Court Enjoins Transfer of Shares Pending Suit

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In a recent Business Litigation Session case, Tkhilaishvili v. Torosyan, Judge Kaplan enjoined the defendant from transferring the shares of an LLC pending the outcome of the case even though the Plaintiffs had failed to establish that they were likely to succeed on the merits.

The details in the reported decision are scant, but lurid. In 2014, the parties opened a suboxone clinic called Allied Health and entered an operating agreement defining their rights. Torosyan, who had provided all of the financing to open the clinic, had a unilateral right under the operating agreement to manage Allied until his contributions had been repaid. When the defendant brothers tried to threaten and intimate Torosyan, into relinquishing those contractual rights, in part by claiming that they had ties to the Russian mafia, Torosyan ousted them from Allied and purported to strip them of their ownership interests.

The Court denied the plaintiffs’ request for an injunction restoring their positions, noting that their affidavits were no more credible than Torosyan’s, but in a somewhat surprising move, nevertheless enjoined the transfer of any ownership interests in Allied pending the outcome of the case . The judge reasoned that such a transfer would make it difficult to “unscramble the eggs” should the Plaintiffs ultimately prevail.

In this unusual decision, Judge Kaplan may be attempting to avoid a situation similar to that in Allison v. Eriksson , where crafting the proper remedy was challenging when the plaintiff shareholder had slept on his rights for years by the time of trial (OCM represented the company and majority shareholder).

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