The opinion of the court was delivered by: Leisure, District Judge:
This is an action for declaratory and injunctive relief, and for
monetary damages, arising from defendant Liberty Mutual Insurance
Company's ("Liberty") alleged breaches of its contractual and fiduciary
duties owed to its insured, Emons Industries, Inc. ("Emons"). Emons now
comes before the Court on a motion for a preliminary injunction enjoining
Liberty from interfering in any way with the attorney-client relationship
between Emons and its counsel, Anderson, Kill, Olick & Oshinsky ("the
Anderson Firm"), and enjoining Liberty from withholding certain
indemnification and attorneys' fees payments due Emons.
Emons is a New York corporation primarily engaged in the boxcar leasing
business. As the corporate successor to a number of pharmaceutical
companies, Emons has been sued in numerous product liability cases
arising out of the sale by those companies of diethylstilbestrol
("DES"). Liberty is a Massachusetts mutual insurance company and is
Emons's insurer with respect to DES lawsuits pursuant to comprehensive
general liability insurance policies ("the Policies") issued by Liberty
to Emons and its corporate predecessors between 1945 and 1970.
In 1975, Emons was first sued in a DES-related lawsuit. Emons notified
Liberty, and requested that Liberty defend Emons in the suit and
indemnify Emons if Emons were found liable. Liberty refused the defense
and coverage requests and Emons thereafter retained on its own behalf the
firm of Greenberg, Irwin, Pellman & Slade ("the Greenberg Firm") to
represent Emons in both the burgeoning number of DES lawsuits, as well as
in a suit against Liberty seeking coverage under the Policies ("the
In 1978, Emons and Liberty reached an interim settlement of the
Coverage Action ("the Interim Settlement"), which provided that Liberty
pay for Emons's costs in defending against the DES cases. Emons apparently
continued to control its defense of the DES cases through counsel chosen
by Emons. Through 1980, Emons was represented by the Greenberg Firm,
which then split its membership and Emons's counsel became the firm of
Slade, Pellman & Biehl. In 1982, Slade, Pellman & Biehl became Slade &
Pellman. These firms successively represented Emons in the DES cases,
with Liberty, pursuant to the Interim Settlement, paying all of Emons's
defense costs. At the same time, these successive firm entities
represented Emons in the Coverage Action against Liberty.
In 1988, Emons (represented by Slade & Pellman) and Liberty reached a
final settlement of the Coverage Action ("the Settlement Agreement"),
pursuant to which Liberty agreed to continue paying Emons's DES defense
costs and to pay indemnification to Emons subject to per claim and
aggregate limits, as well as limits on coverage of so-called "third
generation claims."*fn1 In 1989, Slade & Pellman became Slade, Moross,
Rahl, Glatzer & Stamm ("Slade Moross").
On April 13, 1990, Jeffrey L. Glatzer, Esq. ("Glatzer"), a Slade Moross
partner, informed Liberty DES Claims Examiner Jerry Clark ("Clark") that
Slade Moross would be merging with the Anderson Firm. Clark indicated
that he did not believe Liberty would object to the Anderson Firm
defending the DES cases. The parties dispute whether during this
conversation Glatzer informed Clark that the Anderson Firm represented
interests adversarial to Liberty in certain unrelated coverage actions.
May 1, 1990, Slade Moross merged into the Anderson Firm, the Slade Moross
attorneys involved in representing Emons prior to the merger continuing
in that capacity as members of the Anderson Firm. On the same day as the
merger, Liberty informed Glatzer that it would not agree to the Anderson
Firm continuing in the role of DES counsel, in which role Slade Moross
and its predecessor firms had served. Liberty stated that its basis for
objecting was the Anderson Firm's involvement in unrelated coverage
actions against Liberty.
On July 25, 1990, Liberty informed Emons that Liberty was assigning
defense of the DES cases to another firm, Jacobson & Triggs, and that, if
Emons refused to cooperate in the transfer of counsel, Liberty would no
longer defend Emons in the DES cases, nor would it indemnify Emons under
the Settlement Agreement or the Policies. On August 2, 1990, Emons
brought suit against Liberty, Jacobson & Triggs and John F. Triggs, Esq.
("Triggs") in New York Supreme Court, County of New York, seeking a
declaration of rights and a permanent injunction enjoining Liberty from
interfering with Emons's attorney-client relationship with the Anderson
Firm. Emons also sought monetary damages, including any unpaid defense or
indemnity payments ("Coverage Payments") due Emons since May 1, 1990.
On August 13, 1990, Justice Ira Gammerman granted a request by Emons
for a temporary restraining order preventing Liberty from interfering
with Emons's relationship with the Anderson Firm, but refused to enjoin
Liberty from withholding Coverage Payments pending a hearing on Emons's
pending motion for a preliminary injunction. The case was subsequently
removed to this Court, and, pursuant to a stipulation entered into
between Emons on the one hand, and Jacobson & Triggs and Triggs ("the
Triggs defendants") on the other, Emons's claims against the Triggs
defendants were dismissed with prejudice on October 3, 1990. On October
4, 1990, the Court denied Liberty's motion to dismiss the Anderson Firm
from representing Emons in this action. On October 9 and October 10,
1990, hearings were held on Emons's motion for a preliminary injunction.
That latter motion is now before the Court.
"A party seeking a preliminary injunction must demonstrate that it is
likely to suffer possible irreparable harm if the requested relief 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.'" Citibank v. Nyland (CF8), Ltd., 839 F.2d 93, 97 (2d Cir.
1988) (quoting 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); Consolidated Gold Fields,
PLC v. Minorco, S.A., 871 F.2d 252, 256 (2d Cir. 1989). The Court thus
turns to analyze whether Emons has met these requirements.
The Second Circuit has repeatedly stressed the importance of a showing
of irreparable harm by a party moving for a preliminary injunction.
"[I]nequitable conduct alone cannot justify the entry of a preliminary
injunction. The linchpin of such interim relief is that threatened
irreparable harm will be prevented by that injunction." Buckingham Corp.
v. Karp, 762 F.2d 257, 262 (2d Cir. 1985). "`"Perhaps the single most
important prerequisite for the issuance of a preliminary injunction is a
demonstration that if it is not granted the applicant is likely to suffer
irreparable harm before a decision on the merits can be rendered."'"
Citibank, N.A. v. Citytrust, 756 F.2d 273, 275 (2d Cir. 1985) (quoting
Bell & Howell: Mamiya Co. v. Masel Supply Corp., 719 F.2d 42, 45 (2d
Cir. 1983) (quoting 11 C. Wright & A. Miller, Federal Practice and
Procedure § 2948 at 431 (1973) (footnote omitted))).
"Irreparable injury" has been defined by the Second Circuit as "one
that cannot be redressed through a monetary award.
Where money damages are adequate compensation a preliminary injunction
should not issue." JSG Trading Corp. v. Tray-Wrap Inc., 917 F.2d 75, 79
(2d Cir. 1990). Therefore, the irreparable harm alleged "must be one
requiring a remedy of more than mere monetary damages. A monetary loss
will not suffice unless the movant provides evidence of damage that
cannot be rectified by financial compensation." Tucker Anthony, supra,
888 F.2d at 975; see also Loveridge v. Pendleton Woolen Mills, Inc.,
788 F.2d 914, 917-18 (2d. Cir. 1986); Jackson Dairy, Inc. v. HP. Hood &
Sons, Inc., 596 F.2d 70, 72 (2d Cir. 1979). In addition, a plaintiff
seeking to establish irreparable injury "must ...