Ltd Commodities, Inc. v. Igor G. Perederij and Beacon Data Processing Service Corporation

699 F.2d 404, 1983 U.S. App. LEXIS 30685

• Court: Court of Appeals for the Seventh Circuit
• Decided: February 8, 1983
• Docket: 82-1349
• Status: Published

Opinions

DUMBAULD, Senior District Judge.

“The law’s delay” of which Shakespeare and Dickens eloquently speak, is frequently more truth than poetry or fiction. It is often inordinately prolonged, especially since the “litigation explosion” and mounting caseloads in the courts. Yet in many cases vital interests of litigants may be jeopardized by procrastination, and immediate action may be necessary to prevent irreparable injury threatened by intervening circumstances. The court’s final judgment may prove nugatory and futile if measures of relief pendente lite are not taken in the meantime.¹

How are these conflicting necessities to be reconciled? In practically every developed legal system² some form of interlocutory remedy is provided.³ In federal procedure the temporary restraining order and preliminary injunction perform this function. Their issuance is always discretionary, and unlike a final decree can never be a matter of right. The standard of appellate review is whether the court below abused its discretion.⁴

As stated in a recent case in this Circuit, O’Connor v. Board of Education, 645 F.2d 578, 580 (7th Cir.1981):

The district court’s exercise of discretion in issuing a preliminary injunction is guided by four familiar factors:

(1) whether the plaintiff will have an adequate remedy at law or will be irreparably harmed if the injunction does not issue;

(2) whether the threatened injury to the plaintiff outweighs the threatened harm the injunction may inflict on the defendant;

(3) whether the plaintiff has at least a reasonable likelihood of success on the merits; and

(4) whether the granting of a preliminary injunction will disserve the public interest.

Reinders Bros. v. Rain Bird Eastern Sales Corp., 627 F.2d 44, 48 (7th Cir.1980). The likelihood of success factor serves as a threshold requirement. We have held that if this factor is unsatisfied, and if the plaintiff has not shown irreparable injury, the court need go no further in denying the preliminary injunction. Kolz v. Board of Ed. of City of Chicago, 576 F.2d 747 (7th Cir.1978).

Most private litigation does not substantially affect the public interest, and in exercising its discretion the court can usually confine its consideration to weighing the two principal factors: the hardship to the parties respectively and the probability of their ultimate success on the merits.

Because of the nature and function of relief pendente lite as a regulation of the interim status quo so as to assure that the prevailing party when final judgment on the merits has been rendered will not find his victory valueless, it is ordinarily true that preliminary relief is not granted which is identical with that which a party would obtain upon winning the case on the merits. As a rule courts are unwilling before full adjudication to order affirmative action, transfer of possession, or change in the existing status. (But the status itself may be one of continuing action, such as furnishing the services of a public utility; and it is the last uncontested status preceding the controversy which is to be maintained by the court, rather than a status wrongfully altered by unilateral action after dispute has arisen.)

Nevertheless sometimes preliminary and final relief may coincide in content, where such a result is warranted by the circumstances of the case in the light of the nature and function of relief pendente lite. For example, if the only object of the final judgment in a case is to prohibit commission of a wrongful act, and the preliminary injunction forbids it temporarily, the two decisions are factually equivalent in content.⁵ A well known illustration is furnished by the case of the United States against Iran before the International Court of Justice relating to the hostages. The Court’s order of December 15, 1979, indicated, inter alia, as provisional measures pendente lite, the immediate release of the hostages:

A. (i) The Government of the Islamic Republic of Iran should immediately ensure that the premises of the United States Embassy, Chancery and Consulate be restored to the possession of the United States authorities under their exclusive control, and should ensure their inviolability and effective protection as provided for by the treaties in force between the two States, and by general international law;

(ii) The Government of the Islamic Republic of Iran should ensure the immediate release, without any exception, of all persons of United States nationality who are or have been held in the Embassy of the United States of America or in the Ministry of Foreign Affairs in Tehran, or have been held as hostages elsewhere, and afford full protection to all such persons, in accordance with the treaties in force between the two States, and with general international law;

(iii) The Government of the Islamic Republic of Iran should, as from that moment, afford to all the diplomatic and consular personnel of the United States the full protection, privileges and immunities to which they are entitled under the treaties in force between the two States, and under general international law, including immunity from any form of criminal jurisdiction and freedom and facilities to leave the territory of Iran;

B. The Government of the United States of America and the Government of the Islamic Republic of Iran should not take any action and should ensure that no action is taken which may aggravate the tension between the two countries or render the existing dispute more difficult of solution.

The final judgment of May 24, 1980, decided, inter alia, that Iran “must immediately terminate the unlawful detention of . .. United States nationals now held hostage in Iran.” I.G.J. Reports 1980, 3, 44.

The identical content of the two pronouncements does not detract from the propriety of the indication of provisional measures. The basic rule that an interim measure does not prejudice the final decision on the merits is a rule regarding the effect or consequences of the preliminary injunction, not a rule respecting the conditions or circumstances in which it may be granted.⁶

The foregoing discussion suffices to demonstrate that although the order of the District Judge requiring irrevocable payment of money in advance of trial is rather unusual and unorthodox, it is not necessarily for that reason invalid or an abuse of discretion. In light of the unusual circumstances in the case at bar, and the agreements of the parties made in the course of the court proceeding, we conclude that no reversible error has occurred.

Analysis of the record will disclose that Judge Shadur in fact made the appropriate evaluation of each party’s hardship and likelihood of ultimate success, and weighed and compared the interests involved. Further disclosed is the fact that, as a result of the Judge’s actions and the negotiations and agreements of the parties during the discussion at the hearing, each party in fact obtained the protection it desired for its respective irreparably threatened interests.

This will appear from a brief review of the proceedings. Plaintiff (LTD) is a mail order house whose orders, billing, and other records are computerized and embodied in tapes, cassettes, or other tangible articles owned by LTD but used by defendant (Data) a computer service bureau in performing work for LTD under a contract which gave Data a lien on those articles until paid for service performed.

LTD provided 40 percent of Data’s business, and was given a reduced price by Data upon the understanding that Data would be used by LTD for two more Christmas seasons.⁷ LTD paid the bill at the low rate. Then in January, 1982, LTD demanded its materials back, supposedly for use in testing on a Burroughs computer LTD was planning to buy in order to handle its work “in house” rather than use Data. Thereupon Data revoked the price concession and billed LTD for the amount thereof (amounting to $127,960.19).

LTD then filed suit, seeking a temporary restraining order requiring Data to make LTD’s computer materials available to LTD, without which LTD’s business would be totally deranged and irreparable injury would ensue.

At the TRO hearing Judge Shadur did weigh the comparative hardship to the parties respectively, making express reference to the four O’Connor criteria. He recognized that LTD would suffer irreparable injury without access to its computer software, but that to order turnover of these vital materials would be a change in the existing status quo where Data had possession of them, and claimed a lien for the adjusted price of work performed for LTD. Such change would irreparably injure the business interests of Data, in view of the large proportion of Data’s business which the work for LTD represented. In fairness to both parties, therefore, Judge Shadur ordered that LTD receive its computer materials, but that LTD make funds available which the Court could order paid to Data in the event that plaintiff failed to obtain a preliminary injunction. Under these conditions, if LTD failed to obtain equitable relief by way of preliminary injunction, it should be in no better position than it was before the status quo was changed by the turnover of the vital computer materials; that is to say it should be required to litigate at law a pecuniary claim regarding the merits of Data’s adjusted billing and the validity of its asserted lien.

Judge Shadur made very plain the conditions upon which he would exercise his discretion to grant the TRO, conditions which were fair to both parties and enabled each to obtain what it thought was essential protection to its vital interests and would ward off threatened irreparable injury to those interests. Counsel for LTD clearly understood the conditions imposed by the Court and agreed to them on behalf of LTD.

Judge Shadur stated: “If, for example, the result of a hearing on preliminary injunction is that the plaintiff is not entitled to preliminary injunctive relief, which means that they would have changed the status quo by their obtaining of the property, then under those circumstances- they should be in no better position than ... the contract gives them under which circumstances the funds should be released to substitute for the assets in your hands, and at that point they may have a law claim for dollars ... [Y]ou understand, Mr. Spitz, the point that I am making.” LTD’s counsel replied “I do, your Honor.” Judge Shadur repeated:

The Court: That if you do not establish your right to get the preliminary injunctive relief, then the funds that you have put up, will have put up in substitution for the assets, would simply be released to the defendant here, and you would have to abide your ability to succeed on the merits.

Mr. Spitz: I understand exactly. I know I am at risk, on that.

The Court: All right.

Mr. Spitz: And that is my intention posting the security.

The Court: All right. Mr. Lavery, under those circumstances it seems to me there is a sufficient basis ... to support .. . the temporary relief that is sought, but on the conditions I have expressed. [Tr. 11-12; Appellees’ App. iii-iv]

Further on Judge Shadur reiterated:

The Court: Mr. Spitz, I will tell you, if you are not entitled to preliminary injunctive relief, then the funds would go over because at that point you would simply have a lawsuit... You simply have a lawsuit for money.

Mr. Spitz: I understand what you are saying.

[Tr. 21, Appellees App. xi]

Subsequently, after further hearing, the Court denied plaintiff’s motion for preliminary injunction, and by order of M[arch 4, 1982, directed the payment of $127,960.19 to Data. [Appellant’s App. i].

At the hearing on preliminary injunction, judge Shadur ruled that since LTD now had the computer materials as a result of the disposition agreed to at the TRO hearing, there was no irreparable injury, LTD now having only a pecuniary claim. The Court stated:

Without this lawsuit LTD could have gotten its property on payment of the bill. It would then have had a claim against the defendants, if that bill was wrongful. That’s the posture that would have happened before this lawsuit, and that’s the posture in which the Court would leave the parties by the denial of the preliminary injunction. [Ibid., xi]

Another ground upon which the District Court denied the preliminary injunction was that LTD had not established a reasonable likelihood of success on the merits. LTD’s lawsuit was based on the contention that Data’s refusal to turn over the computer materials constituted “extortion” in violation of the RICO statute (Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961 et seq.). Judge Shadur held that “This is a good faith commercial dispute and it is not criminal” [Ibid., viii]. Without passing upon the merits of this contention, it suffices to say that to regard a commercial dispute between two business organizations about the validity of a “mechanic’s lien” as an offense smacking of organized crime is certainly a merely arguable position, one displaying counsel’s ingenuity, but not such a well-established and indisputable proposition of law that we can find Judge Shadur’s contrary holding to be clearly erroneous and an abuse of discretion. Plaintiff’s lack of likelihood of ultimate success on the merits constitutes an independent ground for denial of the preliminary injunction under the standards of O’Connor, supra.

The decision of the District Court is Ad-FIRMED.

1 . Dumbauld, Interim Measures of Protection in International Controversies (1932) 6-7.

2 . Even at an early period in Roman law the example is recorded of the praetor’s intervention when two parties are struggling for possession of a slave. Commanding both to let go (“Mittite ambo hominem") he regulates the status quo pendente lite. Ibid., 35.

3 . In a notable pronouncement by an international tribunal it was declared that by measures of interlocutory relief the courts strive to remedy the delays incident to administration of justice, so that insofar as possible the result of the case will be the same as if it could end in a day. “Par les mesures conservatoires les tribunaux cherchent á remédier aux lenteurs de la justice, de maniére qu’autant que possible l’issue du procés soit le méme que s’il pouvait se terminer en un jour.” German-Polish Mixed Arbitral Tribunal, July 29, 1924, quoted in ibid., 20.

4 . Ibid., 60-61; Doran v. Salem Inn, Inc., 422 U.S. 922, 931-32, 95 S.Ct. 2561, 2567-68, 45 L.Ed.2d 648 (1975); Yakus v. U.S., 321 U.S. 414, 440, 64 S.Ct. 660, 674, 88 L.Ed. 834 (1944); Meccano Ltd. v. John Wanamaker, 253 U.S. 136, 141, 40 S.Ct. 463, 465, 64 L.Ed. 822 (1920).

5 . Another example of overlapping content is furnished by obligations of support or alimentation in domestic relations law. Thus when a needy mother obtained a support order under German Civil Code § 1716 against the putative father of her illegitimate child for support during its first three months, this payment is not provisional anticipation of the duty of the father of an illegitimate child to support it until the age of 16 (§ 1708). The preliminary payment to relieve distress may be smaller than would be required by the scale of support later to be adjudged under § 1708. It is a separate obligation imposed because the legislator has found that since in many cases the prima facie father will be found to be the real father, it is better that he should relieve the urgent need than that the community should do so. Dumbauld, Interim Measures of Protection in International Controversies (1932) 23, 86-87.

6 . Indeed in rendering its final judgment the court is not bound by its interlocutory decision, and may even vacate it or determine that it was improvidently granted.

7 . On the issue of credibility the Court specifically found that Data “had the good faith belief that their reduction of rates ... was coupled with and therefore conditioned on the understanding that LTD would remain with [Data] for at least 2 Christmas seasons. When LTD demonstrated that it had not so intended and [Data] had therefore been misled, [Data] had a reasonable basis for rescinding the reduction and billing LTD for the difference.” Appellee’s App. xiv.