Goldman Sachs Defeats TRO/Preliminary Injunction Motions by Charles Schwab and TD Ameritrade

September 21, 2018

Cleary Gottlieb represented Goldman Sachs (Goldman) in its defeat of a requests for a temporary restraining order and preliminary injunctive relief by Charles Schwab and TD Ameritrade (collectively, the plaintiffs), before Justice O. Peter Sherwood of the New York Supreme Court, Commercial Division, to prevent the termination of a distribution agreement entered into by the parties in 2001 (TRO motion) on September 21, 2018.

The distribution agreement—which contained no termination date—guaranteed the plaintiffs an allotment of the free retail shares for oversubscribed IPOs and follow-on public offerings that Goldman receives when serving as an underwriter or lead book runner for such offerings. Goldman has not received any benefit in exchange for the plaintiffs’ allotments since 2007 at the latest, when the exclusive period under the distribution agreement expired.

Though the distribution agreement contained no explicit term permitting the plaintiffs to receive their benefit in perpetuity, the plaintiffs argued that the distribution agreement should remain in effect for so long as Goldman serves as an underwriter. In opposition, Cleary contended that well-settled New York law creates a presumption against perpetual agreements and that, absent an explicit termination date, the distribution agreement was either terminable at will or after a reasonable period that had long passed.

The court denied the plaintiffs’ TRO and request for preliminary injunctive relief , finding no clear likelihood of success on the merits because it accepted our argument that the distribution agreement had been properly terminated. In addition, the court found no irreparable damage, including because all of the plaintiffs’ alleged injuries could be remedied by a monetary award.