A New York  appeals court upheld a preliminary injunction issued by a trial court that had ordered Citigroup to resume lending to a “green” expansion of the Carousel Center shopping mall in Syracuse.

Construction of the 1.3-million-square-foot mall expansion came to a halt last June after Citigroup Global Markets Realty Corp. refused to make any further draws or loan payments because the  project was at least $15 million over-budget, a year behind schedule, and had no tenants with signed leases. The bank had insisted that the developer contribute $15 million as a condition to any further loan disburesments.  The bank had said the developer would not have enough money to pay for $15 million in tenant improvement even if it received the balance of the $155 million loan. The developer argued that the cost of  the tenant build-outs were not part of the required improvements that the developer had to fund through the construction loan.

In July, a state trial court ruled that Citigroup had breached its loan agreement by refusing to make the loan payments and ordered the bank to pay the remaining $68.4 million of the original $155 million construction loan, starting with an immediate draw of $29 million.

A preliminary injunction is granted to maintain the "status quo" until a court could hold a trial on the merits of a case. Such injunctive relief is unusual in a breach of contract case since money damages are usually sufficient to compensate the injured party.  

In this case, the court specifically identified the project’s sustainable design features and construction financing which used federally-backed Green Bonds as so “unique” and “revolutionary” that money damages alone would not be sufficient to compensate Destiny if the injunction were denied. As a result, the court found that there was a potential that Destiny would suffer enormous and irreparable harm to its business reputation if the project which money damages would be insufficient

However, the appeals court said the lower court improperly ordered the bank to pay all future draws on the loan. Thus, Citibank is only required to make the pending draw of $29 million. The appeals court also said the lower court should have required the Destiny to post a $15 million bond.

While the appeals ruling is not on the merits, Destiny had to establish a likelihood of ultimate success on the merits of its lawsuit to prevail on the preliminary injunction.