Objective Standard Institute v. Barney et. al.

said, the court will proceed with the request to strike references to ‘punitive damages.’

The only places in the TAC which state “punitive damages” are COA Nos. 3 and 9, and Prayer ‘f’. Oddly, despite COA No. 6 being on for ‘Fraud,’ Defendant did not request the court strike that COA. However, all three of those COA were successfully demurred to, so there is no basis for the punitive damages prayer.

As there are no other requests for punitive damages in the TAC, the MTS is GRANTED and the prayer for punitive damages is ordered stricken.

Motion for Access

Plaintiff’s Motion For An Order Requiring Clerk To Grant Access To Public Court Records Deliberately Restricted By Attorney Alan Mark Rothman is DENIED.

It appears Plaintiff requests the court issue an order directing the Clerk of the Court to identify every lawsuit defense counsel has ever been a part of. Plaintiff provides no legal basis which would permit the court to grant the request. Plaintiff also does not state he has been prohibited access to any specific docket(s), but rather requests the Clerk perform work on behalf of Plaintiff to discover and compile a list of such cases for Plaintiff. This is an inappropriate use of judicial resources and Plaintiff is not being prohibited from performing his own research on the issues.

The motion for access should be DENIED.

Plaintiff is given leave to file an amended complaint within 15 days of written notice of the ruling.

Case Management Conference is CONTINUED to October 16, 2026, at 9:30 a.m.

Defense counsel to give notice. 11 Objective Before the Court is an order to show cause why a preliminary Standard injunction should not issue enjoining cross-defendant Objective Institute v. Standard Institute (OSI) from releasing, dissipating, encumbering or Barney et. al. otherwise utilizing the approximately $9 million (the “Funds”) provided to OSI by cross-complainants Carl B. Barney and Center for Excellence in Higher Education (collectively, Cross-Complainants) pending resolution of this action. For the reasons set forth below, a preliminary injunction is DENIED.

OSI’s evidentiary objections to the declaration of Carl B. Barney (Barney Decl.”) and declaration of Gerard M. Mooney (“Mooney Decl.”) are OVERRULED in their entirety.

Cross-Complainants’ evidentiary objections to the declaration of Jason Haas (“Haas Decl.”) are OVERRULED; the objections to the declaration of Craig Biddle (“C. Biddle Decl.”) are SUSTAINED as to

paragraphs 6 through 11 but otherwise OVERRULED; the objections to the declaration of Sarah Biddle (“S. Biddle Decl.”) are SUSTAINED as to paragraphs 18 and 19 but otherwise OVERRULED.

The purpose of a preliminary injunction is to preserve the status quo until a final determination following a trial. (Scaringe v. J.C.C. Enterprises, Inc. (1988) 205 Cal.App.3d 1536, 1542.) The decision to grant a preliminary injunction rests in the sound discretion of the trial court. (IT Corp. v. County of Imperial (1983) 35 Cal.3d 63.) In exercising that discretion, the court evaluates two interrelated factors: the likelihood that the plaintiff will prevail on the merits at trial, and the interim harm that the plaintiff is likely to sustain if the injunction were denied as compared to the harm that the defendant is likely to suffer if the preliminary injunction were issued. (Nutro Products, Inc. v.

Cole Grain Co. (1992) 3 Cal.App.4th 860, 865; Tahoe Keys Property Owners’ Assn. v. State Water Resources Control Bd. (1994) 29 Cal.App. 4th 1459, 1470-1471.) “The trial court’s determination must be guided by a ‘mix’ of the potentialmerit and interim-harm factors; the greater the plaintiff’s showing on one, the less must be shown on the other to support an injunction.” (Butt v. State of California (1992) 4 Cal. 4th 668, 678.)

Probability of Success:

Despite the numerous causes of action alleged in the crosscomplaint, at the heart of this dispute is the enforceability of the Advisement Agreements which placed conditions on the use of the $7.5 million in OSI Reserve Funds over $10,000, including requiring unanimous approval by Barney, Biddle and Lenny Esmond.

1. Declaratory relief

Cross-Complainants seek declaratory relief that the “unanimous consent requirement in the Advisement Agreement is a permissible use restriction” under federal tax law, and the “Advisement Agreement is a valid and enforceable agreement that governs the use of the [OSI Reserve Funds]” under state law such that the “unanimous consent requirement remains in full force and effect, and OSI has no authority to expend the Restricted Funds without the unanimous consent of Mr. Barney, OSI’s Executive Director, and Mr. Esmond, except for projects under $10,000.” (XC ¶¶ 42, 45.)

Here, Cross-Complainants submit no argument or authority supporting their allegations that the Advisements are legally enforceable documents under either federal or state law. Cross- Complainants bypass these material allegations, and merely assume the Advisements are enforceable. (Motion, pp. 22-23.)

Cross-Complainants concede the four grants totaling $7.5 million to OSI constitute charitable donations for which they took federal tax deductions. (XC ¶ 20; Haas Decl., Ex. A.) In the opposition, OSI cites to overwhelming authority under federal and state law requiring a donor to relinquish complete control and dominion over the donated property to qualify for tax deductible contributions. (Opposition, pp. 13-16, citing Goldstein v. Comm’r (1987) 89 T.C.

535, 541-542; Viralam v. Comm’r of Internal Revenue (2011) 136 T.C. 151, 162; Davis v. Comm’r of Internal Revenue (1983) 81 T.C. 806, 817; 26 C.F.R. § 1.170A-1; 26 C.F.R. § 25.511-2(b); Jaffe v. Carroll (1973) 35 Cal.53, 59; see also California’s Uniform Prudent Management of Institutional Funds Act, Probate Code §§ 18501 et. seq.) OSI argues the Advisement Agreements are void as contracts with an illegal object, i.e., for Cross-Complainants to retain the tax benefit of completed charitable gifts while simultaneously retaining control over the disposition of those funds. (Opposition, p. 16, citing Civ.

Code §§ 1550, 1667; Yoo v. Jho (2007) 147 Cal.App.4th 1249, 1251.) Cross-Complainants fail to address any of these arguments in the Reply, thereby conceding the merits. (DuPont Merck Pharmaceutical Co. v. Sup. Ct. (2000) 78 Cal.App.4th 562, 566; Westside Center Associates v. Safeway Stores 23, Inc. (1996) 42 Cal.App.4th 507, 529.)

Cross-Complainants failed to show probability of success on the merits of their declaratory relief claims, i.e., that the Advisement Agreements are enforceable.

2. Breach of trust

Cross-Complainants contend OSI held the Funds “in trust” and that OSI breached the trust by failing to abide by the terms of the Advisement Agreements. (Motion, p. 23; XC ¶ 50.) The parties dispute whether the elements of trust intent and designated beneficiaries are met to form a valid trust. Critically, however, a trust may only be “created for any purpose that is not illegal or against public policy.” (Prob. Code § 15203.) A trust terminates when “[t]he trust purpose becomes unlawful.” (Prob.

Code § 15407, subd. (a)(3).) Taken together, these provisions establish that an unlawful trust either prevents valid formation or compels termination – leaving no legally cognizable trust instrument upon which a breach of trust can be grounded. As discussed above, Cross- Complainants failed to rebut OSI’s argument the Advisement Agreements are void for having an unlawful purpose. Cross- Complainants fail to show probability of success on the merits of the breach of trust claim.

3. Rescission

Cross-Complainants argue that even if the Advisements are “unenforceable,” the $7.5 million in OSI Restricted Funds must “be returned to Cross-Complainants via rescission of the Advisement Agreements for either unilateral or mutual mistake.” (Motion, p. 23; see also XC ¶¶ 114, 115.)

Rescission extinguishes the contract and restores the parties to their original position. Each party typically must return what was received under the contract. (Civ. Code §§ 1688, 1691, 1692; Geraghty v. Shalizi (2017) 8 Cal.App.5th 593, 597; Witkin, Summary of California Law, Contracts §§ 965 to 975.)

Here, Cross-Complainants concede the parties entered into the Advisements only after the four charitable contributions were

completed. (Barney Decl. ¶¶ 8-16.) At the time of the funds were transferred, Cross-Complainants acknowledged them as “grants” and/or OSI sent receipts of the tax-deductible contributions. (C. Biddle Decl., Exs. 5, 7, 8, 9, 10.) Accordingly, by the time the Advisements were executed, the grants had been made and completed. The funds were not transferred via the Advisements, and OSI received nothing by virtue of the Advisements. Thus, rescinding the Advisements does not entitle Cross-Complainants to the return of the funds.

Cross-Complainants fail to show probability of success on their rescission claim. Cross-Complainants also failed to make any legal argument as to any of their other claims, including fraud, breach of fiduciary duty, etc.

Irreparable Harm:

Irreparable harm is where someone will be significantly hurt in a way that cannot later be repaired. (People ex rel. Gow v. Mitchell Brothers’ Santa Ana Theater (1981) 118 Cal.App.3d 863, 870-871.) “An injunction cannot issue in a vacuum based on the proponents' fears about something that may happen in the future. It must be supported by actual evidence that there is a realistic prospect that the party enjoined intends to engage in the prohibited activity.” (Korean Philadelphia Presbyterian Church v. California Presbytery (2000) 77 Cal.App.4th 1069, 1084.)

Here, Cross-Complainants argue OSI is “aggressively dissipating” the OSI Reserve Funds, including the immediate threatened use of $1 to $2 million for a “LevelUp Conference” scheduled for July 8-11, 2026 in Chicago. (Barney Decl. ¶¶ 28-35.) In response, OSI contends the expenditures for the annual LevelUp Conference are ordinary, recurring expenses that are and have always been part of OSI’s usual business operations, and in fact, the 2026 LevelUp Conference was previously disclosed to Cross-Complainants. (C.

Biddle Decl. ¶ 98-100; S. Biddle Decl., ¶ 18.) OSI also produced evidence that it has adhered to an interim spending protocol that limits expenditures to ordinary operating expenses and reasonable attorney costs, and OSI’s present operation expenditures are consistent with its historical expenditures in prior years. In fact, the 2026 projected expenses are lower than previous years. (S. Biddle Decl. ¶¶ 2-5, 15-18, Exs. A, B.) Cross-Complainants produced no evidence that OSI is unreasonably dissipating funds beyond ordinary operating expenses.

Cross-Complainants have not shown irreparable harm of inadequate remedy at law (e.g., money damages).

By contrast, preventing OSI from accessing or using the OSI Reserve Funds would force OSI to cease all of its operations, i.e., OSI contends that without these funds OSI can only operate for 3-4 weeks. Specifically, without being able to draw upon the OSI Reserve Funds, OSI will be unable to pay its employees and contractors, unable to continue teaching students, be forced to discontinue online courses, cancel its annual summer conference, cancel scholarships, shut down its website, and unable to pay its legal fees, and forced to go out of business as a nonprofit

educational organization. (S. Biddle Decl. ¶¶ 7-13.) OSI has shown irreparable harm if the preliminary injunction were granted.

The balance of harms weighs in favor of denying the preliminary injunction, and Cross-Complainants have not shown probability of success on the merits of their claims. As such, Cross-Complainants’ request for preliminary injunction is DENIED.

Counsel for Cross-Complainant OSI shall give notice of this ruling. 12 13 14 15 16 17 18 19 20 21