National Viatical, Inc. v. Universal Settlements International, Inc.

In Michigan district court, Universal Settlements International, Inc. (USI) (plaintiff) sued National Viatical, Inc. (NVI), James Torchia, and Marc Celello (defendants) for misappropriating $5 million of USI’s escrowed funds. While the Michigan case was pending, USI sought relief in a Canadian creditor’s court. The parties reached a settlement agreement under which NVI and Torchia (collectively, Torchia) agreed to pay USI $1.2 million in installment payments; Torchia would pay a penalty of $5 million if he defaulted on any payment; and there would be a mutual confidentiality provision, except that USI could report the settlement terms to the Canadian court, taxing authorities, attorneys, and accountants on a need-to-know basis. Torchia’s primary concern regarding confidentiality was for it not to appear as if he owed a $5 million judgment. Thereafter, USI petitioned the Canadian court for settlement approval and was directed to post a website notice informing creditors of the settlement agreement. The notice included the $1.2 million settlement amount and noted only that there would be unspecified “sanctions” if there was a default. Based on the web posting, Torchia refused to perform under the settlement agreement, claiming that USI had breached the confidentiality provision. Torchia filed an action in Georgia state court seeking to be excused from performing the settlement agreement due to USI’s alleged breach. The state court granted Torchia’s request for a temporary restraining order, enjoining USI from demanding performance. The matter was removed and transferred to the Michigan district court. There, USI requested dissolution of any existing injunction. The court conducted a traditional balancing test and determined that Torchia was not entitled to a preliminary injunction because he did not have a strong likelihood of success on the merits and would not suffer irreparable harm. Torchia appealed.