East West Bank vs HERBL Inc

Case Number

23CV02629

Case Type

Hearing Date / Time

Mon, 09/08/2025 - 10:00

Nature of Proceedings

CMC; Motion re Adjudication of Claim filed by IRS; Motion: Order Authorizing Release of Funds

Tentative Ruling

East West Bank v. HERBL, Inc., et al.

Case No. 23CV02629

           

Hearing Date: September 8, 2025                                                      

HEARING:              (1)       Receiver Kevin Singer’s Motion For Adjudication Of Claim Filed By Internal Revenue Service And Objection To Proof Of Claim

                             (2)       Receiver Kevin Singer’s Motion For Issuance Of Order Authorizing Receiver To Distribute Additional Funds To East West Bank

ATTORNEYS:        For Plaintiff East West Bank: Marshall J. Hogan, Andrew B. Still, Bryce A. Suzuki, Snell & Wilmer L.L.P.

                                    For Defendant HERBL, Inc., and Receiver Kevin Singer: Blake C. Alsbrook, Chase A. Stone, Ervin Cohen & Jessup LLP

                                    For Claimant Central Coast Agriculture, Inc.: Christopher D. Nissen, Adam E. Wayne, Sonia T. Amodeo, Wilson, Elser, Moskowitz, Edelman & Dicker LLP

                                    For The United States of America: Bilal A. Essayli, David M. Harris, Jolene Tanner, Gavin L. Greene, Office of the United States Attorney

TENTATIVE RULING:

The motions of receiver Kevin Singer for adjudication of, and objection to, claim filed by the Internal Revenue Service, and for an order authorizing the receiver to distribute additional funds to East West Bank, are each continued to October 20, 2025. On or before September 29, 2025, the receiver and any interested party shall file and serve supplemental briefs addressing, with reasoned factual and legal argument, the matters further discussed herein.

Background:

On June 20, 2023, plaintiff East West Bank (EWB) filed its complaint in this action asserting causes of action for: (1) breach of contract; (2) appointment of receiver; and (3) injunction in aid of receiver. The complaint alleges a loan to defendant HERBL, Inc., (HERBL) documented by a promissory note and secured by all or substantially all of HERBL’s personal property. (Complaint, ¶¶ 5-11.)

On June 26, 2023, EWB filed a stipulation of the parties for the appointment of a receiver and issuance of a preliminary injunction. On June 28, at the hearing of the ex parte application of EWB on the stipulation, the court entered its order appointing the receiver and issuing the preliminary injunction.

On July 10, 2023, the court confirmed the appointment of Kevin Singer as receiver (Receiver). The written order of the court was entered on July 17.

On April 18, 2025, the Receiver filed a motion (the April 18 Motion) objecting to, and requesting an adjudication of, a Proof of Claim for Internal Revenue Taxes (the IRS Claim) filed by the Department of the Treasury/Internal Revenue Service (the IRS), asserting a debt for unpaid taxes due from HERBL in the amount of $9,053,181.15. (Receiver Decl., 6 & Exh. E.) As grounds for the motion, the Receiver disputes the legal basis for the asserted tax liability, asserts that HERBL is entitled to a significant tax refund, and contends that the IRS Claim may be adjudicated in this proceeding pursuant to Internal Revenue Code section 6871.

Court records reflect that on May 27, 2025, the United States of America filed notice of the filing of notice of removal of this action in the United States District Court for the Central District of California pursuant to section 1446 of title 28 of the United States Code.

On July 28, 2025, the court continued the hearing on the Adjudication Motion to September 8, 2025.

On August 6, 2025, the Receiver filed an unopposed motion for an order (the August 6 Motion) authorizing the Receiver to distribute the amount of $1,391,932.20 to EWB.

Analysis:

The filing of a notice of removal of a civil action “shall effect the removal and the State court shall proceed no further unless and until the case is remanded.” (28 U.S.C.A. § 1446(d).) Once a notice of removal is filed, “[t]he state court ‘los[es] all jurisdiction over the case, and, being without jurisdiction, its subsequent proceedings and judgment [are] not ... simply erroneous, but absolutely void.’ [Citation.]” (Roman Catholic Archdiocese of San Juan, Puerto Rico v. Acevedo Feliciano (2020) 589 U.S. 57, 63-64 [140 S.Ct. 696, 206 L.Ed.2d 1].) Further, “the state court may resume its first-instance jurisdiction if—but only if—there is a ‘remand’ of the action to it from the federal court. [Citation.]” (Allstate Ins. Co. v. Superior Court (1982) 132 Cal.App.3d 670, 675, fn. 6; 28 U.S.C.A. § 1447(c).)

Considering that the United States of America has filed a notice of removal to the United States District Court for the Central District of California, and given written notice of that filing (28 U.S.C.A. § 1446(b) & (d)), it appears under the general rules discussed above that the court is without jurisdiction as to all matters and proceedings in this action, including with respect to the IRS Claim, the April 18 Motion, and the August 6 Motion. There is also no information in the present record to indicate whether any requested distribution or payment of assets, including the distribution at issue in the August 6 Motion, may implicate or impact the IRS Claim.

For all reasons discussed above, the court will continue the hearing on the April 18 Motion and the August 6 Motion to permit the Receiver, and any interested party, to file and serve supplemental briefs explaining, with reasoned legal and factual argument, whether and to what extent the court has jurisdiction to proceed in this action, including as to the IRS Claim, the April 18 Motion, and the August 6 Motion, in light of the filing of the notice of removal as further discussed above, and absent a remand from the federal court.