345 P.3d 1273
Utah Ct. App.2015Background
- Lorence A. Harmer, a former Zagg director, and Zagg entered a settlement in which Harmer executed a promissory note and agreed not to sell ~80,000 specified Zagg shares (the "Encumbered Shares") until two months after full payment of the note.
- Harmer made no payments, sued seeking a declaratory judgment that Zagg breached the settlement, and asserted he was excused from performance.
- During litigation Harmer sought to sell the Encumbered Shares; Zagg moved for a preliminary injunction to block any sale pending resolution of the dispute.
- The district court denied the preliminary injunction, finding Zagg’s threatened harm was quantifiable in money and therefore not irreparable, though it acknowledged serious merits issues warranting further litigation.
- Zagg appealed the interlocutory denial of injunctive relief; the Court of Appeals reviewed whether the district court abused its discretion in denying the injunction based on irreparable harm.
Issues
| Issue | Plaintiff's Argument (Zagg) | Defendant's Argument (Harmer) | Held |
|---|---|---|---|
| Whether Zagg will suffer irreparable harm if Harmer sells the Encumbered Shares | The no-sale covenant is valuable, bargained-for leverage that cannot be fully compensated by money; sale would permanently destroy that leverage | Any harm is purely monetary because Zagg can recover the value of the shares by breach-of-contract damages | Reversed: sale would eliminate non-monetary, leverage-based harm; district court erred in finding no irreparable harm |
Key Cases Cited
- Hunsaker v. Kersh, 991 P.2d 67 (Utah 1999) (defines irreparable harm as harm not adequately compensable by money)
- Aquagen Int’l, Inc. v. Calrae Trust, 972 P.2d 411 (Utah 1998) (standard for reviewing injunctive relief cited by Utah courts)
- Miller v. Martineau & Co., 983 P.2d 1107 (Utah Ct. App. 1999) (appellate standard for reviewing denial of preliminary injunction)
- Brady v. Nat’l Football League, 640 F.3d 785 (8th Cir. 2011) (loss of bargaining leverage can constitute irreparable harm)
- NAMA Holdings, LLC v. Related World Mkt. Ctr., LLC, 922 A.2d 417 (Del. Ch. 2007) (restrictive covenants that prevent liquidation provide material commercial advantage)
- Water & Energy Sys. Tech., Inc. v. Keil, 974 P.2d 821 (Utah 1999) (appellate review standard for abuse of discretion)