Commercial litigants often seek the provisional and equitable remedy of a preliminary injunction under Article 63 of the CPLR to protect the client’s rights that are difficult to monetize and quantify. The relief sought typically involves a party restraining from certain conduct and maintaining the status quo where it “appears that the defendant threatens or is about to do, or is doing or procuring or suffering to be done, an act in violation of the plaintiff’s rights respecting the subject of the action” (see CPLR 6301).
New York courts consider the issuance of a preliminary injunction to be an “extraordinary remedy” that should not be granted as a routine matter. Therefore, in order to meet the high burden for a preliminary injunction, the movant must satisfy the oft-cited tripartite test of (1) likelihood of ultimate success on the merits, (2) irreparable injury if the preliminary injunction is withheld, (3) and a balance of equities tips them in favor of the moving party.
A mandatory preliminary injunction (as opposed to a prohibitory preliminary injunction), is an application by which the movant does not seek to restrain the actions of the opposing party but instead seeks a court mandate that directs the opposing party to engage affirmative, specific conduct during the pendency of an action. As such, a mandatory injunction’s function is to actually disrupt the status quo, requiring the movant to show that the status quo is endangered by the opposing party’s failure to act. Therefore, it requires the movant to satisfy an even more rigorous standard than that of a prohibitory injunction and is only granted under extraordinary or unique circumstances.
In Sebco Dev. v Bldg. Mgmt. Assocs., Bronx County Commercial Division Justice Fidel E. Gomez found such clear-cut extraordinary circumstances to exist, treating the plaintiffs’ motion seeking a preliminary injunction as that which also sought a mandatory injunction and granted them both after finding that the plaintiffs had met both standards. As has come to be a trademark characteristic of his decisions, Justice Gomez in Sebco offered a thorough analysis of the preliminary injunction standard of review and the essential principles and caselaw governing its requirements.
Plaintiff Sebco is a not-for-profit organization that provides affordable housing in the Bronx and sponsored the development of properties for the co-plaintiff property owners, and provided oversight for such properties. Defendant served as property manager for the properties owned by the plaintiffs, which duties included leasing and maintaining the property owners’ properties, requiring that defendant maintain tenant data and tenant files to ensure compliance with city, state, and federal regulatory agreements, as well as hiring and overseeing maintenance staff. In January 2023, the plaintiffs terminated their relationship with the defendant and also appointed Sebco to assume the management of the properties.
A week after that decision was made, the defendant denied the plaintiffs the ability to access their own bank accounts, and despite being terminated, continued to draw management fees from bank accounts belonging to them. Defendant also impeded Sebco’s attempt to assume management functions for the property owners, by refusing to comply with requests that Sebco be provided with information regarding the property owners’ buildings and bank accounts, refusing to relinquish control of millions of dollars belonging to the property owners, and refusing to relinquish control over the plaintiffs’ data. In their complaint, the plaintiffs asserted multiple causes of action against the defendant, including a cause of action for declaratory judgment wherein the plaintiffs sought a declaration that defendant had been relieved as the property manager and that, as such, they had the right to access to and control of their bank accounts and data. They also asserted a cause of action for conversion where they alleged that they have a possessory interest in their data and the funds in the accounts, which despite demand, the defendant refused to return. Based on affidavit support and the legion of documents submitted by the plaintiffs, the court found that the plaintiffs clearly demonstrated entitlement to injunctive relief, enjoining the defendant from affirmatively interfering with Sebco’s management of the properties.
The plaintiffs established a likelihood of success on the merits by clear and convincing evidence that the defendant no longer managed the properties; that Sebco assumed that role; and therefore that the defendant had no right to prevent access to and could not control the plaintiffs’ bank accounts or data, to the exclusion of their rights. Regarding irreparable harm, the plaintiffs showed that without injunctive relief allowing Sebco to assume control of the bank accounts and data, Sebco would be unable to properly manage the plaintiffs’ properties and they would lose low-income rental subsidies as a result, forcing Sebco and the plaintiffs to cease operating. With respect to the balancing of the equities, the court surmised that if all defendant is being asked to do is relinquish control of information it can no longer legally control, injunctive relief would hardly prejudice defendant.
The court also founds that insofar as the plaintiffs also sought to compel the defendant to affirmatively take all steps required to allow Sebco to assume management of their properties, which would alter rather than preserve the status quo, a mandatory injunction was justified since preservation of the status quo would afford the plaintiffs insufficient relief.
Although sparingly granted, preliminary injunctions are commonly utilized and effective tools in the commercial litigator’s arsenal. Not only do they offer the remedy of immediately halting (or mandating) certain conduct of the opposing party pending the litigation, but they afford litigants the opportunity to make a good first impression with the court and set the tone for the life of the case.
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