Filed 9/28/26 DC Modesto, LLC v. Sarkis CA5
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIFTH APPELLATE DISTRICT
DC MODESTO, LLC et al.
F089571
Plaintiffs and Respondents,
(Super. Ct. No. CV-24-009363)
v.
ANGILBERT SARKIS,
OPINION
Defendant and Appellant.
APPEAL from a judgment of the Superior Court of Stanislaus County. John R.
Mayne, Judge.
Gavrilov & Brooks, Michael Coleman and Eliezer M. Cohen; Dhillon Law Group,
Michael A. Columbo; Renner, Shaw, Mann and Christopher G. Renner for Defendant and
Appellant.
Frost, Christoper Frost, David Shackelford and Nicholas Lauber for Plaintiffs and
Respondents.
-ooOoo-
Defendant and appellant Angilbert Sarkis appeals from an order granting a
preliminary injunction in favor of plaintiffs and respondents DC Modesto, LLC doing
business as Levels, CV Merced, Inc., and CV McHenry, Inc. (collectively, plaintiffs).
We reverse.
FACTUAL AND PROCEDURAL BACKGROUND
I. The Parties
Plaintiffs are the owners of three cannabis dispensaries that do business as
“Levels” (Levels) located in Modesto and Merced. Plaintiffs filed suit against defendants
Sarkis and “The Premier Group”1 alleging four causes of action against the defendants
for violation of the Cartwright Act (Bus. & Prof. Code, § 16700 et seq.),2 unfair
competition (id., at § 17200), interference with prospective economic advantage, and
unjust enrichment due to the defendants’ alleged unfair and anticompetitive conduct.
Sarkis has ownership interests in a number of cannabis dispensaries
located throughout California, which he markets under the name “The Premier Group”
(Premier), including two dispensaries located in Modesto: Phenos Collective, Inc. (PCI)
and Patient Care First, Inc. (PCF). PCI and PCF were added as defendants to the
litigation after plaintiffs filed their motion to obtain the preliminary injunction which is
the subject of this appeal. Sarkis is the chief executive officer and president of PCI and
PCF.
1 In his opening brief on appeal, Sarkis states that plaintiffs dismissed The Premier
Group as a defendant in the litigation. Plaintiffs did not confirm this fact in their
respondent’s brief and the dismissal is not mentioned in the appellate record.
2 Unless otherwise indicated, all further statutory references are to the Business and
Professions Code.
2.
II. The Complaint
On November 19, 2024, plaintiffs filed their original complaint (the complaint)3
against defendants Sarkis and Premier (Sarkis defendants) and Does 1 through 50. The
complaint identifies plaintiffs as “affiliated cannabis retailers located in Modesto and
Merced …, that do business as Levels and [that] have common ownership and
management.”
The complaint identifies Premier as “a cannabis retailer with [10] locations
including in Modesto, Merced” and other California locations, and states that Sarkis is
“the owner and principal of Premier.” In the complaint, plaintiffs allege Sarkis and
Premier, each, were, and are, “the agents, servants, alter egos and/or employees” of each
other and other defendants, that Sarkis and Premier have “such a unity of interest and
ownership that the individuality or separateness of Sarkis and Premier has ceased,” that
all defendants were acting in concert with each other in doing the acts alleged in the
complaint, and all defendants were members of an alleged conspiracy in violation of
California law.
Plaintiffs allege that Sarkis and Premier engaged in unfair and anticompetitive
business practices to prevent plaintiffs from competing with them and “unlawful[ly]
scheme[d] to prevent [plaintiffs] from having access to the popular cannabis brands and
products it needs to entice customers to visit [plaintiffs’] store[s] and purchase [their]
products.” Plaintiffs further allege Sarkis and Premier “decided to wield [their]
substantial clout and influence by intimidating, coercing and threatening cannabis
distributors with economic sanctions to inhibit and stifle [plaintiffs’] ability to compete
for customers.” According to the complaint, Sarkis and Premier “threatened distributors
3 The register of actions reveals that plaintiffs amended their complaint on more
than one occasion after filing their motion for a preliminary injunction. The amended
complaints are not part of the record on appeal.
3.
of popular cannabis products and brands that if [Sarkis] found out they were selling to
[plaintiffs], … Premier would refuse to purchase their products.”
Under their first cause of action, plaintiffs allege the Sarkis defendants’ conduct is
“a per se illegal restraint of trade in violation of the Cartwright Act” (italics omitted)
(§ 16720 et seq.), or if not a per se illegal restraint, that it “violates the [Cartwright] Act
under the rule of reason.”4 Plaintiffs allege that, “unless restrained,” Sarkis and Premier
“will continue to unreasonably limit, reduce or suppress actual and potential competition
in the market and will continue to prevent [plaintiffs] from fairly competing.”
In their second cause of action, plaintiffs contend the Sarkis defendants’ conduct is
unfair, fraudulent, and unlawful under section 17200. In support of their section 17200
claim for fraudulent activity, plaintiffs allege the Sarkis defendants’ conduct violates
Civil Code section 1710, subdivision 3.5 In support of their section 17200 claim for
unlawful activity, plaintiffs allege the Sarkis defendants’ conduct violates California
Administrative Code, title 14, section 15088.5.6
4 “Under [the] Cartwright Act …, some restraints of trade are treated as per se
unlawful, while others are analyzed under the ‘rule of reason.’ ‘In general, only
unreasonable restraints of trade are prohibited. [Citation.] However, “there are certain
agreements or practices which because of their pernicious effect on competition and lack
of any redeeming virtue are conclusively presumed to be unreasonable and therefore
illegal without elaborate inquiry as to the precise harm they have caused or the business
excuse for their use.” [Citation.] …’ Under the rule of reason, the challenged conduct is
unlawful only if its anticompetitive effects outweigh its procompetitive effects.”
(Flagship Theatres of Palm Desert, LLC v. Century Theatres, Inc. (2011) 198
Cal.App.4th 1366, 1374.)
5 Subdivision 3 of Civil Code section 1710 defines actionable “deceit” as “[t]he
suppression of a fact, by one who is bound to disclose it, or who gives information of
other facts which are likely to mislead for want of communication of that fact.”
6 The California Administrative Code is now referred to as the California Code of
Regulations. Section 15088.5 of title 14 of the California Code of Regulations pertains to
the recirculation of environmental impact reports. Given the context of the litigation, we
suspect the citation may be incorrect.
4.
In their third and fourth causes of action, respectively, plaintiffs allege Sarkis and
Premier’s unlawful, anticompetitive conduct has interfered with plaintiffs’ prospective
economic advantage by preventing them from being able to stock certain brands of
cannabis in order to compete against said defendants, and that said defendants have been
unjustly enriched.
III. The Motion for a Preliminary Injunction
On December 16, 2024, plaintiffs filed their motion for a preliminary injunction
against Sarkis and Premier. The motion was premised on plaintiffs’ contention that
Premier had “enormous leverage over smaller-independent [cannabis] dispensaries and
vendors” and used that leverage to “restrain trade and create a near-monopoly over the
sale of cannabis” to plaintiffs’ detriment. Plaintiffs contend that Sarkis defendants
“threatened distributors of popular cannabis products and brands that if [they] found out
they were selling to Levels, that Premier would refuse to purchase their products.”
Plaintiffs contend Sarkis defendants “made this threat to dozens of the distributors who
sell the most popular cannabis products in the market, and, in particular, targeted the
sellers of products stocked at [plaintiffs],” and that “distributors have acceded” to these
threats “and are now too afraid to sell their products to [plaintiffs].”
Specifically, plaintiffs contended Sarkis and Premier entered into “unlawful
agreements with various vendors” and “prohibit[ed] those vendors [from] sell[ing] to any
of Premier’s competitors, including [plaintiffs].” After a large number of objections to
plaintiffs’ evidence in support of the motion were lodged by Sarkis, plaintiffs submitted
additional evidence to support their motion with their reply paperwork.
On January 24, 2025, the motion came on regularly for a hearing. The trial court
concluded certain evidence submitted with plaintiffs’ reply paperwork appeared relevant
to the merits of the motion and, rather than striking the evidence, permitted Sarkis to file
a sur-reply. The hearing was continued to a later date.
5.
Sarkis filed a sur-reply along with additional evidence in opposition to plaintiffs’
motion. In response, plaintiffs again filed additional evidence to support its motion but
the trial court struck those filings as unauthorized.
On February 19, 2025, the trial court heard oral arguments on plaintiffs’ motion
and took the matter under submission. On February 25, 2025, the court issued its ruling
after the hearing. In it, the court ruled on the parties’ respective objections to evidence in
support and opposition to the motion. The court granted plaintiffs’ motion, modified
plaintiffs’ proposed injunctive order, and required plaintiffs to post an undertaking in the
amount of $20,000 to effectuate the preliminary injunction.
IV. Evidence Submitted by Plaintiffs in Support of the Motion
After the trial court ruled on the parties’ respective objections to evidence, the
admissible evidence before the court included the following:
A. Shan Bal’s Initial Declaration
The following averments were made in the initial declaration of Shan Bal in
support of plaintiffs’ motion for a preliminary injunction:
Shan Bal, plaintiffs’ general manager and the owner of CV Merced, Inc. and
CV McHenry, Inc., stated that plaintiffs operate three cannabis dispensaries “in areas in
direct competition to Premier”—i.e., Modesto and Merced. Bal refers to plaintiffs’
dispensaries as “Levels,” which, presumably, is a fictitious business name under which
the dispensaries operate. Bal states that Levels has been doing business since 2019, and
that “Levels’[s] goal is to provide the best and largest selection of cannabis at an
affordable price.”
Bal declared, “Premier is the largest cannabis dispensaries [sic] in the Central
Valley region, which gives Premier enormous leverage over independent dispensaries as
well as cannabis vendors.” “On information and belief, … Sarkis is the owner and/or
managing principal of Premier.”
6.
Levels’s retail operations and Premier’s retail operations are “less than three miles
away from each other and compete for the same customers” and both obtain their
inventory from “various cannabis distributors that offer brand name products desired by
consumers.” “Upon information and belief, Premier typically purchases 20 [to] 30 times
(or greater) the volume of product as Levels from common distributors.”
Cannabis “customers develop brand loyalty and seek out certain brands,” which
makes it “essential that cannabis retailers, like Levels, carry popular brands.”
Levels’s first store opened in 2019, and another store opened in April 2023. Up
until that point and for a brief time thereafter, “Levels was able to stock and carry all of
the most popular brands” but “starting in or around May of 2023, Levels started receiving
calls from their vendors stating that they are no longer able to work with or supply
[product] to Levels.”
In his initial declaration, Bal attempted to attribute the alleged refusal of various
cannabis distributors to sell product to Levels to communications between Sarkis and
those distributors. Notably, the trial court sustained objections to Bal’s averments in that
regard based primarily on grounds of hearsay. Similarly, the court sustained hearsay
objections to the documents that Bal submitted in an effort to corroborate those
averments. As a result, most of the evidence submitted by Bal in his original declaration
was determined to be inadmissible by the court. Accordingly, we do not credit such
matter in our review of the order granting plaintiffs’ motion for a preliminary injunction.
B. Shan Bal’s Reply Declaration
In his reply declaration, Bal averred that the following cannabis brands last
accepted orders from Levels in the month and year indicated: Dimebag (May 2023);
Gelato (June 2023); Smokie[z] (September 2023); Claybourne (March 2024); and
High 90s (August 2024). In addition, Bal averred that the brand Bodega Boyz, which
PCI carries, “has refused to accept any orders from Levels.”
7.
Bal further declared that in 2021, he “instituted a business policy for all [his]
stores that all products would be discounted 30%” in order to remain competitive, and “to
attract and retain customers.” He submitted copies of webpages from Weedmaps.com
showing the price PCI charged for seven different cannabis products from a total of four
different brands or vendors (Himalaya, High 90s, Gelato, and Claybourne) and submitted
Levels’s internal records which showed the prices charged by Levels for the same
products. The internal records of Levels shows the date of sale at the price level
indicated (ranging from April 5, 2023, through July 29, 2024) but the webpages showing
the advertised prices of PCI for those same products are undated and Bal did not provide
dates for those webpages in his declaration.
The trial court sustained an objection to Bal’s averment that the brands identified
in his reply declaration refused to sell to Levels at the request of Sarkis or his
corporations. Consequently, there is no admissible evidence to that effect in either Bal’s
initial declaration or his reply declaration.
Plaintiffs have not argued on appeal that objections were sustained by the trial
court in error. In their respondents’ brief, plaintiffs acknowledge that the court
“sustained the majority of Sarkis’s evidentiary objections … and overruled all of
Plaintiffs’ objections to Sarkis’s evidence” and state, “[i]n advancing their arguments …,
Plaintiffs only rely upon evidence admitted by the trial court.”
C. Alexis Maxwell’s Declaration
Alexis Maxwell averred that she is a “sales representative at Kiva Sales and
Services (‘Kiva’),” which sells approximately 20 different cannabis brands and supplies
to cannabis dispensaries, and that, since approximately October 2024, she was assigned
Kiva’s account with Levels. She declared, “The brands Kiva is prohibited from selling to
8.
Levels include Gelato among others.” There is no admissible evidence of the reason for
this prohibition in the record on appeal.7
D. Klent Jewett’s Declaration
Klent Jewett declared that he is the manager and owner of Illa Guerilla, LLC; that
“[s]ometime after August 2023, a sales representative from [Premier]/[PCI] informed
[him] that if Illa Guerilla LLC were to work with or sell to Levels, then [Premier] would
cease ordering from Illa Guerilla LLC”; that “[s]ince in or around August 2023, [Premier]
has not purchased any orders from Illa Guerilla LLC; and that he communicated these
facts to Shan Bal.
V. Evidence Submitted by Sarkis in Opposition to the Motion8
Also before the trial court was the following evidence submitted by Sarkis.
A. Sarkis’s Initial and Sur-Reply Declarations
Sarkis made the following averments in his original declaration: Sarkis states he
has ownership interests in a number of cannabis dispensaries located throughout the state
of California; that the dispensaries he owns in whole or in part are marketed under
Premier; that he is the chief executive officer and president of PCI and PCF located in
Modesto; and that he oversees inventory purchases for his dispensaries. He stated that
7 Sarkis objected to the declaratory statement to which this footnote is appended.
However, the trial court did not rule on the objection and Sarkis has not renewed the
objection on appeal. In any event, whether Kiva was prohibited from selling certain
brands to Levels appears to be a matter within the personal knowledge of Maxwell—but
the reason for this prohibition is not contained in any admissible evidence. The court
sustained objections to statements by Maxwell wherein she averred that “it is common
knowledge” that PCF maintains a “do-not-sell to list created by … Sarkis.”
Consequently, we do not credit the latter averment.
8 Among the sur-reply evidence submitted by Sarkis was a declaration from his
attorney indicating his discussions with opposing counsel in an attempt to clarify
contentions made in plaintiffs’ moving papers and, pursuant to the trial court’s request at
the January 24, 2025 initial hearing, to clarify the actual relief that plaintiffs were seeking
in their proposed order. The declaration is not relevant to the issues before us and has no
bearing on our opinion.
9.
Premier “is not a business entity” or a registered fictitious business name—it is only a
marketing phrase he uses to describe his cannabis-related companies.
Sarkis declared that Modesto has “several other dispensaries … including the
massive conglomerate, Cookies, which has developed global recognition” and has “over
70 retail locations, including a storefront minute[s] from [a Levels] shop.”
Sarkis described some of his business strategies including, without limitation,
ensuring his dispensaries offer competitive pricing, and that his retail salespeople “offer
excellent customer service.” “One important business strategy,” he declares “is ensuring
products in [his] stores are not oversaturated by other products in the same market. [He]
make[s] intentional decisions about what inventory [he] want[s] in [his] stores.” Sarkis
stated that having “shelves … stocked with top-tier, desirable products, [that] are not
oversaturated in the relevant market, is important to our business model.”
Sarkis declared that like other industries, “the cannabis market has top-tier,
mid-level, and low-tier retailers”; that his dispensaries “are top-tier brick and mortar
dispensaries that provide a unique and exciting shopping experience…. Lower-tier
stores, such as those [p]laintiffs operate, often feel like a corner store or ‘bodega.’ ”
Sarkis declared that he has “no problem selling the same products as other top-tier
competitors”; that he competes with top-tier dispensaries by providing “the same or
similar products at competitive prices”; that this “fosters competition among the top-tier
retailers, and benefits our brand in the marketplace”; that he does “not wish for [his]
stores to be associated with mid-level and low-tier stores and thus, [he] aim[s] to carry
different products to prevent customer confusion”; and that “when Levels began carrying
certain products also available at [PCI] and PCF, [he] became less inclined [to] have [his]
employees re-purchase those products.” “Upon learning of this business decision,” he
stated, “it appears that some of those distributors started declining to sell to Levels.” He
denied, however, that he ever “demand[ed] or coerce[d] the distributors to stop selling to
10.
Levels” and denied that “any of [his] dispensaries have agreements that require
distributors to refuse business to Levels.”
Sarkis declared that PCI and PCF “sell many of the same products as [Levels]” but
that they are sold “at lower prices.” Sarkis stated that he confirmed this by comparing
prices for these products sold in common by Levels, PCI and PCF, as advertised on
Weedmaps.com, and stated it was his understanding that cannabis retailers control the
pricing for their products that appear on Weedmaps.com. Sarkis further stated that he
“discovered several brands on Levels’[s] webpage, which Levels now erroneously claims
they are blocked from purchasing from distributors” and that, when he “accessed
Levels’[s] webpage in December of 2024, the company was advertising products for sale
from brands like Gelato, Claybourne, High 90s, Dimebag, and Smokiez.” Sarkis attached
to his declaration copies of the webpages referenced in this paragraph.
In his sur-reply declaration, Sarkis further averred that he “do[es] not recall
personally working with or communicating with … Illa Guerilla, LLC, … Klent Jewett”
or with “Kiva Sales and Services, or Alexis Maxwell.”
Sarkis reiterated that he “never prohibited a distributor from selling to [Levels],
and ha[s] never stated or suggested that [he] would ‘penalize’ or ‘retaliate’ against a
distributor selling to [Levels].” He candidly admits, however, that he “ha[s]
communicated to distributors that we do not want to stock certain products that are sold
in lower tier stores” and that, just as distributors “have the discretion to sell their products
to whoever they want to,” “[PCI] and PCF have the discretion to determine which
products to sell.”
Sarkis identified a number of factors that influence his decisions on which
products to sell “including market saturation, price, prior sales metrics, and future sales
projections.” He indicated his dispensaries “must be selective with the brands we choose
to work with, and the products [PCI] and PCF sell. If a brand suddenly becomes
oversaturated due to widespread availability, or its prestige diminished because it is sold
11.
in lower tier stores or all over town, its availability on our shelves negatively impacts” the
PCI and PCF brands. Sarkis stated he “developed this strategy by observing other
successful retailers that do not carry products that are saturated in other lower tier
retailers.” He identified more than a dozen well-known companies he contends employ a
similar strategy. He also stated he has employed this strategy “since before Levels
opened a store in Modesto.”
Sarkis stated that the largest cannabis retailers in Modesto, which also operate
“throughout the Central Valley and much of California, are Cookies and Stiizy,” that both
retailers have stores within three minutes of plaintiffs’ stores, and that both retailers (and
other cannabis retailers) carry the same cannabis brands as PCI and PCF. He stated that
“there are several thousands of product lines that are on the market and which [p]laintiffs,
and other retailers, can choose to sell.”
B. Natasha Parra’s Declaration
In her declaration, Natasha Parra declared that she is “an independent contractor
who does work for several different cannabis dispensaries, including [PCI] and [PCF]”;
and that she is “a compliance and licensing manager” for PCI and PCF and “ha[s] been
performing a variety of services for these dispensaries … since approximately 2017.”
She compiled, and created a table of, information concerning “a handful of brands which
are sold by [PCI] and [PCF].” Included in that information was the “out-the-door price”
charged by PCI and PCF for select products within those brands. She stated her “data
reveals an overall decrease in prices of [p]roducts sold by PCF and [PCI].” However, she
clarified that her data does not include all products within the selected brands that are
sold by PCF and PCI, and that other brands and products are also sold by PCF and PCI.
The reduction in prices “is part of the companies’ overall strategy to price their products
as competitively as possible.” She stated that, based on her “eight years of experience in
the cannabis industry” as well as her “discussions with other industry professionals” and
her “ongoing research of sales trends,” “[she] ha[s] noticed a general trend of decreasing
12.
sales over the last few years” and that “consumers have generally been spending less and
less money on cannabis.”
Parra further stated that she has “never coerced or threatened any cannabis
distributors, and [is] not aware of anyone associated with [PCI] or PCF making any such
threats.”
C. Kayla Pinedo’s Declaration
Kayla Pinedo declared that she “ha[s] been the purchasing manager for PCF and
[PCI] for at least the last six years” and that she is “the person that ultimately provides
and orders all product for PCF and [PCI], and [is] the only employee authorized to do
so.”
With regard to Jewett’s declaration in support of plaintiffs’ motion, Pinedo
declared she “ha[s] not purchased any products from Illa Guerilla since around
August 2023” because the representative who worked for Illa Guerilla, named Tyler, and
with whom they were used to working with, began working for a different distributor.
She averred that the products distributed by Illa Guerilla are distributed by other
companies including Tyler’s current employer, and that PCF and PCI “continue to
purchase the same products that [they] previously purchased from Illa Guerilla” from
Tyler.
Pinedo declared that she “do[es] not actively reach out to distributors to order
products; rather, distributors contact [her]” and solicit PCF and PCI’s business. She
averred that “Illa Guerilla has only solicited … product sales” from her twice since
August 2023 and that she opted not to order the products through Illa Guerilla because
she “had already ordered those products from other sources” or the products were “older
products that [they] didn’t want to carry.” She stated that she did not stop ordering
products from Illa Guerilla because it was selling product to Levels and that she “was
unaware of Illa Guerilla even selling products to [Levels].” She also observed that “[i]t is
13.
unclear what ‘sales representative’ Mr. Jewett is referring to [in his declaration], as [she
is] the only employee authorized to make the purchasing decisions.”
Pinedo averred she “ha[s] never prohibited a distributor from selling to [Levels],
and ha[s] never stated or suggested that [she] would ‘penalize’ or ‘retaliate’ against
distributors selling to [Levels].” She stated that “[their] stores invest in marketing and
displaying a limited number of brands.” Like Sarkis, she avers that she has told
distributors that she “do[es] not want to stock … certain brands if they are widely
available and sold at all stores across town, and specifically if those brands are also sold
at lower tier ‘mom and pop’ stores.”
VI. The Preliminary Injunction Issued by the Trial Court
On March 10, 2025, the trial court issued a formal order granting plaintiffs’
motion for a preliminary injunction. The order provided as follows:
“[Sarkis defendants], and each of them, any of their officers,
directors, agents, servants, employees, and attorneys, and all persons acting
in concert or in participation with [Sarkis defendants], and each of them,
are hereby enjoined and restrained from:
“1. Requiring, requesting, or communicating with distributors,
suppliers, vendors, firms, or corporations [Sarkis defendants] do business
with to cease selling products to Plaintiffs;
“2. Continuing, maintaining, entering into, and attempting to enter
into any agreement or understanding with any distributor, supplier, vendor,
firm, or corporation to limit supply or to refuse to sell products to Plaintiffs
and/or any other retailer[;]
“3. Urging, inducing, coercing, or pressuring, or attempting to urge,
induce, coerce, or pressure any distributor, supplier, vendor, firm, or
corporation it does business with to limit supply or to refuse to sell products
to Plaintiffs and/or any other retailer[;]
“4. Refusing to purchase any product from distributors, suppliers,
vendors, firms or corporations where the reasons for such refusal or
discrimination is, in whole or in part, express or implied, that the
distributors, supplier, vendor, firm, or corporation selling the product has
sold or proposed to sell the same product to Plaintiffs[;]
14.
“5. Retaliating against, penalizing, imposing any consequence, or
otherwise taking any adverse action against any distributors, suppliers,
vendors, firms or corporations including but not limited to, cancelling,
terminating, refusing to renew or in any manner impairing any contract,
agreement or understanding, express or implied, to purchase from said
entity for the reason, in whole or in part, that such person, firm or
corporation sold product or proposes to sell product to Plaintiffs and/or any
other retailer;
“6. Including Plaintiffs on any ‘Do-Not-Sell’ lists that [Sarkis
defendants] distribute or otherwise communicate with their distributors,
suppliers, vendors, firms, and/or corporation;
“7. Purchasing any product from distributors, suppliers, vendors,
firms or corporations on the condition, agreement or understanding, express
or implied:
“A. That the distributor, supplier, vendor, firm, or
corporation selling the product shall not sell the product to Plaintiffs or any
other retailer;
“B. That the distributor, supplier, vendor, firm, or
corporation only sell product to [Sarkis defendants] and not [to] Plaintiffs
or other retailers[;]
“8. Participating or attempting to participate in any form of
monopolization, unlawful restraints of trade, and other unlawful trade
practices, including without limitation, requiring distributors, suppliers,
vendors, firms, or corporations they do business with to stop selling to
Plaintiffs and/or other retailers;
“9. Such other equitable relief as the Court deems just and
appropriate.
“[Sarkis defendants], and each of them, and any of their officers,
directors, agents, servants, employees, and attorneys, and all person acting
in concert or in participation with [Sarkis defendants], and each of them,
are hereby required to:
“10. Immediately cease and desist from the above-described
unlawful restraints of trade, monopolization, and attempted
monopolization[;]
15.
“11. Immediately remove Plaintiffs from any ‘Do-Not-Sell’ lists
that [Sarkis defendants] distribute or otherwise communicate to their
distributors, suppliers or vendors;
“12. Immediately permit and allow distributors, suppliers, and
vendors that [Sarkis defendants] do business with to sell products to
Plaintiffs without consequence, penalty, retaliation, fear of retaliation, or
otherwise any adverse action from [Sarkis defendants]. [Sarkis defendants]
shall communicate to such distributors, suppliers, and vendors that they are
authorized to sell to Plaintiffs and that doing so will not result in any
adverse action, penalty, or restriction.
“[T]he above Preliminary Injunction is effective on March 7, 2025
or upon posting of the bond/undertaking, whichever is later. Plaintiffs are
required to file a bond or undertaking in the sum of twenty-thousand dollars
($20,000.00) within ten (10) court days of entry of this order.”
On March 20, 2025, plaintiffs gave notice that they had posted the required bond,
and the preliminary injunction went into effect according to its terms.
VII. The Appeal
On March 25, 2025, Sarkis timely appealed the trial court’s order granting
plaintiffs’ motion for a preliminary injunction.
DISCUSSION
I. Standard of Review
“ ‘ “The general purpose of a preliminary injunction is to preserve the status quo
pending a determination on the merits of the action. [Citation.] ‘ “The granting or denial
of a preliminary injunction does not amount to an adjudication of the ultimate rights in
controversy. It merely determines that the court, balancing the respective equities of the
parties, concludes that, pending a trial on the merits, the defendant should or … should
not be restrained from exercising the right claimed by him [or her].” ’ ” ’ ” (Jamison v.
Department of Transportation (2016) 4 Cal.App.5th 356, 361.)
“The trial court’s decision on the propriety of granting … injunctive relief is
reviewed for abuse of discretion [citations], but its underlying factual determinations are
reviewed for substantial evidence [citation], and its resolution of legal issues is subject to
16.
de novo review.” (DiQuisto v. County of Santa Clara (2010) 181 Cal.App.4th 236, 276–
277.) We consider “whether the trial court abused its discretion in ‘ “evaluat[ing]
two interrelated factors when deciding whether or not to issue a preliminary injunction.
The first is the likelihood that the plaintiff will prevail on the merits at trial. The second
is the interim harm that the plaintiff is likely to sustain if the injunction were denied as
compared to the harm the defendant is likely to suffer if the preliminary injunction were
issued.” ’ ” (People ex rel. Gallo v. Acuna (1997) 14 Cal.4th 1090, 1109.)
II. Preliminary Injunctions
“A preliminary injunction may be granted at any time before judgment upon a
verified complaint, or upon affidavits if the complaint in the one case, or the affidavits in
the other, show satisfactorily that sufficient grounds exist therefor.” (Code Civ. Proc.,
§ 527, subd. (a).) A party moving for injunctive relief must make the necessary showing
with admissible evidence. (People v. Pacific Land Research Co. (1977) 20 Cal.3d 10,
21.)
“ ‘An injunction may grant both prohibitive and mandatory relief ….’ ”
(Ironridge Global IV, Ltd. v. ScripsAmerica, Inc. (2015) 238 Cal.App.4th 259, 265,
fn. 4.) A prohibitory injunction “requires no action [on the part of enjoined party] and
merely preserves the status quo,” whereas a mandatory injunction requires the enjoined
party to take affirmative action. (Daly v. San Bernardino County Bd. of Supervisors
(2021) 11 Cal.5th 1030, 1035.)
“When … the preliminary injunction mandates an affirmative act that changes the
status quo, it is scrutinized even more closely on appeal: ‘ “ ‘ “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.” ’ ” ’ ” (City of Corona v. AMG Outdoor Advertising, Inc. (2016) 244
Cal.App.4th 291, 299.) “ ‘ “[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
17.
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.” ’ ” (Santa Clara Valley Water Dist. v. Eisenberg (2025) 117
Cal.App.5th 714, 728.)
Sarkis contends aspects of the preliminary injunction are mandatory because they
require that plaintiff purchase products it does not want. Plaintiffs concede portions of
the preliminary injunction are mandatory but they argue those provisions “are necessary
to effectuate the prohibitory purpose [of the injunction] and prevent evasion,” citing
People ex rel. Brown v. iMergent, Inc. (2009) 170 Cal.App.4th 333. In iMergent, the
court issued a preliminary injunction that enjoined the defendant “from conducting any
further business in California without first complying with” the Seller Assisted Marketing
Plan (SAMP) Act’s9 disclosure provisions, an Act to which it was subject. (iMergent, at
p. 342.) The Act “imposes a duty on the seller of SAMP’s to make certain disclosures to
the Attorney General and the prospective purchasers.” (iMergent, at p. 336.) Plaintiffs’
quote the iMergent court wherein it wrote: “Any aspects of the injunctions that require
[the] defendants to engage in affirmative conduct are merely incidental to the injunction’s
objective to prohibit [the] defendants from further violating California’s consumer
protection law. Accordingly, the injunction is prohibitory in nature.” (Id. at p. 342.)
The iMergent court distinguished it from cases that involved injunctions that were
mandatory in nature, for example Paramount Pictures Corp. v. Davis (1964) 228
Cal.App.2d 827 where the actress Bette Davis was sued for specific performance of a
contract to act in a movie and the injunction prohibited her from “performing any work as
an actress prior to completing her contract with Paramount, even for her current
employer.” (People ex rel. Brown v. iMergent, Inc., supra, 170 Cal.App.4th at pp. 342–
343, citing Davis at pp. 833–834, 838.) The iMergent court stated the Davis injunction
9 Civ. Code, § 1812.200 et seq.
18.
was mandatory “because it compelled her ‘to violate her contract with [her current
employer] and to surrender a status and rights lawfully held by her ….’ ” (iMergent, at
p. 343.) The iMergent court continued: “In Ambrose v. Alioto (1944) 62 Cal.App.2d
680, another specific performance case, the defendant was ordered to deliver fish to the
plaintiff and enjoined from performing her current contract to deliver fish to another
company. The court concluded that the injunction was mandatory, reasoning as follows:
‘The result and effect of the decree is not only mandatory in character but compels the
performance of a substantive act and also contemplates a change in the relative position
or rights of the parties which existed at the time the decree was entered.’ ” (iMergent, at
p. 343, citing Ambrose, at p. 686.)
Here, at least two provisions of the preliminary injunction are mandatory in
nature—paragraph 4 which enjoins the Sarkis defendants from refusing to purchase
products where the reason for the refusal is, “in whole or in part,” due to the fact that
same product has been sold to Levels, and paragraph 5 which enjoins the Sarkis
defendants from refusing to renew contracts on substantially the same grounds. These
provisions do not merely maintain the status quo. They require that the Sarkis defendants
enter into additional contracts they may not wish to enter into for reasons based on their
subjective intent and not tied to any alleged unlawful combination or conspiracy. At a
minimum, the injunction warrants this court’s close scrutiny. (City of Corona v. AMG
Outdoor Advertising, Inc., supra, 244 Cal.App.4th at p. 299.)
III. The Cartwright Act
The Cartwright Act “ ‘generally outlaws any combinations or agreements which
restrain trade or competition or which fix or control prices’ [citation], and declares that,
with certain exceptions, ‘every trust is unlawful, against public policy and void’
(§ 16726).” (Pacific Gas & Electric Co. v. County of Stanislaus (1997) 16 Cal.4th 1143,
1147, italics added.) The Cartwright Act defines a “trust” as follows:
19.
“A trust is a combination of capital, skill or acts by two or more
persons for any of the following purposes:
“(a) To create or carry out restrictions in trade or commerce.
“(b) To limit or reduce the production, or increase the price of
merchandise or of any commodity.
“(c) To prevent competition in manufacturing, making,
transportation, sale or purchase of merchandise, produce or any commodity.
“(d) To fix at any standard or figure, whereby its price to the public
or consumer shall be in any manner controlled or established, any article or
commodity of merchandise, produce or commerce intended for sale, barter,
use or consumption in this State.
“(e) To make or enter into or execute or carry out any contracts,
obligations or agreements of any kind or description, by which they do all
or any or any combination of any of the following:
“(1) Bind themselves not to sell, dispose of or transport any
article or any commodity or any article of trade, use, merchandise,
commerce or consumption below a common standard figure, or
fixed value.
“(2) Agree in any manner to keep the price of such article,
commodity or transportation at a fixed or graduated figure.
“(3) Establish or settle the price of any article, commodity or
transportation between them or themselves and others, so as directly
or indirectly to preclude a free and unrestricted competition among
themselves, or any purchasers or consumers in the sale or
transportation of any such article or commodity.
“(4) Agree to pool, combine or directly or indirectly unite any
interests that they may have connected with the sale or transportation
of any such article or commodity, that its price might in any manner
be affected.” (§ 16720, italics added.)
IV. The Cartwright Act Cause of Action
With regard to plaintiffs’ Cartwright Act claim, Sarkis argues, among other things,
that the Act “does not prohibit unilateral conduct” and observes that the Act requires “a
combination of capital, skill or acts by two or more persons” (§ 16720, italics added).
20.
Sarkis cites to Bondi v. Jewels by Edwar, Ltd. (1968) 267 Cal.App.2d 672 (Bondi),
wherein the court stated the Act “contemplates concert of action by separate individuals
or entities maintaining separate and independent interests” (id. at p. 678). Sarkis argues
that, to the extent plaintiffs are alleging a combination or conspiracy between Sarkis and
his affiliated dispensaries, no Cartwright Act violation can be shown because he and his
dispensaries do not maintain separate and independent interests. Sarkis further argues
there is no evidence that he or his dispensaries entered into any agreement to boycott
plaintiffs’ dispensaries. Sarkis contends the conduct that forms the basis of plaintiffs’
claims is unilateral conduct and is protected under the holding in United States v. Colgate
& Co. (1919) 250 U.S. 300 (Colgate).
Plaintiffs contend Sarkis has forfeited any argument based on the Colgate holding
because Sarkis failed to make any mention of the case at the trial court level. Plaintiffs
also argue that “[t]he trial court reasonably and implicitly inferred that Sarkis’s efforts to
‘freeze out the competition’ … resulted in implied agreements not to sell product to
[p]laintiffs.” Plaintiffs argue the Jewett declaration, along with “reasonably drawn
inferences from Sarkis’s declaration, significantly his failure to deny his efforts to ‘freeze
out the competition’ …, is sufficient to uphold the injunction.”
A. No Forfeiture of Argument Based on Colgate
We disagree with plaintiff’s contention that Sarkis has forfeited any argument
based on Colgate. Sarkis argued to the trial court that his conduct was unilateral and that
unilateral conduct is insufficient to constitute violation of the Cartwright Act. He cited
numerous cases in support of the proposition, including several cases that expressly relied
on the holding in Colgate including, without limitation, G.H.I.I. v. MTS, Inc. (1983) 147
Cal.App.3d 256, 267–268 (G.H.I.I.), Kolling v. Dow Jones & Co. (1982) 137 Cal.App.3d
709, 720, and Drum v. San Fernando Valley Bar Assn. (2010) 182 Cal.App.4th 247, 254
(Drum). “[T]he doctrine of forfeiture does not apply where … a party raises additional
21.
support for a theory that was argued below.” (Unilab Corp. v. Angeles–IPA (2016) 244
Cal.App.4th 622, 641, fn. 7.)
B. No Conspiracy Based on Combination/Agreement Between Sarkis
Defendants, PCI and/or PFC
In Bondi, the plaintiff and the defendants were competitors in the jewelry business.
(Bondi, supra, 267 Cal.App.2d at p. 674.) The defendants included the corporation (i.e.,
the defendants’ jewelry store) and its officers and directors. (Ibid.) One of the defendant
officers/directors asked the plaintiff to close his business and to come work for
defendants’ jewelry store. (Ibid.) The plaintiff did so. (Ibid.) After the plaintiff closed
his business, the defendants reneged on their promise to employee the plaintiff. (Id. at
pp. 674–675.) The plaintiff sued for breach of contract, promissory fraud, and for
violation of the Cartwright Act. (Id. at pp. 674–676.) The trial court sustained a general
demurrer to each of the three causes of action and entered a judgment of dismissal. (Id.
at pp. 673–674.)
On appeal, the Bondi court reversed the judgment of dismissal but determined that
the demurrer was properly sustained as to the third cause of action for violation of the
Cartwright Act. (Bondi, supra, 267 Cal.App.2d at p. 678.) The Bondi court observed
that the plaintiff was claiming “the defendant corporation entered into a combination or
conspiracy with its officers and directors, who were at all times acting as the agents of the
corporate defendant.” (Id. at p. 677.) The court held that the Cartwright Act
“contemplates concert of action by separate individuals or entities maintaining separate
and independent interests” and determined the plaintiffs’ Cartwright Act cause of action
“charges only wrongful conduct on the part of a single entity acting through its officers
and agents.” (Id. at p. 678.) “[A] corporation cannot conspire with itself or its agents for
purposes of the antitrust laws.” (Kolling v. Dow Jones & Co., supra, 137 Cal.App.3d at
p. 720.)
22.
To the extent plaintiffs or the trial court may have relied on an alleged conspiracy
between Sarkis, Premier, PCI, and PCF (or any combination of them), we agree with
Sarkis that such concerted action is not actionable under the Cartwright Act.
C. Unilateral Conduct and the Absence of Evidence of an Agreement
As mentioned, Sarkis also argues the conduct that forms the basis of plaintiffs’
claims is unilateral conduct protected under the holding in Colgate.
In Colgate, the United States Supreme Court affirmed the sustaining of a demurrer
and the quashing of an indictment against Colgate & Company brought under the
Sherman Act.10 (Colgate, supra, 250 U.S. at pp. 301–302, 308.) The issue before the
court was “ ‘whether a manufacturer of products shipped in interstate trade, is subject to
criminal prosecution under the Sherman Act, for entering into a combination in restraint
of such trade and commerce, because he agrees with his wholesale and retail customers,
upon prices claimed by them to be fair and reasonable, at which the same may be resold,
and declines to sell his products to those who will not thus stipulate as to prices. This, at
the threshold, presents for the determination of the court how far one may control and
dispose of his own property; that is to say, whether there is any limitation thereon, if he
proceeds in respect thereto in a lawful and bona fide manner. That he may not do so
fraudulently, collusively, and in unlawful combination with others, may be conceded.’ ”
(Colgate, at pp. 304–305.) In affirming the judgment of the district court, the high court
wrote:
“In the absence of any purpose to create or maintain a monopoly, the [Sherman
Act] does not restrict the long recognized right of trader or manufacturer engaged in an
entirely private business, freely to exercise his own independent discretion as to parties
with whom he will deal. And, of course, he may announce in advance the circumstances
under which he will refuse to sell. ‘The trader or manufacturer … carries on an entirely
10 15 U.S.C. § 1 et seq.
23.
private business, and can sell to whom he pleases.’ [Citation.] ‘A retail dealer has the
unquestioned right to stop dealing with a wholesaler for reasons sufficient to
himself ….’ ” (Colgate, supra, 250 U.S. at p. 307, italics added.)
“ ‘California courts have adopted the Colgate doctrine for purposes of applying
the Cartwright Act.’ ” (Beverage v. Apple, Inc. (2024) 101 Cal.App.5th 736, 750
(Beverage), quoting Chavez v. Whirlpool Corp. (2001) 93 Cal.App.4th 363, 370
(Chavez); G.H.I.I., supra, 147 Cal.App.3d at p. 267; Drum, supra, 182 Cal.App.4th at p.
254.)
As stated in Chavez, “[t]he Cartwright Act prohibits every trust, defined as ‘a
combination of capital, skill or acts by two or more persons’ for specified anticompetitive
purposes. [Citation.] The federal Sherman Act prohibits every ‘contract, combination …
or conspiracy, in restraint of trade.’ [Citation.] The similar language of the two acts
reflects their common objective to protect and promote competition. [Citations.] Since
the Cartwright Act and the federal Sherman Act share similar language and objectives,
California courts often look to federal precedents under the Sherman Act for guidance.”
(Chavez, supra, 93 Cal.App.4th at p. 369.)
“In order to state a claim under the Cartwright Act, a plaintiff must allege ‘ “the
formation and operation of the conspiracy and the illegal acts done in furtherance of the
conspiracy.” ’ [Citations] Conversely, a claim describing only a unilateral refusal to
deal without alleging a corresponding illegal conspiracy or combination does not state
an actionable antitrust claim. [Citation.] This premise, that ‘[a]bsent a legal provision to
the contrary, a private party generally may choose to do or not to do business with
whomever it pleases’ without violating antitrust laws (Drum[, supra,] 182 Cal.App.4th
[at p. 254]), is known as the Colgate doctrine …. [Citation.] In Colgate, ‘the Supreme
Court recognized that, subject to antitrust laws such as the Sherman Act, there is a “long
recognized right of [a] trader or manufacturer engaged in an entirely private business,
24.
freely to exercise his own independent discretion as to parties with whom he will
deal.” ’ ” (Beverage, supra, 101 Cal.App.5th at pp. 749–750, italics added.)
“The Colgate doctrine is ‘firmly entrenched in antitrust jurisprudence.’ [Citation.]
It reflects a limitation to the reach of antitrust liability, grounded in the concept that ‘a
single firm’s conduct, absent the danger of monopolization, is not the object of intense
antitrust scrutiny because to treat it with such scrutiny would heighten “the risk that the
antitrust laws will dampen the competitive zeal of a single aggressive entrepreneur.” ’
[Citation.] ‘[C]oncerted action poses a substantially greater risk of anticompetitive harm
than does independent behavior’ because it ‘ “deprives the marketplace of the
independent centers of decisionmaking that competition assumes and demands.” ’ ”
(Beverage, supra, 101 Cal.App.5th at p. 750.)
“It is well settled that the antitrust laws do not preclude a trader from unilaterally
determining the parties with whom it will deal and the terms on which it will transact
business. [Citations.] An antitrust case must be based upon conspiratorial rather than
unilateral conduct.” (G.H.I.I., supra, 147 Cal.App.3d at pp. 267–268, italics added.)
Plaintiffs argue that “[t]he trial court reasonably and implicitly inferred that
Sarkis’s efforts to ‘freeze out the competition’ … resulted in implied agreements not to
sell product to [p]laintiffs.” In support of this argument, plaintiffs state that an implied
agreement to unlawfully restrain trade is sufficient to demonstrate an unlawful agreement
to restrain trade, and that an express agreement to that effect is not necessary, citing
Roland Machinery Co. v. Dresser Industries, Inc. (7th Cir. 1984) 749 F.2d 380, 392,
decided under section 3 of the Clayton Act (15 U.S.C. § 14).
We agree that an implied agreement to unlawfully restrain trade is sufficient to
raise a cognizable antitrust claim. (See Beverage, supra, 101 Cal.App.5th at p. 751;
Drum, supra, 182 Cal.App.4th at p. 255.) However, in the case at bar we have no
evidence of an agreement, express or implied, between Sarkis (and/or his affiliated
25.
dispensaries), on the one hand, and third parties such as distributors of various cannabis
brands, on the other hand, to engage in anticompetitive conduct.
Plaintiffs rely on the declaration of Jewett and the declarations of Sarkis to support
their claim that Sarkis entered into such agreements. In his original declaration, Sarkis
readily admits that he has chosen a business strategy to supply cannabis products that
“are not oversaturated by other products in the same market” and that he wants to avoid
stocking his shelves with products that are available in “lower tier” stores. He desires to
maintain a “top-tier” status not only by being selective about the products he stocks in
inventory, but also by providing his customers with what he believes is a “unique and
exciting shopping experience.”11
Sarkis states he does not want his dispensaries “to be associated with mid-level
and low-tier stores and thus, aim[s] to carry different products to prevent customer
confusion.” Thus, when Levels (plaintiffs’ dispensaries) began carrying the same
products he was carrying in his stores he “became less inclined to have [his] employees
re-purchase those products. He denies ever having “demand[ed] or coerce[d] …
distributors to stop selling to Levels” and denies that he or his dispensaries have entered
into “agreements that require distributors to refuse business to Levels.” However, he
states that when distributors learned of his decision to carry a different product line from
stores that he considers to be lower tier, “it appears that some of those distributors started
declining to sell to Levels.”
11 To achieve the goal of providing the customer with a unique and exciting
shopping experience, Sarkis states he is selective about the location of his dispensaries,
decorates the stores in ways which he believes elevate their status above those of stores
he believes “feel like a corner store or ‘bodega,’ ” has amenities such as big screen
televisions and comfortable, well-appointed waiting areas, and hires staff he believes
provide “excellent customer service.” “Additional factors that [he] consider[s] include
wait time for customers, accessibility of product information online and in person,
versatility in cannabis strains and products [they] offer, quality of product, advertising,
and public relations.”
26.
In his sur-reply declaration, Sarkis reiterated that he has “never prohibited a
distributor from selling to [Levels], and ha[s] never stated or suggested that [he] would
‘penalize’ or ‘retaliate’ against a distributor selling to [Levels].” He admits that he has
“communicated to distributors that we do not want to stock certain products that are sold
in lower tier stores.” He reiterated his considerations in distinguishing his stores from
stores he considers lower tier and that his decision to sell particular products is “based on
numerous independent factors, including market saturation, price, prior sales metrics, and
future sales projections. Thus, deciding whether to dedicate limited shelf-space to a
given product, and/or whether to invest in and expend resources in displaying and
marketing a product, and training staff on a product, is not made lightly.”
Nothing in Sarkis’s declarations show, or tend to show, any agreement or
conspiracy between Sarkis and his dispensaries, on the one hand, and any other third
party, on the other hand, to engage in anticompetitive conduct. At most, it demonstrates
that Sarkis made known to cannabis distributors his business strategy of differentiating
his companies based, in part, on product differentiation—a practice condoned in Colgate.
(Colgate, supra, 250 U.S. at p. 307.)
Jewett declared that “[s]ince in or around August 2023, [Premier] has not
purchased any orders from [his company]” and that “after August 2023, a sales
representative from [Sarkis’s dispensaries] informed [him] that if [his company] were to
work with or sell to Levels, then [Premier] would cease ordering from [his company].”
The Jewett declaration plainly demonstrates there was no agreement between
Jewett or his companies, on the one hand, and Sarkis or his dispensaries, on the other
hand. Similarly, it fails to show any agreement between Sarkis (and/or his dispensaries)
and any other third party. Nor is there any solicitation of an agreement or conspiracy
evident from anything contained in the Jewett declaration. Arguably, Jewett’s
declaration at most shows that a sales representative from Sarkis’s companies made
Sarkis’s business strategy known to Jewett. But even a liberal reading of Jewett’s
27.
declaration fails to establish any sort of anticompetitive combination or any attempt to
form such a combination.
None of the above evidence relied on by plaintiffs shows, or tends to show, any
agreement, combination, or conspiracy between Sarkis and his dispensaries, on the one
hand, and other third parties, on the other hand, to engage in anticompetitive conduct.
In analyzing plaintiffs’ motion, the trial court determined “[t]here is at least
one direct allegation that Defendant Sarkis is telling people not to work with Levels” and
that “[t]his is not permitted under case law prohibiting enforcement of agreements to
freeze out competitors,” citing Eastman Kodak Co. v. Image Technical Services, Inc.
(1992) 504 U.S. 451.12 The trial court did not state the particular evidence it was relying
on in making the above statements. Of course, a mere allegation is insufficient to meet
plaintiffs’ burden of demonstrating a likelihood of prevailing on the merits. (See People
v. Pacific Land Research Co., supra, 20 Cal.3d at p. 21.) To the extent the trial court’s
comments were in reference to the declaration of Jewett, we have concluded this
evidence is insufficient to show any sort of agreement, combination, or even an attempt
to arrive at an agreement or combination in restraint of trade.
12 Neither party discusses Kodak in their briefs on appeal. Kodak involved Eastman
Kodak Company’s (Kodak) attempts to limit the ability of customers to use independent
service organizations (ISOs) to service Kodak’s products and to limit the ability of ISOs
to perform such services by selling replacement parts “only to buyers of Kodak
equipment who use Kodak service or repair their own machines” and by entering into
agreements with original equipment manufacturers (OEMs) that the OEMs “would not
sell [Kodak parts] to anyone other than Kodak,” by “pressur[ing] Kodak equipment
owners and independent parts distributors not to sell Kodak parts to ISO’s,” and by
taking “steps to restrict the availability of used [Kodak] machines.” (Eastman Kodak Co.
v. Image Technical Services, Inc., supra, 504 U.S. at p. 458.) The facts of Kodak bear
little similarity to the facts set forth in Jewett’s declaration and, as mentioned, we are of
the opinion that Jewett’s declaration does not support an inference that any
anticompetitive agreements were arrived at, or sought.
28.
The remaining evidence proffered in support of plaintiffs’ motion for preliminary
injunctive relief is likewise devoid of any facts that would tend to show an illegal
combination or even an attempt to form an illegal combination.
In Chavez, the court stated, “a manufacturer’s announcement of a resale price
policy and its refusal to deal with dealers who do not comply coupled with the dealers’
voluntary acquiescence in the policy does not constitute an implied agreement or an
unlawful combination as a matter of law.” (Chavez, supra, 93 Cal.App.4th at p. 372.)
“[T]here must be some … evidence showing that the manufacturer and distributors were
not acting independently, but had achieved ‘ “a meeting of the minds” ’ or ‘ “a common
scheme.” ’ ” (Id. at p. 371.) “ ‘[E]vidence must be presented both that the distributor
communicated its acquiescence or agreement, and that this was sought by the
manufacturer.’ ” (Ibid., quoting Monsanto Co. v. Spray-Rite Service Corp. (1984) 465
U.S. 752, 764, fn. 9) There must be some evidence that “ ‘tend[s] to exclude the
possibility that the manufacturer and nonterminated distributors were acting
independently’ and must ‘reasonably tend[] to prove that the manufacturer and others had
a conscious commitment to a common scheme designed to achieve an unlawful
objective.’ ” (Chavez, at p. 372, quoting Monsanto, at pp. 764, 768.)
Here, the evidence submitted in support of plaintiffs’ motion does not in any way
exclude the possibility that Sarkis and his dispensaries were acting independently in
communicating their product purchase preferences and policy to not stock the same
products as those sold in what Sarkis considered to be lower-tier stores. The evidence
submitted is not inconsistent in any way with Sarkis’s contention that he was acting
independently and, as mentioned, does not tend to show any agreement, combination or
conspiracy to engage in anticompetitive conduct. Consequently, we conclude there is no
29.
evidence before us that would tend to show plaintiffs have a likelihood of prevailing on
the merits of their Cartwright Act claim.13
V. The Unfair Competition Law Cause of Action
Section 17200 defines unfair competition to “mean and include any unlawful,
unfair or fraudulent business act or practice.” “ ‘[A] business practice need only meet
one of [those] three criteria to be considered unfair competition.’ ” (Naranjo v. Doctors
Medical Center of Modesto, Inc. (2025) 111 Cal.App.5th 408, 434–435.) Here, plaintiffs
have not submitted evidence of any fraudulent business practices on the part of Sarkis or
his dispensaries. Their unfair competition claim is premised on the “unlawful” and
“unfair” prongs of the Unfair Competition Law (UCL).
“By proscribing ‘any unlawful’ business practice, ‘section 17200 “borrows”
violations of other laws and treats them as unlawful practices’ that the unfair competition
law makes independently actionable.” (Cel-Tech Communications, Inc. v. Los Angeles
Cellular Telephone Co. (1999) 20 Cal.4th 163, 180 (Cel-Tech).) The UCL “makes clear
that a practice may be deemed unfair even if not specifically proscribed by some other
law.” (Ibid.)
To the extent plaintiffs contend that Sarkis and his dispensaries have engaged in
“unlawful” conduct, their motion for a preliminary injunction is premised solely upon an
alleged violation of the Cartwright Act. As discussed in the preceding section of this
opinion, the evidence submitted at this early stage of the litigation in support of plaintiffs’
motion for a preliminary injunction is insufficient to demonstrate a likelihood of
prevailing on the merits of a Cartwright Act claim. Consequently, the evidence in
13 We reiterate that our determination in this regard is not an adjudication of the
merits of plaintiffs’ claims. (Jamison v. Department of Transportation, supra,
4 Cal.App.5th at p. 361.) Our determination is only that the admissible evidence
submitted by plaintiffs in support of their motion is insufficient to demonstrate any
likelihood of prevailing on the merits.
30.
support of plaintiffs’ motion is likewise insufficient to demonstrate a likelihood of
prevailing on a UCL claim premised on the “unlawful” prong of section 17200.
Plaintiffs contend, however, that their UCL cause of action does not depend on a
Cartwright Act violation. In that regard, plaintiffs rely on the “unfair” prong of the UCL.
They contend that the evidence demonstrates that the Sarkis defendants’ conduct
“ ‘threatens an incipient violation of antitrust law, or violates the policy or spirit of one of
those laws because its effects are comparable to or the same as a violation of the law, or
… harms competition,’ ” quoting Cel-Tech, supra, 20 Cal.4th at p. 187. Plaintiffs
contend the evidence supports the trial court’s finding that Sarkis is “operat[ing] ‘in a
manner that increases [the] consumer prices of some products’ ” and that this conduct
“limits consumer choice.” Plaintiffs state that Sarkis is “using purchasing power to
coerce distributors into boycotting a competitor.”
Sarkis contends the holding in Colgate provides a safe harbor against plaintiffs’
claim and that “the trial court erred in relying upon the ‘broad-based policies’ of the
UCL.” Sarkis relies on Chavez and Beverage to support his contention.
In Chavez, as in the case before us, the plaintiffs asserted causes of action for both
a violation of the Cartwright Act and unfair and unlawful business practices under the
UCL. (Chavez, supra, 93 Cal.App.4th at pp. 366–367.) After determining that the
alleged conduct of the Chavez defendants did not constitute a viable Cartwright Act
violation because the alleged behavior of said defendants was independent activity and
was “behavior permitted under the Colgate doctrine,” the court went on to consider the
viability of the plaintiffs’ UCL cause of action. (Chavez, at pp. 373–375.)
The Chavez court citing Supreme Court precedent wrote, “[a]lthough conduct may
be ‘unfair’ even if there is no statute prohibiting the conduct, conduct is not actionable
under the [UCL] if a statute expressly precludes an action based on the conduct.”
(Chavez, supra, 93 Cal.App.4th p. 374, citing Cel-Tech, supra, 20 Cal.4th at pp. 183–
184; Cel-Tech, at p. 182 [“When specific legislation provides a ‘safe harbor,’ plaintiffs
31.
may not use the general unfair competition law to assault that harbor.”].) Similarly, the
Chavez court concluded “as a matter of law that conduct … the courts have determined to
be permissible under the Colgate doctrine cannot be deemed ‘unfair’ under the [UCL].”
(Chavez, at p. 375.) “If the same conduct is alleged to be both an antitrust violation and
an ‘unfair’ business act or practice for the same reason—because it unreasonably
restrains competition and harms consumers—the determination that the conduct is not an
unreasonable restraint of trade necessarily implies that the conduct is not ‘unfair’ toward
consumers. To permit a separate inquiry into essentially the same question under the
[UCL] would only invite conflict and uncertainty and could lead to the enjoining of
procompetitive conduct.” (Ibid.) Here, the alleged conduct that forms the basis of
plaintiffs’ Cartwright Act claim is the same conduct upon which plaintiffs rely to support
their UCL claim.
In Beverage, the plaintiffs argued that Chavez was wrongly decided and that “the
implication from Chavez that a ‘safe harbor’ can be found outside of explicit statutory
language immunizing specific conducts cannot be reconciled with [the] Cel-Tech …
court’s declaration that the ‘Legislature’s mere failure to prohibit an activity does not
prevent a court from finding it unfair.’ ” (Beverage, supra, 101 Cal.App.5th at p. 753,
citing Cel-Tech, supra, 20 Cal.4th at p. 184.) In rejecting this assertion, the court
determined that the “description of qualifying ‘safe harbors’ in Cel-Tech was not limited
solely to instances where explicit statutory language either authorizes conduct as lawful
or imposes a litigation bar. Instead, the court explained that ‘safe harbors’ can arise in
two ways: ‘If the Legislature has permitted certain conduct or considered a situation and
concluded no action should lie, courts may not override that determination.’ [Citations.]
Building on that concept, the court emphasized the principle that a plaintiff may not
‘ “plead around” an “absolute bar to relief” simply “by recasting the cause of action as
one for unfair competition.” ’ [Citation.] This rule ensures that courts are not imposing
‘their own notions of the day as to what is fair or unfair’ under the guise of the UCL ….”
32.
(Beverage, at p. 753.) “In substance, that is exactly what Chavez held; a plaintiff cannot
plead around the absolute bar imposed by the Colgate doctrine by resurrecting a failed
antitrust claim as an unfair business practice under the UCL .…” (Beverage, at p. 753.)
The Beverage court observed that “the Colgate doctrine ‘has been a basic part of
antitrust law concepts since it was first announced in 1919’ by the United States Supreme
Court. [Citation.] Rather than retreat from the doctrine over time, the high court
continues to recognize its viability. [Citations.] The Colgate doctrine was
first recognized by California courts in 1979.” (Beverage, 101 Cal.App.5th at p. 754.)
The court further observed that, although the Cartwright Act had been “amended … at
least twice since 1979” and “numerous times since 1919,” “it has not undermined the
applicability or effect of the Colgate doctrine.” (Beverage, at p. 754.) The court wrote,
“[b]ecause ‘[w]e generally presume the Legislature is aware of appellate court decisions’
[citation], its inaction on this subject for at least the past 45 years is significant.” (Ibid.)
The court also remarked that a number of California courts have “adopted and applied”
the Chavez holding (Beverage, at p. 754, citing several cases), and that the Ninth Circuit
has held similarly that “a ‘categorical legal bar’—as opposed to express statutory
language—can also operate as a ‘safe harbor’ against UCL liability in the area of
antitrust.” (Beverage, at pp. 754–755, citing Epic Games, Inc. v. Apple, Inc. (9th Cir.
2023) 67 F.4th 946, 1001.)
The Beverage court concluded that, “[b]ecause both antitrust laws and the UCL
are designed to protect and promote competition for the benefit of consumers [citations],
logic dictates that there can be no harm to consumers under the UCL based on the same
unilateral practices that have been historically accepted as procompetitive and
categorically shielded from antitrust liability by the Colgate doctrine. [Citation.] This
remains true whether the ‘unlawful’ and ‘unfair’ prongs [of section 17200] are considered
jointly or separately.” (Beverage, supra, 101 Cal.App.5th at pp. 755–756.)
33.
Plaintiffs seek to distinguish Beverage based on the fact that the lower court in
Beverage found that the “ ‘[p]laintiffs’ causes of action under the Cartwright Act and the
“unlawful” prong of the UCL were legally insufficient by application of the Colgate
doctrine,’ ” whereas here “the trial court did not find that Sarkis’s conduct constituted
permissible unilateral conduct.” We acknowledge the difference between the trial court’s
rulings in this case and those in Beverage. Notwithstanding, we have reviewed the
evidence in this matter and have found that the evidence is simply insufficient to support
the court’s finding that Sarkis’s conduct was not unilateral action.
Plaintiffs seek to distinguish Chavez based on the fact that the case was brought by
a consumer rather than a competitor. Plaintiffs do not explain, however, why this
distinction should make a difference and we see no reason why it would.
We conclude there is no evidence in support of plaintiffs’ motion that
demonstrates plaintiffs are likely to prevail on the merits of their Cartwright Act and
UCL claims.
VI. Interim Harm
We now turn to the second consideration in determining whether to grant a
preliminary injunction, i.e., “the relative interim harm to the parties from issuance or
nonissuance of the injunction.” (Butt v. State of California (1992) 4 Cal.4th 668, 678.)
“The trial court’s determination must be guided by a ‘mix’ of the potential-merit
and interim-harm factors; the greater the plaintiff’s showing on one, the less must be
shown on the other to support an injunction. [Citation.] Of course, ‘[t]he scope of
available preliminary relief is necessarily limited by the scope of the relief likely to be
obtained at trial on the merits.’ [Citation.] A trial court may not grant a preliminary
injunction, regardless of the balance of interim harm, unless there is some possibility that
the plaintiff would ultimately prevail on the merits of the claim.” (Butt v. State of
California, supra, 4 Cal.4th at p. 678, italics added.) Similarly, our high court has stated
that a “court will consider the probability of the plaintiff’s ultimately prevailing in the
34.
case and … will deny a preliminary injunction unless there is a reasonable probability
that plaintiff will be successful in the assertion of his rights. (Continental Baking Co. v.
Katz (1968) 68 Cal.2d 512, 528.)
Having determined that plaintiffs have failed to submit evidence that would allow
a court to determine that plaintiffs have a likelihood of prevailing on the merits of their
claims, we are of the opinion that no showing of interim harm by plaintiffs would have
permitted the trial court to grant the preliminary injunction.
Even if we were to more favorably view plaintiffs’ admissible evidence as
showing a slight likelihood of prevailing on the merits, we are of the opinion that
plaintiffs’ showing of interim harm was of insufficient strength to warrant the trial court
granting the preliminary injunction for the reasons set forth below.
VII. The Balancing of Harms
On appeal, Sarkis argues plaintiffs have not “demonstrate[d] they would suffer
irreparable injury in the absence of an injunction.” The trial court found that this was
plaintiffs’ “weakest prong” but determined that plaintiffs’ “continued business viability is
at least in substantial question.”
Sarkis cites to Friedman v. Friedman (1993) 20 Cal.App.4th 876, wherein the
court stated, “[c]ase law has made it clear that mere monetary loss does not constitute
irreparable harm in the context of proposed injunctive relief unless there is some showing
that one against whom injunctive relief is sought is insolvent or otherwise unable to
respond in damages.” (Id. at p. 890.) “At most,” Sarkis argues, “this case presents a
claim that [plaintiffs] have suffered economic damages stemming from their inability to
sell certain popular products due to [Sarkis’s] conduct.” Sarkis observes, correctly, that
there is no evidence before the court that demonstrates he is insolvent or could not
respond in damages if plaintiffs ultimately obtained an award of damages. He further
contends plaintiffs have not shown that they will suffer any harm—let alone that the
balance of harms tilts in favor of granting preliminary injunctive relief.
35.
Plaintiffs’ evidence of irreparable harm consists solely of statements contained in
Bal’s initial and reply declarations. Bal averred that because “[m]any customers develop
brand loyalty and seek out certain [cannabis] brands” “it is essential that cannabis
retailers, like Levels, carry popular brands.” Bal averred that his vendors called and told
him that “they are no longer able to work with or supply to Levels” and provided a list of
more than a dozen vendors who, presumably, so advised him. (However, there is no
admissible evidence that attributes these vendors’ stated inability to supply Levels with
product to any conduct on the part of Sarkis or his affiliated dispensaries.) Bal also
declared that he has run out of stock from five of those vendors. However, there is no
information presented as to how much business plaintiffs have lost or might reasonably
expect to lose as a result of this asserted stock depletion—in terms of dollars, percentage
of plaintiffs’ total business, or otherwise.
Plaintiffs have also stated that to “stay competitive in the market, beginning in or
around 2021, [Bal] instituted a business policy for [Levels] that all products would be
discounted 30%. This is common in the industry to attract and retain customers.” Yet,
this policy, instituted in 2021, was instituted before any of the conduct at issue, which is
alleged to have occurred in 2023.
We agree that “continued business viability” is an important consideration in
determining whether to grant injunctive relief. However, even if we were to conclude
that plaintiffs had made a slight showing that they are likely to prevail in the litigation—a
showing we have determined was not made by plaintiffs—their showing of irreparable
harm is of insufficient strength to warrant injunctive relief.
Given our conclusions in this matter, we need not consider Sarkis’s remaining
arguments on appeal.
36.
DISPOSITION
The order granting plaintiffs’ motion for a preliminary injunction is reversed.
Sarkis is entitled to his costs on appeal.
HARRELL, J.
WE CONCUR:
MEEHAN, Acting P. J.
GUERRA, J.
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