Make It Stop: Understanding the Differences Between Temporary Restraining Orders, Preliminary Injunctions, and Permanent Injunctions in Business Litigation
Most business disputes come down to one thing: money. One party says they are owed money from the other party, either because a contract, invoice, or other agreement creates an obligation or because that other party engaged in wrongful conduct (fraud, unfair competition, etc.) that caused them losses for which they seek compensation. More often than not, an award of money damages is a sufficient remedy for a plaintiff in a business lawsuit. Sometimes, however, a party may be doing something that needs to be either stopped or prevented from occurring to prevent damages for which dollars and cents alone won’t be sufficient to make the injured business whole.
It is precisely for such reasons that both federal and state court judges have the power to grant injunctive relief through an order prohibiting a party from engaging in particular conduct or, in some circumstances, to take specific, affirmative actions. Injunctive relief typically takes one of three forms: a temporary restraining order (TRO), a preliminary injunction, and a permanent injunction. Although all three types of orders can be warranted by and address similar conduct, they serve different purposes, arise at different stages of litigation, and require different showings from the party seeking the relief.
For business owners, understanding these differences and the kind of conduct that may justify seeking injunctive relief is important when a dispute arises, as it almost inevitably will. While there are slight distinctions between how, why, and when a federal and state court may grant or deny injunctive relief, the underlying principles behind each of the three orders are largely the same.
Common Acts and Conduct That Can Be the Subject of Injunctive Relief in Business Lawsuits
No matter how egregious or infuriating another party’s conduct may be, not every misdeed can support a successful request for injunctive relief. Some of the most common acts that are the subject of petitions for a TRO or injunction include:
- Misappropriation of Trade Secrets: The disclosure or use of confidential business information, pricing details, or proprietary formulas by current or former employees or competitors.
- Violation of Restrictive Covenants: Breaching non-compete or non-solicitation agreements by setting up a rival business or targeting company clients.
- Poaching Clients and Employees: Actively soliciting customers, accounts, or key staff members.
- Dissipation or Transfer of Assets: Hiding, liquidating, or fraudulently transferring company funds and property during an active dispute.
- Breaching Fiduciary Duties: Acting against the company’s best interests, such as selling off corporate assets without proper authorization.
- Freezing Out Minority Shareholders: Excluding or terminating minority owners in closely held businesses to block their access or operational involvement.
- Infringing Intellectual Property Rights: Using unauthorized patents, trademarks, or copyrighted materials.
The key concept of all three forms of injunctive relief is irreparable harm, that is, the damage that is or would be caused by the defendant’s acts cannot be repaired or adequately compensated through money damages. The injury must be sufficiently certain, imminent, and significant rather than merely theoretical.
Temporary Restraining Order: Now or Never
A temporary restraining order is generally the most immediate form of injunctive relief. Its purpose is to prevent imminent harm while the court arranges a more complete hearing on whether longer-lasting relief is appropriate. It is specifically designed for situations in which the lack of relief would create a fait accompli, for example, the demolition of a wing of a unique, historic building that a plaintiff seeks to prevent. Given its urgency and the fact that the urgency may be so grave that it may require the entry of a TRO without notice to the party to be restrained, the bar is set purposely high for this type of relief.
For example, Michigan Court Rule 3.310(B) permits a TRO to be issued without advance notice to the opposing party in limited circumstances. The party seeking the order must show through specific facts in an affidavit or verified complaint that immediate and irreparable injury, loss, or damage will result from the delay necessary to provide notice, or that giving notice itself could precipitate the adverse action the applicant seeks to prevent. The attorney also must certify the efforts made to provide notice and explain why notice should not be required.
That strict standard reflects the emergency nature of a TRO. The applicant is not ordinarily asking the court to finally decide the underlying dispute. Instead, the request essentially asks for something to be stopped now so the court can meaningfully address the dispute.
A TRO issued without notice generally cannot last indefinitely; it expires within the period specified by the court, which ordinarily cannot exceed 14 days, unless it is properly extended or the restrained party consents to a longer extension. The order must provide for an early hearing concerning a preliminary injunction, and courts may also require an applicant seeking a TRO (or preliminary injunction) to provide security for costs and damages that could result if a judge later determines that the applicant was wrongfully granted the requested relief.
Preliminary Injunction: Preserving the Status Quo
A preliminary injunction is different. It generally follows notice and a hearing at which both sides have an opportunity to present their positions. Its primary purpose is to preserve the status quo while the underlying lawsuit proceeds.
Courts consider four principal factors when deciding whether to grant a preliminary injunction:
- Whether the moving party is likely to prevail on the merits;
- Whether the moving party will suffer irreparable harm without the injunction;
- Whether the harm to the moving party without an injunction outweighs the harm an injunction would cause the opposing party; and
- The potential effect of the injunction on the public interest.
The party requesting the preliminary injunction carries the burden of establishing that relief is appropriate, regardless of whether a TRO was previously issued.
A preliminary injunction, therefore, can have a substantial practical effect. It may restrict conduct for months while the case moves toward a determination on the merits. The entry of a preliminary injunction essentially freezes the circumstances of the dispute while the parties fight it out, and can therefore have a significant impact on the respective parties’ settlement posture and on whether the matter will, in fact, go to trial.
Permanent Injunction: The Final Word
A permanent injunction is different from both a TRO and a preliminary injunction because it is generally issued as part of the court’s final resolution of the parties’ rights at the conclusion of a case.
A permanent injunction is not simply a preliminary injunction that lasts longer. It represents a remedy based on the court’s determination of the parties’ underlying rights and obligations. It is a court agreeing with a plaintiff on the merits of their claims and deciding that those merits warrant an indefinite restraint on the defendant’s actions.
For an aggrieved business owner, it can be easy to be so indignant about conduct they see as harming their company that they call their lawyer and demand that they take immediate, robust action to stop that conduct. While such a request may be understandable, the nature and impact of a TRO, preliminary injunction, or permanent injunction mean that a thoughtful, albeit relatively quick, assessment should be made as to whether a judge is likely to grant injunctive relief before running to the courthouse.
If you have any questions about injunctive relief in business disputes, please contact Michael Hamblin at Maddin Hauser.