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Pitcoff Law Group’s 1st LIVE Session: Preliminary Injunctions 101

by | Feb 16, 2024

Pitcoff Law Group hosted its first-ever LIVE video session, delving into the crucial topic of the value of preliminary injunctions in business disputes.

In case you missed our Preliminary Injunctions 101 LIVE session, here’s your chance to catch up!
Discover unparalleled guidance and expertise crafted for legal professionals, offering comprehensive insights and strategic mastery for navigating this vital legal tool. These LIVE sessions provide a unique opportunity to acquire invaluable knowledge, practical strategies, and actionable insights that can truly elevate your brand or business.
For more details and to ensure you don’t miss out on future sessions, contact Pitcoff Law Group today.
If you’re ready to dive right in, watch the recorded session now:

 

preliminary injunctions 101

Preliminary Injunctions 101: LIVE Session

 

For more information or to speak with a legal professional today, contact our office by calling: (866) 996-1401 or emailing: info@pitcofflawgroup.com to learn more about how we can help protect your interests and ensure compliance with legal requirements. We would be happy to assist you.

Video Transcript:

00:00
I believe we are live. So thank you for coming to join. If anybody has, looks like nobody has yet, I’ll wait a couple minutes.
00:53
Well thank you for those of you who have joined. As you guys know, my name is Ross Pitcoff. Oh, let’s see. Are we streaming here? Are we streaming? It looks like we’re streaming on YouTube, Facebook. We are streaming on LinkedIn. All right, great. So my name is Ross Pitcoff. I’m the founder and owner of the Pitcoff Law Group in New York. New York. We help business owners resolve complex disputes between partners, shareholders, and third parties. This is a new series for us where we’re going to be going live so that way you can get a sense of who we are, what it is we do, and also get a sense of the types of matters that we wind up handling on behalf of our clients. Today I’m going to be sharing with you a little summary concerning preliminary injunctions. Now, preliminary injunctions are a form of equitable relief, which means that it’s an order from a court during a litigation that stops a party from doing something.
01:44
So unlike a money judgment, which requires a party to pay something to another, this type of order is designed to ensure that a defendant in a litigation stops is stopped or a stopped from doing something that would ultimately deliver harm to the plaintiff during the pendency of the litigation. So I’m going to go ahead and share a slideshow with you that was put together by our fantastic marketer, Ella Schmit, who I believe is also viewing and we’ll get started. Okay? So once again, my name is Ross Pitcoff of the Pitcoff Law Group. Today we’re talking about preliminary injunctions and we will dive into things right away. So during today’s live, we’re going to be discussing a few topics. Number one, we’re going to be discussing what a preliminary injunction is. I’m going to explain it to you, explain what it actually does as a function in terms of a court order.
02:37
Then we’re going to talk about how do we obtain a preliminary injunction. So how are we going to utilize the court process to actually get one? What are the steps necessary to get to the point that we obtain one? Number three, we’re going to discuss how our preliminary injunction actually works. When you put it into the process, it’s kind of like, okay, we can get this order from court. We’re going to learn how do we actually get it before a judge, but now what can we do with it? And then number four, we’re going to talk through the benefits and the detriments of a preliminary injunction order. So that way if you ever are in a situation where you’re considering needing to get a preliminary injunction, you can decide if it’s really right for you. Okay, and now here we go.
03:17
So what is a preliminary injunction? A preliminary injunction is an actual form of preliminary relief provided by a court. In order to get a preliminary injunction, you need to show three things. Number one, a likelihood of success on your claims, which we’ll talk about. Number two, you’re going to have to show that the defendant, if the relief you’re seeking isn’t granted, the defendant is going to suffer irreparable harm, which we’ll talk about what that means. And number three, you need to show that a balancing of the equities is going to be in your favor. And just so we’re clear before we even get into what a preliminary injunction is, the question of why would a party seek a preliminary injunction is as follows, we want to ensure, or the courts want to ensure that we’re able to preserve the status quo pending the outcome of litigation.
04:06
In other words, if you have two parties that are in a dispute and it’s simply about a contract and whether one party owes money to another, we’re not really concerned about what happens over the one to two years while the two parties are litigating their claims. In other words, the plaintiff could wind up getting a money judgment once that order’s received, the plaintiff can then enforce it and the defendant will have to pay the plaintiff for that reason. Preliminary injunctions are not able to be obtained when all the plaintiff is seeking in a litigation is a money judgment. But what about those situations where we know that a litigation can take a lot of time anywhere from one to three years, and now we’re presented with a scenario whereby you have two owners of a business and one of the business partners is doing things that not only is causing damage to the plaintiff, but that could wind up completely eradicating the business altogether.
04:56
In that situation, after a one to three year litigation process, the plaintiff may win the case. The plaintiff may show, for example, that the defendant breached their fiduciary obligations that the defendant committed corporate waste, that the defendant took monies out of the company bank account. But if the business is no longer there at the end of this litigation, then really what’s going to be the benefit of getting to the point that you’re able to get a judgment That is when the preliminary injunction tool comes into being. So what happens is a plaintiff will file a summons and complaint in court and then at the same time they’ll also file an application to obtain a preliminary injunction and temporary restraint relief, and we’ll go through that one by one.
05:40
So as for how one may obtain a preliminary injunction, we’re first going to need to show, let me back up a little bit. So we discussed what the preliminary injunction is and remember we discussed the elements that we’re going to need to get there. How does one obtain a injunction? Once again, you’re going to file a summons and complaint in court at the same time you’re going to make an immediate application to the court for this injunctive relief. Now, this is very different than simply filing a summons and complaint. For example, what you’re going to need to do is you’re going to have to file what’s called an order to show cause this is an emergency application. You’re filing to the court to say, judge, your honor, we need immediate relief because despite the fact that we’ve set forth our claims and set forth our different causes of action, set forth our claims that there’s been fraud, there’s been fiduciary breaches, there’s been this corporate waste, there’s been unjust enrichment, we need you to do something right away to stop this bad faith actor from making things worse.
06:42
So the package that gets filed is the summons and complaint. Then in order to show cause, which is the emergency application, and then you need to support that order to show cause. So that means that you need to file what’s called a memorandum of law. A memorandum of law is going to set forth the law of all the different causes of actions that you have to show why you believe when applied to the facts you’d be likely to win at trial. The memorandum of law is also going to explain details related to obtaining success on the merits of the case. Details as to why. In this instance, if a court doesn’t grant relief, there is going to be irreparable harm. The memorandum of law is also going to focus on this balancing of equities, which we’re going to talk about a little more in a little bit.
07:26
In addition to the order to show cause and the memorandum of law, we’re going to need to back so the memorandum of law will apply a lot of the legal aspects, all of the case law and the statutes in New York State Court, article 63 of the CPLR. It’s going to apply that to say this is what the law is and it will briefly touch upon the facts to show why we’ve satisfied the elements of what we need to in order to get this relief. Then there’s more. We need actual factual testimony we can rely upon to show that this is very real and very serious and that the claims we’re stating are actually happening. It’s not simply enough to refer back to the complaint which makes allegations. So you need affidavits in support and these affidavits can come directly from the plaintiff, him or herself stating what’s gone on what’s happened.
08:12
Because remember, these are sworn statements when you file an affidavit and also you can submit additional affidavits, affidavits of witnesses, witnesses who viewed or took note that this was happening or that was happening. It could be a witness that’s aware that funds were taken out of the company bank account without the consent of the plaintiff. Despite the plaintiff being a 50% partner. It could be an owner of a separate company that was approached by a defendant in a case to say, I want to take all the assets of my business and sell it to you and I want you to sell it back to me in my individual name. In that case, the other owner of the business acting as a plaintiff would have a right to an injunction to stop the improper sale of the assets. So an affidavit in support and multiple affidavits are even better are going to be required.
08:57
An attorney will often also include an attorney affirmation. Now an attorney affirmation is also considered to be a sworn statement by a lawyer concerning what they’ve done to get us to this point. The affirmation in this context often will include a list of exhibits in support of the order to show cause to obtain the preliminary injunctive relief. In addition to that, often a lot of the cases that are taking place in and around New York will belong in the commercial division if there’s a business component to it. And the amount that’s sought in terms of relief is likely to exceed, for example, $500,000. So if you’re looking to go to the commercial division, you will make a specific request to go to that division of the court. And finally, you’ll need to file what’s called a request for judicial intervention, which is a document by the New York State Court system that needs to be filed to get an item before a judge. So once you package your summons and complaints and your order to show cause and all of those supporting papers together and you bundle it all up, you can then file it with the court so that way you can either get a judge to sign your order to show cause, or you can get a court date right away where the judge will listen to your grievances and decide whether or not to grant some sort of interim relief.
10:09
How does a preliminary injunction work? Now, just so we’re clear, a preliminary injunction is a court order that lasts the dependency of a litigation before we even get to a preliminary injunction. If you plead things properly in your papers, you might be able to get what’s called a temporary restraining order. A temporary restraining order is part of your order to show calls. And so what happens is you take all your papers and you file them before the court and you say, your Honor, we’ve got this emergency situation, we’d like an injunction, but we understand you need time to review all of these papers and what’s being submitted, which could be hundreds if not thousands of pages. And also we understand that the defendant is always entitled to a defense. However, your Honor, in the interim, until you set that court date, we believe that the devastation to our business or to ourself is so severe and so imminent that pending that hearing, which we understand you’re going to require to happen very quickly to determine if you’re going to issue the preliminary injunction, we need you to issue an interim mort and that interim mortar is called a temporary restraining order, otherwise known as a TRL.
11:13
The TRL often will mirror the relief that a party seeking at a preliminary injunction here. So it’s always advantageous when you file that order to show cause for a preliminary injunction to also put in language showing that you’re seeking that interim relief.
11:29
So once you get and the process unfolds like this, we run into court, we file for a preliminary injunction, maybe we obtain a temporary restraining order, maybe we don’t. Hopefully we do regardless, the court then puts this on notice for a hearing on a particular date so that the parties can have oral argument about whether or not a preliminary injunction will be granted on that date. Usually right, you’re before the court, the court, the judge will read in its decision and order. Sometimes the judge will reserve their decision and let the parties know quickly afterwards whether or not they’re granting the relief if the order is granted. And if you obtain a preliminary injunction stopping that defendant, that bad faith actor from doing something negative during the remainder of the litigation, you then take that order and you’re required to serve a copy of the order on the defendant and the court will provide the way that they want you to serve that order. You’ll then be uploading proof in the form of an affidavit or affirmation of service to the court to notify the court that you have in fact served the documents on the bad faith acting party at that point in time, the defendant is now stopped by law from continuing to participate in the detrimental conduct
12:45
Benefits of the preliminary injunction. Now, there are a lot of benefits that you’re probably already imagining when considering a preliminary injunction. Number one, the preliminary injunction again stops a bad faith actor from doing something that could ultimately destroy your business during the pendency of this litigation, and that’s a very positive, powerful and potent outcome. Now, I will tell you courts consider preliminary injunctions to be an extraordinary remedy. So the biggest piece of what you’re going to have to show is the irreparable harm component. In other words, absent this relief, my business is going to be completely destroyed. Somebody’s infringing upon my trademark rights and they’re utilizing our trademark to run a competing business despite the fact that it’s our trademark and they know it’s our trademark. Well, if I get a preliminary injunction, I can enjoin and stop them from further using the trademark that’s owned by me.
13:37
So you can imagine the power that an injunction can have if you’re two partners in a business dispute and there’s millions of dollars in this dollar in the company bank account and you’re aware that one of the parties is actually taking funds out of the account, part of your injunction can be an attachment of the bank account to stop them from doing that. In that instance, you’re ensuring that the company’s resources aren’t completely depleted so that by the time this goes to trial two or three years later, you know that there are still going to be funds in the company bank account. So those are the benefits. Now what are the potential detriments? Well, a preliminary injunction frankly can be a very costly and expensive process. Since it’s considered to be an extraordinary remedy, you’re not guaranteed any outcome. It’s very difficult to get them, but they are attainable.
14:22
And oftentimes a temporary restraining order prior to a preliminary injunction is even more attainable. There’s also another point when you’re a plaintiff seeking a preliminary injunction that could wind up working against you in the worst case scenario, and that is the requirement to post bond. Often judges will require a party that obtains a preliminary injunction to post a bond with the court. Now a bond is an availability ultimately serves as a financial safety net for the defendant. In the event that when we go to trial, if it’s determines after a trial of the facts that what the plaintiff alleged actually wasn’t true, the defendant has now been damaged, the bond keeps monies aside and ensures that in the event of that damage, the defendant would then have a right to relief. So while most parties that obtain a preliminary injunction obtain it because they’re going to be the successful party in litigation, if they’re not, since they’re often required to post bonds, if they wind up losing, then that bond will ultimately likely impart or on hold be distributed to the defendant.
15:24
Now I will say this, every time that our office seeks to obtain a temporary restraining order and preliminary injunction, we will always argue in favor of the court not requiring us or the plaintiff to post bond. Now withstanding that bond is often required, so this is something to keep in mind moving onwards. Now here we have a slide about civil and criminal contempt. Just so we’re fully aware, we should first discuss what contempt is. Contempt is an application or contempt allows a party to a court order to file an application for contempt to say that number one, the court order has been violated. And number two, this has been done so knowingly this will happen in scenarios where you’re really dealing with the bad faith actors. So for example, you may have a defendant who is selling shares in a company that were owned by you but they had control over them and they violated your rights by selling the shares.
16:20
In that instance, you likely would be entitled to a preliminary injunction and joining them in the right scenario and under the right circumstances from continuing that sale process. But what if they get served with a court order and they still keep doing it? Your remedy becomes filing an application for consent and you go through the same process. You file an emergency application in order to show cause you file a memorandum of law, you file an affidavit of witnesses even if it’s your client in support and others to say, this is what’s taking place. Now, civil contempt is different from criminal contempt. The logic behind civil contempt is that we want to protect the plaintiff in a litigation and ensure that the plaintiff’s rights are maintained. So if there has been a violation of a court order, the plaintiff is likely now suffering additional damages. So the court can actually issue a monetary judgment or an order against that defendant holding them in civil contempt of court.
17:18
Now criminal contempt is a different beast. In a criminal contempt scenario, you actually have a violation that’s so egregious it has to be so egregious that essentially this is an offense against a judicial authority. So in other words, it’s almost as if you are looking at the judge and saying, judge, I don’t care. I’m violating your court order. So the standard’s higher than knowingly disobeyed. It almost has to be intentional. Now the ramifications of criminal contempt can be extreme and what are those? Believe it or not, if there is a criminal contempt order, a warrant can be placed out for the defendant’s arrest and the defendant can actually be jailed under the judiciary law for up to 30 days. The courts take very seriously these orders, orders to show cause that are signed for temporary restraining order or preliminary injunction. And if it is signed, a defendant absolutely should not be violating it. If they do, they’re likely subject to civil or criminal contempt penalties, which could be monetary damages, which must be paid or potential jail time.
18:23
And now we have moving on the three elements to a preliminary injunction. So if you recall, a preliminary injunction is an extraordinary remedy. The idea of it is to maintain the status quo between the parties pending the outcome of the case. We want to keep things as business as usual as possible until we can render a final determination. So what do you have to show to get that preliminary injunction? We discussed these three elements that are required, the likelihood of success on the merits, proof of irreparable harm, the balancing of the equities, the likelihood of success on the merits. Now a likelihood of success on the merits does not mean with certainty the plaintiff is going to win their claims, but we need to show a high likelihood that once this case goes to trial, if it goes to trial or if it’s a matter of summary judgment, the plaintiff has a very good chance of winning.
19:20
And we do that through the process we discussed. We have to set forth the various claims in our memorandum of law such as let’s say a breach of a fiduciary duty or even fraud. Well, what does it take? We have to show the court, your Honor, we’re filing the suit. We have two business partners. One is defrauding the other. We are very confident that we have a claim for fraud that ultimately will be successful at trial. So what do we need to show to establish a claim for fraud? Well, we need to show number one, an intentional misrepresentation. Number two, we need to show that those misrepresentations were material of material facts. We need to show that the plaintiff relied upon those intentional representations to the plaintiff’s detriment and as a result of that, the plaintiff suffered damages. Now, there’s this whole element of intentionality that the defendant knew that their statements were false when they made them and the reliance by the plaintiff, it would’ve been reasonable.
20:13
In other words, they reasonably relied upon these intentionally false statements and because of that, they suffered damages. Unlike a complaint that just sets forth various and appointed fashion. Point one, this happened, 0.2, this happened and now we’ve been damaged and it’s fraudulent. We’re going to have to show based upon affidavits based upon that sworn testimony. Here’s what happened, your honor. Look at the sworn testimony. We’re going to reference it and we’re now showing how 0.1 of this element, the intentional misrepresentation took place. It was relied upon damages were sustained. Same thing with a breach of contract claim. Same thing with the breach of a fiduciary duty, unjust enrichment, the breach of fiduciary duty. One party was a fiduciary to another because they were partners in business together. Therefore, that fiduciary relationship was owed. However, it was broken when X, y, Z happened. Here’s the proof, here’s the facts, here’s the bank statements, here’s documentation, emails, correspondence, and here’s a sworn statement of somebody who witnessed the whole thing. Therefore, we believe there’s a high likelihood of success in the merits. Now if you can establish that for any of your claims, you can now move on to element two of attempting to obtain a preliminary injunction,
21:24
Proof of irreparable harm. As previously mentioned, irreparable harm is without a doubt 100% the most important portion of what you need to prove to obtain a preliminary injunction. In fact, courts have held that if there is no irreparable harm, if you cannot show that the harm is irreparable, you’re not going to get the injunctive relief. We talked a little bit earlier about one of those issues and in one of the situations, and that’s when there’s a money judgment. So one party is a creditor, the other party’s a debtor. They file for breach of contract on a promissory note because the defendant failed to make payments. If you sought a preliminary injunction or tried to attach a bank account of the debtor, you would not get this relief. And that’s because irreparable harm requires that there’s something more than money at issue. Trademark infringement, that’s one example.
22:16
We dealt with the restaurants that was dealing with the competitor. They were an owner of the restaurant, but then they took the trademark, opened up a new restaurant under a completely new name and new entity and they began advertising as if they were the first. And then they began diverting customers away by going on social media campaigns. And then one of the chefs wound up utilizing, believe it or not, wound up utilizing the menu and even the food product from one location and brought it to the other. In that instance, there’s something more than money damages at play. The entire brand of the restaurant was at play. The entire reputation of the company was at stake and even the staff who was supposed to be working for the plaintiff was actually doing work for the defendant. And those funds were getting funneled elsewhere. Irreparable harm would likely attach another situation.
23:04
Let’s see, two physicians that were having a dispute and a highly hotly contested dispute in multiple locations working together, but with multiple different entities set up. And one physician decides to lock the other physician out of all the electronic medical record systems, locks them out, turns down the internet, tries to shut down everything they can with respect to access at the location. Patients are showing up, the office can’t treat them, and then the defendant begins to start placing phone calls and telling all the customers or patients don’t go there. That’s actually closed down, come here. So they were trying to divert assets away from the partnership. That’s a scenario where you can get a preliminary injunction because the company itself wasn’t possibly going to be completely depleted to the point that it couldn’t operate. These are examples and scenarios whereby an injunction potentially can be obtained and we see it very often playing out in all different types of cases.
24:01
And then you have some very complex scenarios whereby we want to maintain the status quo, but at the same time the business needs to operate. So for example, two partners in a business, they’re real estate developers, they are building and they’re constructing and they have drawdowns on loans. One of the partners decides to start taking funds out of the bank account because that partner had control over the accounts. The other party sought to completely freeze that bank account due to this issue. But then what happens with payroll then? What happens with the ability for the contractors to be paid for the construction project to continue to try and draw down on loans? If the order also included language that essentially froze everything in place, that was an issue. In that instance. Judges, you can go back to court and say, your Honor, even if you believe that it’s right, that there would be a preliminary injunction. We need what’s called a carve out provision to allow for certain things to happen because the whole irony is the preliminary injunction is supposed to maintain the status quo. And if this order is going to put us out of business or put the company out of business, then it cannot stand as is. So as you can see, these things can get tricky. They can get very complex and that’s why it’s always smart to speak to an attorney about the way that they would procure or attempt to procure one of these preliminary injunction orders.
25:18
And next is the balancing of equity. Now the balancing of equities is the third and final element that ultimately needs to be satisfied and we seek to argue that the injury sustains. This is what a court will look to the court is going to consider and balance out if we grant this, what’s likely to happen versus if we don’t. So generally the court will say, if the injury to be sustained by the plaintiff is going to be more damaging than any harm to the defendant, if we allow this preliminary injunction order to be signed, then we’re likely to grant the preliminary injunction order. The balancing of equities is really a back and forth weighing of the pros and cons of what happens in the event we do grant and what happens in the event we don’t. And that’s where frankly, sometimes these carve out situations come into play because the courts are also concerned that if we grant too much relief, we might actually wind up destroying the entity, the business that we were trying to protect by providing for this order.
26:15
So the balancing of equities is a very important part of this whole process. And finally, we discussed the posting of bond. So if you’re a plaintiff and if you showed that there was a likelihood of success in the merits of your claims and you show that the plaintiff, you being the plaintiff was likely to suffer irreparable harm absent this order being put into place, meaning that we’re not just seeking monetary damages, meaning that a final judgment won’t be rendered worthless by the time we get there. If you’ve done that and if you’ve showed the balancing of the equities once again, meaning that the damage to me far outweighs or the damage to the plaintiff outweighs any potential damage to the defendant, if the order is granted, then the next step is the posting of bond. And I always encourage a plaintiff to argue that bond should not be required, but the judge will offer require the plaintiff to either post a bond so place funds with the court, or to either reach out to a bonding company where they will take some certain from you and they will post bond on your behalf. So the bond application, the bond process is not for Naugh, but it ultimately is going to be a potential safe haven for the defendant in the event that the wrong determination was made when the preliminary injunction order was granted.
27:30
And that’s it. I’m going to open up to any questions to the extent we can, but otherwise I would say thank you very much for joining. It’s been a pleasure having everybody here. I hope you found there to be value in this. And in the future we’ll be discussing more topics so you can contact us if you have any questions, any follow up, you can call us at: (646) 386-0990. You can also email me at: ross@pitcofflawgroup.com. You can reach me on any one of these social channels that you’re watching right now. We’ll be happy to talk with you. And we’re making this a series so that every month we can educate our audience about different things that are going on, different legal topics of value. And we hope you found value today. If you did, please make sure to and share on our social channels and give us some feedback. Thank you very much.