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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SECURITIES AND EXCHANGE 

COMMISSION,

Plaintiff,

v.

SAN FRANCISCO REGIONAL CENTER 

LLC, et al.,

Defendants.

Case No. 17-cv-00223-RS 

ORDER DENYING MOTION FOR 

TEMPORARY RESTRAINING ORDER

The Receiver appointed in this action moves for a temporary restraining order and order to 

show cause re issuance of a preliminary injunction against former Relief Defendant Berkeley 

Healthcare Dynamics, LLC (“BHD”), as to which the receivership has previously been terminated. 

The Receiver’s motion seeks an “asset freeze,”—more specifically an order precluding BHD from 

encumbering or disposing of the net proceeds from a pending sale of certain real property that has 

been referred to in this litigation as “the 20th Street Warehouse,” or just “the Warehouse.” 

Asserting that the sale is scheduled to close on August 28, 2019, and that “BHD (and its 

representatives) will likely place the proceeds of the 20th Street Warehouse beyond the reach of a 

judgment,” the Receiver seeks “immediate” relief.

The motion is denied. As the Receiver acknowledges, a United States District Court lacks 

the power to issue a preliminary injunction preventing a defendant from transferring assets in 

which no lien or equitable interest is claimed. Grupo Mexicano de Desarrollo S.A. v. All. Bond 

Fund, Inc., 527 U.S. 308, 333, 119 S. Ct. 1961, 1975 (1999). Even assuming the procedural 
CASE NO. 17-cv-00223-RS

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United States District Court

Northern District of California

posture here is otherwise equivalent to one in which a named plaintiff seeks recovery against a 

named defendant, the claim the Receiver is pursuing is for enforcement of an alleged written 

contractual obligation of BHD to repay two promissory notes issued by NA3PL, LLC, in the event 

NA3PL, LLC “cannot” do so. See Dkt. Nos. 414-15, 414-16. As such, not only is the claim 

fundamentally contractual, the alleged obligation the Receiver seeks to enforce is one to pay 

money. Nothing in the alleged contracts purports to give the promisee any ownership right, lien, or 

other interest in any specific property belonging to BHD, be it the Warehouse or anything else.

The Receiver argues the Grupo Mexicano rule is inapplicable because her motion to 

enforce the alleged promissory note guaranties1invokes promissory estoppel and ostensible 

authority among its various contentions. Although those are equitable concepts, they do not 

represent equitable claims for relief that might fall outside Grupo Mexicano. Rather, even 

assuming the Receiver were to prevail by proving that either promissory estoppel or ostensible 

authority applies, those doctrines would merely permit enforcement of the obligation to pay 

money.

The Receiver relies on U.S. ex rel. Rahman v. Oncology Assocs., 198 F.3d 489 (4th Cir. 

1999) to argue: “That money damages are claimed along with equitable relief does not defeat the 

district court’s equitable powers.” Id. at 498. As the careful analysis in Rahman reveals, however, 

there still must be actual equitable claims of a nature that will support the requested asset freeze.

[W]here 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. A debt claim 

leads only to a money judgment and does not in its own right 

constitute an interest in specific property. Accordingly, a debt claim 

does not, before reduction to judgment, authorize prejudgment 

execution against the debtor’s assets.

On the other hand, when the plaintiff creditor asserts a cognizable 

claim to specific assets of the defendant or seeks a remedy involving 

 

1 The Intervenors previously contended the language in the promissory notes does not rise to a 

guaranty. This order does not reach that issue.
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United States District Court

Northern District of California

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. This nexus between the assets sought 

to be frozen through an interim order and the ultimate relief 

requested in the lawsuit is essential to the authority of a district 

court in equity to enter a preliminary injunction freezing assets . . . . 

Id. at 496–97 (emphasis added).

In Rahman the court ultimately concluded the asset freeze was proper because:

to the extent that the [plaintiff] United States has alleged claims 

seeking to impose a constructive trust on assets as “equitable 

property” of the United States and to void fraudulent transfers of 

assets and have them transferred to the United States, the United 

States claims an equitable interest in the assets of the defendants.

Id. at 498; See also, In re Focus Media Inc., 387 F.3d 1077, 1085 (9th Cir. 2004) (approving asset 

freeze where claims for fraudulent conveyance and a constructive trust had been alleged).

Here, as noted, the claims the Receiver is pursuing are to enforce an alleged obligation to 

pay money, not for ownership in or a lien against the Warehouse or the proceeds from its sale.2

There is no “nexus between the assets sought to be frozen” and “the ultimate relief requested in 

the lawsuit.” As such, there is no legal basis for the relief the Receiver seeks, and the motion must 

be denied.

 

2

 A passing reference in the Receiver’s motion suggests relief is necessary to ensure she will be 

able to recover “improperly diverted funds.” The amount of improperly diverted funds BHD is 

obligated to disgorge has previously been adjudicated and reduced to judgment. In the event BHD 

is liable on these alleged guaranties, that represents a contractual obligation it must honor, not 

“improperly diverted funds.”
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United States District Court

Northern District of California

IT IS SO ORDERED.

Dated: August 23, 2019

______________________________________

RICHARD SEEBORG

United States District Judge