Key Points

  • The Appellate Division, First Department, unanimously affirmed a Supreme Court, New York County order preliminarily enjoining LOLA Energy PetroCo LLC from distributing encumbered proceeds to its members, shareholders or owners pending resolution of BP Energy Co.'s suit.
  • The panel took judicial notice of a later Supreme Court order dismissing LOLA's counterclaims and the first 16 of its affirmative defenses, and on that basis held that BP had established a probability of success on its breach-of-contract claim.
  • The panel held that LOLA's $4.52 million distribution of encumbered assets without BP's consent, in violation of the parties' agreements, constituted irreparable harm to BP as a secured creditor.
  • The panel found the balance of equities favored BP because the injunction required LOLA to do nothing beyond what the agreements already required: make no distributions to members while in default on the loan obligations.
  • The panel granted BP's motion asking it to take judicial notice of an order entered on or about August 18, 2026, and awarded costs to BP.

A New York appeals court on Thursday upheld an order that blocks LOLA Energy PetroCo LLC from paying out encumbered proceeds to its owners while BP Energy Co. pursues a breach-of-contract suit against the company, keeping in place a freeze the court said protects BP's interest as a secured creditor.

A five-justice panel of the Appellate Division, First Department, ruled unanimously in an unsigned decision and order, affirming a February 2026 ruling by Justice Joel M. Cohen of Supreme Court, New York County. The panel found that BP had met each requirement for a preliminary injunction and awarded BP costs on the appeal.

The decision leaves LOLA barred from making distributions of encumbered proceeds to its members, shareholders or owners "pending resolution of the action." In reaching that result, the panel held that a borrower's transfer of a lender's collateral in breach of the parties' agreements causes irreparable harm. It also relied on a trial-court ruling issued after the injunction to find that BP was likely to win.

The decision says little about the underlying loans. It describes BP, the plaintiff, as a secured creditor, and it refers to restrictions in "the parties' agreements" and to "the underlying loan obligations." LOLA Energy III LLC and other defendants are also named in the suit, but only LOLA Energy PetroCo appealed.

According to the decision, LOLA "had undertaken an actual distribution of $4.52 million in encumbered assets and downstream transfers without plaintiff's consent and in violation of restrictions contained in the parties' agreements."

Justice Cohen granted BP's motion for a preliminary injunction in an order entered on or about Feb. 20, 2026. The appellate panel, made up of Justices Kennedy, who presided, Friedman, Rodriguez, O'Neill Levy and Parker-Raso, held that "Supreme Court providently exercised its discretion in granting the preliminary injunction to plaintiff."

To win a preliminary injunction in New York, a party must show "a probability of success on the merits, danger of irreparable injury in the absence of an injunction and a balance of equities in its favor," the panel wrote, quoting a 2005 decision in Nobu Next Door, LLC v. Fine Arts Hous., Inc. and citing CPLR 6301. The panel addressed each element in turn.

On the first element, the panel looked to events that occurred after Justice Cohen issued the injunction. Following entry of that order, the decision says, the trial court granted BP's motion to dismiss LOLA's counterclaims, along with "the first 16 of its affirmative defenses which pertained to the breach of contract cause of action."

BP filed a separate motion in the appeal asking the panel to take judicial notice of an order entered on or about Aug. 18, 2026. The panel granted the motion. "We may take judicial notice of this order," the panel wrote of the dismissal ruling, citing its own decisions in New Empire Bldr. Corp. v. Onboard Hospitality LLC from 2026 and Kazantzis v. Cascade Funding RM1 Acquisitions Grantor Trust from 2023. "Accordingly, plaintiff has established a probability of success on the merits of its breach of contract claim against LOLA," the court held.

On irreparable harm, the panel pointed to the $4.52 million distribution and to BP's status as a lender holding collateral. "As a secured creditor, plaintiff has a legally recognized interest in preventing dissipation of encumbered property prior to judgment," the panel wrote. It added that "depriving plaintiff of the value of the collateral by transferring secured assets in violation of binding agreements constitutes irreparable harm," relying on Winchester Global Trust Co. Ltd. v. Donovan, a 2009 decision of the Appellate Division's Second Department.

The panel then turned to the balance of the equities. It found that the order took nothing from LOLA beyond what LOLA had already agreed to. The injunction "was narrowly tailored and directed LOLA to do nothing more than it was already required to do under the terms of the agreements," the panel wrote. That obligation, the panel said, was to "make no distributions to members while in default on the underlying loan obligations."

"Thus, the balance of the equities favors plaintiff," the panel concluded, citing its 2022 decision in Asprea v. Whitehall Interiors NYC, LLC. The decision does not describe the specific arguments LOLA made on appeal. "We have considered defendant's remaining arguments and find them unavailing," the panel wrote in its closing line on the merits.

LOLA Energy PetroCo was represented by Marc Tepper of Buchanan Ingersoll & Rooney PC. BP Energy was represented by Anthony Lauriello of Norton Rose Fulbright US LLP.

The breach-of-contract case, Index No. 653357/25, remains pending, with LOLA's counterclaims and the first 16 of its affirmative defenses already dismissed and the injunction remaining in force until the action is resolved. The appellate ruling, docketed as Appeal No. 7491 and Case No. 2026-00880, was published as 2026 NY Slip Op 06569 and remains uncorrected and subject to revision before publication in the Official Reports.