640 F.2d 109 (8th Cir. 1981), 80-1111, Dataphase Systems, Inc. v. C L Systems, Inc.

Docket Nº:80-1111.
Citation:640 F.2d 109
Party Name:DATAPHASE SYSTEMS, INC., Appellee, v. C L SYSTEMS, INC., Appellant.
Case Date:January 07, 1981
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit

Page 109

640 F.2d 109 (8th Cir. 1981)

DATAPHASE SYSTEMS, INC., Appellee,

v.

C L SYSTEMS, INC., Appellant.

No. 80-1111.

United States Court of Appeals, Eighth Circuit

January 7, 1981

Submitted Oct. 24, 1980.

Page 110

[Copyrighted Material Omitted]

Page 111

Edmund C. Case, Testa, Hurwitz & Thibeault, Boston, Mass., for appellant.

Gordon D. Gee, Rich, Granoff, Levy & Gee, Kansas City, Mo., argued, Gregory L. Vranicar, Kansas City, Mo., for appellee.

Before LAY, Chief Judge, HEANEY, BRIGHT, ROSS, STEPHENSON, HENLEY, McMILLIAN and ARNOLD, Circuit Judges, en banc.

HENLEY, Circuit Judge.

C L Systems, Inc. (CLSI) appeals from the district court's order of January 23, 1980, granting a preliminary injunction restraining CLSI from making "any false or misleading statement which disparages, directly or indirectly, plaintiff (Dataphase Systems, Inc.), its product, its financial condition or its ability to furnish goods and services." For reasons to be stated we vacate the preliminary injunction.

Dataphase, a Missouri corporation, and CLSI, a Massachusetts corporation, compete for contracts for the installation of computerized, automated library circulation systems. Dataphase is a relative newcomer to the field. It started business and incorporated in December, 1975. By its own admission, CLSI is the established leader in the field of library automation.

On June 1, 1978 Dataphase filed its complaint in this suit against CLSI. Dataphase alleged that CLSI engaged in a course of conduct intended to restrain competition and deny market access to Dataphase, thereby eliminating and destroying Dataphase as a competitor. The course of anti-competitive conduct allegedly included deliberately bidding below cost in order to prevent Dataphase from receiving contracts; interfering with Dataphase's present and potential contractual obligations; making false statements to potential customers regarding Dataphase's reliability, solvency, and ability to furnish the goods and services bid upon; and, in general, falsely and maliciously disparaging Dataphase to its customers and potential customers, both orally and in writing.

The complaint alleged that this course of conduct constituted a violation of the antitrust laws, in particular section 2 of the Sherman Act, 15 U.S.C. § 2 (1976), and section 3 of the Robinson-Patman Act, 15 U.S.C. § 13a (1976), and that CLSI's false and malicious accusations unlawfully interfered with Dataphase's reasonable business expectancies. Dataphase sought treble damages and equitable relief enjoining CLSI from continuing the allegedly unlawful course of conduct. Federal jurisdiction exists under 28 U.S.C. §§ 1331, 1332, 1337 (1976).

CLSI denied the essential allegations of the complaint, and raised various defenses, inter alia, that all statements and representations made by CLSI to Dataphase's customers were true and not misleading. The parties proceeded with discovery, and in February and March, 1979 the district court held evidentiary hearings on Dataphase's request for a preliminary injunction. On January 23, 1980 the district court entered its order granting the preliminary injunction.

CLSI filed notice of appeal, and on March 20, 1980 this court entered an order remanding the matter "to the district court for the limited purpose of permitting that court to set forth in detailed findings those representations and statements of the appellant that it believes 'raise questions serious enough to require litigation.' "

On April 18, 1980 the district court certified limited findings. It found that "whether there is a dangerous probability of monopolization of a specific product market in a particular geographic market" constituted a "serious litigable issue." The district court paraphrased twelve statements which it observed that Dataphase claims are completely false, while CLSI contends they

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are true. The district court stated that these statements "raise questions of fact which are serious enough to require litigation."

Without prejudice to the entry of a permanent injunction, we vacate the preliminary injunction and remand the case to the district court. We agree with the panel that justice would be served by proceeding to trial with all due haste in order to secure a ruling on the merits of the claims raised.

The court has considered this case en banc in an effort to clarify the standard to be applied by the district courts of this circuit in considering requests for preliminary injunctive relief. We apprehend that in recent years there has developed some misunderstanding of the standard has developed. We recognize that language in some of our recent opinions may have contributed to uncertainty as to the appropriate test or tests. Thus, we take this opportunity to reaffirm that there is a single "test" or list of considerations to be used in every case and to suggest its proper application. 1

In Minnesota Bearing Co. v. White Motor Corp., 470 F.2d 1323 (8th Cir. 1973), we enumerated four factors to be weighed by the district court in deciding whether to grant or deny preliminary injunctive relief: (1) whether there is a substantial probability movant will succeed at trial; (2) whether the moving party will suffer irreparable injury absent the injunction; (3) the harm to other interested parties if the relief is granted; and (4) the effect on the public interest. Id. at 1326. This statement of the standard, in particular the requirements of "substantial probability" and "irreparable injury," has become known as the "traditional test." See, e. g., Young v. Harris, 599 F.2d 870, 875-76 (8th Cir.), cert. denied sub nom. Young v. Landrieau, 444 U.S. 993, 100 S.Ct. 526, 62 L.Ed.2d 423 (1979); Fennell v. Butler, 570 F.2d 263, 264 (8th Cir.), cert. denied, 437 U.S. 906, 98 S.Ct. 3093, 57 L.Ed.2d 1136 (1978). 2

Perhaps due to dissatisfaction with restrictive practical application of the language of the traditional test, this court offered a restated version in Fennell v. Butler, 570 F.2d 263. In that case we suggested that a preliminary injunction should issue:

upon a clear showing of either (1) probable success on the merits and possible irreparable injury, or (2) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly toward the party requesting preliminary relief.

Id. at 264. 3

Some confusion apparently has been spawned by our characterization of the

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Fennell standard as an "alternative test." 4 Despite this label, we find no contradiction between Fennell and Minnesota Bearing. Whatever the verbal formulation, the relevant factors remain the same. Whether a preliminary injunction should issue involves consideration of (1) the threat of irreparable harm to the movant; (2) the state of the balance between this harm and the injury that granting the injunction will inflict on other parties litigant; (3) the probability that movant will succeed on the merits; and (4) the public interest.

The major difficulty with application of the traditional test has arisen from the phrase "probability of success on the merits." Some have read this element of the test to require in every case that the party seeking preliminary relief prove a greater than fifty per cent likelihood that he will prevail on the merits. Under this view, even if the balance of the other three factors strongly favored the moving party, preliminary relief would be denied if the movant could not prove a mathematical probability of success at trial. Although this construction of the "probability of success" requirement is technically possible, we reject it.

The very nature of the inquiry on petition for preliminary relief militates against a wooden application of the probability test. At base, the question is whether the balance of equities so favors the movant that justice requires the court to intervene to preserve the status quo until the merits are determined. 5 The equitable nature of the proceeding mandates that the court's approach be flexible enough to encompass the particular circumstances of each case. Thus, an effort to apply the probability language to all cases with mathematical precision is misplaced.

In balancing the equities no single factor is determinative. The likelihood that plaintiff ultimately will prevail is meaningless in isolation. In every case, it must be examined in the context of the relative injuries to the parties and the public. If the chance of irreparable injury to the movant should relief be denied is outweighed by the likely injury to other parties litigant should the injunction be...

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