Monday, July 10, 2006

Can the 2d Circuit's Injunction Standard Last?

In deciding whether to grant injunctive relief, the Supreme Court and every circuit other than the Second Circuit (OK, the Ninth Circuit part of the time) uses the traditional four factor analysis. See eBay Inc. v. MercExchange, L.L.C., 126 S.Ct. 1837 (2006): (l) a likelihood of prevailing on the merits, (2) irreparable harm if interim relief is denied, (3) balancing of hardships (harm to defendant if the injunction is granted versus the harm to plaintiff if the injunction is denied); and (4) weighing the effect on the public interest, including on non-parties

In the Second Circuit, though a two-part test for private claims is used, requiring a showing of (1) irreparable harm and (2) either (a) a likelihood of success on the merits or (b) sufficiently serious questions going to the merits as the make them a fair ground for litigation, and a balance of hardships tipping ‘decidedly” or “sharply” in movant’s favor. Under this formulation, a showing of irreparable harm is required under either prong; indeed the circuit has stated “in most cases the moving party must first demonstrate that [irreparable] injury is likely before the other requirements for the other requirements for the issuance of an injunction will be considered.” Zervos v. Verizon of N.Y. Inc., 252 F.3d 163, 172 (2d Cir. 2003) (quoting Rodriguez v. DeBuono, 175 F.3d 227, 234-235 (2d Cir. 1999)).

The origins of the prong 2(b) - sufficiently serious questions going to the merits as the make them a fair ground for litigation, and a balance of hardships tipping ‘decidedly” or “sharply” in movant’s favor – may be traced to Judge Jerome Frank’s 1953 opinion in Hamilton Watch Co. v. Benrus Watch Co., 206 F.3d 738 (2d Cir. 1953). Hamilton alleged violation of Section 7 of the Clayton Act, claiming Benrus had bought a large stock of common shares in Hamilton for the purchase of gaining control over it. The complaint requested that Benrus be ordered to sell the shares. Plaintiff also requested a preliminary injunction (principally against voting the shares), which was entered. Defendant asserted its actions were lawful, a position the court of appeals cast doubt on. The irreparable harm took a number of forms, one of which was the immediate ability to elect a director to the Board of Directors and access to confidential and highly competitive materials.

There seems little doubt the injunction could have been affirmed applying traditional equitable principles; but in a throw-away passage that has inexplicably become a bedrock of Second Circuit jurisprudence, it was stated:

"To justify a temporary injunction it is not necessary that the
plaintiff’s right to a final decision, after a trial be absolutely
certain, wholly without doubt; if the other elements are present
(i.e., the balance of hardships tips decidedly toward plaintiff), it
will ordinarily be enough that the plaintiff has raised questions
going to the merits so serious, substantial, difficult and doubtful,
as to make them a fair ground for litigation and thus for more
deliberate investigation.
206 F.2d at 740.

These remarks are striking both for their lack of any support in centuries of equity jurisprudence and for making the case against issuance of an injunction. Likelihood of success on the merits, not compliance with Federal Rule of Civil Procedure 8’s liberal pleading requirements, is a touchstone of injunctive relief as is irreparable harm: if the most that can be said about your case is that you have raised doubts about the merits of your own case, but that it is a serious case, you are well below any acceptable likelihood of success on the merits; indeed, abolition of the likelihood of success requirement seems to be the sole pupose for the Hamilton test.

Although in the 50 years plus years since Hamilton the Second Circuit has curbed some of the wilder implications of the opinion, it is well past time for the court of appeals to abandon its test. In this regard, it should be noted that the Supreme Court has not only never approved of the Second Circuit’s approach, but instead itself, in 2006, strongly endorsed the traditional four-factor test in eBay Inc. v. MercExchange, L.L.C.,


Anonymous said...

Prof. Patry:

Minor but related point:

The eBay court actually stated the first two of the traditional four factors in a somewhat nontraditional way. To quote the court, a plaintiff must show:

"(1) that it has suffered an irreparable injury;
(2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury;
(3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and
(4) that the public interest would not be disserved by a permanent injunction."

eBay, op. at 2. When I read the decision for the first time, I did a double take, as factors 1 and 2 are always articulated as you posted: (1) irreparable injury (which by definition means that there is no adequate remedy at law, otherwise the injury is per se "reparable"), and (2) likelihood of success on the merits (which is a big deal at the preliminary injunction stage but is a given in the permanent injunction context, in that there has been an adjudication of infringement).

Justice Thomas' opinion seems to needlessly break traditional factor #1 into two parts, and either writes traditional factor #2 out of existence or else makes it "implicit" in factor #1.

As a practical matter, it may not matter because courts may just continue to just articulate the four factor test as they always have, relying on the fact that the Supreme Court was clearly holding that the "traditional" four factor test remained the law.

Still, the High Court has spoken, and we ought to consider whether this change meant anything (e.g., in a preliminary injunction context, is a plaintiff required to clearly establish irreparable injury, or just show a "likelihood of success" on a claim of irreparable injury). Or, as appears to me to be the case, was this just the result of sloppy drafting?


LKB in Houston

William Patry said...

Thanks, LBK. I was paraphrasing, and of course eBay was a permanent injunction case, although a number of courts say the tests are the same for both. Thomas's phrasing of the test may have something to do with it being a permanent injunction, though.

I think plaintiffs are required to always show irreparable injury if an injunction is not granted and always show a likelihood of success on the merits.