Court of Chancery Enjoins Consummation Of Purchase Agreement Pending Arbitration
Flight Options Int'l, Inc. v. Flight Options, LLC, C.A. No. 1459-N, 2005 WL 2335353 (Del. Ch. Sept. 20, 2005).
Plaintiff sought preliminary injunction against consummation of Purchase Agreement pending arbitration of its substantive disputes with Defendant.
Plaintiff Flight Options International, Inc. owned approximately 31% of Defendant Flight Options, LLC. Raytheon Travel Air Company ("RTA") owned approximately 69% of Defendant. Defendant had struggled for several years and RTA had invested a substantial amount of money in the Defendant. RTA agreed to provide $50 million to the Defendant, but only as an equity investment. Defendant and RTA entered into a Purchase Agreement that would dilute Plaintiff's equity interest to 1%. Plaintiff alleged that the Purchase Agreement was subject to entire fairness because RTA controlled both sides of the transaction and RTA-designated managers breached their fiduciary duties and obligations under the LLC Agreement. The parties agreed that their disputes were subject to arbitration, but Defendant argued that Plaintiff was not entitled to a preliminary injunction.
The Court held that Plaintiff was entitled to a preliminary injunction in aid of arbitration because it had established a reasonable probability that its arbitration claims were sound, it would suffer imminent, irreparable harm if a preliminary injunction was not issued, the harm to Plaintiff, if relief was denied, outweighed the harm to Defendant if relief was granted. The Court limited the injunction to thirty days.