Opinion
Index No. 508333/2022
11-09-2022
YOEL WEBER and YOEL LEONOROVITZ, Individually and derivatively on behalf of HORSEPOWER ELECTRIC AND. MAINTENANCE CORP., Plaintiff., v. GARY BARNETT, HP STOCK LLC and EXTEL.L. DEVELOPMENT COMPANY, Defendants, GARY BARNETT, Third-Party Plaintiff, v. PASCAOK GROUP LLC and PASCACK WL HOLDINGS LLC, Third-Party Defendants,
Unpublished Opinion
DECISION AND ORDER
HON. LEON RUCHELSMAN, JUDGE
The Plaintiffs have -.moved seeking to: an injunction preventing the., defendants from breaching, the shareholder agreement and to the defendants to arrange for a letter of credit. The defendants oppose the motion. Papers have been submitted by the parties and arguments held. After reviewing the. arguments of the parties, this court now makes the following determination.
As recorded; in a prior order, Horsepower Electric and Maintenance Corp..., is equally owned by plaintiffs Yoel Weber, .Yoel Leonorovitz and an entity called HP Stock LLC. pursuant to an operating agreement dated October 28, 2014. Gary Barnett is the managing, member of HP Stock. Horsepower Electric is an electrical subcontractor in the construction industry.. Pursuant to the operating agreement Horsepower Electric- was required to prioritize its work on behalf of defendant. Extell. Development Company, an entity owned by Barnett. The Verified Complaint alleges various wrongs committed by Barnett including reducing the profits to which Horsepower Electric was entitled, failing to .pay Horsepower Electric for work performed on Extell projects and .other acts and omissions-. The Verified Complaint .alleges- causes of action for breach of fiduciary duty, breach of contract, unjust enrichment, tortious interference, quantum meruit and attorney's fees.
The plaintiffs- now seek an injunction- essentially preventing the defendants- from allegedly further b re aching, the operating agreement operating, and from, allegedly continuing to breach their fiduciary duties. Specifically, the plaintiffs allege, the defendants allowed payments, for various work performed by Horsepower Electric in less than amounts, required in the shareholder agreement, failed to pay Horsepower Electric sums it is owed for work performed, failed to. maintain line of credit and bonding for Horsepower Electric as required under tine .shareholder agreement and failed to include Horsepower- Electric in insurance programs to .reduce Horsepower- Electrics premiums (see, Memorandum in- Support, pages 7, 8 [NYSCEF Doc.. No. 40.]). The plaintiffs now seek an injunction to prevent the further breaches of the shareholder agreement- as noted.
Conclusions of Law
CPLR §6301, as, it pertains to this base-, permits the court to issue a' preliminary injunction "in any' action,.. where the plaintiff has demanded and would be entitled to a judgment restraining, defendant from the commission Or the continuance of an act which, if committed or continued during the pendency of the action, would produce injury to the- plaintiff" (id) A party seeking a preliminary injunction "must demonstrate a probability of success on. the merits, danger of irreparable injury in the absence of the .injunction and. a balance, of the equities in its favor" (Nobu Next Door, LLC v.. Fine Arts Hosing, Inc., 4 N.Y.3d 839, 800. N.Y.S.2d 48 [2005], see also, Alexandra v. Pappas, 68 A.D.3d 690, 890 N.Y.2d 593 [2d Dept., 2009]:).. Further, each of the above elements, must be proven by. the moving party with "clear and convincing evidence" (Liotta v. Mattone, 71 A.D.3d 741, 900 N.Y.S.2d .62 [.2d Dept., 2010]).
Considering the first prong, establishing; a likelihood of .success on the merits, the plaintiff, must prima facie establish a reasonable probability of success. (Barbas Restaurant Inc. v. Seuzer 218 LLC, 140 A.D.3d 430, 33 N.Y.S.3d 43 [2d Dept., 2016]). Thus, while it is true that, a preliminary injunction may be granted where some, facts are in. dispute and. it. .is still apparent:the moving., .party .has a. likelihood of success on the. merits, (see. Borenstain v.. Rochel Properties, 176 A.D.2.d 171., 574 N.Y.S.2d 192 [1st Dept,, 1991]) some evidence of likelihood of success must be presented..
In tills case, the plaintiffs assert the defendants- have breached their duties to. Horsepower .Electric-. The defendants deny-any wrongdoing. Even if the plaintiff's allegations are sufficient to demonstrate a likelihood of success on the merits,, concerning the central allegation- of the- complaint, namely that defendants have undermined Horsepower's Electric financial .stability,, that is a mere money claim, without any accompanying emergency application.. In order to satisfy the second prong irreparableness harm it must be demonstrated that monetary damages are insufficient (Autoone Insurance Company v. Manhattan Heights. Medical. P..C., 24 Misc.3d 1229.{A), 899 N.Y.S.2d 57 [Supreme Court Queens County, 2009]) . The plaintiff a do, not even allege anything other than, money damages. Thus, the entire basis for the. injunction, namely to insure Horsepower Electric is paid: .the .sums it. is- owed and to prevent the further erosion of money it is owed are merely- claims- for damages which can be satisfied with money- damages. Thus, while:the plaintiffs may prevail in all its claims, against the- defendants, The plaintiff Have failed to establish that the. denial of the injunction will affect anything- other than economic or- financial matters. Thus, any alleged loss, which can be compensated by money .damages is not irreparable harm (Family Friendly Media Inc., v Recorder television, Network, 74 A.D.3d 738, 903 N.Y.S.2d 80 [2d Dept., .2010.). An Injunction based upon purely monetary damages is improper even if the- passage .of time will render any judgment obtained ineffectual (Rosenthal v. Rochester Button Company, 148 A.D.2d 375, 533 N.Y.S.2d 11 [1st Dept.:1989]) . As noted, the entire injunction, sought is- merely to insure and secure funds in which' to pay the company. This is not irreparable harm and is an improper basis, upon which to obtain an injunction.
Turning to the portion of the relief that seeks to require the defendants to take certain actions, indeed, the. central aspect, of this, motion, the court will consider the request to impose such mandatory injunction... A-mandatory injunction is rarely granted, and only under unusual circumstances to maintain the status quo pending trial. (Matos v. City of New York, 21 A.D.3d 936, 801 N.Y.S.2d. 610. [2d Dept., 2005]), Thus., where a party is. engaged, in unlawful conduct which is continuous then a mandatory injunction, is proper (Rosenthal v. Helfer., 136 Misc2d. 9, 516. NYS.2d 1020 [Civil Court New York County, .1987]) . Moreover, where a party acts' deliberately and. intentionally which, affects the plaintiff's rights or where the party engages in unlawful conduct which is capable of repetition then a mandatory injunction requiring the party to cease is likewise proper [Marcus v. Village of Mamaroneck, 283 NY 325, 28. N.E.2d 856 [1940], Rombom v. Weberman, 2002 WL 1461890 [Supreme Court Kings County 2002]).
The plaintiffs assert the defendants have failed to comply with Paragraphs 17..2 and. 17.3 of the Shareholder Agreement. Those paragraphs require the defendants to "arrange for a. .line of credit facility .for file. Corporation, in the Corporation's name,, with. a .favorable- rate of interest, which, shall be lower than that customarily paid by the Corporation for a similar type of facility, Such line of. credit facility will be repaid, by the .Corporation, and., if required, personally guaranteed, jointly, and severally by the Shareholders (in. the case .of the corporate Shareholder, by an acceptable affiliate)" {¶17.;2) and to . "arrange and facilitate increased surety bonding for the Corporation with reference to projects requiring bonding and which, upon review by the Corporate-Shareholder,; carry prof it of not less than twenty (20%) percent and overhead of not greater than fifteen (15%) percent. The initial surety; bonding facility, shall be arranged on an as-needed basis, with a maximum initial capacity of One Hundred. Million .{$.100.:000, 000.00) Dollars., to be reviewed annually as of January 1, 2016" (¶17.3.) [.NYSCEF Doc. No. 36]). Thus, the plaintiff Weber asserts, that in or around late: 2021, HPE requested that HP Stock and/or Barnett .arrange- for and/or maintain, a letter of credit facility in the amount- of $12.5 million and a bonding facility in the amount of $,100 million in order for HPE to continue operating its business- In furtherance .of the aforementioned request and in. response to HP Stock and Barnett's request, HPE provided all requested financial records, and related documentation, m order to .assist HP: Stock and/or Barnett in. obtaining the necessary letter of credit facility and bonding facility. HPE has offered to allow a forensic accountant of Barnett.'s choosing to review the financial. records in order to satisfy Barnett's requests" (see, Affidavit of Yoel Weber, ¶¶30,31 [NYSCEF Doe. No. 34]). Further, the plaintiffs insist the defendants failed to enter into a forbearance .agreement with Bank United in order to avoid default on a loan (id,, at ¶33.) .
However., paragraph 13.1 of the Shareholder Agreement, states that, nineteen "major decisions" require the unanimous .consent of all shareholders, including "the borrowing of funds or the pledging, mortgaging or otherwise encumbering of an Corporate property other than in the ordinary course of business"1 (¶13.1. (3)} and the "establishment of any third-party lines of credit or loan arrangements-, institutional, private or otherwise, other than in the ordinary course of business" (¶13-, 1 (9) } .
Thus, notwithstanding paragraph 17,. it is clear that certain, major decisions contemplated in paragraph 13 and urged by the plaintiffs in this.-, motion require, unanimous consent-. Further, the' defendants- have presented cogent ..reasons why they are- unwilling to agree t« the requests of 'the plaintiff . The. Reasons consist of the reluctance to increase the debt of. Horsepower Electric and the, denial by the- plaintiffs to provide the. books and records of Horsepower Electric so. a more- informed, decision could be made. To be .sure, the positions of the parties might be motivated by their, strategies in this lawsuit as a whole,. the mere .fact the. parties-are litigants must be taken into consideration, nevertheless,, the plaintiffs have failed to demonstrate the defendants have acted in bad faith or unreasonably in not agreeing to the plaintiff's requests. Therefore, there is no basis: to impose a mandatory injunction and consequently, the motion seeking such injunction is denied.
So ordered