Malley v. San Jose Midtown Development LLC
- Edward Davila
- 5:20-cv-01925
- U.S. District Court · Northern District of California
- 3
In Malley v. San Jose Midtown Development LLC, Judge Davila denied Malley’s request for a temporary restraining order.
Gregory Malley, San Jose Midtown Development LLC, Sangeeth Peruri, and Thomas Malgesini; the order denied Malley’s request for emergency injunctive relief but did not decide the underlying contract or civil RICO claims.
What happened
In Malley v. San Jose Midtown Development LLC, Gregory Malley claimed that agreements allowed the defendants to charge allegedly illegal interest and withhold part of his share from a property sale. He also challenged an agreement allowing one defendant to take $250,000 from his sale proceeds.
Malley asked the court to temporarily stop San Jose Midtown Development LLC from enforcing those agreements and distributing some of the sale proceeds. The court said he had to show a significant threat of harm that money could not later repair.
The court found that Malley’s alleged injuries were financial and could be addressed with money damages. It therefore denied the temporary restraining order, and Judge Edward J. Davila signed the order.
The detailed version
- Malley v. San Jose Midtown Development LLC · No. 5:20-cv-01925
- Edward Davila
- Mar. 19, 2020
Background
Gregory Malley sued San Jose Midtown Development LLC, Sangeeth Peruri, and Thomas Malgesini under California contract law and the federal civil Racketeer Influenced and Corrupt Organizations Act. Peruri led an investment consortium holding a majority stake in San Jose Midtown Development LLC, and Malgesini belonged to that majority group.
In 2014, Malley and two other investors contributed property at 777 West San Carlos Street in San Jose to San Jose Midtown Development LLC. An amended operating agreement gave Malley a 16.66% economic interest in the company. The company later agreed to sell the property. Escrow closed on March 18, 2020, and the $11.2 million sale proceeds were deposited into the company’s bank account on March 19, 2020.
Malley alleged that Peruri forced minority stakeholders to bear development costs by retiring debt carrying 10% interest and requiring minority members to take loans carrying interest rates from 20% to 40%. Malley alleged that two amendments to the company’s operating agreement authorized the company to charge allegedly illegal interest, change the operating agreement without unanimous written consent, and withhold a member’s distribution unless the member waived claims against the company. He alleged that the defendants planned to deduct fees from his share of the sale proceeds and withhold the rest because he would not waive his claims.
Malley also had a joint venture agreement with Malgesini under which Malgesini loaned him $200,000. The agreement allowed Malgesini to take $250,000 from Malley’s property-sale proceeds if Malley had not repaid the loan before escrow closed.
Motion and legal standard
Malley moved for a temporary restraining order, which is an emergency order temporarily preventing specified conduct. He asked the court to stop San Jose Midtown Development LLC from enforcing the challenged provisions and from distributing 15% of the property-sale proceeds. The court noted that the same legal standard applies to a temporary restraining order and a preliminary injunction: the plaintiff must show a likelihood of success, likely irreparable harm without relief, favorable balancing of the hardships, and that an injunction serves the public interest. For a temporary restraining order, the plaintiff must show a significant threat of irreparable injury.
Ruling
The court held that Malley had not shown a significant threat of irreparable harm. It found that his asserted injuries were economic, including the alleged withholding of property-sale proceeds and the claimed inability to retain counsel. Malley did not cite support for treating an inability to retain counsel as irreparable harm or explain why he could not obtain contingency-fee representation.
The court further held that Malley’s requested relief—including treble damages, a finding that the defendants improperly withheld money, and other special damages—could be addressed through monetary damages. Because Malley had not met the irreparable-harm requirement, the court denied his motion for a temporary restraining order. His request concerning the distribution of 15% of the sale proceeds was moot because that amount had already been distributed.
Read the full 3-page opinion on CourtListener, the free public archive maintained by the Free Law Project.