ED Capital, LLC v. Bloomfield Inv. Res. Corp.

Decision Date05 January 2016
Docket Number15 Civ. 9056 (VM)
Citation155 F.Supp.3d 434
Parties ED Capital, LLC and ED Capital Management, LLC, Plaintiffs, v. Bloomfield Investment Resources Corp., Reuben Brothers Resources Group, RB Resources Limited, and Reuben Brothers Limited, Defendants.
CourtU.S. District Court — Southern District of New York

Richard Joseph Lamar Lomuscio, Drinker Biddle & Reath, LLP, New York, NY, for Plaintiffs.

Peter Christopher Gourdine, Rachel Kathryn Marcoccia, Steven Cooper, Reed Smith LLP, New York, NY, for Defendants.

DECISION AND ORDER

VICTOR MARRERO

, United States District Judge.

Plaintiffs ED Capital, LLC and ED Capital Management, LLC (collectively ED Capital) brought this action against Bloomfield Investment Resources Corp. (Bloomfield), Reuben Brothers Resources Group, RB Resources Limited, and Reuben Brothers Limited (collectively Defendants). ED Capital's Complaint (“Complaint”) seeks a declaratory judgment, injunctive relief, and damages for its claims of abuse of process, prima facie tort, and breach of contract. (Dkt. No. 1.) On the same day that ED Capital commenced suit against Defendants, ED Capital moved for temporary and preliminary injunctive relief (the “Motion”) in the form of: 1) an order preventing Bloomfield from prosecuting a lawsuit pending in the Netherlands against United Meat Group (“UMG”); 2) an order requiring Bloomfield to release funds attached in the Netherlands as part of that suit; and 3) prejudgment attachment of Defendants' assets in New York. (Dkt. No. 16.) ED Capital also sought an expedited hearing on its declaratory judgment action. Defendants cross-moved to dismiss ED Capital's complaint. (Dkt. No. 8.) At a hearing held on December 11, 2015 (December 11 Hearing,” see Dkt. Minute Entry for Dec. 11, 2015), the Court denied ED Capital's Motion and stated that it would issue an order embodying its ruling and encompassing ED Capital's request for a hearing on its declaratory judgment as well as Defendants' cross-motion to dismiss ED Capital's Complaint (the Cross–Motion to Dismiss).

For the reasons discussed on the record at the December 11 Hearing and discussed in this Decision and Order, the Court DENIES the Motion and ED Capital's request for an expedited declaratory judgment hearing and GRANTS Bloomfield's Cross–Motion to Dismiss ED Capital's suit.

I. BACKGROUND1

Plaintiff ED Capital, a Delaware corporation, is the investment advisor and investment manager of Synergy Hybrid Fund, Ltd. and Synergy Hybrid Feeder Fund Ltd. (collectively “Synergy Funds”), investment funds incorporated in the Cayman Islands which invest primarily in Russian public and privately held securities. The Synergy Funds hold 100 percent of the shares of UMG, a Russian corporation and holding company for a large-scale poultry producer.

In November 2011, Defendant Bloomfield transferred $25 million to UMG. The character of that transaction is at the core of both the suit in the Netherlands (the “Netherlands Action”) and the instant suit. ED Capital's version of events is that the $25 million was an investment in the Synergy Funds. In support of its Complaint, ED Capital presents the Synergy Hybrid Fund Subscription Agreement (“Subscription Agreement”), which was executed by Bloomfield on November 4, 2011 and incorporates the Confidential Private Placement Memorandum (“Memorandum”) detailing the rights and obligations of investors in the Synergy Funds. ED Capital argues that the contractual terms of the Subscription Agreement, as well as subsequent e-mail correspondence between Defendants and ED Capital, make clear that Bloomfield undertook an investment rather than a loan. According to ED Capital, Bloomfield was given signatory authority on an account in UMG's name for the purpose of monitoring its investment in UMG. In 2015, $15 million was transferred from that account to an account at Demir–Halkbank (“DHB”) in the Netherlands. ED Capital maintains that at all times the $25 million was an investment, and UMG had no duty to repay that amount.

Defendants maintain a very different view of the $25 million transaction. They assert that the transaction was a two-year loan to UMG made in 2011 that was provided, per ED Capital's request, by way of the Synergy Funds.2 Defendants' position that the $25 million was a loan led them to initiate the Netherlands Action in an attempt to ensure repayment.

In June 2015, Defendants initiated a prejudgment attachment of the funds maintained in UMG's account at DHB in Rotterdam District Court (the “Netherlands Court). On June 17, 2015, the Netherlands Court granted Bloomfield attachment of $15 million maintained in the DHB account. ED Capital was not a party to the action. Several weeks later, on July 15, 2015, the Netherlands Court released $3.3 million of the attached funds on UMG's request that it be permitted to make an upcoming bond payment.

On August 11, 2015, Bloomfield commenced formal proceedings in the Netherlands against UMG seeking repayment of the $25 million. UMG wrote to Bloomfield on November 10, 2015, to request that Bloomfield lift the attachment of the remaining funds in the DHB account to allow UMG to make a bond payment in the amount of $2,944,562.07 due on December 20, 2015. As of the December 11 Hearing, the funds were still subject to attachment in the Netherlands.

On November 18, 2015, ED Capital brought this action seeking, among other forms of relief, a declaratory judgment that Bloomfield's $25 million transfer constituted an investment, not a loan. ED Capital also seeks immediate relief in the form of a preliminary injunction pursuant to Rule 65 of the Federal Rules of Civil Procedure

(“Rule 65 ”) preventing Defendants from prosecuting the Netherlands Action and requiring Defendants to release the funds attached in the Netherlands to permit UMG to make its upcoming bond payment.

The Court held a hearing on the matter on December 11, 2015. At the conclusion of the hearing, the Court stated that it was “not persuaded that the plaintiff has made a sufficient showing of standing ... or that the plaintiffs have shown irreparable harm.” (Dkt No. 14 at 19 ¶ 20–22.) Accordingly, the Court found that it would be inappropriate to issue an injunction restraining the parties from pursuing the Netherlands Action. This Order explains in greater depth the Court's decision to deny ED Capital's preliminary injunction motion. The Court further addresses ED Capital's motion for a declaratory judgment hearing and Defendants' Cross–Motion to Dismiss.

II. DISCUSSION
A. ED CAPITAL'S MOTION FOR A PRELIMINARY INJUNCTION
1. Preliminary Injunction Standard

The district court has wide discretion in determining whether to grant a preliminary injunction. See Grand River Enterprise Six Nations, Ltd. v. Pryor, 481 F.3d 60, 66 (2d Cir.2007)

(citing

Moore v. Consolidated Edison Co. of New York, Inc., 409 F.3d 506, 511 (2d Cir.2005) ). However, a preliminary injunction is “an extraordinary and drastic remedy, one that should not be granted unless the movant, by a clear showing, carries the burden of persuasion.” Mazurek v. Armstrong, 520 U.S. 968, 972, 117 S.Ct. 1865, 138 L.Ed.2d 162 (1997) ; see also

Patton v. Dole , 806 F.2d 24, 28 (2d Cir.1986) (recognizing that “preliminary injunctive relief is an extraordinary remedy and should not be routinely granted”).

A court may issue a preliminary injunction only where the moving party demonstrates “a) irreparable harm and b) either 1) likelihood of success on the merits or 2) sufficiently serious questions going to the merits to make them a fair ground for litigation and balance of hardships tipping decidedly toward the party requesting the preliminary relief.” Citigroup Global Mkts. Inc. v. VCG Special Opportunities Master Fund Ltd., 598 F.3d 30, 35 (2d Cir.2010)

; see also

Tom Doherty Associates, Inc. v. Saban Entertainment, Inc., 60 F.3d 27, 33 (2d Cir.1995).

Irreparable harm is the “single most important prerequisite for the issuance of a preliminary injunction.” Freedom Holdings, Inc. v. Spitzer, 408 F.3d 112, 114 (2d Cir.2005)

. To fulfill the irreparable harm requirement, the moving party “must demonstrate an injury that is neither remote nor speculative, but actual and imminent, and one that cannot be remedied by an award of monetary damages.” Rodriguez ex rel

.

Rodriguez v. DeBuono, 175 F.3d 227, 234 (2d Cir.1999). In the absence of a showing of irreparable harm, a motion for a preliminary injunction should be denied. See

JSG Trading Corp. v. Tray–Wrap, Inc., 917 F.2d 75, 80 (2d Cir.1990) (finding no irreparable harm where movant could be compensated by money damages); see also

Freedom Holdings, 408 F.3d at 115 (loss of market share was not ‘imminent harm’); Polymer Technology Corp v. Mimran, 37 F.3d 74 (2d Cir.1994) (no imminent harm where money damages were calculable and available for contract claim).

Although threat to the continued existence of a business or loss of business reputation may in certain situations constitute irreparable harm, see Jacobson & Co. v. Armstrong Cork Co., 548 F.2d 438, 444–45 (2d Cir.1977)

, absent extraordinary circumstances, generalized damage to reputation falls short of irreparable injury. See

Sampson v. Murray, 415 U.S. 61, 91–92, 94 S.Ct. 937, 39 L.Ed.2d 166 (1974) ; see also

Jamaica Ash & Rubbish Removal Co., Inc, v. Ferguson, 85 F.Supp.2d 174, 181 (E.D.N.Y.2000) (distinguishing Jacobson where claimed reputational harm was “grounded only on speculation and assumption”).

2. Anti–Suit Injunction Standard

Where, as in this case, a plaintiff seeks to enjoin a foreign proceeding, an especially rigorous standard applies. Because an injunction against a party to a properly initiated foreign proceeding effectively restricts the jurisdiction of a court of a foreign sovereignty, such an anti-suit injunction implicates questions of international comity. See China Trade and Development Corp. v. M.V. Choong Yong, 837 F.2d 33, 35 (2d Cir.1987)

. Therefore, anti-suit injunctions against foreign suits should be “used...

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