Master Tax LLC v. Ultimate Software Group, Inc.

• Court: Court of Appeals for the Ninth Circuit
• Decided: May 16, 2019
• Docket: 18-16792
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS MAY 16 2019 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

MASTER TAX LLC, No. 18-16792

Plaintiff-Appellee, D.C. No. 2:18-cv-01463-DLR

v. MEMORANDUM* ULTIMATE SOFTWARE GROUP, INC.,

Defendant-Appellant.

Appeal from the United States District Court for the District of Arizona Douglas L. Rayes, District Judge, Presiding

Submitted May 14, 2019** San Francisco, California

Before: WALLACE and IKUTA, Circuit Judges, and MOLLOY,*** District Judge.

Ultimate Software Group, Inc. appeals from a preliminary injunction. We

have jurisdiction under 28 U.S.C. § 1292, and we vacate and remand.

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The panel unanimously concludes this case is suitable for decision without oral argument. See Fed. R. App. P. 34(a)(2). *** The Honorable Donald W. Molloy, United States District Judge for the District of Montana, sitting by designation. “We review the grant of a preliminary injunction for abuse of discretion.”

Network Automation, Inc. v. Advanced Sys. Concepts, Inc., 638 F.3d 1137, 1144

(9th Cir. 2011). “In deciding whether the district court has abused its discretion,

we employ a two-part test: first, we ‘determine de novo whether the trial court

identified the correct legal rule to apply to the relief requested’; second, we

determine ‘if the district court’s application of the correct legal standard was (1)

illogical, (2) implausible, or (3) without support in inferences that may be drawn

from the facts in the record.’” Pimentel v. Dreyfus, 670 F.3d 1096, 1105 (9th Cir.

2012) (quoting Cal. Pharmacists Ass’n v. Maxwell–Jolly, 596 F.3d 1098, 1104 (9th

Cir. 2010)).

A party can obtain a preliminary injunction by showing that (1) it is “likely

to succeed on the merits,” (2) it is “likely to suffer irreparable harm in the absence

of preliminary relief,” (3) “the balance of equities tips in [its] favor,” and (4) “an

injunction is in the public interest.” Winter v. Nat. Res. Def. Council, Inc., 555

U.S. 7, 20 (2008). Typically, an injunction is prohibitory—it enjoins a party from

acting. In contrast, the injunction here requires Ultimate to provide affirmatively

various information to Master Tax LLC. This type of relief is a “mandatory”

injunction because it “orders a responsible party to ‘take action.’” Garcia v.

Google, Inc., 786 F.3d 733, 740 (9th Cir. 2015) (en banc) (quoting Marlyn

Nutraceuticals, Inc. v. Mucos Pharma GmbH & Co., 571 F.3d 873, 879 (9th Cir.

2 2009)). Mandatory preliminary injunctions are subject to a heightened standard.

Park Vill. Apartment Tenants Ass’n v. Mortimer Howard Tr., 636 F.3d 1150, 1161

(9th Cir. 2011). Master Tax “must establish that the law and facts clearly favor

[its] position, not simply that [it] is likely to succeed.” Garcia, 786 F.3d at 740.

Moreover, Master Tax must also show that “‘extreme or very serious damage’ will

result from the denial of a preliminary injunction.” See Am. Freedom Def.

Initiative v. King Cty., 796 F.3d 1165, 1173 (9th Cir. 2015) (quoting Marlyn, 571

F.3d at 879).

The district court abused its discretion when it did not apply the heightened

standard governing mandatory injunctions. See Pom Wonderful LLC v. Hubbard,

775 F.3d 1118, 1123 (9th Cir. 2014) (“[A] district court abuses its discretion if the

court rests its decision on an erroneous legal standard”).

Our holding that the district court applied an erroneous legal standard is

sufficient to resolve this appeal. However, we address one other issue raised by

the parties because it could arise again on remand and because it has been fully

briefed. See United States v. Mancuso, 718 F.3d 780, 796 (9th Cir. 2013); United

States v. Van Alstyne, 584 F.3d 803, 817 n.14 (9th Cir. 2009). The district court

concluded that Master Tax was likely to suffer irreparable harm under the Winter

standard. This was an error because there is “no evidence in the record that could

support a finding of irreparable harm” in this case. adidas Am., Inc. v. Skechers

3 USA, Inc., 890 F.3d 747, 759 (9th Cir. 2018). The materials requested through the

injunction are preserved by order of the district court, and Ultimate stopped using

the software after May 31, 2018. In other words, Master Tax would not suffer

irreparable harm in the absence of a preliminary injunction because all relevant

materials have been preserved, and Master Tax could litigate the case and obtain a

permanent injunction requiring the audit, thus exercising its audit right.

VACATED and REMANDED.