Hotel Investors v. Modular Steel Systems
Filing
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MEMORANDUM (Order to follow as separate docket entry) re 2 MOTION for Temporary Restraining Order filed by Hotel Investors. (PLEASE SEE MEMORANDUM FOR COMPLETE DETAILS)Signed by Honorable Malachy E Mannion on 7/1/16. (lh)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF PENNSYLVANIA
HOTEL INVESTORS, LLC,
Plaintiff
:
MODULAR STEEL
SYSTEMS, INC.,
CIVIL ACTION NO. 4:16-1337
:
v.
:
(JUDGE MANNION1)
:
:
Defendant
:
MEMORANDUM
Pending before the court is the “Plaintiff’s Emergency2 Motion for
Temporary Restraints”, in which the plaintiff seeks to have the court enjoin the
defendant from selling, transferring, alienating, or exercising any control over
any assets which relate the Agreement between the parties concerning the
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The court notes that the above action is assigned to the Honorable
Matthew W. Brann. However, because Judge Brann was unavailable to
review the plaintiff’s emergency motion today, the motion was referred to the
undersigned. The undersigned’s review of the matter is limited solely to the
motion for emergency relief.
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Court documents establish that the defendant formally notified the
plaintiff of its default on the terms of the parties’ Agreement on January 15,
2016. To this extent, among other things, counsel notified the plaintiff that it
was indebted to the defendant in the amount of $580,863.00 for modular
Units completed under the Agreement. The plaintiff was notified if it failed to
cure its default within twenty (20) days, the defendant would terminate its
Agreement and pursue all rights under the Agreement, including the sale of
the Units to recapture its losses. (Doc. 1, Ex. A) (emphasis added). Despite
having this knowledge, the plaintiff did not file the instant action and motion
for “emergency” relief to stop the sale of the Units until June 30, 2016, over
five months later.
manufacture and delivery of 107 modular hotel units, including 74 Units which
have been paid in full by the plaintiff, pending resolution of an arbitration
relating to disputes arising from the Agreement. (Doc. 2). Based upon the
court’s review of the plaintiff’s motion and accompanying brief, the motion will
be denied.
In its motion, the plaintiff provides that it was formed in 2013 for the
express purpose of constructing a 107 room Homewood Suites Hilton Hotel.
On or about December 11, 2014, in order to complete its project, the plaintiff
entered into a written agreement, (“Agreement”), with the defendant for the
manufacture and delivery of 107 modular hotel units. As per the Agreement,
the plaintiff paid for 74 Units constructed by the defendant and the plaintiff
claims rights, title and interest in those 74 Units.
On or about January 15, 2016, a dispute arose between the parties
concerning a breach of the Agreement by the plaintiff. By the terms of the
Agreement, the plaintiff argues that the dispute must be submitted to
mandatory mediation and arbitration. Despite being fully aware of the dispute
and the terms of the Agreement relating to mediation and arbitration, the
plaintiff presents that the defendant is attempting to sell 89 Units that it has
manufactured to a third party, including the 74 Units which the plaintiff has
paid for in full.
By way of the instant motion for emergency relief, the plaintiff now seeks
to have the court enjoin the defendant from attempting to sell, transfer,
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alienate, or exercise any control over any assets which relate to the
Agreement between the parties concerning the manufacture and delivery of
107 modular hotel units, including the 74 Units which have allegedly been
paid in full by the plaintiff, pending the resolution of an arbitration relating to
disputes arising from the Agreement.
Federal Rule of Civil Procedure 65 governs the granting of injunctive
relief such as temporary restraining orders and preliminary injunctions.
Injunctive relief is not granted as a matter of right. Kerschner v. Mazurkewicz,
670 F.2d 440, 443 (3d Cir. 1982). It is well-established that injunctive relief is
extraordinary in nature and should issue only in limited circumstances. See
American Tel. and Tel. Co. v. Winback and Conserve Program, Inc., 42 F.3d
1421, 1426–27 (3d Cir. 1994), cert. denied, 514 U.S. 1103 (1995). Such relief
should not be granted unless the movant, by a clear showing, carries the
burden of persuasion. Mazurek v. Armstrong, 520 U.S. 968, 972 (1997). See
also Adams v. Freedom Forge Corp., 204 F.3d 475, 486 (3d Cir. 2000)
(moving party bears the burden of establishing the factors for injunctive relief).
The Third Circuit has indicated that “[u]pon an application for a preliminary
injunction to doubt is to deny.” Madison Square Garden Corp. v. Braddock,
90 F.2d 924, 927 (3d Cir. 1937). Whether injunctive relief is granted is at the
sound discretion of the court. Orson, Inc. v. Miramax Film Corp., 836 F.Supp.
309, 311 (E.D.Pa.1993).
The United States Court of Appeals for the Third Circuit has outlined
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four factors that a court ruling on a request for injunctive relief must consider:
(1) whether the movant has shown a reasonable probability of success on the
merits; (2) whether the movant will be irreparably injured by denial of the
relief; (3) whether granting preliminary relief will result in even greater harm
to the nonmoving party; and (4) whether granting the preliminary relief will be
in the public interest. Crissman v. Dover Downs Entertainment Inc., 239 F.3d
357, 364 (3d Cir. 2001). These same factors are used to determine a motion
for a temporary restraining order. Bieros v. Nicola, 857 F.Supp. 445, 446
(E.D.Pa.1994). The moving party bears the burden of establishing each of the
four elements. Adams v. Freedom Forge Corp., 204 F.3d 475, 486 (3d Cir.
2000). As a practical matter, likelihood of success on the merits and
irreparable injury are the most important factors. See Am. Tel. & Tel. Co. v.
Winback and Conserve Program, Inc., 42 F.3d 1421, 1427 & n.8 (3d Cir.
1994).
To establish a reasonable probability of success on the merits, the
moving party must produce sufficient evidence to satisfy the essential
elements of the underlying cause of action. See Punnett v. Carter, 621 F.2d
578, 582–83 (3d Cir. 1980); McCahon v. Pa. Tpk. Comm’n, 491 F.Supp.2d
522, 527 (M.D.Pa. 2007). In determining whether success is likely, the court
must look to the legal principles controlling the claim and the potential
defenses available to the opposing party. See BP Chems. Ltd. v. Formosa
Chem. & Fibre Corp., 229 F.3d 254, 264 (3d Cir. 2000).
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Here, the plaintiff argues that its likelihood of success on the merits is
high. To this extent, the plaintiff argues that to prevail on its claim for
conversion, it need only show that it was the owner of the relevant Units and
that the defendant deprived the plaintiff of or otherwise interfered with that
property interest, without consent or lawful justification. Westport Ins. Corp.
v. Hanft & Knight, P.C., 523 F.Supp.2d 444, 459 (M.D.Pa. 2007) (citing
Universal Premium Acceptance Corp. v. York Bank & Trust Co., 69 F.3d 695,
704 (3d Cir. 1995)). The plaintiff argues that the defendant has proffered no
legitimate rationale for selling the Units to which it lacks title, but only seeks
to circumvent the dispute resolution procedures to which it agreed.
Similarly, as to the unjust enrichment claim, the plaintiff argues that it
must “show that the party against whom recovery is sought either wrongfully
secured or passively received a benefit that would be unconscionable for the
party to retain without compensating the provider.” Bair v. Purcell, 500
F.Supp.2d 468, 499 (M.D.Pa. 2007) (quoting Hershey Foods Corp. v. Ralph
Chapek, Inc., 828 F.2d 989, 999 (3d Cir. 1987). The plaintiff argues that it
would clearly be unconscionable for the defendant to retain the benefit of a
second sale of the relevant Units, worth in excess of two million dollars,
without returning the balance of those funds, adjusted for any actual damages
resulting from the purported breach of the Agreement, to the plaintiff.
Although not a certainty, at this juncture, the court will assume, based
upon the plaintiff’s submissions that it has shown a reasonable likelihood of
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success on the merits of its claims. Despite this, however, the court finds that
the plaintiff has not demonstrated irreparable injury. Irreparable injury is
“potential harm which cannot be redressed by a legal or equitable remedy
following a trial.” Instant Air Freight Co. v. C.F. Air Freight, Inc., 882 F.2d 797,
801 (3d Cir. 1989). A court may not grant preliminary injunctive relief unless
“[t]he preliminary injunction [is] the only way of protecting the plaintiff from
harm.” Id. Speculative injury does not constitute a showing of irreparable
harm. Continental Group, Inc. v. Amoco Chemicals Corp., 614 F.2d 351, 359
(3d Cir. 1980); see also Public Serv. Co. of N.H. v. Town of West Newbury,
835 F.2d 380, 383 (1st Cir. 1987). “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.” Instant Air Freight, 882 F.2d at 801 (quoting Sampson v. Murray, 415
U.S. 61 (1964)).
As to this factor, the plaintiff argues that it faces irreparable injury
because “upon information and belief” the defendant is selling the Units which
are crucial to the viability of the project and the loss of which would deprive
the plaintiff of the very business opportunity for which it was organized.
Initially, the plaintiff’s “belief” that the defendant is selling or has sold the Units
is speculative at best and not warranting injunctive relief. Moreover, the
plaintiff argues that it is “unable to determine the financial health, stability or
longevity of [the defendant] and faces unknown risk in attempting to recoup
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the value of the Units at some indefinite point in the future”. However, this
again is speculation. There is no indication that compensatory damages or
other corrective relief would not be available to the plaintiff should the plaintiff
be able to establish its claims. As such, the plaintiff has failed to sufficiently
establish irreparable injury such that it is not entitled to injunctive relief.
As the plaintiff has failed to establish that it will suffer irreparable injury
should an injunction not issue, the court need not examine the remaining
factors, as the test for injunctive relief is conjunctive.
On the basis of the foregoing, an appropriate order shall issue.
s/ Malachy E. Mannion
MALACHY E. MANNION
United States District Judge
Date: July 1, 2016
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