| Cooperstown Capital, LLC v Patton |
| 2009 NY Slip Op 02277 [60 AD3d 1251] |
| March 26, 2009 |
| Appellate Division, Third Department |
| Cooperstown Capital, LLC, Respondent-Appellant, v Martin P.Patton et al., Appellants-Respondents. |
—[*1] Gozigian Washburn & Clinton, Cooperstown (Edward Gozigian of counsel), for Martin P.Patton and another, appellants-respondents. Westerman, Ball, Ederer, Miller & Sharfstein, L.L.P., Mineola (Richard Gabriele ofcounsel), for respondent-appellant.
Kane, J. Cross appeals from an order of the Supreme Court (Dowd, J.), entered May 28,2008 in Otsego County, which granted plaintiff's motion for a preliminary injunction.
Defendant Cooperstown All Star Village, LLC (hereinafter CASV) owns and operates abaseball camp on property owned by defendant Abner Doubleday, LLC. Defendants Martin P.Patton and Brenda Patton own 35.01% of both Abner and CASV, defendant Marco Lionettiowns 29.99% of each company, and plaintiff owns 35%. When CASV and Abner were formed,the members issued promissory notes to the Pattons to pay for the land. The parties disputewhether the notes must be repaid by the members individually or by the companies, and aseparate pending lawsuit addresses that issue (Patton v Ferrara, 46 AD3d 1203 [2007] [finding questions of factbecause the promissory note obligates plaintiff to pay but the LLC operating agreements includepayments of the Patton notes as LLC operating expenses]). Martin Patton called a specialmeeting of Abner, where the members voted to issue a capital call only on plaintiff for [*2]$454,742.95, to be paid within 15 days. Plaintiff commenced thisaction for declaratory and injunctive relief, including a preliminaryApril 6, 2009 injunctionenjoining defendants from collecting the capital call or impairing plaintiff's rights for not paying.Supreme Court granted the preliminary injunction, requiring plaintiff to post a $216,585.44undertaking. Defendants and plaintiff cross-appeal.
Supreme Court did not err in granting plaintiff's motion for a preliminary injunction. As theparty seeking a preliminary injunction, plaintiff was required to demonstrate a likelihood ofsuccess on the merits, "danger of irreparable injury in the absence of an injunction and a balanceof equities in its favor" (Nobu NextDoor, LLC v Fine Arts Hous., Inc., 4 NY3d 839, 840 [2005]; see CPLR 6301).The decision of whether to issue a preliminary injunction rests in the trial court's sounddiscretion (see Schweizer v Town ofSmithtown, 19 AD3d 682, 682 [2005]; Honeywell Intl. v Freedman & Son, 307AD2d 518, 519 [2003]). The existence of factual questions for a trial does not prevent a partyfrom establishing a likelihood of success on the merits; success need not be a certainty to obtaina preliminary injunction (see Karabatosv Hagopian, 39 AD3d 930, 931 [2007]; Egan v New York Care Plus Ins. Co.,266 AD2d 600, 601 [1999]).
While both Supreme Court and this Court previously determined that questions of factpreclude summary judgment in the parties' related case (Patton v Ferrara, 46 AD3d at1205), plaintiff has still established a likelihood of success here. Abner's operating agreementpermits capital calls, but specifies that the "[m]embers shall contribute such additional capital ona pro rata basis in proportion to their respective '[m]embership [i]nterests.' " Under the operatingagreement and the promissory notes, the Patton notes are payable as operating expenses ofAbner and CASV rather than the individual members, and capital calls "shall" be shared pro rataby the "members"—plural. Hence, despite questions of fact, it is at least likely thatplaintiff will succeed in proving the impropriety of Abner's notice requiring a capitalcontribution only from plaintiff to pay the Patton note.
An opportunity for defendants to shift the balance of power and wrest complete control overthe company can constitute irreparable injury (see Vanderminden v Vanderminden, 226AD2d 1037, 1041 [1996]; Casita, LP v Maplewood Equity Partners [Offshore] Ltd., 17Misc 3d 1137[A], 2007 NY Slip Op 52322[U], *8 [2007]; see also Matter of Brenner v HartSys., 114 AD2d 363, 366 [1985]). If plaintiff does not pay the capital contribution, theoperating agreement permits the remaining members to meet the capital contribution onplaintiff's behalf as a loan, then repay the loan with plaintiff's equity interests in Abner. In thatscenario, plaintiff would lose not only its shares of Abner, but also its ability to block certainactions which require a two-thirds vote. Those actions include selling major LLC assets anddissolving the LLC. The possibility of plaintiff losing any real say in Abner, as opposed tomaintaining the status quo where defendants suffer no actual harm, suggests that the equitiesbalance in plaintiff's favor. Thus, Supreme Court did not abuse its discretion in granting thepreliminary injunction (see Matter ofKalichman, 31 AD3d 1066, 1067 [2006]).
The amount of the undertaking was appropriate. When granting the preliminary injunction,Supreme Court was required to order plaintiff to post an undertaking (see CPLR 6312[b]; Egan v New York Care Plus Ins. Co., 266 AD2d at 602). The amount of thatundertaking is left to the sound discretion of the court, although "it should be rationally related tothe potential damages" that defendants could recover if an injunction is ultimately deemedunwarranted (Bonded Concrete, Inc. vTown of Saugerties, 42 AD3d 852, 854-855 [2007]; see Livas v [*3]Mitzner, 303 AD2d 381, 383 [2003]). Here, the court struck abalance and set an amount equal to the difference between the requested capital call and Abner'sestimated net income. The amount of the undertaking, together with the net income, wouldpermit Abner to pay the Patton notes. While not necessarily equal to defendants' potentialdamages, the court did not abuse its discretion in setting that amount.
Cardona, P.J., Peters, Rose and Lahtinen, JJ., concur. Ordered that the order is affirmed,without costs.