The opinion of the court was delivered by: Spatt, District Judge.
MEMORANDUM OF DECISION AND ORDER
This case concerns a contractual dispute over a joint venture to develop real estate in the Manhattan neighborhood of Washington Heights. The case is before this Court pursuant to the Court's diversity jurisdiction powers provided in 28 U.S.C. § 1332. Currently pending is the plaintiff's motion for a preliminary injunction expelling the defendant from managing the parties' joint venture. The Court previously referred this motion for a hearing before United States Magistrate Judge William D. Wall, who has now reported and recommended to the Court. For the reasons set forth below, the Court now adopts Judge Wall's Report and Recommendation in its entirety, and grants the plaintiff's motion for a preliminary injunction.
In 2007, plaintiff Audubon Levy Investors, LP ("Audubon Levy") and defendant East West Realty Ventures, LLC ("East West") entered into a written joint venture agreement to develop on a parcel of land in upper Manhattan. For this purpose, the parties formed a limited liability company named Audubon Terrace LLC ("Terrace LLC"), in which Audubon Levy had an 80% ownership interest and East West had a 20% ownership interest. They also executed a written agreement called the "Operating Agreement for Audubon Terrace LLC," dated September 2007 (the "Operating Agreement"), that governed the parties' rights and responsibilities with regard to the joint venture. The Operating Agreement provided that Audubon Levy, which is located in California, would supply project capital for the joint venture and have veto rights over major management decisions, while East West, which is located in New York, would manage the day-to-day operations of the project. In furtherance of this agreement, East West was named the "Manager" of Terrace LLC, a title that provided East West with the power to take actions on behalf of Terrace LLC with regard to its daily management, including making routine disbursements and entering into contracts valued at less than $25,000.
In addition, East West was responsible under the Operating Agreement for obtaining a loan to finance the development of the property. Specifically, the Operating Agreement required that, by mid-March 2008, East West procure a lender's commitment to loan approximately $11.8 million to Terrace LLC, and that by mid-September 2008 that the loan be finalized. The due dates for these tasks are vague because the Operating Agreement was dated only by month, and not day, but the parties do not suggest that any material issue in this case depends on fixing these dates more precisely.
The Operating Agreement also provided Audubon Levy with recourse if East West did not fulfill its obligation to obtain project financing. Thus, if East West failed to procure and finalize the $11.8 million loan by the relevant dates, then Audubon Levy had the right to remove East West as Manager of Terrace LLC. In addition, the removal of East West as the Manager of Terrace LLC then triggered Audubon Levy's right to purchase East West's share in Terrace LLC for 75% of its value. The Operating Agreement provided that, for purposes of this forced sale, the value of East West's share would be appraised by two experts, one appointed by each party.
However, the Operating Agreement also provided that Audubon Levy may not remove East West as Manager if Audubon Levy's own breach of the Operating Agreement caused East West's failure to procure a loan. Thus, Section 5.2.3(b) of the Operating Agreement reads in part:
East/West may be removed as Manager by [Audubon] Levy under the following circumstances and/or events provided that the circumstances or event giving rise to the right to remove East/West as Manager is not caused by Levy's actions or failure to act in violation of the terms of this Agreement...
(v) failure to obtain a commitment for the [$11.8 million] Construction Loan within six (6) months of the [September 2007] execution of this Agreement, or the failure to [finalize that loan] within twelve (12) months of the execution of this Agreement... (Operating Agreement, § 5.2.3(b), emphasis added.)
The parties agree that East West neither obtained a commitment for the loan by March 2008, nor finalized the loan by September 2008. In fact, to date, the loan has not been procured and the property remains vacant. However, the parties disagree as to who is at fault for East West's failures. Both East West and Audubon Levy acknowledge that East West brought one potential lender to Terrace LLC before March 2008, and that this lender requested personal financial information from Ken Levy, one of Audubon Levy's principals. The parties also agree that Ken Levy declined to provide certain of information, and that the lender then withdrew because of this refusal. According to East West, it was therefore Audubon Levy's fault that no loan was procured, and Audubon Levy therefore has no power to remove it as Manager.
Audubon Levy disagrees with this assignment of blame, and between May and October 2009, Audubon Levy sent East West several notices attempting to exercise its right to remove East West as Manager of Terrace LLC and to purchase East West's share in the company. Each of these was ignored. Audubon Levy's notices also requested East West to appoint an appraiser to value East West's share in Terrace LLC, but East West declined.
On October 23, 2009, Audubon Levy filed the present suit, asserting causes of action for declaratory judgment, breach of contract, and unjust enrichment, and seeking a permanent injunction effecting East West's removal as a Manager of Terrace LLC. In particular, Audubon Levy requests that the Court order East West to turn over all books and records for Terrace LLC, and enjoin East West from (1) acting on behalf of Terrace LLC, (2) holding itself out as Terrace LLC's agent, (3) interfering with Terrace LLC's management, and (4) controlling or dissapating any of Terrace LLC's assets. Audubon Levy also requests additional equitable relief directing East West to timely appoint an appraiser to value its stake in Terrace LLC, or to forfeit its right to do so. Audubon Levy also seeks money damages for unjust enrichment.
On October 27, 2009, Audubon Levy made the present motion seeking preliminary injunctive relief that is identical to the permanent injunctive relief sought. On January 8, 2010, the Court held oral argument on the motion for a preliminary injunction, at which time the parties agreed that East West would turn over copies of Terrace LLC's books and records to Audubon Levy, and Audubon Levy would appoint an additional Manager for Terrace LLC. The Court at that time also referred the motion to United States Magistrate Judge William D. Wall for an evidentiary hearing. Prior to the hearing before Judge Wall, Audubon Levy appointed Glen Una Management Company, Inc. as an additional Manager for Terrace LLC.
On February 12, 2010, Judge Wall held a hearing on the plaintiff's motion, and on February 18, 2010, he issued a Report and Recommendation recommending that the Court grant the preliminary injunction as requested. Judge Wall found that Audubon Levy faced irreparable harm if no injunction issued, and that Audubon Levy was likely to succeed in showing that it could remove East West as a Manager. Pursuant to the relevant rules, the parties were provided fourteen days to object to Judge Wall's Report and Recommendation.
On March 3, 2010, East West timely objected to Judge Wall's recommendation. East West argues that Audubon Levy faces no irreparable harm because Audubon Levy is in possession of a complete set of books and records for Terrace LLC, and has been permitted to appoint an additional Manager. East West also argues that Audubon Levy is not likely to succeed on the merits of its claims, because Audubon Levy was at fault for East West's failure to procure the $11.8 million loan. On March 15, 2010, Audubon Levy filed an opposition to East West's objection, asserting ...