FLEET NAT. BANK v. Rapid Processing Co., Inc.
| Decision Date | 18 September 1986 |
| Docket Number | Civ. A. No. 86-2602-C. |
| Citation | 643 F. Supp. 1065 |
| Parties | FLEET NATIONAL BANK and Fleet Credit Corporation, Plaintiffs, v. RAPID PROCESSING COMPANY, INC., Sharnet Corporation, Bartex Industries Corp. and Michael K. Torf, Defendants, and Family Mutual Savings Bank and Shawmut Bank of Boston, N.A., Trustees. |
| Court | U.S. District Court — District of Massachusetts |
Joseph F. Ryan, James E. McGuire, Steven B. Levine, Thomas M. Sobol, Brown, Rudnick, Freed & Gesmer, Boston, Mass., for plaintiffs.
Barry Portnoy, Sullivan & Worcester, Boston, Mass., Patrick P. Dinardo, for defendants.
This matter is before the Court on plaintiffs' motion for preliminary injunction. Plaintiffs Fleet National Bank ("Fleet") and Fleet Credit Corporation ("Fleet Credit") seek to enjoin defendants Rapid Processing Company, Inc. ("Rapid"), Sharnet Corporation ("Sharnet"), Bartex Industries Corp. ("Bartex"), and Michael A. Torf ("Torf") from disposing of or otherwise alienating any of the assets in which plaintiffs have an interest or from otherwise interfering with plaintiffs' rights with respect to such property. Plaintiff Fleet loaned approximately $3,300,000 to Rapid and Sharnet. Plaintiffs claim that defendants are now in default under the original loan agreement as well as under a subsequent "Standstill Agreement."
Under the law established in the First Circuit, plaintiffs must satisfy four criteria in order to be entitled to a preliminary injunction. The Court must find: (1) that plaintiff will suffer irreparable injury if the injunction is not granted; (2) that such injury outweighs any harm which granting injunctive relief would inflict on the defendant; (3) that plaintiff has exhibited a likelihood of success on the merits; and (4) that the public interest will not be adversely affected by the granting of the injunction. Planned Parenthood League of Massachusetts v. Bellotti, 641 F.2d 1006, 1009 (1st Cir.1981).
In general, harm which can be adequately compensated with money damages is not considered to be irreparable. Interco, Inc. v. First National Bank of Boston, 560 F.2d 480, 485 (1st Cir.1977); Itek Corp. v. First National Bank of Boston, 730 F.2d 19, 22 (1st Cir.1984). Where an action for damages would be inadequate because the defendant is insolvent or its assets are in danger of depletion and dissipation, however, a preliminary injunction may be appropriate. Teradyne, Inc. v. Mostek Corp., 797 F.2d 43, 52 (1st Cir.1986). The court in Teradyne noted that the United States Supreme Court in Deckert v. Independence Shares Corporation, 311 U.S. 282, 61 S.Ct. 229, 85 L.Ed. 189 (1940) held that a preliminary injunction, designed to freeze the status quo and protect the damages remedy, is an appropriate form of relief when it is shown that the defendant is likely to be insolvent at the time of judgment. Teradyne, 797 F.2d at 52. Thus, a preliminary injunction may be granted when it is necessary to protect the damages remedy. Teradyne, at 53.
In this case, plaintiffs claim that Rapid and Sharnet are insolvent and their assets in danger of dissipation. In the last few months, Rapid has suffered a series of business losses. Although Paul D. Sandler, Treasurer and Vice President in charge of financial affairs of defendants Rapid and Sharnet, states in his affidavit that August 1986 was a profitable month for Rapid and Sharnet, he also admits that in June and July of 1986 the companies' business fell off. Since part of Fleet's collateral consists of inventory and receivables, the defendants' operating losses have resulted in a decline in the value of Fleet's collateral position. Plaintiffs' memorandum in support of a preliminary injunction and the affidavit of Paul Sandler sharply disagree on the financial status of Rapid and Sharnet and whether their debts to plaintiffs are adequately secured. Nevertheless, this Court is satisfied that the assets of Rapid and Sharnet are in danger of depletion, dissipation, and disappearance; consequently, a preliminary injunction is necessary to protect a damages remedy.
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