Understanding Injunctions in Business Disputes
Consider these nightmare scenarios. Your former top grossing salesman has been hired by your largest competitor and is trying to poach your best customers. Days after an IT contractor upgrades your systems, you discover one of its employees has posted your top-secret design for a new product for sale on an internet forum. With your own delivery commitments hanging in the balance, a critical supplier threatens to dump your order for thousands of components on the open market unless you renegotiate a purchase price.
Crises like these can pose an immediate existential threat to your business. Even if you win a judgment for money damages at some point in the future, that won't necessarily solve your problem today or make you whole. You need to put a stop to the bad behavior right away so that your business can survive, and then, later, put protections in place to prevent the same crisis from happening again.
In other words, you probably need a court to issue an "injunction."
Broadly speaking, an injunction is a court order directing a party to do, or not to do, something specific. To get an injunction, you need to show a court that there's a specific need for the order you want, that your need outweighs the impact on the other party and the public, and that if the dispute continues all the way through discovery, motions and (maybe) a trial, it's more likely than not that you'd win. Injunctions carry the authority of a court, meaning that the party being enjoined has to comply or risk severe sanctions.
In this article, we describe the three basic forms of injunctions, and how each can be deployed to address a threat to your business that money damages alone won't solve.
Temporary Injunction (a.k.a. "Temporary Restraining Order")
A temporary injunction (or "temporary restraining order," or "TRO") is the order your business litigator asks the court to issue on an emergency basis to "stop the bleeding." It is a particularly time-sensitive, labor-intensive, and aggressive form of an injunction, characterized by two unique and unusual features. First, it can be issued ex parte, meaning that the persons affected by the injunction -- the business rival, rogue ex-employee, thieving contractor, etc. -- need not know you've requested it or be given an opportunity to respond, before the court acts, so long as they instead receive immediate notice once the injunction is issued and they have the opportunity to come into court to challenge it soon after. Second, because a TRO can have such an immediate and extraordinary impact on the people and entities being enjoined, it is time-limited, remaining in effect only so long as it takes for the parties to appear before the court to discuss whether longer-term relief is needed.
A preliminary injunction is one of those forms of longer-term relief. Its purpose is to preserve the status quo between the parties while a court process plays out over weeks, months or longer. In a "stop the bleeding" scenario where a TRO was granted, your lawyer may ask for a preliminary injunction essentially to serve as an extension of the TRO over the course of the lawsuit. Alternatively, in situations that aren't so dire and your business litigator has advised against asking the court for a TRO, you may still request a preliminary injunction to prevent your opponent from taking particular actions that harm your business while your lawsuit against them is pending.
Sophisticated business litigators will often advise their clients to request a preliminary injunction in order to speed up the resolution of a business dispute. That's because a court, in weighing your request for a preliminary injunction, has to hear arguments from both sides about the probability of you ultimately winning your lawsuit. As a result, proceedings on a request for a preliminary injunction often resemble a "mini-trial" at which the court hears from witnesses, reviews documentary evidence, and considers legal arguments. The "mini-trial" isn't as thorough as the full-blown trial you might have after months of discovery and legal motions, but it's enough to allow the court to get a handle on the facts and the law. The court's decision on whether to issue a preliminary injunction then typically signals whether the court thinks you are likely win your case down the road, which in turn often helps to push the parties to a prompt settlement.
A permanent injunction, as the name implies, orders a party to do something, or not do something, permanently, and is usually only entered at the end of a lawsuit when a court has heard all of the evidence and legal arguments (either through motions or at a trial). A permanent injunction is generally an option for the court any time money damages alone will not do justice for the winning party in a lawsuit. The permanent injunction may simply make the terms of a preliminary injunction permanent, but it can also contain other provisions, and can even be awarded when no preliminary injunction was requested or issued.
At Hendershot, Cannon & Hisey, P.C., our experienced business litigators have counseled clients through every phase of asking courts for injunctions to address a business crisis. We've helped clients deal with breach of contract cases, business disputes, and much more. To learn how we can help the next time your business faces a nightmare scenario, contact us today.