LYNEER INVESTMENTS LLC LYNEER HOLDINGS INC LYNEER STAFFING SOLUTIONS LLC v. SPP LLC RICK ARROWSMITH (2026)

This action arises from a series of agreements under which defendant SPP Credit Advisors LLC made mezzanine loans to plaintiffs Atlantic International Corp. and Lyneer Investments, LLC. SPP served notices of default on Atlantic and Lyneer Investments and exercised default remedies that, in effect, gave SPP substantial control over the corporate governance of those plaintiffs and two of their affiliated entities, plaintiffs Lyneer Holdings, Inc., and Lyneer Staffing Solutions, LLC.

In response to SPP's notice of default and exercise of default remedies, plaintiffs brought this action, seeking a declaratory judgment that, in effect, plaintiffs did not default; injunctive relief restraining SPP from exercising its contractual default remedies; and damages.

Plaintiffs seek by order to show cause to bring on motion sequence 001, requesting injunctive relief barring SPP from exercising the contractual default remedies. (See NYSCEF No. 13 at 1-2 [proposed OSC].) Plaintiffs also seek a similar temporary restraining order pending a determination of the motion. (See id. at 2-3.)

The court is signing the proposed OSC. Plaintiffs' request for interim relief is denied.

I. Likelihood of Success

On the current record, plaintiffs have not shown a sufficiently strong likelihood of success to warrant granting a temporary restraining order.

1. As relevant here, SPP made two mezzanine loans to plaintiffs, and served plaintiffs a notice of default for each loan. Plaintiffs argue that the notice of default for the earlier, larger loan (the Term Loan) is invalid. According to plaintiffs, as part of a refinancing arrangement in April 2025, they transferred to SPP shares in Atlantic with a value exceeding the amount of the Term Loan, on condition that SPP liquidate those shares and use the proceeds to pay down the debt—thereby assertedly satisfying the Term Loan in substance. On this record, though, this court is unpersuaded that plaintiffs have shown that the parties understood the Atlantic-shares-transfer to render the Term Loan satisfied. Plaintiffs have also not established that the agreement by which SPP received the Atlantic shares required SPP to sell those shares in satisfaction of the Term Loan; nor that SPP had the unimpaired ability to sell the Atlantic shares yet chose not to do so.

2. Plaintiffs do not dispute SPP's claim in the Term Loan notice of default that plaintiffs breached the Term Loan agreement by failing for multiple quarters to pay interest on the outstanding principal of the Term Loans. At most, plaintiffs suggest that SPP waived that default by failing to demand interest payments. But as SPP argues—and plaintiffs do not dispute—the Term Loan agreement contains a no-waiver provision. Plaintiffs do not attempt to argue either that the no-waiver provision is invalid or has itself been waived through conduct.

3. SPP claims in the Term Loan notice of default that plaintiffs failed to pay the net cash proceeds from issuance of equity interests in Atlantic to repay the Term Loan. Plaintiffs argue that there was no default here because the Term Loan agreement requires these proceeds to go first to plaintiffs' senior lender before being used to pay down the SPP loans. But it is undisputed that plaintiffs did not use the equity-issuance proceeds to pay down the senior loan obligations or the Term Loan obligations. Instead, plaintiffs say, they used the capital raised through this issuance of equity to pay legitimate business operating expenses—"[h]ardly the corporate defalcation SPP would want this court to believe occurred." (NYSCEF No. 32 at 4.) The problem with this argument is that it cannot be reconciled with the payment obligations imposed by the Term Loan agreement. Those obligations require all proceeds of an equity issuance to be paid toward loan obligations, except for tax and administrative expenses incurred in connection with the issuance itself—not unrelated (and ongoing) operational expenses of the business.

4. SPP also served a notice of default for the later, smaller loan made to plaintiffs (the Bridge Loan). SPP claims in that notice that plaintiffs breached the terms of the Bridge Loan by acquiring another company (Circle8 Group) and incurring debt to finance the Circle8 acquisition. Plaintiffs do not contend (whether in their complaint or in their submissions to date on this motion) that the Circle8 acquisition was permitted under the terms of the Bridge Loan; that the notice of default was inaccurate in describing that acquisition as having been financed through the issuance of debut; or that the Bridge Loan permitted plaintiffs to incur additional debt.

5. The Bridge Loan agreement, like the Term Loan agreement, includes a provision requiring plaintiffs to use the proceeds of equity issuances (net of expenses and taxes incurred in connection with an issuance) to pay down the Bridge Loan. The Bridge Loan notice of default claims that plaintiffs failed to pay the proceeds of an equity issuance—the same one as in the Term Loan notice of default—toward the Bridge Loan. Plaintiffs do not dispute that the net proceeds of the equity issuance were used for purposes other than paying down the Bridge Loan. They argue instead that the provisions of the Term Loan governing equity-issuance proceeds, discussed above, take precedence over the corresponding provisions in the Bridge Loan. That is, plaintiffs say, equity-issuance proceeds must go to plaintiffs' senior lender before being used to pay down either the Bridge Loan or the Term Loan. But, as discussed above, no proceeds did go to the senior lender. Thus, either plaintiffs breached the relevant provision of the Term Loan agreement (by making no payment of proceeds to the senior lender) or they breached the relevant provision of the Bridge Loan agreement (by making no payment of proceeds toward the Bridge Loan).

II. Irreparable Harm

Plaintiffs claim two forms of irreparable harm: (i) Inability to meet ongoing operating and payroll expenses; and (ii) loss of corporate control. With respect to payment of ongoing business expenses, SPP represents (and plaintiffs do not dispute) that it is taking steps to continue to ensure, at least in the short term, that plaintiffs have access to funds needed to pay those ongoing expenses.

With respect to corporate control, this court agrees with plaintiffs that loss of corporate control of the sort that plaintiffs have alleged could constitute irreparable injury. Plaintiffs have not shown, however, that this loss of control is so imminent that it is likely to occur absent a TRO. The court need not, and does not, reach the question whether plaintiffs' claimed injuries to their control/managerial rights would constitute irreparable harm supporting issuance of a preliminary injunction, as requested in the underlying order to show cause.

III. Balance of Equities

Plaintiffs have not shown, on this record, that the balance of the equities is in their favor with respect to their requested TRO.

1. Plaintiffs argue that SPP has acted inequitably in avoiding satisfaction of the Term Loan on which SPP is now claiming plaintiffs defaulted. In particular, plaintiffs assert, if SPP sold the Atlantic stock as intended, it would be obliged under a side agreement to pay two Lyneer executives "up to 50% of the [resulting] debt satisfaction," as long as those executives were "employed by the Lyneer Entities at the time SPP sold the Atlantic stock." (NYSCEF No. 30 at 3.) This incentive, plaintiffs claim, has led SPP to (i) refrain from selling the Atlantic shares, while (ii) pressuring plaintiffs to fire the two executives for non-performance-related reasons.

As the court understands the current record, this claim by plaintiffs suffers from a simple but fundamental shortcoming: The provisions of the side agreement are separate from, and unrelated to, the terms of the refinancing transaction under which SPP received Atlantic stock that it could sell to pay down the Term Loan.

SPP entered into the side agreement with these Lyneer executives in June 2024—nearly a year before the April 2025 refinancing transaction. (See NYSCEF No. 24 at 1 [side agreement].) As SPP points out (see NYSCEF No. 31 at 6), the terms of §§ 5 (b) and 6 of the side agreement, on which plaintiffs appear to be relying, pertain on their face to proceeds realized by Atlantic from a capital raise, not proceeds realized by another party (like SPP) selling Atlantic stock. (See NYSCEF No. 24 at 3 §§ 5 [b], 6.) Moreover, § 5 (a) requires that the capital-raise proceeds at issue be paid first towards the senior loan obligations; and § 5 (b) imposes a 50/50 split of proceeds only after the senior loan obligations have been paid in full. (See id. at 3 § 5 [a]-[b].) Under the terms of the April 2025 refinancing, SPP was required to devote proceeds from the sale of Atlantic stock to paying down the SPP Term Loan not the senior loan obligations. SPP's selling Atlantic stock to pay down the Term Loan thus by definition could not give rise to an obligation to pay 50% of the Atlantic-stock proceeds to Lyneer executives.

2. Plaintiffs argue that SPP, as a mezzanine lender, should not be able to leverage the obligations of the Term Loan and Bridge Loan to exercise governance control over the Lyneer entities. But plaintiffs do not contend that SPP has exceeded the scope of the permissible remedies available to it upon declaring defaults (assuming for the moment that those defaults indeed occurred). It is possible that plaintiffs did not anticipate how SPP would be able to use those available contractual remedies in the event of default; and that SPP has gained more control over plaintiffs' governance than plaintiffs had anticipated. But the Term Loan and Bridge Loan are complex commercial-financing transactions entered into by sophisticated, counseled parties. That the transactions may not have worked out as plaintiffs intended does not, without more, shift the balance of the equities in plaintiffs' favor.

3. Plaintiffs also argue, with respect to the particular defaults claimed by SPP, that the equities are in their favor for TRO purposes because SPP is "invoking months-old alleged reporting issues as a pretext to seize control of operating subsidiaries generating hundreds of millions of dollars in revenue." (NYSCEF No. 30 at 6, citing Fifty States Mgt. Corp. v Pioneer Auto Parks, 46 NY2d 573, 576-577 [1979].) This argument is unpersuasive.

It is true, as plaintiffs contend, that the Court of Appeals has said that "equity will often intervene to prevent a substantial forfeiture occasioned by a trivial or technical breach." (Fifty States Mgt., 46 NY2d at 576-577.) But plaintiffs have not established that all of the defaults at issue are trivial or inconsequential within the meaning of Fifty States Management.

In particular, the defaults declared by SPP included plaintiffs' having (i) failed for multiple periods to pay interest on the Term Loan; (ii) failed to comply with their obligations, upon realizing proceeds from equity issuances, to pay down their existing debt; and (iii) incurred new debt to acquire the shares of another entity, in violation of the terms of the Bridge Loan agreement. These claimed defaults are neither trivial nor purely technical. (Compare Atlantis Mgt. Group II LLC v Nabe, 216 AD3d 526, 527 [1st Dept 2023] [declining to enforce an operating agreement that would have permitted plaintiff to buy back defendants' interests in the LLC for $1.00 upon "any act in contravention of the [operating agreements], without limitation"] [emphasis added]; Tunnell Publ. Co. v Straus Communications, 169 AD2d 1031, 1032 [3d Dept 1991] [denying plaintiffs' summary-judgment motion seeking the accelerated balance of a promissory note upon the dissolution of the original obligor, based on evidence submitted by defendants that the successor obligor was continuing the business of, and satisfying the loan obligations of, the original obligor, such that plaintiffs had sustained no damages].)

This court's conclusions set forth above are necessarily provisional; and the court does not rule out the possibility that it could reach a different conclusion, following further briefing, on the underlying request by plaintiffs for a preliminary injunction. But at this point, on this record, plaintiffs have not shown that they are entitled to a temporary restraining order.

DATE 4/29/2026

Gerald Lebovits, J.