In the case of Israel Discount Bank of New York v. First State Depository Company LLC, C.A. No. 7237-VCP (Del. Ch. March 19, 2012), the Court examined the issue of whether the defendants should be held in contempt for violating a preliminary injunction order.
The Court looked to Court of Chancery Rule 70(b), which governs the standard for contempt. Rule 70(b) provides as follows:
(b) Contempt and other remedies for disobedience of Court order. — For failure to obey a restraining or injunctive order, or to obey or to perform any order, an attachment may be ordered by the Court upon the filing in the cause of an affidavit showing service on the defendant, or that the defendant has knowledge of the order and setting forth the facts constituting the disobedience. At the hearing of the attachment, the examination of the defendant and also of witnesses shall be oral before the Court, unless it be otherwise ordered by the Court.
In other proceedings taken in the name of the State to punish contempt, the attachment may be ordered upon the filing of an affidavit setting forth the facts constituting the contempt and thereupon the proceedings shall be as set forth in the preceding paragraph of this rule.
Court of Chancery Rule 70(b).
In this matter, defendants expressly violated the terms of a stipulated preliminary injunction which followed the earlier imposition of a temporary restraining order. Specifically, defendants failed to provide a report regarding the property used as collateral, and failed to allow plaintiff to inspect and appraise such collateral.
The Court further awarded Plaintiff attorneys’ fees, based upon its determination that Defendant never intended to comply with the terms of the preliminary injunction, and thus the violation was in bad faith. The Court further fined the defendants $5,000 for every day that they failed to comply with the order subsequent to the Court’s order holding defendants in contempt.