UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
TD INTERNATIONAL, LLC, ) ) Plaintiff, ) ) v. ) ) Civil Case No. 09cv867 (RJL) STEVEN K. FLEISCHMANN ) ) & ) ) TERTIUM DATUR ) INTERNATIONAL, LLC a/k/a ) TERTIUM DATUR, LLC, ) ) Defendants. ) --------------------------)
MEMORANDUt!;;INION (August ~, 2009)
TD International, LLC ("TDI") seeks a preliminary injunction! to freeze one of
defendants' bank accounts pending a judgment on TDI's claims for roughly $1.2 million
in damages ("PI. Mot." [Dkt. # 2]). After consideration of both parties' pleadings and
1 Plaintiff also sought an ex parte temporary restraining order to freeze defendants' bank account while the motion for a preliminary injunction was pending. That request was denied on May 19, 2009 because it did not comply with Federal Rule of Civil Procedure 65(b)(I)(A), which requires TRO requests be accompanied by an affidavit or a verified complaint containing specific facts to "clearly show that immediate and irreparable injury, loss, or damage will result ... before the adverse party can be heard in opposition." Rule 65 must be strictly applied because ex parte relief runs counter to core values of notice and opportunity to be heard. See Granny Goose Foods, Inc. v. Bhd. of Teamsters and Auto Truck Drivers Local No. 70 ofAlameda County, 415 U.S. 423, 438 (1974). their oral arguments before the Court, TDI's motion for a preliminary injunction is
DENIED.
BACKGROUND
The focus of the parties' dispute is the terms of a partnership agreement between
Fleischmann and TO!. TDI is a Washington, D.C.-based business consulting firm formed
in 1999. (CompI. ~ 9.) According to TDI's complaint, Fleischmann entered into a
Members Agreement in January of2004 with two principals ofTDI, William Green and
Ronald Slimp. Pursuant to the agreement, each of the three members held a one-third
ownership interest in the company in furtherance of the company's business. (Id. ~ 10.)
Additionally, as a supplement to the obligations imposed by the Members
Agreement, TDI claims Fleischmann was bound by a second agreement-the Third
Amended and Restated Operating Agreement, dated May 1, 2004-to "devote his best
efforts and substantially all of his productive working time to TOrs business." (Id.) An
unsigned copy of this agreement is attached to TDI's pleadings. (ld. Exh. 2.) However,
the terms of this second agreement contradict the purported terms of the first Members
Agreement as it is described in plaintiffs complaint. In particular, according to the
second agreement, there were five members of TDI who held varying ownership interests,
not three members with a one-third interest each. (ld. Exh. 2 at Exh. A.)
Based on this limited set of facts, TDI seeks a preliminary injunction to freeze one
of Fleischmann's bank accounts on the grounds that, contrary to the terms of his
-2- agreements, he misappropriated some $626,401.42 in accounts receivable owed to TDI.
(Id. ~ 15.) Fleischmann allegedly accomplished the misappropriation by incorporating a
shell company with a name nearly identical to TDI-Fleischmann's company is named
Tertium Datur, International, which could also be abbreviated "TDI"-and instructing a
client to direct its payments to this newly created company. (Id. ~ 11-18). According to
TDI, it, and not Fleischmann, held the engagement contract with the client in question,
and the client unwittingly sent payments to Fleischmann's similar-sounding shell
company on the mistaken belief it was settling up with TDI. (Id.)
ANALYSIS
A preliminary injunction is an "extraordinary remedy that is never awarded as of
right." Winter v. Natural Res. Defense Council, Inc., --- U.S. ---, 129 S. Ct. 365,376, 127
L.Ed.2d 249 (2008). A movant may obtain a preliminary injunction only if it is able to
demonstrate: (1) that it is likely to succeed on the merits; (2) that it is likely to suffer
irreparable harm in the absence of preliminary relief; (3) that the balance of equities tips
in its favor; and (4) that an injunction is in the public interest. Id. At 374. "If the plaintiff
makes a particularly weak showing on one factor ... the other factors may not be enough
to compensate." Dodd v. Fleming, 223 F.Supp.2d 15, 20 (D.D.C. 2002) (citing Taylor v.
Resolution Trust Corp., 56 F.3d 1497, 1507 (D.C. Cir. 1995), amended on other grounds
on reh 'g, 66 F.3d 1226 (D.C. Cir. 1995)). In particular, a movant must show at the very
least that irreparable harm is likely to occur should an injunction not issue. See Winter,
-3- 129 S.Ct. at 375. The mere possibility of irreparable harm is not enough, see id., and a
court may deny a motion for preliminary relief without considering any other factors
when irreparable harm is not established, see CityFed Financial Corp v. DTS, 58 F.3d.
738, 747 (D.C. Cir. 1995). Unfortunately for TDI, it has failed to make the requisite
showing of irreparable harm. How so?
While the concept of irreparable harm may be difficult to define, it is abundantly
clear that the impending harm must be "certain and great," and it must be "actual and not
theoretical." Wisconsin Gas Co. v. FERC, 758 F.2d 669, 674 (D.C. Cir. 1985).
Additionally, the harm must be imminent. Injunctive relief "will not be granted against
something merely feared as liable to occur at some indefinite time." Id. (citing
Connecticut v. Massachusetts, 282 U.S. 660, 674 (1931 )). Finally, it is "well settled that
economic loss does not, in and of itself, constitute irreparable harm." Id. The only
instance where economic loss can give rise to irreparable harm, and thus a preliminary
injunction, is when such loss "threatens the very existence of the movant's business."
Isong v. Apex Petroleum Corp., 273 F. Supp. 2d 1,2 (D.D.C. 2002) (citing Washington
Metropolitan Area Transit Comm'n v. Holiday Tours, Inc., 559 F.2d 841,843 n. 2
(D.C.Cir.1977)).
TDI's sole argument with respect to irreparable harm is that it holds an "equitable
interest" in the funds it seeks to freeze. (PI. Mot. at 5-6.) Putting aside TDI's failure to
advance any legal or factual basis to support its claim to an "equitable" interest in the
-4- funds, it does not establish what irreparable harm will befall it if the Court does not grant
the injunction it seeks. Indeed, the mere existence of an equitable interest in the funds is
not enough on its own to warrant injunctive relief. To the contrary, TDI must
demonstrate that the likely loss of these funds threatens its business's very existence. See
/song, 273 F. Supp. 2d at 2. In that regard, TDI's reliance on Ellipso v. Mann 2 is, at best,
misplaced. While an equitable interest is necessary under Ellipso to obtain an injunction
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UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
TD INTERNATIONAL, LLC, ) ) Plaintiff, ) ) v. ) ) Civil Case No. 09cv867 (RJL) STEVEN K. FLEISCHMANN ) ) & ) ) TERTIUM DATUR ) INTERNATIONAL, LLC a/k/a ) TERTIUM DATUR, LLC, ) ) Defendants. ) --------------------------)
MEMORANDUt!;;INION (August ~, 2009)
TD International, LLC ("TDI") seeks a preliminary injunction! to freeze one of
defendants' bank accounts pending a judgment on TDI's claims for roughly $1.2 million
in damages ("PI. Mot." [Dkt. # 2]). After consideration of both parties' pleadings and
1 Plaintiff also sought an ex parte temporary restraining order to freeze defendants' bank account while the motion for a preliminary injunction was pending. That request was denied on May 19, 2009 because it did not comply with Federal Rule of Civil Procedure 65(b)(I)(A), which requires TRO requests be accompanied by an affidavit or a verified complaint containing specific facts to "clearly show that immediate and irreparable injury, loss, or damage will result ... before the adverse party can be heard in opposition." Rule 65 must be strictly applied because ex parte relief runs counter to core values of notice and opportunity to be heard. See Granny Goose Foods, Inc. v. Bhd. of Teamsters and Auto Truck Drivers Local No. 70 ofAlameda County, 415 U.S. 423, 438 (1974). their oral arguments before the Court, TDI's motion for a preliminary injunction is
DENIED.
BACKGROUND
The focus of the parties' dispute is the terms of a partnership agreement between
Fleischmann and TO!. TDI is a Washington, D.C.-based business consulting firm formed
in 1999. (CompI. ~ 9.) According to TDI's complaint, Fleischmann entered into a
Members Agreement in January of2004 with two principals ofTDI, William Green and
Ronald Slimp. Pursuant to the agreement, each of the three members held a one-third
ownership interest in the company in furtherance of the company's business. (Id. ~ 10.)
Additionally, as a supplement to the obligations imposed by the Members
Agreement, TDI claims Fleischmann was bound by a second agreement-the Third
Amended and Restated Operating Agreement, dated May 1, 2004-to "devote his best
efforts and substantially all of his productive working time to TOrs business." (Id.) An
unsigned copy of this agreement is attached to TDI's pleadings. (ld. Exh. 2.) However,
the terms of this second agreement contradict the purported terms of the first Members
Agreement as it is described in plaintiffs complaint. In particular, according to the
second agreement, there were five members of TDI who held varying ownership interests,
not three members with a one-third interest each. (ld. Exh. 2 at Exh. A.)
Based on this limited set of facts, TDI seeks a preliminary injunction to freeze one
of Fleischmann's bank accounts on the grounds that, contrary to the terms of his
-2- agreements, he misappropriated some $626,401.42 in accounts receivable owed to TDI.
(Id. ~ 15.) Fleischmann allegedly accomplished the misappropriation by incorporating a
shell company with a name nearly identical to TDI-Fleischmann's company is named
Tertium Datur, International, which could also be abbreviated "TDI"-and instructing a
client to direct its payments to this newly created company. (Id. ~ 11-18). According to
TDI, it, and not Fleischmann, held the engagement contract with the client in question,
and the client unwittingly sent payments to Fleischmann's similar-sounding shell
company on the mistaken belief it was settling up with TDI. (Id.)
ANALYSIS
A preliminary injunction is an "extraordinary remedy that is never awarded as of
right." Winter v. Natural Res. Defense Council, Inc., --- U.S. ---, 129 S. Ct. 365,376, 127
L.Ed.2d 249 (2008). A movant may obtain a preliminary injunction only if it is able to
demonstrate: (1) that it is likely to succeed on the merits; (2) that it is likely to suffer
irreparable harm in the absence of preliminary relief; (3) that the balance of equities tips
in its favor; and (4) that an injunction is in the public interest. Id. At 374. "If the plaintiff
makes a particularly weak showing on one factor ... the other factors may not be enough
to compensate." Dodd v. Fleming, 223 F.Supp.2d 15, 20 (D.D.C. 2002) (citing Taylor v.
Resolution Trust Corp., 56 F.3d 1497, 1507 (D.C. Cir. 1995), amended on other grounds
on reh 'g, 66 F.3d 1226 (D.C. Cir. 1995)). In particular, a movant must show at the very
least that irreparable harm is likely to occur should an injunction not issue. See Winter,
-3- 129 S.Ct. at 375. The mere possibility of irreparable harm is not enough, see id., and a
court may deny a motion for preliminary relief without considering any other factors
when irreparable harm is not established, see CityFed Financial Corp v. DTS, 58 F.3d.
738, 747 (D.C. Cir. 1995). Unfortunately for TDI, it has failed to make the requisite
showing of irreparable harm. How so?
While the concept of irreparable harm may be difficult to define, it is abundantly
clear that the impending harm must be "certain and great," and it must be "actual and not
theoretical." Wisconsin Gas Co. v. FERC, 758 F.2d 669, 674 (D.C. Cir. 1985).
Additionally, the harm must be imminent. Injunctive relief "will not be granted against
something merely feared as liable to occur at some indefinite time." Id. (citing
Connecticut v. Massachusetts, 282 U.S. 660, 674 (1931 )). Finally, it is "well settled that
economic loss does not, in and of itself, constitute irreparable harm." Id. The only
instance where economic loss can give rise to irreparable harm, and thus a preliminary
injunction, is when such loss "threatens the very existence of the movant's business."
Isong v. Apex Petroleum Corp., 273 F. Supp. 2d 1,2 (D.D.C. 2002) (citing Washington
Metropolitan Area Transit Comm'n v. Holiday Tours, Inc., 559 F.2d 841,843 n. 2
(D.C.Cir.1977)).
TDI's sole argument with respect to irreparable harm is that it holds an "equitable
interest" in the funds it seeks to freeze. (PI. Mot. at 5-6.) Putting aside TDI's failure to
advance any legal or factual basis to support its claim to an "equitable" interest in the
-4- funds, it does not establish what irreparable harm will befall it if the Court does not grant
the injunction it seeks. Indeed, the mere existence of an equitable interest in the funds is
not enough on its own to warrant injunctive relief. To the contrary, TDI must
demonstrate that the likely loss of these funds threatens its business's very existence. See
/song, 273 F. Supp. 2d at 2. In that regard, TDI's reliance on Ellipso v. Mann 2 is, at best,
misplaced. While an equitable interest is necessary under Ellipso to obtain an injunction
to freeze assets, it is not a sufficient basis, alone, to warrant an injunction that does so.
Accordingly, whether TDI's interest in the funds in Fleischmann's bank account is
equitable or not, it cannot obtain injunctive relief absent the necessary showing of
irreparable harm required in this Circuit. 3
2 480 F.3d 1153 (D.C. Cir. 2007)
3 TDI fails to even argue, let alone establish, that the damages it has allegedly suffered on account of Fleischmann pose a threat to its business. Assuming arguendo TDI's allegations to be true, Fleischmann diverted approximately $626,401.42 in funds owed to TDI. (CompI. ~ 15.) In addition, TDI claims it sunk roughly $600,000 in unrecouped costs to service T AQA, the client whose payment Fleischmann allegedly misappropriated. (Jd. ~ 18.) This alleged loss, however, is never placed in the context of the financial condition ofTDI's business. Moreover, TDI's acknowledgment at the preliminary injunction hearing that Fleischmann had not moved any funds out of the account since paying taxes in April, despite his awareness ofTDI's suit against him, raises additional doubts as to whether any potential harm is "imminent." (H'rg Tf. at 5.)
-5- CONCLUSION
Thus, for all of the reasons stated above, the Court DENIES TDI's Motion for a
Preliminary Injunction. An appropriate order will issue with this Memorandum Opinion.
~ RICHARD. E N United States District Judge
-6-