Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_02-cv-01277/USCOURTS-azd-2_02-cv-01277-2/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Other Contract

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

FINOVA Capital Corporation, )

)

Plaintiff, ) No. CIV 02-1277-PHX RCB

)

Vs. ) O R D E R

)

Richard A. Arledge, Inc., )

d/b/a Arledge Motor Co., )

et al., )

)

Defendants. ) )

I. Introduction

On August 24, 2005, Defendants Richard A. Arledge, Inc., et

al. ("the Arledges") filed an application for a temporary

restraining order (with notice) ("TRO") and an order to show cause,

or, alternatively, an application for a prejudgment writ of

attachment. Motion (doc. 204). Plaintiff FINOVA Capital Corporation

("FINOVA") opposed the motion. Resp. (doc. 207). This motion was

fully briefed on September 14, 2005, and ruled upon in the Court's

Order of September 21, 2005. Order (doc. 210). In its Order, the

Court granted the Arledges' request for a writ of attachment, 

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however, the Court found insufficient evidence to support the

issuance of a TRO. Id. The Court set a hearing on the Arledges'

application for a preliminary injunction, and such hearing took

place on October 24, 2005. Id. After having carefully considered

the arguments presented by the parties, the court now rules on the

application. 

II. Background Facts

The Court refers to the Order of September 21, 2005, for an

extensive description of the procedural and factual background of

this case. Order (doc. 210) at 1-5.

III. Standard

In order for a party to show that it is entitled to a

preliminary injunction, it must demonstrate either: 

(1) [A] likelihood of success on the merits and the

possibility of irreparable injury, or (2) the existence

of serious questions going to the merits and the balance

of hardships tipping in [the movant's] favor. These two

formulations represent two points on a sliding scale in

which the required degree of irreparable harm increases

as the probability of success decreases.

MIA Sys. Corp. v. Peak Computers, Inc., 991 F.2d 511, 516 (9th Cir.

1993), citing, Diamontiney v. Borg, 918 F.2d 793, 795 (9th Cir.

1990). Under any formulation of the standard, however, the

plaintiff "must demonstrate that there exists a significant threat

of irreparable injury." Oakland Tribune, Inc. v. Chronicle Pub.

Co. Inc., 762 F.2d 1374, 1376 (9th Cir. 1985). 

The purpose of a preliminary injunction is to preserve the

status quo among the parties until a final resolution of the merits

of the action can be reached. Regents of Univ. of California v.

American Broadcasting Companies, Inc., 747 F.2d 511, 514 (9th Cir.

1984). As noted by the United States Supreme Court, "[i]t

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frequently is observed that a preliminary injunction is an

extraordinary and drastic remedy, one that should not be granted

unless the movant, by a clear showing, carries the burden of

persuasion." Mazurek v. Armstrong, 520 U.S. 968, 972 (1997)

citing, 11A C. WRIGHT, A. MILLER, & M. KANE, FEDERAL PRACTICE AND PROCEDURE

§ 2948, pp. 129-130 (2d ed. 1995).

IV. Preliminary Injunction

FINOVA opposes the Arledges' application for a preliminary

injunction for three main reasons. First, FINOVA argues that the

Court has already granted the Arledges an adequate remedy at law,

thus any further relief would be inappropriate. Memo. (doc. 218) at

10-11. Specifically, FINOVA points out that the Arledges sought and

were granted a writ of attachment in the Court's Order of September

21, 2005. Id.; Order (doc. 210). FINOVA asserts that such relief is

sufficient and no further remedy is necessary. Memo. (doc. 218) at

10-11. Finova's position is correct.

Second, FINOVA asserts that a preliminary injunction would be

futile because FINOVA has no unencumbered assets. Resp. (doc. 207)

at 2; Memo. (doc. 218) at 11-12. FINOVA states that it has no

unencumbered assets against which the Arledges can ever recover on

their counterclaim. Resp. (doc. 207) at 4; Memo. (doc. 218) at 11-

12. Thus, FINOVA argues that it would be futile for the Court to

enjoin the liquidation of its assets pending trial as the Arledges

will not benefit from such relief and the orderly liquidation of

such assets would be disrupted. Resp. (doc. 207) at 10; Memo. (doc.

218) at 12.

At the hearing on October 24, 2005, Richard A. Ross, Senior

Vice President, Chief Financial Officer and Treasurer of FINOVA,

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testified that all of FINOVA's assets are encumbered, with the

exception of 9 aircraft leveraged leases (eight Northwest Airlines

leases and one Continental Airlines lease) and a $65 million

Atlantic Trust Bank Account. See Memo. (doc. 218) at 8. The

Arledges do not contest that the remainder of FINOVA's assets are

encumbered. 

With respect to the Northwest aircraft leases, there is no

doubt that they are valueless based upon the Northwest bankruptcy.

Hearing Transcript, Oct. 24, 2005 at 03:56:23PM-03:56:55PM.

Consequently, only the Continental aircraft lease may have any

value, however any proceeds received from that lease are

encumbered. Id. at 02:34:32PM-02:34:52PM, 02:41:20PM-02:41:54PM,

03:56:55PM-03:03:57:00PM. 

In regards to the $65 million Atlantic Trust Bank Account,

Ross stated that the money in this account is secured for the

benefit of a collateral trustee. Id. at 02:43:00PM, 03:43:01PM03:46:40PM, 03:57:05PM-04:00:06PM. Hence, these assets are

encumbered as well, leaving none of FINOVA's assets unencumbered.

In light of this information, the Court concludes that the issuance

of a preliminary injunction against FINOVA in this case would be

futile.

Third, FINOVA argues that the Arledges have not shown a

likelihood of success on the merits of their counterclaim. Memo.

(doc. 218) at 12-14. The Court noted in its Order of August 25,

2004, and reiterated in its Order of September 21, 2005, that the

question of who's burden it would be to establish who had the

responsibility to monitor the minimum net cash flow covenant is at

issue. Order (doc. 167); Order (doc. 210). However, in light of the

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previously granted writ of attachment and the futility of the

issuance of a preliminary injunction in this case, the Court need

not reach the issue as to whether the Arledges have shown a

likelihood of success on the merits of their counterclaim.

Therefore,

IT IS ORDERED that the Arledges' application for a preliminary

injunction (doc. 204) is DENIED.

DATED this 6th day of January, 2006.

Copies to counsel of record.

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