JOHN S. MARTIN, JR., United States District Judge
This action was commenced by one of the principal shareholders of New York.com Internet Holdings, Inc. (hereinafter "Holdings") seeking to enjoin the New York.com Operating Co., Inc. (hereinafter "Operating") from interfering with Holdings' ability to operate the web site New York.com.
There is no dispute that Holdings is the owner of the domain name New York.com. Operating contends, however, that it acquired the right to operate the web site pursuant to a Maintenance and Operations Agreement dated the 28th of January, 2002, between it and Holdings which was executed for Holdings by its then Chairman, Melvin Hardy, Jr. (hereinafter "the Operations Agreement"). Operating contends also that Mr. Stafford has no authority to maintain this lawsuit on behalf of Holdings.
A hearing was held on October 24, 2002, at which four of the five directors of Holdings testified: Thomas Stafford, Anthony Arrott, Melvin Hardy, Jr. and Leland Hardy. On the basis of the affidavits submitted prior to the hearing and the testimony of the witnesses, the Court finds that the Operations Agreement was never approved by Holdings' Board of Directors and its existence was not disclosed in a timely manner to two of the Directors. While the Defendants contend that the Operations Agreement was subsequently approved at a Special Meeting of the Board of Directors the evidence at the hearing persuades the Court that notice of this alleged meeting was never given to all of the directors.
To the extent the testimony of Anthony Arrott is inconsistent with any of the findings made herein, the Court rejects his testimony as unworthy of belief based not only on its assessment of his demeanor at the hearing, but also on the fact that he improperly transferred $25,000 out of Holdings' bank account in clear violation of an injunction issued by a federal judge in a related case.
DISCUSSION
In order to obtain a preliminary injunction, the moving party must show:
(a) that it will suffer irreparable harm in the absence of an injunction and (b) either (i)likelihood of success on the merits or (ii) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly in the movant's favor.
Tom Doherty Assoc., Inc. v. Saban Entm't, Inc., 60 F.3d 27, 33 (2d Cir. 1995) (citations omitted).
Here there can be little question that Plaintiff will be irreparably harmed if it is deprived of its right to control its internet site and Defendants apparently do not dispute that fact. Defendants contend, however, that Holdings has never authorized this action and, in any event, it is validly operating the web site under the Operations Agreement.
Turning first to the question of standing, it is clear that there is currently a sharp disagreement among the original directors of Holdings concerning the issues in this action. Arrott is a principal of Operating and strongly supports its claim that the Operations Agreement is valid and that this action has not been properly authorized. Stafford, Melvin Hardy, Sr. and Leland Hardy support this action and have attempted to remove Arrott from Holdings' Board.
Subsequent to the hearing, counsel for Arrott contacted the Court claiming that other directors were frustrating efforts to have presented to the Board a settlement of this action, which Arrott was proposing. Thereafter, the Court had a conference call with counsel during which the Court urged Plaintiff's counsel to agree to Defendants' counsel's request for a Board meeting. Within a day of the conference call Plaintiff's counsel advised the Court that his client would agree to hold a meeting of the Board to consider the settlement proposal and to decide whether the corporation wished to proceed with this action.
However, although e-mail notice of a Board meeting for this purpose was given on December 19th, Arrott, who was in his office, refused to participate in the conference call.
Therefore, the four other directors proceeded with the meeting at which they unanimously endorsed the continuation of this action and rejected Arrott's settlement offer.
On this record there is little doubt that Plaintiff will prevail on its contention that it is authorized to bring this action on behalf of the corporation. All of the directors other than Arrott have authorized this action and the only reason a meeting of the full Board did not take place is that Arrott unreasonably refused to participate, despite the representation of his counsel to the Court that he was anxious to have such a meeting.
In any event, this action was also authorized by Leland Hardy who, pursuant to a consent order in a related action in the Eastern District of Pennsylvania, was given the authority "to conduct the day to day business of the Corporation. . . ."
Turning to the merits of the claim, Plaintiff is likely to prevail on its claim that the self-dealing Operations Agreement is not valid. Section 3.8.2 of Holdings' by-laws requires a two-thirds vote of the Board of Directors to authorize the sale or disposition of substantially all of the assets of the corporation or of the domain name "New York.com Internet Holdings, Inc." The Plaintiff is likely to prevail on its claim that this provision renders the Operations Agreement invalid without authorization of the Board. The Court finds that there never was a duly called meeting of the Board that authorized or ratified the Operations Agreement. Even if one were to accept the testimony of Mr. Arrott that there was a duly called meeting of the Board which he attended along with Melvin Hardy, Sr. and Melvin Hardy, Jr. — testimony which the Court finds unworthy of belief — there could be no valid action on the Agreement because Arrott was deeply interested in the transaction and his interest was not disclosed to Melvin Hardy, Sr. There is also evidence that Melvin Hardy, Jr. also was an interested director since the corporate records of Operating indicate that Melvin Hardy, Jr. was a director of that corporation.
In sum, the Court finds that Plaintiff is likely to prevail on its claim that Arrott improperly transferred control of Holdings' website to an entity that he controlled and thereafter illegally stole $25,000 of Holdings' money. To allow someone like Arrott to control the operation of Holdings' web site would clearly cause Holdings irreparable damage.
For the foregoing reasons, the Defendants and anyone acting in conjunction with them are enjoined, pending final determination of this action, from taking any action that would interfere with the right of the Plaintiff to operate and control the operations of the New York.com web site and Defendants are ordered immediately to deliver to Plaintiff all passwords, records and other information necessary to permit Plaintiff to operate the New York. com web site.