The Hon. David H. Souter, Associate Justice (Ret.) of the *

Supreme Court of the United States, sitting by designation.

United States Court of Appeals

For the First Circuit

No. 09-2540

BRAINTREE LABORATORIES, INC., BRAINTREE HOLDINGS, and

BRAINTREE REAL ESTATE MANAGEMENT COMPANY, LLC.,

Plaintiffs, Appellants,

v.

CITIGROUP GLOBAL MARKETS INC. and CITI SMITH BARNEY,

Defendants, Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Nathaniel M. Gorton, U.S. District Judge]

Before

Boudin, Circuit Judge,

Souter, Associate Justice, *

and Howard, Circuit Judge.

Barry S. Pollack, with whom Joshua L. Solomon, Phillip

Rakhunov and Sullivan & Worcester LLP, were on brief, for

appellants.

Charles E. Davidow, with whom Brad S. Karp, Susanna M.

Buergel, Paul, Weiss, Rifkind, Wharton & Garrison LLP, Robert A.

Buhlman, Brandon L. Bigelow and Bingham McCutchen LLP, were on

brief, for appellees.

October 12, 2010
The other named defendant, Citi Smith Barney, is a division 1

and service mark of CGMI. 

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HOWARD, Circuit Judge. In February of 2008, the market

for auction-rate securities ("ARS") froze, creating a wellpublicized liquidity crisis. During the following summer,

plaintiffs Braintree Laboratories, Inc., Braintree Holdings, and

Braintree Real Estate Management Company (collectively,

"Braintree") made $41 million worth of investments in ARS -- by

that point already illiquid and significantly depreciated -- at par

value. Braintree later insisted that it had been deceived.

Claiming that its broker-dealer, defendant Citigroup Global

Markets, Inc. ("CGMI"), had misrepresented the purchased 1

securities as entirely liquid money market investments, Braintree

brought this action in federal district court seeking rescission of

the transactions, restitution of the consideration paid, and

damages.

The district court ordered the dispute transferred to

arbitration pursuant to Braintree's brokerage agreement. It also

denied Braintree's request for a mandatory preliminary injunction

to rescind the contract and refund the purchase price, pending

arbitration. Braintree Labs, Inc. v. Citigroup Global Markets,

Inc., 671 F. Supp. 2d 202 (D. Mass. 2009). Braintree now appeals

both of those decisions.
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I.

ARS are debt instruments, such as municipal or corporate

bonds, with long-term maturities. Their interest rates or dividend

yields are reset periodically through so-called Dutch auctions

managed by the issuing bank or another financial institution.

Potential purchasers, including the existing holders of the

securities, bid the lowest interest rate or dividend yield that

they are willing to accept. A designated auctioneer then sets the

interest rate for the period until the next auction by determining

the lowest bid rate at which all securities at auction could be

sold to buyers.

So long as auctions continue to clear, meaning that a

willing bidder exists for every security up for auction, then any

holder can turn around and sell the security as soon as the next

auction arrives -- typically either a week or a month distant. If,

however, the number of bids submitted is less than the number of

ARS up for auction, then the auction fails. When such a failure

occurs, ARS holders wishing to sell are unable to do so. As a

result, the securities' liquidity depends on there being a critical

mass of bidders.

For years, investors in ARS generally did not need to

fear auction failures, as the broker-dealers who facilitated the

auction would voluntarily place "cover bids" to purchase the number

of ARS necessary to ensure the auction cleared, effectively serving
The other two named plaintiffs are affiliates of Braintree 2

Laboratories.

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as bidders of last resort. Failures remained the exception rather

than the rule, and broker-dealers were able to promote ARS as cash

equivalents with the advantage of higher interest rates than a

short-term loan. By early 2008, the market for ARS had grown to

$330 billion.

In February 2008, the system collapsed. With the

worldwide credit markets in crisis, broker-dealers that had

previously intervened to ensure successful auctions ceased to do

so. Auctions began to fail widely, and many owners of now-illiquid

ARS were left holding their investments indefinitely.

The freeze in the ARS market sparked a number of class

action lawsuits and regulatory enforcement measures against the

firms that had marketed ARS to investors as liquid money market

alternatives. One of these firms was CGMI. In August 2008, CGMI

entered into a settlement agreement with the Securities and

Exchange Commission ("SEC"), as well as with various state

agencies. That agreement provided some relief to certain classes

of investors, but those not covered by it were left to pursue

private litigation for redress of their losses.

Braintree Laboratories, a pharmaceutical company, is one

of the many institutional investors that purchased ARS from CGMI.2

It opened brokerage accounts with CGMI between 2001 and 2003, and
The district court had supplemental jurisdiction over the 3

non-federal claims pursuant to 28 U.S.C. § 1367.

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had bought ARS from CGMI well before the market froze in 2008.

Braintree has not challenged any of these pre-2008 sales. Rather,

Braintree alleges that CGMI continued to sell it ARS in a series of

transactions between June and August 2008 -- well after the freeze

and during the pendency of regulatory investigations -- while

incorrectly informing Braintree that the securities were liquid

government bonds. Seeking to rescind these sales, which were not

affected by CGMI's settlements, Braintree brought suit in federal

district court under Section 10(b) of the Securities Exchange Act

of 1934, the Massachusetts Uniform Securities Act, and other state

statutory and common law doctrines not at issue in this appeal.3

Braintree's primary piece of evidence supporting its

allegations is the sworn testimony of Peter Renaghan, Braintree's

broker at CGMI and the employee who sold the disputed securities on

CGMI's behalf. During a deposition for a related state action,

Renaghan stated that he had never used the term ARS in connection

with the sale, instead referring to the securities as money market

alternatives that could be sold within seven days. Renaghan

recounted how Braintree had emphasized from the start that its top

investment priority was liquidity. Renaghan then explained that he

had mistakenly believed these securities to satisfy that objective,
A preliminary injunction pending arbitration is ordinarily 4

temporary emergency relief that extends only until the arbitrator

itself can decide whether to award relief, Next Step Med. Co. v.

Johnson & Johnson Int'l, No. 09-2077, 2010 WL 3386569, at *3 (1st

Cir. Aug. 30, 2010); see Merrill Lynch, Pierce, Fenner & Smith,

Inc. v. Salvano, 999 F.2d 211, 215 (7th Cir. 1993); and if in this

case the arbitration panel could give temporary relief, then any

court relief would last until the arbitrator could act on such a

request. Salvano, 999 F.2d at 215. Because we agree that

Braintree is not entitled to a preliminary injunction at all, its

possible duration need not be determined.

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and that Braintree had in turn believed the inaccurate information

that he gave.

CGMI responded to the complaint by moving to transfer the

dispute to arbitration, pursuant to a clause in Braintree's

brokerage agreement. While that motion was pending, Braintree

moved for a preliminary injunction requiring CGMI to refund the

purchase price pendente lite. Finding the arbitration clause to be

binding and provisional relief to be inappropriate, the district

court granted CGMI's motion and denied Braintree's. Braintree now

appeals both rulings.

II.

Braintree first appeals from the denial of its motion for

a preliminary injunction pending arbitration. District courts have

the authority to issue injunctive relief even where resolution of

the case on the merits is bound for arbitration. P.R. Hosp.

Supply, Inc. v. Boston Scientific Corp., 426 F.3d 503, 505 (1st

Cir. 2005). Accordingly, courts assessing the propriety of 4
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injunctive relief pending arbitration proceed according to the

familiar set of four factors: "(i) the likelihood that the movant

will succeed on the merits; (ii) the possibility that, without an

injunction, the movant will suffer irreparable harm; (iii) the

balance of relevant hardships as between the parties; and (iv) the

effect of the court's ruling on the public interest." Waldron v.

George Weston Bakeries, Inc., 570 F.3d 5, 9 (1st Cir. 2009). 

Braintree does not seek a traditional, prohibitory

preliminary injunction, but instead asks for a mandatory

preliminary injunction, which requires affirmative action by the

non-moving party in advance of trial (in this case, rescission of

the contract and a refund of the purchase price pendente lite).

Because a mandatory preliminary injunction alters rather than

preserves the status quo, it "normally should be granted only in

those circumstances when the exigencies of the situation demand

such relief." Mass. Coal. of Citizens with Disabilities v. Civil

Def. Agency, 649 F.2d 71, 76 n.7 (1st Cir. 1981). Nevertheless,

those exigencies should still be measured according to the same

four-factor test, as "[t]he focus always must be on prevention of

injury by a proper order, not merely on preservation of the status

quo." Crowley v. Local No. 82, 679 F.2d 978, 996 (1st Cir. 1982),
We have previously explained that the status quo may be 5

determined by looking at "the last uncontested status which

preceded the pending controversy." Crowley, 679 F.2d at 995–96.

At oral argument, Braintree suggested that such status was in fact

the period before it purchased the ARS, rather than the time at

which relief was sought. The theory is not entirely devoid of

support. United Steelworkers of Am., AFL-CIO v. Textron, Inc., 836

F.2d 6, 10 (1st Cir. 1987) (Breyer, J.) (concluding that an

injunction requiring the payment of benefits was properly viewed

"not as mandatory, but as prohibitory" where the last uncontested

status that preceded the pending controversy was a status in which

the defendant paid the necessary premiums). Nevertheless, because

Braintree had not disputed the "mandatory injunction"

classification prior to oral argument, leaving CGMI with no

opportunity to prepare a counterargument, we do not rely on that

theory here. See The Shell Co. (Puerto Rico) Ltd. v. Los Frailes

Serv. Station, 605 F.3d 10, 19 (1st Cir. 2010).

-8-

rev'd on other grounds by 467 U.S. 526 (1984), (quoting Canal Auth.

v. Callaway, 489 F.2d 567, 576 (5th Cir. 1974)).5

The district court denied Braintree's motion after

considering the first two of these factors, which weigh heaviest in

the analysis, Gonzalez-Droz v. Gonzalez-Colon, 573 F.3d 75, 79 (1st

Cir. 2009), and concluding that the motion failed on each of them.

On appeal, we review the district court's decision using the same

four-factor test. We will reverse a denial of a preliminary

injunction only if "the district court mistook the law, clearly

erred in its factual assessments, or otherwise abused its

discretion in [denying] the preliminary injunction." ANSYS, Inc.

v. Computational Dynamics N. Am., Ltd. 595 F.3d 75, 77 (1st Cir.

2010). "Within that framework, however, findings of fact are

reviewed for clear error and issues of law are reviewed de novo."
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United States v. Weikert, 504 F.3d 1, 6 (1st Cir. 2007) (internal

quotation mark omitted).

In this case, we need to focus our attention on only one

of the four factors -- irreparable harm, "the essential

prerequisite for equitable relief," Gonzalez-Droz, 573 F.3d at 81

-- as Braintree's insufficient showing on it disposes of the claim.

Rejecting Braintree's claim that illiquidity was forcing it to

forego certain unspecified investment opportunities, the district

court concluded that "a need for liquidity is not irreparable harm

because plaintiffs offer no evidence that [CGMI] cannot pay damages

and thus provide an adequate remedy at law. Prejudgment interest,

moreover, compensates for any loss of use of money." Braintree

Labs., Inc., 671 F. Supp. 2d at 208.

On appeal, Braintree urges that its ongoing inability to

liquidate its investments is generating incalculable losses from

missed opportunities, including new product acquisitions, inlicensing activities, and research and development programs. The

ostensibly irreparable harm is to be found not in the amount of

funds to which Braintree has effectively been denied access, but to

the damage that would flow from that denial. If successful on the

merits, Braintree would be unable to rely on the normal time-value

of money because, the argument goes, the foregone opportunities

might have yielded a higher return than the available pre-judgment

interest rate. And, further, Braintree could not rely on a
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historical rate of return for such investments; it insisted on

liquidity from the outset precisely because these entrepreneurial

activities are high-risk, high-reward ventures, the want of which

is not easily measured in monetary terms after the fact. Because

it might be difficult to determine retrospectively how much these

missed opportunities were actually worth, Braintree insists that

liquidity in the present moment, and not monetary damages at a

point in the future, is the only way to make it whole.

The district court did not abuse its discretion in

rejecting this argument. An investor could always claim that she

could put money to better use than simply letting it accrue

interest at the prevailing rate. An asserted injury so ubiquitous

cannot serve as the basis for the issuance of a preliminary

injunction. See Charlesbank Equity Funds II v. Blinds to Go, Inc.,

370 F.3d 151, 162–63 (1st Cir. 2004). Rather, if a claim of

irreparable injury tied to outperforming the market could ever be

recognized, it could only be on the basis of a substantial

evidentiary showing. In the absence of such a showing a plaintiff

like Braintree, if successful on the merits, would be entitled only

to monetary damages, perhaps calculated with reference to a

historical rate of return. And although Braintree stressed at oral

argument that its case is exceptional because its year-to-year

performances would be too volatile to provide such a reference

point, there is no record evidence to support that contention.
-11-

Braintree's mere say-so is insufficient to convert its desire for

prejudgment cash into a justification for a prejudgment injunction.

In arguing against the district court's conclusion,

Braintree principally relies on RoDa Drilling Co. v. Siegal, 552

F.3d 1203 (10th Cir. 2009), in which the Tenth Circuit affirmed a

lower court's issuance of a preliminary injunction forcing the

transfer of record title for various oil and gas investments. The

appeals court concluded that the plaintiff suffered irreparable

harm by being denied ownership of real property, "resulting in

delays, missed opportunities, and most importantly, unquantifiable

damages." Id. at 1211. Because "realizing [the properties']

income potential depends upon active management," the court

reasoned that potential damages would be "most difficult to prove,

if not practically unquantifiable." Id. That was sufficient to

establish irreparable harm, even for a mandatory injunction.

Yet Braintree's reliance on RoDa Drilling is misplaced.

The plaintiff in that case had provided expert testimony on the

issue of irreparable harm and the unpredictability of damages

absent a preliminary injunction. Id. Here, the record contains no

such evidence. On that issue, Braintree proffered neither expert

testimony nor any data that would tend to show its investment

practices and historical rates of return. All it has put in the

record is a conclusory affidavit from its Chief Financial Officer.

It might be that market conditions, business practices, and
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investment opportunities would vary so wildly over time that past

performance would be too imprecise an instrument to measure

compensatory damages in a non-speculative manner. Applied to a

business engaged in the research and development of pharmaceutical

products, that theory is at least plausible. But plausibility

alone is no basis for assailing the district court's finding.

It is true that we measure irreparable harm on "a sliding

scale, working in conjunction with a moving party's likelihood of

success on the merits," Vaqueria tres Monjitas, Inc. v. Irizarry,

587 F.3d 464, 485 (1st Cir. 2009), such that "[t]he strength of

the showing necessary on irreparable harm depends in part on the

degree of likelihood of success shown." Mass. Coal. of Citizens

with Disabilities, 649 F.2d at 75. Based on this principle,

Braintree would rest on the laurels of its case on the merits and

ask us to excuse whatever shortcomings might exist in the harm that

it alleges. Yet at least some positive showing of irreparable harm

must still be made. See Gately v. Commonwealth of Mass., 2 F.3d

1221, 1232 (1st Cir. 1993) ("[A] federal court cannot dispense with

the irreparable harm requirement in affording injunctive relief.").

Accordingly, we find no abuse of discretion in the

district court's decision to withhold preliminary injunctive

relief.
The statute provides an exception for orders that the 6

district court certifies for appeal under 28 U.S.C. § 1292(b), but

that exception is not at issue here.

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III.

Braintree also appeals from the district court's order

compelling arbitration. Congress enacted the Federal Arbitration

Act ("FAA"), codified as amended at 9 U.S.C. § 1 et seq., in order

to "overcome judicial resistance to arbitration and to declare a

national policy favoring arbitration of claims that parties

contract to settle in that manner." Vaden v. Discover Bank, 129 S.

Ct. 1262, 1271 (2009) (internal quotations and citations omitted).

To further that policy, Section 16(b) of the FAA prohibits the

immediate appeal of various interlocutory orders that favor

arbitration, including orders compelling arbitration. See 9 6

U.S.C. § 16(b)(3). Unfazed by this limitation on our appellate

jurisdiction, Braintree advances two arguments for why we should

nonetheless consider whether this case is arbitrable. First,

Braintree claims that the order may have been final, rather than

interlocutory. Second, it contends that we could review the matter

by exercising pendent appellate jurisdiction. We take up each

argument in turn.

While Section 16 limits the immediate appealability of

most pro-arbitration interlocutory orders, it still permits appeals

to be taken from a "final decision with respect to an arbitration."

9 U.S.C. § 16(a)(3). Whether an order compelling arbitration is
-14-

interlocutory or final depends on whether the district court

chooses to stay litigation pending arbitration or instead to

dismiss the case entirely. If the district court stays litigation,

parties wishing to challenge the case's arbitrability must normally

wait until the arbitrator resolves the matter on the merits and the

district court enters a final judgment. Green Tree Fin. Corp. v.

Randolph, 531 U.S. 79, 87 n.2 (2000). If, on the other hand, the

district court couples its order compelling arbitration not with a

stay but with an outright dismissal, leaving nothing more for

itself to do but execute the eventual judgment, then an appeal may

be taken. Id. at 86–87.

Seizing on the fact that the district court here did not

specify in its order whether it was staying or dismissing the case,

Braintree asks us to remand the case to the district court, which

could then clarify which outcome it intended. We see no need to do

so. To begin with, Braintree did not request this remand until its

reply brief, and its opening brief did not even mention the alleged

ambiguity except in a cursory footnote appended to its discussion

of pendent appellate jurisdiction. We have on numerous occasions

warned litigants that "issues adverted to in a perfunctory manner,

unaccompanied by some effort at developed argumentation, are deemed

waived." United States v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990).

The slight development in the reply brief does nothing to help

matters, as arguments raised there for the first time come too late
We note that district courts can easily avoid this sort of 7

confusion in the future. The Second Circuit offered sound advice

when it urged "district courts in these circumstances to be as

clear as possible about whether they truly intend to dismiss an

action or mean to grant a stay pursuant to 9 U.S.C. § 3, which

supplies that power, or whether they mean to do something else

entirely." Salim Oleochemicals v. M/V Shropshire, 278 F.3d 90, 93

(2d Cir. 2002) (Sotomayor, J.).

-15-

to be preserved on appeal. Evans Cabinet Corp. v. Kitchen Intern.,

Inc., 593 F.3d 135, 148 n.20 (1st Cir. 2010). 

Moreover, even had the issue been properly preserved, we

would still read the district court's order as a stay. CGMI's

motion to compel arbitration specifically requested a stay pending

arbitration. See Defendant's Motion to Stay Proceedings Pending

Determination of the MDL Panel or to Compel Arbitration at 1,

Braintree Labs., 671 F. Supp. 2d 202 (D. Mass. 2009) (No. 09-

10601). It is true that the court granted the motion without

reference to either a stay or a dismissal in so many words. But we

think that if it had meant to provide relief other than that sought

in the motion it was granting, it would have said so. The most

plausible reading of the order is that the court was granting the

motion to compel arbitration in its entirety, including the

requested stay pending arbitration.7

Braintree next posits that even if the district court's

order is otherwise non-appealable under Section 16, we may still

review it through the exercise of pendent appellate jurisdiction.

"Instances in which the exercise of pendent appellate jurisdiction
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is appropriate are hen's-teeth rare," arising only when "(i) a

non-appealable issue is inextricably intertwined with one or more

appealable issues or (ii) review of a non-appealable issue is

essential to ensure meaningful review of an appealable issue."

P.R. Ports Auth. v. Barge Katy-B, 427 F.3d 93, 107 (1st Cir. 2005).

Other circuits have disagreed over whether this seldom-used

doctrine could ever permit the review of interlocutory orders that

§ 16 brands as non-appealable. Compare IDS Life Ins. Co. v.

SunAmerica, Inc., 103 F.3d 524, 528 (7th Cir. 1996) (holding that

Section 16 creates a bright-line rule against the exercise of

pendent appellate jurisdiction over refusals to stay arbitration),

with Nat'l R.R. Passenger Corp. v. ExpressTrak LLC, 330 F.3d 523,

528 (D.C. Cir. 2003) (rejecting the Seventh Circuit's approach in

favor of a rule that would allow the exercise of pendent appellate

jurisdiction under limited circumstances); Freeman v. Complex

Computing Co., Inc., 119 F.3d 1044, 1050 (2d Cir. 1997) (same).

Ultimately, however, this case does not require us to

choose sides. Even assuming arguendo that pendent appellate

jurisdiction could in some instances be exercised over orders

compelling arbitration, this would not be one of those instances.

Far from being inextricably intertwined, the district court's

refusal to grant a preliminary injunction and its decision to

compel arbitration have little to do with each other. The former

concerns the underlying claim for relief; the latter concerns the
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forum in which that claim is to be adjudicated. Braintree relies

on National Railroad Passenger Corp., in which the D.C. Circuit

found an order compelling arbitration and an order granting a

preliminary injunction to be inextricably intertwined, but that

case is distinguishable. There, the district court had enjoined

the parties, not based on any irreparable harm or likelihood of

success of the claim to be arbitrated, but based on its conclusion

that the arbitration clause itself "clearly contemplated"

injunctive relief pending arbitration. 330 F.3d at 528 (quoting

Nat'l R.R. Passenger Corp. v. Expresstrak, L.L.C., 233 F. Supp. 2d

39, 50 (D.D.C. 2002)). Because that injunction was only as valid

as the arbitration clause that dictated it, the D.C. Circuit found

that the injunction was entirely dependent on -- and therefore

conferred pendent appellate jurisdiction over -- the case's

arbitrability. Id. It was only this "unique factual context" that

removed any concern that the movant was "'parlay[ing] . . .

collateral orders into multi-issue interlocutory appeal tickets.'"

Id. (quoting Swint v. Chambers County Comm'n, 514 U.S. 35, 49

(1995)) (alterations in original).

Here, by contrast, the preliminary injunction rises or

falls with the traditional four-step analysis, and none of these

steps logically depends on the answer to the question of

arbitrability. Whether we might conclude that the case belongs in

arbitration would not change whether Braintree's claim on the
Braintree contends that insofar as it has alleged that CGMI's 8

invocation of arbitration rights violates the SEC consent

agreement, the public interest prong would be affected. Again,

this conflates the primary dispute over ultimate relief with the

secondary dispute over the appropriate forum. The public interest

that is referred to in the test for a preliminary injunction means

the public's interest in the issuance of the injunction itself. It

does not, by contrast, mean the public's interest in other claims

that happen to touch upon the factual circumstances giving rise to

the request for the injunction. Just because the public may have

a stake in a non-appealable decision does not permit the appellant

to handcuff that decision to a request for a preliminary injunction

and thereby attain immediate review. Here, even if there were some

public interest in Braintree litigating its claims in a court

rather than before an arbitrator, that would have no bearing on our

consideration of whether the public has an additional but separate

interest in the preliminary rescission of Braintree's contract

pending the final outcome of the dispute. 

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merits is likely to succeed or whether Braintree is likely to

suffer irreparable harm while the arbitration is pending, nor would

it alter the balance of hardships or the extent of the public

interest in the outcome. Braintree points to the fact that its 8

claims to both a non-arbitral forum and to a provisional remedy

depend on Section 410(a)(2). This may be true so far as it goes,

but it doesn't go nearly far enough. That the two claims require

us to construe two different aspects of the same statute does not

in and of itself make those claims inextricably intertwined. We

may meaningfully review whether Braintree's state law action merits

provisional relief under Section 410(a)(2) without any need to

determine whether that statute limits the arbitrability of the

action. Braintree also makes the conclusory assertion that both

claims require consideration of its brokerage agreements and CGMI's
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consent agreement with the SEC. Even if this assertion were true

(and, unaided by any explanation from Braintree, we are not

convinced that it is), it is similarly insufficient to establish

pendent appellate jurisdiction. Whatever common issues of fact

these documents might create, we still need not reach the nonappealable claim in order to resolve the appealable one.

In short, even assuming that pendent appellate

jurisdiction could ever be exercised in the arbitrability context,

we find no basis for exercising it in this case. We therefore

conclude that we have no jurisdiction to review the district

court's interlocutory order compelling arbitration.

 IV.

For the foregoing reasons, we affirm the district court's

order denying Braintree's motion for a preliminary injunction and

dismiss for lack of jurisdiction Braintree's appeal from the

district court's order compelling arbitration.