Plaintiff's reply to defendant's motion for preliminary injunction, (Meera Kamegai, Plaintiff, vs. Temple Beth Am, Inc. and Roe Corporations, Defendants)

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MICHAEL V. CRISTALLI, ESQ. Nevada Bar No. 006266 CRISTALLI & SAGGESE, LTD. 732 S. Sixth Street, Suite 100 Las Vegas, Nevada 89101 (702)386-2180 Attorney for Plaintiff DISTRICT COURT CLARK COUNTY, NEVADA MEERA KAMEGAI, President of Temple ) Beth Am, Inc., ) ) Plaintiff, ) ) vs. ) ) TEMPLE BETH AM, INC., DOES I-V, ) And ROE CORPORATIONS I-V, inclusive;) ) Defendants. ) __________________________________________ ) PLAINTIFF?S REPLY TO DEFENDANT?S MOTION FOR PRELIMINARY INJUNCTION COMES NOW, Plaintiff, MEERA KAMEGAI, by and through her attorney o f record, MICHAEL V. CRISTALLI, ESQ., o f the Law Firm of CRISTALLI & SAGGESE, LTD., and hereby files Plaintiff s Reply to Defendant?s Opposition to Plaintiffs Motion for Preliminary Injunction. CASE NO.: A538161 DEPT. NO.: XI 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 This Reply is based on the memorandum of points and authorities herein, all pleadings on file, and any oral argument this Court may allow. DATED th is_________ day of April, 2007. MICHAEL V. CRISTALLI, ESQ. Nevada Bar No. 006266 CRISTALLI & SAGGESE, LTD. 732 S. Sixth Street, Suite 100 Las Vegas, Nevada 89101 REPLY In Defendant?s opposition, Defendant fails to explain why it would not want a forensic audit conducted when Temple Beth Am, Inc. (the Temple) is clearly in such dire financial straits that it is in danger of shutting down completely. first, Defendant states in its motion that Plaintiff, the President of the Temple, ?was required to make a proposal or suggestion to the Board for a forensic audit or receiver. However, Plaintiff failed to make any proposal or suggestion first before filing a Complaint....? (emphasis added) In fact, Defendant?s own exhibit contradicts this assertion. The minutes of the April 11, 2007, Board meeting, attached as Defendant?s Exhibit A states that Plaintiff, ?was asked by Treasurer Andy Saylor whether she had ever put forth a motion to have a forensic audit. Her response was that she had asked many times, but not in the form of a motion.? (emphasis added) Despite repeated requests, the Board, inexplicably, has refused to allow a forensic audit to be conducted. There is no dispute that the Board continues to fight Plaintiff about the need for 2 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 a forensic audit. Hence, in order to protect the Temple, of which she is President of the Board, Plaintiff was forced to file a motion for preliminary injunction. Plaintiffs complaint merely asks for a forensic audit to be conducted, and a receiver to be put in place, in order to save the Temple from extinction. The gross mismanagement of corporate finances has placed the Temple in a situation where it cannot make payroll, nor pay its mortgage. (Exhibit 1) In March 2007 alone, the net income for the temple was $-44,825.52. (Exhibit 1) Defendant further asserts that, because Plaintiff will not personally suffer injury, the motion brought forth, by Plaintiff, as President of the Board of Directors, should be denied. This again, is an assertion that fails in terms o f logic; Defendant fails to even address that Plaintiffs duty as President of the Board of Directors, is to ensure that the best interests of the Temple are protected. In fact, Plaintiff could be liable for corporate waste, if she breached said duty. Defendant actually has the audacity to assert that, though Plaintiff is the President of the Board of Directors, and an active member of the congregation, if the Temple is facing extinction because of financial mismanagement, and heavy debt, instead of proactively acting in the best interest of the Temple, Plaintiff should simply resign as President, and let the Temple continue to bleed. Defendant cannot dispute that multiple examinations of the Temple?s financial situation has proven that the Temple is in dire financial straits. In 2003, an audit was conducted of Temple Beth Am. Defendant does not deny that individuals affiliated with Temple finances discovered that at least $100,000.00 was grossly mismanaged when those funds, which were to be held for cash reserves, were spent contrary to the Board?s wishes. 3 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 Defendant does not deny that when an outside CPA firm, Lynda Keeton and Associates, acting as controller, was brought in to examine the financial records, she discovered that Temple Beth Am had been grossly misled about its financial condition and there were no capabilities for adequate accounting. (Exhibit 2) Ms. Keeton has supplied Plaintiffs counsel with documents concerning Temple Beth Am?s financial situation. (Exhibit 2) She includes prior reports to the Board made on July 5, 2006, and August 2, 2006. She indicates that her services included, Reloading all of FY2006, Reconciling 9 bank accounts for 14 months, training Temple staff in the accounting function, and heavy treasury management.? (emphasis added) She indicates that the Temple has suffered a loss of $84,976.00, pursuant to her January 3, 2007, report. In comparing revenues to the prior year, she indicates that the Temple revenue is down $52,000.00. She also notes that the ?current situation by entity-Temple Beth Am, the net loss to Temple Beth Am is $213,500.00. She writes, ?This entity has not sustained reasonable cash flow to sustain its fixed costs.? (Exhibit 2) In June 2006, Ms. Keeton drafted a memo, including her observations of the Temple. (Exhibit 2) In terms of organization, she found that the office was disorganized, that there was no office leadership, no documented organizational procedures, no authority level guidelines in place for purchases/checks, etc., the systems were not networked, there were no system back ups, there were no office job descriptions, the files were not maintained, critical files were not clearly managed (taxation/govt. filings, etc.), and historic unopened mail. (Exhibit 2) In terms of finances, she was unable to find any asset ledger, no monthly bank reconciliations, no purchase order process in place, no month-end closes completed, an out of date signatory list, unclear banking, unclear petty cash accounting, no verification process before payroll checks went out, no taxation controls, no PO/receipt/invoice/check matching process, 4 blank checks unsecured, no financial data back up completed, unclear approved vender process, and checks that had not been deposited. (Exhibit 2) Regarding financial ?hot items,? Ms. Keeton wrote the following: ? Two deposits were lost from the Shenker Academy after the Accounting Clerks had signed for the deposits.. .One on 3/22/2006 for $3,508.00 and one on 3/27/2006 for $17,335.00. The school then had to send letters to all o f the parents explaining what had happened and then take the stop payment fee out of the tuition. The total amount that was recovered from both deposits was $19,064.00 due to recovering stop payment fees and the cash amount that was involved. ? Another deposit dated 5/25/2006 for $12,631.70 with the May tuition payments was misplaced and found on a desk in an envelope in 6/27/2006. Parents were going to the Shenker Academy letting them know that their checks from May still had not cleared. ? The bank account where the money from the refinance of the building was deposited, and that has Steve Stein as the only signer, needs to be received on this account in order to reconcile and see where the money has gone. ? The Adult Day Care is not able to receive their mail payments anymore because the Accounting Clerks believe that someone in the past was stealing money. ? The Adult Day Care does not receive all of their mail that is delivered to the Temple. There was an instance where some documentation for a grant was never delivered to the Adult Day Care and they received a call asking why they had not responded. ? The copier at the Adult Day Care has been out of service because it is out of toner. Apparently there is a problem with the Office Depot account and they cannot order from them anymore. ? A decision was made by the Board to take $ 100,000.00 and have it deposited into a CD to earn some interest. By the time that the check was cashed for the CD there was not sufficient funds in the account to cover it. A review needs to be completed to see where the money went. ? Acknowledgement letters are not sent for donations that have been received. ? Accounts Payable invoices are not input into QuickBooks timely so that the Temple as a whole does not know what its true Accounts Payable obligation is. Accounts Payable invoices appear to be entered only when there is money to pay for them. (Exhibit 2) 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Defendant further fails to address Plaintiffs discovery of checks written out, on behalf of Temple Beth Am, that had been forged. Defendant fails to address the fact that Plaintiff has been unable to obtain any records for financial review regarding Hillpointe Events, the catering operation of Temple Beth Am. Plaintiff has been unable to obtain any records regarding Hillpointe Events, despite repeated requests for review, in order to ascertain the corporation?s bookkeeping and accounting for said business. Thus, Defendant has brought forth no evidence whatsoever that the Temple does not need a receiver, nor that is not in dire financial straits. Instead, Defendant argues that, if the Board does not want a forensic audit to be conducted, and a receiver to be put in place, the Court should not impose one on the Temple, despite the Temple?s clear inability to manage its finances. Finally, addressing Plaintiffs proposal for the Rabbi to resign, Defendant alleges that the point of the lawsuit is not to save the Temple but to ?fulfill a personal grudge against Rabbi Hect.? In Defendant?s opposition, Defendant has the audacity to call Plaintiff a blackmailer. Nothing could be further from the truth, and this Court should note that Defendant?s counsel has not even attempted to ascertain why Plaintiff would withdraw the lawsuit in exchange for the Rabbi?s resignation; instead, Defendant?s counsel files an opposition makes bald accusations about the legitimacy of Plaintiff s suit, and of Plaintiff s character. In fact, Plaintiff offered to withdraw the lawsuit in exchange for the Rabbi?s resignation for one purpose only. Several years ago, the Temple had many more members. These members, unhappy with Rabbi Hect, left the Temple, and began another Temple. This third party has been saving money to build a temple. When they heard about the Temple?s dire financial straits, they offered to save the Temple from potential extinction; 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 specifically, they offered to pay debts, and overdue mortgage payments, uniting the two temples back to Temple Beth Am, using the money they had originally saved to build their own temple. However, the condition for this offer was that the past members (third party) did not want Rabbi Hect to be the Rabbi, as he was the reason they originally left the Temple. Plaintiff, in an attempt to save the corporation from extinction, brought forth this proposal to the Board, as one opportunity that had been presented to Plaintiff, to save the Temple from insolvency. Her sole interest is keeping Temple Beth Am, of which she is President of the Board of Directors, and an active member o f the congregation, from being terminated. Plaintiff is doing everything within her power, including paying for attorney fees directly out o f pocket, in an attempt to save the Temple she loves. It should not be ?shocking? to Defendant?s counsel that Plaintiff is examining every option for saving the Temple, and bringing forth every option to the Board, as are her duties as President. Thus, it is completely unfair, unsubstantiated, and unjustified to state that she is using this lawsuit for a personal grudge. LEGAL ARGUMENT Pursuant to NRCP 65(a): (1) Notice. No preliminary injunction shall be issued without notice to the adverse party. (2) Consolidation of Hearing With Trial on Merits. Before or after the commencement of the hearing o f an application for a preliminary injunction, the court may order the trial of the action on the merits to be advanced and consolidated with the hearing of the application. Even when this consolidation is not ordered, any evidence received upon an application for a preliminary injunction which would be admissible upon the trial on the merits becomes part of the record on the trial and need not be repeated upon the trial. This subdivision (a)(2) shall be so construed and applied as to save to the parties any rights they may have to trial by jury. 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 A preliminary injunction is normally available upon a showing that a party seeking it enjoys a reasonable success on the merits and that Defendant?s conduct, if allowed to continue, will result in irreparable harm for which compensatory damages is inadequate. Number One Rent-A-Car v. Ramada Inns, Inc., 94 Nev. 779 (Nev. 1978). In the case at bar, Plaintiff will suffer immediate and irreparable injury, loss or damage if this Court does not grant Plaintiff s motion for a preliminary injunction. On or about 2003, and continuing to the present, Defendant has wrongfully and unlawfully refused to allow a forensic audit to be conducted against it, to the damage of Plaintiff, and other parties whose interests are impaired by the alleged mismanagement of corporate funds. The Temple is in danger of facing extinction, as it apparently does not have funds to make payroll and/or pay its mortgage. Plaintiff, as President of the Board of Directors, and as a member of the congregation of the Temple, has an interest in seeing that the Temple, is not destroyed, by financial mismanagement. Should the Temple be forced to close down because of said financial mismanagement, monetary damages are not an adequate remedy. She will lose the Temple where she practices her religious faith, and she will lose her position as the President of Board of Directors, as the Temple will cease to exist. Plaintiff has provided ample evidence that the Temple is in dire financial straits. Plaintiff has provided ample evidence that monies continue to be mismanaged. Additional testimony shall be provided at the hearing on Plaintiffs motion, that the Temple will be forced to close down for inability to pay its mortgage, and manage its financial matters, unless the manner in which the Temple spends its money and/or accounts for its finances, is changed. 8 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 Plaintiff, as President of the Board of Directors, has a duty to the corporation to ensure that its monies are being properly and correctly managed, and accounted for, that monies are not missing, and that temple donations have not been improperly used. Defendant?s own cite to Navellier v. Sletten, 262 F.3d 923 (9th Cir. 2001) warns about corporate waste. Directors are guilty o f corporate waste when they authorize an exchange that is so one sided that no business person of ordinary, sound judgment could conclude that the corporation received adequate consideration. Navellier v. Sletten, 262 F.3d 923 (9th Cir. 2001). Plaintiff is doing everything in her power to ensure that she does not breach her duty, as a director of the corporation. She is attempting to ensure that no corporate waste is ever found, against the directors of the corporation. The fact of the matter is the Temple is in such dire straits, because of past financial mismanagement, allowed to take place by the Board, that the Temple is almost insolvent. Thus, Plaintiff clearly has standing to protect the interest o f the corporation. Navellier v. Sletten, 262 F.3d 923 (9th Cir. 2001) further holds that a court will not substitute its judgment for that of the board if the latter?s decision can be attributed to any rational business purpose. Navellier v. Sletten, 262 F.3d 923 (9th Cir. 2001) (emphasis added) Here, there is absolutely no rational reason why the Board would not allow a forensic audit to be conducted. Plaintiff has brought forth years of evidence accumulated showing that corporation?s finances have been grossly mismanaged. Plaintiff is simply requesting that an audit be conducted to determine how so much money could have been mishandled. Specific instances include evidence of forged checks, a missing amount o f $100,000.00 that was to be used for a CD (for which the Board still has no explanation o f where said funds went), and 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 inquiry as to whether any of the numerous problems discovered by Ms. Keeton, have been corrected. Defendant?s counsel states that because the Temple is having financial difficulties, it is sound business purpose to refuse a forensic audit, as that would only cost more money. However, it is, in fact, a forensic audit that could help the Temple understand where all the money is going, and where $100,000.00 mysteriously disappeared to. It is inexplicable that the Temple could have hundreds of thousands of dollars misplaced and/or mismanaged, and that the Board has absolutely no interest in determining where it went. It is especially disconcerting that the Board refuses to delve deeper into this inquiry considering that the Temple does not even have enough money to make payroll and/or pay the mortgage, and is in danger o f becoming extinct, as a result. As such, Plaintiff is respectfully requesting this Court to compel the Board to conduct a forensic audit; in the interim, in order to stop the bleeding, Plaintiff is requesting a receiver be put in place. NRS 32.010(5) clearly states that a receiver may be appointed by the Court in cases where a corporation is in imminent danger of insolvency. In the case at bar, the Temple cannot make its mortgage payment and/or payroll. The Temple cannot pay its debts. The Temple is not even sure what all of its debts are because no forensic audit has been conducted. There has been evidence of missing checks, checks that have been forged, missing monies of over $100,000.00, and gross financial mismanagement of corporate funds. These are not only past instances of financial impropriety but are instances current and continuing, placing the Temple in a situation where it is in imminent danger of insolvency. 10 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 Because of the Temple?s dire financial straits, and imminent danger of insolvency, Plaintiff has repeatedly requested a forensic audit take place regarding all businesses related to the corporation, all accounts wherein monies from the corporation have been placed, and all documents be examined related to the corporation?s finances. As Defendant has received ample notice about this situation and continues to refuse to remedy the situation, Plaintiff has been forced to commence said suit against Defendant. As such, Plaintiff requests that this Court issue a Preliminary Injunction against Defendant, compelling it to allow a neutral third party to conduct a forensic audit of the corporation to determine the extent of monies mishandled, and misplaced, and ascertain the current location of said monies, to refrain Defendant from selling and/or leasing corporate properties until a forensic audit has taken place, so that monies that may be owed to other parties, by the corporation, may be paid out by the corporation, and place a receiver to manage the Temple finances, until a hearing on the merits of the case can be heard. DATED th is_____ day of April, 2007. MICHAEL V. CRISTALLI, ESQ. Nevada Bar No. 006266 CRISTALLI & SAGGESE, LTD. 732 S. Sixth Street, Suite 100 Las Vegas, Nevada 89101 Attorney for Plaintiff 11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 CERTIFICATE OF SERVICE THIS IS TO CERTIFY that on th e ______ day o f ______________ , 2007,1 hand delivered a copy of the foregoing Reply to: Jeffery Bendavid, Esq., Moran Law Firm LLC, 630 S.Fourth Street, Las Vegas, Nevada and that there is regular communication between the place(s) of mailing and the place(s) so addressed. An employee of CRISTALLI & SAGGESE, LTD. 12