Often, in the context of a partnership dispute or business divorce, clients ask me if there is a way to stop the opposition from doing something that is hurting the business or hurting the client as a co-owner of the business.
Under New York law, one can “restrain” or “enjoin” a party from engaging in certain conduct provided it meets the requisite legal standard.
When a party is seeking to permanently restrain another party it is called injunctive relief.
At the beginning of a case this is called a “preliminary injunction“.
Pursuant to CPLR §6301, the grounds for getting a preliminary injunction and temporary restraining order are as follows: “A preliminary injunction may be granted in any action where it appears that the Defendants threatens or is about to do, or is doing or procuring or suffering to be done, an act in violation of the Plaintiff’s rights respecting the subject of the action, and tending to render the judgment ineffectual, or in any action where the Plaintiff has demanded and would be entitled to a judgment restraining the Defendants from the commission or continuance of an act, which, if committed or continued during the pendency of the action, would produce injury to the Plaintiff. A temporary restraining order may be granted pending a hearing for a preliminary injunction where it appears that immediate and irreparable injury, loss or damage will result unless the Defendants is restrained before the hearing can be had”.
Courts have come up with a 3-part test for determining whether they will grant a request (a “motion”) for a preliminary injunction.
In order to obtain a preliminary injunction, a moving party must demonstrate: (1) a likelihood of ultimate success on the merits; (2) irreparable injury absent the granting of the injunction; and (3) that the equities balance in the movant’s favor (Benjamin Kurzban & Son, Inc. v. Board of Education of the City of New York, 129 A.D.2d 756 [2d Dept. 1987], citing McLaughlin, Piven, Vogel, Inc. v. W.J. Noland & Company, Inc., 114 A.D.2d 165 [2d Dept. 1986]).
Let’s take a look at this 3 part test in greater detail and specifically in the context of a partnership dispute or business divorce.
This means that you have to get into detail about the claims you’re asserting in your lawsuit, how the facts satisfy the elements of each claim, and why you believe you will be successful on your claims.
You need only make a prima facie showing of likelihood of success on the merits, and need not demonstrate a certainty of success on a motion for a preliminary injunction. See Parkmed Co. v. Pro-Life Counselling, Inc., 91 A.D.2d 551, 552 (1st Dept. 1982); see also Terrell v. Terrell, 279 A.D.2d 301, 303 (1st Dept. 2001) (evidence showing likelihood of success on the merits need not be conclusive); Demartini v. Catham Green, Inc., 169 A.D.2d 689, 690 (1st Dept. 1991) (same). That being said, you will want to bring as much information to the table to support your claims.
Even “the existence of a factual dispute will not bar the granting of a preliminary injunction if one is necessary to preserve the status quo and the party to be enjoined will suffer no great hardship as a result of its issuance.” Mr. Natural, Inc. v Unadulterated Food Products, Inc., 152 A.D.2d 729, 730, (2d Dep’t 1989) (a preliminary injunction may be granted where injunctive relief is deemed necessary to maintain the status quo, even if the movant’s success on the merits cannot be determined at the time that the application for a preliminary injunction is brought). Id; see also, U.S. Ice Cream Corp. v Carvel Corp., 136 A.D.2d 626, 628 (2d Dep’t 1988); Burmax Co. v B & S Indus., Inc., 135 A.D.2d 599, 600 (2d Dep’t 1987).
Irreparable injury is probably the most significant prong of the 3-part test for injunctive relief. It means that the injury claimed must be more than just money damages. If money will rectify the issue then you’re going to run into a tough hurdle to prove irreparable injury.
“Irreparable injury is an injury that is neither remote nor speculative, but rather actual and imminent (Khan v. State University of New York Health Science Center at Brooklyn, 271 A.D.2d 656 [2d Dept., 2000]).” Spivak ex rel. Eyeball On the Floor, Inc. v. Bertrand, Index No. 653712/2015, at *15-16 (N.Y. Sup. Ct. 2016)
For example, Courts in New York have uniformly found irreparable injury where an equity holder is being squeezed out of control or management:
In finding irreparable harm in the context of partnership/business disputes Courts have also considered the following:
A motion for a preliminary injunction consist of the following:
The process of filing a motion for a preliminary injunction looks generally as follows:
For a detailed consultation regarding your partnership dispute, business dispute, or business divorce, contact us today!