United States District Court, W.D. Pennsylvania
NVR, INC. d/b/a RYAN HOMES, Plaintiff,
MAJESTIC HILLS, L.L.C. et al., Defendants.
NICHOLAS RANJAN, UNITED STATES DISTRICT JUDGE
the Court is Plaintiff NVR, Inc.’s (“NVR”)
motion for preliminary injunction [ECF 142] against
Defendants Majestic Hills, LLC (“Majestic
Hills”), JND Properties, LLC (the corporate parent of
Majestic Hills), its manager, Joseph DeNardo, and his wife,
Shari DeNardo (collectively, “Developer
Defendants”). For the reasons that follow, the Court
will deny the motion.
2004, homebuilder NVR contracted with Majestic Hills to
purchase 179 residential building lots in what is now known
as the Majestic Hills development in North Strabane Township,
Washington County, Pennsylvania. [ECF 1, at ¶ 12]. In
2018, a devastating landslide occurred at the development,
which caused four families to evacuate their homes and
necessitated significant remediation work. [ECF 143, at 2].
Homeowners, municipal entities, and others have pursued legal
action in state court against NVR, the Developer Defendants,
and others. [Id.].
October 5, 2018, NVR filed this action against the Developer
Defendants, engineering firm Pennsylvania Soil & Rock,
Inc., engineer Mark R. Brashear, and earthwork contractor
Alton Industries, Inc., asserting, among other things, causes
of action for negligence, breach of contract, and
indemnification. [ECF 1, at ¶¶ 86-115]. NVR seeks
money damages in excess of $1.6 million, but claims that the
total damages caused by the Developer Defendants’
alleged negligence currently exceeds $7 million. [ECF 143, at
17, 2019 NVR filed a motion for preliminary injunction to
preserve Developer Defendants’ assets. [ECF 142]. NVR
argues that a freeze is appropriate for various reasons,
including that: 1) Developer Defendants’ insurance
coverage is in doubt; 2) they are likely to be found liable
in this action; 3) they have already fallen behind on
payments to subcontractors; 4) they have a practice of
shifting assets between non-party entities; and 5) they have
publicly admitted that they are or will be insolvent. [ECF
143, at 13]. In particular, NVR seeks an order either
freezing Developer Defendants’ assets (as well as the
assets of related entities Ashwood Land Partners, LP and
Ashwood Commons, LLC) or ordering the Developer Defendants to
put $7 million into an escrow account pending the conclusion
of this action. [ECF 142-1].
parties submitted the motion on the briefs and did not
request oral argument. The motion is ripe for disposition.
Preliminary Injunction Standard.
Rule of Civil Procedure 65(a) grants federal courts the
authority to issue preliminary injunctions. In diversity
cases, like this one, federal courts apply state law to
substantive issues and federal law to procedural issues.
See Hanna v. Plumer, 380 U.S. 460, 465
(1965) (“[F]ederal courts are to apply state
substantive law and federal procedural law.”). The
Third Circuit has clearly stated that it “utilize[s] a
federal standard in examining requests to federal courts for
preliminary injunctions.” Instant Air Freight Co.
v. C.F. Air Freight, Inc., 882 F.2d 797, 799 (3d Cir.
1989); see System Operations, Inc. v. Scientific
Games Dev. Corp., 555 F.2d 1131, 1141 (3d Cir. 1977)
(“Although the right upon which this cause of action is
based is state-created, Rule 65(a) of the Federal Rules of
Civil Procedure contemplates a federal standard as governing
requests addressed to federal courts for preliminary
injunctions.”). Therefore, there can be no dispute that
federal law applies to the preliminary injunction standard to
be applied here.
preliminary injunction standard is well known-“[t]here
are four factors to consider in assessing a motion for a
preliminary injunction: (1) whether the movant has shown a
reasonable probability of success on the merits; (2) whether
the movant will be irreparably harmed by the denial of
relief; (3) whether granting preliminary relief will result
in even greater harm to the nonmoving party; and (4) whether
granting the preliminary relief will be in the public
interest.” Figueroa v. Precision Surgical,
Inc., 423 F. App’x 205, 207-08 (3d Cir. 2011)
(citing Council of Alternative Political Parties v.
Hooks, 121 F.3d 876, 879 (3d Cir.1997)); accord
American Express Travel Related Servs., Inc. v.
Sidamon-Eristoff, 669 F.3d 359, 366 (3d Cir. 2012).
However, before the Court can examine these four factors, it
first must decide whether it even has the authority to issue
a preliminary injunction under the circumstances.
Preliminary Injunctions in Non-Equity Cases Are Controlled by
Grupo Mexicano de Desarrollo, S.A. v. Alliance Bond Fund,
Inc., 527 U.S. 308 (1999).
Grupo, the Supreme Court held that a federal
district court lacks the authority to freeze assets in an
action for damages where no lien or equitable interest in the
assets is claimed. 527 U.S. at 332–33; see
also Karpov v. Karpov, 555 F. App’x 146,
147 n.2 (3d Cir. 2014) (same; affirming district
court’s determination that it “lacked the
authority” to issue an injunction preventing the
defendant from transferring assets). The Court reasoned that
the equity power of the federal courts equates with that
exercised by the High Court of Chancery in England at the
time of the adoption of the Constitution and the Judiciary
Act of 1789. Grupo, 527 U.S. at 318. Rule 65 has not
altered the contours of this power. Id. at 318-19.
The flexibility of equity must be “confined within the
broad boundaries of traditional equitable relief,”
absent a federal statute which has expanded the traditional
rules. Id. at 322. Therefore, absent an act by
Congress bestowing additional power upon the courts, the
traditional rule remains that the federal courts have no
equity power to restrain a defendant from controlling or
alienating its assets pending a decision in an action for
money damages and before any judgment is entered.
Id. at 333.
Grupo, district courts in the Third Circuit have
nearly uniformly declined to grant preliminary injunctions in
cases, such as the instant one, where only damages are sought
and no judgment has been entered. See, e.g.,Novatek Corp. v. Mallet, 324 F. Supp. 3d 560, 566
(E.D. Pa. 2018) (“Under the circumstances, we conclude
that even if Novatek has proven the elements for a
preliminary injunction . . ., Novatek asks for equitable
relief this court has no power to grant.”); Wallace
v. Powell, CA Nos. 9-286, 9-291, 9-357, 9-630, 2014 WL
12638031, at *2 (M.D. Pa. Oct. 21, 2014) (“Under
Grupo[,]. . . absent an equitable interest in the
Avoca Fee or a claim for equitable relief, Plaintiffs’
claim is not sufficient to warrant entry of a freeze order.
And, because Plaintiffs have not identified an equitable
basis upon which the prejudgment freeze sought here can be
granted, the Supreme Court’s decision in Grupo . .
. forecloses Plaintiffs’ request for a preliminary
injunction.”); CNG Int’l v. Power Ptnrs.
Int’l, Inc., CA No. 01-1393, 2006 U.S. Dist. LEXIS
3603, at *3-*4 (W.D. Pa. Jan. 31, 2006) (“Plaintiffs
make no allegation that they have an equitable claim to any
of the assets defendant holds, or might obtain under the
California judgment. Plaintiffs’ arguments and
authorities are simply unavailing in the face of controlling
Supreme Court precedent.”); Smithson v. York Cnty.
Court of Common Pleas, CA No. 15-1794, 2016 U.S. Dist.
LEXIS 102674, at *6 (M.D. Pa. Aug. 3, 2016) (citing
Grupo for why court had no authority to grant
“preliminary injunction freezing all of the
defendants’ assets until this case is
resolved.”); Akers v. Akers, CA No. 15-2512,
2015 U.S. Dist. LEXIS 100118, at *4 (E.D. Pa. ...