PIXIOR, LLC VS JUST FUNKY, LLC, ET AL.

Tentative Rulings

Case Number: *******4033 Hearing Date: February 24, 2022 Dept: 85

Respondent Stunned Mind LLC (“Stunned Mind”) seeks a writ of possession against Petitioner Pixior LLC (“Pixior”) to recover $5.62 million of inventory ordered by Stunned Mind but put on hold by Pixior (“Merchandise”).

The court has read and considered the moving papers, opposition, and reply, and renders the following tentative decision.

A. Statement of the Case

Petitioner Pixior filed its Petition on December 10, 2021, seeking to correct or vacate an arbitration award of December 3, 2021. The Petition alleges in pertinent part as follows.

Pixior is a warehouse that stored merchandise on behalf of Stunned Mind and its affiliate, Just Funky, LLC (“Funky”), merchants of quirky, pop-culture kitchenware, home d cor, collectibles, and stationery.

Stunned Mind and Funky started using Pixior for warehousing services in March 2021. From the beginning, Pixior had difficulty collecting on its invoices. After five months of payment issues, Pixior enforced its warehouse lien under Commerical Code sections 7209 and 7210 and required full payment of all bills and vacation of goods from Pixior’s warehouses by December 20, 2021.

In the parties’ arbitration, Stunned Mind and Funky sought a preliminary injunction requiring Pixior to release the goods, primarily because the total amount sought by Pixior was “not yet due.” On December 3, 2021, the arbitrator granted the motion, issuing a preliminary injunction compelling Pixior to release the withheld merchandise by December 20, 2021. At the same time, the arbitrator ordered Stunned Mind to immediately pay Pixior $32,882.13.

Pixior asserts that the arbitrator’s preliminary injunction was an error of law and that the arbitrator acted beyond her authority and without competent evidence.

2. Course of Proceedings

According to proofs of service accompanying the memorandum of points and authorities, Respondants were served electronically on December 10, 2021.

On December 20, 2021, the I/C court denied Stunned Mind’s amended ex parte application for an order advancing the as yet not set hearing date on Petitioner Pixior’s petition to correct or vacate arbitrator award.

On December 29, 2021, the court (Department 1) denied Stunned Mind’s ex parte application for a temporary protective order and writ of possession against the Stunned Mind Merchandise that Pixior had retained in their warehouse.

B. Applicable Law

A writ of possession is issued as a provisional remedy in a cause of action for claim and delivery, also known as replevin. See Pillsbury, Madison & Sutro v. Schectman, (1997) 55 Cal.App.4th 1279, 1288. As a provisional remedy, the right to possession is only temporary, and title and the right to possess are determined in the final judgment.

A writ of possession is available in any pending action. It also is available where an action has been stayed pending arbitration, so long as the arbitration award may be ineffectual without provisional relief. See CCP 1281.7.

1. Procedure

Upon the filing of the complaint or at any time thereafter, a plaintiff may apply for an order for a writ of possession. Unlike attachment, where Judicial Council forms are optional, the parties must use the mandatory approved Judicial Council forms in a claim and delivery proceeding. (Judicial Council Forms CD-100 et seq.).

A plaintiff must make a written application for a writ of possession. CCP 512.010(a), (b); (Mandatory Form CD-100); CCP 512.010(a). A verified complaint alone is insufficient. 6 Witkin, California Procedure, (5th ed. 2008) 255, p.203. As a proceeding “on application before trial for an order,” a writ of possession qualifies as a Law and Motion. Cal. Rules of Court, Rule 3.1103(a). As such, it must also be accompanied by a memorandum in support of the motion. Cal. Rules of Court, Rule 3.1112(a)(3), 3.1113(a). The application may also be supported by declarations and/or a verified complaint. CCP 516.030. The declarations or complaint must set forth admissible evidence except where expressly permitted to be shown on information and belief. Id.

The application must be executed under oath and include: (1) A showing of the basis of the plaintiff's claim and that the plaintiff is entitled to possession of the property claimed. If the plaintiff's claim is based on a written instrument, a copy of it must be attached; (2) A showing that the property is wrongfully detained by the defendant, how the defendant came into possession of it, and, the reasons for the detention based on the plaintiff’s best knowledge, information, and belief; (3) A specific description of the property and statement of its value; (4) The location of the property according to the plaintiff’s best knowledge, information, and belief. If the property, or some part of it, is within a private place which may have to be entered to take possession, a showing of probable cause to believe that the property is located there; and (5) A statement that the property has not been taken for (a) a tax, assessment, or fine, pursuant to a statute, or (b) an execution against the plaintiff’s property. Alternatively, a statement that if the property was seized for one of these purposes, it is by statute exempt from such seizure. CCP 512.010(b).

2. The Hearing

Before noticing a hearing, the plaintiff must serve the defendant with all of the following: (1) A copy of the summons and complaint; (2) A Notice of Application and Hearing; and (3) A copy of the application and any supporting declaration. CCP 512.030(a). If the defendant has not appeared in the action, service must be made in the same manner as service of summons and complaint. CCP 512.030(b).

Each party shall file with the court and serve upon the other party any declarations and points and authorities intended to be relied upon at the hearing. CCP 512.050. At the hearing, the court decides the merits of the application based on the pleadings and declarations. Id. Upon a showing of good cause, the court may receive and consider additional evidence and authority presented at the hearing, or may continue the hearing for the production of such additional evidence, oral or documentary, or the filing of other affidavits or points and authorities. Id.

The court may order issuance of a writ of possession if both of the following are found: (1) The plaintiff has established the probable validity of the plaintiff’s claim to possession of the property; and (2) The undertaking requirements of CCP section 515.010 are satisfied. CCP 512.060(a). “A claim has ‘probable validity’ where it is more likely than not that the plaintiff will obtain a judgment against the defendant on that claim.” CCP 511.090. This requires that the plaintiff establish a prima facie case; the writ shall not issue if the defendant shows a reasonable probability of a successful defense to the claim and delivery cause of action. Witkin, California Procedure, (5th ed. 2008) 261, p.208. A defendant’s claim of defect in the property is not a defense to the plaintiff’s right to possess it. RCA Service Co. v. Superior Court, (1982) 137 Cal.App.3d 1, 3.

No writ directing the levying officer to enter a private place to take possession of any property may be issued unless the plaintiff has established that there is probable cause to believe that the property is located there. CCP 512.060(b).

The successful plaintiff may obtain a preliminary injunction containing the same provisions as a TRO that remains in effect until the property is seized by the levying officer.[1] CCP 513.010(c).

The court may also issue a “turnover order” directing the defendant to transfer possession of the property to the plaintiff (See Mandatory Form CD-120). The order must notify the defendant that failure to comply may subject him or her to contempt of court. CCP 512.070. The turnover remedy is not issued in lieu of a writ, but in conjunction with it to provide the plaintiff with a less expensive means of obtaining possession. See Edwards v Superior Court, (1991) 230 Cal.App.3d 173, 178.

3. The Plaintiff’s Undertaking

Generally, the court cannot issue an order for a writ of possession until the plaintiff has filed an undertaking with the court (Mandatory Form CD-140 for personal sureties). CCP 515.010(a). The undertaking shall provide that the sureties are bound to the defendant for the return of the property to the defendant, if return of the property is ordered, and for the payment to the defendant of any sum recovered against the plaintiff. Id. The undertaking shall be in an amount not less than twice the value of the defendant's interest in the property or in a greater amount. Id. The value of the defendant's interest in the property is determined by the market value of the property less the amount due and owing on any conditional sales contract or security agreement and all liens and encumbrances on the property, and any other factors necessary to determine the defendant’s interest in the property. Id.

However, where the defendant has no interest in the property, the court must waive the requirement of the plaintiff’s undertaking and include in the order for issuance of the writ the amount of the defendant’s undertaking sufficient to satisfy the requirements of CCP section 515.020(b). CCP 515.010(b).

C. Statement of Facts

1. Stunned Mind’s Evidence

Nitin Narang (“Narang”) is Sales Manager and Business Intelligence Manager for Stunned Mind. Narang Decl., 1. On November 19, 2021, when Pixior put Stunned Mind’s account on hold, inventory reports showed that the total value of Stunned Mind’s impounded merchandise was $7,019,951.86. Narang Decl., 3, Ex. B. Pixior then released 190 disorganized pallets of their products, making the inventory list for that shipment unreliable. Narang Decl., 3. By Stunned Mind’s best estimate, the total value of the remaining merchandise held by Pixior is at least $5.62 million. Narang Decl., 3.

During arbitration of Pixior’s unpaid invoices and lien on Stunned Mind’s Merchandise, Stunned Mind filed a cross-complaint on October 29, 2021 asserting (1) breach of contract, (2) negligence, (3) intentional interference with contract, (4) conversion, (5) Trespass to Chattel, (6) replevin/return or personal property, (7) anticipatory breach of contract, and (8) unfair business practices in violation of Business and Professions Code sections 17200 to 17208. Narang Decl., 4, Ex. D.

On December 3, 2021, the arbitrator ordered Pixior to release Stunned Mind’s goods after Stunned Mind paid $32,822.13. Narang Decl., 5, Ex. E. On December 6, 2021, the arbitrator upheld the order and confirmed that Stunned Mind has paid the amount owed. Narang Decl., 5, Ex. E.

Despite these facts, Pixior has not released the goods, instead asserting a new lien of $179,159.64 and creating logistical difficulties in Stunned Mind’s attempts to collect the Merchandise. Narang Decl., 6-7, Ex. F. Even if the new lien were valid – and it is not – the value of the Merchandise impounded is many times larger than the amount of the lien. Narang Decl., 9.

Pixior’s post-arbitraion lien confirms that the Merchandise was still in the warehouse at South Gate Location, 2601 Sequoia Drive, South Gate, CA 90280 (“Warehouse”) as of December 8, 2021. Narang Decl., 13, Ex. F. The Merchandise was not seized pursuant to a tax, assessment, statutory fine, or execution against Stunned Mind’s property. Narang Decl., 15.

2. Pixior’s Evidence

Pixior entered into an agreement with Stunned Mind and Funky for warehousing on March 25, 2021. Amallal Decl., 2, 4, Ex. 1. After struggling to collect on invoices for five months, Pixior began asserting liens against the goods, the most recent on December 8, 2021 for $156,601.13. Amallal Decl., 6, Ex. 2. Pixior terminated Stunned Mind and Funky as clients on December 20, 2021 with a 120-day notice. Amallal Decl., 7, Ex. 3. The amount owed, and therefore the lien, continues to grow until Stunned Mind retrieves its Merchandise, and as of December 27, 2021 the lien was $180,311.81. Amallal Decl., 8-9, Ex. 4. All Pixior wants is payment of the bill and for Stunned Mind to retrieve the rest of its goods. Amallal Decl., 10.

Two prior ex parte applications for the same writ of possession were both denied. The first, heard on December 20, 2021, failed to show an emergency. Ross Decl., 5, Ex. A.[2] The second, heard on December 29, 2021, failed to show either exigent circumstances or inadequacy of monetary damages. Ross Decl., 6, Ex. B.

On or about February 1, 2022, Pixior and Stunned Mind entered into a Stipulation for Posting Undertaking ("Stipulation"), which resolves the Application. Ross Decl., 7, Ex. C. Under its terms, Pixior would release the Merchandise upon Sound Mind’s posting of an undertaking in the amount of $406,985.14. Ross Decl., 7, Ex. C.

D. Analysis

Respondent Stunned Minds seeks a writ of possession to recover the Merchandise from Petitioner Pixior, noting that the arbitrator ruled that Pixior must release the Merchandise after Stunned Mind paid $32,822.13, and subsequently ruled that this amount has been paid.

Stunned Mind must show that it is entitled to possession of the Merchandise, which is being wrongfully detained by Pixior. Stunned Minds provides an order for a preliminary injunction for Pixior to return the Merchandise it is storing for Stunned Mind. Narang Decl., 5, Ex. E. Barring reversal or vacation by the I/C court, this order entitles Stunned Mind to the Merchandise.

Stunned Mind provides an inventory report of the Merchandise Pixior was withholding as of November 19, 2021. Narang Decl., 3, Ex. B. Pixior has since returned about $1.5 million of the merchandise, and Stunned Mind cannot determine which items were and were not returned. Narang Decl., 3, Ex. B. However, the inventory gives a definitive enough method of determining what to repossess – everything on the list that’s still in the Warehouse.

The December 8, 2021 lien lists the address where Pixior was keeping the merchandise at the time. Narang Decl., 6, Ex. F.

In opposition, Pixior asserts that a writ of possession must be filed by a plaintiff with a supporting claim and that Stunned Mind cannot pursue a writ of possession without filing counterclaims. CCP 512.060(a)(1) (writ of possession will issue if “plaintiff’s claim is probably valid”). Opp. at 6-7. It is generally true that a writ of possessioin must be supported by a claim for claim and delivery or replevin, either in a complaint or cross-complaint. As Stunned Minds asserts, however, Pixior’s position ignores the fact that Stunned Minds filed a cross-complaint with just such a claim in the underlying arbitration. Narang Decl., 4, Ex. D. Code of Civil Procedure section 1281.8(b) allows a party to an arbitration to seek provisional relief in court where an arbitration award may prove ineffectual. Stunned Mind has the right to apply for the provisional remedy of a writ of possession in connection with the parties’ arbitration without filing a cross-complaint in this matter.

Pixior also asserts that the reasons stated by the I/C court and Department 1 on December 20 and 29, 2021 for denying Stunned Mind’s two previous ex parte applications – particularly the absence of irreparable harm and adequacy of damages – also justify denying this writ of possession. Opp. at 5-6, 7; Ross Decl., 6, Ex. B. As Stunned Mind points out, however, an ex parte application requires a showing of emergency which is unnecessary for a noticed writ of possession. Reply at 2. The court may order issuance of a writ of possession if both of the following are found: (1) The plaintiff has established the probable validity of the plaintiff’s claim to possession of the property; and (2) The undertaking requirements of CCP section 515.010 are satisfied. CCP 512.060(a). Irreparable harm is not required for a noticed application for writ of possession.

Stunned Minds concedes that the parties have stipulated to resolve Pixior’s Petition pursuant to which Stunned Minds will post an undertaking of $406,985.14 to obtain the Merchandise. Ross Decl., 7, Ex. C. Stunned Minds suggests that, if the I/C judge does not issue the stipulated order prior to the instant hearing, the court should order a writ of possession on the same basis as the stipulation -- release of the Merchandise upon posting of a $406,985.14 bond. Reply at 1.

E. Conclusion

Respondent Stunned Mind is entitled to possession of the Merchandise until Pixior’s Petition to Vacate the Arbitration Decision is resolved. Thus, the application for writ of possession is granted. Per the parties’ stipulation, the bond shall be $406,985.14. The writ of possession and bond do not resolve Pixior’s Petition; that order will have to come from the I/C judge.