Court Opinion

ID: 3195203
Source: CourtListenerOpinion
Date Created: 2016-04-18 20:01:06.41092+00
Date Added: 2024-06-11T14:36:24.658948
License: Public Domain

FILED
                           NOT FOR PUBLICATION
                                                                            APR 18 2016
                    UNITED STATES COURT OF APPEALS                       MOLLY C. DWYER, CLERK
                                                                          U.S. COURT OF APPEALS

                            FOR THE NINTH CIRCUIT

THE WIMBLEDON FUND, SPC CLASS                    No. 15-56540
TT,
                                                 D.C. No. 2:15-cv-06633-CAS-
              Plaintiff - Appellee,              AJW

 v.
                                                 MEMORANDUM*
GRAYBOX, LLC,

              Defendant - Appellant.

                   Appeal from the United States District Court
                       for the Central District of California
                   Christina A. Snyder, District Judge, Presiding

                        Argued and Submitted April 5, 2016
                               Pasadena, California

Before: FARRIS, TYMKOVICH**, and M. SMITH, Circuit Judges.

      Defendant-Appellant Graybox, LLC (Graybox) appeals from the district

court’s grant of a preliminary injunction. We affirm.

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
       **
            The Honorable Timothy M. Tymkovich, Chief Circuit Judge for the
U.S. Court of Appeals for the Tenth Circuit, sitting by designation.
       1.     “We review a district court’s grant or denial of a preliminary

injunction for abuse of discretion and the underlying legal principles de novo.”

DISH Network Corp. v. F.C.C., 653 F.3d 771, 776 (9th Cir. 2011). Graybox argues

that pursuant to Grupo Mexicano de Desarrollo S.A. v. Alliance Bond Fund., Inc.,

527 U.S. 308 (1999), a preliminary injunction is not available because Plaintiff-

Appellee The Wimbledon Fund, Spc Class TT (Wimbledon) had no lien or other

equitable interest in the funds. But Grupo Mexicano specifically expressed “no

opinion” on cases arising under the Uniform Fraudulent Conveyance Act, which

“may have altered the common-law rule that a general contract creditor has no

interest in his debtor’s property.” Id. at 324, n. 7.

       Accordingly, we have held that “Grupo Mexicano thus exempts from its

proscription against preliminary injunctions freezing assets cases involving

bankruptcy and fraudulent conveyances, and cases in which equitable relief is

sought.” In re Focus Media Inc., 387 F.3d 1077, 1085 (9th Cir. 2004); Johnson v.

Couturier, 572 F.3d 1067, 1084 (9th Cir. 2009). Because this is a fraudulent

conveyance case and one in which Wimbledon sought equitable relief, Grupo

Mexicano does not bar a preliminary injunction. Focus Media, 387 F.3d at 1085.

       2.     Graybox argued that the injunction violated a bankruptcy stay because

$200,000 of the funds frozen by the district court’s injunction were owed to a

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bankruptcy trustee in another matter. Assuming arguendo that a bankruptcy stay

had been implicated, the preliminary injunction affected only $2,412,000 of the

$2,900,000 available, which left ample funds to pay the trustee.1

       3.     The district court did not err in granting the preliminary injunction

under the California Uniform Fraudulent Conveyance Act. Under the Act, a

transfer is fraudulent if made “[w]ith actual intent to hinder, delay, or defraud any

creditor of the debtor.” Cal. Civ. Code § 3439.04(a)(1). California Civil Code §

3439.04(b) provides a list of non-exclusive factors that a court may consider to

determine whether a transfer was made with such “actual intent.”

       The district court determined that, inter alia, the following factors were

present: (1) the transfer or obligation was to an insider; (2) the debtor retained

possession or control of the property transferred after the transfer . . . (5) the

transfer was of substantially all of the debtor’s assets . . . (8) the value of the

consideration received by the debtor was not reasonably equivalent to the value of

the asset transferred or the amount of the obligation incurred, and (10) the transfer

occurred shortly before or shortly after a substantial debt was incurred. We review

       1
        Further, as Graybox’s counsel acknowledged at oral argument, the trustee
has in fact been paid, so its claim can no longer present any barrier to a preliminary
injunction.

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these findings for clear error, Pom Wonderful LLC v. Hubbard, 775 F.3d 1118,

1123 (9th Cir. 2014), and hold that they are not clearly erroneous.

      In addition to showing likelihood of success on the merits, “[a] plaintiff

seeking a preliminary injunction must establish . . . 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. Nat. Res.

Def. Council, Inc., 555 U.S. 7, 20 (2008).

      As to irreparable harm, “[a] party seeking an asset freeze must show a

likelihood of dissipation of the claimed assets, or other inability to recover

monetary damages, if relief is not granted.” Johnson, 572 F.3d at 1085 (citing

Conn. Gen. Life Ins. Co. v. New Images of Beverly Hills, 321 F.3d 878, 881 (9th

Cir. 2003)). Here, Graybox acknowledged that it intended to dissipate the assets to

related entities, although it contended that much of the money was ultimately for

the benefit of non-related entities.

      As to the balance of equities, the district court evaluated Graybox’s

argument that multiple third parties would be affected by a freeze of the settlement

proceeds. The district court did not clearly err in finding that the third parties were

in fact related to Graybox or its principal, David Bergstein, and that Graybox had

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not shown that the attorneys who submitted declarations asserting that they were

owed fees were in fact so entitled.

      And, the district court did not clearly err in finding that the hardship to these

Graybox-affiliated entities and individuals did not outweigh the harm to

Wimbledon. Bergstein structured the settlement to direct the settlement proceeds to

Graybox “as a matter of convenience.” This is consistent with Bergstein’s prior use

of Graybox funds to pay his personal entertainment and gaming expenses, and

many others of a “highly private” and “personal” nature, “including but not limited

to payments to lawyers, investment activities, mortgage payments, rent payments,

charitable donations, and transfers of investment proceeds to/from [Bergstein] and

[his] wife.” And on Wimbledon’s side of the scale, Graybox identified no other

avenue through which Wimbledon could recover on its claim.

      Finally, Graybox argued that an injunction would negatively impact the

public interest because it would interfere with the litigation settlement. The district

court did not clearly err in determining that due to the relationship of the

potentially affected parties with Graybox, the public interest was not a significant

factor, and did not weigh against the issuance of an injunction.

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      As all factors weighed in favor of a preliminary injunction, the district court

did not abuse its discretion in issuing one.

      Appellant’s November 11, 2015 motion to supplement the excerpts of record

is granted.

      AFFIRMED

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