RED TREE CENTER LLC v. ORION EDUCATION GROUP USA LLC (2025)

ORDER DENYING MOTION FOR PRELIMINARY INJUNCTION

After failing to close a stock purchase transaction with Plaintiff Red Tree Center, LLC (“Red Tree”), Defendant Orion Education Group USA, LLC (“OEG”) began exploring a similar transaction with third parties. Red Tree seeks a preliminary injunction preventing OEG from continuing to do so. Red Tree has not, however, established a fair chance of prevailing on its breach of contract claim, particularly insofar as Red Tree seeks the remedy of specific performance. Instead, the record shows that Red Tree is far more to blame for the failure to close than OEG. Accordingly, the Court DENIES Red Tree's Motion for Preliminary Injunction. (ECF 12.)

I. FINDINGS OF FACT.

A. Mid-2023: Red Tree Buys 24% of Orion Technical College, Ltd.

Orion Technical College is a for-profit college in Davenport, Iowa. (ECF 43-1, ¶ 3.) It is owned and operated by Orion Technical College, Ltd. (“OTC, Ltd.”), which, prior to July 24, 2023, was wholly owned by OEG. (Id.) Orion Technical College is accredited by the Accrediting Commission of Career Schools and Colleges (“ACCSC”). (Hrg.¹ )

Sometime prior to 2023, OEG's sole member, Troy Harris, decided to sell OTC, Ltd. (ECF 43-1, ¶¶ 2, 4.) Through a broker, Harris was connected to Red Tree and its principal, Haribabu (“Hari”) Motupalli. (Id., ¶¶ 4, 7; ECF 1, ¶ 19.) Harris wanted to sell all of OTC, Ltd., in a single transaction, but Red Tree preferred a “transitional” process because the company (a) wanted time to learn the business and (b) wanted to expand the programs available at Orion Technical College in a way that might have triggered regulatory pushback if Red Tree acquired 100% of the stock all at once. (ECF 43-1, ¶¶ 7–8.) Accordingly, the parties agreed to a two-step transaction in which Red Tree initially would purchase 24% of OTC, Ltd., with an option to purchase the remaining 76% one year later. (Id., ¶ 8.)

The transaction was governed by a Stock Purchase Agreement dated May 17, 2023 (the “Stock Purchase Agreement”). (ECF 43-3.) Red Tree agreed to pay [Redacted] for 2,400 shares of Common Stock and 21,600 shares of Class B Non-Voting Common Stock of OTC, Ltd. (Id., § 2.4.) The transaction closed on July 24, 2023, although it took more than two months for Red Tree to deliver the full purchase price [Redacted] despite the Stock Purchase Agreement requiring full payment at closing. (Id., § 6.3(e)(i); ECF 43-1, ¶¶ 19–20.)

In addition to receiving the 24% ownership interest, Red Tree received “an exclusive but time-restricted option” to purchase the remaining 76% of OTC, Ltd., for an agreed-upon price of [Redacted] “payable in full at the closing on the Option.” (ECF 43-3, § 2.4(a).) The Stock Purchase Agreement required Red Tree to give notice of its intent to exercise the option within twelve months, “subject to [Red Tree] obtaining all required regulatory approvals and third-party consents.” (Id., § 2.4(b).) If the option expired, OEG would have the right to repurchase Red Tree's shares at the original purchase price for those shares plus interest at a simple annual rate of 3% and,

[OEG] also shall have the right to pursue any transaction for a sale or merger involving any part or all of the assets or equity of [OTC, Ltd.] (an “Exit Transaction”) under which [Red Tree], for its respective ownership interest in [OTC, Ltd.], would be paid only the amount of the Purchase Price plus interest accrued thereon at the rate of three percent (3%) from the date of the Closing on the Shares to the closing on the Exit Transaction.

(Id.)

At closing, the parties executed “Amendment No. 1” to the Stock Purchase Agreement (the “First Amendment”). (ECF 43-1, ¶ 21; ECF 43-5.) Among other things, the First Amendment replaced provisions of the Stock Purchase Agreement regarding real estate (which OEG or one of its affiliates would continue to own). (ECF 43-5, p. 2.) In addition, the First Amendment contemplated the execution of additional agreements identified as the “(i) Management Agreement, (ii) EMC Agreement and (iii) the Shareholders Agreement.” (Id., pp. 2–3.)

B. Developments Subsequent to the Closing of the First (24%) Transaction.

Following the closing of the first transaction, Red Tree and OEG worked together to run OTC, Ltd. (See e.g., 43-1, ¶ 30.) The relationship was rocky, as illustrated by long and combative emails between Harris and Motupalli in May 2024 about the company's financial situation, strategic direction, and related issues. (ECF 43-27.) Still, on May 30, 2024, Red Tree provided timely written notice via email of its intent to exercise the option to purchase the remaining 76% stock interest of OTC, Ltd. (ECF 43-1, ¶ 28; ECF 15-3.)

The parties originally contemplated a closing date in October 2024, but this was pushed back to December 27, 2024, due to Red Tree's delayed filing of its Change in Ownership application with the ACCSC. (ECF 43-1, ¶ 29.) OEG blames Red Tree for the delayed filing, with Harris averring that he told Red Tree “many times” to retain a higher education lawyer who could help move the regulatory process along. (Id., ¶ 50.) According to Harris, OEG also had to take the lead in providing written notice to students and the U.S. Department of Education to satisfy regulatory requirements. (Id., ¶¶ 50–51.) Harris further states that Red Tree drug its feet in preparing the Change in Ownership application for ACCSC, with the application not being submitted until the last week of October 2024. (Id., ¶ 52.) When ACCSC asked for additional information about Red Tree by December 5, 2024, Harris says that he “had to press Motupalli to ensure this information was submitted to ACCSC by the deadline.” (Id., ¶ 53.)

For its part, Red Tree devoted time and funding to OTC, Ltd., to help Orion Technical College develop educational programs that Motupalli believed would make the school more profitable. (ECF 37, ¶¶ 6–7.) The school's audited financial statements later said [Redacted] (ECF 43-24, p. 17.) In other words, Harris effectively agreed that the changes recommended by Motupalli had [Redacted]. (See id.) According to Motupalli, Red Tree also contributed money to the company on other occasions to help cover expenses despite having no contractual obligation to do so. (ECF 12-2, ¶¶ 8, 12; ECF 37, ¶¶ 9–12.)

Although the parties appeared to agree on a closing date of December 27, 2024 (subject to regulatory approvals), it does not appear that Red Tree was taking any meaningful steps to close on that date. (ECF 43-1, ¶ 29.) For example, OEG sent a proposed campus lease to Motupalli and Red Tree's counsel, Vinay Malik, for review and approval in November 2024 but received no response. (Id., ¶ 53.) In addition, it is unclear whether Red Tree had the necessary funds to close. (See id., ¶¶ 56–57.) Red Tree asserts that OEG, too, was not prepared to close in December 2024 because the parties “had not reached an agreement regarding the allocation of funds spent by Red Tree and the lease of the building owned by OTC.” (ECF 12-2, ¶ 16.) The second part of the transaction did not close in 2024.

C. The Second Amendment to the Stock Purchase Agreement.

In late December 2024, the parties began negotiating an amendment to the Stock Purchase Agreement that ended up being entitled “Amendment to Stock Purchase Agreement.” (ECF 43-1, ¶¶ 58–59; ECF 15-4.) The parties refer to this as the “Second Amendment,” and the Court will do the same. (See ECF 12-1, p. 7; ECF 43-1, ¶ 59.) The Second Amendment covered many topics that had arisen between the parties since closing on the first 24% stock interest, including audits, capital contributions, the allocation of debt obligations, campus real estate, purchase price, and other “miscellaneous matters.” (ECF 15-4, §§ 3–8, 11.)

Specifically, and as relevant to this dispute, the Second Amendment imposed various payment obligations on Red Tree prior to closing, including: $500,000 toward a line of credit payment on behalf of OTC, Ltd. (id., § 5(f)); $45,000 to OEG as reimbursement for funding OTC, Ltd.'s payroll for January 2025 (id., § 5(g)); and certain property tax and mortgage payments (id., § 5(h)). Further, the Second Amendment stated:

From [January 23, 2025] to the Closing Date, [Red Tree] agrees that it shall be solely responsible to contribute to [OTC, Ltd.] such funds as [OTC, Ltd.] may require in order to make timely payment of operating expenses incurred in the ordinary course by [OTC, Ltd.], including without limitation mortgage payments (principal & interest), interest on the Credit Line, payroll costs, taxes and insurance and utilities, and fees owed to service providers and vendors, which are not covered by [OTC, Ltd.'s] revenues․

(Id., § 11(b).)

The Second Amendment also stated that “[o]ther than the funding obligations expressly specified in this Amendment or in the [Stock Purchase Agreement] as [Red Tree] obligations, it is agreed that [Red Tree] shall have no other funding obligations for [OTC, Ltd.] between [January 23, 2025] and the Closing Date.” (Id., § 11(c).) Additionally, the Second Amendment stated:

[A]ll financial contributions made to [OTC, Ltd.] by each Party since July 24, 2023 ․ which (i) shall be deemed to be capital contributions made by each Party and not loans made to [OTC, Ltd.] and (ii) shall not result in any changes to the ownership percentages of either Party or of the allocation of losses/profits of [OTC, Ltd.] but which shall be considered to be part of each Party's tax basis in its stock held in [OTC, Ltd.].”

(Id., § 4.)

As for the closing of the 76% stock interest itself, the parties calculated the exact purchase price for Red Tree's acquisition to be [Redacted]. (Id., § 8.) OEG agreed to waive interest from January 1, 2025, through the closing date. (Id.) OEG further agreed to finance [Redacted] of the purchase price pursuant to a promissory note issued by Red Tree and payable to OEG at [Redacted] (the “Promissory Note”). (Id.) This was a change from the original Stock Purchase Agreement, which contemplated that Red Tree would pay the full purchase price in cash, with no contingency for Red Tree's ability to obtain financing. (See ECF 43-3, § 2.4.) The Second Amendment stated that the Promissory Note “shall be secured by commercially acceptable collateral such as pledged marketable securities or pledged real estate ․ The parties shall agree upon the form of the Note and related Security Agreement no later than five (5) business days prior to the Closing.” (ECF 15-4, § 8.)

The Second Amendment also addressed OTC, Ltd.'s real estate, which Red Tree was given an option to purchase. (Id., § 6.) If Red Tree did not exercise the option, the real estate would be transferred to OEG free and clear of any liens, “and [OTC, Ltd.] and [OEG] shall enter into a lease for [OTC, Ltd.'s] occupancy of space [on enumerated terms] ․ The form of the Lease will be finalized, with the foregoing terms included, prior to a Closing or a sale to a third-party.” (Id., § 7.) In such case, the Second Amendment gave OEG the right to enter and close a real estate sale contract with a third-party buyer prior to the closing of Red Tree's purchase of the 76% stock interest. (Id.) Red Tree agreed that it “will not object to such transaction nor cite it as a basis for not proceeding to the Closing under the Purchase Agreement, provided that Buyer has not been denied the opportunity to timely exercise the [option].” (Id.)

The Second Amendment contained two sections relating specifically to closing. (Id., §§ 9–10.) Section 9 stated:

[T]he Closing ․ shall occur on either (x) March 14, 2025, or (y) any earlier business date that is five (5) business days after the date by which [OTC, Ltd.] has received both the written approval from SEVIS on its pending 1-17 application and written notice from its auditor that the 2024 Audits will be ready to be issued within ten (10) business days (the “Closing Date”)․

(Id., § 9.) Section 9 further stated:

[T]here is no financing contingency associated with [Red Tree's] obligation to close on the Closing Date and that [Red Tree] will be in breach of the Purchase Agreement, as amended by this Amendment, if [Red Tree] fails or refuses to close on the Closing Date on the basis that it lacks funds to pay the [purchase price].

(Id.) Additionally, § 10 of the Second Amendment stated:

Consequences of [Red Tree's] Failure to Close: In the event that [Red Tree] fails or refuse to close the Option Transaction on the Closing Date and to pay the Option Closing Price to [OEG] on that date, then [Red Tree] shall be in material breach of the Purchase Agreement, as amended by this Amendment, and [Red Tree's] Option rights shall expire, [Red Tree] shall remain a minority shareholder and [OEG] shall have the rights delineated in Section 2.4(b) of the Purchase Agreement, including [OEG's] Repurchase Right and the right to pursue an Exit Transaction.

(Id., § 10.) In turn, § 2.4(b) of the Stock Purchase Agreement states that in the event the option expired, OEG “shall have the right to pursue any transaction for a sale or merger involving any part or all of the assets or equity of [OTC, Ltd.] (an ‘Exit Transaction’)” and Red Tree would be entitled to the price it originally paid for the 24% stock interest “plus interest accrued thereon at the rate of three percent (3%) from the date of the Closing on the Shares to the closing on the Exit Transaction.” (ECF 15-1, § 2.4(b).)

D. Failure to Close the Second (76%) Stock Purchase Transaction.

Problems arose shortly after the execution of the Second Amendment. As of February 1, 2025, Red Tree had not fulfilled its obligation to pay back taxes and mortgage payments related to OTC, Ltd.'s real estate. (ECF 43-1, ¶ 74.) As a result, OEG's outside counsel, Ronald Holt, emailed outside counsel for Red Tree, Vinay Malik, to express concerns about the non-payment of these items and to “urge [Motupalli] to begin planning for the security required for the [Redacted] Note” that Red Tree was issuing to OEG to help finance the acquisition of the 76% stock interest. (ECF 43-11, pp. 3–4; ECF 43-1, ¶ 74.) Holt followed up again six days later, with Malik responding that he would “confer with Hari.” (ECF 43-11, pp. 1–3.)

Although the Second Amendment contemplated a closing date of no later than March 14, 2025, (ECF 15-4, § 9), the parties agreed in late February 2025 to an extension to April 2, 2025 (ECF 43-1, ¶ 66; ECF 43-31). However, they made limited progress toward closing in February and March. On February 28, 2025, CPA Rick Evans sent an engagement letter for the audit of OTC, Ltd.'s 2024 financial statements to Motupalli. (ECF 37-14.) Motupalli signed and returned the letter the same day. (Id.) Red Tree did not, however, pay the $6,000 fee that was required under the engagement letter “before [the auditor would] begin any audit work.” (Id., p. 5; ECF 41-1, p. 1.) Motupalli claims he asked Patty McCracken, Orion Technical College's Regional Director of Operations and Financial Services, to “forward the $6,000 retainer to OTC's auditor from the contributions made by Red Tree.” (ECF 37-4, p. 2; ECF 37, ¶¶ 10, 37.) McCracken denies that Motupalli made any such request. (Hrg.) The Court finds her testimony credible. And even if Motupalli indeed made such a request, the Second Amendment did not contemplate that Red Tree would pay the auditor's fees in an indirect manner using funds the entity provided to OTC, Ltd., but rather directly from Red Tree. (ECF 15-4, § 3.) In any event, notwithstanding the non-payment of the fee, Evans sent McCracken a letter on March 5, 2025, identifying the items Evans needed to perform the audit. (ECF 37-15.) As of March 25, 2025, McCracken had not gathered these materials. (ECF 15-5, p. 2.)

On March 11, 2025, Holt emailed Malik to address items relating to the Promissory Note for OEG's financing of [Redacted] of the purchase price, which Holt said he was “working on” and “will send to you in a few days.” (ECF 37-10, p. 2.) Holt noted that Motupalli proposed commercial property in Virginia as security for the Promissory Note. (Id.) Because the property was nominally owned by what Holt understood to be a Motupalli-controlled entity called Cottonwood Plaza, LLC (“Cottonwood Plaza”), Holt requested a Guaranty from that entity for the Promissory Note, as well as a unanimous consent showing approval of the Guaranty and the granting of a Second Deed of Trust on the property. (Id., pp. 2–3.) Holt also asked for consent or approval from Cottonwood Plaza's lender, AmeriServ Financial Bank, for the Second Deed of Trust. (Id., p. 3.) Holt explained that OEG had no connection to the commercial property, and thus “we are expecting you and Hari and [Red Tree] to take care of these matters within the next 10 days so that the parties will be prepared to close on April 1.” (Id.) Three days later, Motupalli replied, stating that he “agreed” to the request for documents from Cottonwood Plaza and that “Ameri[S]erv agreed to grant a second deed of trust” in response to the request for confirmation that the entity's lender consented to the use of the property as security. (Id., pp. 1–2.)

On March 24, 2025, Harris sent a proposed lease to Red Tree via Docusign. (ECF 37-2, p. 3; ECF 37-9, pp. 2–16.) According to Red Tree, although the proposed lease contained some terms that were consistent with the Second Amendment, it also improperly imposed maintenance and repair costs on Red Tree as the tenant. (ECF 37-2, p. 3; ECF 37-9, pp. 4–16.) There is no indication, however, that Red Tree responded with comments on the lease.

Starting on Tuesday, March 25, 2025, there was a flurry of email traffic regarding closing. (See, e.g., ECF 43-17; ECF 43-19.) That morning, Motupalli sent an email to Holt asking for details on the Promissory Note, which Holt said he had already included “in the [Redacted] Promissory Note itself which I sent to you and Vinay some 2 weeks ago ․” (ECF 37-12, pp. 1–2.) Red Tree has no record of receiving a draft of the Promissory Note, nor did OEG submit evidence that it was ever sent prior to March 25, 2025. (ECF 37-3, p. 3; ECF 37-12, p. 1.) In any event, throughout the morning and afternoon of March 25, Motupalli exchanged emails with McCracken asking about “the status of 2024 OTC audited report.” (ECF 15-5, p. 3.) McCracken said she was “working on the requested items from the auditor this week. I am trying to get the majority of it to him by the end of the week.” (Id., p. 2.) Motupalli said if the audit was not completed by April 1, “I have to move the closing date accordingly, please talk to Troy on this.” (Id.)

In the mid-afternoon of March 25, 2025, Holt circulated an email with a list of nine items (not including subparts) that needed to be completed in connection with closing. (ECF 43-17.) These items (and Holt's stated deadline for completing them) included: (1) Red Tree making payments to OTC, Ltd.'s lender for past due rents (“tomorrow”); (2) Red Tree making the “long overdue” reimbursement payment to OEG in the amount of $45,000 for January payroll (“tomorrow”); (3) Red Tree returning the signed lease for the campus property (“Thursday afternoon, March 27, 2025”); (4) comments on the draft Promissory Note and a copy of the Second Deed of Trust (“Friday afternoon, March 28, 2025”); (5) documents from Cottonwood Plaza and its lender relating to the Second Deed of Trust and Guaranty for the Promissory Note (“Monday afternoon, March 31, 2025”); (6) the signed Second Deed of Trust itself (“Monday afternoon, March 31, 2025”); (7) information for regulatory agencies (“Tuesday, April 1”); (8) signed closing documents (“At the Wednesday April 2 Closing”); and (9) audited financial statements and other regulatory documents (“Within [10–14] business days of the Closing”). (Id.)

Two days later, on March 27, 2025, Holt sent an email to Malik requesting “a status update” for the list of items from the email two days earlier, starting with “the matters, on the attached list, on which [Red Tree] is in breach right now. Items 1 & 2.” (ECF 43-19.) Holt then stated, “[w]e also need to have [Red Tree's] signed copy of the Lease today.” (Id.) He further demanded Red Tree's “comments on the Note/Guaranty by tomorrow and [Red Tree's] draft of the Second Deed of Trust by tomorrow. Please confirm that this will happen.” (Id.) Holt next asked for copies of documents relating to the Second Deed of Trust, including a copy of the email placing AmeriServ on notice of the Second Deed of Trust and an executed unanimous consent from Cottonwood Plaza. (Id.) Holt concluded by stating: “[Red Tree] is also long past due and in breach for its payment obligations. If [Red Tree] wants to save its Option rights and be able to close on Wednesday April 2, the last available day under the ACCSC approval, [Red Tree] must act now! Please respond ASAP with ACTION today!” (Id.)

The following day—March 28, 2025—Holt sent “formal notification” via email at 4:53 p.m. (central time) purporting to terminate Red Tree's option to purchase the remaining 76% of OTC, Ltd., based on “multiple material breaches” of the Stock Purchase Agreement, as amended. (ECF 15-7; ECF 43-21.) Holt's email identified five alleged breaches, including Red Tree's failure to: (i) pay the $45,000 payroll reimbursement for January 2025; (ii) pay Orion Technology College rents for February and March 2025; (iii) sign and return the proposed campus lease; (iv) confirm acceptance of the Promissory Note and Guaranty pursuant to which OEG would finance part of Red Tree's purchase of the 76% stock interest; and (v) provide the draft Second Deed of Trust that would serve as security for the Promissory Note and Guaranty. (ECF 15-7.) Holt stated that the option “is terminated” and that “[OEG] is now free to pursue sale of its 76% stock interest to other parties, along with the right to ‘drag-along’ and sell [Red Tree's] 24% stock interest.” (Id., p. 2.) Holt said OEG “will still provide [Red Tree] with one final new opportunity to purchase the 76% stock interest” on terms that included, among other things, the full purchase price at closing, prepayment of rent payments, and a three-year campus lease agreement. (Id.) Holt stated that these terms had to be satisfied “before the close of business on Wednesday, April 2, 2025.” (Id.)

In subsequent days, more emails were exchanged, some of which reflected Motupalli's efforts to complete the open tasks. For example, the morning of March 31, 2025, he sent a copy of the Promissory Note and Second Mortgage via email to Thomas Boyd (ECF 37-13), who appears to be affiliated with AmeriServ (ECF 37-11, p. 1; ECF 37-3, pp. 3–4). The same morning, Motupalli sent the same documents to Harris and Holt via email, stating: “The enclosed documents were sent to the bank for review ․” (ECF 43-12, p. 2.) Harris responded later that morning with an email stating:

Hari, You'll need to schedule a meeting with Vinay and Ron if they are available. You have received multiple notifications of the Buyer's breaches of the SPA from Ron. Therefore, that option is off the table—I will not be providing seller financing for any part of any future transaction, regardless of who the buyer is.

(Id., pp. 1–2.) Motupalli replied later that day: “Hi Troy, I never violated any rules. You asked me the loan to run the school and I provided whenever I can.” (Id., p. 1.) Motupalli further stated:

Attached is the payments I made towards the 76% of OTC equity purchase.

Total Sale Price: [Redacted]

24% Stock Price: [Redacted]

Loan to Troy/OTC: [Redacted]

Balance for the closing: [Redacted]

I am ready with the funds and I need K-1 form from OTC to file my tax returns. The delay is from your side, hope you understand and I wish to settle the account amicably too.

(Id.)

On April 1, 2025, the parties had a Zoom call, the substance of which is summarized (from OEG's perspective) in an email from Holt to Malik. (ECF 43-16.) Holt's email stated, among other things, that he and Harris became upset when Motupalli “had the audacity to ask the Seller to increase the financing to [Redacted] and then to [Redacted] or Buyer would not close. Well, the Seller financing concept is gone and indeed Buyer's stock option is gone.” (Id., p. 1.) Holt's email recited other frustrations, too, complaining that “legal commitments apparently mean nothing to Hari. He feels free to ignore them and unilaterally change them if they become inconvenient for him.” (Id., p. 2.) Holt then reiterated that a breach had occurred and OEG had the right to pursue a transaction with a third party. (Id.) In subsequent days, the parties tried without success to negotiate a third amendment to the SPA. (E.g., ECF 15-8; ECF 43-9.)

In late April and early May 2025. OEG executed a [Redacted] well as related documents. (ECF 38-1; ECF 38-2; ECF 38-3.) Red Tree filed this lawsuit on April 22, 2025 (ECF 1) and a motion for preliminary injunction on May 20, 2025 (ECF 12). On July 9, 2025, [Redacted] (whom the Court understands to be affiliated with [Redacted]) sent an email to Harris and Holt expressing concerns about the lawsuit, saying: “I think it's paramount that we get that agreement in place to return those funds like we talked about on this past Friday and Monday.” (ECF 44-1.) He further stated:

I prefer that your group [Redacted] while the injunction remains in place, as it represents stochastic risk for us in light of the diligence processes that we are involved in, is being named in any way in the dispute, and our lack of control or influence in the forthcoming ruling(s).

(Id.)

II. LEGAL STANDARDS.

“A preliminary injunction is an extraordinary remedy never awarded as of right.” Tumey v. Mycroft AI, Inc., 27 F.4th 657, 664 (8th Cir. 2022) (quoting Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 24 (2008)). “[T]he burden of establishing the propriety of an injunction is on the movant.” Turtle Island Foods, SPC v. Thompson, 992 F.3d 694, 699 (8th Cir. 2021). The Court must consider the following four factors when determining whether to issue a preliminary injunction: “(1) the threat of irreparable harm to the movant; (2) the state of the balance between this harm and the injury that granting the injunction will inflict on other parties litigant; (3) the probability that [the] movant will succeed on the merits; and (4) the public interest.” Sleep No. Corp. v. Young, 33 F.4th 1012, 1016 (8th Cir. 2022) (alteration in original).

“While no single factor is determinative, the probability of success factor is the most significant.” Carson v. Simon, 978 F.3d 1051, 1059 (8th Cir. 2020) (per curiam). For actions that do not seek to enjoin the enforcement of a statute or regulation, a plaintiff must establish only a “fair chance of prevailing,” which is a lesser burden than “likely to prevail.” D.M. by Bao Xiong v. Minn. State High Sch. League, 917 F.3d 994, 999–1000 (8th Cir. 2019); see also PCTV Gold, Inc. v. SpeedNet, LLC., 508 F.3d 1137, 1143 (8th Cir. 2007) (“[A] court does not decide whether the movant will ultimately win.”).

With respect to the remaining three factors, a plaintiff “is not required to prove with certainty the threat of irreparable harm, but it must prove that ‘irreparable injury is likely in the absence of an injunction.’ ” Young, 33 F.4th at 1018 (quoting Winter, 555 U.S. at 22). “Irreparable harm occurs when a party has no adequate remedy at law, typically because its injuries cannot be fully compensated through an award of damages.” Gen. Motors Corp. v. Harry Brown's, LLC, 563 F.3d 312, 319 (8th Cir. 2009). “In balancing the equities, we weigh the threat of irreparable harm shown by the movant against the injury that granting the injunction will inflict on other parties litigant.” MPAY Inc. v. Erie Custom Comput. Applications, Inc., 970 F.3d 1010, 1020 (8th Cir. 2020). This “requires a court to distinguish between ‘weak or illusory injur[ies]’ and ‘very real threats’ of injuries.” Rodriguez v. Molina, 608 F. Supp. 3d 791, 798 (S.D. Iowa 2022) (alteration in original) (quoting Sak v. City of Aurelia, 832 F. Supp. 2d 1026, 1046 (N.D. Iowa 2011)). It considers harm to both the litigants and other interested parties, like the public. Wachovia Sec., L.L.C. v. Stanton, 571 F. Supp. 2d 1014, 1047 (N.D. Iowa 2008). The last factor, the public interest, “invites the court to indulge in broad observations about conduct that is generally recognizable as costly or injurious.” Id. at 1048 (citing Dataphase Sys., Inc. v. C L Sys., Inc., 640 F.2d 109, 114 (8th Cir. 1981) (en banc)).

The Stock Purchase Agreement contains a Delaware choice-of-law provision. (ECF 15-1, § 8.2(a).) Accordingly, this Order will cite primarily to Delaware cases, although it occasionally will cite Iowa and Eighth Circuit cases, too, when the law reflected in those cases is similar to Delaware. The outcome would not change if the Court evaluated the issues primarily under Iowa law instead of Delaware.

III. LEGAL ANALYSIS.

A. Red Tree Has Not Established a Fair Chance of Success on its Breach of Contract Claim.

Although the parties spend a fair amount of time pointing fingers at each other about things that happened in 2024, there is no material dispute legally about where things stood between Red Tree and OEG at the time of the Second Amendment on January 23, 2025. The parties had closed the first part (24%) of the stock purchase transaction, and Red Tree had provided timely notice of its desire to acquire the remaining 76% of the stock. After failing to close the second transaction by year-end 2024, the parties essentially hit “reset” and used the Second Amendment to set the stage for trying to get it across the finish line in early 2025. Thus, the outcome of Red Tree's motion for preliminary injunction revolves primarily around the terms of the Second Amendment, not on what happened in 2024.

With respect to the Second Amendment, the record indicates that Red Tree committed multiple material breaches. For starters, Red Tree did not pay $45,000 on or before February 3, 2025, to reimburse OEG for funding January 2025 payroll, as required by § 5(g) of the Second Amendment. (ECF 15-4, § 5(g).) It also did not satisfy its obligation under § 5(h) to make tax and mortgage payments in a timely fashion. (Id., § 5(h).) Furthermore, although the parties dispute the issue, the record suggests that Red Tree later breached its obligation under § 11(b) of the Second Amendment to make real estate payments in February and March 2025. (Id., § 11(b); ECF 43-18.) Finally, Red Tree did not do its part to ensure the preparation of the Promissory Note and Security Agreement in connection with OEG's financing of [Redacted] of the purchase price. (Id., § 8.) Instead, Red Tree drug its feet in preparing consents and related documents even though the entity that owned the property that would be used to secure OEG's financing—Cottonwood Plaza—is ostensibly controlled by Motupalli. Red Tree therefore breached its obligation to work with OEG to agree on the form of the Promissory Note and Security Agreement “no later than five (5) business days prior to the Closing.” (Id.)

In arguing otherwise, Red Tree asserts, as to the payment issues, that it paid more in the aggregate to OEG in early 2025 than it was obligated to pay under the Second Amendment. (ECF 37-1.) OEG's post-hearing brief was conspicuously silent on that issue, which suggests Red Tree might be right. But the timing still presents a problem for Red Tree: even under its own accounting, it was obligated to pay nearly [Redacted] on or before February 3, 2025, but did not fully satisfy that obligation until February 27, 2025. (Id.; see also ECF 15-4, §§ 5(g), (h).) Meaning: Red Tree was in material breach for the entire month of February. Moreover, Red Tree's accounting identifies only three items as being “due” under the Second Amendment: (i) back property taxes and mortgage payments; (ii) reimbursement for January payroll; and (iii) a payment of $500,000 toward OTC's line of credit. (ECF 37-1.) But Motupalli's Supplemental Declaration appears to admit that there were roughly [Redacted] in additional unfunded expenses in February and March 2025, including payroll. (ECF 37, ¶ 21.) Red Tree was obligated under § 11(b) of the Second Amendment to pay these unfunded expenses, and thus its failure to include them in the accounting leads the Court to conclude that it likely did not perform all material obligations under the contract.

The communications between Red Tree and OEG in February and March 2025 reinforce Red Tree's problem. OEG's counsel repeatedly sent emails identifying the January 2025 payroll reimbursement and February and March 2025 real estate payments as not having been made. (ECF 43-11; ECF 43-18; ECF 43-32.) At no point in those communications did Red Tree claim otherwise. If, as Red Tree now insists, the company paid everything it was obligated to pay, it is odd that it failed to mention this in response to specific accusations during the relevant timeframe. The Court cannot conclude in these circumstances that Red Tree has proven a fair chance of success on the merits.

Even if Red Tree truly did not breach its payment obligations, the company's failure to take meaningful steps on the Promissory Note, Security Agreement, and related documents on the Cottonwood Plaza property nonetheless prevent the company from establishing a fair chance of success on its breach of contract claim. Those items were crucially important to closing because OEG clearly would not finance [Redacted] of the purchase price without them given prior problems with Red Tree satisfying payment obligations. See generally eCommerce Indus., Inc. v. MWA Intel., Inc., No. 7471-VCP, 2013 WL 5621678, at *17–19 (Del. Ch. Sept. 30, 2013) (describing the factors courts must consider when evaluating materiality, including “the extent to which the injured party will be deprived of the benefit it reasonably expected”). Yet Red Tree appears to have done virtually nothing to obtain the requisite consents and approvals from Cottonwood Plaza and its lender (AmeriServ) in a timely manner. At best, Motupalli had perfunctory communications with AmeriServ prior to OEG providing the notice of termination, at which point Motupalli suddenly began scrambling to obtain what he needed. This was too little, too late: the Second Amendment required agreement on the form of those documents five business days before closing. (ECF 15-4, § 8.) Moreover, based on testimony at the preliminary injunction hearing, it does not appear that Motupalli provided complete or accurate information about the ownership of Cottonwood Plaza in the first place. (Hrg.) He led OEG to believe it was his company, when in fact the sole member was someone else. Id. Simply put, Red Tree did not provide information or documents relating to the Cottonwood Plaza property in a timely fashion.

In response, Red Tree largely focuses on a different issue: whether OEG breached its obligation to “promptly make arrangements with its existing auditor for the performance of the 2024 Audits beginning as soon as possible following the Effective Date and with a commitment for the earliest possible delivery date but in no event any date later than March 14, 2025.” (ECF 15-4, § 3.) If so, according to Red Tree, the transaction could not have closed on time anyway. This argument serves as a sort of “escape hatch” for Red Tree in a situation where the record shows that the company was not prepared to close by April 2, 2025.

There are at least three problems with Red Tree's position. First, Red Tree breached its obligation with respect to the audits, too, by failing to make the initial $6,000 payment to the auditor “within such time period as specified in the auditor's engagement letter with the Company for the 2024 Audits,” as required by § 3 of the Second Amendment. Thus, while it is true that OEG contributed to the delay in the audits by failing to gather documents in a timely fashion, Red Tree contributed to the delay just as much.

Second, the record shows that Red Tree was already likely in breach by the time of OEG's alleged breach of its audit-related obligations. As noted above, Red Tree undeniably missed two payment deadlines: the January 27 deadline for back taxes and mortgage payments (id., § 5(h)) and the February 3 deadline for reimbursement for January payroll (id., § 5(g)). Red Tree therefore was in material breach of the Second Amendment just days after it was signed. While Red Tree apparently later paid the back taxes and mortgage payments, it never claimed to have cured the breach with respect to payroll reimbursement until long after OEG sent the notice of termination. Similarly, although the record is incomplete, it appears that Red Tree missed payment obligations relating to real estate in February and March 2025. If so, by early March 2025, OEG already had sufficient grounds for declaring breach and terminating the Second Amendment. See, e.g., Taylor Enter., Inc. v. Clarinda Prod. Credit Ass'n, 447 N.W.2d 113, 116 (Iowa 1989) (“A material condition which is agreed to by the parties must be fulfilled by the party bringing suit in order for such party to recover on the contract.”). Simply put, OEG was not obligated to close a transaction—for which OEG was financing part of the purchase price, no less—with an entity that repeatedly breached interim payment obligations in material ways. See BioLife Sols., Inc. v. Endocare, Inc., 838 A.2d 268, 278 (Del. Ch. 2003), as revised (Oct. 6, 2003) (“A party is excused from performance under a contract if the other party is in material breach thereof.”); DeMarie v. Neff, No. Civ.A.2077-S, 2005 WL 89403, at *6 (Del. Ch. Jan. 12, 2005) (denying specific performance based on plaintiff's non-performance).

In any event, even if Red Tree could prove that it satisfied every payment obligation under the Second Amendment, there is nonetheless a third problem with its attempt to use the incomplete audit as a basis for seeking a preliminary injunction: Red Tree itself was clearly unprepared to close on April 2, 2025, irrespective of the status of the audit. To that end, it is important to recognize that the parties agreed in § 9 the Second Amendment that closing “shall occur” on March 14, 2025 (which the parties later agreed to extend to April 2, 2025). The inclusion of a drop-dead closing date in the Second Amendment stands in stark contrast to how the parties handled the closing in the original (24%) stock purchase transaction, which set a “floating” date of the “tenth (10th) business day following the satisfaction or waiver of the conditions to the obligations of the Parties ․” (ECF 15-1, § 6.1.) In effect, the parties agreed in the Second Amendment that time would be of the essence. See Brasby v. Morris, No. C.A. 05C-10-022-RFS, 2007 WL 949485, at *3 (Del. Super. Ct. Mar. 29, 2007) (recognizing that whether time is of the essence depends on contract language and the parties' course of dealing); see also enXco Dev. Corp. v. N. States Power Co., 758 F.3d 940, 946 (8th Cir. 2014) (enforcing plain contract language as to timing).

The parties' agreement to a drop-dead date for closing is an insurmountable obstacle to Red Tree's request for injunctive relief. In essence, Red Tree wants the Court to force OEG to close with Red Tree (or, at least, to continue negotiating exclusively with Red Tree). The record is clear, however, that Red Tree was not prepared to close by the drop-dead date, irrespective of issues with the audit. For example, at the preliminary injunction hearing, Motupalli was noticeably vague about where Red Tree would have come up with cash to close by April 2, testifying that he would have relied on “friends” or other nebulous sources. (Hrg.) When this testimony is combined with Red Tree failing to complete tasks related to the Promissory Note and Security Agreement, not responding in a timely fashion to OEG's counsel's emails, and otherwise dragging its feet on closing items in February and March 2025, the only reasonable conclusion is that Red Tree had no intention or desire to close by April 2, 2025.

Motupalli's communications on March 31, 2025, and April 1, 2025, reinforce this conclusion. (ECF 43-12; ECF 43-16.) In the Second Amendment, the parties specifically agreed, to the dollar, on the purchase price for Red Tree's acquisition of the remaining 76% of the stock. They further agreed that all prior cash infusions from either side would be treated as contributions to capital that would not affect the relative percentage ownership interests of each side. Yet in an email dated March 31, 2025, Motupalli asserted that Red Tree's prior cash infusions should offset the purchase price and that the company owed only [Redacted] in additional cash. (ECF 43-12, p. 1.) In other words, he attempted to totally renegotiate the parties' deal. The following day, he apparently asserted during a Zoom call that OEG should have to provide roughly twice as much in financing as OEG had previously agreed. These are not the negotiating tactics of someone ready, willing, and able to close on the original terms of the deal.

In these circumstances, it is highly unlikely that Red Tree would succeed on a claim for specific performance, which is the foundation for its request for a preliminary injunction. (If Red Tree only wanted money damages, a preliminary injunction would be unnecessary.) Under Delaware law, “[a] party seeking specific performance must establish that (1) a valid contract exists, (2) he is ready, willing, and able to perform, and (3) that the balance of equities tips in favor of the party seeking performance.” Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1158 (Del. 2010). Red Tree must prove these elements by clear and convincing evidence. Id. Here, even if Red Tree proves that OEG breached the Second Amendment in connection with the audit and that Red Tree itself was not already in material breach (the latter of which is unlikely), it almost certainly will not prove that it was ready, willing, and able to close on April 2, 2025. Nor, given Red Tree's inactivity in February and March 2025, is the company likely to prove that the “balance of equities tips in favor” of specific performance. The Court is not inclined to conclude that a party that failed to take meaningful steps toward closing by an agreed-upon deadline and later tried to renegotiate the deal on far more favorable terms to itself nonetheless should be permitted to close the transaction anyway. Accordingly, Red Tree is highly unlikely to obtain the remedy of specific performance. See Peden v. Gray, 886 A.2d 1278, 2005 WL 2622746, at *4 (Del. 2005) (unpublished table decision) (affirming denial of specific performance where plaintiffs failed to show they were ready to close by the agreed-upon date).

Moreover, it is highly unclear what “specific performance” even would mean in these circumstances. After the parties' failed attempt to negotiate a Third Amendment, OEG turned to a third-party to help with ongoing operating expenses—expenses that Red Tree otherwise would have been obligated to pay under the Second Amendment. It would be extremely difficult in these circumstances for the Court to award temporary or permanent injunctive relief in a way that unwind these subsequent events. In effect, the Court would be forcing Red Tree and OEG to become contractual partners again despite their historical failure to do so productively. Neither specific performance nor a preliminary injunction is appropriate in these circumstances. See Vera, Inc. v. Tug Dakota, 769 F. Supp. 451, 455 (E.D.N.Y. 1991) (denying motion for temporary injunction in the context of a “business relationship ․ gone sour” where the record “is rife with allegations, by both sides, or bad faith and distrust”); USA Network v. Jones Intercable, Inc., 704 F. Supp. 488, 491 (S.D.N.Y. 1989) (“Specific performance is particularly undesirable and impractical where it would force essentially hostile parties into an ongoing, active business relationship.”).

The outcome might be different if the facts showed that OEG intentionally tried to prevent or obstruct closing. But the record shows the opposite: OEG consistently tried to advance the ball toward closing in February and March 2025, but Red Tree did little to support the effort. In these circumstances, the Court will not save Red Tree from its own inertia and negotiating tactics by rewriting the parties' agreement to turn the drop-dead closing date into a floating date. Instead, the Court concludes that Red Tree does not have a fair chance of prevailing on its claim for specific performance. This, in turn, is fatal to its request for preliminary injunction. See Tug Dakota, 769 F. Supp. at 455. The Remaining Factors Weigh Against Preliminary Injunctive Relief.

Red Tree's failure to show a fair chance of success on its claims is deeply problematic for its motion for preliminary injunction, as “the absence of a likelihood of success on the merits strongly suggests that preliminary injunctive relief should be denied.” CDI Energy Servs. v. W. River Pumps, Inc., 567 F.3d 398, 402 (8th Cir. 2009). Nonetheless, “no single factor is determinative,” and thus the Court will consider the other three factors: threat of irreparable harm, balance of harms, and public interest. Carson, 978 F.3d at 1059.

With respect to the first factor, the record shows that Red Tree will suffer some level of irreparable harm if injunctive relief is not awarded given the time and energy it invested to develop programs and curriculum specifically for Orion Technical College. If forced to pursue new opportunities with different for-profit schools, Red Tree will have to start over. Even so, this factor only weighs modestly in Red Tree's favor because the company is responsible for its own predicament given its failure to act with any urgency to close the transaction in late 2024 or early 2025. Moreover, if Red Tree successfully proves a breach of contract claim, it will be entitled to recover damages for its financial injuries under the indemnification provisions of the Stock Purchase Agreement. (ECF 15-1, art. VII.)

The next factor—balance of harms—weighs in OEG's favor. The record shows that OEG was far more eager than Red Tree to close in late 2024 and early 2025 and has suffered financial (and, in the case of its owner, non-financial) repercussions from the failure to do so. Furthermore, although OEG pursued a transaction with an alternative buyer after sending the notice of termination to Red Tree, the mere threat of an injunction was enough to prevent that transaction from moving forward. Accordingly, OEG is currently stuck running a [Redacted] school that it wanted to sell twelve months ago. The threat of irreparable harm to OEG from the entry of injunctive relief therefore roughly counterbalances the threat to Red Tree from the failure to award such relief.

The final factor, the public interest, is neutral. The record does not show any compelling reason to believe the public would be better off with or without the entry of injunctive relief.

In sum, the remaining three preliminary injunction factors are collectively neutral, which is nowhere near enough to warrant injunctive relief in a situation where Red Tree has failed to prove a fair chance of success on the merits.

IV. CONCLUSION.

The Court DENIES Red Tree's Motion for Preliminary Injunction. (ECF 12.)

Two versions of this Order are being filed, both under seal. The first version is unredacted and will remain under seal. The second version shows (in yellow highlighting) the redactions the Court intends to make to the Order when it is made available on the public docket. The second version will remain under seal only temporarily. Within five (5) business days of the date of this Order, the parties may file objections identifying: (a) any additional portions of the second version that they believe should be redacted when the document is made available on the public docket; and/or (b) any portions of the second version that are currently proposed for redaction that they believe should not be redacted when the document is made available on the public docket. If no objections are filed, the Court will make the second version available to the public in its current form (except with the yellow highlighted language fully redacted). If objections are filed, the Court will review them and make the changes it deems appropriate before making the second version available to the public in redacted form. To assist the Court in this endeavor, the parties' objections should explain the basis for any proposed changes and include (as to proposed additional redactions) citations to the page(s) of their ECF filings where they requested confidential treatment in the first place.

IT IS SO ORDERED.

FOOTNOTES

1.   All references to “Hrg.” are to the Preliminary Injunction hearing on July 11, 2025. In the interest of efficiency, the Court is preparing this ruling before transcripts from the hearing are finished, and thus the facts are based on the Court's recollection of testimony and evidence from the hearing.

STEPHEN H. LOCHER, UNITED STATES DISTRICT JUDGE