Anstalt v. Ness Energy Int'l Inc

• Decision Date: 24 January 2011
• Docket Number: NO. CIV-10-1218-D,CIV-10-1218-D
• Court: U.S. District Court — Western District of Oklahoma
• Parties: ALPHA CAPITAL ANSTALT, a Liechtenstein corporation, Plaintiff, v. NESS ENERGY INTERNATIONAL, INC., a Washington corporation, et al., Defendants.

ALPHA CAPITAL ANSTALT, a Liechtenstein corporation, Plaintiff,

v.NESS ENERGY INTERNATIONAL, INC., a Washington corporation, et al., Defendants.

NO. CIV-10-1218-D

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF OKLAHOMA

Dated: January 24, 2011

FINDINGS OF FACT, CONCLUSIONS OF LAW, AND ORDER

Before the Court is the Motion [Doc. No. 13] of Plaintiff Alpha Capital Anstalt ("Alpha Capital") for Preliminary Injunctive and Declaratory Relief. Defendants filed a response and, pursuant to the Court's December 17, 2010 Order [Doc. No. 36], the parties were authorized to conduct limited expedited discovery regarding the request for preliminary injunctive relief and to submit supplemental briefs following the completion of that discovery.

On January 20 and 21, 2011, the Court conducted a hearing on the motion. At the close of the hearing, the Court advised the parties that, if they wished to supplement their closing arguments, they could do so in written form to be filed no later than 9:00 a.m. on Monday, January 24, 2011. The parties timely submitted written arguments. Having considered the evidence and the arguments of counsel, the Court finds as follows.

Background:

In this action, Alpha Capital seeks a declaratory judgment¹ that it is the owner of 100 percentof the stock of Ness Energy of Israel, Inc. ("Ness Israel"). It alleges the stock was acquired as a result of a May 29, 2008 order of the United States District Court for the Southern District of New York (the "New York court") directing that Ness Energy International, Inc. ("Ness International")²deliver the Ness Israel stock to Alpha Capital in partial satisfaction of a January 18, 2008 judgment entered in favor of Alpha Capital and against Ness International by the New York court. According to Alpha Capital, Ness Israel was a wholly owned subsidiary of Ness International at the time. Alpha Capital alleges that, on August 19, 2008, Ness International's chief executive officer, Alan Stricklin, executed an "Affirmation of Loss, " representing that the Ness Israel stock certificates could not be located; however, Mr. Stricklin also expressly acknowledged Alpha Capital's ownership of the stock and the attendant rights of ownership, and stated the certificates would be delivered to Alpha Capital as soon as they were found.

Alpha Capital alleges that, later in 2008 and in 2010, it learned of competing claims to the ownership of Ness Israel's stock. In 2008, Alpha Capital was notified that Defendant OKT Resources, LLC ("OKT") claimed ownership of 100 percent of Ness Israel's stock as a result of a November 13, 2008 sale by Ness International. Alpha Capital alleges that it notified OKT's general manager, Defendant David Boyce, of its ownership of Ness Israel, and provided him with documents evidencing the New York court order and the Affirmation of Loss. According to Alpha Capital, Mr. Boyce then acknowledged that the November 13, 2008 purported sale was unauthorized and that Ness International had previously conveyed the Ness Israel stock to Alpha Capital; Mr. Boyce latersent the Ness Israel materials in his possession to Alpha Capital's representatives.³ Alpha Capital also alleges that, in May 2010, it was notified by Defendant Viceroy, LLC ("Viceroy"), for which Mr. Boyce also served as general manager, that Viceroy claimed ownership of 100 percent of Ness Israel's stock as a result of a May 27, 2010 transfer to Viceroy from Shannon "Sha" Stephens.

In 2010, Alpha Capital learned that a wholly owned subsidiary of Ness Israel had caused the transfer of 95 percent of the subsidiary's stock to another entity. Because Ness Israel had not authorized its subsidiary to take that action, Alpha Capital made inquiries, and it learned that Viceroy had represented to involved persons in Israel that Viceroy owned 100 percent of the Ness Israel stock. Alpha Capital, on its own behalf and on behalf of Ness Israel, ultimately filed a lawsuit in Israel challenging the validity of the subsidiary's stock transfer; the action remains pending, and Viceroy is seeking to intervene in that action.

In their answers to the Complaint, all defendants deny that Alpha Capital is the owner of Ness Israel's stock. They contend the August 19, 2008 transfer via the Affirmation of Loss was invalid because Mr. Stricklin was not authorized to transfer Ness Israel's stock at that time and/or because Alpha failed to comply with New York law regarding the transfer of stock in partial satisfaction of its judgment. Viceroy asserts a counterclaim alleging that it is the lawful owner of Ness Israel, contending that Ness International did not own Ness Israel at the time of the purported August 19, 2008 transfer to Alpha Capital. Viceroy alleges that Sha Stephens owned all of Ness Israel's stock at that time and that he transferred it to Viceroy in May of 2010.

The only issue now before the Court is whether Alpha Capital is entitled to a preliminary injunction and/or preliminary declaratory relief. Alpha Capital seeks to preliminarily enjoin thedefendants from representing that Ness International, OKT or Viceroy own the stock of Ness Israel, pending the resolution of the claims in this lawsuit. It contends that the evidence shows the factors warranting preliminary injunctive relief are present. Alpha Capital's request for preliminary declaratory relief asks the Court to determine, at this stage of the litigation, that it is the owner of Ness Israel's stock. It contends that such a remedy is proper in these circumstances.

Defendants contend that Alpha Capital's request for preliminary declaratory relief must be denied because such relief is not an authorized remedy, and that its request for a preliminary injunction must be denied because it cannot establish the elements required to warrant such relief. Preliminary Injunction Standards:

"Preliminary injunctions are extraordinary equitable remedies designed to 'preserve the relative positions of the parties until a trial on the merits can be held.'" WestarEnergy, Inc. v. Lake, 552 F. 3d 1215, 1224 (10^th Cir. 2009) (quoting University ofTexas v. Camenisch, 451 U. S. 390, 395 (1981)). Thus, a preliminary injunction "serves to preserve the status quo." MacArthur v. San Juan County, 497 F. 3d 1057, 1066 (10^th Cir. 2007), (citing Keirnan v. Utah Transit Authority, 339 F. 3d 1217, 1220 (10^th Cir. 2003)). "In issuing a preliminary injunction, a court is primarily attempting to preserve the power to render a meaningful decision on the merits." Keirnan, 339 F. 3d at 1220. "[B]ecause a preliminary injunction is an extraordinary remedy, the right to relief must be clear and unequivocal." Port City Properties v. Union Pacific R. Co., 518 F. 3d 1186, 1190 (10^th Cir. 2008).

"[T]he status quo is 'the last uncontested status between the parties which preceded the controversy until the outcome of the final hearing.'" Schrier v. University of Colorado, 427 F. 3d 1253, 1260 (10^th Cir. 2005) (emphasis added) (quoting Dominion Video Satellite, Inc. v. EchoStar Satellite Corp., 269 F. 3d 1149, 1155 (10th Cir.2001) (quoting SCFC ILC, Inc. v. Visa USA, Inc., 936 F.2d 1096, 1100 n.8 (10^th Cir. 1991), overruled on other grounds, O Centro Espirita Beneficiente Uniao Do Vegetal v. Ashcroft, 389 F. 3d 973, 975 (10^th Cir. 2004))⁴. It is also described as the "'last peaceable uncontested status existing between the parties before the dispute developed.'" Schrier, 427 F. 3d at 1260 (emphasis added) (quoting 11A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 2948, at 136 (2d ed.1995)). "In determining the status quo for preliminary injunctions, this court looks to the reality of the existing status and relationship between the parties and not solely to the parties' legal rights." Schrier, 427 F. 3d at 1260.

To obtain a preliminary injunction, the movant must show: 1) a substantial likelihood of success on the merits; 2) irreparable harm to the movant if the injunction is denied; 3) the threatened harm to the movant outweighs any harm to the opposing party if the injunction issues; and 4) issuance of the injunction would not be adverse to the public interest. Flood v. ClearOne Communications, Inc., 618 F. 3d 1110, 1117 (10^th Cir. 2010); Heideman v. South Salt Lake City, 348 F. 3d 1182, 1188 (10^th Cir. 2003); Kikumura v. Hurley, 242 F. 3d 950, 955 (10^th Cir. 2001). Substantial Likelihood of Success on the Merits:

To demonstrate a substantial likelihood of success on the merits of its claim, a plaintiff is required "to present 'a prima facie case showing a reasonable probability that [it] will ultimately be entitled to the relief sought.'" Salt Lake Tribune Pub. Co., LLC v. AT & T Corp. 320 F. 3d 1081, 1100 (10^th Cir. 2003) (quoting Autoskill v. Nat'l Educ. Support Sys., 994 F.2d 1476, 1487 (10th Cir.1993)). The movant is not required to show there is an "absolute certainty" that it will prevail on the merits. Autoskill, 994 F. 2d at 1487. Nor is it required to show an "overwhelming likelihood" of success. Koerpel v. Heckler, 797 F. 2d 858, 867 n. 5 (10^th Cir. 1986) (citing Atchison, Topeka, and Santa Fe. Railway Co. v. Lennen, 640 F. 2d 255, 261 (10^th Cir. 1981)).

The movant's burden of showing a likelihood of success on the merits is modified if it establishes that the factors of irreparable harm, balancing of hardships, and the public interest tip strongly in its favor; if so, the movant may satisfy the likelihood of success on the merits factor by showing "that questions going to the merits are so serious, substantial, difficult, and doubtful as to make the issue ripe for litigation and deserving of more deliberate investigation." Davis v. Mineta, 302 F. 3d 1104, 1111 (10^th Cir. 2002); Fed. Lands Legal Consortium ex rel. Robart Estate v. United States, 195 F. 3d 1190, 1195 (10^th Cir. 1999)⁵.

Irreparable Harm:

The Tenth Circuit has emphasized the importance of showing irreparable harm: "In examining these factors, courts have consistently...