CNL-AB, LLC v. Eastern Property Fund I SPE (MS FEF) LLC, C.A. No. 6137-VCP (Del. Ch. Jan. 28, 2011), read opinion here.

Short Overview.

Motion for TRO or Injunction denied.  Investors were unsuccessful in their attempt to restrain a mezzanine creditor’s foreclosure proceeding on collateral securing its loan.  The emergency request for relief was barred by laches. Substantial space in the opinion was devoted to the “alphabet soup” of entities and overlapping ownership structures of the various parties involved.

Procedural History

Jan. 19, 2011 – Complaint filed seeking expedited trial on injunctive relief

Jan. 21, 2011 – Counterclaim filed seeking TRO and appointment of receiver pendente lite

Legal Issues Addressed

The opinion provides an excellent review of Delaware’s TRO standard and the nuances of timing, and how the TRO prerequisites compare to related criteria for a preliminary injunction.  See footnotes 67 to 72. The Court applied each of the TRO criteria to the facts in its thorough analysis.

There is a noteworthy discussion of the “irreparable harm” element for injunctive relief, may be found to have been satisfied “in cases where an after-the-fact attempt to quantify damages would involve a costly exercise in imprecision and would not provide full, fair and complete relief for the alleged wrong.”  See footnote 108.

However, a “lost opportunity” to “realize speculative gains sometime in the future is too ephemeral to serve as the basis for irreparable injury under Delaware law” [as in this case].  See footnote 119,

Laches was successfully asserted to bar a TRO request based on the facts of this case.  The elements for a TRO are juxtaposed in terms of how those elements relate to the reason why the Court found laches did bar a TRO in this case. See footnotes 51 to 55.

A mere two week delay in this matter constituted laches for purposes of seeking a TRO in this matter, and the exception for "settlement negotiations" did not apply to the facts of this case because the Court was not persuaded that despite “assertions” to the contrary, there was any realistic chance (in the Court’s view), of any earlier amicable resolution. See footnotes 62 to 65.

That delay left the parties and the Court only 6 days to prepare for a preliminary injunction hearing, and the Court found that delay prejudiced both the parties and the Court; and left “virtually no time for appeal" if one were to be taken.