The Delaware Court of Chancery routinely entertains requests for the entry of a temporary restraining order ("TRO") or preliminary injunction ("PI") to prevent an imminent threat of irreparable harm; that is, a harm that is happening or will happen very soon and that cannot be remedied by money damages alone. Examples include preventing an M&A deal, preventing an executive subject to a noncompete from competing with his employer or accepting a position with a competitor, stopping the sale of real estate, and many other types of cases.

Parties generally seek a temporary restraining order when the time to act is short and the risk of irreparable harm is nearing. A TRO is a "special remedy of short duration" and is designed to prevent imminent, irreparable injury pending a preliminary injunction or final resolution of the matter. The primary focus of the court when analyzing a TRO motion is the likelihood of imminent and irreparable harm to the moving party.

If the threat of irreparable harm is approaching, but is not as imminent, a party can seek a preliminary injunction. A PI is an equitable remedy whereby the Court of Chancery requires or prohibits certain action of a party prior to a final judgment. In contrast to a TRO, an application for a PI is generally presented after some discovery has occurred and a record has been developed.

A. The Standard to Obtain a Temporary Restraining Order

Temporary restraining orders are extraordinary measures that will be granted only if imminent and irreparable injury will likely be suffered by the moving party absent relief. The court will consider the following factors in deciding whether to enter a TRO: (i) the existence of a colorable claim, (ii) imminent and irreparable harm will be suffered if relief is not granted, and (iii) a balancing of hardships favoring the moving party.

Due to the time constraints involved in a TRO, the court's focus is less upon the merits of the claim as it is on the pending harm. The court concentrates on whether the absence of a TRO will permit imminent, irreparable injury to occur to the applicant and whether that possibility of injury outweighs the injury that the TRO itself might inflict on the defendants. "In a case where this balance tilts in favor of the applicant and where a responsible consideration of the merits cannot be had, [the] court will issue a TRO even though the applicant has only raised claims that are colorable, litigable, or . . . raise questions that deserve serious attention."

1. Colorable Claim

In the context of a TRO, a colorable claim simply means that the claim is not frivolous. If the moving party pleads a nonfrivolous claim of wrongful conduct that threatens irreparable harm, a TRO may issue. Further, a finding that a claim is not likely to prevail is not required. A claim is colorable for purposes of a TRO if plaintiff can allege enough facts to support its claims. For example, a claim for a TRO, which sought to enjoin a defendant from using funds that plaintiff alleged were illegally withdrawn from its account was a sufficiently colorable claim. In Smart Home, plaintiff sought to enjoin defendant from utilizing funds that defendant withdrew from the plaintiff corporation pending a final determination of whether defendant was entitled to the funds, considering defendant had been discharged as an employee from the plaintiff company.

Similarly, in Trilogy Portfolio Co., LLC v. Brookfield Real Estate Fin. P'rs, the court found plaintiffs breach of contract and breach of fiduciary duty claims to be "colorable." In Trilogy, plaintiffs sought to enjoin defendants from consummating a proposed restructuring of a mortgage loan. Plaintiffs alleged a colorable claim by identifying multiple assertions to support a breach of contract and breach of fiduciary duty, which plaintiffs supported by referencing specific contractual provisions and alleging the existence of an agency relationship, respectively.

2. Imminent Irreparable Harm

To make a showing of imminent irreparable harm, the moving party "must demonstrate harm for which she has no adequate remedy at law and that refusal to issue an injunction would be a denial of justice." The alleged harm must also be imminent and genuine—not speculative. The fact that potential harm may result in the future will not constitute imminent irreparable harm for purposes of an injunction. For example, irreparable harm exists when the plaintiff can show that, absent an injunction, the plaintiff will lose the benefits of its contractually negotiated rights and protections. In Trilogy, the plaintiffs alleged that allowing a mortgage transaction to close, which they believed was a breach of contract and fiduciary duty and which would affect whether plaintiffs were paid back on their investment in full, would cause irreparable harm. Plaintiffs argued a TRO enjoining the transaction was necessary so that the parties would have the opportunity to conduct discovery and be heard during a preliminary injunction hearing. The court agreed that, by not granting the TRO, plaintiffs would lose their bargained for priority and defendants would receive a significant advantage.

Conversely, irreparable harm is not found when the harm is not imminent. For example, in Smart Home, Inc. v. Bryan Selway, the Court of Chancery held that Plaintiff failed to establish "imminent irreparable harm," because the allegations that plaintiff's future operations may be prejudiced without a return of the withdrawn funds were merely conclusory. Irreparable harm is not found to exist when the court can fashion an order later remedying the expected harm. For example, in Cottle v. Carr, plaintiff shareholders sought to enjoin defendants from purchasing shares of a company pursuant to a tender offer. Plaintiffs claimed that allowing the transaction to proceed would dilute the shares and preclude the opportunity for the company to pursue other offers. The court found that it could later divest the defendant of the purchased stock if plaintiffs were to prevail at trial; thus, the harm was not irreparable.

3. Balancing of Hardships

The court will balance the threat posed to the moving party, if the restraining order were not granted, against any harm to the defendants that would result if the relief were granted. When the defendants advance nothing other than conclusory allegations that a TRO would invoke harm and fail to show how their interests will be harmed, the scale will tip in favor of issuing the TRO. For example, in Trilogy, plaintiff sufficiently alleged that the proposed transaction would cause irreparable harm. The defendants merely asserted that disallowing the mortgage transaction to close would affect the borrowers continuing ability to meet its obligations under the loan, however, defendants failed to show how delaying the closing a few weeks would be detrimental to their own interests as lender.

B. The Standard to Obtain a Preliminary Injunction

The standard to obtain a preliminary injunction is higher than the standard to obtain a TRO. To obtain a PI, a party must demonstrate (i) a reasonable probability of success on the merits; (ii) a threat of irreparable injury if an injunction is not granted; and (iii) that the balance of the equities favors the issuance of an injunction. In considering whether to issue a preliminary injunction, the factors are not necessarily weighted equally. The court places greater emphasis on the probability of success on the merits at the PI stage than at the TRO stage.

1. Reasonable Probability of Success on the Merits

The party seeking a PI must first establish a reasonable probability of success on the merits. The standard "falls well short of that which would be required to secure final relief following trial, since it explicitly requires only that the record establish a reasonable probability that this greater showing will ultimately be made." For example, in Applied Energetics v. Farley, the stockholders of Applied Energetics, Inc. sued defendants (a director who sat on the board of directors of the company and the defendant-director's family-owned holding company, AnneMarieCo. LLC) for breach of fiduciary duties for issuing stock to the director-defendant and the holding company in a self-interested transaction. While the underlying action was pending, the stockholder plaintiffs sought a preliminary injunction to restrain the defendants from selling the transferred shares until the underlying action was resolved.

The court found that there was a reasonable probability of success on the merits and granted a preliminary injunction. In so finding, the court considered whether the transfer was valid and whether it was likely that the defendant director breached his fiduciary duties. Plaintiffs presented evidence that showed that soon after two out of three board members resigned from the Applied Energetics board, the remaining director-defendant issued himself 25 million shares, representing 25% of Applied Energetics' stock at $0.001 par value despite at market price of $0.004 per share. Soon thereafter, the director-defendant issued another 20 million shares to his family-owned holding company—the relationship of which was not revealed until six months after the transfer. The court determined that according to the company bylaws, which required a majority vote (in this case, 2 out of 3 board member approval was required), the issuance was likely invalid since it had been executed by one board member and was not approved by an independent director. Further the court established that it would be difficult for the defendant director to prove entire fairness in this transaction because there was no legitimate reason to transfer the shares at the lowered value. Thus, the court found the collective evidence established a reasonable probability on the merits and granted the injunction.

By contrast, in FP UC Holdings v. Hamilton, plaintiff, an operator of an urgent medical care business, sought to enjoin a former employee from establishing a competing business. The court held that the noncompete clauses were too broad in geographic scope under Delaware law which plaintiff had failed to sufficiently justify. The court found the plaintiff was not likely to have success on the merits; thus, the preliminary injunction was denied.

2. Irreparable Harm

Second, the party must demonstrate that absent the injunction they face a threat of irreparable harm. Harm is not irreparable if an alternative legal remedy is available, practical and efficient to the ends of justice and its prompt administration as the remedy in equity. When damages would be easy to calculate, the court will not find irreparable harm. For example, in Retirement Board of Allegheny County v. Rothblatt, plaintiffs sought a preliminary injunction to enjoin the exercise of options issued under an option exchange plan. Plaintiff alleged that the plan violated the existing stock option plan and violated the CEO's agreement with the company. Plaintiff also alleged that the board breached their fiduciary duties by approving the new plan. The court found there was no showing of irreparable harm because, although it was true that the options would be less than the cash inflows would have been before the new stock options, the damages could be easily calculated.

Conversely, when harm is not calculable, the court can find irreparable harm. For example, in Police & Fire Ret. Sys. of The City of Detroit v. Bernal, a shareholder plaintiff sought to enjoin certain provisions of a merger agreement, which contained deal protection measures that would deter potential bidders and not prevent the board from committing to its fiduciary duties by maximizing an available price. The court held that the resulting harm from such deterrents would be "incalculable" if relief was not granted and it would be impossible to later "unscramble the eggs." The court also held that an injunction was the only realistic remedy the shareholders may have had for certain breaches of fiduciary duty in connection with the sale of control transaction. Thus, irreparable harm was proven sufficient to enjoin the board from completing the transaction.

3. Balance of the Equities Third, the court must balance the equities. In other words, the court must be cautious that granting a PI will not do more harm than good. A court must consider all of the foreseeable consequences of issuing an injunction and balance those consequences in a way that will avoid a risk of greater harm to the defendants, the public, or other identified interests. In addition to the above factors, the court may also consider whether it is in the public's interest to grant an injunction.

When the court finds that any potential harm to the defendant could be remedied but the harm to the plaintiff could not, the balance of equities will weigh in favor of the plaintiff. For example, in Applied Energetics, shareholder plaintiffs sued the defendants for issuing stock in a self-interested transaction. Plaintiff sought a preliminary injunction to restrain the defendants from selling the shares pending a stockholder litigation. The court found that the equities weighed in favor of plaintiff, because any loss to the defendants in not selling the transferred shares, could be remedied by the bond posted by plaintiff.

Conversely, in In re Micromet, Inc., Shareholders Litigation, stockholder plaintiffs sought to enjoin a merger transaction. Plaintiffs claimed that the board of directors breached their fiduciary duties by favoring a certain bidder, waiting too long to complete a meaningful market check, and agreeing to deal protections that deterred other tender offers and unreasonably shortened the tender offer period. The court ultimately found that plaintiffs were not likely to succeed on the merits because the market check was adequate and the board was well-informed of the transaction as a whole. The court also found the balance of equities (and the other two factors: success on the merits and irreparable harm) weighed in favor of defendants. The court found that the proposed transaction offered the stockholders a significant premium for their share and because no other bidder emerged during what the court considered a reasonable sales process, the transaction was likely the best result.

II. The Procedures for Filing for a Temporary Restraining Order or Preliminary Injunction

A party may seek a temporary restraining order or preliminary injunction as a remedy in the party's verified complaint or may file a separate motion and supporting affidavit. When seeking a preliminary injunction, the moving party must provide notice to the adverse party. Due to the emergent nature of a temporary restraining order, the moving party may in certain circumstances proceed ex parte – meaning without notice to the adverse party. This is only possible if (1) it clearly appears from specific facts shown by affidavit or by the verified complaint that immediate and irreparable injury, loss or damage will result to the applicant before the adverse party or that party's attorney can be heard in opposition, and (2) the applicant's attorney certifies to the court in writing the efforts, if any, which have been made to give the notice and the reasons supporting the claim that notice should not be required. This is not an easy hurdle; thus, the moving party must make every effort to notify the adverse party of the action.

Additionally, the requesting party must also post a bond in an amount determined by the court for costs and damages for any party who is wrongfully enjoined. The bond should be identified in the initial motion and the party must be prepared to address this with the court. The bond security must post immediately after the court enters the injunction.

III. Other Relevant Considerations and Nuances Under Delaware Law

The Delaware Court of Chancery is the preeminent business court in the world and has repeatedly emphasized its availability to decide significant business matters on an expedited basis. Accordingly, the court is very familiar with hearing TROs and PIs on a speedy basis with the benefit of a limited record. Of course, if a litigant wishes the court to act quickly, then the litigant must also act quickly. The court will take a dim view of a litigant who seeks speedy relief like a TRO and/or PI when the litigant has slumbered on its rights.

Despite the need for a litigant to act quickly, it is important to spend some time to consider whether the requesting party should seek a TRO and/or a PI and what standard the court is likely to apply under the circumstances. The standard that the court will apply to the plaintiff's motion or other request for TRO or PI does not always neatly correspond to the title of plaintiff's motion. Thus, timing is an important strategic consideration when determining whether a TRO or a PI is an appropriate first step or appropriate at all.

Generally, if a plaintiff believes the defendant will take some action that will cause it imminent and irreparable harm while its team is gathering facts and information to seek expedited injunctive relief from the court, a TRO is likely the appropriate relief to seek. Again, TROs are intended for situations where the time to provide adequate notice to the defendant is limited and there is not enough time for the defendant to be heard prior to the happening of the action and irreparable harm which plaintiff seeks to enjoin. For instance, if a plaintiff will be irreparably harmed in a matter of hours or days if an injunction is not issued, seeking a TRO is likely the appropriate course.

A TRO application should be submitted contemporaneously with the complaint whenever possible. Typically, a motion to expedite should be included with the TRO. Although a TRO can be granted ex parte in certain circumstances, in practice, the court expects plaintiff's counsel to make every possible effort to provide actual notice of the proceeding and TRO to the opposing party. Often, the court will entertain a TRO before service can be effected formally. TROs are intended to be injunctions of short duration (typically 10 days or less) and usually expire when the court hears the motion for preliminary injunction.

Although a PI also is intended to prevent imminent, irreparable harm, the standard to obtain a PI is a higher standard than that required for a TRO. In seeking a PI, the moving party must provide adequate notice to the defendant so the defendant has an opportunity to respond to the request and be heard on the record. A party can seek a PI either in the first instance or after the conclusion of TRO proceedings. The parties often conduct some limited discovery before the hearing on the motion for preliminary injunction. A party may choose to have live witnesses or may rely on its papers and oral argument. The timing of scheduling the hearing on the PI will depend on the court's schedule; a party who wishes to secure a prompt hearing date should contact the court as quickly as possible after the filing of the PI motion (or at the conclusion of a TRO hearing, if PI proceedings will follow).

Whether seeking a TRO and/or PI, it is very important for a plaintiff to file its motion for TRO and/or PI before the action that will cause plaintiff imminent, irreparable harm actually takes place. Keep in mind that the standard of proof to obtain a TRO is lower than the standard for a PI because the plaintiff must prove a "colorable claim" as opposed to a "reasonable probability of success on the merits." However, even when seeking a TRO, if the plaintiff has had the opportunity to develop evidence and present a record from which the court may make a more informed judgment concerning the merits, the Ccourt will apply a standard of proof more akin to the preliminary injunction standard.

Further, the court applies an even stricter standard when a plaintiff seeks a preliminary injunction requiring a party to take certain actions as opposed to being enjoined from taking certain actions. Such an injunction is known as a "mandatory" injunction. When the plaintiff seeks a mandatory injunction, the party must show more than a reasonable probability of success on the merits—the court will evaluate the motion under the standard of whether the plaintiff has shown that it "is entitled as a matter of law to the relief based on undisputed facts."

Another important strategic issue for the plaintiff to consider when filing a TRO and/or PI, is the scope of the relief sought in the motion. In other words, what relief is the plaintiff specifically seeking in the form of the proposed TRO or PI? If through the TRO and/or PI, the plaintiff seeks the same scope of relief that plaintiff would be entitled to in a permanent injunction after a successful, final determination of the merits of the claims, the court is likely to require a level of proof akin to the standard of proof required for summary judgment. Thus, plaintiff's counsel would be wise to limit the scope of the relief sought by the TRO and/or PI to a scope less than the scope of a final injunction that the plaintiff would be entitled to if it is ultimately successful on the merits of the claims.

Gregory B. Williams is a partner in Fox Rothscchild's Wilmington office and focuses his practice on commercial, intellectual property and other business litigation for a wide range of corporate clients, including technology companies, manufacturers, financial institutions, energy companies, health care and pharmaceutical companies, retailers, government entities, colleges and universities and faith-based organizations. 

E. Chaney Hall is a partner in Fox Rothschild's Wilmington office and focuses on representing business entities, officers and directors, and investors in corporate and commercial litigation before the Delaware Court of Chancery, Superior Court, Supreme Court, and the District Court for the District of Delaware.

Katelyn M. Crawford is an associate in Fox Rothschild's Wilmington office and focuses her practice on representing clients in a variety of litigation, bankruptcy and residential real estate matters in Delaware's state and federal courts.