Bluebonnet Sav Bank v. Dir, off of thrift

• Court: Court of Appeals for the Fifth Circuit
• Decided: July 6, 1995
• Docket: 95-10157
• Status: Unpublished

Opinion

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT _______________

No. 95-10157 Summary Calendar _______________

BLUEBONNET SAVINGS BANK, et al.,

Plaintiffs-Appellees,

VERSUS

DIRECTOR, OFFICE OF THRIFT SUPERVISION, et al.,

Defendants,

FEDERAL DEPOSIT INSURANCE CORPORATION,

Defendant-Appellant.

_________________________

Appeal from the United States District Court for the Northern District of Texas (3:91-CV-1066-X) _________________________

(July 21, 1995)

Before SMITH, EMILIO M. GARZA, and PARKER, Circuit Judges.

PER CURIAM:*

The Federal Deposit Insurance Corporation ("FDIC") ap-

peals a preliminary injunction that prohibits it, during the pen-

dency of the underlying action, from exercising its rights under

a warrant agreement. While we appreciate the district court's

* Local Rule 47.5.1 provides: "The publication of opinions that have no precedential value and merely decide particular cases on the basis of well- settled principles of law imposes needless expense on the public and burdens on the legal profession." Pursuant to that rule, the court has determined that this opinion should not be published. diligent efforts to resolve this matter, we conclude that it uti-

lized an incorrect test in issuing the injunction. Accordingly,

we vacate and remand.

I.

Our requirements for a preliminary injunction are well es-

tablished:

First, the movant must establish a substantial likeli- hood of success on the merits. Second, there must be a substantial threat of irreparable injury if the injunc- tion is not granted. Third, the threatened injury to the plaintiff must outweigh the threatened injury to the defendant. Fourth, the granting of the preliminary injunction must not disserve the public interest.

Cherokee Pump & Equip. v. Aurora Pump, 38 F.3d 246, 249 (5th Cir.

1994) (citation omitted). These requirements are indeed steep:

A preliminary injunction is an extraordinary remedy. It should only be granted if the movant has clearly carried the burden of persuasion on all four . . . pre- requisites. The decision to grant a preliminary in- junction is to be treated as the exception rather than the rule.

Id. (citation and internal quotation omitted).

As to the first factor))likelihood of success))the district

court, citing only Cho v. Itco, Inc., 782 F. Supp. 1183, 1185

(E.D. Tex. 1991), states that "[i]t is enough that the movant

has raised questions going to the merits so substantial as to

make them fair ground for litigation and thus for more deliberate

investigation." This is not an accurate statement of the law,

for it would mean that almost any complaint that could withstand

a motion under FED. R. CIV. P. 12(b) would satisfy the likelihood-

of-success factor.

2 Aside from stating that substantial issues await trial, the

district court has not explained how the plaintiffs are likely to

prevail. Indeed, from the district court's opinion it is not

evident whether the court actually thinks the plaintiffs will

prevail or only that they might do so.

We have stated that the importance of the likelihood-of-suc-

cess element varies with the relative harm occasioned to the par-

ties from the issuance vel non of the injunction. See Canal

Auth. v. Callaway, 489 F.2d 567, 577 (5th Cir. 1974). While the

district court has found that the harm to Bluebonnet outweighs

the harm to the FDIC, the court overlooks the fact that while the

injunction is in effect, the FDIC is unable to exercise its

rights as a shareholder, such as being able to share in dividends

and to enforce the protections provided by the fiduciary duty

owed to Bluebonnet by its board of directors. In short, as the

FDIC avers, "[t]he preliminary injunction has deprived the FDIC

of the ability to protect the economic interest in Bluebonnet

that it presently possesses by virtue of its status as a warrant

holder."

We also note that while Bluebonnet, as movant, must show

irreparable harm, the FDIC only must show harm, whether or not

irreparable, that outweighs Bluebonnet's. And under the sliding-

scale analysis in Canal Authority, see, e.g., Apple Barrel Prods.

v. Beard, 730 F.2d 384, 389 n.11 (5th Cir. 1984), the likelihood

of success must be higher to the extent that the harm to the two

sides is not seriously out of balance.

3 In short, the district court, with the best of intentions,

has not properly considered the relationship between and among

the four factors or the proper meaning of "likelihood of

success." As the decision to enter an injunction is

discretionary, the district court should make the decision, in

the first instance, using the proper test. In other words, we

are not in a position, at this point, to second-guess the

district court and apply the factors on appeal.

II.

We also question whether the FDIC was given proper notice

that the December 1994 hearing was to be on a preliminary

injunction rather than just for a temporary restraining order

("TRO"). The FDIC argues that this seriously affected its ability

to present enough evidence to defeat the injunction. The parties

agree that there was inadequate notice under FED. R. CIV. P. 6(d).

Moreover, the district court gave several indications, during the

hearing, that all it was considering was a TRO. For example, the

court stated, "[F]or right now, this is just what it says it is.

It's a temporary restraining order because I don't know what's

really driving this."

If the district court elects, in light of this opinion, to

consider again the entry of an injunction, it should provide full

notice and the opportunity for a full hearing. Any such a

hearing, it should apply the standards for a preliminary

injunction that we have outlined above.

4 The order granting a preliminary injunction is VACATED, and

this matter is remanded for further proceedings. We express no

view on the ultimate merits of this litigation.