Injunction, Injunction, What’s Your Function?

Posted by William J. Piercy on

An injunction is a court order that requires someone to do something or to refrain from doing something, either temporarily or permanently.  Interlocutory (temporary) injunctions are often utilized to maintain the status quo between parties to a lawsuit until a final determination can be made at trial by a judge or jury.  They can be powerful remedies in hotly contested business disputes where there is a real and severe threat to a company’s operations.  A recent Georgia Appeals decision provides some insight into the application of a temporary injunction to a business dispute in this e-commerce era.

In Grossi Consulting, LLC v. Sterling Currency Group, LLC, Sterling hired Grossi to build a website, dinarbanker.com, through which Sterling could market and sell Iraqi dinars (currency).  Sterling’s business volume was impressive right out of the gate.  Internet traffic far exceeded that which the website could handle.  At Sterling’s request, Grossi upgraded the website and established a call center.  Despite these enhancements, the site crashed several times, severely disrupting Sterling’s business. Around this time, disputes arose between Sterling and Grossi concerning Grossi’s unpaid invoices and the manner in which Grossi would be compensated.  Grossi’s principal threatened to take over or destroy the website unless Grossi’s outstanding invoices (totaling in excess of one million dollars) were paid.  Although Sterling paid the invoices the next day, Grossi intimated that it would seek a new “fulfillment company” to service Sterling’s customers unless Grossi was paid on the terms it dictated going forward.

Sterling filed suit against Grossi, seeking an injunction to prevent Grossi from disabling the website or otherwise interfering with Sterling’s business operations. For its part, Grossi countered that Grossi and Sterling were joint venturers (basically partners) and that Grossi owned an interest in the dinarbanker.com website.  Grossi argued that a preliminary injunction would not maintain the status quo, but would instead provide an unfair advantage to Sterling with respect to the hotly contested issue of ownership and control of the website.  After a series of expedited hearings, the trial court entered an interlocutory injunction that required:  (a) Grossi to immediately transfer to Sterling all assets and information relating to dinarbanker.com; (b) Grossi to refrain from manipulating or interfering with any information associated with or generated by the website; and (c) Sterling to pay Grossi monthly for maintaining the website while the injunction was in place.  By its terms, the Order was to remain in place until final disposition of the case or further order of the court.

Grossi appealed, arguing that the injunction went beyond the mere maintenance of the status quo and effectively amounted to a final resolution on the merits.  In analyzing the appeal, the Court of Appeals outlined the following factors for determining whether injunctive relief was appropriate:

  1. There is a substantial threat of irreparable injury if an injunction is  not granted.
  2. The potential harm from not entering the injunction is outweighed by the potential harm from issuing it.
  3. The party seeking the injunction (here Sterling) has a substantial likelihood of prevailing on the merits.
  4. Issuing the injunction will not disserve the public interest.

Because of the discretionary nature of these factors, the Court of Appeals typically gives wide deference to a trial judge’s decision absent a “manifest abuse of discretion”.  After reviewing these factors and finding no abuse by the trial court, the Court of Appeals affirmed the trial court’s ruling, finding that the injunctive relief was an appropriate remedy.

What we can learn from this case?  The outcome of a preliminary injunction hearing can have lasting implications that may be determinative at trial.  Litigants would do well to prepare for a preliminary injunction hearing as if it were the final trial in the case.  In practical effect, it may well be.

Tags: injunction, injunction and trial, injunctive relief, interlocutory injunction, maintain status quo, permanent injunction, preliminary injunction hearing, status quo.