Wait v. Elmen
2017 Ark. App. 648
| Ark. Ct. App. | 2017Background
- Spencer Elmen and Steven Wait are equal 30% members and co-managers of two Arkansas LLCs (Jackie, LLC and Sodakco, LLC) that operate Cupid’s Lingerie; Wait was president and managed the Jacksonville store.
- Elmen sued Wait individually and derivatively alleging conversion, fraud, breach of contract, gross negligence, and breach of fiduciary duty, and sought monetary damages and injunctive relief (removal from management, accounting).
- Evidence at the preliminary-injunction hearing showed repeated bounced checks, interstore transfers to cover shortfalls, employee bookkeeping misconduct (including forged signatures and unauthorized salary payments), and payment of significant personal expenses of Elmen and Wait from company funds.
- The circuit court granted a preliminary injunction removing Wait from any management role, barred loans/distributions/bonuses, prohibited commingling of assets, suspended salary payments to both Wait and Elmen, and voided certain corporate resolutions.
- Wait appealed, arguing the injunction was improper because Elmen failed to show irreparable harm and the court granted sua sponte relief beyond what was requested.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether irreparable harm existed to justify a preliminary injunction | Elmen: ongoing diversion of assets and reputational harm justify injunctive relief beyond money damages | Wait: alleged harms are financial and reparable by money damages; no irreparable harm shown | Court held Elmen did not establish irreparable harm; financial harm is reparable and reputational harm alone insufficient |
| Whether preliminary injunction required likelihood of success prong analysis | Elmen: injunction appropriate given evidence of misconduct and risk to companies | Wait: circuit court failed to properly require both irreparable harm and likelihood of success | Court reversed on irrep. harm ground and did not reach likelihood-of-success because both prongs are required for injunctive relief |
| Whether court could grant relief sua sponte beyond pleadings | Elmen: sought removal from management, accounting, and bar on self-dealing (did not request suspension of both members’ pay or other broader relief) | Wait: trial court exceeded pleadings by suspending salaries and other payments to both members without request | Court held the circuit court abused its discretion by granting sua sponte relief beyond what was pleaded |
| Remedy on appeal | Elmen: requested continuation of injunction to protect the businesses | Wait: asked for dissolution of injunction and remand | Court reversed and remanded with instructions to dissolve the preliminary injunction and permit further proceedings as needed |
Key Cases Cited
- Baptist Health v. Murphy, 365 Ark. 115 (2006) (two-prong preliminary-injunction standard: irreparable harm and likelihood of success)
- Three Sisters Petroleum, Inc. v. Langley, 348 Ark. 167 (2002) (financial harm is generally reparable by money damages; injunction standards)
- United Food & Commercial Workers Int'l Union v. Wal-Mart Stores, Inc., 353 Ark. 902 (2003) (irreparable harm is the touchstone of injunctive relief)
- Wilson v. Pulaski Ass’n of Classroom Teachers, 330 Ark. 298 (1997) (prospect of irreparable harm foundational for injunctive power)
- AJ & K Operating Co., Inc. v. Smith, 355 Ark. 510 (2004) (money damages negate claim of no adequate remedy at law)
- Manila Sch. Dist. No. 15 v. Wagner, 356 Ark. 149 (2004) (claims for money damages undercut assertion of irreparable harm)
- Kreutzer v. Clark, 271 Ark. 243 (1980) (irreparable harm generally means harm not compensable by money)
- Monticello Healthcare Ctr., LLC v. Goodman, 2010 Ark. 339 (2010) (trial court may not grant injunctive relief sua sponte beyond pleadings)