Sterling Commercial Credit-Michigan, LLC v. Phoenix Industries I, LLC ( 2011 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
____________________________________
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STERLING COMMERCIAL )
CREDIT — MICHIGAN, LLC, )
)
Plaintiff, )
)
v. ) Civil Action No. 10-2332 (PLF)
)
PHOENIX INDUSTRIES I, LLC d/b/a )
PHOENIX INDUSTRIES, LLC, et al., )
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Defendants. )
____________________________________)
OPINION
This matter is before the Court on plaintiff’s motion for a temporary restraining
order and preliminary injunction “with notice.” Plaintiff’s title notwithstanding, it is far from
clear whether any of the defendants have in fact received notice of this motion. Accordingly,
although no opposition has been filed, the Court does not treat plaintiff’s motion as unopposed.
Upon consideration of plaintiff’s arguments, the relevant legal authorities, and the entire record
in this case, the Court will deny plaintiff’s motion.1
1
The papers reviewed in connection with the pending motion include the
following: plaintiff’s complaint (“Compl.”); the Factoring and Security Agreement (attached as
Exhibit 1 to Compl.) (“Agreement”); the Letter from Dannette Wright to Michigan Commercial
Credit, LLC, Nov. 8, 2010 (attached as Exhibit 2 to Compl.) (“Letter from Ms. Wright to
MCC”); the Guaranty (attached as Exhibit 3 to Compl.) (“Guaranty”); the Bill of Sale (attached
as Exhibit 4 to Compl.) (“Bill of Sale”); plaintiff’s emergency motion for a temporary restraining
order and preliminary injunction, with notice (“Mot.”); the Affidavit of William Edwin Small in
support of plaintiff’s Mot. (“Small Aff.”); Exhibits 1 through 4 to Small Aff. (the same four
Exhibits as those attached to plaintiff’s Compl., but in a different order); and plaintiff’s Rule 65.1
certificate (“Rule 65.1 Certificate”).
I. BACKGROUND
Plaintiff Sterling Commercial Credit — Michigan, LLC, “specializes in providing
businesses with asset-based lending solutions by purchasing credit-worthy accounts receivable.”
Small Aff. ¶ 3. In other words, plaintiff is in the business of “factoring.” See id. In this
commercial practice, a “factor” or factoring company — here, plaintiff — enters into a factoring
agreement with a business, whereby the factor “buys accounts receivable [from a business] at a
discount, the [business] obtains immediate operating cash, and the factor profits when the face
value of the account is collected.” 32 AM . JUR. 2D FACTORS AND COMMISSION MERCHANTS § 2
(2010); see, e.g., Staff, IT, Inc. v. United States, 482 F.3d 792, 794 (5th Cir. 2007). This case
arises from alleged breaches of a factoring agreement executed in 2008 and purportedly assigned
to plaintiff in 2010.
Defendant Phoenix Industries I, LLC (“Phoenix”) “provides building maintenance
and facility support services.” Compl. ¶ 13. On March 13, 2008, Phoenix entered into a
factoring agreement — the Agreement at issue here — with Michigan Commercial Credit, LLC
(“MCC”), another factoring company. See Agreement at 1; Small Aff. ¶ 4. In brief, the
Agreement provides that Phoenix will sell its accounts receivable to MCC and that Phoenix will
grant to MCC a security interest in other assets belonging to Phoenix. See Agreement §§ 2.1, 8;
Small Aff. ¶ 4. Phoenix’s president, defendant Dannette Wright, later entered into a Guaranty
with MCC, whereby Ms. Wright, in her individual capacity, guaranteed “all [of Phoenix’s]
present and future obligations” to MCC. See Guaranty §§ 1.7, 2.1; Small Aff. ¶¶ 20-22.
On November 20, 2008, MCC purportedly assigned all of its rights in this
Agreement and any guaranty agreement to Midstates Capital LLC (“Midstates”). See Small Aff.
2
¶ 6. Subsequently, on August 24, 2010, Midstates purportedly assigned all of its rights in the
Agreement and any guaranty agreement to plaintiff. See id. ¶ 7. Thus, plaintiff asserts that, as of
August 24, 2010, “all contractual provisions at issue in this matter pertain to [plaintiff].” Id.
Pursuant to the Agreement, plaintiff alleges that Phoenix is currently indebted to
plaintiff in the amount of $908,009.64. Small Aff. ¶ 26. Plaintiff, however, “has received no
payments toward satisfaction of” this debt, and plaintiff contends that Phoenix and Ms. Wright
have failed to perform their duties under the Agreement and the Guaranty, respectively. See id.
¶¶ 30, 35, 38. Specifically, plaintiff alleges that Phoenix has violated the Agreement by
“wrongfully diverting accounts from which [plaintiff] is to receive payments.” Id. ¶ 24; see Mot.
at 3. And Ms. Wright has allegedly violated the Guaranty by failing to make any payments
toward satisfaction of Phoenix’s outstanding debt. Mot. at 4; see Small Aff. ¶¶ 20-22, 27-30.
Plaintiff alleges that Phoenix further violated the Agreement when, on October
30, 2010, Phoenix unilaterally, and without plaintiff’s consent, executed a Bill of Sale with
defendant United Concepts International LLC (“United”) and its president, defendant Melvin
Woodard. See Mot. at 5; Small. Aff. ¶¶ 13-19. Pursuant to the Bill of Sale, Phoenix sold its
accounts receivable and assets to United for $1.5 million. See Bill of Sale at 1. All of the cash
proceeds from this sale were to be paid by United to Phoenix on January 1, 2011. Bill of Sale at
1; see Small Aff. ¶ 32. Plaintiff contends that this sale violated the express terms of the
Agreement and again diverted accounts that were payable exclusively to plaintiff. See Small Aff.
¶¶ 13, 16. Plaintiff further contends that “all or part of the cash proceeds due under the Bill of
Sale may have been paid into an escrow account of an unknown third party and may be disbursed
to other third parties, including a relative of [Ms.] Wright.” Id. ¶ 33.
3
Accordingly, on December 30, 2010, plaintiff filed a complaint against Phoenix,
Ms. Wright, United, and Mr. Woodward. See generally Compl. Plaintiff sets forth six separate
claims in its complaint: (1) breach of contract against Phoenix; (2) breach of contract against Ms.
Wright; (3) common law conversion against all defendants; (4) statutory conversion against
Phoenix, United, and Ms. Wright; (5) temporary restraining order against all defendants; and
(6) preliminary injunction against all defendants. See generally id. On January 6, 2011, plaintiff
filed the pending motion for a temporary restraining order and preliminary injunction. See
generally Mot. Plaintiff requests, among other things, that the Court enjoin defendants from
collecting any further payments purportedly subject to the Agreement; enjoin defendants from
disposing of the cash proceeds and any other assets associated with the sale of Phoenix to United;
and order that all of the disputed money and assets be paid into the Court pending the final
disposition of this case on its merits. See id. at 10-11.
II. LEGAL STANDARD
A preliminary injunction is “‘an extraordinary remedy that should be granted only
when the party seeking the relief, by a clear showing, carries the burden of persuasion.’”
Chaplaincy of Full Gospel Churches v. England, 454 F.3d 290, 297 (D.C. Cir. 2006) (quoting
Cobell v. Norton, 391 F.3d 251, 258 (D.C. Cir. 2004)). To warrant preliminary injunctive relief,
a moving party must show: (1) that there is a substantial likelihood that it will succeed on the
merits of its claims; (2) that it will suffer irreparable harm in the absence of an injunction;
(3) that an injunction would not substantially harm the defendant or other interested parties
(balance of harms); and (4) that the public interest would be furthered, or at least not adversely
4
affected, by the injunction. See id.; Davis v. Pension Benefit Guar. Corp., 571 F.3d 1288, 1291
(D.C. Cir. 2009); Serono Labs., Inc. v. Shalala, 158 F.3d 1313, 1317-18 (D.C. Cir. 1998). “The
same standard applies to both temporary restraining orders and to preliminary injunctions.” Hall
v. Johnson, 599 F. Supp. 2d 1, 3 n.2 (D.D.C. 2009).
These four factors must be viewed as a continuum, with more of one factor
compensating for less of another. Davis v. Pension Benefit Guar. Corp., 571 F.3d at 1291-92.
“If the arguments for one factor are particularly strong, an injunction may issue even if the
arguments in other areas are rather weak.” CityFed Fin. Corp. v. Office of Thrift Supervision,
58 F.3d 738, 747 (D.C. Cir. 1995). An injunction may be justified “where there is a particularly
strong likelihood of success on the merits even if there is a relatively slight showing of
irreparable injury.” Id. Conversely, when the other three factors strongly favor interim relief, a
court may grant injunctive relief when the moving party has merely made out a “substantial” case
on the merits. The necessary level or degree of likelihood of success that must be shown will
vary according to the Court’s assessment of the other factors. Washington Metro. Area Transit
Comm’n v. Holiday Tours, Inc., 559 F.2d 841, 843-45 (D.C. Cir. 1977). An injunction may be
issued “with either a high probability of success and some injury, or vice versa.” Cuomo v. U.S.
Nuclear Regulatory Comm’n, 772 F.2d 972, 974 (D.C. Cir. 1985).
Despite this flexibility, however, “a movant must demonstrate ‘at least some
injury’ for a preliminary injunction to issue,” and “[a] . . . failure to show any irreparable harm”
constitutes grounds for denying the motion for a preliminary injunction, “even if the other three
5
factors entering the calculus merit such relief.” Chaplaincy of Full Gospel Churches v. England,
454 F.3d at 297 (quoting CityFed Fin. Corp. v. Office of Thrift Supervision, 58 F.3d at 747, and
citing Sea Containers Ltd. v. Stena AB, 890 F.2d 1205, 1210-11 (D.C. Cir. 1989)) (emphasis
added).
III. DISCUSSION
A. Notice to Defendants
Although the same substantive standard generally applies to both temporary
restraining orders and preliminary injunctions, see Hall v. Johnson, 599 F. Supp. 2d at 3 n.2,
there is an important procedural distinction between the two: a temporary restraining order may
in some defined circumstances be issued without notice, whereas a preliminary injunction may
not. Compare FED . R. CIV . P. 65(b)(1) (“The court may issue a temporary restraining order
without written or oral notice to the adverse party or its attorney . . . .”), with FED . R. CIV . P.
65(a)(1) (“The court may issue a preliminary injunction only on notice to the adverse party.”)
(emphasis added); see also Laster v. District of Columbia, 439 F. Supp. 2d 93, 99-100 (D.D.C.
2006) (“Because a preliminary injunction may be unlimited in duration, notice to adverse parties
is required.”). The Local Civil Rules of this Court are more stringent, requiring “proof
satisfactory to the court” of actual notice or efforts made to give such notice; an ex parte
application for a temporary restraining order will be considered only “in an emergency.” See
LOC. CIV . R. 65.1(a).
Plaintiff titles its motion as one “with notice.” Mot. at 1. Moreover, plaintiff
clearly states that it “gave Defendants notice prior to filing the subject Motion.” Id. at 1 n.1.
6
Plaintiff’s Rule 65.1 Certificate, however, paints a different picture. At best, plaintiff provided
notice by e-mail to Phoenix and by voicemail to United but even that is unclear. The Court
describes below plaintiff’s notification efforts with respect to each defendant, as stated in
plaintiff’s Rule 65.1 Certificate:
1. Phoenix — On January 5, 2011, plaintiff e-mailed its motion papers to
Phoenix. Rule 65.1 Certificate at 1. Plaintiff explains that the e-mail was “successful,” though it
is unclear to the Court what that actually means.
2. Ms. Wright — On January 5, 2011, plaintiff e-mailed its motion papers to Ms.
Wright. Rule 65.1 Certificate at 1. The e-mail, however, “was rejected.” Id. Thus, that same
day, plaintiff attempted to deliver its papers by courier to Ms. Wright at what was believed to be
her home address, as listed on the Guaranty, but this attempt at notice also failed: “The address
listed on the Guaranty did not designate a specific apartment number and the property manager
would not provide [Ms.] Wright’s apartment number or confirm whether she resides there.” Id.
at 1-2.
3. United — On January 5, 2011, plaintiff sent its motion papers via courier to
what was believed to be United’s business address but “was informed by a security guard that no
business by [United’s] name . . . has an office at that address.” Rule 65.1 Certificate at 2. That
same day and the following day, January 6, 2011, plaintiff’s counsel attempted to call what was
believed to be United’s business number but no one answered. See id. at 2. Plaintiff’s counsel
therefore left a message identifying plaintiff’s counsel and contact information. Id. Plaintiff did
not receive a response. Id.
7
4. Mr. Woodard — On January 6, 2011, plaintiff’s counsel attempted to call Mr.
Woodard on what was believed to be his cell phone but no one answered. See Rule 65.1
Certificate at 2. Because no voicemail was set up, plaintiff could not leave a message. Id.
As the court of appeals has explained, “[t]he purpose of Rule 65(a)(1)’s notice
requirement is to allow the opposing party a fair opportunity to oppose the preliminary injunction
. . . , and compliance is mandatory . . . .” United States v. Microsoft Corp., 147 F.3d 935, 944
(D.C. Cir. 1998) (internal quotations and citations omitted) (emphasis added); see also Beierle v.
Zavares, Nos. 99-1383, 99-1530, 2000 WL 757725, at *6 (10th Cir. June 12, 2000)
(“Compliance with this notice requirement [pursuant to Rule 65(a)(1)] is mandatory, and the rule
has constitutional as well as procedural dimensions.”). This notice requirement “reflect[s] the
fact that our entire jurisprudence runs counter to the notion of court action taken before
reasonable notice and an opportunity to be heard has been granted both sides of a dispute.”
Granny Goose Foods, Inc. v. Bhd. of Teamsters & Auto Truck Drivers, 415 U.S. 423, 438-39
(1974). Thus, “[p]reliminary injunctions entered without notice to the opposing party are
generally dissolved.” United States v. Microsoft Corp., 147 F.3d at 944.
Upon review of plaintiff’s Rule 65.1 Certificate, the Court cannot be certain that
any of the defendants have in fact been provided with notice of the pending motion. On the
contrary, what is clear to the Court is that neither Ms. Wright nor Mr. Woodard has been
provided with such notice. Although plaintiff concludes that it “has taken all reasonable steps to
notify all Defendants,” see Rule 65.1 Certificate at 2, the Court disagrees. The Court finds
plaintiff’s efforts — taken over the span of only two days and, in the case of Mr. Woodard,
amounting to one unanswered phone call — rather minimal.
8
The Court’s conclusion on the matter of notice is, by itself, sufficient to deny
plaintiff’s request for a preliminary injunction, FED . R. CIV . P. 65(a)(1), as well as — under the
Local Rules — to deny plaintiff’s request for a temporary restraining order. See LOC. CIV . R.
65.1(a). Nevertheless, the Court will turn to the merits of plaintiff’s motion.
B. Irreparable Harm
The court of appeals “has set a high standard for irreparable injury.” Chaplaincy
of Full Gospel Churches v. England, 454 F.3d at 297. This factor thus “erects a very high bar for
a movant.” Coalition for Common Sense in Gov’t Procurement v. United States, 576 F. Supp.
2d 162, 168 (D.D.C. 2008). To make the required showing of irreparable harm, a moving party
must establish that its injury satisfies a two-part test. See Chaplaincy of Full Gospel Churches v.
England, 454 F.3d at 297.
“First, the injury ‘must be both certain and great; it must be actual and not
theoretical.’” Chaplaincy of Full Gospel Churches v. England, 454 F.3d at 297 (quoting
Wisconsin Gas Co. v. FERC, 758 F.2d 669, 674 (D.C. Cir. 1985)). Thus, “[t]he moving party
must show ‘[t]he injury complained of is of such imminence that there is a ‘clear and present’
need for equitable relief to prevent irreparable harm.’” Id. (quoting Wisconsin Gas Co. v. FERC,
758 F.2d at 674) (emphasis in original); see Coalition for Common Sense in Gov’t Procurement
v. United States, 576 F. Supp. 2d at 168 (“[T]he alleged injury must be certain, great, actual, and
imminent.”). “Bare allegations of what is likely to occur are of no value since the court must
decide whether the harm will in fact occur.” Wisconsin Gas Co. v. FERC, 758 F.2d at 674(emphasis in original); see TD Int’l, LLC v. Fleischmann & Tertium Datur Int’l, LLC, 639 F.
9
Supp. 2d 46, 48 (D.D.C. 2009) (“Injunctive relief ‘will not be granted against something merely
feared as liable to occur at some indefinite time.’”) (quoting Wisconsin Gas Co. v. FERC, 758
F.2d at 674)). Instead, “[t]he movant must provide proof that the harm has occurred in the past
and is likely to occur again, or proof indicating that the harm is certain to occur in the near
future.” Wisconsin Gas Co. v. FERC, 758 F.2d at 674. Moreover, “the movant must show that
the alleged harm will directly result from the action which the movant seeks to enjoin.” Id.“Second, the injury must be beyond remediation.” Chaplaincy of Full Gospel
Churches v. England, 454 F.3d at 297. Thus, “‘[t]he possibility that adequate compensatory or
other corrective relief will be available at a later date, in the ordinary course of litigation weighs
heavily against a claim of irreparable harm.’” Id. at 297-98 (quoting Wisconsin Gas Co. v.
FERC, 758 F.2d at 674). The Court finds that plaintiff has failed to demonstrate that, in the
absence of injunctive relief, it will suffer irreparable harm for which there is no adequate remedy
at law.
1. Plaintiff’s Economic Harm Argument
Plaintiff contends:
Defendant Phoenix is currently indebted to [plaintiff] in the
amount of $908,009.64 . . . . All Defendants have converted assets
owned by [plaintiff] and monies owed to it, and the Sales Proceeds
have and/or may be distributed to third parties other than
[plaintiff]. Once the cash proceeds are gone, that source of money
will be extinguished and [plaintiff’s] rights will be hindered
further.
Mot. at 6. In sum, plaintiff alleges economic harm in the amount of $908,009.64. But the
“general rule [is] that economic harm does not constitute irreparable injury.” Davis v. Pension
10
Benefit Guar. Corp., 571 F.3d at 1295; see Wisconsin Gas Co. v. FERC, 758 F.2d at 674 (“It is
. . . well settled that economic loss does not, in and of itself, constitute irreparable harm.”). As
the court of appeals has stated:
The key word in this consideration is irreparable. Mere injuries,
however substantial, in terms of money, time and energy
necessarily expended in the absence of a stay are not enough. The
possibility that adequate compensatory or other corrective relief
will be available at a later date, in the ordinary course of litigation
weighs heavily against a claim of irreparable harm.
Chaplaincy of Full Gospel Churches v. England, 454 F.3d at 297-98 (quoting Wisconsin Gas Co.
v. FERC, 758 F.2d at 674) (emphasis in original). Although there appear to be two exceptions to
this general rule, plaintiff has failed to establish that either applies.
First, economic harm may qualify as irreparable where a plaintiff establishes that
the harm “is so severe as to cause extreme hardship to the business or threaten its very
existence.” Coalition for Common Sense in Gov’t Procurement v. United States, 576 F. Supp.
2d at 168 (internal quotations omitted); see Toxco Inc. v. Chu, 724 F. Supp. 2d 16, 31 (D.D.C.
2010); TD Int’l, LLC v. Fleischmann & Tertium Datur Int’l, LLC, 639 F. Supp. 2d at 48. The
critical consideration under this exception is the effect that the purported economic harm will
have on a movant’s business or its very existence — not any monetary amount per se. Plaintiff
plainly does not allege that it will sustain a harm of this nature. Indeed, plaintiff provides no
information whatsoever as to what effect, if any, this purported economic harm will have on its
business. See TD Int’l, LLC v. Fleischmann & Tertium Datur Int’l, LLC, 639 F. Supp. 2d at
48-49, 49 n.3 (holding that plaintiff failed to establish irreparable harm because, even assuming
plaintiff’s alleged economic loss of over one million dollars in damages were true, “[t]his alleged
11
loss . . . [was] never placed in the context of the financial condition of [plaintiff’s] business”);
see also Isong v. Apex Petroleum Corp., 273 F. Supp. 2d 1, 2 (D.D.C. 2002) (“The only harm
plaintiff alleges he will suffer is the loss of $95,000, which he can recover when and if he
establishes that there was a valid contract . . . between the parties and it was breached by the
defendant.”).
Second, courts have also held, under some circumstances, that economic harm
may qualify as irreparable “where a plaintiff’s alleged damages are unrecoverable.” Clarke v.
Office of Fed. Hous. Enter., 355 F. Supp. 2d 56, 65 (D.D.C. 2004); see Bracco Diagnostics, Inc.
v. Shalala, 963 F. Supp. 20, 29 (D.D.C. 1997) (“While the injury to plaintiffs is admittedly
economic, there is no adequate compensatory or other corrective relief that can be provided at a
later date, tipping the balance in favor of injunctive relief.”) (internal quotations and citation
omitted). Even unrecoverable losses, however, must have a “serious” effect on a plaintiff in
order to be considered irreparable for purposes of a preliminary injunction. See Toxco Inc. v.
Chu, 724 F. Supp. 2d at 31; Mylan Pharms., Inc. v. Shalala, 81 F. Supp. 2d 30, 42 (D.D.C. 2000)
(“Because [plaintiff] is alleging a non-recoverable monetary loss, it must demonstrate that the
injury [is] more than simply irretrievable; it must also be serious in terms of its effect on the
plaintiff.”) (internal quotations and citation omitted). Compare LG Elecs., USA, Inc. v. Dep’t of
Energy, 679 F. Supp. 2d 18, 35-36 (D.D.C. 2010) (“Even assuming [the plaintiff] will not be able
to recover monetary damages from [defendant] . . . the financial impact [plaintiff] claims it will
suffer does not rise to the level of irreparable harm” because that impact represents only “a
minuscule portion of the company’s worldwide revenues . . . .”); Sandoz, Inc. v. FDA, 439 F.
Supp. 2d 26, 32 (D.D.C. 2006) (“A loss of less than 1 percent total sales” — in that case,
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amounting to nearly $31 million — “is not irreparable harm . . . nor would it threaten the
company’s very existence.”) (internal quotations and citation omitted).
Perhaps in an attempt to invoke this exception, plaintiff states:
If Phoenix, Wright, United and Woodard are not ordered to refrain
from releasing the funds at issue to any party other than [plaintiff],
and from continuing to divert funds owed to [plaintiff] from its
accounts under the . . . Agreement, [plaintiff] will be irreparably
harmed because, among other things, Phoenix has sold all of its
assets and will likely not remain in business and the funds may be
disbursed outside of the District of Columbia and may become
unable to be recovered.
Small Aff. ¶ 38 (emphasis added). Plaintiff’s “[b]are allegations of what is likely to occur,”
couched as they are here in mere possibilities, however, “are of no value since the court must
decide whether the harm will in fact occur.” Wisconsin Gas Co. v. FERC, 758 F.2d at 674(emphasis in original). Moreover, plaintiff has not demonstrated that the harm would be serious
in terms of its effect on the plaintiff’s business or its existence. See Toxco Inc v. Chu, 724 F.
Supp. 2d at 31; Mylan Pharms., Inc. v. Shalala, 81 F. Supp. 2d at 42. As discussed, plaintiff has
provided no information as to what effect the purported economic harm will have on its business.
Thus, plaintiff has provided no reason for this Court to depart from the established rule “that
economic harm does not constitute irreparable injury.” See Davis v. Pension Benefit Guar.
Corp., 571 F.3d at 1295.
2. Plaintiff’s Multiplicity of Suits Argument
Plaintiff presents a second irreparable harm argument. Plaintiff contends that it
will suffer irreparable harm because it may be forced to pursue a “multiplicity of suits” to recover
damages. See Mot. at 7. Plaintiff states: “The effect of Defendants’ continued wrongful
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diversion of accounts and proceeds that belong to [plaintiff] under the . . . Agreement is
subjecting all account debtors from which payments are made to become subject to further
lawsuits . . . .” Id. Relying on the Delaware Uniform Commercial Code, plaintiff asserts that “in
each and every instance that one or more of the Defendants’ actions cause account debtor
payments to be misappropriated and misdirected to their dominion, control and use; each account
debtor becomes exposed to litigation . . . .” Id. (citing DEL. CODE ANN . tit. 6, § 9-406(a)).2 Thus,
plaintiff concludes, because “[t]he law provides that a party may seek equitable relief if a
multiplicity of suits will otherwise result,” injunctive relief is warranted here. Id. (citing
Oppenheimer v. Philadelphia, Baltimore, & Washington R.R. Co., 39 App. D.C. 253 (D.C. Cir.
1912)).
The one case that plaintiff cites for this proposition, Oppenheimer, simply noted
that “[a court of equity] will . . . give its aid to prevent oppressive or interminable litigation, or a
multiplicity of suits, or where the injury is of such nature that it cannot be adequately
compensated by damages at law . . . .” Oppenheimer v. Philadelphia, Baltimore, & Washington
R.R. Co., 39 App. D.C. at 265 (quoting Parker v. Winnipiseogee Lake Cotton and Woolen Co.,
67 U.S. (2 Black) 545, 551 (1862)) (alteration in original). Plaintiff has not cited any case
holding that a movant established irreparable harm for purposes of a temporary restraining order
2
Plaintiff asserts that, because the District of Columbia’s choice of law rules
“provide that the law governing perfection and priority of security interests is the law where
Phoenix is registered,” Delaware’s Uniform Commercial Code applies to this case. See Mot.
at 1 n.1.
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or preliminary injunction simply by showing that it would be required to pursue a multiplicity of
suits to gain relief.3
The problem with plaintiff’s argument is that plaintiff again provides no more
than “[b]are allegations of what is likely to occur.” Wisconsin Gas Co. v. FERC, 758 F.2d at
674. As discussed “[t]he movant must provide proof that the harm has occurred in the past and is
likely to occur again, or proof indicating that the harm is certain to occur in the near future.” Id.Here, plaintiff has simply asserted a “likelihood of protracted or multiple lawsuits” sometime in
the future, see Mot. at 7 (emphasis added), without any discussion of how many accounts may
have been wrongfully diverted or how many parties may be subject to liability. These bare
allegations, without more, do not establish an injury that is “certain, great, actual, and imminent,”
for which legal remedies are inadequate. See Coalition for Common Sense in Gov’t
Procurement v. United States, 576 F. Supp. 2d at 168.
The Court therefore concludes that plaintiff has failed to show any irreparable
harm. The economic harm that plaintiff alleges — indebtedness in the amount of $908,009.64 —
can be recovered “when and if [plaintiff] establishes that there was a valid contract . . . between
the parties and it was breached by the defendant[s].” Isong v. Apex Petroleum Corp., 273 F.
Supp. 2d at 2. Because “[a] . . . failure to show any irreparable harm” constitutes grounds for
denying plaintiff’s motion, “even if the other three factors entering the calculus merit such
relief,” Chaplaincy of Full Gospel Churches v. England, 454 F.3d at 297 (citing Sea Containers
3
On its own review of the case law, the Court has found some limited support for
this proposition. See Lynch Corp. v. Omaha Nat’l bank, 666 F.2d 1208, 1212 (8th Cir. 1981);
Ashland Oil, Inc. v. Gleave, 540 F. Supp. 81, 86 (W.D.N.Y. 1982).
15
Ltd. v. Stena AB, 890 F.2d at 1210-11) (emphasis added), the Court finds that plaintiff is not
entitled to injunctive relief.
C. The Merits
Absent any showing of irreparable harm, the Court need not address the remaining
factors. See Chaplaincy of Full Gospel Churches v. England, 454 F.3d at 297. The Court,
however, briefly discusses one issue regarding the merits. Plaintiff contends that it “is not only
likely to but will most definitely succeed on the merits . . . .” Mot. at 9. Plaintiff’s argument on
this point is essentially that defendants have clearly breached their contractual obligations,
whereas plaintiff has honored all of its obligations. See id. The first element of a breach of
contract claim, however, is “a valid contract between the parties.” See, e.g., Edmond v. Am.
Educ. Servs., Civil Action No. 10-0578, 2010 WL 4269129, at *2 (D.D.C. Oct. 28, 2010). Apart
from the affidavit in support of plaintiff’s motion, the Court has found nothing in the record
actually linking plaintiff to the two contracts at issue in this case.
The Agreement is between Phoenix and MCC. See Agreement at 1. The
Guaranty is between Ms. Wright and MCC. See Guaranty at 1. Plaintiff states that, by
assignment — first, from MCC to Midstates; then, from Midstates to plaintiff — “all contractual
provisions at issue in this matter pertain to [it].” Small Aff. ¶ 7. Neither of the two assignment
documents, however, are in the record. Plaintiff further states that “Sterling [i.e., plaintiff]
received a letter dated November 8, 2010 from [Ms.] Wright, on behalf of Phoenix, in which
[Ms.] Wright represented that any outstanding debts to Sterling would be paid in full.” Small
Aff. ¶ 27 (emphasis added). But this letter is neither addressed to plaintiff nor does it mention
16
plaintiff — like the Agreement and the Guaranty, it is addressed to MCC. See Letter from Ms.
Wright to MCC, Nov. 8, 2010. Thus, even if plaintiff had established irreparable harm, plaintiff
would not be entitled to injunctive relief on the record now before the Court. Although the Court
has no basis at this stage in the litigation to doubt the veracity of plaintiff’s statements regarding
the assignments, it is plaintiff’s burden to establish “by a clear showing” that it is entitled to
injunctive relief. See Chaplaincy of Full Gospel Churches v. England, 454 F.3d at 297 (internal
quotations and citation omitted). Without showing that it is in fact a party to the contracts at
issue, plaintiff cannot come close to establishing that there is a substantial likelihood that it will
succeed on the merits of its claims.
IV. CONCLUSION
For the foregoing reasons, plaintiff’s motion for a temporary restraining order and
preliminary injunction [Dkt. Nos. 3 and 4] will be DENIED. An Order consistent with this
Opinion shall issue this same day.
SO ORDERED.
/s/
PAUL L. FRIEDMAN
DATE: January 28, 2011 United States District Judge
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