Opinion
A167588 A167678
09-25-2023
KRISTINA E. EDWARDS et al., Plaintiffs and Respondents, v. FORWARD LLP et al., Defendants and Appellants.
NOT TO BE PUBLISHED
Marin County Super. Ct. No. CIV2300690
MARKMAN, J. [*]
This litigation concerns the immediate aftermath of a falling-out among colleagues in a poorly documented accounting partnership called Forward LLP (Forward). The trial court granted plaintiffs temporary restraining orders (TRO) restoring Kristina Edwards and Sean Forman's access to Forward software, e-mail, Google Drive, and client correspondence and files while the accounting professionals resolved their dispute. Defendants immediately appealed from the TROs, rather than developing the evidentiary record at a preliminary injunction hearing. We granted defendants a writ of supersedeas and a stay of the TROs because the language used in the TROs was mandatory and not prohibitory.
We affirm the trial court's orders granting plaintiffs' TRO applications. The use of mandatory rather than prohibitory language in the TROs does not compel their reversal. We see no basis to conclude that the trial court abused its discretion by granting the TROs.
BACKGROUND
The following background summary is derived only from the pleadings and the parties' submissions in connection with plaintiffs' TRO applications. The trial court found the facts supported a conclusion that plaintiffs were likely to prevail on at least a subset of their claims for purposes of granting plaintiffs' TRO applications. We recognize, however, that many of the underlying facts are likely disputed, and that those disputes have yet to be resolved by anyone. We also recognize that defendants refer to and rely on evidence they submitted at the preliminary injunction stage. As discussed below, we decline defendants' request to not only review the record, but also direct the trial court to deny, plaintiffs' pending application for preliminary injunction. Doing so would be premature, since the trial court continued the preliminary injunction hearing pending our resolution of the appeal.
A. The Underlying Dispute
Plaintiff Kristina Edwards is a certified public accountant (CPA). She worked in her family tax preparation business and, after her father's death in 2013, took over the business and changed the name to Edwards CPA, Inc. (Edwards CPA). In 2017, plaintiff Sean Forman was working with Edwards at her office. Forman is an unlicensed accountant and does not sign tax returns.
Edwards told Forman that she was interested in divesting her tax practice. Forman introduced Edwards to defendant John Ward in October 2017 to see if Ward might be interested in acquiring Edwards' accounting practice. Forman had previously worked with Ward, who became a CPA in 2009. Ward had formed Forward with his spouse as a California limited liability partnership (LLP) back in 2015.
Ward did not acquire Edwards' practice. Instead, according to Ward, he, Edwards, and Forman "agreed for plaintiffs' individual business entities-defendants Edwards CPA, Inc. ('Edwards CPA,' operated by Edwards) and SWF, Inc. ('SWF,' operated by Forman) to become partners of Forward." Ward also explains that he formed Momentum Business Administration LLC (Momentum) "to engage in business management services," and agreed that it, too, would be a partner in Forward. Ward represents that Edwards CPA and SWF planned to operate as "contractors" based on an agreed sharing of Forward's revenue, but Ward "would hold a 100% share of Forward's profits, losses, capital, and liabilities." Ward "notified the California Board of Accountancy that Forward was admitting Edwards CPA, SWF, and Momentum as new partners effective January 1, 2019."
No one memorialized this partnership agreement-or any of the terms Ward describes-in writing. Edwards and Forman have a different view concerning the parties' business. They allege Edwards, Forman, and Ward operated as partners and agreed to a share of the profits based on the tax returns prepared by each partner. They agree Ward was to manage the business: a "house account" was to pay all expenses and any remainder in the house account would go to Ward because he was "in complete control of all administrative procedures," including the firm accounting and computer systems.
The parties' conflict began in 2022. According to Edwards and Forman, Ward had "unilaterally changed firm procedures" regarding the payment of operating expenses, which triggered a disagreement regarding whether Forman was entitled to an additional distribution of $40,991 based on his workload and tax returns he had prepared. For his part, Ward asserted that Forman did not renew his "preparer tax identification number" (PTIN) for 2023 and was concerned because Forman would eventually need his PTIN to help prepare tax returns. Edwards and Forman viewed Ward's alleged concerns about Forman's late renewal of his PTIN as pretextual.
In January 2023, Ward locked out Edwards and Forman from access to Forward records and files, including client files. The lockout also included Forward's ProSystems tax software. According to Ward, he limited Forman's access because Forman did not renew his PTIN quickly enough. Ward said he then locked Edwards out because "[o]n information and belief," she had "downloaded substantially all electronic files related to client accounts that she worked on from Forward's computer systems" and announced she was "operating her own CPA practice."
Edwards and Forman allege they could not access all client records to complete then-ongoing work preparing tax returns. Edwards and Forman contend that their inability to access the tax software and client records tripled their workload, damaged their reputations, forced delay in filing client tax returns, and eroded confidence resulting in a loss of clients.
B. The Complaint
Plaintiffs Edwards, Forman, Edwards CPA, and SWF filed a complaint in March 2023 against defendants Forward, Ward, his wife, and Momentum. Plaintiffs asserted causes of action for declaratory relief, injunctive relief, breach of fiduciary duty, and an accounting. The complaint alleged that defendants violated their fiduciary duties "in that they failed to properly wind down the affairs of the Forward LLP partnership," and "failed to account to the limited partnership and hold as trustee property, profit and benefit under applicable laws." The complaint also alleged that defendants violated their fiduciary duties by "negligently, purposefully and with reckless disregard locked Plaintiffs out of the computer system, databases and records of Forward LLP for the purpose of cutting Plaintiffs out of the client base and destroying Plaintiffs financially."
C. Ex Parte Applications for TRO
Just under a month after filing the complaint, plaintiffs filed an ex parte application for a TRO and order to show cause (OSC) regarding a preliminary injunction. The contemplated TRO and preliminary injunction would restore their access to client files and information, their "forwardllp.com" e-mails, the partnership's tax preparation software, and the partnership's own records. Edwards and Forman each submitted declarations, and Ward submitted papers in response, including his own declaration.
The trial court held a hearing on the TRO application on April 12, 2023. The court granted plaintiffs' application as to Edwards, but denied it as to Forman without prejudice "until and unless the court is provided with proof that [Forman] has a valid PTIN." The court explained that "once that proof is submitted to the court, I intend to grant the relief as to him as well." The court therefore ultimately issued two TROs.
The trial court explained at the hearing: "it does appear from the court's perspective that the Plaintiff is entitled to the relief demanded in the complaint, which includes restraining the lockout" and "there is a likelihood of success for the Plaintiff on the merits." The court also found "that an injunction at this point is necessary to prevent irreparable harm that is not just money damages. I don't find the argument compelling that at this point money damages are adequate relief. There is a great risk from the court's perspective that if an injunction is not granted not just reputations will be damaged, but that members of the public's tax returns will be at risk of not being timely submitted. That to me is a big deal." The court found that "Plaintiffs are highly likely to be harmed significantly without a restraining order and I don't find there to be any harm to the Defendants if one is granted, particularly in the way that I am going to fashion it."
On April 12, 2023, the trial court issued its written order restoring Edwards' access to "active ProSystems tax software, their forwardllp.com emails, Google Drive, and all client correspondence, files and records." Plaintiffs subsequently filed an ex parte application to extend the existing TRO as to Forman, attaching a confirmation letter dated February 13, 2023, with his renewed PTIN. After another hearing, the trial court issued its written order on April 20, granting the TRO request as to both Edwards and Forman. Defendants filed notices of appeal of both orders.
D. Writ of Supersedeas
We granted defendants' request to consolidate the appeals on the two TROs. Defendants petitioned this court for a writ of supersedeas to stay the TROs during the pendency of their appeals. We granted the petition. We explained that, "[a]s measured by the parties' relative positions at the time the temporary restraining orders were entered, the orders are mandatory and thus are automatically stayed during the pendency of the appeal." We noted that the stay was conditioned upon an expedited briefing schedule and would dissolve upon issuance of the remittitur in the appeal.
Meanwhile, in the trial court, defendants filed a memorandum opposing plaintiffs' application for a preliminary injunction and another declaration from Ward with exhibits. Defendants also filed a cross-complaint asserting causes of action for declaratory relief and breach of fiduciary duty, alleging plaintiffs "knowingly acted against the interests of Forward by surreptitiously appropriating Forward's property to their own use so that they could compete against Forward, including confidential information belonging to Forward and to its clients." The trial court continued the preliminary injunction hearing "in light of the pending appeal and writ of supersedeas."
DISCUSSION
I. Scope of Review
Defendants argue and plaintiffs do not contest that the TROs in this case are immediately appealable. (Code Civ. Proc., § 904.1, subd. (a)(6) ["An appeal . . . may be taken from . . . [¶] . . . [¶] an order granting or dissolving an injunction, or refusing to grant or dissolve an injunction"]; see McLellan v. McLellan (1972) 23 Cal.App.3d 343, 357.) That said, the record is not well developed-the trial court has not yet even held a hearing on the merits of a preliminary injunction. Though the parties filed briefs in anticipation of a preliminary injunction hearing, on May 26, 2023, the trial court continued the hearing in light of the writ of supersedeas and this pending appeal.
Acknowledging the problems caused by an appeal from the TROs rather than from a preliminary injunction order, defendants ask us to also consider evidence they presented at the preliminary injunction stage. In order to do so, they suggest that we may treat the opening brief "as a timely appeal or petition for writ of mandate" challenging the trial court's May 26, 2023 continuance of the preliminary injunction hearing. Defendants then ask us to direct the trial court to deny plaintiffs' application for a preliminary injunction.
We decline defendants' invitation to go beyond reviewing the TROs and evidence presented at the TRO stage. We have no order to evaluate in connection with the preliminary injunction. It is for the trial court to develop the record with the parties and to evaluate the evidence in the first instance, to decide whether to permit or require live testimony, and to decide whether to ask additional questions of any testifying witnesses. (BGJ Associates v. Superior Court (1999) 75 Cal.App.4th 952, 958 ["Ordinarily a reviewing court will not consider evidence arising after the trial court ruling, involving facts open to controversy which were not placed in issue or resolved by the trial court"].)
Even if we were to treat defendants' brief as they request, we would not proceed to the merits of the preliminary injunction but would simply direct the trial court to proceed with the hearing. (See, e.g., San Diego Municipal Employees Assn. v. Superior Court (2012) 206 Cal.App.4th 1447, 1466.) Defendants' preferred alternative would be an end-run around long-established procedures for obtaining preliminary injunctive relief under California law. (Code Civ. Proc., § 527.)
II. Standard of Review
We review the orders granting the TROs for abuse of discretion. (Salazar v. Eastin (1995) 9 Cal.4th 836, 849-850; Nakamura v. Parker (2007) 156 Cal.App.4th 327, 333.) "A trial court will be found to have abused its discretion only when it has' "exceeded the bounds of reason or contravened the uncontradicted evidence." '" (IT Corp. v. County of Imperial (1983) 35 Cal.3d 63, 69.) The burden rests on defendants "to make a clear showing of an abuse of discretion." (Ibid.) As we describe further below, we apply a heightened degree of scrutiny for an abuse of discretion where the injunction is "mandatory" and requires affirmative acts that could change the status quo. (Daly v. San Bernardino County Bd. of Supervisors (2021) 11 Cal.5th 1030, 1035.)
The trial court weighs two interrelated factors when deciding whether or not to issue a TRO: (1) the likelihood plaintiffs will prevail on the merits; and (2) the relative interim harm to the parties if the TRO is granted or denied. (See Butt v. State of California (1992) 4 Cal.4th 668, 677.) An appeal from an order granting temporary injunctive relief "involves a limited review of these two factors-likelihood of success on the merits and interim harm." (Shoemaker v. County of Los Angeles (1995) 37 Cal.App.4th 618, 625 (Shoemaker).) "Where the evidence before the trial court was in conflict, we do not reweigh it or determine the credibility of witnesses on appeal. '[T]he trial court is the judge of the credibility of the affidavits filed in support of the application for preliminary injunction and it is that court's province to resolve conflicts.'" (Ibid., quoting Monogram Industries, Inc. v. Sar Industries, Inc. (1976) 64 Cal.App.3d 692, 704.) "Our task is to ensure that the trial court's factual determinations, whether express or implied, are supported by substantial evidence." (Shoemaker, at p. 625.) "Thus, we interpret the facts in the light most favorable to the prevailing party and indulge in all reasonable inferences in support of the trial court's order." (Ibid.) "Insofar as the trial court's ruling depends on determination of the applicable principles of law, however, it is subject to independent appellate review." (Huong Que, Inc. v. Luu (2007) 150 Cal.App.4th 400, 408.)
III. Impact of the Writ of Supersedeas
Defendants sought, and we granted, a writ of supersedeas staying the trial court's TROs. Defendants reference our writ as a basis to reverse the TROs.
We reject plaintiffs' contention that defendants "wrongfully prosecuted" the writ as untimely. (See Cal. Rules of Court, rules 8.268, 8.500.)
Our decision on the writ of supersedeas was tied tightly to the language used in the TROs. Defendants' writ petition relied on California's "long- established set of rules govern[ing] stays of injunctive orders .... An injunction that requires no action and merely preserves the status quo (a so-called prohibitory injunction) ordinarily takes effect immediately, while an injunction requiring the defendant to take affirmative action (a so-called mandatory injunction) is automatically stayed during the pendency of the appeal." (Daly v. San Bernardino County Bd. of Supervisors, supra, 11 Cal.5th at p. 1035.) The rule exists "[t]o prevent injuries 'from the premature enforcement of a determination which may later be found to have been wrong.'" (Ibid., quoting Scripps-Howard Radio v. Comm'n (1942) 316 U.S. 4, 9.)
Here, the TROs included both prohibitory and mandatory language. They ordered defendants not only to stop "[p]reventing plaintiffs . . . access to the parties' active ProSystems tax software, their forwardllp.com emails, Google Drive, and all client correspondence, files and records," but also "to provide plaintiffs access to their active ProSystems tax software, forwardllp.com emails, Google Drive, and all client correspondence, files and records."
Use of mandatory language in a TRO may require a stay of the order pending appeal so we can review (and carefully scrutinize) the order, but it does not necessarily mean that the trial court abused its discretion by issuing it in the first place. (See Board of Supervisors v. McMahon (1990) 219 Cal.App.3d 286, 295 ["Where, as here, the preliminary injunction mandates an affirmative act that changes the status quo, we scrutinize it even more closely for abuse of discretion. 'The judicial resistance to injunctive relief increases when the attempt is made to compel the doing of affirmative acts. A preliminary mandatory injunction is rarely granted, and is subject to stricter review on appeal.' [Citation.] As our Supreme Court noted many years ago, '[t]he granting of a mandatory injunction pending the trial, and before the rights of the parties in the subject matter which the injunction is designed to affect have been definitely ascertained . . . is not permitted except in extreme cases where the right thereto is clearly established and it appears that irreparable injury will flow from its refusal' "].) We still review the trial court's two-factor analysis regarding likelihood of success on the merits and interim harm. (Ibid.; Ryland Mews Homeowners Assn. v. Munoz (2015) 234 Cal.App.4th 705, 712, fn. 4 [legal principles on preliminary prohibitory and mandatory injunctions" 'do not materially differ'" and while courts" 'are perhaps more reluctant'" to issue a mandatory injunction," 'in a proper case it is never denied' "].)
IV. No Abuse of Discretion
Defendants argue that the trial court abused its discretion in at least four ways. First, they contend that the TROs "conflict[] with controlling precedent," citing Voorhies v. Greene (1983) 139 Cal.App.3d 989 (Voorhies), because the orders would "change the possession" of accounting client files without the consent of the affected clients. Second, defendants argue that the trial court incorrectly concluded plaintiffs were likely to succeed on the merits. Third, defendants contend that the record similarly fails to support the trial court's conclusions regarding interim harm. Fourth, defendants argue that the TROs are overbroad because they "exceed the scope of relief available for the harm alleged in their Complaint." We disagree with defendants on each point.
A. The Voorhies Decision and Forward's Partnership Structure
Defendants' primary argument is that the trial court" 'change[d] the possession' of a professional practice's client files and other business property of a professional practice," contrary to Voorhies. Defendants argue that, under Voorhies, injunctive relief "cannot be issued to compel a professional practice to disclose its client files or most other business information to a plaintiff who has been dissociated from the practice, whether the dissociation was rightful or wrongful, because the dissociated plaintiff lacks any property interest in those records."
Defendants misapply Voorhies. That case involved an attorney who was terminated and then locked out of the building that housed his former employer, a law firm organized as a corporation. (Voorhies, supra, 139 Cal.App.3d at pp. 992-993.) The fired attorney co-owned the building along with a former colleague, and together they had leased the building to the corporation. (Id. at p. 992.) After he was locked out, the terminated attorney filed a complaint seeking injunctive relief, involuntary dissolution of the corporation, and termination of the lease. (Id. at p. 993.) The trial court issued a preliminary injunction restoring the attorney's access to the office, as well as client files he claimed to be his personal property. (Id. at pp. 993, 996.)
The appellate court reversed the preliminary injunction. The decision relied on the general rule, described in San Antonio Water Co. v. Bodenhamer (1901) 133 Cal. 248, 251, that" 'courts of equity will not interfere by preliminary injunctions to change the possession of real property, the title being in dispute'; nor is it a proper remedy for recovering possession of personal property." (Voorhies, supra, 139 Cal.App.3d at p. 997.)
The facts here raise at least three significant points of distinction from Voorhies. First, Voorhies involved a corporation, not a partnership like Forward. (Voorhies, supra, 139 Cal.App.3d at p. 992.) Fiduciary duties of a partnership-the duties of candor and loyalty, and associated duties of disclosure-were therefore not at issue in Voorhies. Of course, "An association organized as another entity (e.g., a corporation) is not a partnership." (Eng v. Brown (2018) 21 Cal.App.5th 675, 694.) "The common law recognizes that when persons execute a contract that has the legal effect of creating a partnership, they acquire rights and subject themselves to duties growing out of their fiduciary relationship." (McCain v. Phoenix Resources, Inc. (1986) 185 Cal.App.3d 575, 579 (McCain).) This distinction matters for the relief requested here: restoration of access to e-mail, client files, and business records of the partnership. "One of the most important duties created is each partner's duty of full disclosure." (Ibid.) Accordingly, partners have broader entitlement to access and inspection of partnership information than corporate employees. (Ibid.)
This entitlement is consistent with the partnership provisions of the Corporations Code, which supply default rules in the absence of a written partnership agreement. (Corp. Code, § 16103, subd. (a) ["To the extent the partnership agreement does not otherwise provide, this chapter governs relations among the partners and between the partners and the partnership"].) Corporations Code section 16403, subdivision (b) provides, in relevant part: "A partnership shall provide partners and their agents and attorneys access to its books and records. It shall provide former partners and their agents and attorneys access to books and records pertaining to the period during which they were partners."
Second, unlike the preliminary injunction in Voorhies, the TROs imposed by the trial court here would not change the physical possession of real or personal property. (Voorhies, supra, 139 Cal.App.3d at p. 997.) Plaintiffs are not requesting any transfer of property or access to office space. Third, unlike the fired attorney in Voorhies, neither Edwards nor Forman claim that the Forward software, e-mails, or client data are their personal property. Instead, they acknowledge this information as the partnership's property.
Defendants contend that the TROs somehow "rewrite" Forward's partnership structure because Edwards and Forman were not individual equity partners in Forward. Rather, they had created corporate shells for themselves-Edwards CPA and SWF-and the corporate shells were partners with Ward's own accounting corporation and his management company.
Contrary to defendants' suggestion, the TROs do not appear to alter Forward's structure or the parties' respective duties to one another. The corporations and the accountants-Edwards CPA for Edwards, SWF for Forman, and Momentum for Ward-are all parties to the lawsuit, along with Forward itself. Ward describes Edwards CPA and SWF as Edwards's and Forman's "individual business entities." The TROs do not give Edwards and Forman greater access to Forward information than they had before they were locked out. For purposes of the TROs, defendants have not identified and we cannot perceive a material difference in the way California partnership law ought to apply as between individual accountants versus between individual accountants' closely held professional corporations. Nor have defendants offered any authority to explain how the disputed characterization of Edwards CPA and SWF as non-equity partners would preclude those entities from regaining access to partnership information.
Pointing again to Voorhies, defendants further argue that the law bars the trial court from restoring Edwards and Forman's access to Forward's information because they are "dissociated" partners. But defendants offered no evidence in connection with the TRO (or even in the preliminary injunction briefing) of any actual dissociation. Ward declared on information and belief that Edwards was operating her own practice, but did not say that Edwards and Forman (or Edwards CPA and SWF) had dissociated from Forward. (Riviello v. Journeymen Barbers, etc. (1948) 88 Cal.App.2d 499, 503 [averments in affidavit on information and belief disregarded in application for preliminary injunction].) Defendants reference dissociation events listed in Corporations Code section 16601, but do not specifically argue that any such event occurred here. Ward's stated understanding was that "Edwards CPA and SWF would remain partners only as long as everyone agrees for them to continue as partners." Indeed, Ward declared that he sought agreement from Edwards to expel Forman from the partnership in January 2023. She did not agree to do so.
Events include notice of withdrawal, event of dissociation pursuant to partnership agreement, expulsion pursuant to the partnership agreement, expulsion by the unanimous vote, and expulsion by judicial determination. (Corp. Code, § 16601, subds. (1)-(5).)
Finally, defendants argue that the TROs would improperly "change possession" of Forward client records, contravening Voorhies, because the California Tax Preparation Act prohibits disclosure of confidential taxpayer information without written permission from the client. Again, defendants do not explain how restoring an accounting professional's access to information to which they previously had access in order to carry out their duties as partners (or as the professionals in control of the professional corporations forming the partnership) constitutes an unlawful "disclosure" under these circumstances. Further, the California Tax Preparation Act provides an exception for "[d]isclosures made when specifically required by law." (Bus. &Prof. Code, § 22252.1, subd. (a)(6).) The TROs would certainly appear to satisfy that exception.
B. Likelihood of Prevailing on Merits
Defendants contend that the trial court abused its discretion by finding that plaintiffs were likely to succeed on the merits of their claims. In order to address this contention, we must first identify plaintiffs' actual claims. Defendants suggest that plaintiffs' claims are efforts (1) "to dissolve the practice involuntarily," (2) "to claim client files as if they were [plaintiffs'] personal property," and (3) to allege a breach of fiduciary duty in blocking plaintiffs' access to client and partnership records.
Defendants' first two characterizations of plaintiffs' claims are inaccurate. The complaint alleges that defendants violated their fiduciary duties "in that they failed to properly wind down the affairs of the Forward LLP partnership." Unlike the complaint in Voorhies, however, plaintiffs are not seeking involuntary dissolution of a corporation (or of the partnership here). (Voorhies, supra, 139 Cal.App.3d at p. 993.) Nor do plaintiffs claim that the Forward client files are their personal property. (See discussion, ante, at pp. 13-14.) We need not address arguments regarding the likelihood of plaintiffs prevailing on claims they have not made.
The core of plaintiffs' case in connection with the TRO applications (and the order to show cause regarding why a preliminary injunction should not issue) is the breach of fiduciary duty claim. Defendants do not appear to dispute that the fiduciary duty of full disclosure is owed to their other partners while in good standing, nor that blocking those partners' access to partnership books and records would breach such a duty.
Under California law, partners are entitled to "broad access to partnership information," including" 'all things affecting the partnership.'" (McCain, supra, 185 Cal.App.3d at p. 580; see also Corp. Code, § 16403, subd. (b).) In McCain, for example, the trial court granted an application for preliminary injunction by two limited partners and enjoined the managing general partner from refusing inspection of not only partnership accounting and financial records, but also" 'all correspondence, memoranda, legal documents, files, books of account and any other documents and written materials relating to the formation, operation management, and financial affairs of said limited partnership.'" (McCain, at p. 578.) The appellate court affirmed, noting that a partner's duty of full disclosure is grounded in common law fiduciary principles and demonstrated in statutory obligations under the Corporations Code. (McCain, at p. 579.) Records relating to the partnership's business activities, and not just the partnership's books, accounting records, and legal documents, "were not the private property of [the managing partner], but were subject to the rights guaranteed to the other partners to have access to all information pertaining to partnership affairs." (Ibid.)
Instead, defendants argue that plaintiffs are unlikely to prevail on the merits of their fiduciary duty claim because either (1) plaintiffs were nonequity or dissociated partners, or (2) plaintiffs breached their fiduciary duties first, having "secretly looted massive amounts of Forward's admittedly confidential client and business data so that they could set up a competing practice" before Ward locked them out. But as detailed above, defendants do not explain how equity status alters the fiduciary duties of the parties alleged here. Nor did defendants offer any evidence, at the TRO stage, to support their contentions regarding the purported disassociation or looting. The trial court correctly disregarded Ward's declaration, "[o]n information and belief," that Edwards had downloaded client files. (Riviello v. Journeymen Barbers, etc., supra, 88 Cal.App.2d at p. 503.) Nor do we agree with defendants that the alleged "looting" is "undisputed." Plaintiffs' description of any such conduct as "mitigation" reflects a dispute about the timing and scope of defendants' alleged breaches of fiduciary duty. We conclude that the trial court did not abuse its discretion by finding plaintiffs' likely to succeed on the merits for purposes of issuing the TROs that restored access to client and partnership records.
C. Relative Interim Harm
Defendants argue that the trial court abused its discretion in balancing the interim harm at the TRO stage. They first challenge the trial court's concern regarding the potential harm to client-taxpayers, arguing that any delay in filings caused by the lockout "lacks any basis in the record" because deadlines have been extended to October 2023. We are not persuaded. The inference of harm, based on forcing taxpayers to use the extension and draw out their filings (and any associated refunds), is an entirely reasonable one. (Shoemaker, supra, 37 Cal.App.4th at p. 625.) We also note that the extension deadline is fast approaching.
Defendants next challenge plaintiffs' showing of interim harm. Defendants note that reputational harm is "ordinarily remedied by compensatory damages, not an injunction." But it is well-settled that damage to the reputation of a plaintiff can be considered when evaluating interim harm on a TRO. (E.g., Shoemaker, supra, 37 Cal.App.4th at pp. 633-634.) Defendants then contend that the trial court "identified no evidence in the record suggesting that any party will suffer reputational harm beyond that inherent in any litigated dispute." The lack of an explicit reference to evidence in the court's ruling does not mean there was none in the record. Edwards and Forman declared that the lockout damaged their reputations and eroded confidence, resulting in a loss of clients.
Defendants also argue that plaintiffs have not suffered harm from the lockout of Forward's ProSystems tax software because they can still obtain information from the returns in prior years by requesting copies from the client, and any additional work would be compensable in money damages. Again, we are not persuaded. It seems reasonable to infer that any such request to clients could cause reputational harm and, as supported by the Edwards and Forman declarations, that use of the software may lead not only to more efficient, but also more accurate, tax return preparation. We also note that we lack sufficient information on the existing limited record (including the materials submitted in connection with the preliminary injunction motion) concerning the terms of any license to the ProSystems tax software for us to effectively evaluate defendants' arguments concerning the balance of hardships.
We are also not persuaded by defendants' arguments that their own interim harm outweighs the harm to plaintiffs and the likely harm to taxpayer clients who plan to continue to work with Edwards and/or Forman rather than with Ward. Defendants' concern about the risk that plaintiffs may use information to "plunder Forward's clients" and serve those clients "outside Forward" is counterbalanced by plaintiffs' concern that Ward has been "unilaterally" communicating with clients who previously worked with Edwards and Forman without notifying those clients of the lockout. Moreover, as detailed above, the risk cannot be avoided by denial of access to partnership records, since Corporations Code section 16403, subdivision (b) explicitly provides for access to books and records by both partners and former partners. We cannot conclude that the trial court improperly weighed the potential harms that defendants identify as against those identified by plaintiffs.
Defendants repeat their assertion that some Forward clients could be harmed by disclosure of their confidential information, and defendants could be subject to professional discipline for disclosing it. We again reject that reasoning. Restoring access to documents that an accountant needs to do the job the clients hired the accountant to do and to which the client would reasonably expect the accountant would be able to access is not the same as granting access to confidential documents that the owner never intended the accountant to access. Only disclosure of the latter is barred under the California Tax Preparation Act.
Finally, defendants hypothesize that Forman should not have access to such data if he is working "independently" because he is not properly registered to prepare tax returns. As explained above, defendants offered no evidence that Forman actually dissociated from the partnership. They also have not shown that Forman is otherwise operating as an independent tax preparer or doing anything beyond working with Edwards as he did before Ward locked Edwards and Forman out of Forward's files.
D. Scope of Relief
Defendants contend that the trial court should have denied the TROs because they "exceed the scope of relief available for the harm alleged in [plaintiffs'] Complaint." In fashioning injunctive relief, courts should "strive for the least disruptive remedy adequate to its legitimate task" and must tailor such remedy "to the harm at issue." (See Butt v. State of California supra, 4 Cal.4th at pp. 695-696.) "The scope of available preliminary relief is necessarily limited by the scope of the relief likely to be obtained at trial on the merits." (Common Cause v. Board of Supervisors (1989) 49 Cal.3d 432, 442.)
Defendants contend that, because the "gravamen" of the fiduciary duty claim alleges failure to wind down the Forward partnership and the complaint does not invoke the "exclusive statutory procedure" for winding up a partnership under the Uniform Partnership Act, plaintiffs cannot obtain a TRO "compelling distribution of partnership property." The trial court, however, did not "compel distribution of partnership property" in the TROs. The TROs simply restore access to client records and partnership documents so that Edwards and Forman can continue to serve their clients while the parties address their evident partnership dispute. The complaint alleges a breach of fiduciary duty based on Ward, Momentum, and Forward's failure to wind down Forward's business before locking out the individual accountants who control two of Forward's partners. It also alleges that defendants "failed to account to the limited partnership and hold as trustee property, profit and benefit under applicable laws" and "negligently, purposefully and with reckless disregard locked Plaintiffs out of the computer system, databases and records of Forward LLP for the purpose of cutting Plaintiffs out of the client base and destroying Plaintiffs financially." The scope of relief on this cause of action includes restoration of access to client and partnership records. The TROs do not involve a premature "distribution" of any partnership property.
In sum, we conclude that the trial court did not abuse its discretion in granting the TROs.
Defendants purport to "preserve their statutory right to an undertaking for the future payment of damages if it is ultimately determined that the injunction was wrongfully issued." We need not and do not address this issue, as it was not raised in the trial court and defendants present no argument on appeal that the trial court abused its discretion in declining to require an undertaking upon granting the TROs.
DISPOSITION
The April 12, 2023, and April 20, 2023 temporary restraining orders are affirmed. The stay issued on May 26, 2023, is dissolved forthwith. Plaintiffs are entitled to their costs on appeal. (Cal. Rules of Court, rule 8.278(a)(1), (2).)
We concur: Stewart, P.J., Richman, J.
[*] Judge of the Alameda Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.