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Solar Eclipse Investment Fund XXXV, LLC v. $5

United States District Court, D. South Carolina, Beaufort Division

April 30, 2019

Solar Eclipse Investment Fund XXXV, LLC and East West Bank, Plaintiffs,
v.
$5, 000, 000.00 U.S. Dollars Deposited to IOLTA Account of the Strauss Law Firm, LLC in rem, and The Strauss Law Firm, LLC, in personam, Defendants.

          ORDER AND OPINION

          RICHARD MARK GERGEL UNITED STATES DISTRICT COURT JUDGE

         Before the Court is Plaintiffs' motion for a temporary restraining order. (Dkt. No. 8.) For the reasons set forth below, the motion for a temporary restraining order is granted.

         I. Background

         Plaintiffs East West Bank ("EWB") and Solar Eclipse Investment Fund XXXV ("Fund XXXV") allege that EWB entered into an agreement with Halo Management Services, LLC ("Halo"), wherein EWB was the investor member and Halo the managing member of Fund XXXV, an investment vehicle created to own, operate and lease mobile solar generators from DC Solar. (Dkt. No. 1118, 10.) Pursuant to the Fund XXXV agreement, Halo was responsible for handling EWB's investments into Fund XXXV in accordance with the agreement's terms and conditions and Halo's fiduciary obligations. (Id. 1114-15.) EWB invested in Fund XXXV via two deposits, including a deposit into Fund XXXV of$5, 000, 000 on December 17, 2018. On or about December 13 through 18, 2018, federal search and seizure warrants were executed on Halo and affiliates of DC Solar, purportedly for an investigation into money laundering and wire fraud. (Id. 1117-18.) On December 19, 2018, Halo transferred $5, 000, 000 out of Fund XXXV into the IOLTA account of Defendant The Strauss Law Firm, LLC ("Strauss Law Firm")[1], without notice to EWB or authority under the Fund XXXV agreement (the "funds"). (Id. ¶ 19, No. 8-1.) EWB with Fund XXXV, including through its newly-appointed manager, requested from Halo and Defendant Strauss Law Firm an accounting of the $5, 000, 000 transfer into the IOLTA account, which they have failed to provide. (Id. ¶¶ 11, 22, No. 9-2 at 8-12.)

         On April 23, 2019, Plaintiffs initiated this lawsuit seeking (1) in rem jurisdiction of the $5, 000, 000, (2) declaratory judgment finding Strauss Law Firm unlawfully in control of the funds and ordering return to Plaintiffs, and (3) an accounting from Strauss Law Firm of its subsequent disbursements of the funds. (Id. ¶¶ 23-32.)

         On April 24, 2019, Plaintiffs moved for the instant temporary restraining order ("TRO") and preliminary injunction against Defendant Strauss Law Firm. (Dkt. Nos. 8, 9.) On April 26, 2019, Plaintiffs served the motion for a TRO and preliminary injunction on Strauss Law Firm. (Dkt. No. 10 at 1.) On April 29, 2019, Plaintiffs moved for an expedited hearing on the motion for a preliminary injunction. (Dkt. No. 10.) On April 30, 2019, the Court granted the motion for an expedited hearing (Dkt. No. 11), noticed a hearing on the motion for a preliminary injunction for May 6, 2019 and directed Strauss Law Firm to respond in opposition by May 3, 2019 (Dkt. No. 12).

         II. Legal Standard

         Rule 65 of the Federal Rules of Civil Procedure provides that the Court may issue a TRO without written or oral notice to the adverse party or its attorney "if specific facts in an affidavit or a verified complaint clearly show that immediate and irreparable injury, loss, or damage will result to the movant before the adverse party can be heard in opposition." Fed.R.Civ.P. 65(b). Rule 65(b) also requires that "the movant's attorney certifies in writing any efforts made to give notice and the reasons why [notice] should not be required." Fed.R.Civ.P. 65(b)(1)(B).

         The Court may issue a TRO upon the movant's showing of the four factors also required to warrant a preliminary injunction: (1) the movant's likelihood of success on the merits, (2) whether the movant will face irreparable harm in the absence of preliminary relief, (3) whether the balance of equities favors preliminary relief, and (4) whether injunctive relief is in the public interest. Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 20 (2008); see also Moore v. Kempthorne, 464 F.Supp.2d 519, 525 (E.D. Va.2006) ("The standard for granting either a TRO or a preliminary injunction is the same.").

         III. Discussion

         A. Notice to Strauss Law Firm, Pursuant to Rule 65(b)

         Rules 65(b)(1) governs under what circumstances the Court may issue a TRO "without written or oral notice to the adverse party or its attorney," and Rule 65(b)(2) mandates the contents and expiration of a TRO issued without such notice. Plaintiffs' motion for a TRO was not filed ex parte and Plaintiffs' counsel certifies that she notified Strauss Law Firm of the motion by personal service on Friday, April 26, 2019. (Dkt. No. 10 at 1, No. 13.)

         B. Satisfaction of the Winter Standard

         The Court finds that Plaintiffs have sufficiently demonstrated each of the four Winter factors to ...


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