Medequa LLC v. O'Neill & Partners LLC
1:21-cv-06135
S.D.N.Y.Aug 6, 2021Background
- Medequa agreed to buy $10,200,000 of PPE from SonerMed to be donated to FEMA on behalf of the King Salman Humanitarian Aid and Relief Center; Medequa deposited $5,100,000 (half the price) into escrow with O’Neill & Partners.
- SonerMed failed to deliver the goods; Medequa issued a cancellation notice on November 22, 2020 and requested return of the escrowed $5,100,000, but O’Neill declined to return the funds.
- O’Neill asserts competing claims/communications (from SonerMed, Medequa’s prior counsel, and Saudi Arabia/the Relief Center) and is retaining the funds while those third‑party disputes are unresolved.
- Medequa sued O’Neill for breach of contract, breach of fiduciary duty, and conversion, and moved for a temporary restraining order and preliminary injunction to freeze the escrow funds and compel an accounting.
- At the August 5, 2021 hearing, the Court concluded Medequa failed to show irreparable harm and denied the requested injunctive relief.
- The Court ordered O’Neill to interplead the escrow funds and name all relevant claimants by noon on August 11, 2021 (i.e., deposit the funds with the Clerk and join claimants via interpleader).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a TRO/PI should bar disbursement of the escrow funds and compel accounting | Medequa: will suffer irreparable harm because recovery on a judgment may be ineffectual; funds may be dissipated; needs an accounting | O’Neill: dispute is a money/contract claim; competing third‑party claims justify retention; no obligation to produce documentary proof under the escrow agreement | Denied — Medequa failed to show irreparable harm; adequate remedy at law exists (money damages); injunction not warranted |
| Whether O’Neill must provide documentary proof that funds remained in segregated escrow or otherwise account now | Medequa: escrow requires proof/accounting that funds remain in escrow | O’Neill: escrow only requires maintenance in a segregated TD Bank account; no documentary proof obligation; may refrain from action when parties disagree | Held for O’Neill — escrow agreement does not require production of documentary proof now; accounting order unnecessary; interpleader is appropriate remedy |
| Whether the escrow agent may retain funds pending resolution of third‑party disputes or must immediately interplead | Medequa: funds should be returned rather than retained (or frozen by court) | O’Neill: may hold funds while it resolves uncertainty about beneficial ownership and can attempt to mediate | Held: Escrow agent should not act as mediator; if uncertain, agent must interplead/deposit funds with the Court — Court ordered interpleader |
| Whether other preliminary‑injunction factors (likelihood of success, balance of hardships, public interest) support relief | Medequa: serious questions on the merits and hardships tip in its favor; public interest in recovering funds | O’Neill: monetary remedy suffices; no special public‑interest showing; hardships do not tip decisively | Held: Factors do not support injunction given absence of irreparable harm; motion denied |
Key Cases Cited
- Mazurek v. Armstrong, 520 U.S. 968 (U.S. 1997) (preliminary injunction is an extraordinary, drastic remedy requiring clear showing)
- New York ex rel. Schneiderman v. Actavis PLC, 787 F.3d 638 (2d Cir. 2015) (elements for preliminary injunction in Second Circuit)
- Grand River Enterprise Six Nations, Ltd. v. Pryor, 481 F.3d 60 (2d Cir. 2007) (irreparable harm is the single most important prerequisite for a preliminary injunction)
- New York v. United States Dep’t of Homeland Sec., 969 F.3d 42 (2d Cir. 2020) (irreparable harm must be actual, imminent, and non‑remediable by money damages)
- Faiveley Transp. Malmo AB v. Wabtec Corp., 559 F.3d 110 (2d Cir. 2009) (injunctive relief unavailable where adequate remedy at law exists except in extraordinary circumstances)
- Wisdom Imp. Sales Co. v. Labatt Brewing Co., 339 F.3d 101 (2d Cir. 2003) (only harm non‑compensable by money supports injunctive relief)
- Tucker Anthony Realty Corp. v. Schlesinger, 888 F.2d 969 (2d Cir. 1989) (monetary loss insufficient for injunction absent evidence it cannot be rectified by damages)