Injunctions, TRO’s and Receiverships
What are Injunctions and Receiverships and When Can They Be Obtained?
What do you do when you find out someone is seeking a restraining order, injunction or receivership on your business? The implications are significant and require immediate action. The same holds true when you need to obtain this type of legal help to protect your business and livelihood. The seasoned California litigation attorneys at Brown & Charbonneau, LLP can help.
While monetary damages are the most common type of relief sought and awarded in a lawsuit, there are times when damages will not provide adequate relief. For example, you are a minority shareholder of a corporation being looted by the fraudulent conduct of the corporation’s sole officer and director. An injunction may be available to immediately prevent access to the corporation’s bank account pending litigation. Similarly, a receiver may be appointed to take charge of corporation and preserve its assets. Provisional remedies such as injunctions and receiverships can be effective tools to protect a party’s interests during a case and when damages after trial may not provide adequate relief.
An injunction is a form of equitable relief, preventing or compelling a particular act by order of the court. An injunction may be either prohibitory or mandatory. A prohibitory injunction prevents action, and thus leaves the parties in the same position as they were prior to the injunction. A mandatory injunction compels an affirmative act, and thus changes the position of the parties. A mandatory injunction is much more difficult to obtain, and are granted only in extraordinary circumstances.
A preliminary injunction is issued to preserve the parties’ respective positions pending the outcome of the case. In determining whether to issue a preliminary injunction, courts consider two factors: (1) the likelihood that the plaintiff will prevail at trial; and (2) the harm that the plaintiff is likely to suffer if the injunction is denied compared to the harm the defendant is likely to suffer if injunction is granted.
Among other grounds, an injunction may be sought based on a claim that the commission of some act during the case will produce waste, or great or irreparable injury to a party to the case. An injunction may also be sought when money damages would not provide adequate relief, or when it would be extremely difficult to ascertain the amount of compensation that would afford adequate relief. Examples of situations where a preliminary injunction may be granted include an injunction to stop a competitor’s use of copyrighted material, to prevent a former employee from soliciting customers, or compel a contractor to release a mechanic’s lien on an owner’s property.
Temporary Restraining Orders
A temporary restraining order (“TRO”) is essentially an emergency injunction, granted by a court pending its decision on an application for a preliminary injunction. A TRO is available for the same grounds as a preliminary injunction, the primary difference being that a TRO lasts only a limited time, most often, until the court has decided whether or not to grant a preliminary injunction. TROs may be requested on an emergency basis upon a showing that great or irreparable injury will result to the applicant before a formal preliminary injunction application could be heard by the court.
Like injunctive relief, receivership is an ancillary remedy provided for by California statute. Receivers may be appointed before a judgment and during the litigation, or after a judgment. By statute, a receiver is neutral, acting for the benefit of all who may have an interest in the receivership property, and holding the assets as an agent for the court, not as an agent for any party.
A receiver appointed before a judgment (receiver pendente lite) is charged with the management and preservation of property that is subject of the case, and with ultimately disposing of the property in accordance with the eventual judgment. A receiver may be appointed to take over a business, to preserve business property, and even to operate a business with authority to incur expenses and make purchases necessary for the business. A receiver appointed after a judgment is generally based on a need to preserve property while an appeal is decided, or for purposes related to enforcement of a judgment.
A receiver may be appointed only in limited circumstances allowed by law. In the business context, a common example is the appointment of a receiver when a corporation has been dissolved. On application of any creditor or shareholder of a dissolved corporation, the court may appoint a receiver to preserve the corporation’s assets, collect and pay its debts, and distribute remaining funds and property to the corporation’s owners. Receivers may also be appointed when a corporation is insolvent or in imminent danger of insolvency, or upon application of a minority shareholder or director based on fraud or mismanagement of the corporate executives.
Getting Legal Help
Call us today to schedule a consultation and learn more about how we can help you at 714.505.3000
The California business litigation attorneys of Brown & Charbonneau, LLP have extensive experience in both obtaining and defeating applications for preliminary injunctions, TROs and receiverships. If you are involved in a dispute involving such claims for provisional relief, or would like to learn about your rights and how to protect your business, we can provide you with the information you need.