Interesting Discussion of Preliminary Injunction Mechanics and Elements

The 3rd District Illinois Appellate Court recently published a decision in the Happy R Securities, LLC v. Agri-Sources, LLC that was full of interesting discussions on the mechanics and elements of preliminary injunctions.

The origin of this case is rather tortuous. In 2007, Kurt McChesney and Mage Farms, LLC, a company he owned with his mother, formed another corporation: Agri-Sources, LLC. The purpose of this company was the selling of agricultural products from a 20-acre parcel in Gladstone, and it later purchased the parcel outright from another one of McChesney’s holding companies.

Around the same time, McChesney also created Oquawka River Terminal, LLC, a fertilizer company, based on an 8-acre section of the parcel. He himself owned 25%, while his business partners, Rousonelos, Butler, Job and Ryan, held the remaining 75%. ORT began to make a series of leases that allowed it to expand its business, including the use of a nearby dock on the Mississippi River, as well as a railroad spur and two buildings on the parcel. These leases were essential to the continued business of ORT, because its proximity to both the river and a railroad. Without them, ORT claimed, would be hard-pressed to carry on.

Business was good enough, though, for ORT to contemplate expansion, and it asked for a small business loan for that purpose. ORT claimed to have reorganized itself as a manager-managed LLC in order to comply with FSBI’s demand that Jobe not be a party to the loan.

ORT then agreed to purchase their 8-acre parcel outright from Agri-Sources. Because there were a number of liens and judgments on the property, the process protracted.  But ORT deposited 10% of the purchase price with a title company. In response, McChesney had his attorney send ORT a letter that he, in his capacity of part-owner of ORT, objected to the closing.

In 2011, FSBI filed a foreclosure action against the parcel. McChesney, as it turned out, owed over $3 million dollars to FSBI, and the bank had grown weary of attempting to clear the liens on the property, choosing to go for the more dramatic remedy instead.

At this point, there was a dispute between the ORT owners over McChesney’s status with the company. McChesney claimed that the other owners had ejected him from the company, and that he no longer owned any share of ORT. The others claimed that McChesney maintained an 18% share he had at the time, and therefore owed his fiduciary duties to the company.

Believing himself to no longer be part of ORT, McChesney negotiated with the bank an agreement whereby the mortgage rights to the parcel would be assigned to Happy R Securities (HRS), a new corporation he had created for this purpose; the foreclosure proceedings against his former partners in ORT continued.

After counter-suing McChesney and HRS for specific performance of the delivery of the 8-acre parcel, as well as alleging that McChesney had breached his fiduciary duty, ORT then filed for a preliminary injunction to stop the foreclosure of the parcel.

The circuit court found that:

  1. ORT had a clearly ascertainable right to complete the transaction to acquire the 8 acre parcel of land.
  2. ORT had no adequate remedy at law, as this was a case involving real property, and therefore money damages would not be adequate.
  3. ORT would suffer irreparable harm without the injunction.
  4. ORT’s continued existence depended on owning that specific piece of land, because of its proximity to the railroad and river.
  5. ORT  was likely to succeed on its claims for specific performance and breach of fiduciary duty.

Because ORT had established all of these elements, the circuit court issued the injunction. HRS then appealed. Our next part will consider this appeal.

 

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