The Court of Chancery recently reviewed and denied an ex parte application for a temporary restraining order (“TRO”) in the decision of Smart Home, Inc. v. Brian Selway, et al., C.A. No. 6778-VCG (Del. Ct. Ch., Aug. 15, 2011). According to the Complaint, Plaintiff alleged that Defendant Selway improperly withdrew funds from the operating account of Plaintiff Smart Home. In response, Plaintiff sought a TRO enjoining Defendant and his wife from removing funds from their personal bank account, and also requested that the TRO be granted on an ex parte basis—meaning without prior notice to Defendant.
The Court reiterated the requisite elements to be demonstrated by a plaintiff seeking a TRO, which are as follows:
- The plaintiff has a colorable claim,
- That absent the entry of the order, plaintiff will suffer irreparable harm, and
- The hardship to the plaintiff absent entry of the restraining order outweighs the harm which the order may cause to the defendant.
The Court further noted, however, that a party seeking an ex parte temporary restraining order must further demonstrate imminent irreparable injury, as the granting of an ex parte restraining order is an extreme remedy. See Royal Improvements Co. v. Rosauri, 1987 WL 19318, at *1 (Del. Ch. Oct. 30, 1987) (emphasis added).
The Court held that Plaintiff failed to establish “imminent irreparable harm”, as the allegations made by Plaintiff that its future operations may be prejudiced without a return of the withdrawn funds were merely conclusory. In addition, the Court note that entering a TRO which froze the funds of a bank account held by Defendant and a third-party, without prior notice, would raise due process concerns.
Accordingly, the Court denied Plaintiff Smart Home’s request for an ex parte temporary restraining order, and instead deferred on a final ruling of the application, pending service of the Complaint on the Defendant, along with an opportunity for Defendant to be heard in connection with the matter.
This decision demonstrates the difficulty in obtaining temporary restraining orders on an ex parte basis, and accordingly, plaintiffs seeking such ex parte relief must be prepared to establish facts demonstrating imminent irreparable injury.