UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF PENNSYLVANIA

HOTEL INVESTORS, LLC, :

Plaintiff : CIVIL ACTION NO. 4:16-1337

v. : (JUDGE MANNION )1

MODULAR STEEL :

SYSTEMS, INC.,

:

Defendant

:

MEMORANDUM

Pending before the court is the “Plaintiff’s Emergency Motion for 2

Temporary Restraints”, in which the plaintiff seeks to have the court enjoin the

defendant from selling, transferring, alienating, or exercising any control over

any assets which relate the Agreement between the parties concerning the

The court notes that the above action is assigned to the Honorable 1

Matthew W. Brann. However, because Judge Brann was unavailable to

review the plaintiff’s emergency motion today, the motion was referred to the

undersigned. The undersigned’s review of the matter is limited solely to the

motion for emergency relief.

Court documents establish that the defendant formally notified the 2

plaintiff of its default on the terms of the parties’ Agreement on January 15,

2016. To this extent, among other things, counsel notified the plaintiff that it

was indebted to the defendant in the amount of $580,863.00 for modular

Units completed under the Agreement. The plaintiff was notified if it failed to

cure its default within twenty (20) days, the defendant would terminate its

Agreement and pursue all rights under the Agreement, including the sale of

the Units to recapture its losses. (Doc. 1, Ex. A) (emphasis added). Despite

having this knowledge, the plaintiff did not file the instant action and motion

for “emergency” relief to stop the sale of the Units until June 30, 2016, over

five months later.

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manufacture and delivery of 107 modular hotel units, including 74 Units which

have been paid in full by the plaintiff, pending resolution of an arbitration

relating to disputes arising from the Agreement. (Doc. 2). Based upon the

court’s review of the plaintiff’s motion and accompanying brief, the motion will

be denied.

In its motion, the plaintiff provides that it was formed in 2013 for the

express purpose of constructing a 107 room Homewood Suites Hilton Hotel.

On or about December 11, 2014, in order to complete its project, the plaintiff

entered into a written agreement, (“Agreement”), with the defendant for the

manufacture and delivery of 107 modular hotel units. As per the Agreement,

the plaintiff paid for 74 Units constructed by the defendant and the plaintiff

claims rights, title and interest in those 74 Units.

On or about January 15, 2016, a dispute arose between the parties

concerning a breach of the Agreement by the plaintiff. By the terms of the

Agreement, the plaintiff argues that the dispute must be submitted to

mandatory mediation and arbitration. Despite being fully aware of the dispute

and the terms of the Agreement relating to mediation and arbitration, the

plaintiff presents that the defendant is attempting to sell 89 Units that it has

manufactured to a third party, including the 74 Units which the plaintiff has

paid for in full.

By way of the instant motion for emergency relief, the plaintiff now seeks

to have the court enjoin the defendant from attempting to sell, transfer,

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alienate, or exercise any control over any assets which relate to the

Agreement between the parties concerning the manufacture and delivery of

107 modular hotel units, including the 74 Units which have allegedly been

paid in full by the plaintiff, pending the resolution of an arbitration relating to

disputes arising from the Agreement.

Federal Rule of Civil Procedure 65 governs the granting of injunctive

relief such as temporary restraining orders and preliminary injunctions.

Injunctive relief is not granted as a matter of right. Kerschner v. Mazurkewicz,

670 F.2d 440, 443 (3d Cir. 1982). It is well-established that injunctive relief is

extraordinary in nature and should issue only in limited circumstances. See

American Tel. and Tel. Co. v. Winback and Conserve Program, Inc., 42 F.3d

1421, 1426–27 (3d Cir. 1994), cert. denied, 514 U.S. 1103 (1995). Such relief

should not be granted unless the movant, by a clear showing, carries the

burden of persuasion. Mazurek v. Armstrong, 520 U.S. 968, 972 (1997). See

also Adams v. Freedom Forge Corp., 204 F.3d 475, 486 (3d Cir. 2000)

(moving party bears the burden of establishing the factors for injunctive relief).

The Third Circuit has indicated that “[u]pon an application for a preliminary

injunction to doubt is to deny.” Madison Square Garden Corp. v. Braddock,

90 F.2d 924, 927 (3d Cir. 1937). Whether injunctive relief is granted is at the

sound discretion of the court. Orson, Inc. v. Miramax Film Corp., 836 F.Supp.

309, 311 (E.D.Pa.1993).

The United States Court of Appeals for the Third Circuit has outlined

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four factors that a court ruling on a request for injunctive relief must consider:

(1) whether the movant has shown a reasonable probability of success on the

merits; (2) whether the movant will be irreparably injured by denial of the

relief; (3) whether granting preliminary relief will result in even greater harm

to the nonmoving party; and (4) whether granting the preliminary relief will be

in the public interest. Crissman v. Dover Downs Entertainment Inc., 239 F.3d

357, 364 (3d Cir. 2001). These same factors are used to determine a motion

for a temporary restraining order. Bieros v. Nicola, 857 F.Supp. 445, 446

(E.D.Pa.1994). The moving party bears the burden of establishing each of the

four elements. Adams v. Freedom Forge Corp., 204 F.3d 475, 486 (3d Cir.

2000). As a practical matter, likelihood of success on the merits and

irreparable injury are the most important factors. See Am. Tel. & Tel. Co. v.

Winback and Conserve Program, Inc., 42 F.3d 1421, 1427 & n.8 (3d Cir.

1994).

To establish a reasonable probability of success on the merits, the

moving party must produce sufficient evidence to satisfy the essential

elements of the underlying cause of action. See Punnett v. Carter, 621 F.2d

578, 582–83 (3d Cir. 1980); McCahon v. Pa. Tpk. Comm’n, 491 F.Supp.2d

522, 527 (M.D.Pa. 2007). In determining whether success is likely, the court

must look to the legal principles controlling the claim and the potential

defenses available to the opposing party. See BP Chems. Ltd. v. Formosa

Chem. & Fibre Corp., 229 F.3d 254, 264 (3d Cir. 2000).

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Here, the plaintiff argues that its likelihood of success on the merits is

high. To this extent, the plaintiff argues that to prevail on its claim for

conversion, it need only show that it was the owner of the relevant Units and

that the defendant deprived the plaintiff of or otherwise interfered with that

property interest, without consent or lawful justification. Westport Ins. Corp.

v. Hanft & Knight, P.C., 523 F.Supp.2d 444, 459 (M.D.Pa. 2007) (citing

Universal Premium Acceptance Corp. v. York Bank & Trust Co., 69 F.3d 695,

704 (3d Cir. 1995)). The plaintiff argues that the defendant has proffered no

legitimate rationale for selling the Units to which it lacks title, but only seeks

to circumvent the dispute resolution procedures to which it agreed.

Similarly, as to the unjust enrichment claim, the plaintiff argues that it

must “show that the party against whom recovery is sought either wrongfully

secured or passively received a benefit that would be unconscionable for the

party to retain without compensating the provider.” Bair v. Purcell, 500

F.Supp.2d 468, 499 (M.D.Pa. 2007) (quoting Hershey Foods Corp. v. Ralph

Chapek, Inc., 828 F.2d 989, 999 (3d Cir. 1987). The plaintiff argues that it

would clearly be unconscionable for the defendant to retain the benefit of a

second sale of the relevant Units, worth in excess of two million dollars,

without returning the balance of those funds, adjusted for any actual damages

resulting from the purported breach of the Agreement, to the plaintiff. 

Although not a certainty, at this juncture, the court will assume, based

upon the plaintiff’s submissions that it has shown a reasonable likelihood of

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success on the merits of its claims. Despite this, however, the court finds that

the plaintiff has not demonstrated irreparable injury. Irreparable injury is

“potential harm which cannot be redressed by a legal or equitable remedy

following a trial.” Instant Air Freight Co. v. C.F. Air Freight, Inc., 882 F.2d 797,

801 (3d Cir. 1989). A court may not grant preliminary injunctive relief unless

“[t]he preliminary injunction [is] the only way of protecting the plaintiff from

harm.” Id. Speculative injury does not constitute a showing of irreparable

harm. Continental Group, Inc. v. Amoco Chemicals Corp., 614 F.2d 351, 359

(3d Cir. 1980); see also Public Serv. Co. of N.H. v. Town of West Newbury,

835 F.2d 380, 383 (1st Cir. 1987). “The possibility that adequate

compensatory or other corrective relief will be available at a later date, in the

ordinary course of litigation, weighs heavily against a claim of irreparable

harm.” Instant Air Freight, 882 F.2d at 801 (quoting Sampson v. Murray, 415

U.S. 61 (1964)).

As to this factor, the plaintiff argues that it faces irreparable injury

because “upon information and belief” the defendant is selling the Units which

are crucial to the viability of the project and the loss of which would deprive

the plaintiff of the very business opportunity for which it was organized.

Initially, the plaintiff’s “belief” that the defendant is selling or has sold the Units

is speculative at best and not warranting injunctive relief. Moreover, the

plaintiff argues that it is “unable to determine the financial health, stability or

longevity of [the defendant] and faces unknown risk in attempting to recoup

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the value of the Units at some indefinite point in the future”. However, this

again is speculation. There is no indication that compensatory damages or

other corrective relief would not be available to the plaintiff should the plaintiff

be able to establish its claims. As such, the plaintiff has failed to sufficiently

establish irreparable injury such that it is not entitled to injunctive relief.

As the plaintiff has failed to establish that it will suffer irreparable injury

should an injunction not issue, the court need not examine the remaining

factors, as the test for injunctive relief is conjunctive.

On the basis of the foregoing, an appropriate order shall issue.

s/ Malachy E. Mannion MALACHY E. MANNION

United States District Judge

Date: July 1, 2016

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