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Sagarra Inversiones, S.L. v. Cementos
Portland Valderrivas, S.A., No. 6179-VCN (Del.Ch. July 7, 2011),
read letter ruling here.
When is the poor financial condition of a defendant
"poor enough" to satisfy the irreparable harm requirement for injunctive relief
based on the argument that the defendant would not be able to satisfy a money
judgment (if one were eventually secured).
This Delaware Court of Chancery decision involved the
request for a status quo order (in essence, a preliminary injunction) to stop installment
payments in connection with the challenged sale of a company. The argument was
that the sale was tainted and should be rescinded or money damages awarded. The
reason for the request for injunctive relief was based on the argument that the
defendant was in such dire financial straits that money damages would not be
adequate relief to the extent that the defendant would not have the abililty to
pay them if and when granted at the end of the normal timetable for a trial to
be held in the context of routine corporate litigation.
The request for a status quo order is subject to the
prerequisites for seeking a preliminary injunction. One of those familar
prerequisites is that irreparable harm be evident. In some instances this
element can be satisfied if a defendant would be unable to pay a money judgment
in the event one would be granted (and if there is a reasonable likelihood that
one would be granted), and when rescission is not available. See
footnotes 9 and 10.
The facts of this case demonstrated substantial debt,
financial distress and breach of the defendant's financial covenants with its
lenders, but the Court found that there was no evidence of imminent insolvency,
and therefore, the Court determined that there was an inadequate demonstration
of irreparable injury because money or rescissory damages would likely suffice
to remedy the claims if the plaintiff prevailed on the mer
Read more Delaware business
litigation case summaries and commentary on Delaware
Corporate and Commercial Litigation Blog, a blog hosted by Francis G.X.
Pileggi, of Eckert Seamans.
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