Rel: September 20, 2024
Notice: This opinion is subject to formal revision before publication in the advance sheets of Southern Reporter. Readers are requested to notify the Reporter of Decisions, Alabama Appellate Courts, 300 Dexter Avenue, Montgomery, Alabama 36104-3741 ((334) 229-0650), of any typographical or other errors, in order that corrections may be made before the opinion is printed in Southern Reporter.
SUPREME COURT OF ALABAMA SPECIAL TERM, 2024
_________________________
SC-2024-0128 _________________________
Red Mountain Diagnostics, LLC, Donald R. Simmons, and William T. DeVos
v.
Robert A. Black, individually and on behalf of Molecular Diagnostics Laboratory, LLC
Appeal from Jefferson Circuit Court (CV-21-902086)
STEWART, Justice.
The proceedings underlying this appeal involve numerous parties
and claims. The appellants are Donald R. Simmons, William T. DeVos, SC-2024-0128
and Red Mountain Diagnostics, LLC ("Red Mountain"), an Alabama
limited-liability company of which Simmons and DeVos are the members
(Red Mountain, Simmons, and DeVos are referred to collectively as "the
Red Mountain parties"). The appellees are Robert A. Black and Molecular
Diagnostics Laboratory, LLC ("MDL"), a foreign limited-liability
company formed under the laws of Arizona of which Black and Robert
Strange are the members (MDL, Black, and Strange are referred to
collectively as "the MDL parties"). Black is also the sole member of Prolab
Consulting, LLC ("Prolab"). Strange and Prolab are parties in the
underlying proceedings but are not parties to this appeal.
In July 2019, Red Mountain and MDL entered into an agreement
that provided for the division of revenues after expenses ("the joint
venture") in relation to rendering medical-laboratory testing services.
The joint venture ended on April 30, 2021, and, afterward, the parties
accused one another of diverting revenues from the joint venture. In July
2021, Strange, individually and on behalf of MDL, sued Black and Prolab
in the Jefferson Circuit Court, seeking damages, injunctive relief, and the
judicial dissolution of MDL. Strange alleged that Black had diverted
2 SC-2024-0128
funds from MDL and Red Mountain, and he sought a preliminary
injunction enjoining Black from continuing to divert funds from MDL.
In August 2021, Black filed an answer to Strange's complaint and,
individually and on behalf of MDL, asserted counterclaims against
Strange and third-party claims against the Red Mountain parties. The
Red Mountain parties responded and asserted counterclaims against
Black and MDL and cross-claims against Prolab.
In April 2022, Black, individually and on behalf of MDL, filed a
motion for a preliminary injunction requiring Strange and the Red
Mountain parties to deposit with the circuit-court clerk "all funds derived
from the operation" of the joint venture. Black alleged that the other
parties had conspired to deprive him of funds to which he was entitled,
that they had refused to disclose the amount of funds they possessed, and
that he was "fearful that the funds are subject to being disposed of
pending the resolution of this cause."
On July 26, 2022, based on an agreement between Strange and
Black, the circuit court entered a preliminary injunction requiring Black
and Strange to deposit a total of $1,026,836.64 with the circuit-court
clerk; Black was ordered to deposit $925,471.26 and Strange was ordered
3 SC-2024-0128
to deposit $101,365.38. Upon receipt of the funds, Strange's motion for a
preliminary injunction was dismissed.
In January 2023, Black, individually and on behalf of MDL, filed,
pursuant to Rule 65, Ala. R. Civ. P., an amended motion for a preliminary
injunction requiring, among other things, the Red Mountain parties to
deposit with the circuit-court clerk "all funds derived from the operation"
of the joint venture. In the motion, Black and MDL asserted that, despite
repeated requests, the Red Mountain parties had refused to disclose the
amount of funds in their possession collected on behalf of the joint
venture and that, as a result, "MDL is fearful that the funds are subject
to being disposed of or attached by other parties or authorities pending
the resolution of this cause."
In February 2024, the Red Mountain parties filed a response to the
amended motion in which they asserted, among other things, that,
although Black and MDL had styled the motion as having been filed
pursuant to Rule 65, the motion actually sought a prejudgment seizure
of property pursuant to Rule 64, Ala. R. Civ. P., and that Black and MDL
had not satisfied the requirements of Rule 64. The Red Mountain parties
argued that Black and MDL had not shown any possessory or ownership
4 SC-2024-0128
interest in the funds they were seeking, which were contained in Red
Mountain's operating account, and that allowing the extraordinary
remedy of prejudgment seizure of Red Mountain's operating funds "could
cause [Red Mountain] to cease operations, force [it] to terminate its
employees, breach its contract with Brookwood Hospital, and otherwise
cause damage to [Red Mountain] and its members." The Red Mountain
parties further argued that, even if the motion was correctly filed under
Rule 65, Black and MDL had failed to allege sufficient information to
meet the required elements for injunctive relief. The Red Mountain
parties asserted that, if the circuit court imposed an injunction, it should
require an injunction bond of no less than $3,000,000.
On February 20, 2024, the circuit court adopted and entered Black
and MDL's proposed order granting Black and MDL their requested
injunctive relief and finding, in pertinent part:
"8. The Joint Venture operated very profitably and generated revenue amounting to millions of dollars.
"9. [Red Mountain Diagnostics, LLC ('RMD, LLC'),] and MDL both collected revenue related to the operation of the Joint Venture. There is a dispute among the parties as to the proper percentage of division of the profits for the 1st year of operation, but the parties concede that the split of profits after the 1st year was to be 50% to RMD, LLC and 50% to MDL for
5 SC-2024-0128
the work performed until the termination of the Joint Venture on April 30, 2021.
"….
"12. RMD, LLC, Simmons, and DeVos are currently in possession of or have access to substantial funds which were generated by the Joint Venture operations. The Regions Bank business checking account statement in the name of RMD, LLC (the account in which Joint Venture revenue was deposited), for the month ending April 30, 2021, reflected an ending balance of $2,268,113.26.[1]
"13. Despite repeated requests from MDL, Strange, and Black, RMD, LLC, Simmons and DeVos have refused to disclose the present total amount of funds collected on behalf of the Joint Venture, and, further, have refused to pay said funds into Court as MDL has done.
"14. RMD, LLC is currently using the funds contained in the aforementioned Regions Bank account for current operating expenses of RMD, LLC for purposes other than the Joint Venture and is apparently co-mingling funds belonging to the Joint Venture with revenue being currently generated by RMD, LLC in connection with other endeavors.
"15. Both MDL and RMD, LLC, and their members, have included a demand for an accounting in their respective pleadings in connection with the business dealings among the parties.
"16. Based on the Agreement between RMD, LLC and MDL, at least one-half (50%) of the net profit generated by the Joint Venture and contained in the aforementioned Regions Bank Account currently already belongs to MDL.
1Notably, the circuit court referenced an account balance from almost three years before the date the preliminary injunction was issued. 6 SC-2024-0128
FINDINGS BY THE COURT
"17. The Court finds that MDL has met the required elements entitling it to injunctive relief, to wit:
"(1) Without the entry of the requested injunction, MDL will suffer irreparable injury. MDL's profits contained in the RMD Regions account is being used by RMD, LLC for its current business operations unrelated to the Joint Venture. Moreover, RMD, LLC is co-mingling MDL's money with funds ostensibly being generated by RMD, LLC's current operations which are unrelated to the Joint Venture. The Court finds that money currently owned by MDL may be depleted by the time an accounting is completed. MDL should not be required to finance RMD, LLC's current operations which are unrelated to the Joint Venture.
"(2) MDL has no adequate remedy at law. All parties have demanded an accounting in this cause. The co-mingling of RMD, LLC funds and depletion of Joint Venture funds by RMD, LLC pendente lite will surely cause accounting chaos and operate to thwart MDL's right to a full and proper accounting, which may result in guesswork as to an accurate monetary judgment.
"(3) MDL has at least a reasonable chance of success on the ultimate merits in this cause. RMD, LLC is holding money which is subject to division between RMD, LLC and MDL. MDL's claim for the recovery of its share of Joint Venture profits has a likelihood of success.
"(4) That the hardship imposed on RMD, LLC by the injunction would not unreasonably 7 SC-2024-0128
outweigh the benefit accruing to MDL. The granting of injunctive relief to MDL only results in the protection of its portion of Joint Venture profits which will still be subject to claims for set- off. RMD, LLC still retains in its possession funds which approximate its entitlement for profits, also subject to set off.
"18. RMD, LLC, DeVos, and Simmons had the opportunity to be heard and were provided the opportunity to file opposing affidavits objecting to MDL's sworn Petition and the granting of MDL's requested relief; they elected to do neither.
"19. That the sum of $2,268,113.26 on deposit in the checking account in the name of RMD, LLC at Regions Bank on April 30, 2021, belongs to the Joint Venture and is subject to division between RMD, LLC and MDL under the Joint Venture Agreement between the parties.
CONCLUSION
"Based upon the foregoing, it is the opinion of the Court that the following relief is due to be granted. It is therefore ORDERED that:
"1. DeVos, Simmons, and RMD, LLC shall forthwith deposit the sum of $1,026,836.64 with the Clerk of this Court, said sum to remain on deposit with the Clerk until further orders of the Court.
"2. DeVos, Simmons, and RMD, LLC shall maintain the sum of $1,241,276.62 in the checking account in the name of RMD, LLC at Regions Bank, and shall not access or use these funds in any manner until further orders of the Court.
"3. DeVos, Simmons, and RMD, LLC are being allowed to maintain under their control more than their share of 8 SC-2024-0128
profits from the Joint Venture contained in the Joint Venture account as of April 30, 2021, pendente lite. Additionally, the remaining portion of Joint Venture profits in the Regions account will be on deposit with the Clerk of this Court when said parties comply with this Order. Lastly, MDL has already deposited the sum of $1,026,836.64 with the Clerk of this Court in this cause. Therefore, the injunctive relief granted herein shall become effective when MDL files, as security for costs and damages, pursuant to the requirement contained within Rule 65(c), Ala. R. Civ. P., its written approval that the sum of $25,000.00 may be earmarked as such security from the money it has already deposited with the Clerk." 2
The Red Mountain parties appealed the preliminary injunction
and, shortly thereafter, filed in the circuit court a motion to stay the
injunction pending the outcome of the appeal. Black and MDL filed a
response in opposition to the request for a stay. On July 17, 2024, the Red
Mountain parties filed a motion in this Court seeking a stay of the
injunction pending the outcome of the appeal, asserting that, despite the
passage of four months, the circuit court had not ruled on their motion
for a stay and that Black and MDL had filed a contempt motion seeking
to enforce the injunction. Black and MDL filed a response in this Court,
opposing the request for a stay.
2On February 27, 2024, Black and MDL filed, in writing, their approval to earmark those funds as security for the issuance of the preliminary injunction. 9 SC-2024-0128
Standard of Review
When this Court considers a trial court's entry of a preliminary
injunction, we review de novo the trial court's resolution of questions of
law based on undisputed facts, but we review the decision to enter the
preliminary injunction under the excess-of-discretion standard. City of
Helena v. Pelham Bd. of Educ., 375 So. 3d 750, 752 (Ala. 2022). As part
of our review, we must consider whether the trial court's decision to issue
the preliminary injunction is supported by evidence in the record. Id.
A party seeking a preliminary injunction must produce evidence
sufficient to demonstrate all four of the following prerequisites:
"(1) the party would suffer irreparable harm without the injunction, (2) the party has no adequate remedy at law, (3) the party has at least a reasonable chance of success on the ultimate merits of the case, and (4) the hardship that the injunction will impose on the opposing party will not unreasonably outweigh the benefit accruing to the party seeking the injunction."
Id. (citing Holiday Isle, LLC v. Adkins, 12 So. 3d 1173, 1176 (Ala. 2008)).
"If the party seeking the injunction fails to establish each of these
prerequisites, then a preliminary injunction should not be entered. If the
trial court enters a preliminary injunction when these prerequisites have
not been met, the trial court's order must be dissolved and the case
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remanded." Blount Recycling, LLC v. City of Cullman, 884 So. 2d 850,
853 (Ala. 2003).
Discussion
The Red Mountain parties argue that Black and MDL did not
present evidence satisfying any of the prerequisites for a preliminary
injunction. First, they argue that Black and MDL did not establish that
they would suffer immediate or irreparable harm without the issuance of
a preliminary injunction and that they offered only bare speculation,
unsupported by any factual allegations, that the funds in Red Mountain's
operating account may be depleted without the requested injunction. The
Red Mountain parties also argue that the potential alleged harm -- the
depletion of funds allegedly owed to Black and MDL -- could be remedied
through an award of money damages and that, as a result, injunctive
relief is improper. 3
3The Red Mountain parties also argue on appeal, as they did in the
circuit court, that Black and MDL actually sought a prejudgment seizure of property, a process governed by Rule 64, Ala. R. Civ. P., and that they did not comply with the requirements of that rule. Black and MDL argue that, if this Court determines that they were required to proceed under Rule 64, the injunction should be upheld based on judicial economy because, they assert, they can prevail under Rule 64. However, because the circuit court entered the injunction order under the auspice of Rule 65, we will consider the circuit court's order under that framework. 11 SC-2024-0128
Whether a party has demonstrated the necessity of an injunction to
prevent imminent, irreparable harm and the absence of an adequate
legal remedy are interrelated considerations. See Ex parte B2K Sys.,
LLC, 162 So. 3d 896, 904 (Ala. 2014)("Our cases hold that a preliminary
injunction should be issued only when the party seeking the injunction
can demonstrate that, without the injunction, he or she would suffer
irreparable injury for which there is no adequate remedy at law.").
" 'Irreparable injury' is an injury that is not redressable in a court of law
through an award of money damages." Perley v. Tapscan, Inc., 646 So. 2d
585, 587 (Ala. 1994)(citing Triple J Cattle, Inc. v. Chambers, 551 So. 2d
280 (Ala. 1989)). "[W]hen a plaintiff alleges a purely monetary loss and
seeks only to recover monetary damages to redress that loss, the alleged
injury is reparable." Slamen v. Slamen, 254 So. 3d 172, 177 (Ala.
2017)(plurality opinion). See also Ormco Corp. v. Johns, 869 So. 2d 1109,
1113 (Ala. 2003) (quoting Martin v. City of Linden, 667 So. 2d 732, 736
(Ala. 1995)) (explaining that injunctive relief is unavailable to prevent
possible injuries; " 'the injury must be imminent and irreparable in a
court at law' "). "A plaintiff that can recover damages has an adequate
remedy at law and is not entitled to an injunction." SouthTrust Bank of
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Alabama, N.A. v. Webb-Stiles Co., 931 So. 2d 706, 709 (Ala. 2005)(citing
Benetton Servs. Corp. v. Benedot, Inc., 551 So. 2d 295, 299 (Ala. 1989)).
Black and MDL acknowledge this Court's precedent establishing
the necessity of imminent, irreparable harm as one factor required for
injunctive relief, and they concede that injunctive relief is not available
to a party seeking to recover monetary damages because that party has
an adequate remedy at law. They argue, however, that injunctive relief
is available to preserve and secure assets before the entry of a final
judgment, and they rely on Lisenby v. Simms, 688 So. 2d 864, 868 (Ala.
Civ. App. 1997), which they assert is factually congruous to this case.
Lisenby involved an action by a deceased mother's estate against
one of the mother's daughters to recover money belonging to the estate.
The evidence in that case established that, shortly before her mother's
death, Julia Lisenby had transferred her mother's $81,000 certificate of
deposit to herself pursuant to a power of attorney. The trial court
determined that Lisenby's actions were not authorized by the power of
attorney under which Lisenby had acted and that the funds belonged to
the mother's estate. The trial court also specifically found that Lisenby
had been using, and would continue using, the funds for her personal
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living expenses; that she had no employment, income, or assets; that,
without an injunction, the remaining balance of $69,107.21 would be
dissipated; and that the estate would be unable to recover those funds
through an action against Lisenby. Id. at 866.
Likening Lisenby to this case, Black and MDL base their claim of
imminent, irreparable harm on their assertion that the Red Mountain
parties have "openly" admitted to commingling and disposing of joint-
venture funds to operate Red Mountain and have "brazenly" refused to
stop spending the funds.4 Black and MDL further assert that they have
no adequate remedy at law because the Red Mountain parties may
continue to deplete the funds in Red Mountain's operating account and,
as the circuit court found, the commingling and depletion of funds " 'will
surely cause accounting chaos and operate to thwart [their] right to a full
and proper accounting which may result in guesswork as to an accurate
monetary judgment.' " Black and MDL's brief at 22 (quoting the circuit
court's injunction order).
4Black and MDL do not point this Court to the portion of the record
supporting their assertions that the Red Mountain parties have admitted to commingling or disposing of joint-venture funds, and, despite a thorough review of the record, we have not located such admissions. 14 SC-2024-0128
Lisenby does not support Black and MDL's argument, and it is
distinguishable from the situation in this case because the trial court in
Lisenby held an ore tenus hearing and decided the merits of the pertinent
issue before entering an injunction. In this case, in support of their
request for injunctive relief, Black and MDL submitted a verified motion
containing a general allegation that the Red Mountain parties either
possessed, had taken, or had access to "substantial funds which were
generated by the Joint Venture operations and other business
transactions among the parties." Although Black and MDL alleged that
the Red Mountain parties had refused to disclose the amount of funds in
Red Mountain's operating account, Black and MDL did not submit any
evidence indicating what amount of funds they claimed had been
generated by the joint venture or the amount of funds to which they
claimed to be entitled. Black and MDL's bare allegations in their verified
motion do not establish any entitlement to the funds in Red Mountain's
operating account, nor do they establish that the Red Mountain parties
possessed, had disposed of, or intended to dispose of funds belonging to
the joint venture or to Black and MDL. They further rely on the Red
Mountain parties' contention that requiring them to deposit the funds
15 SC-2024-0128
with the circuit clerk could cause the end of their business as "very
strongly indicat[ing]" that the Red Mountain parties are using the joint-
venture funds and do not have other funds to satisfy a judgment. As this
Court has explained, a "plaintiff's mere allegation that, without the
issuance of an injunction, a defendant might be unable to satisfy a
potential judgment does not convert the plaintiff's reparable injury into
an irreparable one that justifies injunctive relief." Slamen, 254 So. 3d at
177.
There is no evidence supporting the conclusions that Black and
MDL will suffer imminent, irreparable harm without an injunction or
that any harm that could occur cannot be remedied by a judgment
awarding damages to Black and MDL in the event they present evidence
supporting their claims.5 Accordingly, because Black and MDL failed to
establish at least two of the four prerequisites for injunctive relief, the
preliminary injunction is due to be dissolved. See Blount Recycling, 884
So. 2d at 853.
5We pretermit discussion of the two remaining elements; however,
we note that, by failing to present evidence supporting the foregoing elements, Black and MDL have, likewise, failed to establish a reasonable chance of success on the merits. 16 SC-2024-0128
Because the Red Mountain parties have demonstrated that the
preliminary injunction is due to be dissolved, we reverse the circuit
court's order entering the preliminary injunction, and, based on that
holding, the Red Mountain parties' motion to stay the injunction and
their challenge to the sufficiency of the injunction bond are moot. 6 See Ex
parte Cooper, [Ms. SC-2023-0056, Aug. 25, 2023] ___ So. 3d ___, ___ (Ala.
2023)(explaining that a request to increase an inadequate preliminary
injunction bond "can be entertained only while the injunction is still in
place; once the injunction is determined to be unwarranted, any request
to increase the bond is moot").
REVERSED AND REMANDED.
Parker, C.J., and Wise, Sellers, and Cook, JJ., concur.
6The Red Mountain parties also challenged the $25,000 injunction
bond as inadequate and requested that this Court increase the bond to $3,000,000 if the injunction was not dissolved. See DeVos v. Cunningham Grp., LLC, 297 So. 3d 1176, 1186 (Ala. 2019)(holding a $25,000 injunction bond to be inadequate in light of the evidence of the potential losses caused by an injunction against DeVos and Simmons -- who are also parties to this case). 17