relief as a mandatory injunction: It would require Joy to affirmatively enter the marketplace seeking a new letter of credit for $ 10.7 million. Borderline situations like this have led our appellate court to observe that "the distinction between mandatory and prohibitory injunctions is often more semantical than substantive." Innovative Health Systems, Inc. v. City of White Plains, 117 F.3d 37, 43 (2d Cir. 1997) (internal quotes omitted). I need not decide here which semantic characterization is more appropriate, as I find that Bischoff has failed to satisfy even the lower prohibitory injunction standard.
2. Irreparable Injury
The initial prerequisite for a prohibitory preliminary injunction is a showing that, absent the requested relief, the plaintiff will suffer irreparable injury. This requirement is "perhaps the single most important" element of the preliminary injunction test. Citibank N.A. v. Citytrust, 756 F.2d 273, 275 (2d Cir. 1985) (internal quotes omitted). To justify an injunction, the complained-of injury must be "likely and imminent, not remote and speculative." NAACP v. Town of East Haven, 70 F.3d 219, 224 (2d Cir. 1995); see also JSG Trading Corp. v. Tray-Wrap, Inc., 917 F.2d 75, 79 (2d Cir. 1990) (the "possibility" of harm is insufficient). An injury is not "speculative" simply because it is not certain to occur; however, "a plaintiff's imaginative, worst case scenario flowing from the defendant's alleged wrong" does not adequately show irreparable injury. USA Network v. Jones Intercable, Inc., 704 F. Supp. 488, 491 (S.D.N.Y. 1989).
Bischoff argues that it is faced with likely irreparable harm in that TPC will probably assess liquidated damages against it for late and/or inadequate performance. If such damages are assessed, it contends, only Joy's letter of credit stands between it and sole liability to TPC, given Joy's precarious-at-best financial status. See Gobel Dec. at P 3.
This argument has superficial appeal, but wilts under closer scrutiny. First, Bischoff does not now face a liquidated damages judgment; years will pass before TPC obtains such a judgment, if indeed it ever does. Not only has TPC not yet made any demands for performance-related liquidated damages, it has not even expressed dissatisfaction with either Joy or Bischoff's performance. Given the performance problems and delays that have occurred, this may well change. However, it will not (and indeed cannot) change for some time: The system tests upon which performance-related damages would be based have not even begun, and will not be complete before September, 1999 at the earliest. See Gobel Dec. at P 26, 28.
The arbitrators, on the other hand, will reach the letter of credit issue sometime within the next nine months. See Reply Memorandum in Further Support of Lentjes Bischoff GmbH's Request for an Injunction in Aid of Arbitration at 2. There is thus no question that the letter of credit issue will be resolved well before Bischoff is faced with the massive claim for performance damages it fears. Under Bischoff's reasoning, this is no solace, because by the time the issue is decided, Joy will be unable to pay any judgment it may be found to owe. When its letter of credit expires, Bischoff contends, Joy will become effectively worthless.
The problem with this theory is that, as Bischoff itself repeatedly points out, Joy is effectively worthless now. Bischoff apparently believes that Joy can simply be ordered to "renew" its current letter of credit. However, that letter expires by its own terms on October 31, and no replacement can be obtained without the consent of a creditor. Given Joy's large negative net worth, this consent is unlikely to be forthcoming now or nine months from now. Joy's current creditworthiness approaches zero; it can hardly get worse over the next nine months.
Realistically, the only way Joy could comply with an order to obtain a new letter of credit would be to draw on an existing line of credit held by one of its parent companies. In fact, according to Bischoff, this is how Joy obtained its current letter. See Letter of Lentjes Bischoff GmbH, Oct. 28, 1997, at 2. It is not disputed that these parent companies are large, solvent businesses, and are likely to remain in a position to guarantee future lines of credit well into the future. See id. (characterizing Joy Technologies, Inc. ("JTI"), Joy's direct parent, as "a solvent company with sales of hundreds of millions of dollars"). Moreover, there is no reason to believe that they will be less disposed to extend this credit to Joy in nine months than they would be today.
Joy's ability to obtain a replacement letter of credit at that time therefore appears to be exactly the same as it is now. In other words, granting the proposed injunction would have no effect whatever on the question of whether Bischoff actually suffers the harm it fears.
Under these circumstances, it is clear that Bischoff's assertion that it will suffer irreparable injury absent a preliminary injunction is not merely speculation, it is speculation without any reasonable factual basis. Courts have repeatedly rejected more plausible theories of irreparable injury. See, e.g., Jayaraj v. Scappini, 66 F.3d 36, 40 (2d Cir. 1995) (preliminary injunction preventing employer from terminating employee unwarranted; fear that employer would hire a replacement while the legality of the termination was litigated, and thus make reinstatement less likely, was "purely speculative."). Bischoff's request for a preliminary injunction thus fails to clear the first hurdle.
3. Bischoff's Claim on the Merits
A preliminary injunction might not be warranted even if Bischoff could meet the irreparable harm requirement, as its interpretation of the Bischoff/Joy contract is deeply suspect. Bischoff certainly could not meet the clear entitlement to relief or likelihood of success on the merits tests. See Phillip, 118 F.3d at 133; Time Warner, 118 F.3d at 923. In fact, whether it could present even a fair ground for litigation on the issue would be a close question. See id.
Bischoff argues that § 3.6 of the contract envisions that Joy will maintain its letter of credit in place until Bischoff is relieved of liability to TPC. As Joy points out, however, this argument is simply not supported by the contractual language. Section 3.6 describes the letter of credit that Joy had already obtained, but is utterly silent on the subject of mandatory renewal: "Joy has provided Bischoff with a letter of credit for US $ 10,700,000 which shall be governed by the terms stated therein with respect to drawing . . . ."
If renewal was as important to Bischoff as it now claims, it would have explicitly required that the letter be renewed until such time as the job was complete and/or such time as all disputes were resolved. A provision clearly requiring indefinite renewal would not have been at all difficult to draft. Moreover, the passage that incorporates by reference Joy's existing letter of credit states that "in any event, the maturity date of this letter of credit shall not be extended beyond October 31, 1997." Bischoff argues that the letter is incorporated into § 3.6 only with regard to "terms . . . with respect to drawing," and the letter's expiration date is not such a term. Even if this is true, the presence of the expiration date in the letter of credit, combined with its partial incorporation by reference, should surely have alerted Bischoff to the fact that Joy's indefinite renewal obligation -- if such an obligation were intended -- would have to be made explicit. Therefore, not only does Bischoff fail to identify contractual language that even arguably requires indefinite renewal, the language it cites raises a strong inference that indefinite renewal was not intended.
C. Expedited Discovery
Bischoff also moves for expedited discovery on the subject of Joy's financial condition. To evaluate a request for expedited discovery, the following factors must be considered:
(1) irreparable injury, (2) some probability of success on the merits, (3) some connection between the expedited discovery and the avoidance of the irreparable injury, and (4) some evidence that the injury that will result without expedited discovery looms greater than the injury that the defendant will suffer if the expedited relief is granted.
Irish Lesbian and Gay Organization v. Giuliani, 918 F. Supp. 728, 730 (S.D.N.Y. 1996). Bischoff does not meet this standard. As I have already discussed, it has not shown a threat of irreparable injury or that it has a significant probability of success on the merits. All four factors therefore counsel against granting expedited discovery. Furthermore, I note that Bischoff has failed even to assert that discovery taken pursuant to the arbitral proceeding will be inadequate. In addition to being unwarranted under the terms of the test outlined above, then, expedited discovery ordered by this court would appear to be completely unnecessary.
For the reasons stated above, the plaintiff has failed to demonstrate that it is likely to suffer irreparable harm absent the requested relief. Its motion for a preliminary injunction is therefore denied. For the same reasons, and because it has also failed to show that it has any probability of success on the merits of its claim, the plaintiff's motion for expedited discovery is also denied.
Shira A. Scheindlin
Dated: New York, New York
October 31, 1997