The opinion of the court was delivered by: Lechner, District Judge.
The statements of Philip J. Pirro ("Pirro"), Executive Vice
President of Marsellis-Warner, are not to the contrary. Upon the
commencement of his employment in June 1994, Pirro audited all
jobs of Marsellis-Warner. See Pirro Aff. at ¶ 2. According to
Pirro, an audit of the jobs under the control of Rabens and Jack
Fernandez revealed the following suspect activities:
Id. at ¶¶ 2-3.
It additionally appears Marsellis-Warner undertook reasonable
steps to investigate the activities of the Defendants. On the
basis of the suspicions of Pirro and Amsterdam concerning the
activities of Rabens and Jack Fernandez, Robert Shockley
("Shockley") was hired in February 1998 as a general supervisor
to monitor the activities of the South Jersey Office. See
Shockley Aff. at ¶ 2.*fn14 Shockley stated that immediately
after assuming his monitoring duties, he encountered hostility
from Rabens and Jack Fernandez:
Id. at ¶¶ 3-5.
The extent and exact nature of the alleged fraud was not
uncovered, however, until Bennett came forward. See Amsterdam
Aff. at ¶ 3. It appears Marsellis-Warner reasonably relied to its
detriment on the alleged fraudulent timesheets and invoices and
other misstatements. See id.; see also Complaint at ¶¶ 23-24.
During the period of employment, "the employee has a duty not
to compete with the employer's business." Chernow, 239
N.J.Super. at 204, 570 A.2d 1282 (citing United Board & Carton
Corp. v. Britting, 63 N.J. Super. 517, 524, 164 A.2d 824 (1959)).
The solicitation of customers or potential customers of an
employer or comparable competitive acts constitutes a breach of
an employee's duty of loyalty. See Cameco, 299 N.J.Super. at
214, 690 A.2d 1051; Auxton Computer Enterprises, 174 N.J.Super.
at 423-24, 416 A.2d 952 ("[An employer] may not solicit his [or
her] employer's customers for his [or her] own benefit before he
[or she] has terminated his [or her] employment. Nor may he [or
she] do other similar acts in direct competition with the
employer's business."); see also Subcarrier Communications, Inc.
v. Day, 299 N.J. Super. 634, 645, 691 A.2d 876 (App. Div. 1997)
(quoting Auxton Computer Enterprises, 174 N.J.Super. at 423-24,
416 A.2d 952).
Marsellis-Warner appears to have alleged conduct constituting a
breach of fiduciary duty. Rabens and Jack Fernandez, selected by
Marsellis-Warner to manage and oversee the projects of the South
Jersey Office, were delegated control over the office without
expectation of interference or monitoring on the part of
Marsellis-Warner. Consequently, Rabens and Jack Fernandez owed
Marsellis-Warner the strictest duty of good faith and loyalty.
See Silverstein v. Last, 156 N.J. Super. 145, 152, 383 A.2d 718
(App. Div. 1978).
It also appears, at this stage, Marsellis-Warner has stated a
claim for conversion. The fourth count of the Complaint alleges,
inter alia, the conduct of the Defendants constitutes common
law conversion. Complaint at ¶ 39.
Common law conversion under New Jersey law is defined as "the
exercise of any act of dominion in denial of another's title to .
. . chattels, or inconsistent with such title." Mueller v.
Technical Devices Corp., 8 N.J. 201, 207, 84 A.2d 620 (1951);
see Huffmaster v. Robinson, J.A., 221 N.J. Super. 315, 323,
534 A.2d 435 (Law Div. 1986) (quoting Life Ins. Co. of Va. v.
Snyder, 141 N.J. Super. 539, 545, 358 A.2d 859 (App. Div. 1976)
("Conversion is `the wrongful exercise of dominion and control
over the property of another in a manner inconsistent with that
other person's rights.'"); see also McAdam v. Dean Witter
Reynolds, Inc., 896 F.2d 750, 771 (3d Cir. 1990) (citing, inter
alia, Life Ins. Co. of Va., 141 N.J.Super. at 545, 358 A.2d 859
and Mueller, 8 N.J. at 207, 84 A.2d 620); Communications
Programming, Inc. v. Summit Mfg., Inc., No. Civ. A. 98-253, 1998
WL 329265, at *5 (D.N.J. June 16, 1998) (AMW) (citing and
applying New Jersey conversion law). Accordingly, the elements of
common law conversion under New Jersey law are "[the existence
of] property and the right to immediate possession thereof
belonging to plaintiff, and the wrongful interference with that
right by defendant." Andrews, 1995 WL 875883, at *14 (citing
First Nat'l Bank of Bloomingdale v. North Jersey Trust Co., 18
N.J.Misc. 449, 14 A.2d 765 (1940)); see Huffmaster, 221
N.J.Super. at 323, 534 A.2d 435; McAdam, 896 F.2d at 771
(citing New Jersey conversion law); Communications Programming,
Inc., 1998 WL 329265, at *5 (same).
The affidavits submitted by Marsellis-Warner demonstrate a
strong likelihood the' Defendants wrongfully exercised control
over the property of Marsellis-Warner in a manner inconsistent
with the rights of Marsellis-Warner. By virtue of their positions
as executive Vice President and foreman, Rabens and Jack
Fernandez exercised dominion and control over the South Jersey
Office of Marsellis-Warner. It appears they utilized the workers,
equipment, services and materials of Marsellis-Warner in
performing various side projects, without the consent or
knowledge of Marsellis-Warner. In this manner, the Defendants
likely depleted the materials and labor of Marsellis-Warner.
The numerous other affidavits submitted on behalf of the
Defendants do not introduce any basis for concluding the
Defendants will prevail in this action. Notably absent from the
affidavits submitted by the Defendants are affidavits of the
central characters familiar with the daily operations of the
South Jersey Office. The affidavits are instead submitted by
peripheral non-parties who do not deny the existence of a
fraudulent scheme or the submission of fraudulent daily work
reports and invoices by the Defendants. See, e.g., Sandra
Rabens Aff.; DiGirolamo Aff.; Assuncao Aff.
The Cackowski Affidavit comes closest to a general denial of
any fraud by the Defendants. Cackowski, a shop steward formerly
employed by Marsellis-Warner, worked under the direction of Jack
Fernandez. Cackowski attempts to explain how the Defendants
performed side jobs while still billing more than forty hours a
week per laborer to Marsellis-Warner. Cackowski states:
Cackowski Aff. at ¶ 3.
The allegations of the Cackowski Affidavit are contradicted by
the daily work reports regularly submitted by the Defendants
during the relevant time frame. The daily work reports, attached
to the Supplemental Amsterdam Affidavit, evidence a different
billing practice by the Defendants. These reports indicate during
the summer from Monday through Friday, and sometimes Saturday,
the Defendants billed approximately eight hour days to
Marsellis-Warner. See Supplemental Amsterdam Aff. at ¶ 7 and
Exhibits B and C (attaching copies of daily work reports
submitted by Jack Fernandez for Fridays and Saturdays during the
summers of 1995 to 1997).
The affidavit of Strucke and the declaration of Elaine Simone
("Simone"), also submitted by the Defendants, are similarly
unpersuasive. Strucke, the president of a cellular telephone
company located in Freehold, New Jersey, stated, in relevant
Strucke Aff. at ¶¶ 4-6 (emphasis added). It appears, however,
Marsellis-Warner did not receive any revenue from the paving of
the parking lot. The daily work report submitted by Jack
Fernandez on 7 July 1995 indicates Jack Fernandez and his crew
spent the entire eight hour day performing work at the Fort
Monmouth job site of Marsellis-Warner. See Supplemental
Amsterdam Aff. at ¶ 9 and Exhibit E (attaching a copy of the
daily work report of 7 July 1995). It appears all the workers,
services, equipment and materials listed in the daily work report
for 7 July 1995 were paid for by Marsellis-Warner. See id.
The Simone Declaration, submitted by the Defendants with the
Defendants' Rebuttal Brief, attempts to undermine the assertions
of Pirro. Simone, a controller/bookkeeper employed by
Simone Decl. at ¶ 5. Notably, Simone may not have been employed
during the time in which Pirro prepared his audits of jobs
performed by the South Jersey Office. Pirro stated he conducted
his audits "[s]hortly after [his] commencement of employment with
the company [in June 1994]." Pirro Aff. at ¶ 2. Simone, however,
resumed working for Marsellis-Warner on 14 September 1994, after
an approximately four month absence. Simone Decl. at ¶¶ 1, 5. Her
employment with Marsellis-Warner ended on 5 February 1995. See
, 655 (3d
Cir. 1994); see Caplan v. Fellheimer Eichen Braverman & Kaskey,
, 839 (3d Cir. 1995); Jews for Jesus v. Brodsky, 993
F. Supp. at 311. The mere risk of irreparable harm or the
possibility of a remote future injury is not enough. See
Acierno, 40 F.3d at 655. The word irreparable "connotes `that
which cannot be repaired, retrieved, put down again [or] atoned
for.'" Id. at 653. As such, Marsellis-Warner must demonstrate
that, absent the issuance of a preliminary injunction, it will
suffer harm which cannot be redressed sufficiently following a
trial of the matter. See id. at 652; One World Botanicals Ltd.
v. Gulf Coast Nutritionals, Inc., 987 F. Supp. 317, 336 (D.N.J.
1997) (quoting Instant Air, 882 F.2d at 801). In other words,
the issuance of a preliminary injunction must be the only way to
protect Marsellis-Warner from injury or harm. See id.; see also
Opticians, 920 F.2d at 195 (quoting Morton v. Beyer,
, 372 (3d Cir. 1987)).
Preliminary Injunction Moving Brief at 3-4 (emphasis in
It appears from the affidavits submitted by Marsellis-Warner
the Defendants have already engaged in repeated acts of
secreting, removing and/or destroying business records and
documentation which may contain evidence implicating them in
illegal or unauthorized activities. Amsterdam stated:
Amsterdam Aff. at ¶¶ 5-7.
Adeel Malik ("Malik"), an estimator for Marsellis-Warner who
occasionally used computer equipment at the South Jersey Office.
On the night of Tuesday, May 26, 1998, Andrew
Amsterdam, Rob Shockley, Rebecca Kilduff and I met at
the South Jersey office at 8:00 p.m. I was present to
perform a backup of the computer so as to have a copy
of all correspondence for the projects handled by the
South Jersey office. When we arrived at the office we
noticed that the two computers used by defendant
Charles Rabens and his secretary, Susan McGowan, were
missing, although the computer in Robert McGreevy's
office was still there. This came as a shock to me,
because these computers, to my knowledge, were never
taken out of the office.
In addition, Andrew Amsterdam expressed surprise to
see a new photocopier in the office. During my
previous visits to [the South Jersey Office], I had
noticed that this photocopier had been there before.
Later, we found the old photocopier in a cabinet in
the storage room of the office.
Furthermore, in our search for files, we opened the
drawers of all filing cabinets. In Rabens's room
there were empty pendaflexes that were labeled with
tabs, however, there were no files in the
pendaflexes. The same was the case with the filing
cabinet in the main room, under the fax machine. We
left the office at 8:30 p.m.
During my previous visits to the South Jersey
office, I had noticed that the files were always
present in their respective drawers and that all
three computers were always present.
Malik Aff. at ¶¶ 3-6.
Shockley, who also was present at the South Jersey Office on
the evening of 26 May 1998, further corroborates these versions
of the events. He stated:
[O]n May 26, 1998, Andrew Amsterdam, Adeel Malik,
Rebecca Kilduff and I met at the South Jersey office
at approximately 8:00 p.m. When we entered the
office, we immediately noticed a new photocopy
machine. We then inspected the filing cabinets and
discovered that all of the office files were missing
from the pendaflex sleeves. In addition, two of the
three computers in the office were missing.
The next morning, Philip Amsterdam, Andrew
Amsterdam, Philip Pirro and I attended a meeting at
the South Jersey office with Charles Rabens.
Immediately upon entering the office, I noticed that
the new photocopy machine was missing and the old
photocopy machine had been returned to its place. I
also noticed that all three computers were present in
the office. During the meeting, Phil Amsterdam asked
to see a particular file and when Rabens opened the
filing cabinet, we could see that all of the files
had been returned to their pendaflex sleeves.
Shockley Aff. at ¶¶ 6-7.
Significantly, the Defendants have not submitted any affidavits
indicating they did not engage in financial manipulation or
destroy potentially incriminating business records and
documentation of work performed out of the South Jersey
The Defendants also have failed to demonstrate they are not
predisposed to further destroy, hide or manipulate assets
unrelated to the underlying litigation. Based on the evidence
submitted, it appears defendants are untrustworthy. The likely
future dissipation and transfer by the Defendants of otherwise
recoverable assets would render a judgment in favor of
In this regard, a money judgment which is uncollectible is not
an adequate remedy at law. The "`fact that the payment of monies
is involved does not automatically preclude a finding of
irreparable injury.'" Andrews, 1995 WL 875883, at *11 (quoting
United Steelworkers of Am. v. Fort Pitt Steel Casting,
598 F.2d 1273, 1280 (3d Cir. 1979)). This Circuit has recognized the
"`unsatisfiability of a money judgment can constitute irreparable
injury.'" Gerardi, 16 F.3d at 1373 (quoting Hoxworth, 903
F.2d at 205-06). In Hoxworth, 903 F.2d 186,*fn24 the court
[T]he injunction was a reasonable measure to preserve
the status quo pending final determination of the
questions raised by the bill. . . . As already
stated, there were allegations that [the defendant
seller] was insolvent and its assets in danger of
dissipation or depletion. This being so, the legal
remedy against [the defendant seller], without
recourse to the fund in the hands of [the third
party], would be inadequate.
Id. at 196; see Kiesewetter, 98 F.3d at 57-58 (upholding
asset freeze "where the very assets subject to a potential
judgment will likely be dissipated without entry of the order");
Gerardi v. Pelullo, 16 F.3d 1363, 1373-74 (3d Cir. 1994)
(upholding preliminary injunction restraining transfers of assets
unrelated to the underlying litigation where defendants were
financially unstable). Defendants who have engaged in "past
financial manipulations" create a "substantial and real risk . .
. that funds would be unavailable to satisfy a reasonably
foreseeable judgment in plaintiffs' favor." Andrews, 1995 WL
875883, at *11.
The Defendants argued that unlike the situation in Hoxworth,
the Defendants in the instant case are unsophisticated in
financial matters. See Preliminary Injunction Opposition Brief
at 28-29. They asserted they no longer maintain control over the
enterprise they are alleged to have used to perpetrate fraud.
Id. at 29. Because they are no longer employees of
Marsellis-Warner, the Defendants argued, there exists no threat
of continuing harm. Id.
These arguments are unconvincing, however, in light of the
affidavits of Amsterdam, Shockley and Malik, which evidence the
suspect behavior and untrustworthy character of the Defendants.
That the Defendants are no longer in control of the South Jersey
Office or employed by Marsellis-Warner is of no moment. A
substantial risk remains Jack and Patricia Fernandez will
dissipate or otherwise dispose of assets still in their
possession or unrelated to their employment with
Marsellis-Warner. As stated, the Defendants have not submitted
any affidavits contradicting these assertions, or indicating they
are not predisposed to further transfer or dissipate their own
In this case, a preliminary injunction "`is reasonably
necessary to preserve the status quo, and thus to ensure the
satisfaction of a potential future judgment ordering the transfer
of money from [the Defendants] to [Marsellis-Warner.]'"
Gerardi, 16 F.3d at 1373-74 (quoting Hoxworth, 903 F.2d at
196). Marsellis-Warner has made a sufficient showing the damages
award they will likely be entitled to is in jeopardy. In point of
fact, the past financial manipulation of the Defendants and the
potential future depletion or dissipation of assets still in the
possession of the Defendants create a real and substantial risk
money damages may ultimately be unobtainable. See Andrews, 1995
WL 875883, at *11 (citing Hoxworth, 903 F.2d 186). A
preliminary injunction is necessary to preserve a future damages
remedy against Jack and Patricia Fernandez. Irreparable injury,
therefore, is established.
c. Extent to Which the Defendants Will Suffer Irreparable Harm
if a Preliminary Injunction is Issued
As discussed, in determining whether to grant a preliminary
injunction, the extent to which the Defendants will suffer
irreparable harm also must be considered. Pappan, 143 F.3d at
805; Gerardi, 16 F.3d at 1374; Brodsky, 993 F. Supp. at 312.
"In considering this harm, the district court must undertake to
balance the hardships to the respective parties." Pappan, 143
F.3d at 805 (citing Opticians, 920 F.2d at 197). Balancing the
equities, it appears the issuance of an injunction will not harm
the Defendants more than a denial would harm Marsellis-Warner.
The Defendants have not submitted any affidavits or otherwise
demonstrated they will suffer any harm if they are enjoined from
further dissipation of assets in their possession. See Gerardi,
16 F.3d at 1374 (upholding issuance of preliminary injunction
where defendants "have not proffered significant evidence
regarding any substantial harm they might suffer from the
preliminary injunction"). The Defendants merely argue the injury
to Marsellis-Warner is not irreparable. See Preliminary
Injunction Opposition Brief at 26-30.
In any event, the Defendants may not complain they will suffer
irreparable injury if a preliminary injunction is issued. As
explained in more detail, the Preliminary Injunction Application
is narrowly tailored to protect Marsellis-Warner while imposing a
minimal burden on Jack and Patricia Fernandez. Marsellis-Warner
merely is seeking to protect the status quo; the conduct of the
Defendants is not otherwise limited.
It appears, moreover, "any difficulties [Jack and Patricia
Fernandez] now face were brought on by [their] own conduct."
Pappan, 143 F.3d at 805. The suspect dealings and
untrustworthiness exhibited by the Defendants created a
substantial risk to Marsellis-Warner best assuaged through
injunctive relief. Any injury Jack and Patricia Fernandez may
suffer as a result of the issuance of a preliminary injunction is
outweighed by the irreparable harm Marsellis-Warner will suffer
if Jack and Patricia Fernandez are not enjoined from further
depleting their assets. As such, the balance of equities favors
Marsellis-Warner. This factor also supports the issuance of a
d. Extent to Which the Public Interest Favors the Issuance of
a Preliminary Injunction to Marsellis-Warner
Finally, it must be determined whether the issuance of a
preliminary injunction serves the public interest. Pappan, 143
F.3d at 807; American Telephone & Telegraph Co., 42 F.3d at
1427. Where a party demonstrates both the likelihood of success
on the merits and irreparable injury, "it almost always will be
the case that
the public interest will favor" the issuance of an injunction.
American Telephone & Telegraph Co., 42 F.3d at 1427 n. 8; see
Brodsky, 993 F. Supp. at 312. The issuance of a preliminary
injunction in the instant matter clearly serves the public
interest in preserving the strict fiduciary duty owed employers
by employees. Injunctive relief of this sort helps to insulate
employers from further acts of financial manipulation, fraud or
embezzlement by their employees and protects third party clients
of the employer who may be indirectly affected by the fraud.
e. Scope of Injunction
Before imposing a preliminary injunction encumbering the assets
of a defendant to protect a future money judgment, a "court must
make some attempt reasonably to relate the value of the assets
encumbered to the likely value of the expected judgment."
Hoxworth, 903 F.2d at 198. This Circuit has identified problems
stemming from the issuance of extremely broad preliminary
injunctions. For instance, where the claims of plaintiffs "[are]
worth, at most $25,000, then a preliminary injunction encumbering
well over $10 million of assets to protect the likely judgment
obviously would involve funds that could not `be the subject of
the provisions of any final decree.'" Id. (quoting De Beers
Consolidated Mines v. United States, 325 U.S. 212, 220, 65 S.Ct.
1130, 89 L.Ed. 1566 (1945)).
The exact value of the assets of Jack and Patricia Fernandez is
unclear from the submissions of the parties. Significantly, it
appears the Defendants have refused to produce their personal
financial records in response to the document request of
Marsellis-Warner. See Supplemental Amsterdam Aff. at ¶ 23.
Under other circumstances, further pre-judgment asset discovery
may be necessary to reveal the location and existence of unknown
assets. In the instant case, however, a Discovery Stay has been
imposed pending resolution of the Motion to Stay, discussed
below. See 11 January 1999 Order.*fn26
Even without the benefit of further discovery of the assets of
the Defendants, it appears the preliminary injunction sought by
Marsellis-Warner represents a reasonable encumbrance. The damages
alleged by Marsellis-Warner appear to be reasonably calculated.
According to Amsterdam, the damages incurred by Marsellis-Warner
as a result of the actions of the Defendants are at least
$235,274.40. See Supplemental Amsterdam Aff. at ¶ 23 and
Exhibit I, attached thereto. In calculating damages,
Marsellis-Warner details the specific equipment and workers used
at individual project sites, the hours spent working and the
costs incurred in connection therewith. See Supplemental
Amsterdam Aff. at Exhibit I.
The concerns expressed in Hoxworth are not present here. The
Defendants are not a large securities firm potentially subject to
the claims of a class of creditors. Marsellis-Warner is not
alleging the Defendants are in possession of millions of dollars
in assets; rather, it simply is trying to protect a future
monetary judgment in the realm of approximately only $235,000. As
such, any discrepancy between the value of the expected judgment
and the assets likely encumbered will not be of such an
unreasonable nature so as to preclude the issuance of injunctive
relief. See Gerardi, 16 F.3d at 1373 n. 18 (where expected
judgment was in excess of $1,700,000, preliminary injunction
prohibiting defendants from dissipating $1,500,000 of potential
litigation recovery deemed reasonable); see also Hoxworth, 903
F.2d at 199 (at preliminary stages of litigation, a district
court need not "make an extended effort to match the value of
assets encumbered to the expected value of the judgment dollar
Accordingly, the Preliminary Injunction Application, insofar as
it seeks the encumbrance of no more than $250,000 worth of assets
of the Defendants, is granted. As described in the accompanying
order, the Defendants are enjoined from concealing, converting,
selling, transferring or otherwise dissipating any assets,
including cash, stocks, bonds, other personalty or realty, in
which they have an ownership, legal or beneficial interest, which
may be subject to an approximately $250,000 monetary judgment
rendered in favor of Marsellis-Warner. The Defendants are further
prohibited from transferring any funds outside the ordinary
course of business and from transferring any funds outside the
country without prior approval of the court. Additionally, the
prohibition against the destruction of business records or
documents relevant to the instant action set forth in the 22
September 1998 Order to Show Cause remains in effect.
f. Bond Requirement
As mentioned, before a preliminary injunction may be issued,
the applicant for the injunction usually must give security
in such sum as the court deems proper, for the
payment of such costs and damages as may be incurred
or suffered by any party who is found to have been
wrongfully enjoined or restrained.
Fed.R.Civ.Pro. 65(c) ("Rule 65(c)"); Kiesewetter, 98 F.3d at
59-60 (stating security must be given unless balance of equities
weighs overwhelmingly in favor of party seeking injunction and
then district court has discretion to waive Rule 65(c) bond
requirement after proper finding).
The Third Circuit has strictly interpreted the bond
requirement. See Kiesewetter, 98 F.3d at 59; Waterfront Comm'n
of N.Y. Harbor v. Construction & Marine Equip. Co., 928 F. Supp. 1388,
1405 (citing Hoxworth v. Blinder, Robinson & Co., Inc.,
903 F.2d 186, 210 (3d Cir. 1990)). The Hoxworth court observed:
Although the amount of the bond is left to the
discretion of the court, the posting requirement is
much less discretionary. While there are exceptions,
the instances in which a bond may be required are so
rare that the requirement is almost mandatory. We
have previously held that absent circumstances where
there is no risk of monetary loss to the defendant,
the failure of a district court to require a
successful applicant to post a bond constitutes
903 F.2d at 210; see Nat'l Credit Management, 21 F. Supp.2d at
463-64; Waterfront Comm'n of N.Y. Harbor, 928 F. Supp. at 1405.
The issuance of an improper interlocutory order "may harm the
defendant and a bond provides a fund to use to compensate
incorrectly enjoined defendants." Instant Air Freight Co., 882
F.2d at 804; see Nat'l Credit Management, 21 F. Supp.2d at 464;
Waterfront Comm'n of N.Y. Harbor, 928 F. Supp. at 1405. The bond
requirement also "deters rash applications for interlocutory
orders; the bond premium and the chance of liability on it cause
plaintiff to think carefully beforehand." Instant Air Freight
Co., 882 F.2d at 804; see Nat'l Credit Management, 21
F. Supp.2d at 464.
The protection afforded by the imposition of a bond offers an
otherwise unavailable avenue of recovery to an enjoined
defendant. Generally, with rare exceptions, a defendant
wrongfully enjoined only has recourse against the bond. As the
Supreme Court has observed: "A party injured by the issuance of
an injunction later determined to be erroneous has no action for
damages in the absence of a bond." Waterfront Comm'n of N Y
Harbor, 928 F. Supp. at 1405 (quoting W.R. Grace & Co. v. Local
Union 759, Int'l Union of United Rubber, Cork, Linoleum and
Plastic Workers, 461 U.S. 757, 770 n. 14, 103 S.Ct. 2177, 76
L.Ed.2d 298 (1983)); see also Kiesewetter, 98 F.3d at 59.
Because a preliminary injunction is granted before a trial is
held on the merits, the possibility it was incorrectly imposed is
reality. See Clark v. K-Mart Corp., 979 F.2d 965, 968 (3d Cir.
1992); Nat'l Credit Management, 21 F. Supp.2d at 464;
Waterfront Comm'n of N.Y. Harbor, 928 F. Supp. at 1405.
As indicated, in Hoxworth, this Circuit observed, "[w]hile
there are exceptions, the instances in which a bond may not be
required are so rare that the requirement is almost mandatory."
903 F.2d at 210. This strict reading of Rule 65(c)
notwithstanding, there may be instances in which a strict reading
of the Rule 65(c) is inappropriate.
In Temple University v. White, 941 F.2d 201 (3d Cir. 1991),
cert. denied sub nom. 502 U.S. 1032, 112 S.Ct. 873, 116 L.Ed.2d
778 (1992), the Circuit recognized an exception to the bond
requirement pursuant to Rule 65(c). See id. at 219. Relying
upon an approach utilized by the First Circuit, the court in
Temple University determined, "at least in noncommercial cases,
the court should consider the possible loss to the enjoined party
together with the hardship that a bond requirement would impose
on the applicant." Id. (quotation omitted); see Kiesewetter,
98 F.3d at 59-60 (quoting Temple University, 941 F.2d at 219);
Waterfront Comm'n of N.Y. Harbor, 928 F. Supp. at 1405.
The exception proffered in Temple University involves a
balance of the equities of the potential hardships that each
litigant would suffer as a result of the imposition of a
preliminary injunction. See Kiesewetter, 98 F.3d at 60. When
the balance of these equities overwhelmingly favors the party
seeking the injunction, a district court has the discretion to
waive the Rule 65(c) bond requirement. See id.
The scope of the possible loss to Marsellis-Warner appears to
exceed $235,274.40. See Supplemental Amsterdam Aff. at ¶ 23.
Marsellis-Warner believes, however, its actual losses are
significantly higher, but have not yet been uncovered. See id.
Applying the above principles to the instant case, it appears
Marsellis-Warner should not be exempted from the bond
requirement. Marsellis-Warner does not appear to be an
impecunious party. Accordingly, there appears no reason why
Marsellis-Warner cannot set aside adequate revenues to satisfy a
bond requirement in the instant matter. No economic hardship or
duress will be imposed upon Marsellis-Warner by the imposition of
The computation of the bond amount may be set "in such sum as
the court deems proper." Fed.R.Civ.P. 65(c); see Hoxworth, 903
F.2d at 210; Nat'l Credit Management, 21 F. Supp.2d at 465;
Waterfront Comm'n of N.Y. Harbor, 928 F. Supp. at 1405; see
also Maryland Dep't of Human Resources v. United States Dep't of
Agriculture, 976 F.2d 1462, 1483 (4th Cir. 1992). Under the
circumstances existing in this case, a large bond is necessary to
protect the Defendants against the possibility they are later
determined to have been erroneously enjoined. In this regard, a
bond of no less than $250,000.00 will suffice.
B. Standard for a Writ of Attachment
Marsellis-Warner also seeks an order authorizing the issuance
of a writ of attachment against the assets of the Defendants
located in New Jersey, pursuant to Section 2A:26-2*fn27 and Rule
64.*fn28 See Preliminary Injunction Moving Brief at 3.
State law governs an application for a writ of attachment.
Fed.R.Civ.P. 64. Pursuant to N.J.S.A. 4:60-5(a) ("Rule
4:60-5(a)"), a writ of attachment may issue where:
(1) there is a probability that final judgment will
be rendered in favor of the plaintiff; (2) there are
statutory grounds for issuance of the writ; and (3)
there is real or personal property of the defendant
at a specific location within this State with is
subject to attachment.
The purpose of a writ of attachment is "for the collection of
an ordinary debt by seizure of the property of the debtor."
Wolfson v. Bonello, 270 N.J. Super. 274, 289, 637 A.2d 173
(App. Div. 1994). As such, a writ of attachment is an
extraordinary remedy. Id. (quoting Russell v. Fred G. Pohl,
Co., 7 N.J. 32, 39, 80 A.2d 191 (1951)). Applications for
attachment must be construed accordingly. Id. at 290,
637 A.2d 173.
Such an analysis pursuant to Rule 64 and the relevant State law
is not required in the instant case. It appears a preliminary
injunction effectively freezing the assets of the Defendants
renders a writ of attachment redundant, and the relief afforded
Marsellis-Warner duplicative. This Circuit has applied the
preliminary injunction standards under Rule 65 in evaluating a
request for injunctive relief which is akin to a request for
pre-judgment attachment. See Hoxworth, 903 F.2d 186 (applying
Rule 65 rather than Rule 64 standards where requested injunctive
relief was in the form of an asset freeze to protect a potential
future damages remedy).
It appears, therefore, Rule 64 is not the only procedural
mechanism which may be used to prevent a litigant from concealing
or transferring assets to prevent satisfaction of a potential
monetary judgment. As discussed in the preceding sections, assets
of defendants unrelated to the underlying litigation may be
frozen when money damages are requested. See, e.g., id.
The Second Circuit, adopting the reasoning of the Third Circuit
in Hoxworth, more directly addressed the interplay between Rule
64 and Rule 65. Alliance Bond Fund, Inc. v. Grupo Mexicano de
Desarrollo, S.A., 143 F.3d 688 (2d Cir.), cert. granted, ___
U.S. ___, 119 S.Ct. 537, 142 L.Ed.2d 447 (1998), involved the
sale of notes to United States investment funds (the plaintiffs)
by a Mexican holding company (the defendant). Years later, when
the defendant defaulted on the notes, the plaintiffs caused the
acceleration of the principal. Because the defendant owed more
than $450 million to other creditors, the plaintiffs sought
damages and a preliminary injunction restraining the defendants
from assigning notes issued by the Mexican government to settle
its obligations to other creditors. The district court granted a
preliminary injunction preventing the defendant from dissipating,
transferring, conveying or otherwise encumbering the rights of
the plaintiffs to receive benefit from the notes. The Second
Circuit, relying on Rule 65, affirmed the issuance of the
On appeal to the Second Circuit, the defendant argued Rule 64
is the only procedural mechanism by which to prevent a litigant
from concealing or dissipating assets to prevent satisfaction of
a potential judgment. The defendant further argued, and the court
agreed, prejudgment attachment under Rule 64 was unavailable
because the notes in issue were not located in New York. Id. at
The court nevertheless exercised its inherent equity power
under Rule 65 to freeze the assets of the defendant, including
those not directly involved in the litigation. Interpreting
Supreme Court precedent, the Second Circuit held the district
court had the authority to issue a preliminary
injunction to protect the right of the plaintiffs to recover
monetary damages in light of the threat of dissipation of assets
not directly involved in the pending litigation. See id. at 696
(observing the Supreme Court in De Beers, 325 U.S. 212, 65
S.Ct. 1130, 89 L.Ed. 1566, Deckert v. Indep. Shares Corp.,
311 U.S. 282, 61 S.Ct. 229, 85 L.Ed. 189 (1940) and United States v.
First Nat'l City Bank, 379 U.S. 378, 85 S.Ct. 528, 13 L.Ed.2d
365 (1965) broadly construed the power of a district court to
grant injunctive relief).
Alliance stands for the proposition that where prejudgment
attachment pursuant to Rule 64 is not possible, a preliminary
injunction freezing the assets of the defendant provides an
adequate means of protecting a potential future damages judgment.
See id.; see also Local 397, Int'l Union of Electronic, Elec.,
Salaried, Mach. & Furniture Workers v. Midwest Fasteners, Inc.,
763 F. Supp. 78, 82 (D.N.J. 1990) (CSF) (citing Hoxworth, 903
F.2d at 197) (stating plaintiff union was not required to seek a
writ of attachment in light of authority of the district court to
issue a preliminary injunction seizing assets to protect
potential future damages remedy). In the instant case, injunctive
relief pursuant to Rule 65 is sufficient. A preliminary
injunction under Rule 65 adequately freezes the assets of the
Defendants. A writ of attachment pursuant to Rule 64, even if
found to be available under New Jersey law, is nevertheless
For the reasons stated, the Preliminary Injunction Application
is granted. The Attachment Request of Marsellis-Warner is denied.
The Motion to Stay is denied without prejudice with leave to
refile for the reasons expressed on the record during the 23
February 1999 Hearing.