CCSAC, Inc. v. Pacific Banking Corp

Background

CCSAC, Inc. and CANN Distributors, Inc. filed claims against Pacific Banking Corp., Justin Costello, and GRN Funds, LLC. The claims included breach of contract, fraud, negligence, injunctive relief, and declaratory relief concerning indemnification. Plaintiffs alleged that they deposited more than $2.8 million with Pacific Banking under Capital Management Agreements; that Pacific Banking failed to carry out required transactions; and that it instead transferred some or all of the funds to accounts held by GRN Funds, which plaintiffs alleged was controlled by Costello.

Plaintiffs filed an ex parte motion for a temporary restraining order, meaning an emergency order issued before the opposing parties had an opportunity to be heard. They sought to preserve the deposited funds while their claims were resolved. Their declarations described a concern that Pacific Banking might immediately divert the remaining funds to other accounts, companies, or individuals. Plaintiffs’ attorney also certified the efforts made to provide notice and stated that the defendants could not be located in time for a hearing.

Court’s Analysis

Under Federal Rule of Civil Procedure 65(b), an ex parte temporary restraining order requires a clear showing that immediate and irreparable injury will occur before the opposing party can be heard, along with a written certification of the efforts to give notice and the reasons notice should not be required. The court found that the plaintiffs’ affidavits demonstrated the required threat of immediate and irreparable injury. It also found that the attorney had adequately certified the efforts to provide notice.

The order emphasized that an ex parte temporary restraining order should preserve the status quo and prevent irreparable harm only long enough for a hearing. The court determined that a bond was not required under Rule 65(c), given the nature of the case and the relief ordered.

Order

The court granted the ex parte temporary restraining order. Once they received actual notice of the order, Pacific Banking, Costello, GRN Funds, and their officers, agents, employees, attorneys, and others acting with them were prohibited from using, withdrawing, transferring, or otherwise reducing funds deposited with Pacific Banking by CCSAC or CANN without the plaintiffs’ express consent. They were also prohibited from deleting, destroying, editing, or otherwise altering records concerning the plaintiffs’ deposits, including transaction and deposit-balance records.

The order was issued at noon on April 8, 2020, and was set to expire on April 22, 2020. The court set a telephone hearing on a preliminary injunction for April 22 at 1:00 p.m. Plaintiffs were directed to file their preliminary-injunction motion by April 13. Under Rule 65(b)(4), the defendants could apply to the court for modification or dissolution of the order upon two days’ notice to the plaintiffs. Judge Donato signed the order.