Opinion ID: 605988
Heading Depth: 2
Heading Rank: 2

Heading: Injunctive Relief Standard

Text: 12 Unlike a party seeking specific performance, a party that requests a preliminary injunction must discuss the merits of the dispute underlying the injunction motion. The requirements for a preliminary injunction are well settled: a party seeking relief must show (a) irreparable harm and (b) either (1) likelihood of success on the merits or (2) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly in its favor. Jackson Dairy, Inc. v. H.P. Hood & Sons, 596 F.2d 70, 72 (2d Cir.1979) (per curiam). 13 The test for specific performance is more flexible. It initially requires proof that (1) a valid contract exists between the parties, (2) the plaintiff has substantially performed its part of the contract, and (3) plaintiff and defendant are each able to continue performing their parts of the agreement. See Travellers Int'l AG v. Trans World Airlines, Inc., 722 F.Supp. 1087, 1104 (S.D.N.Y.1989). A party seeking relief must show equitable factors in its favor, for example, the lack of an adequate remedy at law, and must also demonstrate that its risk of injury, if the injunction is denied, is one that after balancing the equities entitles it to relief. Id. One of the factors balanced is irreparable harm, a common element under both tests. See Guinness-Harp Corp. v. Jos. Schlitz Brewing Co., 613 F.2d 468, 472 (2d Cir.1980); see also Payroll Express Corp. v. Aetna Casualty and Sur. Co., 659 F.2d 285, 292 (2d Cir.1981) (specific performance injunction granted where money damages speculative and court found absence of offsetting equities militating against a grant of equitable relief); Erving v. Virginia Squires Basketball Club, 468 F.2d 1064, 1067 (2d Cir.1972) (specific performance injunction upheld based on contract language and showing of irreparable damage). 14 In its complaint plaintiff requested a preliminary injunction and a final injunction directing Jeep Eagle to specifically perform the provisions of Paragraph 7. It is understandable therefore that a trial court could be rushed into relying on preliminary injunction analysis. Nonetheless, when a party seeks a preliminary injunction, not to further proceedings in the district court--but to process proceedings in some other forum, notably, the arbitration forum--then the relief requested is more akin to a permanent injunction, even though for a limited time. It is permanent insofar as the trial court is concerned because, unlike its grant of a preliminary injunction, the parties--presently before the trial court, but contemplating further proceedings elsewhere--plan to conduct no further litigation in the district court. See Manning v. Energy Conversion Devices, Inc., 833 F.2d 1096, 1100-01 (2d Cir.1987); see also Guinness-Harp, 613 F.2d at 471. Both Nemer and Eagle Sales agree that the merits of their dispute--whether Eagle Sales legally granted four new franchises in the Albany market area--will be litigated in the arbitration forum. Therefore, Nemer's request was not for a traditional preliminary injunction, and the district court erred in treating it as such. 15 In fact, the circumstances we face are quite similar to those analyzed in Guinness-Harp. In that case a brewery sought to end its relationship with a beer distributor. The parties' contract called for arbitration of disputes before the brewery terminated its distributor, and the distributor sought an injunction halting termination until arbitration was complete. In granting the injunction, we relied on the contract language and applied the equitable test for specific performance. See 613 F.2d at 471-72. Thus, the rule seems to be fairly established that where a party's request for a status quo injunction pending arbitration is grounded in the words of a contract, specific performance analysis is required. See Connecticut Resources, 705 F.2d at 35; Erving, 468 F.2d at 1066-67. But cf. Blumenthal v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 910 F.2d 1049, 1052-54 (2d Cir.1990) (holding that district court has jurisdiction to issue status quo injunction pending arbitration but not deciding appropriate standard for injunctive relief); Roso-Lino Beverage Distribs., Inc. v. Coca-Cola Bottling Co. of N.Y., Inc., 749 F.2d 124, 125 (2d Cir.1984) (per curiam) (where underlying contract did not contain status quo provision, court applied preliminary injunction analysis in deciding whether to issue an injunction pending arbitration). 16 Hence, we hold status quo injunctions pending arbitration are final in nature because the merits of the parties' underlying dispute will be resolved by an arbitrator. Moreover, when a motion for such an injunction is based on a status quo provision in the parties' contract, it must be analyzed under specific performance principles.