DATAPAK ASSOCIATES, INC. v. HOYNASH (S.D.N.Y. 2004)

RICHARD CASEY, District Judge

Plaintiff Datapak Associates, Inc. has brought an application for a preliminary injunction pursuant to Federal Rule of Civil Procedure 65 by way of an order to show cause. The parties submitted written briefs on the matter and the Court heard oral argument on October 4, 2004. For the following reasons, the application is DENIED.

Plaintiff is a New York corporation with its principal place of business in Greenlawn, New York, and was formed in 1987 by Bruce and Elin Anderson. Plaintiff develops, manufacturers, and markets component and replacement parts for the United States Navy Seahawk Helicopter Blade Restraint System ("Blade Restraint System"). Sometime in 2000, Plaintiff, through Bruce Anderson, agreed with Defendant Peter Hoynash to engage in a joint venture (although without any written contract) to develop new technology for the Blade Restraint System, which they intended to sell to the U.S. Navy. Defendant was to contribute his technological expertise to the enterprise, and was to be compensated by a share in the profits if the Navy purchased the new system.

Plaintiff had an agreement with Air Industries Machining Corp. ("Air Industries") under which Air Industries was to manufacture the materials and components necessary to develop prototypes of a new version of the Blade Restraint System. Air Industries was to ship those materials to Defendant, who would then assemble the prototypes. The parties had intended to present the prototypes to Navy representatives at a conference in Jackonsonville, Florida in March 2004. Defendant was also given certain documentation relating to the Blade Restraint System. According to Plaintiff, Air Industries delivered the component parts and documentation to Defendant, but Defendant unlawfully retained them and did not go to the conference in Florida as the parties had agreed he would.

Plaintiff maintains that representatives of the Navy told Bruce Anderson that it would not negotiate with Plaintiff until the dispute between the parties is resolved. Plaintiff further maintains that a preliminary injunction is necessary because there is an imminent threat that Defendant will sell or otherwise encumber Plaintiff's property, causing Plaintiff irreparable harm. Therefore, Plaintiff seeks to prohibit Defendant from using, offering, selling, assigning, or otherwise transferring the Blade Restraint System and its prototypes; to prohibit Defendant from representing to customers that he is the owner or developer of the system; and to prohibit him from reproducing or modifying Plaintiff's property in his possession.

Defendant contends that he invented the technology for the new Blade Restraint System and that the parties had agreed to form a new company, Datapak2, through which they would market the product. Datapak2 was apparently incorporated in North Carolina, but the parties abandoned its operation due to inability to agree on its management. Defendant's position is that he, not Plaintiff, is the rightful owner of the new Blade Restraint System.

A. Standard to Obtain a Preliminary Injunction

Plaintiff bears the burden of establishing: (1) irreparable harm, and either (2a) a likelihood of success on the merits or (2b) "sufficiently serious questions going to the merits of the case to make them fair ground for litigation and a balance of hardships tipping decidedly toward" Plaintiff. LaForest v. Former Clean Air Holding Co., 376 F.3d 48, 54 (2d Cir. 2004). Defendant argues that Plaintiff has failed to show that it will be irreparably harmed, and that it is likely to succeed on the merits or that there is a balance of hardships tipping toward it.

Irreparable harm means "injury for which a monetary award cannot be adequate compensation." Jackson Dairy, Inc. v. H.P. Hood Sons, Inc., 596 F.2d 70, 72 (2d Cir. 1979) (per curiam). The injury must also be "neither remote nor speculative, but actual and imminent." Rodriquez v. DeBuono, 175 F.3d 227, 234 (2d Cir. 1999) (internal quotation marks omitted). The threat of irreparable harm is the "single most important prerequisite for the issuance of a preliminary injunction," without which a preliminary injunction cannot be issued. Id. Plaintiff argues that monetary damages cannot compensate it for the harm that will occur if Defendant sells or encumbers the prototypes and related property. In addition, it argues that the loss of business to Plaintiff that will result from Defendant's selling or transferring the property is unquantifiable.

Plaintiff has presented no evidence that transfer, sale, or encumbrance of the assets is imminent. It has not shown that Defendant has entered into any agreement, or is seeking to enter into any agreement, to sell the system. It merely asserts that because Defendant has the prototypes and related assets and that he has attempted to sell the new Blade Restraint System to the U.S. Navy. Plaintiff has not offered any evidence to bolster this claim, however. Conclusory statements are an insufficient foundation on which to find irreparable harm. See Baker's Aid v. Hussmann Foodserv. Co., 830 F.2d 13, 16 (2d Cir. 1987);Awosting Reserve LLC v. Chafin/Light Assocs. Co., 296 F. Supp.2d 470, 473 (S.D.N.Y. 2003). Plaintiff has not shown that it will suffer actual and imminent injury if the Court does not issue a preliminary injunction.

Even assuming Plaintiff had established the threat of irreparable harm, it has not demonstrated likelihood of success on the merits or a balance of hardships tipping in its direction. Plaintiff did not cite any law in its complaint, in its moving papers, or at oral argument in support of its argument that it is likely to succeed on the merits of this suit. It has not articulated any legal theory nor even the applicable jurisdiction's law under which it is suing. Plaintiff's argument and documentary proof center on its ownership of the assets that went into making the prototypes — the component parts and documentation. At oral argument, Defendant offered to return all of the materials that Air Industries shipped to him on Plaintiff's behalf. Thus, the relevant dispute is over the ownership of the rights to the new Blade Restraint System, not merely the pieces from which Defendant assembled the prototypes. On that issue, Plaintiff has presented no evidence of ownership, and certainly not enough to show a likelihood of success on the merits.

Plaintiff may satisfy its burden by demonstrating that fair grounds for litigation exist and that the balance of hardships tips decidedly in its favor. See LaForest, 376 F.3d at 54. But the balance is even here. Both parties would suffer the same harm were the Court to rule against them on this application — the losing party would be unable to market the system that each claims to have invented. In any event, a preliminary injunction would not ameliorate Plaintiff's asserted hardship. Plaintiff asserted at the hearing in this matter that the U.S. Navy has refused to deal with it regarding the new Blade Restraint System until the parties resolve their dispute. A preliminary injunction would merely prevent Defendant from selling the system to the Navy, which seems to be the only potential customer. Given the Navy's position that it will not deal with Plaintiff until the dispute is resolved, it is highly unlikely that it would negotiate with Defendant either. Thus, Plaintiff has not shown that the balance of hardships tips decidedly in its favor.

Plaintiff has failed to meet its burden to obtain a preliminary injunction and therefore its application is DENIED. Because the factual situation may change, however, the application is denied without prejudice.