Empire Trust, LLC v. Cellura

Background

Empire Trust, LLC, ADMI Inc., Michael Ghiselli, Bruce Houle, and Baynon International Corp., also known as Global Brands Capital Corp., sued Joseph R. Cellura, Emelia Baer Cellura, Malibu 55 Inc., and three unidentified defendants. The plaintiffs alleged that the defendants engaged in fraudulent conduct, including that Cellura transferred company funds to companies he owned instead of distributing them to the plaintiffs. They alleged that approximately $17 million was involved.

The plaintiffs sought an ex parte temporary restraining order, meaning an emergency order requested without first giving the opposing parties notice. The proposed order would have restricted the defendants from transferring, liquidating, or converting assets described in the amended complaint. The plaintiffs emphasized a planned March 28, 2024, $3.5 million real-estate closing and an obligation of approximately $1 million due in April 2024.

Court’s analysis

The court applied the standard used for preliminary injunctions. Generally, a party seeking this type of emergency relief must show a likely success on the claims or serious questions for litigation, likely irreparable harm, a favorable balance of hardships, and consistency with the public interest. Because the plaintiffs sought the order without notice, Federal Rule of Civil Procedure 65(b)(1) also required specific facts showing that immediate and irreparable harm would occur before the defendants could be heard. The plaintiffs’ lawyer also had to explain in writing why notice should not be required. Local Rule 6.1(b) required a clear and specific showing of good reasons for proceeding without notice.

The court held that the plaintiffs did not satisfy those requirements. First, the plaintiffs did not clearly allege that ADMI lacked the funds to complete the real-estate transaction or that the funds would disappear before an expedited hearing could occur. The lawyer’s declaration did not provide specific information about ADMI’s accounts or ability to obtain funds and did not mention the March 28 closing. The court also noted that freezing the allegedly misappropriated funds would not appear to provide the funds needed to finance the transaction.

The court further noted that the plaintiffs had known about at least some of the alleged transactions since June 2023, had made demands and attempted resolution several times, and waited more than a month after filing the action before seeking emergency relief. The court used this delay as additional support for its conclusion that immediate relief without a hearing was not justified.

Second, the court found that the plaintiffs did not give sufficient reasons for proceeding without notice. The lawyer’s general statement that the defendants might continue taking or converting assets did not explain why the danger was immediate. The court also observed that the defendants appeared to know about the claims and the case, including through prior communications, which reduced any reason to keep the request secret.

Disposition

Judge Kenneth M. Karas denied the plaintiffs’ motion without prejudice and directed the Clerk of Court to terminate the pending motion. The court stated that the plaintiffs could bring the motion by properly serving and filing a notice of motion under the Federal Rules of Civil Procedure and the Southern District of New York’s local rules. The order addressed only the request for temporary emergency relief; it did not decide the merits of the plaintiffs’ underlying fraud allegations.