TRT LeaseCo, LLC v. DGI-BNSF Corp.

Background

DGI-BNSF Corp. had previously sued TRT LeaseCo, LLC in a related action scheduled for trial on November 16, 2020. TRT later filed this related lawsuit seeking a declaratory judgment and moved for a preliminary injunction. DGI filed a motion to dismiss, but the court did not decide that motion in this order.

TRT argued that it faced irreparable harm because it could not obtain money from a Wells Fargo trust account to fund its defense in the related lawsuit. The opinion states that TRT’s defense had been funded by Kingsway Financial Services and CMC Acquisition, which the court described as TRT’s parent companies and beneficiaries of the corporate actions at issue in the related case.

Preliminary-injunction standard

The court explained that a party seeking a preliminary injunction generally must show either a likelihood of success on the merits or sufficiently serious questions for litigation combined with a decisive balance of hardships, as well as a likelihood of irreparable harm without the injunction. The court also described a stricter standard for an injunction that would alter the status quo by requiring a positive act. Preliminary injunctions are extraordinary remedies, and the moving party bears the burden of persuasion.

Reasons for denying the injunction

The court held that TRT had not made a clear showing that its alleged irreparable harm was causally related to DGI’s conduct. TRT alleged that Leo Schwartz interfered with the transfer of funds, but Schwartz was an officer of DGI and several other entities, and TRT sued DGI rather than Schwartz. Schwartz stated that the Wells Fargo escrow agent contacted him in his capacity as an officer of CMC Industries, TRT, or CRIC TRT Acquisition, LLC—not as a DGI officer. The court found at least a substantial factual question about whether DGI caused any harm to TRT.

The court also concluded that the requested injunction would probably not remedy the alleged harm. If TRT again requested a transfer, an officer of CRIC TRT Acquisition, LLC or CMC Industries might repeat the objection. The court further noted a substantial factual question about whether TRT’s request to use the trust account violated a standstill agreement involving several entities and previously approved by another judge.

Finally, the court stated that preliminary-injunction proceedings should not be used to decide contract-breach questions that could properly be determined after trial. In the court’s view, TRT was effectively seeking access to the financial relief at issue in the underlying contract dispute before its right to obtain a judgment had been decided. The court stated that the proper scope of the Management Services Agreement would be determined at trial and that deciding the preliminary-injunction motion was not an adjudication on the merits.

Disposition

The court DENIED TRT’s Motion for Preliminary Injunction. It also STAYED this action, including all open motions, pending the conclusion of the related action, DGI-BNSF Corp. v. TRT LeaseCo, LLC, No. 18-CV-3252. The order additionally stated that nothing in it prevented Ruberry, Stalmack, & Garvey, LLC, from suing its client for unpaid legal fees and costs, and reminded counsel that court permission is required to withdraw from representation.