Key Points

  • The Appellate Division, First Department, unanimously reversed a Supreme Court, New York County order and granted a preliminary injunction barring Nantucket Capital Corp. and its co-defendants from prosecuting their first-filed California state-court action.
  • The court held that the Tacora plaintiffs had shown every Chayes v. Chayes ground for enjoining out-of-state litigation: bad faith, intent to harass, and a purpose to evade the law of the parties' domicile.
  • The court relied on findings that the defendants lulled the plaintiffs with settlement talks, filed in California on Oct. 31, 2025 without mentioning the filing on a same-day call, and stated in their complaint that the suit aimed to invalidate the loan documents' New York forum and choice-of-law clauses.
  • The court held that the risk of losing the application of New York law constitutes irreparable harm, and that substantial overlap in issues created a risk of inconsistent judgments.

A New York appeals court on Tuesday ordered Nantucket Capital Corp. to stop pursuing a lawsuit it filed in California state court against Tacora Nantucket Financing LLC. The court found that the California case was a bad-faith effort to escape the New York courts and New York law that the parties' loan documents had chosen.

A unanimous five-justice panel of the Appellate Division, First Department, reversed a January ruling by Justice Robert R. Reed of Supreme Court, New York County. Justice Reed had denied the Tacora plaintiffs' motion for a preliminary injunction. The appeals court granted the motion outright, barring Nantucket Capital and its co-defendants from further prosecuting the California action.

The ruling is an exception to the usual practice. "Out of concerns of comity, courts generally will not enjoin out of state litigation," the panel wrote. It then held that every circumstance that justifies an exception was present, and that the risk of losing New York law amounts to irreparable harm.

The decision was unsigned. The panel consisted of Justices Webber, who presided, Moulton, Friedman, González and Chan.

The panel applied the standard of its 1992 decision in Chayes v. Chayes. Under that standard, courts should enjoin out-of-state litigation where a party clearly shows that "the suit sought to be enjoined was brought in bad faith, motivated by fraud or an intent to harass the party seeking an injunction, or if its purpose was to evade the law of the domicile of the parties." Chayes itself was quoting a 1987 Second Department decision, George Hyman Construction Co. v. Precision Walls Inc.

The panel found all of those grounds present. "Plaintiffs have shown that all of these factors are present here," the court wrote.

The court's account began with settlement talks. According to the decision, Nantucket Capital and the other defendants initiated settlement discussions and asked the Tacora plaintiffs to enter into a pre-negotiation letter to explore possible resolution. The panel found that the defendants "lulled plaintiffs into inaction" by doing so.

The defendants then filed suit in California on Oct. 31, 2025. They held a conference call with the plaintiffs' attorneys that same day. During that call, the panel wrote, the defendants "omitted any mention of this filing." The California case, styled Nantucket Capital Corp. v. Tacora Nantucket Financing LLC, is No. 25CU059250C, and the panel described it as the first-filed of the two suits.

The court also pointed to the defendants' own words. They "stated expressly in their California complaint that its purpose was to invalidate the forum selection and New York choice of law clauses in the parties' loan documents," the decision said. On that point the panel cited two of its earlier decisions, White Light Productions v. On The Scene Productions from 1997 and Aon Risk Services v. Cusack from 2013.

The panel held that the threat to the contract's choice of New York law was itself irreparable harm. "The risk of losing the application of New York law constitutes irreparable harm," the court wrote, citing its 2016 decision in Madden International Ltd. v. Lew Footwear Holdings Pty Ltd.

The court gave a second reason to stop the California case. "The substantial overlap in issues also militates in favor of halting the California action, as there is a risk of inconsistent judgments," the panel wrote. For that proposition it cited its 2025 decision in Lee v. Grimblat.

The decision is brief. It does not recount Justice Reed's reasoning or the defendants' arguments on appeal. It also does not describe the terms of the loans, identify which companies borrowed or lent, or state the amount in dispute.

Lawyers for the Tacora plaintiffs included Timothy Cleveland of Cleveland Krist PLLC in West Lake Hills, Texas, a member of the Texas bar admitted pro hac vice. Nantucket Capital and its co-defendants were represented by Emma Schwartz of Sher Tremonte LLP in New York.

The panel reversed the January order "on the law, without costs." The injunction runs against the defendants rather than the California court: it bars them from prosecuting their California action. The decision, reported as 2026 NY Slip Op 06565, is uncorrected and subject to revision before publication in the Official Reports.