Oakberry SD UTC, LLC v. Oakberry Acai, Inc.

• Court: District Court, S.D. California
• Decided: November 13, 2023
• Docket: 3:23-cv-01883
• Status: Unknown

Opinion

7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 OAKBERRY SD UTC, LLC, a ) Case No.: 3:23-cv-01883-BEN-MSB California limited liability company, ) 12 ) ORDER DENYING PLAINTIFF Plaintiff, 13 ) OAKBERRY SD UTC, LLC’S EX v. ) PARTE APPLICATION FOR 14 ) TEMPORARY RESTRAINING OAKBERRY ACAI, INC., a Florida 15 corporation; GEORGIOS PUCCETTI ) ORDER ) 16 FRANGULIS, an individual; ) OAKBERRY USA LLC, a Delaware 17 limited liability company; RENATO ) ) 18 HAIDAR FILHO, an individual; HUGO ) [ECF No. 4] PANNUNZIO, an individual; 19 OAKBERRY CALIFORNIA LLC, a ) ) 20 California limited liability company; ) JOAO PAULO BIANCHINI, an 21 individual; RAFAEL WELLISCH, an ) ) 22 individual; and DOES 1 to 50, inclusive, ) 23 Defendants. )

28 1 Plaintiff Oakberry SD UTC, LLC (“Plaintiff”) brings this breach of contract suit 2 against the above captioned Defendants. Currently before the Court is Plaintiff’s Ex Parte 3 Application for a Temporary Restraining Order. ECF No. 4-1. Plaintiff seeks to enjoin 4 Defendants Oakberry Acai, Inc. (“Oakberry Acai”) and Georgios Puccetti Frangulis 5 (“Frangulis”) from proceeding with arbitration initiated in Miami, Florida. See generally 6 id. For the reasons set forth below, the Court DENIES Plaintiff’s Ex Parte Application 7 for a Temporary Restraining Order. 8 I. BACKGROUND 9 On September 11, 2023 Plaintiff filed suit against Defendants in the Superior Court 10 of California, County of San Diego alleging: (1) violation of the California Franchise 11 Investment Law, see Cal. Corp. Code sections 31000, et seq.; (2) breach of contract; (3) 12 intentional misrepresentation/fraudulent concealment; (4) violation of the California 13 Business & Professions Code, sections 17200, et seq.; (5) unjust enrichment; and (6) 14 declaratory relief. ECF No. 1-8. Plaintiff alleges that it entered into a purported Trademark 15 Licensing Agreement (“the Agreement”) with Defendants, when in reality, the agreement 16 was for the illegal sale of a franchise business. Id. at ¶¶ 16–26. Plaintiff alleges that 17 Defendants failed to make the required disclosures, violating relevant laws. Id. at ¶ 26. 18 Plaintiff contends that Defendants unilaterally terminated the Agreement when Plaintiff 19 refused to sign a Franchise Disclosure Document subsequently sent by Defendants. See 20 id. at ¶¶ 30–35. Plaintiff contends Defendants thus breached the Trademark Licensing 21 Agreement, causing Plaintiff to incur damages. 22 Per the parties’ briefing, on September 5, 2023—before Plaintiff filed suit but after 23 the parties began informal negotiations—Oakberry Acai and Frangulis initiated arbitration 24 proceedings with the American Arbitration Association’s (“AAA”) International Centre 25 for Dispute Resolution (“ICDR”) in Miami, Florida. ECF No. 5 at 2; ECF No. 4-1 at 8–9. 26 Plaintiff states that arbitration did not officially commence until September 19, 2023. Id. 27 Plaintiff asserts it obtained an ex parte hearing date in Superior Court to address the 28 arbitration issue, but that the first available date was on October 19, 2023. ECF No. 4-1 at 1 9. 2 On October 13, 2023, Defendants removed the case to this Court. ECF No. 1. On 3 October 18, 2023, Defendants filed a Motion to Compel Arbitration and Dismiss or Stay 4 the Action. ECF No. 3. On November 1, 2023, Plaintiff filed the instant Ex Parte 5 Application for a Temporary Restraining Order. ECF No. 4-1. On November 2, 2023, 6 Defendants filed an Opposition to Plaintiff’s Ex Parte Application. ECF No. 5. 7 II. DISCUSSION 8 To obtain a preliminary injunction, a plaintiff must show that: (1) they are likely to 9 succeed on the merits; (2) they are likely to suffer irreparable harm in the absence of relief; 10 (3) the balance of equities tips in their favor; and (4) their requested relief is in the public 11 interest. See Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 20 (2008). Here, Plaintiff 12 fails to establish irreparable harm. 13 Plaintiff argues it will suffer irreparable harm without the requested injunctive relief, 14 because “Plaintiff will be forced to expend significant resources defending itself and 15 asserting its counterclaims in an illegitimate arbitration in a venue that is unlawful by 16 statute and legal precedent.” ECF No. 4-1 at 17. Plaintiff explains that if it refuses to 17 participate in the Miami arbitration, “the ICDR has expressly stated it would continue the 18 arbitration and that Plaintiff would not be able to assert its counterclaims, would not be 19 able to participate in arbitrator selection, and could have an award rendered against it 20 without any recourse.” Id. Plaintiff therefore argues that if it continues to participate in 21 the Miamai arbitration, it risks waiving its right to challenge arbitration. Id. Defendants 22 counter that Courts have repeatedly rejected Plaintiff’s argument, finding the burden of 23 proceeding with arbitration insufficient to constitute irreparable harm. Given the facts of 24 this case, Court agrees with Defendants. 25 Certain courts have held that forcing a party to proceed with arbitration can 26 constitute irreparable harm. See, e.g., Textile Unlimited, Inc. v. A..BMH & Co., 240 F.3d 27 781, 786 (9th Cir. 2001) (holding that the district court’s finding of irreparable harm was 28 not clearly erroneous, where the parties sought to enjoin arbitration); Aguilera v. Matco 1 Tools Corp., No. 319-cv-01576-AJB-AHG, 2020 WL 515908, at *7 (S.D. Cal. Jan. 31, 2 2020) (holding that plaintiffs would suffer irreparable harm by being forced to litigate 3 actions in an improper forum); World Grp. Sec. v. Tiu, No. CV 03-2609 NM SHSX, 2003 4 WL 26119461, at *7 (C.D. Cal. July 22, 2003) (“[F]orcing Plaintiff to arbitrate would 5 deprive it of its right to choose a forum and result in simultaneous litigation of this dispute 6 in two forums, causing Plaintiff to expend time and incur additional legal expenses for 7 which it has no adequate remedy at law.”). However, there is another line of cases holding 8 otherwise. See, e.g., Camping Const. Co. v. Dist. Council of Iron Workers, 915 F.2d 1333, 9 1349 (9th Cir. 1990) (“The district court’s principal error lies in its assumption that 10 unnecessarily undergoing arbitration proceedings constitutes irreparable injury. That is 11 simply not the case. First, the party objecting to arbitration might well suffer no harm at 12 all, irreparable or otherwise, for the arbitration panel might decide in its favor.”); Stanchart 13 Sec. Int’l, Inc. v. Gavaldon, No. 12-cv-02522-LAB-MDD, 2012 WL 5471933, at *2 (S.D. 14 Cal. Nov. 9, 2012) (explaining that because any arbitration award on non-arbitrable issues 15 may be vacated, the plaintiffs would suffer no irreparable loss if arbitration proceeds). 16 Given the context of this case in particular, the record does not support a finding of 17 irreparable harm. First, there is already a Motion to Compel Arbitration before the Court. 18 The hearing date for that motion is November 27, 2023. As such, the question of whether 19 the parties will be compelled to arbitration will be resolved in the near future, and there is 20 no indication that the Miami arbitration will resolve before this Court rules on Defendants’ 21 Motion to Compel.1 Second, delay and even costs associated with proceeding in 22 arbitration, alone, are not enough to constitute irreparable harm. In re Cintas Corp. 23 Overtime Pay Arb. Litig., No. C 06-1781 SBA, 2009 WL 1766595, at *5 (N.D. Cal. June 24 22, 2009) (“[A]ny additional cost resulting from the Respondents' involvement in the 25 pending arbitration, as a matter of law, does not constitute irreparable harm.”); cf. Andrade 26 27 1 It also appears that the ICDR provided a ten-day extension of pending deadlines in the arbitration proceedings after being notified of Defendants’ Motion to Compel 28 1 v. P.F. Chang's China Bistro, Inc., No. 12-cv-02724 JLS-MDD, 2016 WL 4098210, at *3 2 (S.D. Cal. Aug. 2, 2016) (citing In re Sussex, 781 F.3d 1065, 1075 (9th Cir. 2015) 3 (explaining that cost and delay alone do not amount to irreparable injury in the context of 4 a request to review a non-final decision arbitration decision)). 5 Third, Plaintiff’s argument that its rights will be waived is unpersuasive, because 6 Plaintiff is actively asserting its position that arbitration should not be compelled, in 7 addition to contesting the location of the ongoing arbitration proceedings. And in the 8 unlikely event that the arbitrator renders a decision prior to this Court resolving 9 Defendants’ Motion to Compel Arbitration, there is no indication that Plaintiff is likely to 10 obtain an unfavorable result. If this Court finds that non-arbitrable issues are decided 11 adversely to Plaintiff in arbitration, Plaintiff has recourse to vacate the decision. See 12 Camping Const., 915 F.2d at1349 (“[A]ny arbitral award obtained by the party seeking 13 arbitration will have no preclusive effect in a subsequent confirmation or vacatur 14 proceeding as long as the objecting party has reserved its right to a judicial, rather than 15 arbitral, determination of arbitrability.”); Stanchart Sec. Int’l, No. 12-cv-02522-LAB- 16 MDD, 2012 WL 5471933, at *2 (citing Textile Unlimited, 240 F.3d at 786) (“If it turns out 17 that the award improperly decides non-arbitrable issues and is adverse to Plaintiffs, they 18 have an adequate remedy at law, i.e., they may have it vacated. Thus, it does not appear 19 Plaintiffs would suffer irreparable loss if the arbitration proceeds.”). However, seeing that 20 arbitration proceedings commenced in late September 2023, a decision from this Court will 21 likely be rendered prior to any final decision in arbitration. As stated in Plaintiff’s briefing, 22 ICDR communicated that proceedings will continue absent a court order, meaning this 23 Court’s decision on Defendants’ Motion to Compel Arbitration could halt proceedings.2 24 See ECF No. 4-1 at 8. 25

26 2 Because the Court is denying Plaintiff’s Ex Parte Application based on a lack of 27 irreparable harm, it does not entertain whether its order arbitration will be binding on arbitration proceedings occurring in Miami, Florida. If necessary, the issue will be 28 1 Fourth, the Court notes that the case was removed to federal court on October 13, 2 2023 and that Plaintiff waited until November 2, 2023 to file its Motion for Temporary 3 Restraining Order—over two weeks after Defendants filed their Motion to Compel 4 Arbitration, on October 18, 2023. The Court thus questions the imminence of the supposed 5 harm, given Plaintiff’s delay in bringing the issue to this Court’s attention. “The Ninth 6 Circuit has held that delays in seeking relief should be considered when determining 7 whether preliminary injunctive relief should be granted.” Stanchart Sec. Int’l, No. 12-cv- 8 02522-LAB-MDD, 2012 WL 5286952, at *2 (citing Miller ex rel. NLRB v. Cal. Pac. Med. 9 Ctr., 991 F.2d 536, 544 (9th Cir.1993); Lydo Enterprises v. City of Las Vegas, 745 F.2d 10 1211, 1213 (9th Cir.1984). The record before the Court provides no reason justifying 11 Plaintiff’s delay in filing its Ex Parte Application.3 12 Finally, although the Court makes no express findings as to whether Plaintiff is likely 13 to succeed on the merits, it does note that an arbitration clause is present in the relevant 14 Trademark Licensing Agreement. Although Plaintiff argues the arbitration provision is 15 not enforceable, on its face, the Court cannot determine exactly how the Agreement should 16 be interpreted without fully developing the record. The parties assert complex, competing 17 arguments as to whether and where arbitration could be compelled, as well as the law to be 18 applied. Furthermore, the parties point to no provision in the Agreement stating where 19 exactly any potential arbitration should occur. As such, this case is distinguishable from 20 Textile Unlimited—the one Ninth Circuit decision affirming a finding of irreparable harm 21 if plaintiffs were forced to proceed in arbitration. There, the arbitration provision was 22 included in supplemental terms that one party never agreed to. See Textile Unlimited, 240 23

24 3 It appears the parties began negotiating a potential stipulation to arbitrate (initiated 25 by Defendants) on October 25, 2023. ECF No. 4-1 at 10. These negotiations fell through around October 30, 2023, and Plaintiff advised Defendants that it would request a 26 temporary restraining order. Id. However, the case was removed to federal court on 27 October 13, 2023, and Defendants Motion to Compel Arbitration was filed on October 18, 2023. Plaintiff does not state why it waited to file its Ex Parte Application and the Court 28 1 F.3d at 788. Here, Plaintiff admits to entering the Trademark Licensing Agreement— 2 which contains the arbitration clause at issue—but argues it is unenforceable for other 3 reasons. Based on these facts, Textile Unlimited is not applicable for purposes of Plaintiff’s 4 Ex Parte Application. 5 For the reasons set forth above, the Court holds that Plaintiff has not established that 6 it is likely to suffer irreparable harm absent a temporary restraining order. Irreparable harm 7 is required to obtain such relief. See Herb Reed Enterprises, LLC v. Fla. Ent. Mgmt., Inc., 8 736 F.3d 1239, 1249–50 (9th Cir. 2013). Because the Court finds no irreparable harm, it 9 need not address the other factors and requirements necessary to obtain a temporary 10 restraining order. See id. at 1251 (“In light of our determination that the record fails to 11 support a finding of likely irreparable harm, we need not address the balance of equities 12 and public interest factors.”); Stanchart Sec. Int’l, No. 12-cv-02522-LAB-MDD, 2012 WL 13 5286952, at *3 (“The Court therefore holds that the ‘irreparable harm’ requirement is not 14 met. The Court need not analyze all the other Winter factors because it is clear Plaintiffs 15 cannot satisfy this test.”). 16 III. CONCLUSION 17 As set forth above, Plaintiff’s Ex Parte Application for a Temporary Restraining 18 Order is DENIED. 19 IT IS SO ORDERED. 20 DATED: November 13, 2023 HON. ROGER T. BENITEZ 21 United States District Judge 22 23 24 25 26 27 28