Opinion ID: 541385
Heading Depth: 2
Heading Rank: 2

Heading: Application of Proper Standards for Injunctive Relief

Text: 15 The proper analysis to be employed in granting interlocutory injunctive relief is well settled in this circuit as set forth in Blackwelder Furniture Co. v. Seilig Mfg. Co., Inc., 550 F.2d 189 (4th Cir.1977). See also Dan River, Inc., v. Icahn, 701 F.2d 278, 283 (4th Cir.1983); North Carolina State Ports v. Dart Containerline, 592 F.2d 749, 750 (4th Cir.1979). The first step is for the Court to balance the likelihood of irreparable harm to the plaintiff against the likelihood of harm to the defendant. If the balance of harm tips in the plaintiff's favor, then the plaintiff will prevail if he raises serious questions. Blackwelder, 550 F.2d at 195. If the plaintiff fails to prevail on the balancing of the hardships test, the plaintiff must demonstrate his likelihood of success on the merits. It is important to note that Blackwelder specifically holds that the plaintiff need not show a likelihood of success if the balance of hardships tips in the plaintiff's favor. Blackwelder, 550 F.2d at 196. Finally, the Court should consider the public interest. 16 The Bankruptcy Trustee argues that if the Bond Trustee disbursed the interest payments to the Bondholders, the cost of recovering these payments, if ultimately found to be property of the estate, would be prohibitively high. This theory rests upon the premise that the Bankruptcy Trustee would be required to sue a large number of Bondholders to recover the payments. On the other hand, the Bond Trustee correctly points out the fact that the Bankruptcy Trustee offered no evidence of cost of recovery or how many individual bondholders the Bankruptcy Trustee would have to sue. In most circumstances, this lack of evidence would preclude the district court from adequately evaluating the hardship involved in recovering the payments. It is clear from the record before us that the district court relied on the Bankruptcy Trustee's pleadings and arguments in granting the injunction. In the context of a preliminary injunction, where swiftness is a virtue, the district court may rely upon a verified complaint as a basis for an injunction. K-2 Ski Co. v. Head Ski Co., 467 F.2d 1087, 1088 (9th Cir.1982). See also Flynt Distributing Co. v. Harvey, 734 F.2d 1389, 1394 (9th Cir.1984) (urgency of obtaining a preliminary injunction means that trial court may give even inadmissible evidence some weight). The district court's failure to take actual ore tenus evidence under oath was not an abuse of discretion. 17 Upon reviewing the district court's Order Granting Preliminary Injunction, the Court finds that the district court did not err in granting the injunction. In its Order the district court correctly applied the Blackwelder test's first step by balancing the harm to the parties which would result from granting or not granting the injunction. The court found that if the injunction was not granted, the Bond Trustee would disburse the interest payment to the Bondholders, the recovery of which would be cost prohibitive. The court based its conclusion upon argument of the Bond Trustee, who informed the court that there were 270 Bondholders. Furthermore, the court found that if it should be determined later that these moneys were property of the estate, the funds would be unavailable to fund a reorganization or restart construction. With respect to the potential of harm to the Bondholders if the injunction was granted, the court also found that the Bond Trustee failed to articulate any particular harm which would result if the injunction was granted. These findings are not clearly erroneous. Consequently, the court found that the potential of harm to the Bankruptcy Trustee greatly outweighed the harm to the Bondholders. 18 Under Blackwelder, if the balance of harm favors the plaintiff, the plaintiff may prevail if grave and serious questions have been raised, and the plaintiff need not show that he would succeed on the merits. The court found that the plaintiff had raised a serious question of statutory conflict between the statutes creating the Authority, Sec. 51-13-810, and the Revenue Bond Act for Utilities, Sec. 6-21-310. The court found that Sec. 6-21-310, providing that proceeds from bond sales may be used to advance payments of interest, conflicted with Sec. 51-13-810, which provides that interest and principal payments are to be made from project revenues. While the actual existence of a statutory conflict is an open question, it is enough that a serious question has been raised necessitating deliberative consideration. Blackwelder, 550 F.2d at 196. The district court did not evaluate the plaintiff's likelihood of success on the merits. 19 The Bond Trustee argues that the district court erred as a matter of law in issuing the injunction without evaluating the likelihood of the Bankruptcy Trustee's success on the merits. In support of its argument, the Bond Trustee cites North Carolina State Ports wherein this Court vacated the injunction issued by the district court. North Carolina State Ports, 592 F.2d at 750. 20 North Carolina State Ports is clearly distinguishable from the case at bar. In North Carolina State Ports, the Court found that the balance of hardship did not tip in either side's favor, and then applied the likelihood of success on the merits test. In accord with Blackwelder, if the balance of hardships tips in favor of the plaintiff, it is enough that grave or serious questions are presented; and plaintiff need not show a likelihood of success. Blackwelder, 550 F.2d at 196. As the district court found that the balance of hardships favored the plaintiff and that grave and serious questions were presented, under the Blackwelder test the district court need not have found that the plaintiff was likely to succeed on the merits. See also Fort Sumter Tours, Inc. v. Andrus, 564 F.2d 1119, 1124-25 (4th Cir.1977) (no finding made of likelihood of success on the merits). Consequently, the Court cannot find that the district court erred as a matter of law by not evaluating plaintiff's likelihood of success on the merits. 21 In sum, the district court applied the proper standards in granting interlocutory injunctive relief, and that action is affirmed. 22