IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

SOTHEBY’S INTERNATIONAL REALTY

AFFILIATES LLC,

Plaintiff,

v.

MLJ HOLDINGS, LLC d/b/a

Southport Sotheby’s

International Realty, KARINA

M. CAULFIELD, and GRAFTON

HOLDINGS, LLC d/b/a Conlon, a

Real Estate Company,

 Defendants.

Case No. 12 C 2173

Hon. Harry D. Leinenweber

MEMORANDUM OPINION AND ORDER

Before the Court is Plaintiff’s Motion for a Preliminary

Injunction seeking the deposit into escrow of commissions on the

sale of some seventy real estate listings. For the reasons stated

herein, the Motion is denied.

I. BACKGROUND

Plaintiff Sotheby’s International Realty Affiliates, LLC

(hereinafter, “SIR”) had a Franchise Agreement with Defendant MLJ

Holdings, LLC (“MLJ”). MLJ is a real estate brokerage firm and

agreed to pay certain royalties and fees to SIR. The Franchise

Agreement was personally guaranteed by MLJ’s manager, Defendant

Karina M. Caulfield (“Caulfield”). MLJ also signed a promissory

note in July 2010 agreeing to pay SIR $195,090.30 over 30 months. 
MLJ executed a security agreement in July 2010 with SIR for both

payment of the note and performance of the Franchise Agreement.

MLJ admits it subsequently breached the terms of the note. 

MLJ’s Am. Answer ¶ 95, 96. MLJ and SIR disagree over whether the

Franchise Agreement was revoked, but it is clear that MLJ owes SIR

a significant amount of money. Id. In its Answer to SIR’s

Complaint, MLJ admits its breach of the terms of the note damaged

SIR in the amount of at least $20,533.26, plus interest. Id. It

also admits to missing payments under the Franchise Agreement. Id.

at ¶ 99.

The expansive Security Agreement with MLJ granted SIR:

a security interest in all accounts; accounts

receivable; contract rights . . . finished

goods and all other items customarily

classified as inventory . . . chattel paper;

instruments; documents; letters of credit; all

funds on deposit with any financial

institution; commissions; real estate listings

and listing Agreement and related rights which

are located at or related to the residential

real estate brokerage business conducted by

Debtor and including the proceeds and products

therefrom and any and all substitutions,

replacements, additions and accessions thereto

and . . . all general intangibles

(collectively the Collateral”) as well as all

parts, replacements, substitutions, profits,

products and cash and non-cash proceeds of the

foregoing Collateral. . . .

Compl. Ex D, at 1, ECF No. 1-6. 

SIR sent MLJ a letter dated July 25, 2011 terminating the

franchise. Caulfield Dec. Ex. A, at 1, ECF No. 26, PageID 349. 

However, the letter granted MLJ a months-long grace period to wind

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down the business. The parties dispute whether MLJ continued to

operate as a franchisee during that time (and thus, whether nocompete provisions are applicable). In any event, it does not seem

to be disputed that SIR eventually ordered MLJ to cease all

operations by March 23, 2012.

Defendant Grafton Holdings, LLC, (doing business as Conlon)

(“Conlon”) is a competitor of SIR. Conlon admits that on March 15,

2012, it entered into a lease for the same office space that MLJ

occupied, but it contends it did not begin operating its business

there until March 21, 2012, the same day MLJ wound down operations

there. Caulfield is now an employee of Conlon, but she represents

that she has no ownership or management interest in Conlon. On

March 23, 2012, SIR filed a UCC-1 Financing Statement recording its

security interest in MLJ’s collateral. It also filed suit in this

Court on the same day. On April 3, 2012, Caulfield filed for

bankruptcy. MLJ has not filed for bankruptcy. 

SIR’s Amended Complaint sues Conlon and MLJ for trademark

infringement, false designation of origin/false advertising,

trademark dilution, common law unfair competition, and breach of

the promissory note. MLJ also is sued for breach of the Franchise

Agreement, replevin, and for an audit and accounting. Conlon is

sued for unjust enrichment and tortious interference with a

contract. All Defendants are sued under civil conspiracy and

constructive trust actions.

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SIR argued in its original Motion that MLJ had control over

seventy property listings that were part of the Security Agreement

MLJ signed with SIR. SIR now seems to concede the number of

listings at issue is significantly less, but its main contention,

that the listings are SIR’s property to which it is entitled,

remains the same. It seeks a preliminary injunction in regards to

these disputed listings. But rather than seeking to repossess the

listings (and trying to sell the properties at issue itself), SIR

argues the least intrusive temporary injunction would be to order

Conlon to put into escrow the commission earned from these

properties. The Conlon agent who sells the property could then

come to SIR and negotiate with Conlon for a reasonable agent

commission, SIR suggests.

II. LEGAL STANDARD

To win a preliminary injunction, a party must show that: it is

reasonably likely to succeed on the merits, it is suffering from

irreparable harm that outweighs any harm the nonmoving party will

suffer if the injunction is granted, there is no adequate remedy at

law, and an injunction would not harm the public interest. 

Christian Legal Soc’y v. Walker, 453 F.3d 853, 859 (7th Cir. 2006). 

III. ANALYSIS

SIR has requested relief in the form of a preliminary

injunction, which it claims is warranted because it has a secured

interest in the collateral: the real estate listings.

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A. Likelihood of Prevailing on the Merits

Although SIR has pegged its right to immediate repossession

(i.e., before judgment on the merits) of its collateral to the

Illinois Commercial Code (the state version of the Uniform

Commercial Code (the “UCC”)), SIR engages in little to no analysis

of what rights the UCC gives it against a third party possessor

(Conlon). SIR does not even identify what type of collateral the

listings are under the UCC. SIR has not addressed whether Conlon

took the listings from MLJ as a bona fide purchaser or whether it

took them for no value, and MLJ and Conlon do not offer this

information either.

The lack of analysis by SIR on the nature of the collateral

and how Conlon acquired it is unfortunate because “[t]he

definitions [of collateral] are . . . important because a mode of

perfection that is permitted or even required for one kind of

collateral may not be permitted for other kinds of collateral. In

addition, the rights of third parties, such as bona fide purchasers

of assets from the debtor, sometimes depend upon the nature of the

collateral.” 4 JAMES J. WHITE & ROBERT S. SUMMERS, UNIFORM COMMERCIAL CODE

§ 30-1, 5 (Practitioner Treatise Series, 6th ed. 2010). The rights

of a third party, Conlon, are precisely what is at issue here, and

SIR has undertaken no exploration of its right to repossess

collateral from a third party under the UCC.

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As SIR’s own quoted case Christian Legal notes, the burden of

showing a likelihood of success on the merits is on the party

moving for the preliminary injunction. Christian Legal, 453 F.3d

at 859. SIR merely cites to UCC passages regarding the general

effectiveness of security agreements (§ 9-201) and the sufficiency

of a financing statement (§ 9-503) without discussion. SIR does

not deal with § 9-203, which requires that a third party have taken

the collateral for value in order for a security agreement to be

enforceable against it.

Thus, without addressing whether value was given for the

listings (and a whole host of potentially applicable UCC sections

regarding rights of third parties), SIR has not sustained its

burden regarding likelihood of prevailing against Conlon under the

UCC.

SIR suggests it is assured of prevailing against Conlon on the

tortious interference count, and that this therefore justifies the

escrow of the disputed property. There are two problems with this

argument. First, Conlon has denied it was aware of the Franchise

Agreement or the Security Agreement, and SIR has presented no

evidence to refute this. See Caterpillar Fin. Servs. Corp. v.

Peoples Nat’l Bank N.A., No. 10-298, 2012 U.S. Dist. LEXIS 89427

(7th Cir. Jun. 28 2012) (required element of tortious interference

is knowledge of the existence of the contract). Second, even if

likelihood of prevailing on the tortious interference count had

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been shown, the damages award SIR would be due would be a tort

award not directly connected to the listing proceeds. A

preliminary injunction would thus constitute an equitable

attachment prohibiting Conlon from access to its property in

anticipation of a judgment. Illinois does not allow such equitable

attachments, as Defendants point out. Franz v. Calaco Dev. Corp.,

751 N.E.2d 1250, 1256 (Ill. App. Ct. 2001) (quoting Carriage Way

Apartments v. Pojman, 527 N.E.2d 89, 96 (Ill. App. Ct. 1988). 

B. Adequate Remedy at Law

The Court is also not convinced that SIR is correct that there

is no adequate remedy at law. SIR argues that if Conlon sells the

listings properties, SIR will have to proceed against both Conlon

and seventy individual Conlon listing agents selling the properties

on behalf of Conlon. This will be inherently impractical because

litigation expenses will dwarf the recovery, SIR says.

Implicit in this argument is the assumption that the agents

take the entire commission and then transfer along to Conlon its

portion of the commission. If the converse is true (that Conlon

takes the entire commission and then pays its agents afterwards),

there is no reason that Conlon won’t be responsible to SIR for the

entire commission in a judgment. As SIR itself stated, “Conlon’s

contractual agreements do not take precedence over Sotheby’s

secured property interests in the appropriate listings.” Pl.'s

Reply Br. 3. SIR has presented no evidence as to how Conlon

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actually structures its listing agreements, but if the MLJ listing

agreements that Conlon entered into evidence are representative of

the industry, the property seller’s obligation to pay a commission

appears to extend only to the agency, not to the listing agent. 

Burford Decl. Ex. 10, at 6-9, ECF No. 38-2, PageIDs 621-264.

Even if the agents take first, SIR in its Reply appears to

concede that far fewer than 70 properties, perhaps as few as 23,

are at issue, meaning fewer actions will be necessary to recover

the funds. Whittling down that number even further, multiple

listings appear to be managed by a common agent, meaning even fewer

actions would be necessary to recover. For example, listings

No. 9, 22 and 33 appear to have the same listing agent. See id. at

Exs. 9, 22 and 23. Listings 18, 29, 30, 39 and 67 also appear to

have a single agent. See id. at Exs. 18, 29, 30, 39 and 67. 

Finally, SIR has not shown with specificity or by citing any

applicable cases how their potential action against the individual

agents does not arise “out of the same transaction, occurrence, or

series of transactions or occurrences,” and therefore the agents

cannot be joined in one action. FED. R. CIV. P. 20(a)(2)(A).

There is no dispute here that money is the only relief sought

by SIR. (Earlier SIR allegations that Conlon continues to infringe

on SIR’s trademarks have been withdrawn by SIR.) There are also no

allegations that Conlon or any of the parties besides Caulfield are

insolvent. Therefore, there is an adequate remedy at law. 

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C. Balance of Harms

Even if the threshold elements needed to obtain a preliminary

injunction had been met in this case, the potential harm to the

public does not weigh in favor of issuance here. While SIR

commendably sought to minimize the impact of a preliminary

injunction upon all parties by focusing on the proceeds of the

listings, none of the parties in this case has really considered

the impact of a preliminary injunction upon the property owners

whose properties are the subject of these listings. And despite

SIR’s best intentions, the individual listing agents would still be

significantly affected.

SIR contends there would be little impact on the agents,

because the Conlon listing agents would simply come to SIR to

negotiate a fair commission. There is no guarantee such

negotiations would be successful, and listing agents could toil to

sell a property only to find out they must accept less than they

expected, or perhaps nothing at all.

The property owners themselves would also likely be affected. 

Even if one listing agent was refused commission or had to engage

in protracted, at-gunpoint negotiations with SIR, word would get

out among listing agents that the former-MLJ listings were tainted,

and agents would likely shy away from investing any significant

time in moving those properties. If this occurred, property owners

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would suffer from a dispute they did not create. Therefore, the

burden on the public weighs against an injunction in this case.

IV. CONCLUSION

SIR has not met its burden in showing either a likelihood of

success in its action, or that no adequate remedy at law exists. 

For these reasons, and because the balance of harms unfairly weighs

on the public, the Motion for Preliminary Injunction is denied.

IT IS SO ORDERED.

Harry D. Leinenweber, Judge

United States District Court

DATE: 7/12/2012

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