Patel v. AR Group Tennessee, LLC

IN THE UNITED STATES DISTRICT COURT FOR THE

MIDDLE DISTRICT OF TENNESSEE

NASHVILLE DIVISION

RAJENDRA PATEL, NAVNEET PATEL, )

and NAVRAJ GROUP, LLC (a Tennessee )

Limited Liability Company), )

) NO. 3:20-cv-00052

Plaintiffs, ) JUDGE RICHARDSON

)

v. )

)

AR GROUP TENNESSEE, LLC (a New )

Jersey Limited Liability Company), ALI S. )

BUTT, MOURAD ELAYAN, and )

DINESH GOSWAMI, )

)

Defendants. )

MEMORANDUM OPINION AND ORDER

Pending before the Court is Plaintiffs’ Motion for Preliminary Injunction, Appointment of

a Receiver, and for an Accounting (Doc. No. 23, “Motion”), filed on April 13, 2020 by Plaintiffs

Rajendra Patel, Navneet Patel, and Navraj Group, LLC (“Navraj Group”), together with a

memorandum in support (Doc. No. 24, “Plaintiffs’ Opening Memorandum”). Defendants AR

Group Tennessee, LLC (“AR Group”), Ali S. Butt, Mourad Elayan, and Dinesh Goswami have

filed a response (Doc. No. 26, “Response”), and Plaintiffs have filed a reply (Doc. No. 29,

“Reply”). For the reasons discussed below, Plaintiffs’ Motion is DENIED.

BACKGROUND1

A. Factual Background

AR Group owns and operates eleven Popeyes Louisiana Kitchen Restaurants (“Popeyes”)

in Nashville, Tennessee. (Doc. No. 1-2). On or around June 5, 2017, the parties executed a

Partnership Agreement, whereby Navraj Group was to obtain 15 percent ownership of AR Group

as of November 1, 2017; Rajendra Patel and Navneet Patel each signed the document on behalf of

Navraj Group. (Doc. No. 1-2 at 11-14).2 On or around March 7, 2018, the parties executed a First

Amendment to the Operating Agreement of AR Group, with Ali Butt selling Plaintiffs Rajendra

Patel and Navneet Patel 15 percent ownership in the partnership and making them limited partners.

(Doc. No. 1-2 at 5). These two documents represent the entirety of the agreement(s) between the

two parties. Plaintiffs invested $250,000 and moved to Tennessee to operate the business. (Doc.

No. 24 at 1). Plaintiffs currently own 15% of the partnership and the partnership properties. (Doc.

No. 1-2 at 16). Defendants Ali Butt, Mourad Elayan, and Dinesh Goswami own the remaining

55%, 15%, and 15% of the partnership, respectively. (Doc. No. 1-2 at 16).

On or about April 6, 2020, Plaintiffs were terminated from operating Popeyes franchises.

(Doc. No. 24-1 at 1). Plaintiffs claim that (1) Defendants improperly terminated Plaintiffs’

operation of the restaurants, (2) Defendants have essentially cut Plaintiffs out of the partnership,

(3) Defendants have hired illegal aliens resulting in fines from the U.S. Department of Labor and

1 The following facts, unless somehow qualified herein, are taken as true for purposes of the

Motion, because they are either: (1) asserted and evidentially supported at least to some degree by

one party and not rebutted by the other side; (2) otherwise not in genuine dispute; (3) asserted and

evidentially supported by one side to such an extent, or in such a manner, that they are credited by

this Court even if rebutted to some extent by the other side; or (4) subject to judicial notice.

2 Herein, cited page numbers are the numbers stamped on the applicable pages by the Clerk’s

Office, which may differ from the page numbers placed on the document by the author/filer of the

document.

a pending investigation by state and federal authorities, and (4) Defendants have filed a false

damage claim with an insurance company. (Doc. No. 24-1 at 2–3). Defendants claim that Plaintiffs

poorly operated the restaurants at issue, were repeatedly warned of their lacking performance, and

were terminated in accordance with the agreement between the parties. (Doc. No. 27 at 2–3).

B. Procedural History

On December 18, 2019, Plaintiff commenced this action by filing a Complaint (Doc. No.

1-2) in the Chancery Court for Williamson County, Tennessee.3 On January 17, 2020, Defendants

3 Plaintiffs also filed an Amended Complaint on June 9, 2020, notably after the filing of the present

Motion. (Doc. No. 36). The Amended Complaint re-alleges claims of intentional

misrepresentation, conversion, and an action for an accounting, which are similar to the counts in

their original Complaint that are referenced in the present Motion. (Doc. No. 1-2). The Amended

Complaint combines the counts of intentional misrepresentation, rehashes the conversion count,

and adds some detail. (Doc. No. 36 at 13-15). Attached to the Amended Complaint is some

supporting documentation, including a spreadsheet that allegedly represents when illicit payments

were made. (Doc. No. 36-3). The Amended Complaint also adds four claims for violation of RICO,

breach of contract, retaliatory discharge, and breach of fiduciary duty. (Doc. No. 36). The Court

has considered only the allegations in the original Complaint and the memoranda associated with

the preliminary injunction in rendering its decision. When an amended complaint is filed after a

preliminary injunction, some courts have found the motion for a preliminary injunction to be moot.

Gentry v. Tennessee Bd. of Judicial Conduct, No. 3:17-0020, 2017 WL 2417829, at *2 (M.D.

Tenn. June 5, 2017), objections overruled sub nom. Gentry v. Tennessee, No. 3:17-CV-0020, 2017

WL 3034695 (M.D. Tenn. July 18, 2017); OnX USA LLC v. Sciacchetano, No. 1:11CV2523, 2013

WL 950512, at *1 (N.D. Ohio Mar. 7, 2013). Other courts have ruled on a preliminary injunction

motion filed prior to an amended complaint to the extent the plaintiffs have shown a likelihood of

success on the merits. Vita-Mix Corp. v. Tristar Prod., Inc., No. 1:07 CV 275, 2008 WL 11383504,

at *1 n.1 (N.D. Ohio Sept. 30, 2008) (noting the subsequent filing of a Second Amended Complaint

and addressing the additional claim in the Second Amended Complaint in ruling on the preliminary

injunction motion); Griffin v. Countrywide Home Loan Servicing, LP, No. 2:11-CV-00953-GMN,

2012 WL 1079187, at *1 (D. Nev. Mar. 30, 2012), aff’d sub nom. Griffin v. Countrywide Home

Loans Servicing, L.P., 592 F. App’x 586 (9th Cir. 2015) (addressing merits of preliminary

injunction motion despite the subsequent filing of an amended complaint); 3M Co. v. Christian

Investments LLC, No. 1:11CV627, 2011 WL 3678144, at *2 (E.D. Va. Aug. 19, 2011) (considering

preliminary injunction despite subsequent amended complaint adding and dropping various

parties). After filing the Amended Complaint, Plaintiffs never filed an amendment to the present

Motion; indeed, in prosecuting this Motion, Plaintiffs never relied on the Amended Complaint nor

otherwise gave the Court reason to believe that the Amended Complaint somehow increased (or

reflected an increase in) their likelihood of success on the merits. Because the present Motion was

based solely on the original Complaint, the Court has cited throughout this opinion to the original

removed this action to (this) federal court. (Doc. No. 1). On April 13, 2020, Plaintiffs filed the

instant Motion. (Doc. No. 23). Plaintiffs also filed a Memorandum of Facts and Law in support of

the Motion. (Doc. No. 24). Defendants filed their Response on April 27, 2020. (Doc. No. 26).

Plaintiffs filed their Reply on May 4, 2020. (Doc. No. 29).

LEGAL STANDARD

The Sixth Circuit has held that the district court must balance four factors when considering

a motion for preliminary injunction under Federal Rule of Civil Procedure 65: (1) whether the

movant has a strong likelihood of success on the merits; (2) whether the movant would suffer

irreparable injury without the injunction; (3) whether the issuance of the injunction would cause

substantial harm to the opposing party or others; and (4) whether the public interest would be

served by the issuance of the injunction. Bays v. City of Fairborn, 668 F.3d 814, 818–19 (6th Cir.

2012). The second of these factors, irreparable injury absent the injunction, must be present in

order for the Court to issue the requested preliminary injunction. See, e.g., Friendship Materials,

Inc. v. Mich. Brick, Inc., 679 F.2d 100, 105 (6th Cir. 1982) (“Whatever the merits of the alternate,

or ‘balance of hardships’ test may be, the purpose of the test is surely not to eliminate the

irreparable harm requirement.”). Otherwise, though, these four items are not prerequisites that

must be satisfied in order for a preliminary injunction to be issued, but rather factors to be balanced

Complaint. The Court notes that the Amended Complaint closely tracks the original Complaint as

to the three state law claims discussed in the present Motion. The Amended Complaint does add

some additional factual allegations, but Plaintiffs at no point argue that these increase the

likelihood of success on the merits. Regardless, the Court would find these additional allegations

insufficient to carry Plaintiffs’ burden in a preliminary injunction motion. Despite the discussion

of the original Complaint throughout this opinion, the Court recognizes that the legally operative

complaint in this matter at this time is the Amended Complaint. See Parry v. Mohawk Motors of

Mich., Inc., 236 F.3d 299, 306 (6th Cir. 2000).

against one another based on their respective strength relative to one another. See D.T. v. Sumner

Cty. Schools, 942 F.3d 324, 326–27 (6th Cir. 2019) (citations omitted).4

Regarding the second factor, irreparable harm, “even the strongest showing on the other

three factors cannot eliminate the irreparable harm requirement. That factor is indispensable.” Id.

(citation and internal quotation marks omitted); see also Patio Enclosures, Inc. v. Herbst, 39 F.

App’x 964, 967 (6th Cir. 2002) (“The demonstration of some irreparable injury is a sine qua non

for issuance of an injunction.”). In other words, “although the extent of an injury may be balanced

against other factors, the existence of an irreparable injury is mandatory.” Sumner Cty. Sch., 942

F.3d at 327. Thus, a district court abuses its discretion if it grants a preliminary injunction without

making specific findings of irreparable injury. Id.5 And to merit a preliminary injunction, an injury

must be both certain and immediate, not speculative or theoretical. Id.

4 The Court is aware that confusion was created when language in some cases appeared to state

that a “balance of hardships” test was an alternative to the traditional irreparable harm test for

injunctive relief. See Friendship Materials, Inc., 679 F.2d at 105. The balance of hardships test,

however, does not eliminate the irreparable harm requirement. Id. As the Sixth Circuit noted last

year:

Courts sometimes describe this inquiry as a balancing test. See, e.g., Certified

Restoration Dry Cleaning Network, L.L.C. v. Tenke Corp., 511 F.3d 535, 542 (6th

Cir. 2007); In re Eagle-Picher Indus., Inc., 963 F.2d 855, 859 (6th Cir. 1992). And

that’s true, to an extent; district courts weigh the strength of the four factors against

one another. But even the strongest showing on the other three factors cannot

“eliminate the irreparable harm requirement.” That factor is indispensable: If the

plaintiff isn't facing imminent and irreparable injury, there’s no need to grant relief

now as opposed to at the end of the lawsuit. That’s why this circuit has held that a

district court abuses its discretion “when it grants a preliminary injunction without

making specific findings of irreparable injury[.]” Thus, although the extent of an

injury may be balanced against other factors, the existence of an irreparable injury

is mandatory.

Sumner Cty. Schools, 942 F.3d at 326–27 (citations omitted).

While the absence of irreparable injury is always fatal to a motion for a preliminary

injunction, “[a] finding that there is simply no likelihood of success on the merits is usually fatal.”

Gonzalez v. Nat’l Bd. of Medical Exam’rs, 225 F.3d 620, 625 (6th Cir. 2000) (emphasis added).

“A preliminary injunction is an extraordinary remedy which should be granted only if the movant

carries his or her burden of proving that the circumstances clearly demand it.” Overstreet v.

Lexington-Fayette Urban County Government, 305 F.3d 566, 573 (6th Cir. 2003). “The party

seeking a preliminary injunction bears a burden of justifying such relief, including showing

irreparable harm and likelihood of success.” Kentucky v. U.S. ex rel. Hagel, 759 F.3d 588, 600

(6th Cir. 2014) (quoting Michigan Catholic Conf. & Catholic Family Servs. v. Burwell, 755 F.3d

372, 382 (6th Cir. 2014)).

Plaintiffs seeking a preliminary injunction may not merely rely on unsupported allegations,

but rather must come forward with more than “scant evidence” to substantiate their allegations.

See e.g., Libertarian Party of Ohio v. Husted, 751 F.3d 403, 417 (6th Cir. 2014); Cameron v.

Bouchard, 815 F. App’x 978, 986 (6th Cir. 2020) (vacating preliminary injunction when plaintiffs

made no evidentiary showing on some elements of their claim, but instead made mere allegations

regarding the treatment of Covid-19 in prisons); McNeilly v. Land, 684 F.3d 611, 614 (6th Cir. 2012)

(upholding denial of preliminary injunction when plaintiff made only a “small showing” of evidence);

United States v. Certain Land Situated in City of Detroit, No. 95-1118, 1996 WL 26915, *1 n.1

(6th Cir. Jan. 23, 1996) (noting a lack of evidence to support speculative allegations); Boulding v.

Corr. Med. Servs., No. 1:06-CV-811, 2008 WL 2095390, at *1 (W.D. Mich. Feb. 11, 2008), report

and recommendation adopted, No. 1:06-CV-811, 2008 WL 2095387 (W.D. Mich. May 15, 2008)

(“Plaintiff did not marshal any evidence in support of his motion [for a preliminary injunction].

Plaintiff’s unsupported allegations do not suffice”. (citations omitted)). In deciding a motion for

preliminary injunction, a court may consider the entire record, including affidavits and other

hearsay evidence. Sterling v. Deutsche Bank Nat’l Tr. Co., 368 F. Supp. 3d 723, 725 (S.D. N.Y.

2019); J.S.R. by & through J.S.G. v. Sessions, 330 F. Supp. 3d 731, 738 (D. Conn. 2018). In

conducting the preliminary injunction analysis, the Court is not limited to the four corners of the

complaint but rather may rely on affidavits and hearsay materials which would not be admissible

evidence for a permanent injunction, if the evidence is appropriate given the character and

objectives of the injunctive proceeding. Express Franchise Servs., L.P. v. Impact Outsourcing

Sols., Inc., 244 F. Supp. 3d 1368, 1379 (N.D. Ga. 2017); Action NC v. Strach, 216 F. Supp. 3d

597, 629 (M.D.N.C. 2016) (explaining that district courts may look to, and indeed in appropriate

circumstances rely on, hearsay or other inadmissible evidence when deciding whether a

preliminary injunction is warranted).

Notably, the decision whether to grant a preliminary injunction is a matter within the

discretion of the district court. Tenn. Scrap Recyclers Ass'n v. Bredesen, 556 F.3d 442, 447 (6th

Cir. 2009).

DISCUSSION

I. Preliminary Injunction6

Plaintiffs have moved for a preliminary injunction enjoining Defendants from selling AR

Group or, alternatively, if the company is sold, to have the assets held by a receiver pending further

orders of the Court. (Doc. No. 23 at 1). Plaintiffs have also moved for a full accounting and access

to Defendants’ books and records and for appointment of a receiver. (Doc. No. 23 at 1). At this

juncture, the Court is not deciding the ultimate merits of Plaintiffs’ case against Defendants.

Rather, the Court is called upon to determine whether Plaintiffs have presented evidence sufficient

to show that a preliminary injunction is warranted at this time. As discussed below, the Court

6 The Court has taken the effort to go through each of the four factors of a preliminary injunction.

However, the Court again emphasizes that the grant of a preliminary injunction is in the discretion

of the district judge. Even if the factors cut in favor of a preliminary injunction (which, as

discussed, they do not in the instant case), this Court would not exercise its discretion to grant a

preliminary injunction when no proper purpose is served. Much of the purpose of a preliminary

injunction is to preserve the status quo while the case works its way towards a resolution. S.

Glazer’s Distributors of Ohio, LLC v. Great Lakes Brewing Co., 860 F.3d 844, 848 (6th Cir. 2017)

(citing Univ. of Tex. v. Camenisch, 451 U.S. 390, 395 (1981); Corbin v. Texaco, Inc., 690 F.2d

104, 105 (6th Cir. 1982). According to the Fifth Circuit, “[t]he purpose of a preliminary injunction

is to preserve the status quo during litigation to determine the merits of the case for permanent

injunction.” Hollon v. Mathis Indep. Sch. Dist., 491 F.2d 92, 93 (5th Cir. 1974). And the Eleventh

Circuit has described “the textbook definition of a preliminary injunction [as one] issued to

preserve the status quo and prevent allegedly irreparable injury until the court had the opportunity

to decide whether to issue a permanent injunction.” Schiavo ex rel. Schindler v. Schiavo, 403 F.3d

1261, 1262 (11th Cir. 2005) (internal quotation marks omitted). That is, according to some courts,

“[a] preliminary injunction is designed to preserve the status quo until a final hearing or trial can

be held on a request for a permanent injunction.” Youngblood v. Wilson, No. 3:07-CV-0079 PS,

2008 WL 215739, at *1 (N.D. Ind. Jan. 24, 2008) (quoting Moore’s Federal Practice and

Procedure § 65.04(1)). Relatedly, the Court notes that “[l]itigants are not entitled to greater

temporary remedies pending litigation than they would be entitled to as the ultimate prevailing

party.” Gomez v. United States, 899 F.2d 1124, 1127 (11th Cir. 1990).

Plaintiffs have made no request for a permanent injunction in this case, and they had made

no showing that ordering a preliminary injunction to enjoin the sale of the business would preserve

the status quo while their unrelated claims of intentional misrepresentation and conversion advance

towards a final resolution. The Court would not exercise its discretion to issue a preliminary

injunction when no valid purpose is served, and the Court finds that this reasoning could perhaps

be enough to dispose of this Motion on its own.

answers that question in the negative; Plaintiffs have failed to show that the extraordinary remedy

of a preliminary injunction is warranted in this case. Plaintiffs’ evidentiary showing and argument

collectively fall short on two critical factors: (1) strong likelihood of success on the merits and (2)

irreparable harm.

A. Likelihood of Success on the Merits

Plaintiffs bring four claims against Defendants including several state law claims: (1) two

claims of intentional misrepresentation; and (2) a claim for conversion. (Doc. No. 1-2 at 5–7). The

Court will address Plaintiffs’ likelihood of success as to the misrepresentation and conversion

claims in turn.

1. Intentional Misrepresentation

Plaintiffs claim that Defendants made intentional misrepresentations by (1) not paying

Plaintiffs the promised profit and salary, and (2) producing false profit and loss statements on

which Plaintiffs then relied in moving to Tennessee, signing the Partnership Agreement and First

Amendment to the Operating Agreement, and investing in the partnership. (Doc. No. 1-2 at 8).

When analyzing a state law tort claim, a federal court sitting in diversity will typically look

to substantive state law. See Performance Contracting Inc. v. DynaSteel Corp., 750 F.3d 608, 611

(6th Cir. 2014) (quoting Erie R.R. v. Tompkins,” 304 U.S. 64, 78 (1938)). But sometimes when the

substantive law of two or more different states conceivably could be deemed applicable to the case,

the court faces a threshold issue as to which state’s law governs the case. See id. To resolve such

an issue, the court applies the choice-of-law rules of the state in which the court sits. See id.

However, the Court here need not decide whether Tennessee or New Jersey law applies at

this juncture, since both Tennessee and New Jersey require a plaintiff to show similar elements to

succeed in a claim of intentional misrepresentation. Under Tennessee law, a plaintiff must show:

“(1) the defendant made a representation of an existing or past fact; (2) the representation was false

when made; (3) the representation was in regard to a material fact; (4) the false representation was

made either knowingly or without belief in its truth or recklessly; (5) plaintiff reasonably relied on

the misrepresented material fact; and (6) plaintiff suffered damage as a result of the

misrepresentation.” Stanfill v. Mountain, 301 S.W.3d 179, 188 (Tenn. 2009) (quoting Walker v.

Sunrise Pontiac–GMC Truck, Inc., 249 S.W.3d 301, 311 (Tenn. 2008)). Under New Jersey law, a

Plaintiff must show “(1) a material misrepresentation of a presently existing or past fact; (2)

knowledge or belief by [d]efendant of its falsity; (3) an intention that the plaintiff rely upon the

fact; (4) the plaintiff’s reasonable reliance upon it; and (5) resulting damages.” Mason v. Coca-

Cola Co., 774 F. Supp. 2d 699, 704 (D.N.J. 2011). For purposes of the instant analysis, the

respective sets of elements do not differ materially from one another.

In Plaintiffs’ Opening Memorandum, Plaintiffs address likelihood of success on the merits

only in the following terse passage:

The Plaintiffs invested time and money into a business relationship with the

Defendants. The Defendants have failed to uphold their end of the bargain and are

converting all monies to their benefit, which is to the Plaintiffs’ detriment. The

Defendants have not provided inspection of the books and records as mandated by

law, and initially provided false P&Ls that were misrepresentations. The Plaintiffs

will be able to satisfy this element.

(Doc. No. 24 at 3) (emphasis added).

In referring to “this element,” Plaintiffs appear to mean a likelihood of success on the merits

as to their claims, including the claim for intentional misrepresentation. But it is not enough for

Plaintiffs to claim that they will be able to show a likelihood of success of the merits. They must

show such likelihood now, in connection with their motion for a preliminary injunction. And

Plaintiffs have failed to do so. Though Plaintiffs’ Opening Memorandum was filed together with

two declarations, Plaintiffs’ Opening Memorandum failed to cite those declarations here or explain

how they support a finding of likelihood of success on the merits on the claim of intentional

misrepresentation; as noted, Plaintiffs instead have relied solely on the blithe assertion that they

will be able to make such a showing. Then in their Reply,

Plaintiffs have presented the limited evidence available to them to establish a

pattern of fraudulent and illegal conduct—sworn affidavits of Mr. Patel and one

former employee. Despite their limited access to evidence, Plaintiffs have

demonstrated a likelihood of success on the merits, which Defendants failed to

meaningfully rebut in their response, even though they have all the evidence at their

fingertips.

(Doc. No. 29 at 3). To the extent that Plaintiffs seek to be excused from not making the required

showing on the grounds that this is Defendants’ fault, the Court can recognize no such excuse at

this stage; the Court’s responsibly is to decide, based on the current record, whether Plaintiffs have

shown a substantial likelihood of success on the merits. As to that question, Plaintiffs have done

no more than make the conclusory assertion that their affidavits (declarations) establish a

likelihood of success on the merits, without even discussing those declarations anywhere in their

briefing, let alone explaining how the declarations indicate a substantial likelihood of success on

each element of Plaintiffs’ various claims. If a party wants an extraordinary remedy such as a

preliminary injunction, it simply must do more than file declarations with alleged facts and then

leave it entirely to the Court to figure out how those facts relate to the party’s particular claims and

whether they likely would establish the party’s claims. And even if the Court were to take it upon

itself to undertake this review, it could find nothing in the declarations to support either of

Plaintiffs’ two claims of intentional misrepresentation.7

7 The Complaint alleges, among other things, that Defendants “orally misrepresented the financial

stability and the expenses of [AR Group] prior to the Plaintiffs entering into the Partnership

agreement,” “collectively misrepresented that the money they allegedly and purportedly invested

in the partnership was actually borrowed by them,” “misrepresented prior to and up to June 2018

that the Plaintiffs would be paid $650,000.00. in profit per annum,” and that “[t]hese

representations were false when made and known to be false at the time.” (Doc. No. 1-2 at 5–6).

The Complaint also claims that Plaintiffs reasonably relied upon these false misrepresentations

and were substantially damaged. (Doc. No. 1-2 at 7–8). Plaintiffs’ first claim of intentional

For all of these reasons, and contrary to Plaintiffs’ suggestion, there was never anything

for Defendants to rebut in this regard. Plaintiffs have failed to show that they would be likely to

succeed on any of their claims, including the claim of intentional misrepresentation.

2. Conversion

According to the Complaint, “Defendants have exercised dominion and control over the

funds of the partnership and the Plaintiffs intentionally used the money to pay for expenses

unknown to or unapproved by the Plaintiffs such as the payment to the bank for the Defendants’

borrowed investment.” (Doc. No. 1-2 at 8). Plaintiffs here clearly have an unfortunate

typographical error; if one did not gather that they meant “Defendants” where they said

“Plaintiffs,” one would think that they were accusing themselves of pulling a fast one on

themselves. In any event, this alleged conduct of Defendants “constitutes the tort of conversion,”

according to the Complaint. (Id. at 9). In the above-quoted paragraph, Plaintiffs (albeit with

extreme brevity) assert that Defendants are converting all money to their benefit and imply that

they likely will be able to show a likelihood of success on the merits on their claim of conversion.8

(Doc. No. 24 at 3). Otherwise, Plaintiffs have nothing to say about likelihood of success on the

merits.

misrepresentation is premised both on the alleged representation that Plaintiffs would receive

profit sharing in the amount of $650,000 per year and on alleged false profit and loss statements

that allegedly induced them to enter into the June 5 Partnership Agreement, and the second claim

of intentional misrepresentation is premised on other “false representations and false documents”

that allegedly induced them to enter into the Partnership Agreement and the First Amendment to

the Operating Agreement. (Id.). The declarations offered by Plaintiff, of Rajendra Patel (Plaintiff)

and Mark Smith (former employee of AR Group), do not present any evidence on either such

claim.

8 The likelihood of success on the merits of conversion was addressed in Plaintiffs’ Opening Brief

in the same terse few sentences as the likelihood of success on the merits of intentional

misrepresentation. (Doc. No. 24 at 3). The Complaint additionally claimed that Defendants

exercise control over the funds of the partnership and that they intentionally use that money to pay

for unknown and unapproved expenses. (Doc. No. 1-2 at 8–9).

Again, the Court need not decide whether Tennessee or New Jersey law applies at this

juncture, since both Tennessee and New Jersey require similar elements be met for a claim of

conversion. Under Tennessee law, a Plaintiff must show “(1) the appropriation of another’s

property to one’s own use and benefit, (2) by the intentional exercise of dominion over it, (3) in

defiance of the true owner’s rights.” PNC Multifamily Capital Inst. Fund XXVI Ltd. P’ship v. Bluff

City Cmty. Dev. Corp., 387 S.W.3d 525, 553 (Tenn. Ct. App. 2012). Similarly, the elements of

conversion under New Jersey law are “(1) the existence of property, (2) the right to immediate

possession thereof belonging to plaintiff, and (3) the wrongful interference with that right by

defendant.” Rickerson v. Pinnacle Foods Inc., No. 17-cv-4469, 2018 WL 1704788, at *2 (D.N.J.

Apr. 9, 2018) (quoting City of Atl. City v. Zemurray St. Capital, LLC, No. 14-5169, 321 F.R.D.

215, 2017 WL 6638203, at *18 (D. N.J. Dec. 29, 2017)).

Plaintiffs fail to show a likelihood of success on the merits of this claim for the same reason

they failed to show a likelihood of success on the prior claim: they simply have not done the work

to explain why the evidence they have offered (i.e., testimony from two declarations) is likely to

establish all elements of a claim of conversion.

And even if the Court did take it upon itself to scour the declarations, which it actually has

done here as it did with the first claim (perhaps against its better judgment), they do not provide

enough evidence to satisfy the burden Plaintiff carries in a motion for preliminary judgment to

show a strong likelihood of success on the merits of a conversion claim. The Declaration of

Rajendra Patel indicates that Defendants have ended Plaintiffs’ access to bank accounts and other

Partnership property. (Doc. No. 24-1). Mark Smith’s declaration states that “[o]n one occasion,

Navneet Patel had confirmed the funds were available but by the time I deposited my paycheck,

the funds had been depleted and my paycheck was returned for insufficient funds. Navneet Patel

corrected it for me the next day. All the bank accounts and money were controlled by the individual

Defendants to this action.” (Doc. No. 24-2 at 3). Although Plaintiffs argue that these statements

indicate that Defendants had sole access to the partnership bank accounts and improperly took

money in which Plaintiffs had a possessory interest, the Court does not find the description of one

incident of insufficient funds in the Partnership bank account to be sufficient evidence that

Plaintiffs are likely to succeed on the merits of their conversion claim, especially where (as

indicated above) Plaintiffs have not bothered to explain why all elements of conversion claim are

satisfied.9

In short, Plaintiffs have failed to show a likelihood of success on the merits. This factor

weighs very heavily against the issuance of a preliminary injunction, and is not far from being fatal

to the Motion by itself.

B. Irreparable Harm

Plaintiffs have also failed to demonstrate that they will be irreparably harmed absent

preliminary injunctive relief from the Court. Plaintiffs argue that they will be irreparably injured

because Defendants have not paid Plaintiffs, Defendants will keep all proceeds upon any sale, the

entity will cease operation, and Plaintiffs face “financial ruin.”10 (Doc. No. 24 at 3). Defendants

deny the allegation of a forthcoming sale or any intent to sell. (Doc. No. 27 at 3).

9 Notably, Plaintiffs’ Reply does not even hint at such an explanation or even mention conversion

at all. In addition, as suggested above, Plaintiffs’ Reply is off base in claiming that Defendants had

to rebut anything about any of Plaintiffs’ claims, including the claim for conversion.

10 In their Reply, Plaintiffs additionally claim irreparable injury will occur because of the

Department of Labor’s fines and the pending investigations, a pattern of illegal conduct, a false

damage claim, and a failure to pay some contractors which could amount to a default under the

Franchise Agreement. (Doc. No. 29 at 2). Rajendra Patel’s declaration indicates that payments to

illegal aliens have caused fines and an investigation, that Defendants have filed a false damages

claim, and that Defendants have not paid contractors. (Doc. No. 24-1 at 2–3). Mark Smith’s

declaration states that an employee of AR Group continues to pay some employees in cash and

In his declaration, Plaintiff Rajendra Patel states that “[t]he individual Defendants have

tried to sell these stores without informing Navneet [Patel] and I. When they received a low offer

from Carrolls Group, they created a false sale agreement with another franchisee, Aziz Chitalwala,

so Carrolls Group would have to match the new false price since they had the first right of refusal.”

(Doc. No. 24-1 at 3). In response, Defendant Dinesh Goswami states that the Franchisor pressured

the partnership into seeking a sale due to the poor management by Plaintiffs. (Doc. No. 27 at 2).

After Plaintiffs’ terminations, sales improved and the Franchisor stopped pressuring the

partnership to sell. (Doc. No. 27 at 3). Goswami additionally denies any present or immediate

intention to sell, stating that “[a]t present, there is no sale, contemplated sale, or imminent sale of

[AR Group] and/or any of its assets. There are no pending offers nor even current discussions of

sale. Due to the extreme impact on market conditions and the conduct of most business amidst the

current Covid-19 pandemic, [AR Group] does not anticipate any sale or even negotiations for sale

of [AR Group] and/or any of its assets to transpire before 2021.” (Doc. No. 27 at 3). The Court has

no reason to discredit the assertions of Goswami in his declaration.

Plaintiffs have offered only their suspicions of an impending or immediate sale as evidence,

and they have not carried their burden of showing that an irreparable injury would occur without

a preliminary injunction. (Doc. No. 24-1 at 3). “A preliminary injunction is an extraordinary

remedy which should be granted only if the movant carries his or her burden of proving that the

circumstances clearly demand it.” Overstreet v. Lexington-Fayette Urban Cty. Gov’t, 305 F.3d

operates restaurants “in an underhanded and fraudulent manner.” (Doc. No. 24-2 at 2–3). Though

these acts, if true, are likely to cause irreparable harm to Plaintiffs’ interests in the partnership, a

preliminary injunction against the sale of partnership assets would not alleviate these harms. The

required showing of irreparable harm cannot properly be premised on harm that would not be

alleviated by the particular preliminary injunction being sought. Madias v. Dearborn Fed. Credit

Union, 916 F. Supp. 659, 660 (E.D. Mich. 1996).

566, 573 (6th Cir. 2003). Based on Defendants’ denial of a pending sale and a lack of evidence

contradicting that denial, the Court has difficulty seeing how it can conclude that Plaintiffs cannot

be made whole via eventual monetary damages. “As a general rule, a movant has not established

irreparable harm where damages would adequately compensate the movant for the asserted harm.”

Performance Unlimited, Inc. v. Questar Publishers, Inc., 52 F.3d 1373, 1382 (6th Cir. 1995)

(citation omitted). Accordingly, the Court finds that Plaintiffs are not likely to suffer irreparable

harm absent a preliminary injunction. This factor weighs against the issuance of an injunction.

Indeed, as noted above, it is fatal to a request for a preliminary injunction

C. Substantial Harm to Defendant and Others

“The third factor for a court to consider is ‘whether the issuance of the injunction would

cause substantial harm to others.’ ” Certified Restoration Dry Cleaning Network, L.L.C. v. Tenke

Corp., 511 F.3d 535, 550 (6th Cir. 2007). “In considering this factor, the Court must (1) balance

the harm [p]laintiff would suffer if its request for a preliminary injunction were denied against the

harm [d]efendant would suffer if an injunction were to issue, and (2) assess the impact the

preliminary injunction might have on relevant third parties.” Procter & Gamble Co. v. Georgia–

Pacific Consumer Prods. LP, No. 1:09–318, 2009 WL 2407764, at *10 (S.D. Ohio Aug. 3, 2009);

Accord Trenton Corp. v. Superior Corrosion Control, Inc., No. 06–15699, 2007 WL 268792, at

*6 (E.D. Mich. Jan. 25, 2007). Since Defendants have asserted no intentions of selling the

partnership now or in the immediate future, Plaintiffs face no harm if the Motion is denied. On the

other hand, Defendants have shown no harm that would occur to them if the Motion were to be

granted; in fact, they could not do so, since they do not have any plans to sell AR Group, and thus

no plans that would be disrupted were the Court preliminarily to enjoin such a sale. Therefore,

there is actually nothing for the Court to balance on this factor, and the balancing of harms does

not weigh significantly in favor of (or against) issuing a preliminary injunction.

D. Public Interest

The last factor in determining whether to grant a preliminary injunction “asks whether the

public interest is advanced in issuing” the requested injunction. Nat’l Hockey League Players

Ass’n v. Plymouth Whalers Hockey Club, 325 F.3d 712, 720 n. 4 (6th Cir. 2003). In their Motion,

Plaintiffs argue that a preliminary injunction would be in the public interest because “the

employees of the multiple Popeye’s Louisiana Kitchen restaurants would receive the wages and

benefits they have earned.” (Doc. No. 24 at 4). In their Response, Defendants contest the allegation

that they are “not meeting payment obligations.” (Doc. No. 26 at 7). Neither party offers any

evidence of whether the employees are currently being paid or not, and in the absence of evidence

of benefit or harm to the public, the Court does not find that this factor weighs in favor of granting

a preliminary injunction.

II. Appointment of a Receiver

In their Motion, Plaintiffs also request that a receiver be appointed.11 (Doc. No. 23 at 1).

Federal Rule of Civil Procedure 66 allows the Court to appoint a receiver in a federal case, and in

a diversity action an appointment of receiver will generally be governed by federal, not state, law.

See Fed. Nat. Mortg. Ass’n v. Mapletree Inv’rs Ltd. P’ship, No. 10–cv–10381, 2010 WL 1753112

at *2 (E.D. Mich. April 30, 2010). “A district court enjoys broad equitable powers to appoint a

receiver over assets disputed in litigation before the court. The receiver’s role, and the district

court’s purpose in the appointment, is to safeguard the disputed assets, administer the property as

suitable, and to assist the district court in achieving a final, equitable distribution of the assets if

necessary.” Liberte Capital Grp., LLC v. Capwill, 462 F.3d 543, 551 (6th Cir. 2006). “A

11 Plaintiffs request both the appointment of a receiver if the company is sold and the general

appointment of a receiver.

receivership is an ‘extraordinary remedy’ that a court should employ with the ‘utmost caution’ and

grant ‘only in cases of clear necessity to protect plaintiff’s interests in the property.’ ” Pension

Ben. Guar. Corp. v. Evans Tempcon, Inc., 630 F. App’x 410, 414 (6th Cir. 2015) (quoting 12

Charles Alan Wright, Arthur R. Miller & Richard L. Marcus, Federal Practice and Procedure

§ 2983 (3d ed. 2014)). District courts consider a number of factors in deciding whether or not to

appoint a receiver, including “whether the property at issue is in imminent danger of…being lost,

concealed, injured, diminished in value, or squandered, whether the defendant engaged in

fraudulent conduct, the inadequacy of the available legal remedies, the lack of less drastic equitable

remedies, and the likelihood that the appointment will do more good than harm.”12 Id. (internal

quotation marks and citation omitted). When a defendant remains active in litigation, the case is

at an early stage with limited evidence, and there is no “significant showing of imminent

catastrophe,” the extreme and rare remedy of appointing a receiver will not be granted. See Midkiff

v. Ludt, No. 1:18-CV-191, 2018 WL 7099016, at *5 (S.D. Ohio Apr. 11, 2018).

Plaintiffs argue that Defendants have fraudulently obtained Plaintiffs’ investment, failed to

pay money promised to Plaintiffs and others, and refused to allow Plaintiffs to view and inspect

the records and books of the company. (Doc. No. 24 at 5). Additionally, the company allegedly is

currently under an investigation by the Department of Labor and has incurred fines totaling

$175,000. (Doc. No. 24-1 at 2). Plaintiffs contend that there have been instances of insurance fraud

and altering of financial records. (Doc. No. 24-1 at 3–4). None of these allegations of fraud are

linked to harming the Partnership assets or, if true, will cause the Partnership’s assets to dissipate.

12 This is not an exhaustive list. Courts have also considered the likelihood of success on the merits

and other factors when determining whether a motion for an appointment of a receiver should be

granted. PNC Bank, Nat. Ass’n v. Goyette Mech. Co., 15 F. Supp. 3d 754, 758 (E.D. Mich. 2014).

As discussed above, Plaintiffs here have not met their burden of showing a likelihood of success

on the merits.

Indeed, there is no reason to believe that the extraordinary remedy of a receiver is necessary

because of systematic fraud and ongoing risk to the partnership. Although Plaintiffs claim that the

property at issue is in imminent danger of being lost or diminished, Defendants’ assertion that

there is no impending sale of the company indicates that Plaintiffs’ concerns are not an imminent

emergency requiring the rare relief of appointing a receiver.

Additionally, a receivership would likely cause more harm than good. The Franchise

Agreement states that if a receivership is appointed, the franchisee will be in default of their

agreement, and “all rights . . . shall automatically terminate.”13 (Doc. No. 26-1 at 46). Defaulting

on the Franchise Agreement would cause harm to Defendants’ employees and to current stores

which are seeing an increase in net sales. (Doc. No. 27 at 3). Plaintiffs argue that this outcome is

no worse than defaulting under a clause in the Franchise Agreement regarding illegal activity, as

to which Plaintiffs supposedly have presented evidence.14 (Doc. No. 29 at 2). Plaintiffs are

incorrect. A default on the Franchise Agreement in the case of illegal activity is not automatic, as

it would be upon the appointment of a receiver. Since appointing a receiver would result in an

automatic default and termination of Defendants’ rights under the Franchise Agreement, the Court

finds that an appointment would cause Defendants significant immediate harm.

13 The Franchise Agreement states that “[f]ranchisee shall be deemed to be in default under this

Agreement, and all rights granted herein shall automatically terminate without notice to

Franchisee, if…a receiver or other custodian (permanent or temporary) of Franchisee’s assets or

property, or any part thereof, is appointed by any court of competent jurisdiction.” (Doc. No. 26-

1 at 46).

14 The Franchise Agreement states that “[f]ranchisee shall be deemed in default and Franchisor

may, at its option, terminate this Agreement and all rights granted hereunder without affording

Franchisee any opportunity to cure the default upon the occurrence of any of the following

events… [f]ranchisee is convicted of or pleads guilty to a felony, a crime involving moral

turpitude, or any other crime or offense that Franchisor believes is reasonably likely to have an

adverse effect on the System, the Proprietary Marks, the goodwill associated therewith, or

Franchisor’s interest therein.” (Doc. No. 26-1 at 47).

For these reasons, the Court declines to appoint a receiver in this matter.

CONCLUSION

For the foregoing reasons, Plaintiffs’ Motion for Preliminary Injunction, Appointment of a

Receiver, and for an Accounting is DENIED.15 In making this determination, the Court does not

suggest that Plaintiffs will be unable to prevail at trial or that any decision here constitutes any law

of the case. See Cold Heading Co. v. B&D Thread Rolling, Inc., No. 2:11-CV-15189, 2012 WL

13008688, at *13 (E.D. Mich. June 5, 2012), adopted by, No. 11-15189, 2012 WL 13012405 (E.D.

Mich. July 19, 2012); Bronson v. Board of Educ. of the City Sch. Dist. of Cincinnati, 550 F. Supp.

941, 945 (S.D. Ohio 1982) (“[B]ecause the nature of findings made in connection with a

preliminary injunction are inherently tentative, it is apparent, under established authority, that

findings made on motions for preliminary injunctions do not estop the parties at the trial on the

merits, and are neither determinative of the issues in the case, nor binding upon the parties or the

Court at a subsequent trial.”).

15 “An accounting is a species of disclosure, predicated upon the legal inability of a plaintiff to

determine how much, if any, money is due him from another. It is an extraordinary remedy, and

like other equitable remedies, is available only when legal remedies are inadequate.” Bradshaw v.

Thompson, 454 F.2d 75, 79 (6th Cir. 1972). When adequate remedies at law and discovery options

are available, an accounting is inappropriate. Id.; Cox v. Mortg. Elec. Registration Sys., Inc., 794

F. Supp. 2d 1060, 1065 (D. Minn. 2011), aff’d, 685 F.3d 663 (8th Cir. 2012); Pennsylvania Ship

Supply, Inc. v. Fleming Int’l, Ltd., 113 F. Supp. 2d 760, 764 (E.D. Pa. 2000). Plaintiffs argue that

they are entitled “to view and inspect the books and records of the general partnership and they

have been refused despite constant requests.” (Doc. No. 1-2 at 9). Other than a fear that Defendants

may sell the partnership property prior to an inspection of the books and records, Plaintiffs have

made no argument that they will be unable to get the information they seek through continuing to

pursue this litigation and utilizing discovery mechanisms. The Court finds that an accounting

would be an inappropriate remedy at this time.

IT IS SO ORDERED.

ELI RICHARDSON

UNITED STATES DISTRICT JUDGE

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