Elliott & Son Excavating LLC v. Square Funding LLC, d/b/a SQ Advance

IN THE UNITED STATES BANKRUPTCY COURT FOR THE
EASTERN DISTRICT OF TENNESSEE
In re
Case No. 3:26-bk-31028-SHB
ELLIOT & SON EXCAVATING LLC 	Chapter 11
Debtor
ELLIOT & SON EXCAVATING LLC
Plaintiff
v. 	Adv. Proc. No. 3:26-ap-03022-SHB
SQUARE FUNDING LLC d/b/a
SQ ADVANCE
Defendant
PRELIMINARY INJUNCTION
Elliot & Son Excavating LLC (“Plaintiff”) filed the Voluntary Petition commencing its
Chapter 11 bankruptcy case on May 22, 2026, together with a Master List of Creditors that
included “SQ Advance, 7901 4th ST N, STE 300, Saint Petersburg, FL 33702.” [Case No. 3:26-
bk-31028-SHB, ECF No. 1 at 33.] 	“SQ Advance” also was included in the List of 20 Largest
Creditors with the same address. [Case No. 3:26-bk-30239-SHB, ECF No. 4.]
SO ORDERED.
SIGNED this 23rd day of June, 2026
THIS ORDER HAS BEEN ENTERED ON THE DOCKET.
PLEASE SEE DOCKET FOR ENTRY DATE.
_____________________________________________________________
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Plaintiff filed the Complaint to Avoid Preferential Transfer, Determine Validity and
Priority of Lien, for Turnover of Property of the Estate, for Violation of the Automatic Stay, and
for Injunctive Relief (“Complaint”) commencing this adversary proceeding on June 3, 2026 [Doc.
1]. The Complaint raised the following causes of action: (I) Determination of Validity, Extent,
Priority, 	Perfection, 	Enforceability, 	and 	Avoidability 	of 	Defendant’s 	Asserted 	Lien; 	(II)
Avoidance of Preferential Transfer; (III) Preservation of Avoided Transfer; (IV) Turnover of
Property of the Estate; (V) Violation of the Automatic Stay; and (VI) Injunctive Relief. [Id.] On
June 5, 2026, Plaintiff filed a Motion for Preliminary Injunction (“Motion”), asking the Court to
enter a preliminary injunction:
(A) enjoining Square Funding LLC dba SQ Advance, together with its officers,
agents, servants, employees, attorneys, and all other persons acting in concert with it
(collectively, “Defendant”) from directing, demanding, instructing, or otherwise causing
any account debtor of Plaintiff to withhold payment from Plaintiff for remittance to
Defendant;
(B) directing Defendant to withdraw all directives, notices, demands, or similar
communications previously issued to Alpha Industries, Inc. or any other account debtor of
Plaintiff concerning receivables, payments, or funds owed to Plaintiff;
(C) directing Defendant to provide written notice to Alpha Industries, Inc.
withdrawing any prior collection directives concerning receivables, payments, or funds
owed to Plaintiff; and
(D) directing Defendant to identify to Plaintiff all account debtors of Plaintiff to
whom Defendant has issued collection directives, notices, demands, or communications.
After notice, a hearing on the Motion was held June 18, 2026. 	Present at the hearing were
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Plaintiff’s counsel and Sheryl Elliott, member and authorized representative of Plaintiff.
FACTUAL FINDINGS
Based on the Declaration of Ms. Elliott filed on June 5, 2026 [Doc. 7-1], and her testimony
at the hearing on June 18, the Court makes the following factual findings. Defendant, a merchant
cash advance company to whom Plaintiff is indebted,1 asserted an interest in Plaintiff’s receivables
with respect to Alpha Industries, Inc. and likely other companies who owe payments to Plaintiff.
Specifically, on March 17, 2026, through a “UCC Lien Notice and Notice of Power of Attorney
Granted by Merchant to Square Funding LLC d/b/a SQ Advance Giving Square Funding LLC
d/b/a SQ Advance Power-of-Attorney Over Account Receivables of Merchant,” Defendant’s
counsel directed Alpha Industries, Inc. to withhold and remit $17,907.10 from the $44,500.00 it
owed to Plaintiff. [Doc. 1-2.] 	Based on Defendant’s directive, Alpha Industries, Inc. paid
$26,592.90 to Plaintiff but withheld the remaining $17,907.10. 	Ms. Elliott testified that the
withholding of accounts receivable significantly impacted and impaired Plaintiff’s cash flow and
ability to operate.
Plaintiff filed its Chapter 11 bankruptcy case on May 22, 2026. Notwithstanding notice of
the bankruptcy case on May 22 and demands made to Defendant’s counsel by Plaintiff’s counsel
on May 22, 27, and 28 [Doc. 1-3], Defendant has failed to withdraw its directive to Alpha
Industries, Inc. and/or authorize Alpha Industries, Inc. to pay the $17,907.10 to Plaintiff, resulting
in detriment to Plaintiff and the bankruptcy estate and leading to the filing of this adversary
proceeding on June 3.
1 The parties entered into a Merchant Cash Advance Agreement on August 15, 2025, after which Defendant advanced
$78,400.00 to Plaintiff. Defendant filed a UCC-1 Financing Statement asserting a security interest in substantially all
of Plaintiff’s accounts, accounts receivable, deposit accounts, and relates proceeds with the Tennessee Secretary of
State on April 22, 2026 [Doc. 1-1].
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As authorized by Federal Rule of Bankruptcy Procedure 7004, Plaintiff’s counsel served
the Complaint and Summons on Defendant through United States Mail, first class, postage prepaid,
addressed to Defendant’s registered agent on June 4, 2026 [Doc. 5]. On June 5, Plaintiff’s counsel
served the Motion, supporting brief [Doc. 7], Ms. Elliott’s Declaration, and a proposed order via
email to Defendant’s counsel, Shanna Kaminski,2 and to Defendant directly by United States Mail,
first class, postage prepaid, at its business address [Doc. 6 at 6].
CONCLUSIONS OF LAW
“The court may issue a preliminary injunction only on notice to the adverse party.” Fed. R.
Civ. P. 65(a) (applicable to adversary proceedings through Fed. R. Bankr. P. 7065). “The purpose
of a preliminary injunction is to preserve the status quo until a trial can occur[.]” Lackey v. Stinnie,
604 U.S. 192, 193 (2025).
I. Notice Required Under Rule 65
“While Rule 65(a)(1) does not expressly require a hearing, Supreme Court precedent
establishes that “[t]he notice required by Rule 65(a) . . . implies a hearing in which the defendant
is given a fair opportunity to oppose the application and to prepare for such opposition.” Hunter v.
Hamilton Cnty. Bd. of Elections, 635 F.3d 219, 246 (6th Cir. 2011) (quoting Granny Goose Foods,
Inc. v. Brotherhood of Teamsters & Auto Truck Drivers Local No. 70 of Alameda Cnty., 415 U.S.
423, 432 n.7 (1974)).
Attempts at service must also satisfy the constitutional minimum for due process—
that is, notice reasonably calculated, under all the circumstances, to apprise
interested parties of the pendency of the action and afford them an opportunity to
present their objections. Where personal service cannot be effected, it is generally
constitutionally sufficient to effect service via mail.
Rover Pipeline LLC v. Kanzigg, No. 2:17-CV-105, 2019 WL 13161928, at *3 (S.D. Ohio July 12,
2 See Collective Exhibit C to the Complaint [Doc. 1-3].
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2019) (quoting Greene v. Lindsey, 456 U.S. 444, 449–450 (1982)) (citation modified). Courts in
this Circuit have recognized that service “via email and FedEx” provide “sufficient notice” under
Rule 65. See CFO Leverage, LLC v. Fennema, No. 2:26-CV-02167-MSN-TMP, 2026 WL 485484,
at *3 (W.D. Tenn. Feb. 20, 2026).
Here, the Complaint including a request for injunctive relief was served on Defendant as
authorized by the Federal Rules of Bankruptcy Procedure, and the Motion, supporting brief, and
Ms. Elliott’s Declaration were served on Defendant directly through United States Mail at its
business address and via email to Defendant’s counsel. Defendant, therefore, received notice in a
manner that was “reasonably calculated, under all the circumstances, to apprise [Defendant] of the
pendency of the action and afford [it] an opportunity to present [an objection].” Rover Pipeline,
2019 WL 13161928, at *3. Accordingly, the Court finds that Defendant received notice as required
by Rule 65(a).
II. Factors Necessary to Grant Injunctive Relief
Injunctive relief is an extraordinary remedy, and each request for such relief requires the
court to “balance the competing claims of injury” and to “consider the effect on each party of the
granting or withholding of the requested relief.” Winter v. Nat’l Res. Def. Council, Inc., 555 U.S.
7, 24 (2008) (citations omitted). Accordingly, the moving party must establish (1) the likelihood
of success on the merits; (2) the likelihood of irreparable harm absent the relief; (3) that a balancing
of the equities tips in the moving party’s favor; and (4) that granting the injunction is in the public
interest. Winter, 555 U.S. at 20. The moving party “bears the burden of justifying such relief.”
Memphis A. Philip Randolph Inst. v. Hargett, 2 F.4th 548, 554 (6th Cir. 2021) (citation omitted).
If one factor is not satisfied, a court is not required to consider the others. D.T. v. Sumner Cnty.
Schs., 942 F.3d 324, 327 (6th Cir. 2019). 	Based on the testimony provided by Ms. Elliott, the
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Court finds that Plaintiff has met its burden of proof and that immediate injunctive relief is
appropriate.
1. Likelihood of Success on the Merits
The likelihood of success on the merits “can often drive the results of a request for relief.”
Int’l Union of Painters & Allied Trades Dist. Council No. 6 v. Smith, 148 F.4th 365, 371 (6th Cir.
2025). Pursuant to 11 U.S.C. § 362(a)(3) and (a)(6), the filing of a bankruptcy petition “operates
as a stay, applicable to all entities, of . . . any act to obtain possession of property of the estate or
of property from the estate or to exercise control over property of the estate[] and/or any act to
collect, assess, or recover a claim against the debtor that arose before the commencement of the
case under this title.” A willful violation of the automatic stay occurs when “the creditor knew of
the stay and violated the stay by an intentional act.” TranSouth Fin. Corp. v. Sharon (In re Sharon),
234 B.R. 676, 687 (B.A.P. 6th Cir. 1999).
Plaintiff avers that Defendant has engaged and is continuing to engage in the postpetition
collection of the debt by directing third-party entities, payors, customers, or account debtors such
as Alpha Industries, Inc. to withhold payments owed to Plaintiff and remit those funds directly to
Defendant. Such actions violate the automatic stay provisions of 11 U.S.C. § 362(a) that became
effective on the filing of the bankruptcy petition on May 22. 	The continued withholding of
payments owed to Plaintiff (which clearly constitute property of Plaintiff’s bankruptcy estate under
11 U.S.C. § 541(a)) as an enforcement of Defendant’s purported lien rights in accounts receivable
also constitutes a stay violation and is a violation of 11 U.S.C. § 542, “which requires any entity
in possession, custody, or control, during the case, of property [of the estate] . . . shall deliver to
the trustee [or debtor in possession], and account for, such property or the value of such property.”3
3 As noted by the bankruptcy court for the Northern District of Illinois in Cordova v. City of Chicago (In re Cordova),
635 B.R. 321, 350 (Bankr. N.D. Ill. 2021): “That compliance with section 542(a) is required even absent an order is
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Although Defendant originally began diverting funds before Plaintiff filed the bankruptcy case,
there is ample evidence that Defendant received notice of the bankruptcy case after it was filed, as
evidenced in the emails from Plaintiff’s counsel to Defendant’s counsel attached as Exhibit C to
the Complaint [Doc. 1-3] and including the notice that was sent to creditors listed on Plaintiff’s
Master List of Creditors [Case No. 3:26-bk-31028-SHB, ECF No. 1 at 33]. 	Based on the
allegations in the Complaint buttressed by Ms. Elliott’s testimony, Plaintiff has proved more than
a likelihood that it will succeed on the merits.
2. Likelihood of Irreparable Harm
Even if it can show a likelihood of success on the merits, the party seeking preliminary
relief also must demonstrate that “irreparable injury is likely in the absence of an injunction.”
Winter, 555 U.S. at 22; see also Fetch! Pet Care, Inc. v. Atomic Pawz Inc., 170 F.4th 546, 558 (6th
Cir. 2026) (clarifying that courts in the Sixth Circuit should apply the federal burden of proof
stated in Winter rather than the clear-and-convincing standard); EOG Res., Inc. v. Lucky Land
Mgmt., LLC, 134 F.4th 868, 883 (6th Cir. 2025) (“Irreparable harm is the core of the preliminary
injunction, as we and the Supreme Court have made clear.”). Courts may “balance the four factors,
but while the extent of an injury may be balanced against other factors, the existence of an
irreparable injury is mandatory.” EOG Res., Inc., 134 F.4th at 883 (citation modified).
Further, “[t]he injury must be irreparable, in the legal sense, and not every injury is
irreparable. ‘Irreparable’ means not fully compensable by monetary damages,” Id. at 884 (citation
modified), and “must be both certain and immediate, not speculative or theoretical.” D.T., 942
F.3d at 327 (citation modified). 	Additionally, “[u]nlike lost profits, which can be fairly easily
tautological. It is so fundamental that it is set forth as such in Collier's. 5 Collier on Bankruptcy ¶ 542.02 (‘By its
express terms, [section] 542(a) is self-executing, and does not require that the trustee take any action or commence a
proceeding or obtain a court order to compel the turnover.’).”
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remedied through damages, courts can’t easily compensate a movant for loss of competitive
position and goodwill.” Churchill Downs Tech. Initiatives Co. v. Michigan Gaming Control Bd.,
162 F.4th 631, 643 (6th Cir. 2025) (citation modified).
Ms. Elliott’s testimony concerning the irreparable harm Plaintiff faces without injunctive
relief was clear: absent the injunction, Defendant would continue intercepting accounts receivable
funds owed to Plaintiff from its customers, and Plaintiff’s operations would be unsustainable.
Plaintiff requires its accounts receivable income for payment of payroll to four employees,
insurance 	obligations, 	fuel 	expenses, 	equipment 	and 	maintenance, 	and 	operational 	costs.
Defendant’s continued violation of the stay threatens Plaintiff’s relationships with its customers
and its ability to reorganize under Chapter 11. 	These harms exceed a mere monetary injury to
Plaintiff. Instead, Plaintiff’s injury will be fatal to its continued operations. These types of injuries
are certain, immediate, and cannot be remedied merely by a monetary judgment after this adversary
proceeding is litigated. This factor is satisfied.
3. Balancing of the Equities.
With respect to balancing the equities, “courts must balance the competing claims of injury
and must consider the effect on each party of the granting or withholding of the requested relief.”
Winter, 555 U.S. at 24. 	Here, the Court easily finds that a balance of the equities weighs in
Plaintiff’s favor. 	The severity of the injury and harm that Plaintiff – and its employees and
customers – will face is heavy. On the other side, however, Defendant will suffer no harm by the
Court’s issuance of an injunction.4
Notably, the Bankruptcy Code itself contains an injunction against what Defendant is doing
– the automatic stay in § 362(a). 	Plaintiff scheduled Defendant as a creditor in the bankruptcy
4 If Defendant is a secured creditor of Plaintiff, its security interest will be protected under the Bankruptcy Code if it
chooses to participate in the case.
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case, and any money that Defendant is owed by Plaintiff will be treated in Plaintiff’s eventual plan
of reorganization, along with all of Plaintiff’s creditors. 	Defendant faces virtually no damage
while Plaintiff’s is significant. Thus, Plaintiff has satisfied this factor.
4. Public Interest
Finally, courts must “pay particular regard for the public consequences in employing the
extraordinary remedy of injunction.” Winter, 555 U.S. at 24. 	“The automatic stay is one of the
most important and powerful features of the bankruptcy system.” Nicole Gas Prod., Ltd., 916 F.3d
566, 578 (6th Cir. 2019). “[It] serves a multiplicity of interests . . . [and] is not just a private injury.
It strikes at the entire bankruptcy system and all parties for whom it was designed.” In re Jorge,
568 B.R. 25, 37 (Bankr. N.D. Ohio 2017) (citation omitted). Because preservation of the automatic
stay is fundamental under the Bankruptcy Code and because willful violations of the stay here are
causing significant harm not only to Plaintiff but also to innocent individuals who utilize Plaintiff’s
services, the Court finds that Plaintiff has satisfied this factor.
ORDER
Because Plaintiff has proven the necessary requirements for injunctive relief under Rule
65(a), the Court directs the following:
1. 	The Motion for Injunctive Relief filed by Plaintiff on June 5, 2026 [Doc. 6], is
GRANTED.
2. 	Defendant Square Funding LLC d/b/a SQ Advance, its officers, agents, servants,
employees, attorneys, and all other persons acting in concert with it are IMMEDIATELY
ENJOINED and SHALL IMMEDIATELY CEASE the following actions:
A. Directing, requesting, demanding, instructing, or otherwise causing any
payor, customer, or account debtor of Plaintiff – including but not limited to Alpha
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Industries, Inc. – to withhold, divert, redirect, or remit any receivables, payments, or
funds owed to Plaintiff Elliott & Son Excavating, LLC to any entity other than Plaintiff;
B. Taking any action to interfere with, hinder, or disrupt Plaintiff’s receipts of
all accounts receivable from any entity, payor, customer, or account debtor of Plaintiff;
C. 	Communicating with any entity, payor, customer, or account debtor of
Plaintiff – including but not limited to Alpha Industries, Inc. – for the purpose of
diverting or redirecting any payments owed to Plaintiff;
D. Exercising control over property of Plaintiff’s bankruptcy estate, including
but not limited to Plaintiff’s accounts receivables, payments, or funds;
E. 	Collecting, intercepting, receiving, or withholding payments owed to
Plaintiff by any entity, payor, customer, or account debtor of Plaintiff, including but
not limited to accounts receivables, payments, or funds; and
F. Taking any action to enforce or collect on any alleged financial obligation
Plaintiff may owe Defendant without permission of this Court.
3. 	Defendant Square Funding LLC d/b/a SQ Advance, its officers, agents, servants,
employees, attorneys, and all other persons acting in concert with it are IMMEDIATELY
DIRECTED TO and SHALL PERFORM the following actions:
A. Identify and provide to Plaintiff’s counsel the names and contact information
of all entities, payors, customers, and account debtors of Plaintiff to whom Defendant
has issued collection directives, notices, demands, or communications;
B. Withdraw all directives, notices, demands, or similar communications
previously issued to all entities, payors, customers, or account debtors of Plaintiff –
including but not limited to Alpha Industries, Inc. – concerning receivables, payments,
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or funds owed to Plaintiff; and
C. Provide written notice to all entities, payors, customers, and account debtors
of Plaintiff – including but not limited to Alpha Industries, Inc. – that any receivables,
payments, or funds owed to Plaintiff must be remitted directly to Plaintiff.
4. 	No later than close of business on Monday, July 6, 2026, Defendant Square Funding
LLC d/b/a SQ Advance shall turn over to Plaintiff’s counsel all funds that it has received since
May 22, 2026, through its actions of redirecting and/or diverting funds owed to Plaintiff as
receivables, payments, funds, or any other property of the estate that are in Defendant’s possession.
See 11 U.S.C. § 542(a).
5. Any failure of Defendant Square Funding LLC d/b/a SQ Advance to comply fully with
the requirements of this Order will constitute contempt of this Court and subject Defendant to
sanctions.
6. 	The hearing on a permanent injunction will be held July 16, 2026, at 1:30 p.m., in
Bankruptcy Courtroom 1-C, Howard H. Baker Jr. United States Courthouse, 800 Market Street,
Knoxville, Tennessee.
7. Plaintiff’s counsel shall serve this Order on Defendant (1) via email to Jack Madeb at
jack@madeblaw.com and (2) via email to Shanna Kaminski at skaminski@kaminskilawpllc.com.
8. The Deputy Clerk shall serve this Order via certified United States Mail, return receipt
requested, and via first class United States Mail to Defendant at the following address:
Square Funding LLC, d/b/a SQ Advance
Attn: Registered Agent, Registered Agents Inc.
7901 4th Street North
Suite 300
St. Petersburg, Florida 33702.
###
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