Opinion
6803/04.
Decided December 13, 2004.
Dollinger, Gonski Grossman, Esqs., Carle Place, New York, Counsel for plaintiff.
Meyer, Suozzi, English Klein, P.C., Mineola, New York, Counsel for Defendants.
Plaintiffs move and Defendants cross-moves for various preliminary injunctive relief pursuant to CPLR 6301.
BACKGROUND
Plaintiff Douglas Wyler ("Douglas") and Defendant Stephen ("Stephen") Wyler are brothers who, since June 1, 1977, have been engaged in the practice of veterinary medicine at the South Shore Animal Medical Hospital ("South Shore") located at 779 Peninsula Boulevard, Hempstead, New York. In 1991, the brothers commenced operation of a second practice located at 98-83 Queens Boulevard, Forest Hills under the name Trylon Vet Care, P.C. ("Trylon"). Each of the brothers is an officer, director and fifty (50%) percent shareholder of S.M. Wyler, D.V.M. and D.K. Wyler, D.V.M., P.C., which does business as South Shore and Trylon.
As the two practices grew, Douglas basically supervised the activities of, and practiced at, South Shore while Stephen supervised the activities of, and practiced at, Trylon. Over the last several years, however, it appears the brothers' personal, as well as business, relationship has deteriorated to such an extent that Douglas commenced this action for money damages based upon his brother's alleged mismanagement and waste of corporate assets in his handling the affairs of Trylon in violation of Business Corporation Law § 720.
The brothers, now in the process of terminating their business relationship, have hired appraisers to value the two practices. Stephen contends that South Shore is substantially more valuable than Trylon. It appears that ultimately Douglas will retain the South Shore practice and Stephen will retain Trylon. Assuming that to be the case, Douglas will be required to make a substantial payment to compensate Stephen for the difference in value of the two practices.
The complaint alleges that Stephen, as an officer and director of Trylon, improperly caused Trylon to issue checks to Stephen's wife, Letizia Rossi Wyler, allegedly for work performed by her on behalf of Trylon while she was outside of the United States. In effect, the complaint alleges "payments to a non-employee for a 'no show job'." Additionally, Douglas alleges that Stephen arbitrarily increased his bi-weekly salary from $4,600 to $7,600 without Douglas' consent even though he is a director and fifty (50%) percent shareholder of Trylon.
Although Stephen asserts he has counterclaimed against South Shore and seeks to enjoin Douglas from committing corporate waste of South Shore's assets, he has not yet served an answer/counterclaim against Douglas or South Shore (which is not a party to this action) at the time these motions were submitted.
By their respective motion and cross-motion, Douglas and Stephen each seek preliminary injunctive relief against the other. Douglas seeks to enjoin the payment of an increased bi-weekly salary to Stephen and any monies to his wife, Letizia. Stephen seeks to enjoin non-party South Shore and Douglas from continuing to employ Douglas' wife, Irma, and Dr. Elias Diamantopoulos. According to Stephen, both had been hired and employed without proper corporate authorization.
With respect to South Shore, the Court notes that pursuant to CPLR 3019(d), when a counterclaim alleges that "a person not a party is * * * liable, a summons and answer containing the counterclaim * * * shall be filed, whereupon he or she shall become a Defendant." Linzer v. Bal, 184 Misc 2d 132, 135 (Civ. Ct., NY Co. 2000). See also, 84 NY Jur. 2d, Pleading §§ 175, 176. In the absence of such service on South Shore, it is not a party to this action.
DISCUSSION
A preliminary injunction is a drastic remedy. It only be granted if the moving party establishes a clear right to the relief under the law and upon the relevant facts set forth in the moving papers. William M. Blake Agency, Inc. v. Leon, 283 AD2d 423 (2nd Dept. 2001). Bare conclusory allegations are insufficient to support the motion. Neos v. Lacey, 291 AD2d 434 (2nd Dept. 2002). More particularly, injunctive relief will lie where a movant demonstrates a likelihood of success on the merits, a danger of irreparable harm unless the injunction is granted and a balance of equities in the movant's favor. CPLR 6301; Pearlgreen Corp. v. Yau Chi Chu, 8 AD3d 460 (2nd Dept. 2004); and Neos v. Lacey, supra.
To establish a likelihood of success on the merits, the movant must show its right to a preliminary injunction is plain on the facts of the case. Peterson v. Corbin, 275 AD2d 35 (2nd Dept. 2000); and Merrill Lynch Realty Assocs. v. Burr, 140 AD2d 589, 592-3 (2nd Dept. 1988). See also, JRT, Inc. v. STG Properties, LLC, 4 Misc 3d 1023 (A) (Sup.Ct. Nassau Co. 2004).
Irreparable injury in this context means any injury for which money damages are insufficient. Klein, Wagner Morris v. Lawrence A. Klein, P.C., 186 AD2d 631, 633 (2nd Dept. 1992). Moreover, entitlement to injunctive relief requires a showing of irreparable harm which is threatened and immediate. Held v. Hall, 190 Misc 2d 444 (Sup.Ct. Westchester Co. 2002). Proof establishing the foregoing elements must be by affidavit and other competent proof supported by evidentiary detail.
Once the movant has established the elements necessary for the granting of a preliminary injunction, factual issues raised by the opponent do not necessarily mandate the denial of the motion. CPLR 6312 (c). The existence of issues of fact on a preliminary injunction motion cannot be the basis, in and of itself, for denial of the motion. 1995 Report of the Advisory Comm. On Civil Practice, pp. 62-3. The 1997 amendment which adds subparagraph c to CPLR 6312 was intended to negate case law which evolved denying injunctive relief where there was a "sharp issue of fact". See, e.g., Walsh v. Design Concepts, Ltd., 221 AD2d 454 (2nd Dept. 1995).
A. Plaintiff's Motion
Although Stephen claims that there is a rational business basis for his recent salary increase, it was done without the approval of his other director and equal shareholder, Douglas. Such unilateral action representing a 60% increase in his salary cannot be permitted. See, Cilco Cement Corp. v. White, 55 AD2d 668 (2nd Dept. 1976); and Business Corporation Law §§ 202(a), 701, 708. The fact that Stephen does not have the professional help at the Trylon facility does not justify his unilateral action.
Likewise, giving his wife, Letizia, a consultanting salary cannot be permitted. Letizia is a veterinarian in Italy. She is not licensed in New York. Paying her a salary appears to be little more than an artifice to siphon moneys from Trylon to Stephen to the detriment of the Trylon and Douglas. Thus, Douglas has established a likelihood of success on the merits. Additionally, on balance, enjoining the payment of such moneys harms Stephen less than Douglas if the application were to be denied.
Most troubling is the question of irreparable harm. Clearly, the moneys taken by Stephen could be used as an offset to the buyout price of the two practices. However, that does not take into account the corporate need to have a regular cash flow. Douglas has established that Trylon's financial circumstances is negatively impacted by Stephen's raise and fees to his wife. Thus, Plaintiff's motion for a preliminary injunction must be granted.
B. Defendant's Cross-Motion
Stephen's cross-motion, which appears to be little more than knee-jerk response to Douglas' motion, cannot be granted. Initially, the absence of South Shore as a party makes it difficult to consider relief which affects the operation of the corporation. See, Caiola v. Allcity Ins. Co., 305 AD2d 350 (2nd Dept. 2003). Additionally, Stephen has failed to establish how the employment of Irma and Dr. Diamantopoulos which has been long standing and apparently with his initial approval is now worthy of injunctive relief. In point of fact, Irma works in South Shore's office. So does Dr. Diamantopoulos who previously worked at Trylon's office. Thus, a likelihood of success on the merits has not been established. Defendant's cross-motion must, thus, be denied.
C. Undertaking
Upon the granting of Plaintiff's motion for a preliminary injunction, the Court must condition such relief on the posting of an undertaking in the event that it is later determined that the preliminary injunction was improvidently granted. CPLR 6312 (b). In this case, the Court finds that the loss which could be sustained by Stephen by the granting of the preliminary injunction is nominal. Any loss of salary can be compensated by an adjustment in the value of Trylon when the parties disengage from, and distribute the values of, South Shore and Trylon. Nevertheless, Stephen's counsel fees must considered as well. In the Court's discretion, the undertaking herein should be $15,000.
Accordingly, it is,
ORDERED, that Plaintiff's motion for a preliminary injunction is granted to the extent that Defendant is enjoined from taking any salary greater than that which Plaintiff takes and from paying any salary, fee or any form of compensation to his wife, Letizia Rossi Wyler; provided that within ten (10) days of the date hereof, Plaintiff shall post an undertaking in the sum of $15,000 either by surety in the form approved by the Court, by depositing such sum with the County Clerk or by depositing same in an interest bearing escrow account maintained by counsel for Plaintiff; and it is further,
ORDERED, that Defendant's cross-motion for a preliminary injunction is denied; and it is further,
ORDERED, that counsel for the parties shall appear before the undersigned for a status conference on January 7, 2005 at 9:30 a.m.
This constitutes the decision and Order of the Court.