Editor’s Note: See C.M. Meiers Preliminary Injunction Decided, But Far From Over for updates, more of the judge’s opinion, comments from attorneys, as well as legal analysis.
A judge has rejected a request for a preliminary injunction in the case of a bankrupt Southern California insurance agency following a long, accusation-fueled legal battle between the former and current owners of the firm.
United States Bankruptcy Court Judge Maureen Tighe on Wednesday denied a request for a preliminary injujction against the old owners of Woodland Hills, Calif.-based C.M. Meiers, a 76-year-old agency believed by its buyers and a bankruptcy trustee to be out-of-trust by up to $1 million.
Woodland Hills-based Liberty Insurance Brokers Inc. outbid two others to acquire C.M. Meiers for $1.75 million in February, and they say they soon discovered afterward that former father and son owners Eric and Herb Rothman and an in-law relation Jason Adleman had taken company information and clientele with them to Adelman’s fledgling agency Affinity Global Insurance. Affinity was the stalking horse bidder for C.M. Meiers and ran the agency for a week before the trustee stepped in and declared bankruptcy and initiated the auction.
Tighe handed down her decision nearly a month after the close of several days of what at some stages turned into caustic testimony over whether the old owners had absconded with clients and information that was to have been sold during the auction in February.
“This motion for preliminary injunction raises the difficult intersection of a sale of a bankruptcy estate’s interest in all assets, tangible and intangible, and the rights of former officers of the debtor corporation to continue pursuing their trade after their employment with the debtor ceases,” Tighe wrote. “Here, Liberty Company Insurance Brokers, Inc. purchased the ongoing business of the debtor on an ‘as is, where is’ basis, only to discover that some of the accounts it thought it had purchased were leaving to join the departed principals of the debtor at a new brokerage business. The question presented is whether there is a clear showing that a preliminary injunction is warranted where: 1) former officers and a once stalking horse bidder of the debtor corporation are pursuing their profession in the same industry as the debtor; and 2) former clients of the debtor are leaving to follow the former officers and stalking horse bidder. While legitimate concerns have been raised, the evidence does not warrant a preliminary injunction against those former officers and their new employer.”
However, this matter may be far from over. Tighe’s decision comes a week after defendants in the case filed countersuits against Liberty claiming libel, slander and unfair competition, among other things.
Those countersuits seek damages, though neither an attorney for the Rothmans nor an attorney for Adelman detailed a monetary amount. However, both stated they expect it to be well over $1 million.
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