United States District Court, S.D. New York
January 7, 2005.
MERIT CAPITAL GROUP, LLC, Plaintiff,
TRIO INDUSTRIES MANAGEMENT, LLC, TRIO INDUSTRIES HOLDINGS, LLC, EVAN R. DANIELS, and ROBERT E. GYEMANT, Defendants.
The opinion of the court was delivered by: RICHARD CASEY, District Judge
MEMORANDUM & ORDER
Merit Capital Group, LLC ("Plaintiff") moves for a preliminary
injunction against Trio Industries Management, LLC, Trio
Industries Holdings, LLC, Evan R. Daniels, and Robert E. Gyemant
("Defendants"). For the following reasons, Plaintiff's motion is
Plaintiff alleges that Trio Industries Management, LLC ("Trio
Industries Management") borrowed in excess of $700,000 from
Plaintiff as part of various lending agreements in 2003, yet has
refused to repay the money. (Complaint ¶¶ 1, 9-11, 16.) Plaintiff
alleges that Trio Industries Holdings, LLC ("Trio Industries
Holdings"), a subsidiary of Trio Industries Management that
researches and develops powder coating on wood substitutes, and
Evan R. Daniels ("Daniels") and Robert E. Gyemant ("Gyemant"),
owners of Trio Industries Management, individually guaranteed the
underlying debt but have likewise refused to repay the money.
(Id. ¶¶ 1, 12, 14.) Additionally, Plaintiff alleges that Trio
Industries Management pledged all right, title, and interest in
Trio Industries Holdings to Plaintiff to induce Plaintiff to
enter into the lending transaction, but has refused to convey its interest in Trio Industries Holdings to
Plaintiff. (Id. ¶¶ 1, 13, 14.)
Plaintiff argues that, under a pledge agreement dated June 13,
2004 and in light of Defendants' purported default under other
loan and related agreements, it now has a 70% ownership interest
in Trio Industries Holdings and the right to immediately
foreclose on that interest. (Id. ¶ 13; Aff. Harvey Bloch in
Support of Motion for Preliminary Injunction, Sept. 23, 2004
("Bloch Aff.") ¶¶ 12, 17.) Plaintiff argues that Trio Industries
Management has been improperly holding themselves out as the
rightful controlling owner of Trio Industries Holdings,
"dissipating the company's assets and impairing the membership
interests in Trio Industries Holdings" to Plaintiff's detriment.
(Complaint ¶¶ 1, 20.) Plaintiff moves for a preliminary
injunction in accordance with Federal Rule of Civil Procedure 65
seeking to enjoin Defendants and their agents (1) from
transferring or encumbering any membership interests in Trio
Industries Holdings or any assets of the company and (2) from
managing, operating, or otherwise engaging in the day-to-day
business of Trio Industries Holdings pending final adjudication
of this action.
Defendants allege, however, that Plaintiff never provided any
direct funding to Trio Industries Holdings or Trio Industries
Management; that Plaintiff procured only $83,333.33 from a sole
third-party investor, which sum Defendants offered to repay; that
the remaining $545,720.81 of the $739,054.14 sought by Plaintiff
was invested by Daniels and Gyemant or participants that they
recruited themselves; and that the loan documents in question
were obtained by Plaintiff fraudulently. (Memorandum in
Opposition to Motion for Preliminary Injunction ("Opposition") at
2-3, 7; Aff. Evan R. Daniels in Opposition to Motion for
Preliminary Injunction, Nov. 5, 2004, ¶¶ 2, 13-18; Aff. Steven G.
Mintz in Opposition to Motion for Preliminary Injunction, Nov.
10, 2004, ¶¶ 3-15.) Defendants characterize Plaintiff's motion as
a "cynical attempt to leverage a relatively small investment into a back-door takeover of defendant's
business enterprise through the use of judicial process."
(Opposition at 10.)
To secure preliminary injunctive relief in this Court,
Plaintiff must demonstrate (1) that irreparable harm is likely
absent an injunction, and (2) either (a) a likelihood of success
on the merits or (b) sufficiently serious questions going to the
merits of the case to make it a fair ground for litigation plus a
balance of hardships tipping decidedly in Plaintiff's favor.
See Mony Group, Inc. v. Highfields Capital Management, L.P.,
368 F.3d 138, 143 (2d Cir. 2004); Wisdom Import Sales Co.,
L.L.C. v. Labatt Brewing Co., Ltd., 339 F.3d 101, 108 (2d Cir.
2003); Kamerling v. Massanari, 295 F.3d 206, 214 (2d Cir.
2002). A moving party must demonstrate that irreparable injury
the most important prerequisite for the issuance of a preliminary
injunction is likely before any other requirement for the
issuance of an injunction may be considered. Kamerling,
295 F.3d at 214; Rodriguez ex rel. Rodriguez v. DeBuono,
175 F.3d 227, 234 (2d Cir. 1999) ("In the absence of a showing of
irreparable harm, a motion for a preliminary injunction should be
Plaintiff falls short of the showing of irreparable harm
required for preliminary injunctive relief. The Second Circuit
has defined "irreparable harm" as "certain and imminent harm for
which a monetary award does not adequately compensate," noting
that "only harm shown to be non-compensable in terms of money
damages provides the basis for awarding injunctive relief."
Wisdom Import Sales, 339 F.3d at 113-14; see also
Kamerling, 295 F.3d at 214 ("To establish irreparable harm, a
party seeking preliminary injunctive relief must show that there
is a continuing harm which cannot be adequately redressed by
final relief on the merits and for which money damages cannot
provide adequate compensation." (internal quotation omitted));
Brenntag Int'l Chemicals, Inc. v. Bank of India, 175 F.3d 245, 249 (2d Cir. 1999) (noting that
the likelihood of monetary injury usually does not constitute
irreparable harm because such injury can be estimated and
compensated, rendering a preliminary injunction to preserve the
status quo unnecessary). As a result, not all bargained-for
contractual provisions provide a basis for injunctive relief.
Wisdom Import Sales, 339 F.3d at 114 (noting that if they did,
"such a broad holding would eviscerate the essential distinction
between compensable and non-compensable harm"). Further, any
claim of irreparable harm must be shown by the moving party to be
imminent and actual, grounded on more than conjecture or
unsubstantiated fears of what the future may bring. See
Kamerling, 295 F.3d at 214; Rodriguez, 175 F.3d at 234.
It is apparent even from Plaintiff's complaint, which primarily
seeks monetary relief in the form of repayment of Defendants'
purported debt, that any potential harm in this action is readily
quantifiable and compensable with monetary damages at the
conclusion of this action. (See Complaint ¶¶ 21-26.) Further,
although Plaintiff alleges that Defendants "very well may soon
transfer, dispose of or impair the membership interests and
assets of Trio Industries Holdings" to Plaintiff's detriment and
that Plaintiff "will be irreversibly harmed without the requested
injunctive relief" because Defendants "have unfettered control
over the day-to-day business of Trio Industries Holdings,"
placing the company "in great jeopardy while defendants remain at
the helm," Plaintiff fails to provide any specific information in
support of the argument that Defendants have or will transfer,
encumber, or otherwise endanger any interests in or assets of
Trio Industries Holdings while this action is pending. (See
Bloch Aff. ¶¶ 4, 21-23.) The Court will not grant preliminary
injunctive relief based only on Plaintiff's speculative and
unsubstantiated assertions, which fail to specifically indicate
to the Court why or how Trio Industries Holdings, its assets, or
its membership interests are in imminent and actual danger. Accordingly, Plaintiff has not
adequately demonstrated that irreparable harm is likely absent a
preliminary injunction, and preliminary injunctive relief is not
In the absence of a showing of irreparable harm, Plaintiff's
motion for a preliminary injunction is DENIED.
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