Opinion
No. 05 Civ. 15 (MHD).
January 12, 2006
MEMORANDUM ORDER
By memorandum and order dated December 30, 2005, we granted plaintiff's motion for a preliminary injunction, and we subsequently embodied that ruling in a separate order, issued January 3, 2006, which required defendant inter alia to deposit a sum of money in the registry of the court by January 6, 2006. (See Serio v. Black, Davis Shue Agency, Inc., Memorandum Order at 54-55 (S.D.N.Y. Dec. 30, 2005); Order dated Jan. 3, 2006 at 1). Defendant has now filed a motion for a stay pending appeal, and plaintiff has moved for an order of civil contempt. We deny the defendant's stay motion, and set a schedule for consideration of the plaintiff's contempt motion.
I. The Stay Motion
In assessing a stay motion under Fed.R.Civ.P. 62 (c), we must consider
(1) whether the applicant has made a strong showing of likelihood of success on the merits [of the appeal];
(2) whether the applicant will suffer irreparable injury absent a stay; (3) whether issuance of the stay will substantially injure other parties interested in the proceedings; and (4) whether the public interest favors issuing a stay.Hilton v. Braunskill, 481 U.S. 770, 776 (1987); Jolly v. Coughlin, 907 F. Supp. 63, 65 (S.D.N.Y. 1995). Given these criteria, defendant fails to justify the relief that it seeks.
In reviewing the grant of preliminary injunctive relief, the appellate court looks generally to whether the trial judge abused his discretion. See, e.g., Zervos v. Verizon New York, Inc., 252 F. 3d 163, 166 (2d Cir. 2001). That question turns principally on whether the issuing court relied on legally incorrect standards or on clearly erroneous factual findings.See, e.g., Shapiro v. Cadman Towers, Inc., 51 F. 3d 328, 332 (2d Cir. 1995). Defendant has failed to identify any error of law in our decision nor has it suggested any compelling basis for questioning the factual premises of the opinion that led to the issuance of the preliminary injunction. Indeed, most of the factual arguments made by defendant on the current motion were assessed and rejected in our prior decision and we see no basis for questioning those findings.
Most notably, defendant fails to demonstrate error in the court's rejection of defendant's contention that Frontier had agreed to amend the Agency Agreement to allow defendant to keep or otherwise dispose of substantial portions of collected premiums.
Defendant also alludes to what it describes as newly discovered information, purportedly obtained through recent discovery, but none of the specifics that it proffers puts into meaningful question the factual premises on which the injunction rests.
Still more striking is defendant's utter failure even to attempt to demonstrate irreparable harm from the preliminary injunction. That order required defendant, among other things, to deposit in the registry of the court a sum of money that represents a portion of the amount of funds that defendant concededly collected — and was required to retain — on behalf of Frontier on four insurance policies. In opposing injunctive relief, defendant went to great — if not very detailed — lengths to suggest that it was able to pay a far larger judgment than the amount of the required deposit. Having done so, it now proffers no evidence to demonstrate (or even suggest) that placing a portion of the funds that it received on Frontier's behalf into an escrowed account would cause it irreparable harm.
As for the harm to other parties that would flow from granting a stay, we have, in substance, addressed that issue in determining that interim injunctive relief was appropriate. It bears emphasis that there is a serious concern — which is heightened by defendant's continuing reticence about finances — that at the end of the case plaintiff will receive an unenforceable judgment for the return of funds belonging to Frontier if the moneys targeted by the injunction are not now set aside from defendant's control. Moreover, in view of the expedited nature of the proceedings currently underway in this court, to stay the injunction may effectively deny it since appellate review — which defendant has apparently not sought to expedite — might well not be completed before proceedings in this case came to an end.
Finally, we note, as we did in granting the Rule 65 motion, that the denial of a preliminary injunction — which might well be the effect of a stay — poses a threat to the public interest embodied in the New York Insurance Law provisions by which the Superintendent of Insurance is charged with the responsibility of marshaling and managing the assets of a licensed insurance carrier that is financially incapable of carrying on its business on its own. If the defendant is unable to satisfy a judgment in this case requiring the transmission of moneys to Frontier that belonged to that carrier, the statutory aim of restoring the carrier to financial health will of course be undermined.
In sum, we conclude that there is no basis for defendant's application for a stay, and we accordingly deny that motion.
We note, and reject, defendant's alternate argument that the injunction should be stayed until the completion of discovery, with additional rounds of briefing to occur thereafter. This "Dance of the Seven Veils" approach to preliminary injunctive relief is at odds with the aim of Rule 65, which is to afford prompt, if temporary, relief to avoid irreparable harm. Of course, as is always the case in equity, the court may revisit its injunction order in light of new circumstances, and defendant will be free to re-argue the issue when and if it has in hand a compelling basis for reconsideration.
II. The Contempt Motion
In responding to defendant's stay motion, plaintiff both opposed the motion and sought affirmative relief in the form of a civil contempt citation. The basis for that motion is plaintiff's representation that defendant has failed to comply with the provision of the preliminary injunction that required it to deposit the sum of at least $1,491,215.76 in the registry of the court. (See Declaration of Robert M. Travisano, Esq., executed Jan. 10, 2006). That sum represents the premiums concededly received by defendant under four specified policies issued by Frontier, net of a large sum that defendant transferred to another entity, Congressional Re, under questionable circumstances.
To adjudicate this motion, we direct that defendant serve and file responding papers by no later than January 17, 2006, with reply papers, if any, due by January 18, 2006. The court will conduct a hearing commencing on January 19, 2006 at 9:00 a.m.