Reuters Ltd. v. United Press Intern., Inc.

• Decision Date: 17 May 1990
• Docket Number: No. 1391,D,1391
• Citation: 903 F.2d 904
• Parties: REUTERS LIMITED, Plaintiff-Appellee, v. UNITED PRESS INTERNATIONAL, INC., Defendant-Appellant. ocket 90-7276.
• Court: U.S. Court of Appeals — Second Circuit

Page 904

903 F.2d 904

REUTERS LIMITED, Plaintiff-Appellee, v. UNITED PRESS INTERNATIONAL, INC., Defendant-Appellant.

No. 1391, Docket 90-7276.

United States Court of Appeals Second Circuit.

Argued April 18, 1990.

Decided May 17, 1990.

Mitchell A. Karlan, New York City (Randy M. Mastro, Roger C. Goodspeed, Gibson, Dunn & Crutcher, New York City, of counsel), for defendant-appellant.

Robert G. Sugarman, New York City (Evie C. Goldstein, Patrick DeAlmeida, Gerald Padian, Weil, Gotshal & Manges, New

York City, of counsel), for plaintiff-appellee.

Before MESKILL, CARDAMONE and PIERCE, Circuit Judges.

CARDAMONE, Circuit Judge:

United Press International (UPI) is one of a handful of major wire services that sells foreign and domestic news and photographs to subscribing newspapers and magazines. As a result of financial problems it sold to Reuters Limited (Reuters), another major wire service company, its foreign newspicture service. Reuters agreed in turn to furnish such newspictures to UPI for the latter to supply to its subscribers. This litigation began when Reuters terminated this service to UPI. UPI moved in the Southern District of New York (Leisure, J.) to obtain a preliminary injunction ordering Reuters to continue the foreign newspicture service pending final judgment of the underlying litigation over a contract that establishes the parties' rights to receive news photographs from each other. Upon denial of its motion for a preliminary injunction, UPI appeals.

BACKGROUND

UPI and Reuters are news gathering organizations that market and sell both written stories and newspictures to their subscribers, which are primarily newspapers and news magazines. Because these companies and similar organizations gather and transmit their products electronically--often utilizing telephone lines--they have been dubbed "wire services." UPI, based in the United States, historically has been considered, along with the Associated Press (AP), one of the two major American wire services. Other than the AP, UPI has had few competitors providing the U.S. print media with national and international news and photographs. Recently Reuters, a British wire service, has given UPI increased competition.

The relevant dealings between the parties began in 1984. Until then UPI had foreign bureaus gathering news and photographs of international events for distribution to its approximately 150 subscribers. It experienced financial difficulties in the early 1980s that prompted it to sell its foreign newspicture service to Reuters, which at that time had no newspicture production capacity. Although UPI sold its foreign newspicture service, it retained its foreign news reporting service and its domestic reporting and newspicture services. A correlate contract was formed at the time of the sale of the foreign newspicture service. Under it the parties agreed to supply each other with newspictures--Reuters providing UPI with foreign photographs, gathered through a world-wide network of staff and free lance photographers, for UPI to sell to its U.S. subscribers, and UPI providing Reuters with United States photographs for Reuters to distribute outside the United States. This exchange was documented in a Picture Service Agreement (Agreement) dated June 25, 1984--effective January 1, 1985--and was to remain in force for ten years.

The Agreement requires UPI and Reuters to provide each other with newspictures in "the same in volume and quality as supplied by UPI to its US and international newspicture subscribers" as of June 25, 1984. It also expressly permits Reuters to market and sell in the U.S. its full newspicture service--including photographs not chosen by UPI--providing that it reimburse UPI for lost profits resulting from the termination of contracts by UPI's subscribers who elect to purchase "the full and unedited Reuters Service" in the United States. Disagreements between the parties regarding such reimbursement were to be resolved through arbitration.

Despite its ten-year term, the Agreement was terminable by either party in the event that

default shall be made in the due observance or performance of any provision on the part of either party hereto to be observed or performed under any of the UPI/Reuters Agreements and such default shall continue for 10 days after notice to the defaulting party.

In the face of such a continuing default,

at any time thereafter during the continuance of such [default], the party not in The parties had many disputes in the several years following Reuters' purchase of UPI's foreign newspicture service. UPI's finances worsened, leading it to file for bankruptcy in 1985, from which it is emerging. Its finances would appear now to be on a more solid financial footing. Reuters' internal memoranda reflect its concern regarding UPI's financial stability and its concern that UPI might be unable to provide Reuters with continuing newspicture coverage in the United States. Letters sent by both parties reveal that one party was often displeased with the other's coverage of specific news events, and UPI complained to Reuters that the latter's sales of its service in the U.S. had cost UPI subscribers for which it had not received reimbursement. As a result of increased tensions arising from its suspicions about Reuters' inroads into the U.S. market, UPI negotiated in 1989 with Agence France Presse (France Presse), a French wire service and the only other organization capable and willing to provide UPI with foreign newspicture service. These negotiations led to France Presse committing itself to provide UPI with foreign newspictures for a three-month period in the event that Reuters stopped its service. Although there is no indication that the French wire service company would be unwilling to extend its three-month commitment, so far it has refused to commit itself for any further period.

default may ... terminate this Agreement, [and] ... exercise any other rights at law or in equity, including the right to a decree of specific performance which remedy both parties hereby agree is an appropriate remedy.

In early 1989 the already strained relations between the parties deteriorated further. UPI asked Reuters on January 17 for reimbursement for lost revenues allegedly caused by Reuters' sales of its foreign picture service to UPI subscribers. Reuters responded in a letter dated January 30 that UPI had fallen short of its obligation to provide pictures of the same quality and volume as it had supplied as of June 25, 1984. This initial letter made no mention of terminating the Agreement, nor of the words "default" or "notice." But Reuters' subsequent March 22, 1989 letter referred to the written notice to UPI in its letter of January 30, 1989 that claimed UPI was in default of its obligations under Section 1.1 of the Agreement, and stated that UPI had not cured the defects.

Throughout the remainder of 1989 each of the parties asserted that the other had violated the Agreement. At the same time they continued to provide each other with photographs. In January 1990 UPI advised Reuters that without reimbursement for lost subscribers it would commence arbitration proceedings to recover its damages. On February 16, 1990 Reuters informed UPI that it was ceasing transmission of foreign news photographs and terminating the Agreement, basing its right to do so on the continuing default noted in its letters of January 30 and March 22, 1989.

After Reuters stopped transmitting photographs for approximately ten hours on February 16 the parties agreed that Reuters would resume transmissions until March 2 to allow UPI to seek judicial relief. On February 27 Judge Leisure entered a temporary restraining order (TRO) requiring Reuters to continue transmissions until a hearing could be held on UPI's request for a preliminary injunction. After the hearing held on March 12 the district court denied UPI's motion, finding that it had failed to establish a likelihood of irreparable harm. The district judge observed that the threatened irreparable injury which UPI alleged consisted of an immediate loss of customers who would not accept a substitution of Reuters' photographs by France Presse and the possible loss of all of UPI's newspicture subscribers if--after the expiration of three months--UPI is unable to extend its arrangement with France Presse. Because the district court believed the first irreparable injury claim to be compensable in money damages and the second claim to be speculative, it concluded that UPI had failed to establish irreparable harm.

UPI appealed and on March 15, 1990 moved in this Court for a stay and an

expedited appeal. On March 20 UPI's motion was granted. During oral argument of the expedited appeal the stay was extended pending this decision. We now reverse.

DISCUSSION

I Requirements for Issuance of a Preliminary Injunction

It is well established in this Circuit that a party seeking a preliminary injunction must show that it is likely to suffer possible irreparable injury if the injunction is not granted and "either (1) a likelihood of success on the merits of its case 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." Coca-Cola Co. v. Tropicana Products, Inc., 690 F.2d 312, 314-15 (2d Cir.1982). See also, Tucker Anthony Realty Corp. v. Schlesinger, 888 F.2d 969, 972 (2d Cir.1989); Video Trip Corp. v. Lightning Video, Inc., 866 F.2d 50, 52 (2d Cir.1989); New York v. Nuclear Regulatory Comm'n, 550 F.2d 745, 755-56 (2d Cir.1977).

Because a showing of probable irreparable harm is " 'the single most important prerequisite for the issuance of a preliminary injunction,' " Bell & Howell: Mamiya Co. v. Masel Co. Corp., 719 F.2d 42, 45 (2d Cir.1983) (quoting 11 C. Wright & A. Miller, Federal Practice & Procedure Sec. 2948, at 431 (1973)), the moving party must first demonstrate that such injury is...