On December 11, 2024, Justice Chan of the New York County Commercial Division issued a decision in Metcalf v. Safirstein Metcalf, LLP, 2024 NY Slip Op. 34381(U), denying a motion for a preliminary injunction because the plaintiff was seeking money damages, even though the funds sought were in an escrow account, explaining:
It is well settled that the ordinary function of a preliminary injunction 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. A preliminary injunction is a drastic remedy, which should not be granted unless the movant demonstrates a clear right to such relief. To be entitled to a preliminary injunction, a party must establish three elements: (1) a likelihood of success on the merits, (2) irreparable injury if the preliminary injunction is withheld, and (3) a balance of equities tipping in its favor. If any one of these three requirements is not met, the motion must be denied. . . .
Here, Metcalf has failed to establish a clear right to injunctive relief. As explained below, even assuming Metcalf had established a likelihood of success on the merits based on her affirmation’s recitation of facts and its accompanying exhibits, she has failed to demonstrate that she would suffer irreparable harm in the absence of an injunction.
In general, to establish irreparable harm, a party seeking a preliminary injunction must demonstrate that its potential damages are not compensable in money and capable of calculation. If a claim is compensable by money damages, a preliminary injunction is not appropriate. This is because, until a judgment is entered, a plaintiff has no rights as against the property of the defendant and thus no legal right to interfere with the defendant in the use and sale of the same.
Metcalf concedes, as she must, that the injunctive relief she seeks is monetary in nature. Indeed, Metcalfs motion, if granted, would result in the immediate release of her purported 50% share of the Namenda Matter funds being held in the IOLA Account. Metcalf nevertheless contends that an injunction is appropriate and warranted here because the at-issue funds fall within identifiable-proceeds exception to the above-referenced general rule.
New York courts have recognized that where the monies involved in an application for injunctive relief are identifiable proceeds, the moving party can establish irreparable harm. However, to constitute identifiable proceeds, there must be a specific, identifiable fund and an obligation to return or otherwise treat in a particular manner the specific fund in question. In making this assessment, courts must distinguish between funds that can be identified and identifiable funds that carry with them some requirement to be treated in a certain manner. Moreover, where proceeds are not the subject of the action, and an injunction would be incidental to and purely for the purposes of enforcement of the primary relief sought here, a money judgment, courts will not invoke the identifiable proceeds exception.
Here, Metcalf maintains that the funds in the IOLA Account are readily identifiable proceeds constituting the remainder of the attorneys’ fees and reimbursed expenses for the Namenda Matter that were deposited by Safirstein in 2023. Metcalfs contentions, however, are belied by three independent, yet equally dispositive, reasons.
First, although she appears to downplay its relevance in making her motion, there is plainly a sharp dispute regarding the funds to which SM LLP and SL, and consequently Metcalf, Safirstein, and possibly Feerick, are entitled from not only the Namenda Matter but also other pre· and post-dissolution litigation handled by SM LLP and SL. Metcalfs mandatory injunctive relief would therefore improperly disrupt, rather than maintain, the status quo pending litigation of various disputed issues going to the ultimate relief sought by Metcalf.
. . . All told, resolution of the parties’ disputes will implicate both the amount of funds in the IOLA Account and the corresponding distribution. Hence, while there may be a sum certain that was deposited into the IOLA Account related to the Namenda Matter, the present record does not support a conclusion that Metcalf has a clear right to have the funds currently held in the IOLA Account be treated in the particular manner for which she advocates.
Second, and more critically, even if the funds from the Namenda Matter were identifiable, Metcalf has also failed to establish that they are the subject of the action. To the contrary, the proper allocation of fees and reimbursements from the Namenda Matter is just one of several fee allocation disputes underlying Metcalfs accounting and breach of fiduciary duty causes of action. Consequently, the injunctive relief sought by Metcalf is purely incidental to the broader accounting dispute, and thus, if granted, it would do nothing more than serve as an early enforcement of the accounting and monetary relief being sought by Metcalf.
Finally, the fees and reimbursements from the Namenda Matter are apparently not the only funds deposited in the IOLA Account, and there is no indication that these funds have been segregated on a matter-by-matter basis or solely for Metcalf s benefit. Although its timing is disputed, such commingling nonetheless has real consequences as to the identifiability of proceeds because an IOLA account is typically an unsegregated interest bearing deposit account with a banking institution for the deposit by an attorney of qualified funds. Accordingly, in the absence of any indication that the IOLA Account is segregated, Metcalfs purported funds do not appear to be, at present, specifically identifiable.
. . .
In sum, for each of the aforementioned reasons, Metcalf has failed to establish irreparable harm insofar as her claimed losses can be fully redressed through monetary damages. The court therefore denies Metcalfs application for a mandatory preliminary injunction.
(Internal quotations and citations omitted).