CULP v. SILVERLINE SERVICES INC (2026)

DECISION & ORDER

In an action, inter alia, to recover damages for fraud, the defendant appeals from an order of the Supreme Court, Nassau County (Francis Ricigliano, J.), dated January 23, 2025.  The order granted the plaintiff's motion for a preliminary injunction enjoining the defendant from enforcing a contract and denied the defendant's cross-motion pursuant to CPLR 3211(a) to dismiss the complaint.

ORDERED that the order is modified, on the law and in the exercise of discretion, by deleting the provision thereof granting the plaintiff's motion for a preliminary injunction, and substituting therefor a provision denying the motion;  as so modified, the order is affirmed, without costs or disbursements.

In 2024, the plaintiff entered into a written merchant agreement with the defendant, whereby the defendant purchased from the plaintiff a portion of the future receivables of the plaintiff's business for a discounted price.  Pursuant to the agreement, the plaintiff was required to make daily payments to the defendant, which were supposed to be calculated to represent a certain percentage of the business's daily revenue.  The plaintiff thereafter commenced this action, inter alia, to recover damages for fraud and breach of the implied covenant of good faith and fair dealing, as well as for a judgment declaring that the agreement is a usurious loan and unenforceable.  The plaintiff alleged, among other things, that the defendant had misrepresented how the daily payments were to be calculated and fraudulently inflated the amount of the daily payment.  The plaintiff moved for a preliminary injunction enjoining the defendant from enforcing the agreement.  The defendant opposed the motion and cross-moved pursuant to CPLR 3211(a) to dismiss the complaint.  In an order dated January 23, 2025, the Supreme Court denied the defendant's cross-motion and granted the plaintiff's motion.  The defendant appeals.

The elements of a cause of action to recover damages alleging fraud “require a material misrepresentation of a fact, knowledge of its falsity, an intent to induce reliance, justifiable reliance by the plaintiff and damages” (Eurycleia Partners, LP v. Seward & Kissel, LLP, 12 N.Y.3d 553, 559, 883 N.Y.S.2d 147, 910 N.E.2d 976;  see ANS 1 Corp. v. Yosef, 244 A.D.3d 669, 670, 247 N.Y.S.3d 142).  “A claim rooted in fraud must be pleaded with the requisite particularity under CPLR 3016(b)” (Eurycleia Partners, LP v. Seward & Kissel, LLP, 12 N.Y.3d at 559, 883 N.Y.S.2d 147, 910 N.E.2d 976;  see ANS 1 Corp. v. Yosef, 244 A.D.3d at 670, 247 N.Y.S.3d 142).  “Each of the foregoing elements must be supported by factual allegations containing the details constituting the wrong sufficient to satisfy CPLR 3016(b)” (Stortini v. Pollis, 138 A.D.3d 977, 978, 31 N.Y.S.3d 90).  “Implicit in every contract is a covenant of good faith and fair dealing which encompasses any promise that a reasonable promisee would understand to be included.  The implied covenant of good faith and fair dealing is a pledge that neither party to the contract shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruit of the contract, even if the terms of the contract do not explicitly prohibit such conduct” (P.S. Fin., LLC v. Eureka Woodworks, Inc., 214 A.D.3d 1, 30, 184 N.Y.S.3d 114 [citations and internal quotation marks omitted] ).

The Supreme Court properly denied the defendant's cross-motion pursuant to CPLR 3211(a) to dismiss the complaint.  Contrary to the defendant's contention, the plaintiff adequately stated causes of action alleging fraud and breach of the implied covenant of good faith and fair dealing with the requisite specificity.  The complaint alleged, inter alia, that the defendant defrauded the plaintiff and breached the covenant of good faith and fair dealing by misrepresenting that the daily payment due would be calculated to reflect a percentage of the daily revenue of the plaintiff's business and fraudulently inflating the amount of the daily payment to accelerate the payment of the money owed the defendant pursuant to the agreement and to cause the plaintiff to default on his obligations and that the plaintiff relied on these misrepresentations when entering into the agreement.

However, the Supreme Court improvidently exercised its discretion in granting the plaintiff's motion for a preliminary injunction.  “To establish the right to a preliminary injunction, the plaintiff must prove by clear and convincing evidence (1) the likelihood of ultimate success on the merits, (2) irreparable injury absent the grant of the injunction, and (3) a balance of the equities in the plaintiff's favor” (Commissioner of N.Y. State Dept. of Transp. v. Polite, 236 A.D.3d 82, 114, 225 N.Y.S.3d 106 [internal quotation marks omitted] ).  “The purpose of a preliminary injunction is to maintain the status quo and prevent the dissipation of property that could render a judgment ineffectual” (Speyside Holdings, LLC v. Nebari Natural Resources Credit Fund I, LP, 243 A.D.3d 714, 715, 247 N.Y.S.3d 83 [internal quotation marks omitted] ).  “As a general rule, the decision to grant or deny a preliminary injunction lies within the sound discretion of the Supreme Court” (Commissioner of N.Y. State Dept. of Transp. v. Polite, 236 A.D.3d at 114, 225 N.Y.S.3d 106 [internal quotation marks omitted] ).

The plaintiff failed to establish a likelihood of success on the merits of his claims for fraud and breach of the implied covenant of good faith and fair dealing.  In an affidavit in support of the motion for a preliminary injunction, the plaintiff's statements that the defendant misrepresented how the daily payment would be calculated and inflated the amount of the daily payment were made only upon “information and belief,” and the plaintiff submitted no evidence demonstrating that the amount of the daily payment was not calculated pursuant to the terms of the agreement or otherwise was improperly inflated.  Moreover, the plaintiff failed to establish a likelihood of success on the merits of his claim for usury, as the agreement contained a reconciliation provision and had no fixed term and bankruptcy did not constitute a default under the agreement (see True Bus. Funding, LLC v. Guerrero A Constr. Corp., 239 A.D.3d 787, 788, 236 N.Y.S.3d 679).

The plaintiff also failed to establish irreparable harm.  To establish irreparable harm, the plaintiff must demonstrate an injury for which money damages are insufficient (see Berman v. Sosman, 243 A.D.3d 755, 758, 246 N.Y.S.3d 385;  Speyside Holdings, LLC v. Nebari Natural Resources Credit Fund I, LP, 243 A.D.3d at 716, 247 N.Y.S.3d 83).  Here, the plaintiff attested in his affidavit that, if the defendant were permitted to enforce the agreement, the defendant would be entitled to 100% of the plaintiff's business's revenue and the business would inevitably cease operation.  The plaintiff, however, failed to demonstrate that this injury could not be adequately compensated by money damages.  Moreover, the plaintiff failed to demonstrate that, without a preliminary injunction, a potential judgment against the defendant would be rendered ineffectual.

The plaintiff therefore failed to establish a likelihood of the success on the merits of any of his claims and that he would suffer irreparable harm without a preliminary injunction.  Accordingly, the Supreme Court improvidently exercised its discretion in granting the plaintiff's motion for a preliminary injunction.

The defendant's remaining contentions are without merit.

LASALLE, P.J., CHAMBERS, WOOTEN and VOUTSINAS, JJ., concur.