The provisional remedies found a cornerstone of practice in the Commercial Division. This month we review the basic elements of the most commonly sought provisional remedy, the preliminary injunction.
It is well settled that an Article 63 preliminary injunction is not a mechanism for determining the ultimate rights of the parties; rather, the provisional remedy is utilized to maintain the status quo.
CPLR 6301 provides in pertinent part:
A preliminary injunction may be granted in any action where it appears that the defendant 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 …
The decision whether to grant a preliminary injunction lies within the sound discretion of the Court. In that regard, movant must satisfy a three prong test to establish it is entitled to preliminary injunctive relief: (1) a probability of success on the merits; (2) danger of irreparable injury absent the injunction; and (3) a balancing of the equities favors granting the injunction.
As for the first element, success on the merits, certainty of success is not the standard that a movant must satisfy to establish that it is likely to succeed on the merits of its claim; rather, it must make a prima facie showing of its right to the relief. In this regard, CPLR 6312(c) is instructive: it provides that even issues of fact highlighted by opposition to the application are insufficient to defeat the motion and “shall not in itself be grounds for denial of the motion.”
Establishing the second prong of an injunction application can be difficult because the vast majority of cases seek monetary damages. The general rule is that one pursuing a money action is generally not entitled to a preliminary injunction because an adequate remedy at law exists. Two exceptions to the general rule warrant elaboration.
The first exception to this rule exists when movant’s cause of action is directed to a specific fund which is “the subject of the action.” A myriad of cases hold a monetary damages claim directed at a specific fund is viable as an irreparable injury worthy of an injunction because the property, not the value of the property, is the true subject of the action. See Societe Anonyme v. Pierre A. Feller (Appellate Division rules that in an action disputing the ownership of shares of a cooperative apartment, plaintiff was entitled to pendente lite injunctive relief since irreparable injury may arise if the defendant was not enjoined from transferring the cooperative’s shares pending final resolution of the dispute); Rolnick v. Rolnick (in an action to impose a constructive trust upon the stock of defendant corporations, the Court ruled that a disposition of the stock shares would render any judgment ineffectual, ruling that an injunction maintaining the status quo would not unduly burden the defendant, yet the denial of such relief could do irreparable harm and cause substantial prejudice to movant); Brennan v. Barnes (Court grants temporary restraining order precluding defendants from transferring the subject stock shares, despite sharp factual differences in the parties’ respective affidavits, so to maintain status quo); and Bronx County Trust v. O’Connor (in a complaint seeking to impose a trust upon a sum generated by the sale of certain shares of a Tobacco Company, premised upon procurement of the shares through fraud and undue influence, the Appellate Division reversed the Supreme Court’s Order denying a motion to continue the pendente lite relief, restraining the defendants from disposing of such proceeds of sale).
Authority exists for a second exception and relates to injunctions which are authorized by statute and purport to be in the public interest. In Spitzer v. Lev, in an action against officers of not-for-profit corporation arising from amounts they allegedly received in violation of their fiduciary duties or by way of unjust enrichment, the Attorney General moved for injunctive relief suspending officers from exercising control. New York County Supreme Court Justice Ramos noted that:
However, the traditional concept of irreparable harm, which applies to private parties seeking injunctive relief, does not apply in the public interest field. Thus, when the Attorney General is authorized by statute to seek injunctive relief to enjoin fraudulent or illegal acts, no showing of irreparable harm is necessary. State of New York v. Terry Buick Inc., 137 Misc.2d 290, 520 N.Y.S.2d 497 (Sup Ct. 1987).
Accordingly, here where the Attorney General is authorized pursuant to NPCL § 112 to seek injunctive relief with respect to any acts which form a basis for the bringing of any action or proceeding by the Attorney General pursuant to the NPCL, no showing of irreparable harm is necessary.
Third, as for balancing the equities, the Court must evaluate the harm that each party will suffer with and without the injunctive relief. Prevailing Second Department precedent requires that movant demonstrate that the harm which it would suffer from the denial of the motion is decidedly greater than the harm its opponent would suffer if the preliminary injunction were granted. In this analysis, a thorough client affidavit is imperative to a successful application. The preliminary injunction application is not the time to be circumspect with respect to all of the facts which have influenced the client’s decision to seek provisional relief.
Finally, an analysis of the quantum of the undertaking is appropriate. It is clear that CPLR 6312(b) requires movant to furnish a bond contemporaneously with the effectuation of a preliminary injunction order. The undertaking is to secure the opposing party for actual losses and costs — not theoretical losses, “if it is later finally determined that the preliminary injunction was erroneously granted.” Indeed, the court’s discretion in setting the amount of the undertaking must be “rationally related” to the potential damages and costs that the enjoined entity may suffer. In that regard, mere conclusory assertions of potential monetary loss are insufficient to justify anything more than a minimal bond.