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Rockwell Medical, Inc. v. Richmond Brothers, Inc.

United States District Court, E.D. Michigan, Southern Division

May 24, 2017

ROCKWELL MEDICAL, INC., Plaintiffs,
v.
RICHMOND BROTHERS, INC., et al., Defendants.

          ORDER DENYING PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION

          ROBERT H. CLELAND UNITED STATES DISTRICT JUDGE

         Pending before the court is Plaintiff's Emergency Motion for Preliminary Injunction (Dkt. #3.) After the motion was fully briefed, the court held a hearing on May 3, 2017, where it heard argument as well as testimony by David Richmond. For the following reasons, the court will deny Plaintiff's motion.

         I. BACKGROUND

         Plaintiff alleges that Defendants formed a shareholder group in February of 2016 and have since engaged in a campaign to wrest corporate control from the founder of Rockwell Medical, Inc. (“Rockwell”), by achieving election of their nominee to the board of directors. It contends that Defendants violated Section 13(d) of the Securities and Exchange Act of 1934 by failing to register as a shareholder group at that time. Plaintiffs filed a Schedule 13D with the SEC in February of 2017 identifying themselves as a shareholder group. Plaintiffs insist that this filing was not only nearly one full year late, but also contained material misrepresentations of fact as to the number of shares over which Defendants had the ability to direct the vote. With an annual shareholder meeting looming, Plaintiffs request this court to enter a preliminary injunction requiring Defendants to file a corrected 13D and to prohibit them from soliciting shareholder votes to allow a “cooling off” period during which time shareholders will be able to digest the new information.

         In response Defendants argue that, though they engaged in negotiations with management as early as March of 2016, they did not constitute a shareholder group because they had not reached any actual agreement to act together “for the purpose of acquiring, holding, voting or disposing of” shares in Plaintiff. They also contend that their amendments to their Schedule 13D have corrected any remaining concerns. Following the hearing, they filed another supplemental Schedule 13D indicating in the complained-of field that they had the power to direct the voting of zero shares. They also advance the position that the election of a board member is not an “irreparable harm” that would justify the imposition of injunctive relief, nor does the balance of the equities or public interest. Finally, Defendants attack Plaintiff's standing to sue on behalf of shareholders in this action.

         Plaintiff replies that emails exchanged in March of 2016 indicate that the Defendants were acting as a single group with a shared purpose of taking some portion of control over the company's management. They also view the supplemental 13D filings to be inadequate, demanding that Defendants include language stating that their supplemental filings were necessary as a result of a misstatement of fact on earlier filings rather than merely an effort to resolve the instant litigation.

         The court held a status conference on May 9, 2017, following the filing of Defendants' most recent Schedule 13D addressing voting power. The conference concerned the parties' competing briefings discussing whether the amendment renders at least this portion of the motion for preliminary injunction moot. (Dkts. ##53, 54, 57.) The court directed the parties to confer in an effort to arrive at an agreed supplemental filing, but they have since indicated that agreement is not possible.

         II. STANDARD

         In Silverman v. Summers, the Sixth Circuit described the rubric by which district courts should assess requests for preliminary injunction:

The district court must consider and balance four factors in ruling on an application for a preliminary injunction: 1) whether the plaintiff has a strong likelihood of success on the merits; 2) whether the plaintiff would suffer irreparable injury in the absence of the injunction; 3) whether the injunction would cause substantial harm to others; and 4) whether the injunction would serve the public interest.

28 F.App'x 370, 372-73 (6th Cir. 2001) (citing Sandison v. Michigan High School Athletic Ass'n, Inc., 64 F.3d 1026, 1030 (6th Cir.1995)).

         III. DISCUSSION

         Plaintiffs do not appear to address Defendants' statutory standing argument. The court will not decide the issue at this stage, as denial of Plaintiff's request for a preliminary injunction is warranted for other reasons. See CSX Corp. v. Children's Inv. Fund Mgmt. (UK) LLP, 654 F.3d 276, 284 (2d Cir. 2011) (“[A]n issuer has an implied right of action to seek injunctive relief for a violation of section 13(d)[.]”).

         A. Voting ...


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