

agent for the sale. (Id. ¶¶ 5, 15.) Ozanne is a partner for the general partnership Dawson and

Ozanne. (Id. ¶ 6.) 

Ozanne presented Plaintiffs with an offer to buy the life insurance polices on January

12, 2010, and O’Malley accepted the offer the following day. (Compl. ¶¶ 18-19.) The sale

agreement called for the seller to deposit 3% of the purchase price of the policies in Dawson

and Ozanne’s Attorney Client Trust Account (“IOLTA”). (Compl. ¶ 22). Pursuant to the

agreement, Plaintiffs transferred monies to the IOLTA account through fours separate

transactions. (Id. ¶¶ 22, 23, 27.) Pursuant to an addendum to the sales agreement, Plaintiffs

claim that this fee is a “break up” fee and is only non-refundable to them if the transaction

does not close under one of three conditions: (1) if the seller is unable to provide required

documentation prior to closing, (2) if the seller is unable to procure the signatures required to

close the transaction, or (3) if the life insurance carriers contest the validity of any the policies.

(Id. Ex. A1.) On the other hand, Defendants claim that the fees are for performing due

diligence and no escrow instructions were ever completed. (Id. ¶ 24.) 

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The sales transaction did not close on May 31, 2010. (Compl. ¶ 37.) In mid-July, 2010,

Ozanne provided Plaintiffs with a new buyer for the life insurance policies. (Id. ¶ 38.) No

closing has occurred with a new buyer. (Id. ¶ 39.) Starting August 2010, Plaintiffs, through

counsel, sent written demands to Defendants asking for return of their funds. No money has

been returned to them to date. (Id. ¶ 40-45.) 

Discussion

I. TRO – Legal Standard

A temporary restraining order is generally reserved for an emergency circumstance

where the rights of a party are in urgent need of protection. See Granny Goose Foods, Inc. v.

Bhd. of Teamsters, 415 U.S. 423, 438-39 (1974). Apart from showing the necessity for

immediate relief, applicants for a TRO must meet the same standards as for a preliminary

injunction. See Stuhlbarg Int’l Sales Co., Inc. v. John D. Brush and Co., Inc., 240 F.3d 832,

839 n.7 (9th Cir. 2001). “A plaintiff seeking a preliminary injunction must establish that he

is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of

preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the

public interest.” Winter v. Natural Res. Def. Council, Inc., 129 S. Ct. 365, 374 (2008); Marlyn

Nutraceuticals, Inc, v. Mucos Pharma GmbH & Co., 571 F.3d 873, 877 (9th Cir. 2009).

Alternatively, a plaintiff may be entitled to a preliminary injunction by establishing “the

existence of serious questions going to the merits and that the balance of hardships tips sharply

in his favor.” Roe v. Anderson, 134 F.3d 1400, 1402 (9th Cir. 1998); see Stuhlbarg Int’l. Sales

Co. v. John D. Brush & Co., 240 F.3d 832, 839-94 (9th Cir. 2001). These alternative

formulations “represent two points on a sliding scale in which the required degree of

irreparable harm increases as the probability of success decreases.” Roe v. Anderson, 134 F.3d

at 1402; see Clear Channel Outdoor Inc. v. City of Los Angeles, 340 F.3d 810, 813 (9th Cir.

2003). Thus, if “the balance of harm tips decidedly toward the plaintiff, then the plaintiff need

not show as robust a likelihood of success on the merits.” State of Alaska ex rel. Yukon Flats

School Dist. v. Native Village of Venetie, 856 F.2d 1384, 1389 (9th Cir. 1988).

///

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II. Likelihood of Success on the Merits / Serious Question Going to the Merits

The claims supporting the application for a temporary restraining order primarily center

around breach of contract and breach of fiduciary duty relating to the funds that Plaintiffs

deposited into Defendant Ozanne’s IOLTA account. Plaintiffs and Defendants dispute the

merits of these claims. 

The original offer agreement stated that the seller or seller’s agent was to deposit 3%

of the purchase price upon acceptance of the offer and that:

“This fee is a ‘break up’ fee for my clients and my firm. Said fee shall be nonrefundable in the event that the Seller is unable to provide the appropriate supporting

documentation and unable to procure the necessary signatures for a successful ‘life

settlement’ transaction. It shall further be deemed non-refundable in the event that any

of the life carriers identified above contest the validity of any of the policies listed

above for any reason. 

However, in the event the Buyer fails to perform their obligations, set forth below, this

fee is refundable in its entirety, together with an interest rate of 6% per annum. Further,

Kodiak Family, LLC agrees to refund this amount, via a credit in the full amount of the

‘break up’ fee at the time of the closing of the life settlement transactions as referenced

above. Please be advised that Dawson & Ozanne, other than its role as Escrow Agent,

is not responsible for the refund of such fees and this duty and responsibility shall be

borne solely by Kodiak Family, LLC or its affiliates. Further, Dawson & Ozanne is

informing Seller and Seller’s Agent that it is not representing in any legal capacity, the

rights of Seller or Seller’s Agents and in no instance shall such entities or individuals

by considered or deemed clients of Dawson & Ozanne.”

(Compl. Ex. A.) This portion was then replaced by an addendum which stated:

“The foregoing fee is the ‘break up’ fee. Said fee shall be non-refundable only in the

event that the Seller is unable to provide the documentation listed on Schedule 1 prior

to closing, is unable to procure the required signatures to close the ‘life settlement’

transaction, or in the event that any of the life carriers identified above contest the

validity of any of the policies, and, for any of these reasons, the transaction does not

close. The ‘break up’ fee, together with the interest at 6% per annum, shall be fully

refundable to Seller if the life settlement transaction closes, by credit at closing, or if

the transaction fails to close for any other reason, including the parties’ failure to agree

on the terms of the escrow and purchase agreement or Buyer’s failure to perform any

of its obligations hereunder. In the latter circumstances, Buyer shall pay Seller such

deposited amount, or deposit the funds in an account designated by Seller, no later than

the date on which closing was scheduled to occur.” 

(Id. Ex. A1.) 

Parties first dispute whether the funds Plaintiff deposited was to be held in escrow for

the benefit of the Plaintiffs. Plaintiffs contend that the monies that they deposited in Defendant

Dawson & Ozanne’s IOLTA account was to be held in escrow and refunded back to

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them—pursuant to the addendum to the offer—at an interest rate of 6%. (Compl. ¶ 25.) The

language of the addendum refers to this fee as a “break up” fee. On its face, it does not state

that the money may be used for due diligence or may be disbursed for other reasons to the

client. The changed language between the original agreement and addendum remove the

statements limiting the liability of Ozanne or Dawson & Ozanne with regards to the fee.

Furthermore, Defendant Ozanne signed the agreement and addendum as the “escrow agent”

on this transaction. 

Defendant Ozanne contends that these funds were for the buyer to use for performing

due diligence on the life insurance policies to ensure they were marketable and that the

transaction was otherwise valid. (Doc. No. 16, Declaration of Brendan Ozanne, ¶¶ 4-6.)

Ozanne contends that because these are due diligence fees and not a security deposit, these

funds were disbursed to Kodiak, the buyer’s agent, and the buyer to perform the due diligence.

(Id. ¶ 7.) Ozanne contends that he never had a duty to hold the money in the IOLTA account

for safekeeping. (Id.) The language of the addendum does not specifically spell out duties and

responsibilities of the escrow agent, which are typical in an escrow agreement. Defendant

Ozanne testified that he did not believe he was acting as an escrow agent with respect to the

“break up” fee. (Doc. No. 23, Ex. 1.) Additionally, he has referred to the fee in

contemporaneous emails to Plaintiffs as due diligence funds. (Compl. Exh. E.) 

 The parties also dispute whether the fees that Plaintiffs paid are refundable at all under

the addendum. Plaintiffs contend that they were ready to close and that the Bank of Utah, as

trustee for the buyer, verified that the life insurance polices met the purchase criteria. (Compl.

¶ 32-33; Doc. No. 4, Affidavit of Michael O’Malley, ¶ 32-40.) Defendant Ozanne contends

the money should not be refunded pursuant to the addendum because Plaintiffs failed to

provide the required signatures. (Doc. No. 23 at 2-3.; Doc. No. 23, Ex. 3.)

The changed language between the original agreement and the addendum specifically

state the fee is fully refundable, except in three limited situations. Plaintiffs presented evidence

that they believed all the documents they provided complied with the requirements and reason

the transaction did not close did not fall within any of the three situations. Furthermore,

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Defendants represented on various occasions that they were satisfied with the documents. (See

Doc. No. 30, Affidavit of Michael O’Malley.) Defendants do present testimony, however,

from the “manager” of the buyer’s trust, Richard Baker, that Plaintiffs failed to provide all

required signatures on disclosures, warranties, and transfer documents. (Doc. No. 23, Ex. 3

¶ 13.) According to Baker, because the required documents were not deposited into the

document depository, the buyer could not finish performing its due diligence and close the

transaction. (Id.) 

The addendum to the sales agreement referred to the funds Plaintiffs deposited as the

break up fee. Ozanne acted as the escrow agent by signing the agreement and addendum as

the escrow agent. The break up fee was sent to him through his IOLTA account. On May 14,

2010—days before closing—Ozanne sent an email to Plaintiff O’Malley stating that there was

$876,000 in his IOLTA account. (Compl., Exh. E.) This email was sent in response to a

request by O’Malley to confirm that money was set aside for the transaction and that the due

diligence was complete and documents accepted. (Doc. No. 30, Affidavit of Michael

O’Malley.) The same email did not mention any deficiencies in the due diligence but did set

closing for two weeks later on May 31, 2010. After that email correspondence, Plaintiffs

continued to receive reassurances from Defendants that closing was moving forward as

planned. (Id.) Plaintiffs did not receive any indication from Defendants that they needed to

provide more signatures in order to close the transaction. The Court concludes based on the

totality of the evidence that Plaintiffs have raised serious questions going to the merits of the

claims. The Court is not prepared at this time to conclude that Plaintiffs are likely to succeed

on the merits. Accordingly, the Court turns to the Ninth Circuit’s alternative formulation for

granting a TRO and next addresses the balance of hardships. 

III. Balance of Hardships 

 Under Ninth Circuit law’s alternative formulation for granting a TRO, a court closely

considers the balance of hardships with whether there are serious questions going to the merits.

See Roe v. Anderson, 134 F.3d at 1042. Both parties dispute whether the money deposited

into the IOLTA account were due diligence funds to be disbursed and spent or a break up fee

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in escrow to be held until such time as the transaction closed or not. 

Defendant Ozanne has testified that he has disbursed all funds that Plaintiffs deposited

into his IOLTA account to Kodiak for payment of due diligence expenses. (Doc. No. 23, Ex.

1 ¶ 9.) He also submitted a declaration stating that he is not holding any such funds in his

IOLTA account or in any other account controlled by himself or Dawson & Ozanne. (Id.)

Defendant Stoen has also testified that all the money that he received from his attorneys has

been spent and paid to individuals who have performed due diligence activities for the

transaction. (Doc. No. 23, Ex. 2 ¶ 10.) Stoen and Kodiak claim that they are not holding any

such funds in any of their accounts. (Id.) If Defendants are no longer holding any such funds

because the money has been transferred or spent, a limited temporary restraining order only

enjoining any such remaining funds that can be identified will not present a hardship to them.

On the other hand, if there are any funds that do still exist and can be identified,

freezing such funds may be Plaintiffs’ only opportunity to recover any of their funds. Plaintiffs

presented evidence that Defendant Stoen is currently involved in six lawsuits, including

pending suits as well as judgments against him. (Doc. No. 26, Affidavit of Alison S. Franklin

¶ 5.) Freezing any identifiable and traceable funds may allow Plaintiffs to claim their money

before it is made available to pay for any other judgments against Defendants. 

Accordingly, the Court concludes that the balance of hardships tips toward Plaintiffs

in granting this limited temporary restraining order. 

IV. Irreparable Harm 

The basis of injunctive relief in the federal courts is irreparable harm and inadequacy

of legal remedies. Sampson v. Murray, 415 U.S. 61, 88 (1974). Generally, an injury that could

be remedied through money damages is not irreparable. Id. at 90 (“The possibility that

adequate compensatory or other corrective relief will be available at a later date, in the

ordinary course of litigation, weighs heavily against a claim of irreparable harm.”).

Plaintiffs have shown that they may not have an adequate remedy at law as to the break

up fee. Plaintiffs presented evidence that Defendant Stoen is involved in six lawsuits involving

a variety of causes of action, including breach of contract, breach of duties owed, fraud, and

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conspiracy. ((Doc. No. 26, Affidavit of Alison S. Franklin ¶ 5.) In one of the cases, a

judgment of over $300,000 has already been entered against Defendant Stoen. (Id.) If

accounts that may still have funds that Plaintiffs deposited are not frozen, Plaintiffs may not

be unable to receive damages even if they eventually prevail on the merits in light of the other

legal actions against Defendants. Thus, the Court concludes Plaintiffs have shown they will

suffer irreparable injury absent a grant of this limited TRO. 

V. Consideration of the Public Interest 

Plaintiffs have shown that they may suffer irreparable harm absent a limited TRO.

Defendants on the other hand will not suffer additional hardship if the money has already been

spent. Because this action arises from a failed business transaction, no other public interests

are particularly strong. 

Conclusion

After due consideration, the Court GRANTS a limited temporary restraining order. The

Court orders as follows: 

(1) Brendan Ozanne and Dawson & Ozanne and its principals, including but not limited to

Matthew Stoen, individually and as agent of Kodiak Family, LLC, are enjoined and

restrained from directly or indirectly transferring the Deposited Funds plus any interest

earned thereon, or any portion thereof, from any account over which any of Defendants

have ownership, possession, or control and into which the Deposited Funds have been

identifiably transferred; 

(2) Ozanne, Dawson & Ozanne, Stoen and Kodiak are to provide, within 10 days from the

effective date of this order, all relevant information regarding all accounts to which the

Deposited Funds were transferred and are now held, including but not limited to: the

location and identity of the transferee account, the date on which the funds were

transferred, the accounts to which they were transferred, the reason for the transfer, and

the identities of all signatories to the account to which the funds were transferred; 

(3) Discovery may commence in this matter immediately and be expedited as to accounting

and issues raised in the application for the temporary restraining order; 

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(4) The Court orders a bond of $7,500 as a condition to this order;

(5) The Court also orders, effective immediately, the parties to preserve evidence; 

(6) The Court reserves the right to modify or dissolve this order at any time. 

IT IS SO ORDERED.

DATED: November 2, 2010

______________________________

MARILYN L. HUFF, District Judge

UNITED STATES DISTRICT COURT

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