Huffines Retail Partners LP v. Atlas Apartments Acquisition LLC, 3:19-cv-02425

Background

Plaintiffs (multiple Huffines entities) entered five agreements by which Defendant Atlas would acquire plaintiffs' membership interests in several LLCs owning large multifamily complexes; scheduled closings in Aug. and Sept. 2019 did not occur.
Plaintiffs sued for breach of contract, breach of guaranty, and attorneys’ fees seeking money damages; Atlas removed the case and counterclaimed seeking specific performance, declaratory relief, injunctions, and fees.
Atlas recorded lis pendens in Denton and Dallas counties and the magistrate held an evidentiary hearing on Plaintiffs’ motion to expunge; the magistrate found Atlas’s real-property counterclaim probably valid and denied expungement.
Plaintiffs later contracted to sell the properties to a third party and moved for an expedited, mandatory injunction compelling Atlas to close within 14 days (or alternatively to cancel the lis pendens), asserting they had provided updated financials and that financing was not a contractual contingency.
Magistrate Judge Horan concluded the application for expedited mandatory relief was procedurally defective (Plaintiffs’ pleadings seek only money damages), Plaintiffs failed to show irreparable harm warranting a mandatory injunction, and Plaintiffs’ proposed $10,000 deposit was inadequate to secure cancellation of the lis pendens; recommended denying both the expedited injunction and the motion to cancel the lis pendens.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
1) Entitlement to expedited mandatory injunction compelling specific performance	Plaintiffs seek a court order forcing Atlas to close under the agreements within 14 days because updated financials were provided and financing is not a contractual contingency	Atlas opposes mandatory relief; asserts conditions precedent remain and seeks specific performance on its counterclaim (not Plaintiffs’ request)	Denied — Plaintiffs lack pleadings seeking injunctive relief and cannot obtain mandatory relief under opponent’s pleadings; mandatory injunction disfavored and requires clear entitlement
2) Procedural sufficiency of Plaintiffs’ request for injunctive relief	Plaintiffs assert court may grant expedited relief based on record and their agreement to specific performance	Atlas notes Plaintiffs’ complaint seeks only money damages and did not plead for equitable relief	Held that Plaintiffs’ application is procedurally defective because their operative complaint requests only monetary relief; they cannot obtain expedited injunctive relief via opponent’s counterclaim
3) Irreparable harm showing necessary for preliminary/mandatory injunction	Plaintiffs argue sale to third-party creates urgency and that denial will cause harm to their ability to sell	Atlas contends Plaintiffs can be compensated monetarily and that status quo should be preserved until trial	Held Plaintiffs failed to show irreparable injury; mandatory injunction not justified absent rare, clear facts and law favoring movant
4) Cancellation of lis pendens under Tex. Prop. Code §12.008 and adequacy of proposed deposit/bond	Plaintiffs offered to post a cash deposit or bond (proposed $10,000) to allow closing with third-party buyer	Atlas argues deposit must cover attorney’s fees and losses from diverting the $350+ million transaction; specific performance claim cannot be adequately secured by money	Denied — $10,000 inadequate; §12.008 protections for deposit/undertaking do not suffice where relief sought is specific performance of real property conveyance

Key Cases Cited

White v. Carlucci, 862 F.2d 1209 (5th Cir. 1989) (preliminary injunction is an extraordinary remedy and movant bears burden of persuasion)
Bluefield Water Ass'n, Inc. v. City of Starkville, Miss., 577 F.3d 250 (5th Cir. 2009) (four-factor preliminary injunction test articulated)
Canal Authority of State of Fla. v. Callaway, 489 F.2d 567 (5th Cir. 1974) (purpose of injunction is to prevent irreparable injury and preserve court's ability to render meaningful decision)
Univ. of Tex. v. Camenisch, 451 U.S. 390 (1981) (preliminary injunction standards and reliance on balancing four factors)
Justin Indus., Inc. v. Choctaw Secs., L.P., 920 F.2d 262 (5th Cir. 1990) (mandatory injunctions require clear entitlement and are disfavored)
Exhibitors Poster Exch., Inc. v. Nat'l Screen Serv. Corp., 441 F.2d 560 (5th Cir. 1971) (mandatory preliminary injunction should not be granted except in rare instances)
Wenner v. Tex. Lottery Comm'n, 123 F.3d 321 (5th Cir. 1997) (prohibitory injunctions freeze the status quo; mandatory injunctions alter it and are disfavored)