Court Refuses to Enjoin Spin-Off of Assets from Defendant

On January 3, 2018, Justice Sherwood of the New York County Commercial Division issued a decision in Magna Equities II, LLC v. Writ Media Group Inc., 2018 NY Slip Op. 30017(U), refusing to enjoin the spin-off of assets from the defendants, explaining:

The party seeking a preliminary injunction must demonstrate a probability of success on the merits, danger of irreparable injury in the absence of an injunction and a balance of equities in its favor. The decision to grant or deny provisional relief: which requires the court to weigh a variety of factors, is a matter ordinarily committed to the sound discretion of the lower courts. Here, the court need not review the first and third clements required for the grant of a preliminary injunction because plaintiffs have failed to show irreparable harm.

The relief being sought in this case is monetary damages. Accordingly, Magna has an adequate remedy at law and thus cannot show that it will suffer irreparable harm if the motion is denied. Similarly, the spin-off of Skylab will have no impact on Writ's assets as all of Skylab's assets and liabilities were transferred to Writ on July 1, 2016. Evidence of an absence of assets appears in the Writ SEC Form 10-Q for the quarter ended September 30, 2017, p. 12. Because Skylab is nothing more than a shell with negligible value, the contemplated spin-off will not cause irreparable harm to Magna.

(Internal citations omitted).

It is common in commercial litigation that parties seek equitable relief such as injunctions and attachments in order to preserve assets or maintain the status quo when money damages will not make them whole at the end of a litigation. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client have questions regarding seeking--or opposing--such relief.