Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_10-cv-00110/USCOURTS-cand-5_10-cv-00110-1/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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 NO. C 10‐0110 RS

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United 

States District 

Court

For the Northern District of California 

*E-Filed 02/04/2010* 

IN THE UNITED STATES DISTRICT COURT 

FOR THE NORTHERN DISTRICT OF CALIFORNIA 

SAN JOSE DIVISION 

KOKKA & BACKUS, PC, 

 Plaintiff, 

 v. 

STEVEN R. BLOCH, et al., 

 

 Defendant. 

____________________________________/

No. C 10-0110 RS 

ORDER DENYING MOTION FOR 

PRELIMINARY INJUNCTION 

I. INTRODUCTION 

 In this action by a law firm seeking to recover unpaid legal fees, the Court previously denied 

plaintiff’s application for a temporary restraining order that would serve as an “asset freeze” of 

defendant DataScout, Inc.’s patent portfolio—a portfolio plaintiff helped DataScout to obtain. 

Because plaintiff has still not shown that the Court even has jurisdiction to issue such an asset freeze 

under the circumstances here, or that such relief is warranted if it is even available, plaintiff’s 

motion for a preliminary injunction will likewise be denied. 

 

Case 5:10-cv-00110-RS Document 21 Filed 02/04/10 Page 1 of 4
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II. BACKGROUND 

 The basic facts giving rise to this action were described in the order denying a TRO, and will 

not be repeated here. In opposition to this motion, defendants contend that contrary to plaintiff”s 

allegations, DataScout is not insolvent and is willing to pay plaintiff’s outstanding legal bills, 

provided any amount is found still to be owing after fee arbitration. DataScout has initiated 

mandatory fee arbitration regarding this matter by filing a demand with the Palo Alto Area Bar 

Association. 

III. DISCUSSION 

 A. Availability of asset freeze

As noted in the prior order, a federal court generally lacks jurisdiction to issue an “asset 

freeze” simply to ensure that any judgment a plaintiff may ultimately obtain will be collectible. See 

Grupo Mexicano de Desarollo, S.A. v. Alliance Bond Fund, Inc., 527 U.S. 308, 319-320 (1999) 

(holding that in an action for money damages, a district court has no power to issue a preliminary 

injunction preventing a defendant from transferring assets in which no lien or equitable interest is 

claimed.) In response to the prior order, plaintiff cites United States v. Oncology Associates., PC, 

198 F.3d 489 (4th Cir. 1999) for the proposition that an asset freeze is available where equitable 

remedies involving the assets are sought. In Oncology Associates, the government alleged a scheme 

of Medicare billing fraud and sought imposition of a constructive trust on defendants’ purportedly 

ill-gotten gains. The Oncology Associates court concluded a preliminary asset freeze was both 

appropriate and necessary to preserve the court’s power to enter final relief imposing the 

constructive trust. 

The court distinguished between two kinds of cases: 

First, where a plaintiff creditor has no lien or equitable interest in the assets of a 

defendant debtor, the creditor may not interfere with the debtor’s use of his property 

before obtaining judgment . . . . 

On the other hand, when the plaintiff creditor asserts a cognizable claim to specific 

assets of the defendant or seeks a remedy involving those assets, a court may in the 

interim invoke equity to preserve the status quo pending judgment where the legal 

remedy might prove inadequate and the preliminary relief furthers the court’s ability 

to grant the final relief requested. 

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198 F.3d at 496 (emphasis added). 

 Here, plaintiff has pleaded a claim under the equitable theory of “unjust enrichment,” but it 

has not shown how that would give it an equitable interest in the patent portfolio or a potential final 

remedy that directly implicates that asset. Unlike the government in Oncology Associates, plaintiff 

has no basis to say that defendants hold the assets in constructive trust. Rather, plaintiff has shown 

that it at most has a claim for damages, which, if reduced to judgment, could perhaps be satisfied by 

executing against the patent portfolio (or any other assets); a showing that simply does not support a 

pre-judgment asset freeze.1

 B. Fraud

 Although it is not clear that a plaintiff must plead or prove fraud to be entitled to equitable 

remedies, plaintiff has characterized its “one over-riding allegation” in this action as being that it 

was induced by fraud to render the services for which it has not been paid. As discussed in the prior 

order, at a minimum plaintiff cannot expect to establish that its services rendered in November and 

December of 2009 were induced by fraud, given its contention that it had come to believe by then 

that DataScout was out of business, insolvent, and intending to pay other creditors first. Even as to 

the purported fraud occurring earlier, plaintiff has not introduced sufficient evidence to support its 

contention that defendants requested legal services for which they intended not to pay. Plaintiff 

may be correct that it has alleged the requisite state of mind, at least in a conclusory fashion, but it 

has not made a showing that would support a preliminary injunction, were an injunction otherwise 

appropriate. 

 

 

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 It is also significant that plaintiff expressly acknowledges that it does not have an attorney’s lien 

on the assets and that it is not proceeding under such a theory. Plaintiff should not be permitted to 

evade the requirements necessary to create an attorney’s lien simply by claiming “unjust 

enrichment.” 

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 C. Effect of arbitration

 Defendants cite California Business & Professions Code § 6201 for the proposition that 

initiation of fee arbitration ordinarily gives rise to an automatic stay of a civil proceeding such as 

this. Defendants acknowledge that the California Code is not binding in, or strictly applicable to, 

proceedings in this forum. Thus, although defendants’ appearance in this action and their initiation 

of the fee arbitration provide additional grounds for concluding that preliminary relief is not 

warranted under the circumstances, the Court is not prepared to conclude that this action has been 

automatically stayed. To the extent that the policy embodied in Business & Professions Code § 

6201 might support delaying part or all of these proceedings, depending on the status of fee 

arbitration, defendants may propose in conjunction with the case management conference, a 

scheduling order that addresses such issues. 

 

IV. CONCLUSION 

 Plaintiff’s motion for a preliminary injunction is denied. 

 

IT IS SO ORDERED. 

Dated: 02/04/2010 

RICHARD SEEBORG 

UNITED STATES DISTRICT JUDGE 

Case 5:10-cv-00110-RS Document 21 Filed 02/04/10 Page 4 of 4