1999 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

3-11-1999

Alghny Energy Inc v. DQE Inc

Precedential or Non-Precedential:

Docket 98-3586

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Recommended Citation

"Alghny Energy Inc v. DQE Inc" (1999). 1999 Decisions. Paper 61.

http://digitalcommons.law.villanova.edu/thirdcircuit_1999/61
Filed March 11, 1999 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

NO. 98-3586 

ALLEGHENY ENERGY, INC. 

Appellant 

v. 

DQE, INC. 

Appellee 

On Appeal from the United States District Court 

for the Western District of Pennsylvania 

D.C. No. 98-CV-1639 

District Judge: Hon. Robert J. Cindrich 

Argued January 15, 1999 

BEFORE: GREENBERG AND RENDELL, Circuit Judges 

and POLLAK, District Judge* 

(Filed: March 11, 1999) 

D. Stuart Meiklejohn 

John L. Hardiman (argued) 

Fraser L. Hunter, Jr. 

Timothy E. DiDomenico 

Sullivan and Cromwell 

125 Broad Street 

New York, New York 10004 

_________________________________________________________________ 

*Honorable Louis H. Pollak, United States District Judge for the Eastern 

District of Pennsylvania, sitting by designation. 
 William M. Wycoff 

 David E. White 

 Thorp, Reed & Armstrong 

 One Riverfront Center 

 Pittsburgh, PA 15222 

 Attorneys for Appellant 

 Douglas M. Kraus (argued) 

 Seth M. Schwartz 

 Skadden, Arps, Slate, Meagher & 

 Flom 

 919 Third Avenue 

 New York, New York 10022 

 Jennifer Wilson Hewitt 

 Doepken, Keevican & Weiss 

 58th floor, USX Tower 

 600 Grant Street 

 Pittsburgh, PA 15219 

 Attorneys for Appellee 

OPINION OF THE COURT 

POLLAK, District Judge. 

This is a diversity case in which an interlocutory appeal 

has been taken from the denial of a preliminary injunction. 

The appeal presents a question of Pennsylvania law. The 

question is whether, on the particular facts of this case, the 

loss by one publicly traded corporation of a contractual 

opportunity to acquire another publicly traded corporation 

through a corporate merger constitutes irreparable harm. 

In concluding that the plaintiff -- the would-be acquiring 

corporation -- was not entitled to a preliminary injunction 

compelling specific performance of the merger agreement, 

the district court ruled that if the plaintiff prevailed on the 

merits it would have an adequate remedy at law in the form 

of an action for damages. Plaintiff's contention that the loss 

of the numerous expected benefits of the merger was not 

quantifiable as damages, and hence constituted irreparable 

injury, was rejected by the district court. On this appeal, 

 2 
plaintiff renews that contention. We conclude that, in the 

context of this case, plaintiff's contention is soundly based. 

Accordingly, we will vacate the judgment of the district 

court and remand for further proceedings. 

I. Facts and Procedural History 

Allegheny Energy, Inc. ("Allegheny")1 and DQE, Inc.

("DQE") -- both of which are utility companies whose 

shares are traded on the New York Stock Exchange --

entered into a merger agreement on April 7, 1997. The 

agreement envisioned a combined company in which DQE 

would be a wholly-owned subsidiary of Allegheny. Allegheny 

is a utility holding company that provides electricity 

generation, transmission and distribution, chiefly in 

Pennsylvania, Maryland and West Virginia; its principal 

operating subsidiary is West Penn, a franchised electric 

service provider in western Pennsylvania. DQE is also a 

utility holding company; its principal operating subsidiary 

is Duquesne, a franchised provider in western 

Pennsylvania. 

The merger agreement describes the context in which the 

agreement was signed: 

 The electric utility industry throughout the United 

 States is in the early stages of dramatic changes that 

 are intended to bring competition to what has been, 

 since the electric industry's inception, a collection of 

 regional monopolies. These changes have been brought 

 about in part through the adoption of the Energy Policy 

 Act of 1992 and through orders 888 and 889 of the 

 FERC [Federal Energy Regulatory Commission]. In 

 addition, in Pennsylvania, where DQE has all of its 

 electric utility business and [Allegheny] has a 

_________________________________________________________________ 

1. Several of the documents in the appendix provided to this court 

identify Allegheny as "Allegheny Power Systems, Inc." or "APS". The 

Pennsylvania Public Utility Commission has noted that "APS has 

changed its name to Allegheny Energy, Inc." Order on Reconsideration, 

Pennsylvania Public Utility Commission Docket # A-110150F.0015 (July 

23, 1998), at n.1. We have substituted "[Allegheny]" for "Allegheny Power 

Systems, Inc." or "APS" wherever we have cited documents employing the 

erstwhile corporate name or its acronym. 

 3 
 substantial portion of its electric utility business, the 

 trend to bring about competition led to the enactment 

 in late 1996 of the Electricity Generation Customer 

 Choice and Competition Act, 66 Pa. Cons. Stat. S 2801 

 et seq. (the "Pennsylvania Restructuring Legislation"), 

 which provides, among other things, for a phase in of 

 competition for retail electric customers in

 Pennsylvania and an opportunity for recovery of certain 

 capital costs ("stranded costs") incurred by utilities in 

 a regulated environment that are not likely to be 

 recoverable through prices charged in a competitive 

 environment. 

A81. The Pennsylvania Restructuring Legislation 

empowered the Pennsylvania Utilities Commission ("PUC") 

"to determine the level of transition of stranded costs for 

each electric utility and to provide a mechanism, the 

competitive transition charge, for recovery of an appropriate 

amount of such costs . . . ." 66 P.S.A. S 2802 (15) (1997).2 

The Joint Proxy Statement prepared by Allegheny and

DQE -- a statement sent to shareholders of both 

corporations prior to the shareholder votes of May, 1997 

approving the merger agreement -- described several

strategic benefits of the merger. In particular, the Joint 

Proxy Statement noted that the Allegheny Board of 

Directors had identified the following reasons for the 

merger: 

 (i) the Merger would better position [Allegheny] to 

 take advantage of changes in the electric utility 

 industry by expanding its service territory and number 

 of customers served by combining its existing service 

 territories with DQE's contiguous service territories; 

_________________________________________________________________ 

2. The competitive transition charge ("CTC") -- intended to recompense 

utilities for "stranded costs" -- is paid by customers. In addition to 

allowing customers to purchase electricity from the generator of their 

choice and empowering the PUC to assess a CTC appropriate to each 

utility's stranded costs, the restructuring legislation requires utilities 

to 

"unbundle" their services. Before the restructuring legislation, the PUC 

set a single electric rate reflecting generation, transmission, and 

delivery 

of electricity; the restructuring legislation will eventually require all 

customers to pay two (unbundled) rates: a negotiated rate for electricity 

generation, and a set rate for electricity transmission and delivery. 

 4 
 (ii) [Allegheny] management has historically been 

 better than its peer companies at managing electric 

 generation, transmission and distribution and its belief 

 that the Merger would permit the combined 

 management to utilize this expertise over greater 

 amounts of generation and distribution; 

 (iii) based upon reports from its outside advisors and 

 [Allegheny] management and publicly available 

 materials regarding DQE, DQE management has 

 historically been better than its peer companies in 

 developing unregulated businesses and the [Allegheny] 

 Board's belief that the Merger would permit the 

 combined management to utilize this expertise as a 

 part of a bigger, financially stronger enterprise; 

 (iv) the terms of the recently enacted Pennsylvania 

 restructuring legislation and the significant mitigation 

 efforts already undertaken by DQE would permit DQE 

 to recover such stranded costs associated with DQE's 

 investment in the Nuclear Facilities as determined to 

 be just and reasonable by the PAPUC; and 

 (v) the synergies estimated by the managements of 

 [Allegheny] and DQE appear to be achievable.

A82. Similarly, the Joint Proxy Statement noted that the 

DQE Board of Directors had identified the following reasons 

for the merger: 

 (i) the Merger will allow the combined company to 

 . . . have the critical mass necessary to compete in a 

 deregulated utility environment; 

 (ii) the estimated synergies from the Merger should 

 improve DQE's financial performance due to savings 

 from the elimination of duplicate activities and by 

 creating improved operating efficiencies and lower 

 capital costs; 

 (iii) the Merger will permit stockholders of DQE to 

 benefit from the combined company's ability to take 

 advantage of future strategic opportunities and to 

 reduce its exposure to changes in economic conditions 

 in any segment of its business; 

 5 
 (iv) the combined service territories of DQE and 

 [Allegheny] will be more geographically diverse than the 

 service territory of DQE alone, reducing DQE's 

 exposure to changes in economic competitive or 

 climatic conditions as well as providing a larger 

 regional platform from which to expand DQE's

 customer base; 

 (v) [Allegheny]'s winter-peaking, low-cost, efficient 

 operations, and suburban and rural customer base, 

 will complement DQE's summer-peaking operations 

 and urban customer base; 

 (vi) DQE's current customers will receive a wider 

 range of energy-related products and services; and 

 (vii) DQE's mix of regulated and unregulated energy 

 products and services provides a strategic fit with 

 [Allegheny]'s core businesses. 

A83. 

Section 6.1 of the merger agreement has provided rules 

for the period between the signing of the agreement and 

consummation of the merger -- a consummation contingent 

both on the stockholder approvals referred to above and on 

approvals by the relevant regulatory boards.3 Among the 

interim rules is a prohibition on any action "that would 

prevent the Merger from qualifying for `pooling of interests' 

accounting treatment." A31.4 

_________________________________________________________________ 

3. Section 6.1 states that each company must operate "in the ordinary 

and usual course" of business and "use its best efforts" to "preserve its 

business organization intact and maintain its existing relations and 

goodwill." Moreover, it generally prohibits either party from unilaterally 

repurchasing stock, encumbering assets, changing stock-based 

compensation plans, or changing any compensation and benefit plan. 

See A30-31. 

4. Under certain circumstances, stock-for-stock mergers may be 

structured to take advantage of an accounting method-- pooling of 

interests accounting treatment -- that provides financial advantages to 

the newly combined company by permitting the absorbed corporation's 

assets to be recorded at book value. See Daniel W. Jones & Val R. 

Bitton, Accounting for Business Combinations, in D.R. Carmichael et al., 

ACCOUNTANTS' HANDBOOK 6.2-.3 (7th ed. 1991). Valuing the absorbed 

 6 
Other agreement provisions allow either party to abort 

the agreement prior to consummation under certain 

conditions. Most prominent is Section 8.2(a), under which 

Allegheny and DQE each reserved the right to terminate the 

contract on October 5, 1998 in the event that the merger 

was not consummated by that date. However, under 

Section 8.2(a), the October 5, 1998 date is automatically 

moved forward six months, to April 5, 1999, if, on October 

5, 1998, certain conditions have been met, among them 

that "each of the other conditions to the consummation of 

the Merger . . . has been satisfied or waived or can readily 

be satisfied . . . ." A42.5 

_________________________________________________________________ 

corporation's assets at book value permits two savings: the combined 

company avoids recording the absorbed corporation's goodwill and 

avoids recording the (often higher) fair market value of the absorbed 

corporation's assets. Charles H. Meyer, ACCOUNTING AND FINANCE FOR 

LAWYERS IN A NUTSHELL 311-13 (1995). The combined company is thus 

freed from the requirement of amortizing the greater costs against its 

earnings over the ensuing years. Id. A combined corporation emerging 

from a merger accounted for under the pooling of interests method 

therefore would report higher annual earnings than the same 

corporation emerging from a merger accounted for under the traditional 

purchase method. Id. 

In order to qualify for pooling of interests accounting treatment, a 

merger must meet several conditions. Those requirements fall into three 

groups: (1) characteristics of the combining companies; (2) manner of the 

combination; and (3) absence of pre- and post-combination transactions. 

Accounting Principles Board Opinion No. 16, "Business Combinations" 

(1970). See also generally AICPA Accounting Interpretations of APB 

Opinion No. 16. The third group of requirements is at issue in this case. 

The APB Opinion and Interpretations identify a number of actions that 

can frustrate pooling of interests accounting treatment if taken after the 

signing of a merger agreement and before consummation of the merger. 

Many of those actions can be taken unilaterally, and several -- such as 

a new stock award plan for officers and directors-- can occur without 

prior public announcement. 

5. Section 8.1 permits termination by mutual written consent of both 

boards of directors. Section 8.3 permits Allegheny to terminate the 

agreement under certain circumstances, including a material breach by 

DQE that cannot be cured within thirty days. Section 8.4 permits DQE 

to terminate the agreement under certain circumstances, including a 

material breach by Allegheny that cannot be cured within thirty days. 

A42. 

 7 
On August 1, 1997 (about four months after the merger 

agreement was signed), pursuant to the Pennsylvania

restructuring legislation, Duquesne and West Penn-- the 

parties' major operating subsidiaries -- eachfiled 

restructuring plans with the PUC, and the two filed joint 

applications for PUC and Federal Energy Regulatory 

Commission ("FERC") approval of the merger. Almost eight 

months later, on March 25, 1998, PUC administrative law 

judges issued recommendations in the Duquesne and West 

Penn restructuring cases. On May 29, 1998, the PUC 

modified the administrative law judges' recommendations in 

the two cases. West Penn was disallowed approximately $1 

billion of the $1.6 billion in allegedly stranded costs that it 

had requested.6 

In a July 23, 1998 Order, the PUC held that the merged 

company would have to prove that it had mitigated its 

market power at a market power hearing to be held in the 

year 2000. Should the merged company fail at that time to 

establish that it had mitigated its market power, the PUC 

would order it to divest itself of 2500 megawatts of 

generation by July 1, 2000. Order on Reconsideration, 

Pennsylvania Public Utility Commission Docket # A110150F.0015 (July 23, 1998), at 10. 

The FERC -- which like the PUC has jurisdiction over 

market power issues -- also found certain elements of the 

parties' joint proposal related to market power to be 

inadequate. On September 16, 1998, the FERC ordered the 

companies either to divest DQE's Cheswick plant prior to 

the merger or to submit to a hearing on market power 

mitigation. A329. 

DQE was concerned with what it viewed as the "material 

adverse effects" of the PUC Order in the West Penn case, 

the PUC market power order, and the FERC market power 

order. On October 5, 1998, DQE informed Allegheny that, 

pursuant to Section 8.2(a) of the merger agreement, it was 

terminating the agreement.7 Allegheny immediately filed a 

_________________________________________________________________ 

6. See note 2, supra. 

7. As noted in text and footnote at note 5, supra, Section 8.2(a) 

authorized either party to terminate the agreement if the merger was not 

 8 
complaint in the United States District Court for the 

Western District of Pennsylvania, seeking specific 

performance of the merger agreement, and -- fearing that 

DQE would take action to scuttle pooling of interests 

accounting treatment -- filed an accompanying motion 

seeking both a temporary restraining order and a 

preliminary injunction "enjoining DQE from taking any 

action that it is precluded from taking without Allegheny's 

consent under Section 6.1 of the Merger Agreement" until 

Allegheny's claim for specific performance was decided. 

A401. 

The District Court heard argument on the motion on 

October 5 and October 26. After considering testimony and 

certain affidavits, the District Court denied both the 

temporary restraining order and the preliminary injunction. 

The District Court began its analysis by observing that 

Allegheny had presented "persuasive" arguments that it had 

a reasonable likelihood of success on the merits of its claim 

that it was entitled to specific performance. Order at 3. The 

court then turned to the question whether Allegheny had 

demonstrated that it would suffer irreparable harm absent 

_________________________________________________________________ 

consummated by October 5, 1998, but also made provision for automatic 

extension of the October date to April 5, 1999. Section 8.2(a) required 

that the October 5, 1998 deadline be automatically extended to April 5, 

1999 if certain conditions were met, among them that"(ii) each of the 

other conditions to the consummation of the Merger set forth in Article 

VII has been satisfied or waived or can readily be satisfied." A42. DQE 

asserted that Allegheny triggered DQE's Section 8.2(a) termination right 

by failing to meet Section 7.3(a), one of the consummation conditions set 

forth in Article VII. Section 7.3(a) conditions the merger on the fact 

that 

all "representations and warranties . . . set forth in this Agreement 

shall 

be true and correct as of the date of this Agreement and as of the 

Closing Date . . . ." A41. DQE claims that Allegheny failed to meet 

Section 7.3(a) because one of its representations or warranties, Section 

5.1(f), was no longer true. Section 5.1(f) states that "since the Audit 

Date 

. . . there has not been (i) any change in the financial condition, 

properties, business or results of operations . . .[or] developments 

affecting it of which its management has knowledge that . . . is 

reasonably likely to have a Material Adverse Effect on it . . . ." A23. In 

DQE's view, the regulatory rulings were likely to have a material adverse 

effect on Allegheny's business. 

 9 
the injunction. The court thought damages would be an 

adequate legal remedy for breach of the merger agreement 

because "[b]usiness valuation experts are routinely called 

upon to value business mergers." Accordingly, the court 

concluded that not granting the requested preliminary 

injunction would not cause Allegheny irreparable injury. Id. 

at 4. The court further found that granting an injunction 

would entail "the possibility of harm to DQE." Id. at 5. 

Finally, the court found that the public interest "weighs 

substantially against the granting of injunctive relief" 

primarily for two reasons: (a) the court believed it would 

have "to become involved in the business affairs" of the 

parties and; (b) the court believed that "unintended 

collision with regulatory agencies and their statutory 

mandates" loomed as a possibility. Id. at 5-6. Allegheny 

appealed under 28 U.S.C. S 1292(a)(1). 

II. Preliminary Injunction Standard 

"Four factors," as we have recently had occasion to

observe, 

 govern a district court's decision whether to issue a 

 preliminary injunction: (1) whether the movant has 

 shown a reasonable probability of success on the 

 merits; (2) whether the movant will be irreparably 

 injured by denial of the relief; (3) whether granting 

 preliminary relief will result in even greater harm to the 

 nonmoving party; and (4) whether granting the 

 preliminary relief will be in the public interest. 

American Civil Liberties Union of New Jersey v. Black Horse 

Pike Regional Bd. of Educ., 84 F.3d 1471, 1477 n.2 (3d Cir. 

1996) (en banc). See also Council of Alternative Political 

Parties v. Hooks, 121 F.3d 876, 879 (3d Cir. 1997). A 

district court should endeavor to "balance[ ] these four . . . 

factors to determine if an injunction should issue." 

American Civil Liberties Union of New Jersey, 84 F.3d at 

1477 n.2. 

Our review of a district court's denial of a preliminary 

injunction is limited to determining "whether there has 

been `an abuse of discretion, a clear error of law, or a clear 

mistake on the facts.' " McKeesport Hosp. v. Accreditation 

 10 
Council for Graduate Med. Educ., 24 F.3d 519, 523 (3d Cir. 

1994) (citing Hoxworth v. Blinder, Robinson & Co., 903 F.2d 

186, 198 (3d Cir. 1990)). 

III. Specific Performance and Irreparable Harm 

A. Choice of Law 

This diversity case is governed by Pennsylvania law. In 

their merger agreement, the parties agreed that "this 

agreement shall be deemed to be made in, and in all

respects shall be interpreted, construed and governed by 

and in accordance with the law of, the Commonwealth of 

Pennsylvania without regard to the conflict of law principles 

thereof." A45 (complete capitalization omitted). The parties' 

contractual choice of law does not appear arbitrary: one of 

the two parties is a Pennsylvania corporation, and 

Pennsylvania is the state in which the parties' chief 

subsidiaries -- West Penn and Duquesne -- conduct their 

principal operations.8 

Notwithstanding that Pennsylvania law governs this case, 

the briefs on appeal and the oral arguments before this 

court have not focused on Pennsylvania cases, presumably 

for the reason that counsel for both parties have found the 

case law from other jurisdictions to touch more closely than 

the Pennsylvania cases on the particular factual scenario 

presented by this litigation. We too have found no 

Pennsylvania cases that closely mirror the dispute between 

Allegheny and DQE. But our review of the pertinent 

Pennsylvania cases persuades us that the dispute at bar 

may be properly addressed within the general framework of 

those cases -- resting as they do on broadly familiar 

principles. And so, in the discussion which follows, we 

commence our analysis with those Pennsylvania cases. We 

_________________________________________________________________ 

8. Had the parties not stipulated that their agreement is to be governed 

by Pennsylvania law "without regard to the conflict of law principles 

thereof," the Erie doctrine would have required the application of 

Pennsylvania law, Erie R. Co. v. Tompkins, 304 U.S. 34 (1938), but with 

the inclusion of Pennsylvania conflict of laws principles. Klaxon Co. v. 

Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941). 

 11 
then turn to consider the pertinent case law on which the 

parties have chiefly relied -- i.e., case law from other 

jurisdictions: taken as a whole, those cases -- some of 

which are, indeed, factually more akin to the present 

dispute than the Pennsylvania cases -- build upon the 

broad foundational principles that inform the Pennsylvania 

cases. We feel comfortable in concluding, therefore, that 

lessons drawn from non-Pennsylvania cases have proper 

application to the Pennsylvania dispute before the court. 

We begin with a consideration of the law of specific 

performance -- in Pennsylvania first, and then more

broadly. After addressing the question whether specific 

performance would be the appropriate remedy for the

breach of contract alleged in this case, we inquire whether 

an affirmative answer to that question mandates afinding 

of irreparable harm. 

B. Specific Performance 

i. 

Allegheny argues that it is entitled to specific 

performance -- not just money damages -- because of "the 

inherent uniqueness of a company sought to be acquired, 

and the irreparable harm suffered by the party acquiring 

the company by the loss of the opportunity to own or 

control that business." Pl. Br. at 22 (citing Peabody Holding 

Co., Inc. v. Costain Group PLC, 813 F. Supp. 1402, 1421 

(E.D. Mo. 1993)). DQE disagrees, arguing that corporate 

combinations are regularly valued. 

Pennsylvania law conforms to the general rules regarding 

the availability of specific performance. "Specific

performance should only be granted . . . where no adequate 

remedy at law exists." Clark v. Pennsylvania State Police, 

436 A.2d 1383, 1385 (Pa. 1981) (citing Roth v. Hartl, 75 

A.2d 583 (Pa. 1970)). "Equitable jurisdiction to grant 

specific performance," the Pennsylvania Supreme Court 

observed in 1986, "depends upon the `inadequacy' of the 

remedy at law." Petry v. Tanglwood Lakes, Inc., 522 A.2d 

1053, 1056 (Pa. 1986). Seventy years earlier the court had 

stated the principle in the following terms: "The mere fact 

 12 
that a remedy at law exists is not sufficient to oust 

equitable jurisdiction; the question is whether the remedy 

is adequate or complete." Edison Illuminating Co. v. Eastern 

Pa. Power Co., 98 A. 652, 655 (Pa. 1916). With respect to 

what constitutes an adequate remedy at law, the 

Pennsylvania Supreme Court has observed that "[a]n action 

for damages is an inadequate remedy when there is no 

method by which the amount of damages can be accurately 

computed or ascertained." Clark, 436 A.2d at 1385 (citing 

Strank v. Mercy Hospital of Johnstown, 117 A.2d 697 (Pa. 

1955)). Damages cannot be accurately ascertained"where 

the subject matter of an agreement is an asset that is 

unique or one such that its equivalent cannot be purchased 

on the open market." Tomb v. Lavalle, 444 A.2d 666, 668 

(Pa. Super. Ct. 1981).9 

These general rules are unremarkable. But the parties 

have not cited, nor has our research disclosed, any

published Pennsylvania opinion discussing the applicability 

of these general rules to a situation presenting the same 

characteristics as the case at bar -- i.e., a dispute arising 

out of the alleged breach of a merger agreement between 

two publicly traded companies. Accordingly, we look for 

guidance to the handful of Pennsylvania cases in which the 

general rules have been applied to closely cognate 

situations: broken agreements for the acquisition of an 

existing business or the development of a business 

opportunity. 

In Cochrane v. Szpakowski, 49 A.2d 692 (Pa. 1946), the 

court upheld an award of specific performance of a contract 

for the sale of a restaurant and liquor business, finding 

that "a similar restaurant and liquor business to the one in 

question could not be purchased in the market, and 

therefore could not be reproduced by money damages." Id. 

at 361. "In this connection," the court continued, 

 the learned chancellor properly said: `The contract 

 involved here is one for the sale of a certain restaurant 

_________________________________________________________________ 

9. A good need not be inherently unique; it may become unique by virtue 

of its context. See Unatin 7-Up Co., Inc. v. Solomon, 39 A.2d 835 (Pa. 

1944) (impossible to value access to sugar or machinery for the 

manufacture of soft drinks during wartime quota system). 

 13 
 and liquor dispensing establishment at a definite 

 location, and the possession of the premises on which 

 the same is located. There are no other premises nor is 

 there any other restaurant which is exactly like the one 

 involved here, and it would, for all practical purpose, 

 be impossible for . . . [appellee] to prove what money he 

 would lose if . . . [appellant] were permitted to breach 

 this contract . . . . 

Id. at 361-62 (ellipses and bracketed terms in original). 

In Easton Theaters, Inc. v. Wells Fargo Land and 

Mortgage Co., Inc., 401 A.2d 1333 (Pa. Super. 1979), a 

lessee sought specific performance of a landlord's 

agreement to build a movie theater for it on property 

adjacent to the landlord's shopping center. The Superior 

Court found that future profits would be impossible to 

calculate accurately and that the landlord had not shown 

that similar substitute properties were available to the 

lessee. Accordingly, the court affirmed the trial court's 

order of specific performance. The Supreme Court appears 

to have approved the reasoning of Easton Theaters in Petry 

v. Tanglwood Lakes, Inc., 522 A.2d 1053 (Pa. 1986). In 

Petry, the court affirmed the denial of a plaintiff's claim for 

specific performance of a developer's contractual promise to 

build a lake adjacent to plaintiff's property.10 Finding that 

"damages here can be readily computed or ascertained," 

522 A.2d at 1056, the court noted that: 

 This case is not similar to Goldman v. McShain, 432 Pa. 

 61, 247 A.2d 455 (1968), where a theater operator was 

 permitted to sue a landowner and builder for specific 

_________________________________________________________________ 

10. It did so because, inter alia, the local condominium association had 

entered into a settlement with the developer requiring him to develop a 

recreational area on the site of the unbuilt lake. Thus, "[s]pecific 

enforcement of the covenant or building contract here at issue impinges 

on the rights and interests of other lot owners . . . . it is difficult to 

see 

how a purchaser in a condominium, or in a common development such 

as this, can reasonably argue that he or she purchased relying on, or is 

entitled to insist on, the absolute right to enforce specifically all 

executory agreements and promises originally made pertaining to the 

development, regardless of the wishes and rights of a majority of the 

other owners." 522 A.2d at 1057. 

 14 
 performance of a contract for the erection and 

 operation of a theater. In that sort of case, involving 

 what essentially amounts to a joint business venture, 

 future business profits are of necessity speculative and 

 difficult to determine. 

In a footnote, the court acknowledged that its lost profits 

 point is not discussed directly in Goldman, but see 

 Easton Theaters, Inc., v. Wells Fargo Land and 

 Mortgage Co., Inc., 235 Pa. Superior Ct. 334, 401 A.2d 

 1333 (1979), where a lessee sought to compel a 

 landlord, by specific performance, to build a theater on 

 its (the landlord's) shopping center property. Superior 

 Court thought that the agreement was specifically 

 enforceable, not only because future profits would be 

 impossible to calculate accurately, but also because 

 the landlord had not shown that other similar 

 properties would be available to the lessee as a 

 substitute. 

Id. at 1056 n.7.11 

_________________________________________________________________ 

11. In our court, the most analogous Pennsylvania case arose in a 

setting that was the obverse of the case at bar, in the sense that the 

plaintiff seeking injunctive relief was the prospective seller who sought 

to 

compel specific performance of an agreement to purchase plaintiff's 

business that the buyer had declined to consummate. The District Court 

had found that the buyer's principal purpose in acquiring the company 

was to obtain certain of the trucking company's regulated transportation 

rights. Determining that " `an award of damages would be inappropriate 

because it would be very difficult to determine the value' " of the 

regulated transportation rights, this court upheld the District Court's 

grant of specific performance. Kroblin Refrigerated Xpress, Inc. v. 

Pitterich, 805 F.2d 96, 103-04 (3d Cir. 1986) (citing district court slip 

opinion at 43). Cf. Girard Bank v. John Hancock Mutual Life Ins. Co., 524 

F. Supp. 884, 895, 896 (E.D. Pa. 1981), aff'd, 688 F.2d 820 (3d Cir. 

1982) (unpublished) (ordering specific performance of agreement in 

which insurance companies were to pay Girard in exchange for turning 

over security interests in boxcars on ground that measuring damages 

would be impossible because "[a]ny calculation of damages would require 

a complex inquiry into an assessment of the depreciated value of the 

boxcars, the changes in market price, the individual conditions of the 

boxcars, the adjustments for costs and expenses incurred during the 

management of the boxcars, as well as an accounting for the gross and 

net earnings of each boxcar."). 

 15 
ii. 

We turn now to a review of cases from other jurisdictions. 

In C&S/Sovran Corp. v. First Fed. Savings Bank of 

Brunswick, 463 S.E.2d 892 (Ga. 1995), First Federal and 

C&S/Sovran -- banks whose shares were publicly traded -- 

had executed an agreement by which First Federal would 

be merged into C&S/Sovran in exchange for shares of

C&S/Sovran stock. Three days before the deadline for 

consummation of the merger, First Federal filed suit in 

state court seeking specific performance and damages for 

breach of contract. Following trial, a jury found that 

C&S/Sovran had breached the merger agreement. 

C&S/Sovran moved for post-trial summary judgment on

First Federal's specific performance claim, but the court 

denied the motion and "ordered C&S/Sovran to prepare 

and file all applications with Federal and State regulatory 

authorities necessary to accomplish the merger," as well as 

to take other steps necessary to consummate the merger. 

Id. at 894. The Supreme Court of Georgia upheld the order 

of specific performance. 

C&S/Sovran is the only opinion cited by counsel, or

found by this court, which has addressed the applicability 

of the general rules of specific performance to a dispute 

arising out of the alleged breach of a merger agreement 

between two publicly traded companies. A number of other 

opinions, however, have considered grants of specific 

performance in cases falling within the broader category of 

broken agreements for the acquisition of an existing 

business or the development of a business opportunity. The 

First Circuit, applying Maine law, has upheld a grant of 

specific performance in the context of a buyer's claim 

arising from a breached contract for the sale of a minor 

league baseball franchise. Triple-A Baseball Club Assocs. v. 

Northeastern Baseball, Inc., 832 F.2d 214 (1st Cir. 1987). 

Speaking through Judge Bownes, the First Circuit noted 

that every court inside or outside of Maine to have

addressed the issue of a breach of contract to sell a 

franchise had concluded that specific performance was an 

appropriate remedy. Id. at 223. Finding that a baseball 

franchise was a unique business, id. at 224, and that 

measuring lost profits would be difficult, id. at 225, the 

 16 
court reversed the district court and remanded the case for 

the entry of a decree of specific performance ordering the 

sale, id. at 228. See also Wooster Republican Printing Co. v. 

Channel 17, Inc., 533 F. Supp. 601, 621 (W.D. Mo. 1981) 

(applying Missouri law and ordering specific performance of 

breached contract to sell television station from one closely 

held corporation to another after finding that television 

station was "unique").12 

The Seventh Circuit read Illinois law in like fashion in 

Medcom Holding Co. v. Baxter Travenol Laboratories, Inc., 

984 F.2d 223 (7th Cir. 1993). Considering an appeal from 

a district court order that a seller convey all of the shares 

in a wholly-owned subsidiary to a buyer that had 

contracted for them, the court noted that "a contract for the 

sale of corporate stock not publicly traded can be 

specifically enforced on the ground that valuation is 

imprecise without an active market for the stock. 

Furthermore, specific performance is also appropriate for 

breach of a contract to sell a business because a business 

is a unique asset." Id. at 227.13 

_________________________________________________________________ 

12. The court found the television station unique on the basis of expert 

testimony at trial, which established that the station "presents an 

unusual potential for future growth in a stable and growing market. 

Because of its potential for expansion with proper management and 

infusion of capital, its relative position in the local and national 

markets, 

its network affiliation, its licensing and frequency, and its physical 

assets, among other things, Channel Seventeen is unique." Wooster 

Republican Printing Co., 533 F.Supp. at 621. See also Peabody Holding 

Co., Inc. v. Costain Group PLC, 813 F. Supp. 1402, 1421 (E.D. Mo. 1993) 

(granting injunction to block sale of business to third party that would 

have breached contract to sell business to plaintiff because: (1) 

agreement "expressly acknowledged `irreparable damage' to Peabody in 

the event of breach" (2) Costain's "coal businesses are unique, including 

the management contracts and equity interests in existing and potential 

mining properties" (3) breach of contract to sell business does 

irreparable harm to frustrated buyer by virtue of "loss of the opportunity 

to own or control that business."). 

13. The court turned from its general statement that "a business is a 

unique asset" to a description of the ways in which the subsidiary was 

unique: the plaintiff's "founder . . . is in the business of purchasing 

companies in order to `turn them around.' He purchased Medcom even 

though it had been losing money for several years. In purchasing 

 17 
The Delaware Court of Chancery has engaged in a similar 

analysis. In True North Comm., Inc. v. Publicis, S.A., 711 

A.2d 34, 44-45 (Del. Ch. 1997), aff'd, 705 A.2d 244 (Del. 

1997), the court considered a controversy arising out of a 

soured joint venture agreement. Seeking to disentangle 

themselves, the two corporations that had entered into the 

joint venture agreement signed a subsequent agreement 

requiring each to assist its former partner in qualifying for 

pooling of interests accounting treatment in the event that 

the other sought to merge with a third party. When True 

North attempted to acquire a third party and to do so via 

pooling of interests, Publicis failed to provide the promised 

support. In concluding that specific performance was 

appropriate, the court noted that the dissolution agreement 

stipulated that injunctive relief would be available in the 

case of a breach. "Even without the contract language 

conceding the irreparable nature of the injury," the court 

continued, "it is nevertheless clear that True North will 

suffer irreparable harm if Publicis is not enjoined" because 

"Publicis' opposition efforts threaten to destroy the [third 

party] merger, which is a unique acquisition opportunity for 

True North." Id. at 44-45.14 

_________________________________________________________________ 

businesses, Manley looked for the right `building blocks.' Without all the 

blocks, it is conceivable that the chances of a successful `turnaround' 

might be lowered. [The subsidiary] could well be one of those building 

blocks necessary to turn Medcom around." Medcom Holding Co, 984 F.2d 

at 227 (deposition citations omitted). 

14. The court did not explain why it deemed the enterprise True North 

was to acquire to be "a unique acquisition opportunity," but it did 

characterize that enterprise as "an international communications 

company with advertising and public relations agencies . . . around the 

world." Id. at 37. 

Courts have found specific performance appropriate where a buyer has 

been frustrated in attempting to exercise a contractual right to purchase 

or maintain a controlling (or even significant but non-controlling) 

interest 

in an enterprise. See Baggett v. Cyclopss Med. Sys., Inc., 935 P.2d 1265, 

1271 (Utah Ct. App. 1997), cert. denied, 940 P.2d 1224 (Utah 1997) 

(plaintiffs "view the shares as a means of control or influence over [the 

business], and not merely as instruments of financial investment"); King 

v. Stevenson, 445 F.2d 565, 572 (7th Cir. 1971) (affirming specific 

 18 
These cases could be interpreted as imposing upon a

plaintiff (the would-be acquirer) the burden of showing with 

some particularity that the business to be acquired is either 

inherently unique or offers a unique opportunity to the 

buyer. However, the cases go into little detail chronicling 

the attributes of uniqueness. Moreover, no case that has 

come to our attention has found a business either not 

unique or not offering a unique opportunity to the buyer. 

This militates against treating the plaintiff 's burden as an 

onerous one. We turn now to the question whether, in the 

case at bar, Allegheny has met that burden. 

iii. 

We think it clear that the agreed-upon Allegheny-DQE 

merger constitutes a unique, non-replicable business 

opportunity for Allegheny. The Joint Proxy Statementfiled 

with the SEC and mailed to both corporations' shareholders 

describes several respects in which the integration of DQE 

and Allegheny could be expected to produce particular 

benefits: the contiguity of Allegheny's and DQE's service 

territories; DQE's particular expertise -- "better than its 

peer companies" -- in "developing unregulated businesses"; 

the complementarity of Allegheny's "winter-peaking, lowcost, efficient operations, and suburban and rural customer 

base" with DQE's "summer-peaking operations and urban 

customer base"; the "strategic fit" of DQE's "regulated and 

unregulated energy products and services" and Allegheny's 

"core businesses"; "the combined company's ability to take 

advantage of future strategic opportunities and to reduce 

its exposure to changes in economic conditions in any 

segment of its business"; and the expectation that the 

_________________________________________________________________ 

performance of stock option agreement permitting majority shareholder 

to purchase shares from minority shareholder because "this block of 

stock was sufficiently important to [plaintiff] as president and 

developer" 

of company). Cf. Mid-Continent Tel. Corp. v. Home Tel. Co., 319 F. Supp. 

1176, 1197 (N.D. Miss. 1970) (specific performance inappropriate where 

decree would not be sufficiently "definite and workable" despite general 

state rule that "[s]pecific performance is an ordinary remedy for breach 

of contract to convey corporate shares where the shares may constitute 

a controlling interest in a unique corporation"). 

 19 
"combined company [would] . . . have the critical mass 

necessary to compete in a deregulated utility environment." 

In the measured prose of the Joint Proxy Statement, "the 

synergies estimated by the managements of [Allegheny] and 

DQE appear to be achievable." DQE has not undertaken to 

identify any available merger partner, other than itself, 

whose acquisition by Allegheny would yield even one, let 

alone all, of these very considerable business opportunities. 

Accordingly, if DQE has breached the merger agreement, 

Allegheny is entitled to specific performance. 

C. The Relationship Between Specific Perform ance and 

Irreparable Harm 

We now turn to a consideration of the harm that could 

befall Allegheny if a preliminary injunction were denied and 

DQE were to take any action destroying the possibility that 

the accounting aspects of the merger could be achieved 

pursuant to pooling of interests accounting. If the loss of 

pooling accounting were to block the ultimate 

consummation of the merger, Allegheny would suffer 

irreparable harm from the loss of the opportunity to control 

DQE. As the specific performance inquiry has shown, that 

loss could not be adequately recompensed through 

monetary damages. 

If the merger is consummated despite the loss of pooling 

of interests accounting, Allegheny would suffer irreparable 

harm because DQE -- by then a part of Allegheny-- would 

no longer be able to recompense Allegheny for the difference 

between the value of the merger under pooling of interests 

accounting and the value of the merger under purchase 

accounting. DQE contends that the loss of pooling of 

interests accounting treatment would not be irreparable 

because the District Court could recompense Allegheny for 

any economic losses it suffered from loss of pooling of 

interests accounting treatment by adjusting the merger 

exchange ratio to give Allegheny's shareholders a greater 

share of ownership of the combined company. Because the 

loss of pooling of interests accounting treatment triggers 

losses that are themselves economic in nature and 

susceptible to financial valuation, DQE argues, DQE

shareholders could fully recompense Allegheny for DQE's 

 20 
breach by giving Allegheny a greater share of the combined 

company, thus vitiating the irreparable nature of the harm. 

However, Pennsylvania's Business Corporation Law does 

not permit changes in the consideration for a merger, once 

shareholder approval has been given, without a new 

shareholder vote. 15 P.S.A. S 1922 (b) states in relevant 

part that: 

 A plan of merger or consolidation may contain a 

 provision that the boards of directors of the constituent 

 corporations may amend the plan at any time prior to 

 its effective date, except that an amendment made 

 subsequent to the adoption of the plan by the 

 shareholders of any constituent corporation shall not 

 change: (1) The amount or kind of shares, obligations, 

 cash, property or rights to be received in exchange for 

 or on conversion of all or any of the shares of the 

 constituent corporation. 

Section 1922(b) constitutes one of the "rules of decision" 

guiding this court sitting in diversity. 28 U.S.C. S 1652. Erie 

R. Co. v. Tompkins, 304 U.S. 64 (1938). 

D. DQE's Arguments Against Irreparable Harm 

Under These Facts 

DQE offers several reasons why its alleged breach should 

not give rise to Allegheny's requested specific performance 

or, if specific performance is appropriate, why the District 

Court was nevertheless correct in determining that 

Allegheny would not suffer irreparable harm if the 

preliminary injunction is denied. DQE's principal 

arguments are as follows: 

(i) DQE argues that "injunctive relief . . . has only been 

granted in a corporate merger case where either (1) the 

contract contains an express provision reciting that 

damages would not be an adequate remedy for a breach 

and permitting the parties to seek injunctive relief and 

specific performance, or (2) the `target' company is nonpublic or closely-held thereby rendering it difficult to 

value." Def. Br. at 17-18 (emphasis in original). However, 

DQE cites no case holding -- or even stating in dictum -- 

that specific performance is not available unless the merger 

 21 
contains an express provision permitting the parties to seek 

specific performance or the target is "non-public or closelyheld." DQE's assertion that no such case has granted 

specific performance is thus no more than an assertion that 

no such case has yet arisen. It may be sufficient, for the 

purposes of the irreparable harm inquiry, that there is a 

contractual provision permitting specific performance15 or 

that a target is "non-public or closely-held," but the 

Pennsylvania Supreme Court has never held either to be a 

necessary predicate to irreparable harm. We see no ground 

for supposing that the Commonwealth's highest court

would craft such a rigid rule. 

(ii) DQE points to Section 8.5(b) of the merger 

agreement, which provides Allegheny with a merger 

termination fee not to exceed $50 million in the event that 

DQE terminates the contract in order to accept a better 

offer. See A43-44. DQE notes that "this provision is 

admittedly not triggered by a breach or other termination," 

but argues that the provision "reflects Allegheny's

agreement and understanding that any `injury' stemming 

from its loss of the opportunity to merge with DQE may 

adequately be compensated through the payment of 

money." Def. Br. at 24. Pennsylvania law forecloses the 

argument that this provision of its own force precludes 

specific performance. As the Pennsylvania Supreme Court 

has stated, the presence of a liquidated damages provision 

in a contract "will not restrict the remedy thereto [i.e., to 

liquidated damages] or bar specific performance unless the 

language of the part of the agreement in question, or of the 

entire agreement . . . shows a contrary intent." Roth v. 

Hartl, 75 A.2d 583, 586 (Pa. 1950).16 Section 8.5(b) speaks 

_________________________________________________________________ 

15. Cf. True North Comm., Inc., v. Publicis, S.A., 711 A.2d 34, 44-45 

(Del. 

Ch.), aff'd, 705 A.2d 244 (Del. 1997) ("Even without the contract 

language conceding irreparable injury . . . it is nonetheless clear that 

True North will suffer irreparable harm if Publicis is not enjoined from 

pursuing its activities in opposition to the merger."). 

16. Peabody Holding Co., Inc. v. Costain Group P.L.C., 813 F. Supp. 1402, 

1421 (E.D. Mo. 1993) is also instructive: 

 Defendants argue, however, that the $5 million liquidated damages 

 provision . . . provides a reasonable estimate of the damages 

 22 
only to the termination fee payable upon the unsolicited 

receipt of a superior merger offer. See A43. It states that "In 

the event that this Agreement is terminated (x ) by the 

Company pursuant to Section 8.3(a) (or 6.2), or (y) by 

Parent pursuant to Section 8.4(b)(i) or (iii), or (z) by the 

Company or Parent pursuant to Section 8.2(d), then the 

Company" shall pay a termination fee not to exceed $50 

million. A43. Section 8.3(a) states that "This Agreement 

may be terminated and the Merger may be abandoned at 

any time prior to the Effective Time, whether before or after 

the approval by stockholders of the Company . . . by action 

of the board of directors of the Company: (a) subject to and 

in accordance with the provisions of Section 6.2;" A42. 

Section 6.2 concerns acquisition proposals by third parties. 

A32-33. Likewise, Section 8.4(b)(i) states that "This 

Agreement may be terminated and the Merger may be 

abandoned at any time prior to the Effective Time, before or 

after the approval by stockholders of Parent . . . by action 

of the board of directors of Parent: (a) subject to and in 

accordance with the provisions of Section 6.2 . . . ." A43. 

We do not read Section 8.5(b) -- which governs the fee 

payable upon a termination of the merger agreement 

arising from an unsolicited receipt of a superior merger 

offer -- to evince an intent to bar specific performance for 

_________________________________________________________________ 

 Peabody would suffer. The Court disagrees with defendants. It is 

 clear, plainly on the face of S4.1(d) of the [stock purchase 

 agreement], that the liquidated damages provision applies only to 

 situations where no sale is consummated between Peabody and 

 Costain based solely upon the existence of an unsolicited proposal 

 which is superior to Peabody's. In such a circumstance, Peabody 

 has protected itself in case it cannot meet the superior offer. 

This 

 does not mean, however, that the provision states an adequate 

 remedy for circumstances where there is no unsolicited bid superior 

 to Peabody's and Costain has breached the [stock purchase 

 agreement]. Peabody needs no monetary protection in such a 

 circumstance because Costain has no right to terminate the 

 contract in pursuit of the better unsolicited offer. Thus, it is 

the 

 opinion of this Court that Peabody will suffer irreparable harm . . 

. . 

The court therefore granted specific performance. Id. at 1422-23. 

 23 
breaches of the merger agreement unrelated to an 

unsolicited receipt of a superior merger offer. 17 

(iii) DQE argues that the benefits of this merger can be 

valued. It points out that the parties have already jointly 

valued one of the more important merger benefits-- the 

"synergies" that would arise from the merger: the Joint 

Proxy Statement filed with the SEC and mailed to both 

corporations' shareholders stated that the companies"have 

jointly studied the estimated synergies arising out of a 

combination of their companies. The companies estimated 

that the Merger could result in savings of approximately $1 

billion over the 10-year period from 1998 to 2008, taking 

into account the costs estimated to be necessary to achieve 

such synergies." A83. Moreover, DQE contends that the 

other benefits of the merger identified by Allegheny "are not 

elusive metaphysical concepts, but rather standard 

business phenomena that have long been quantified and 

valued by economists, investment bankers and other 

experts in commercial cases such as this." Def. Br. at 26. 

But DQE has not attempted to value the other (i.e., nonsynergy) strategic benefits outlined in the Joint Proxy 

Statement. See A83. DQE's failure even to attempt a

valuation of those other strategic benefits is telling.18 

(iv) DQE claims that Allegheny can bid on DQE's 

generating assets (which, according to DQE, are soon to 

appear on the block), and thus achieve one of the stated 

goals of the merger, "increas[ing] its generating capacity by 

almost one-third . . . ensuring that Allegheny will have the 

critical mass to compete in the generation market against 

its larger regional competitors." Pl. Br. at 12 (cited in Def. 

Br. at 28-29). Moreover, DQE argues, Allegheny can solicit 

_________________________________________________________________ 

17. Nor is DQE aided by its recital of statements from Allegheny officials 

attesting to the financial harm that the failure of the merger would cause 

Allegheny. See, e.g., Def. Br. at 25-26. That Allegheny's officers once 

thought that they would pursue damages for breach simply does not 

speak to the issue of whether a fact-finder could calculate those 

damages with any accuracy. 

18. Indeed, even the synergies valuation in the proxy statement hedges: 

the companies "estimated that the Merger could result in savings of 

. . . ." A83 (emphasis added). 

 24 
DQE's customers under Pennsylvania's newly deregulated 

energy market. But "critical mass" is only one of several 

merger benefits identified by the parties, and the statutory 

right to attempt to serve customers is not the equivalent of 

having a preexisting business relationship with them. 

(v) DQE argues that Allegheny could merge with other 

utility companies. It offers no suggestions as to which other 

companies are "exactly like the one involved here,"

Szpakowski, 49 A.2d at 362, i.e., which other companies 

would demonstrably provide Allegheny with the benefits 

that it will lose if this merger agreement is not 

consummated. 

Conclusion 

For the reasons set forth above, we hold that Allegheny 

would be at serious risk of irreparable harm if preliminary 

injunctive relief were withheld. We will, therefore, vacate 

the judgment denying the preliminary injunction and

remand the case to the District Court for further 

proceedings consistent with this opinion. On remand, the 

District Court should reassess -- in light of this opinion -- 

the three remaining factors in the four-factor determination 

of whether a preliminary injunction should issue.19

We do not read the District Court as having conclusively 

decided whether Allegheny has a reasonable likelihood of 

success on the merits. We appreciate that the District 

Court characterized "Allegheny's submissions on this issue 

[as] persuasive," Memorandum Order at 3, but do not

understand this characterization as intended to be fully 

dispositive of that complex question. Accordingly, we think 

the District Court should again assess the question of 

Allegheny's likelihood of success on the merits. 

_________________________________________________________________ 

19. The district court heard oral argument and considered the parties' 

submissions and supporting expert witness affidavits. With the 

advantage of hindsight, we note that an evidentiary hearing in which the 

parties' experts were subject to cross-examination from opposing counsel 

might have benefitted the district court. Particularly where opposing 

affidavits duel for the key to a dispositive issue, affidavits often prove 

a 

poor substitute for live testimony. 

 25 
Likewise, the District Court should undertake to 

determine whether "whether granting preliminary relief will 

result in even greater harm to the nonmoving party" than 

the irreparable harm that denying preliminary relief would 

cause to the moving party. American Civil Liberties Union of 

New Jersey v. Black Horse Pike Regional Bd. of Educ., 84 

F.3d 1471, 1477 n.2 (3d Cir. 1996) (en banc). The question 

to be addressed is not whether DQE "would suffer some 

harm," Memorandum Order at 4, or whether "there is a 

possibility of harm," id. at 5, but which of two potential 

harms -- Allegheny's or DQE's -- is greater. 

Finally, the District Court should reconsider whether its 

reasons for finding that the public interest "weighs 

substantially against the granting of injunctive relief," are 

supported in our case law. In so doing, the District Court 

should determine whether its belief that the injunction 

would require "the court to become involved in the business 

affairs" of the parties presents a recognized rationale for a 

finding that a preliminary injunction would be against the 

public interest. In reassessing its belief that the injunction 

"could have an adverse effect through unintended collision 

with regulatory agencies and their statutory mandates" and 

thus run counter to the public interest, the District Court 

should bear in mind that three state regulatory agencies 

and two federal regulatory agencies have approved the 

merger, each finding that it is in the public interest; no 

state or federal agency has determined that the merger is 

not in the public interest. Cf. Schulz v. United States Boxing 

Ass'n, 105 F.3d 127, 134 (3d Cir. 1997) ("In determining [a 

state's] public policy, we turn to the enactments of the state 

legislature as an authoritative source."). 

Combining its reanalysis of these three factors with this 

opinion's holding on the fourth, the District Court should 

endeavor to "balance[ ] these four . . . factors to determine 

if an injunction should issue." American Civil Liberties 

Union of New Jersey, 84 F.3d at 1477 n.2. 

Accordingly, the judgment of the District Court denying a 

preliminary injunction is vacated and the case remanded 

for further proceedings consistent with this opinion. 

 26 
A True Copy: 

Teste: 

 Clerk of the United States Court of Appeals 

 for the Third Circuit 

 27