Ayro Communications, Inc. v Jaymer Communications Corp.

[*1] Ayro Communications, Inc. v Jaymer Communications Corp. 2005 NY Slip Op 50151(U) Decided on February 9, 2005 Supreme Court, Kings County Harkavy, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on February 9, 2005
Supreme Court, Kings County

Ayro Communications, Inc. d/b/a 1 800 Locksmith f/k/a Metro-Lock Inc.,, Plaintiffs

against

Jaymer Communications Corp., et ano., Defendants



38836/04

Ira B. Harkavy, J.

Upon the foregoing papers, plaintiff Ayro Communications, Inc. d/b/a/ 1 800 LOCKSMITH f/k/a Metro-Lock Inc. (plaintiff or Ayro), moves for a preliminary injunction:

1) enjoining and restraining defendants, and all persons acting on their behalf, from transferring, conveying, or disposing of the telephone number 1 800 LOCKSMITH (the Number), or any property rights relating thereto in the State of New York;

2) compelling and directing defendants, and all persons acting on their behalf, to perform and provide such necessary services so as to preserve the Number;

3) enjoining and restraining defendants, and all persons acting on their behalf, from interfering with plaintiff's use of the Number within the State of New York; [*2]

4) compelling and directing defendants, and all persons acting on their behalf, to restore to plaintiff 24 hour a day call-forwarding services of telephone calls made to the Number within the State of New York;

5) enjoining and restraining defendants, and all persons acting on their behalf, from in any way using the Number within the State of New York;

6) compelling and directing defendants, and all persons acting on their behalf, to place any and all monies received by them from any licensee of the Number, including Suffolk Locksmith and United Locksmith, into a separate and segregated escrow bank account held by plaintiff's attorney; and

7) compelling and directing defendants to transfer and assign any and all of defendant's rights, title and interest in the Number within the State of New York to plaintiff upon the payment of $29,000.

Defendants Jaymer Communications Corp. and Jacob Goldberg oppose the instant motion on the ground that plaintiff has not made the requisite showing entitling it to the injunctive relief sought.

In the instant action, plaintiff seeks specific performance of an agreement pursuant to which defendants allegedly agreed to transfer all rights, title and interest in the Number to plaintiff. In an affidavit submitted by plaintiff in support of the instant motion for a preliminary injunction, Avi Aharon, the president of Ayro, states that in December 2002, Ayro entered into an agreement with Goldberg's company, 1 800 LOCKSMITH 1994 Inc., by which Ayro was to license the use of the Number for Manhattan. The license allegedly gave Ayro exclusive use of the Number within said geographic area. Between December 2002 and March 2003, Aharon claims that Ayro paid the requisite monthly licensing fees which totaled $12,000.

In January 2003, Aharon states that Goldberg approached him with regard to licensing other areas to Ayro, including Queens County and Bergen County. Licensing agreements for these geographic areas were executed by the parties in early January 2003. Aharon alleges that said licensing agreements were not to become effective until April 2003.

However, Aharon claims that because business volume pursuant to the Manhattan license during the months of December 2002, January 2003 and February 2003, had proven to be less than what Goldberg had represented, Ayro decided to terminate all licensing agreements previously entered into with Goldberg's company.

After Ayro informed Goldberg of its desire to terminate the licenses, Goldberg allegedly offered to sell to Ayro all rights, title and interests in the Number within the State of New York. Aharon claims that the parties agreed upon an (unspecified) purchase price that was to be paid in full by January 2005. A down payment of $100,000 by Ayro was required. In addition, Goldberg allegedly agreed that the $12,000 paid by Ayro between December 2002 and March 2003, pursuant to the licenses, would be credited against the purchase price. In April 2003, Ayro allegedly paid Goldberg the down payment of $100,000. After Ayro purportedly tendered the $100,000 down payment in April 2003, [*3]Goldberg allegedly contacted the telephone company and instructed it to forward all calls made to the Number within the State of New York to Ayro's telephone number. At about the same time, Goldberg allegedly changed the name of his company from 1-800-Locksmith 1994, Inc. to Jaymer Communications, Inc. He also allegedly changed the phone number on his invoices from the Number to 1-800- 522-1105.

Ayro claims that it invested over $120,000 in promoting the number through advertising and marketing. In August 2003, Ayro filed a Certificate of Assumed Name as 1 800 LOCKSMITH. Ayro also changed the name of its three stores to 1 800 LOCKSMITH.

Between April 2003 and October 2003, Ayro allegedly continued to pay down the purchase price and had exclusive use of the Number within the state of New York with the exception of two pre-existing licensees, United Locksmith which serviced Bronx County and Suffolk Locksmith which serviced Suffolk County. Allegedly both United Locksmith and Suffolk Locksmith paid their licensing fees to Ayro. Aharon claims that on average, Ayro remitted $7,500.00 monthly to Goldberg to pay down the purchase price for the Number.

Aharon claims, however, that in July 2004, for the first time, Goldberg demanded minimum monthly payments of at least $3,000 to pay down the purchase price and wanted such payments to be made no later than the 15th of every month. For the first time, the purchase agreement between the parties was memorialized in a letter agreement dated July 15, 2003. The letter agreement states as follows:

Balance as of 7/15/2004 $47,000.00

1) Beginning August 1, 2004, $3000.00 minimum payment to be made each month due the 1st day of the month with a grace period to the 15th of each month.

1a) If monthly payment is not received by the 15th of each month (excluding August 2005 payment) a $300.00 late charge will apply to each late payment.

2) Balance must be paid in full by August 31, 2005; otherwise late payment charge of $500.00 per day will apply.

2a) After 90 day of penalty, agreement will go into default and will be cancelled.

3) If necessary, a balloon payment will be made in August 2005 to pay any remaining balance due.

4) At the completion of said payments [Ayro] and Avi Aharon, Yaron Aharon and Rafi Aharon will own [the Number] and its area codes in the New York State only, and can operate and control said phone number using their own methods. [*4]

Above agreement subject to the approval of Norman S. Langer Esq.

Aharon claims that in October 2004, at which time Ayro owed only $39,000 toward the purchase price, Goldberg sought to control the influx of calls to the Number and to personally decide which calls should be transferred to Ayro. Ayro refused to install a screening system to comply with this request. On November 3, 2004, Ayro allegedly made a payment of $10,000 toward the purchase price, leaving an outstanding balance of $29,000.

Aharon alleges that on November 10, 2004, he discovered that Goldberg had contacted the telephone company and cancelled Ayro's call-forwarding service. Accordingly all calls to the Number were re-directed to Goldberg's personal telephone line. When confronted, Goldberg allegedly stated that he would not transfer the Number under any circumstances.

In opposition to the instant motion, defendants present an entirely different version of their business relationship and agreements with plaintiff. In is affidavit, Goldberg asserts that plaintiff entered into license agreements with defendants with regard to the use of the Number in Manhattan, Brooklyn, Queens and Bergen County, New Jersey. Goldberg claims that plaintiff failed to make timely monthly payments as required by the license agreements, refused to pay any additional call charges as required by said agreements and improperly entered into a license agreement with Advanced Lock and Security for its use of the Number in Staten Island even though plaintiff had no right to utilize the Number in said geographic area. Moreover, Goldberg alleges that plaintiff violated the subject license agreements by providing improper services to customers, whose complaints were forwarded to Goldberg.

Goldberg also maintains that no valid agreement exists whereby Goldberg agreed to transfer all rights and interests in the Number for New York State to Ayro. In regard to the July 15, 2003 letter agreement between the parties, Goldberg asserts that such agreement is not enforceable since its terms were subject to the approval of defendants' attorney and said approval was never obtained by the parties.

It is well established that a party seeking a preliminary injunction must demonstrate the probability of success on the merits, danger of irreparable harm in the absence of an injunction, and a balance of the equities in his or her favor (Aetna Ins. Co. v Capasso, 75 NY2d 860, 862 [1990]; Doe v Axelrod, 73 NY2d 748, 750 [1988]; Sheffield Towers Rehabilitation and Health Care Ctr. v Novasso, 293 AD2d 182, 185 [2002]; Neos v Lacey, 291 AD2d 434, 435 [2002]; State v Premier Color of NY, Inc., 285 AD2d 544 [2001]; State v Sour Mountain Realty, Inc., 276 AD2d 8, 15 [2000]; Klein, Wagner & Morris v Klein, 186 AD2d 631, 632 [1992]; Northeast Hotel Assocs. v Natl. Advertising Co., 155 AD2d 520, 521 1989]). "Moreover, the remedy of granting a preliminary injunction is a drastic one which should be used sparingly, and which will not be granted absent a showing that there is a clear right to such relief on the undisputed facts presented" (Schneider Leasing Plus, Inc. v Stallone, 172 AD2d 739, 740 [1991] [internal quotation marks and citations omitted], lv dismissed 78 NY2d 1043 [1991]; see also William M. Blake Agency, Inc. v Leon, 283 AD2d [*5]423, 424 [1991] ["preliminary injunctive relief is a drastic remedy which will not be granted unless a clear right thereto is established under the law and the undisputed facts upon the moving papers, and the burden of showing an undisputed right rests upon the movant"] [internal quotation marks and citations omitted]; Romance Bridals v 1385 Broadway Co., 43 AD2d 544 [1973]["clear legal right to the relief sought" must be demonstrated to obtain preliminary injunctive relief]). "Bare conclusory allegations are insufficient to support a motion for a preliminary injunction" (Kaufman v Intl. Business Machines Corp., 97 AD2d 925, 926 [1983], aff'd 61 NY2d 930 [1984]). Rather, the proof establishing the foregoing elements "must be by affidavit and other competent proof, with evidentiary detail" and "[i]f key facts are in dispute, the relief will be denied" (Faberge Intl v Di Pino, 109 AD2d 235, 240 [1985]).[FN1]

The court is mindful, however, that "it is not for this court to determine finally the merits of an action upon a motion for preliminary injunction; rather, the purpose of the interlocutory relief is to preserve the status quo until a decision is reached on the merits" (Gambar Enterprises, Inc. v Kelly Servs., Inc., 69 AD2d 297, 306 [1979] [internal quotation marks and citation omitted]). Therefore, a preliminary injunction may also be granted where injunctive relief is deemed necessary to maintain the status quo, even if the movant's success on the merits cannot be determined at the time that the application for a preliminary injunction is brought (Mr. Natural, Inc. v Unadulterated Food Products, Inc., 152 AD2d 729, 730 [1989] ["the existence of a factual dispute will not bar the granting of a preliminary injunction if one is necessary to preserve the status quo and the party to be enjoined will suffer no great hardship as a result of its issuance"]; accord U.S. Ice Cream Corp. v Carvel Corp., 136 AD2d 626, 628 [1988]; Burmax Co. v B & S Indus., Inc., 135 AD2d 599, 600 [1987]). Moreover, "where . . . the denial of injunctive relief would render the final judgment ineffectual, the degree of proof required to establish the element of likelihood of success on the merits should be reduced" (State v City of New York, 275 AD2d 740, 741 [2000]; Republic of Lebanon v Sotheby's, 167 AD2d 142, 145 [1990][same]; see also Bisca v Bisca, 108 Misc 2d 227, 233 [1981]["(where) the purpose (of a preliminary injunction) is only to preserve the status quo, the strength and clarity of plaintiff's showing in support of the application as to his or her probabilities of success in the action, are not so important"]).

As a result, a preliminary injunction to maintain the status quo may be granted even where the court "ha[s] grave doubts regarding the likelihood of plaintiff['s] success on the merits" as long as the court finds that "if [the] preliminary injunction is not granted, any [*6]subsequent judgment might be rendered ineffectual" (Schlosser v United Presbyterian Home at Syosset, Inc., 56 AD2d 615 [1977]). Generally, such a preliminary injunction is granted where injunctive relief will prevent the potential dissolution of an existing valuable asset or some comparable potential irreparable harm (see e.g. Mr. Natural Inc., 152 AD2d at 730 [preliminary injunction necessary to maintain status quo despite factual disputes as to merits of claim where "there (was) no assurance that the plaintiff (would) be able to stay in business pending trial" and was in "real danger of losing its business or suffering dissolution" if injunctive relief were not imposed]; U.S. Ice Cream Corp., 136 AD2d at 628 [finding preliminary injunction necessary to maintain status quo where there was "no assurance that the plaintiffs (would) be able to stay in business pending trial" and noting that interference with an ongoing business warranted injunctive relief even where factual disputes exist]; Burmax Co., Inc., 135 AD2d at 600 [preliminary injunction enjoining the distribution of assets was appropriate where injunctive relief was necessary to preserve the status quo and "the defendants w(ould) suffer no great hardship as a result of the issuance of the preliminary injunction"]).

As an initial matter, plaintiff's request for injunctive relief is overbroad. In essence, plaintiff seeks from this court not only an order restraining defendants from transferring, conveying or disposing of the Number, but also an order which effectively compels the specific performance by defendants of an alleged agreement to transfer to plaintiff its ownership rights in the Number for New York State. It is axiomatic that a preliminary injunction is merely a provisional remedy and "[i]ts function is not to determine the ultimate rights of the parties, but to maintain the status quo until there can be a full hearing on the merits" (Wellbilt Equipment Corp. v Red Eye Grill, L.P., 308 AD2d 411 [2003]; see also Olympic Tower Condominium v Cocoziello, 306 AD2d 159, 160 [2003]). As this court cannot make a determination on such issues of "ultimate rights" without a full hearing (see Wellbuilt Equipment Corp., 308 AD2d at 411), it is constrained to deny any form of injunctive relief sought by plaintiff herein which would necessitate a summary finding by the court that plaintiff is entitled to judgment on its underlying specific performance claim.

To the extent that plaintiff seeks an order from the court enjoining and restraining defendants, and all persons acting on their behalf, from transferring, conveying, or disposing of the Number within the State of New York, such injunctive relief is hereby granted to preserve the status quo. In support of their respective positions, plaintiff and defendants have submitted inconclusive and contradictory documentary evidence, and conflicting affidavits which present sharp disputes of fact in regard to the alleged business relationship and agreements between the parties.

Moreover, it is well settled under New York law that when the language of the subject contract makes the agreement subject to the approval of attorneys, then the contract is not binding and enforceable until approved (see Pepitone v Sofia, 203 AD2d 981 [1994]). In addition, "if the contract is incomplete and it is necessary to resort to parol evidence to ascertain what was agreed to, the remedy of specific performance is not available" (O'Brien [*7]v West, 199 AD2d 369 [1993]). The court notes that the only writing which purportedly memorializes the claimed purchase agreement between the parties is the July 15, 2003 letter agreement which, by its terms, requires the approval of defendants' attorney and omits any mention of a purchase price for the Number. Such attorney approval was apparently never obtained and plaintiffs have not presented any evidence of a purchase price or other related items which would allow this court to ascertain the full terms of the alleged agreement between the parties. Given the dearth of evidence in this regard, the plaintiff has not established a likelihood of its ultimate success on the merits. Although the letter agreement, which appears to contain a reference to an outstanding purchase price balance, and other evidence, suggests the existence of issues concerning part performance by plaintiff, or perhaps even quasi-contract or reliance with regard to the alleged agreement between the parties, such factual questions do not bolster plaintiff's contention as to its likelihood of success on the merits, but rather militate against the grant of the requested injunctive relief.

Accordingly, under the circumstances of this matter and upon the facts presented, the court finds that plaintiff has failed to satisfy its high burden of establishing, based upon the undisputed facts, a clear right to the relief sought (see Romance Bridals, 43 AD2d at 544). The inconclusive nature of the evidence presented by plaintiff, coupled with the contradictory evidence adduced by defendants, presently requires the court to resort to inappropriate speculation, guesswork, conjecture and assessments of credibility in order to determine the ultimate likelihood of plaintiff prevailing on its specific performance cause of action. The existence of such factual disputes, however, will not bar this court from granting a preliminary injunction if one is necessary to maintain the status quo and the party to be enjoined will suffer no great hardship as the result of its issuance (see Mr. Natural, Inc., 152 AD2d at 279; U.S. Ice Cream Corp., 136 AD2d at 628; Burmax Co., Inc., 135 AD2d at 600).

In the instant case, the court finds that the "purpose of a preliminary injunction . . . to maintain the status quo and prevent the dissipation of property that could render a judgment ineffectual" (Moy v Umeki, 10 AD3d 604 [2004]) would be well served by the grant of a preliminary injunction prohibiting defendants from transferring, conveying or disposing of the Number. If the Number is transferred, conveyed or disposed of, there is a danger of irreparable harm to plaintiff for which money damages would not be a sufficient remedy. If plaintiff prevailed in its action, only to be prevented from obtaining the Number due to its conveyance or transfer to a third party, a judgment granting plaintiff specific performance on the alleged purchase agreement for the Number would be rendered wholly ineffectual. Also, there is no evidence that such injunctive relief would impose a hardship upon defendants.

In addition, plaintiff also claims that unless it is allowed to use the Number for New York State, and gain business therefrom, during the pendency of the action, it will go out of business and any subsequent judgment in its favor will be rendered moot. Although there is no allegation that the Number, the item which is the real subject of this lawsuit, is in danger of loss or destruction or is otherwise subject to dissolution or to any diminution in [*8]value, there is some undisputed evidence that plaintiff has expended money and effort to advertise and market the Number and defendant has not refuted plaintiff's allegations that it was using the Number for New York State prior to defendants' alleged routing of the Number to their own phone line. The Number itself may, therefore, survive the instant action intact, but an ultimate judgment granting ownership of the Number to plaintiff could nonetheless be rendered ineffectual if plaintiff is not able to stay in business pending such judgment and, as a result, no longer has the funds, business structure or employees necessary to utilize the Number. Moreover, the court finds that the posting of an adequate bond by plaintiff will ameliorate any potential hardship which would accrue to defendants as the result of the grant by this court of injunctive relief in regard to the continued use by plaintiffs of the Number. Accordingly, preliminary injunctive relief identical to that previously issued by this court in the temporary restraining order dated December 8, 2004, which directed that all calls made to the Number in New York State be forwarded and routed to plaintiff, is hereby granted.

As a result, plaintiff's motion for a preliminary injunction is granted to the extent that:

(a) defendants and all persons acting on their behalf are enjoined and restrained from transferring, conveying, or disposing of the Number during the pendency of the instant action; and

(b) upon the posting of an additional bond in the amount of $50,000.00, all calls made to the Number in the State of New York shall be forwarded and routed directly to the plaintiff during the pendency of the instant action. The bond previously filed in conjunction with the TRO issued by this court on December 8, 2004 shall remain in effect, for a total bond posting by plaintiff of $100,000.00. The temporary restraining order issued by this court on December 8, 2004 is hereby vacated and superseded by the instant decision and order.

The foregoing constitutes the decision and order of the court.

E N T E R ,

J. S. C. Footnotes

Footnote 1: CPLR 6312 (c), was amended in 1996, and provides as follows: (c) Issues of fact. Provided that the elements required for the issuance of a preliminary injunction are demonstrated in the plaintiff's papers, the presentation by the defendant of evidence sufficient to raise an issue of fact as to any of such elements shall not in itself be grounds for denial of the motion. In such event the court shall make a determination by hearing or otherwise whether each of the elements required for issuance of a preliminary injunction exists.