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Maryland Court Enters Preliminary Injunction Protecting Interest of Schulman Bhattacharya Client in $480 Million Asset Sale

Jun 07

Schulman Bhattacharya, on behalf of its client, Sachs Capital, LLC, filed a Complaint and motion for a temporary restraining order and preliminary injunction in the Circuit Court for Montgomery County, Maryland, seeking to protect Sachs Capital’s interests in the proceeds of a $480 million sale of a major national petroleum company. Sachs Capital, and its related entities, invested more than $31 million in the petroleum company and is set to receive a preferred return on its investment as the sale of the company’s assets imminently proceeds to closing. Sachs Capital was also involved in raising an additional $17 million in debt for the petroleum company, which loan is also supposed to be repaid immediately from proceeds of the asset sale. Unfortunately, despite clear language in their governing agreements, Sachs Capital’s partner in the deal refused to provide assurances that it would follow the required payment “waterfall” for distribution of the sale proceeds, and Sachs Capital was forced to seek emergency judicial intervention to prevent mishandling of the funds.

On Friday, May 22, 2020, Judge Rubin of the Circuit Court for Montgomery County, Maryland held a video-conference hearing on Sachs Capital’s request for immediate injunctive relief. In a comprehensive 15-page written opinion issued later that day, the Court entered a temporary restraining order requiring Sachs Capital’s partner to turn over all proceeds of the asset sale to the Court’s registry, holding that Sachs Capital had made a “strong showing that at least part of the funds from the sale . . . likely is a ‘liquidity event’ under the operating agreement and that some, if not all, of the net proceeds (after the repayment of debt) must be distributed to [Sachs Capital and its related entities].” Even further, the Court recognized the importance of protecting the reputation of private equity companies such as Sachs Capital, noting that “irreparable injury exists when damages include harm to reputation, goodwill and customer relationships.” At Schulman Bhattacharya’s request, Judge Rubin converted the temporary restraining order into a preliminary injunction, to last for the duration of the case, in a second order signed on June 1. The written opinion and related orders can be found by clicking their respective links.

Schulman Bhattacharya will continue to aggressively protect Sachs Capital’s interest in the deal and looks forward to a full and final resolution of this case in favor of Sachs. The legal team handling this matter consists of Jeremy Schulman, Koushik Bhattacharya, Jake Schaller, Sabina Schiller and Sandra Schiller.