Court Vacates Injunction Because Pre-Litigation Threats to Use Court Constitutes Unclean Hands

As illustrated in Eagle Advance, LLC v. Relik, 2022 NY Slip Op. 33006(U) (N.Y. Sup. Ct. Nassau Cnty 2022), injunctive relief is an equitable remedy – one that may be denied based on the movant’s unconscionable conduct.

In Eagle Advance, LLC, the parties had entered into a contract whereby plaintiff purchased a portion of defendant Relik Realty’s future receivables, entitling plaintiff to receive 25% of payments deposited into a certain bank account owned by Relik Realty at Wells Fargo.  Relik Realty’s owner, also a defendant, personally guaranteed the contract.

During the contract’s performance period, defendants Relik Realty and its owner cut off plaintiff’s access to the Relik Realty account at Wells Fargo and defendants made no further payments under the contract.  In response, plaintiff obtained a temporary restraining order (“TRO”) that restrained all of defendants’ bank accounts at Wells Fargo.  Thereafter, when the court considered whether to grant a preliminary injunction to restrain the funds at Wells Fargo during the pendency of the action, defendants supported their opposition with a submission of threatening, offensive text messages from plaintiff’s principal that suggested plaintiff had sought to use the pervasive restraint of defendants’ accounts at Wells Fargo to strong-arm defendants into making the contractual payments.  Id. at 4.  The messages included “I’m going to have a judge … freeze your account” and “Should I file a lawsuit now since you’re complete broke [sic] this will go against you your [sic] business and personally.  Or should I call your accounts receivable?”  Id.  The court found these text messages lend credence to defendants’ argument that plaintiff was a predatory lender rather than a business providing a service.  Offended by plaintiff’s apparent attempt to use the court’s power improperly, the Court denied the preliminary injunction and vacated the TRO on the grounds that plaintiff’s actions reflected unclean hands.  Id. at 4–5.

The Eagle Advance, LLC decision underscores that a movant’s unclean hands may preclude an equitable remedy.  If you have any questions about injunctive relief, or equitable remedies generally, please contact Michael Rakower or Melissa Yang.