Marathon Constr. v. M

• Court: Alabama Supreme Court
• Writing for the Court: WISE
• Citation: Marathon Constr. v. M, 129 So.3d 272 (Ala. 2013)
• Decision Date: 17 May 2013
• Docket Number: 1120310 and 1120368.
• Parties: MARATHON CONSTRUCTION AND DEMOLITION, LLC, and OAX, LLC v. KING METAL RECYCLING AND PROCESSING CORPORATION.

129 So.3d 272

MARATHON CONSTRUCTION AND DEMOLITION, LLC, and OAX, LLC

v.KING METAL RECYCLING AND PROCESSING CORPORATION.

1120310 and 1120368.

Supreme Court of Alabama.

May 17, 2013.

Richard J.R. Raleigh, Jr., and Christopher L. Lockwood of Wilmer & Lee, P.A., Huntsville, for appellant.

Byrd R. Latham of Latham, Moffatt, P.C., Athens; and Benjamin D. Stevenson of Stevenson McKenna & Callanan LLP, Boston, Massachusetts, for appellee.

WISE, Justice.

Marathon Construction and Demolition, LLC (“Marathon”), and OAX, LLC (“OAX”), the defendants below, appeal from an order entered by the Limestone Circuit Court granting injunctive relief to the plaintiff below, King Metal Recycling and Processing Corporation (“King Metal”). We reverse and remand.

Facts and Procedural History

On August 20, 2012, King Metal sued Marathon and OAX, alleging breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, interference with contractual relations, and breach of fiduciary duty/duty of loyalty. King Metal alleged that it had entered into an agreement with Marathon to purchase, demolish, and redevelop the former Delphi Industrial Complex in Limestone County (“the Delphi Project”). King Metal also alleged that OAX was formed by it and Marathon as the entity through which they would complete the Delphi Project.

King Metal alleged that it filed the complaint after becoming concerned that it was being “frozen out” of the Delphi Project. At the same time, King Metal filed an application for a prejudgment attachment of any net profits generated by the Delphi Project, “to identify the nature, amount, and location of these funds, and prevent them from being further disbursed, concealed or disposed of by the defendants.” It also filed a motion for a preliminary injunction

“a) requiring Defendants to identify, describe, and produce statements regarding any account(s) which have contained or contain any proceeds of the Delphi Project; b) freezing any net profits of the Delphi Project which are in the possession or control of the Defendants and/or any financial institution(s) or outside third party(ies) under the direction or control of the Defendants; and c) order that the net proceeds of the Delphi Project not be disbursed in any manner whatsoever, including but not limited to any of the parties of this case or any agents, principles, or affiliated entities thereof, until further order of the Court.”

On August 23, 2012, the trial court entered an order for a writ of seizure in which it ordered that the net proceeds of the Delphi Project be seized. On August 28, 2012, the defendants filed a motion to quash the order for a writ of seizure, arguing, in part, that the writ was the incorrect procedure for the remedy sought and asserting that King Metal should have instead requested a temporary restraining order. King Metal filed a motion in opposition to the defendants' motion to quash the order for a writ of seizure. The trial court scheduled a hearing on the motions for September 4, 2012. ¹

On October 2, 2012, the trial court entered an order setting aside the order for a writ of seizure and disposing of other issues raised by the parties. That order provided, in relevant part:

“The Defendants' Motion to Quash this Court's Order of Seizure or Prejudgment Attachment having been set before this Court on September 4, 2012 and at that time the parties made known to the Court that an agreement had been reached for the ultimate disposition of the issues raised by the motion which was presented for record at that time and after consideration of same it is therefore,

“ORDERED BY THE COURT as follows:

“1. That this Court's August 23, 2012 Order of Writ of Seizure is set aside;

“2. Defendants shall produce selected electronic and/or hard copy records and documents related to the Delphi Project, sufficient to identify the nature, purpose, payee/payor, and amount of any and all funds received or disbursed, directly or indirectly, by any of the Parties or any other individual(s) or entity(ies) involved in the Delphi Project, as defined in the Verified Complaint. It shall be understood that ‘nature’ and ‘purpose’ mean notations sufficient to explain what the payment was for. The selected document(s) produced shall show all monies received or disbursed, all transactions consummated, all income or funds received, all disbursements or funds paid, and the nature, amount, and complete activity for all accounts operated or maintained in connection with the Delphi Project;

“....

“7. Defendants have represented and warranted to the Court that presently there are and have been no net profits (defined as excess funds exceeding the total debt and operating expenses of the Delphi Project) from the Delphi Project. From the date of this Order forward, Defendants are enjoined from taking, requesting, distributing, or allowing or directing the disbursement of any net profits from the Delphi Project until further order of the Court or written agreement of the parties....”

(Capitalization original; emphasis added.)

On November 13, 2012, King Metal filed a motion, which it says was filed pursuant to Rule 7, Ala. R. Civ. P., for a minor amendment of the October 2, 2012, order. Paragraph 3 of the order provided:

“The records and documents produced by Defendants pursuant to this Order shall be produced as ‘Attorneys' and Clients' Eyes Only.’ Plaintiff [King Metal] and its directors, officers, employees, representatives, agents, and principals shall not be entitled to make or receive any copies of the records and documents produced, and shall not be entitled to make any notes of the records and documents produced. (This restriction does not apply to counsel for Plaintiff [King Metal], who shall be entitled to make and receive copies and make notes; however, those copies and notes shall not be provided to [King Metal] or its directors, officers, principals, employees, representatives, or agents)....”

(Emphasis added.) King Metal asked that the words “or receive” be stricken from the second sentence and that the third sentence be amended accordingly. On November 16, 2012, the trial court granted the motion.

On November 28, 2012, King Metal filed a motion, asking that the defendants be “enjoined from selling, transferring, leasing, or encumbering any portion of the former Delphi site absent further order of the Court or written agreement of the parties.” In support of the motion, it asserted that redevelopment of the property on which the Delphi Project is located was proceeding under the control of the defendants subject to the October 2, 2012, order, with the caveats that there had not been any net profits and that, if there were any net profits, they would be frozen pending further order of the court or agreement of the parties. King Metal also asserted that, in seeking the October 2, 2012, order, it was trying to allow the demolition work to proceed on the Delphi Project, while still protecting the rights of the parties until those respective rights could be resolved, and that every indication at the time was that the defendants intended to take down the buildings on the site and to sell the scrap materials and old equipment for profit. However, it asserted that it had learned that demolition work at the site had slowed or stopped and that it appeared that the defendants were preparing to sell, transfer, or lease some or all the property to third parties.

That same day, the trial court granted King Metal's motion, stating simply:

“[King Metal's] motion to enjoin sale, transfer, lease or encumbrance of the Delphi Property filed by King Metal Recycling & Processing Corp. is hereby granted.”

On November 29, 2012, the defendants filed an emergency motion to dissolve the order, and King Metal filed an opposition to that motion. On December 17, 2012, the trial court conducted a hearing and denied the defendants' motion to dissolve the November 28, 2012, order. These appeals followed.² We have consolidated the appeals for the purpose of writing one opinion.

Standard of Review

“ ‘We have often stated: “The decision to grant or to deny a preliminary injunction is within the trial court's sound discretion. In reviewing an order granting a preliminary injunction, the Court determines whether the trial court exceeded that discretion.” SouthTrust Bank of Alabama, N.A. v. Webb–Stiles Co., 931 So.2d 706, 709 (Ala.2005).

“ ‘A preliminary injunction should be issued only when the party seeking an injunction demonstrates:

“ ‘ “ ‘(1) that without the injunction the [party] would suffer irreparable injury; (2) that the [party] has no adequate remedy at law; (3) that the [party] has at least a reasonable chance of success on the ultimate merits of his case; and (4) that the hardship imposed on the [party opposing the preliminary injunction] by the injunction would not unreasonablyoutweigh the benefit accruing to the [party seeking the injunction].’ ”

“ ‘Ormco Corp. v. Johns, 869 So.2d 1109, 1113 (Ala.2003) (quoting Perley v. Tapscan, Inc., 646 So.2d 585, 587 (Ala.1994)).’ ”

Colbert Cnty. Bd. of Educ. v. James, 83 So.3d 473, 477–78 (Ala.2011) (quoting Holiday Isle, LLC v. Adkins, 12 So.3d 1173, 1175–76 (Ala.2008)).

Discussion

The defendants argue that the trial court erred in entering the preliminary injunction and that the preliminary injunction should be dissolved. Specifically, they contend that it did not comply with the requirements of Rule 65, Ala. R. Civ. P., for entering a preliminary injunction because the trial court issued the injunction without conducting a hearing, without requiring a security bond, and without setting forth the reasons for the injunction and the specific acts to be enjoined.³ For the reasons set forth below, we agree. However, we must first dispose of an argument raised by King Metal.

King Metal argues that the trial court's November 28, 2012, order did not constitute a new preliminary injunction and that,...