The opinion of the court was delivered by: JOHN KEENAN, Senior District Judge Page 2
The facts before this Court have changed from those summarized in
this Court's Memorandum Opinion and Order dated December 29, 2003
["December 29 Order"] only in that defendant Set Top International Inc.
["Set Top"] has given notice of a foreclosure sale of the 50.44% block of
shares of Asia Pacific Wire & Cable Corporation ["APWC"], to be held
on January 21, 2004.*fn1 Plaintiff and intervenor plaintiff Pacific
Electric Wire & Cable Company ["PEWC"]*fn2 both move, by separate
Orders to Show Cause, for a temporary restraining order to prevent this
Plaintiff (but not intervenor plaintiff) also asks for a temporary
restraining order preventing the sale of the 22.4% block of APWC stock.
This Court heard arguments from counsel for plaintiff, intervenor
plaintiff, defendant Set Top, and defendant Robert Everett Wolin on
January 14, 2004.
Both plaintiff and intervenor plaintiff rely almost exclusively on the
language of the December 29 Order, arguing that the imminence that was
lacking in December, and on which this Court based (in part) its
dissolution of the temporary restraining order, now exists. Therefore,
both parties argue, the balance of hardships now tips in favor of PEWC.
Plaintiff and intervenor plaintiff also reiterate their claims that the
sale of the shares will cause PEWC irreparable harm.
Set Top argues that foreclosure is proper. The loan between PEWC's
subsidiary Pacific U.S.A. Holdings Corp. ["PUSA"] and its creditor Swiss
Re Financial Products Corp. ["Swiss Re] (no longer a party to this
action), and the pledge of APWC shares as security for that loan; PEWC's
default on its obligation to repay PUSA's loan; and Swiss Re's transfer
to Set Top of its secured claim against PEWC, Set Top says, are
undisputed. Furthermore, Set Top claims that there can be no irreparable
harm in this instance because the injury PEWC seeks to avoid was
self-inflicted or at least avoidable.
Defendant Wolin also submits a memorandum arguing that, because he has
no control over the shares and no power to cause or prevent the sale of
the shares, an injunction as to him should be denied.
As none of the most drastic tools in the arsenal of judicial remedies,"
injunctive relief "must be used with great care." Hanson Trust PLC
v. ML SCM Acquisition Inc., 781 F.2d 264, 273 (2d Cir. 1986). An
applicant for a preliminary injunction or a temporary restraining order
must demonstrate "(1) the likelihood of irreparable injury in the absence
of such an injunction, and (2) either (a) likelihood of success on the
merits or (b) sufficiently serious questions going to the merits to make
them a fair ground for litigation plus a balance of hardships tipping
decidedly in [applicant's] favor." Wisdom Imp. Sales Co. v. Labatt
Brewing Co., 339 F.3d 101, 108 (2d Cir. 2003) (quoting TCPIP
Holding Co., Inc., v. Haar Communications. Inc., 244 F.3d 88, 92 (2d
Cir. 2001)); see Aim Int'l Trading, LLC, v. Valcucine SpA.,
188 F. Supp.2d 384, 386 (S.D.N.Y. 2002) (noting that the standard for
granting a temporary restraining order is identical to that for a
preliminary injunction). Absent an abuse of discretion, a district
court's decision granting or denying injunctive relief will not be
disturbed on appeal. Aim Int'l,
188 F. Supp.2d at 387. (quoting Reuters Ltd, v. United Press
Int'l, Inc., 903 F.2d 904, 907 (2d Cir. 1990)).
This Court's December 29 Order denied plaintiff's, intervenor
plaintiff's, and defendant's applications for temporary restraining
orders. The Court found that, based on the many factual disputes
surrounding the case, no party could show that it was likely to succeed
on the merits, that the balance of hardships did not tip decidedly in
favor of one party over another, and that, in any event, no party could
prove imminent harm.*fn4 Although the December 29 Order sets up the lack
of imminent harm as a stumbling block for plaintiff and intervenor
plaintiff, the removal of that obstacle does not necessarily warrant
injunctive relief: Harm may be imminent without being irreparable.
Because the December 29 Order discusses only whether the harm is
imminent, the Court now considers whether the injury that PEWC may face
sale of either the 50.44% block or the 22.4% block of APWC stock
Cases where courts have found irreparable harm in corporate or
commercial settings fall into roughly three categories, none of which
categorically equate the loss of a majority interest in
a corporation with irreparable harm. In the first category, courts
express a concern for letting the market run its course. To that end,
courts have held that preventing a ready, willing, and able buyer from
purchasing a majority interest in a corporation either in the
context of an outright purchase or a tender offer constitutes
irreparable harm. See United Acquisition Corp. v. Banque
Paribas, 631 F. Supp. 797 (S.D.N.Y. 1985); LTV Corp. v. Grumman
Corp., 526 F. Supp. 106 (E.D.N.Y. 1981). The second category
demonstrates the courts' concern for protecting the voice of a
corporation's shareholders. Thus, courts have found irreparable harm
where defendant, the majority shareholder, threatened to elect two
directors to the board, which would have reduced the minority
shareholder's representation on the board of directors to 10%, see
Street v. Vitti, 685 F. Supp. 379 (S.D.N.Y. 1988); where management
of a corporation denied shareholders a voice by preventing shareholders
from voting their shares or from having representation on the board of
directors, see Int'l Banknote Co. v. Muller, 713 F. Supp. 612
(S.D.N.Y. 1989); and where defendant breached an agreement giving
plaintiffs certain minority rights, which rights are "irretrievably lost
upon breach, and may not be compensable by non-speculative damages
[because] [t]he only way to render the [minority rights] provision truly
viable is to enforce it," Wisdom, 339 F.3d at 114. Finally,
cases falling in
the third category show the courts' desire to prevent the moving
party from losing its livelihood or its position in a business that the
movant helped to start. This group of cases includes Davis v.
Rondina, 741 F. Supp. 1115 (S.D.N.Y. 1990), in which plaintiff had
been denied the opportunity to continue to manage a company which
plaintiff helped to build from the ground up and for which plaintiff
personally guaranteed substantial loans, and Roso-Lino Beverage
Distributors, Inc., v. Coca-Cola Bottling Co., 749 F.2d 124 (2d Cir.
1984) and Semmes Motors, Inc. v. Ford Motor Co., 429 F.2d 1197
(2d Cir. 1970), in which defendant threatened to revoke plaintiffs'
franchise agreements, thus depriving plaintiffs of their means of
livelihood that they had pursued for many years. None of these cases,
however, establish the notion that loss of a majority of shares in a
corporation constitutes irreparable harm with the black-letter clarity
that plaintiff and intervenor plaintiff urge.
Moreover, none of the concerns that courts finding irreparable harm
have expressed are present in this case. Set Top's planned foreclosure is
not preventing market forces from running their course. If anything,
PEWC's repeated attempts to block the foreclosure are stalling the market
by preventing Set Top, as a creditor, from receiving the money
indisputably owed to it. Plaintiff's and intervenor plaintiff's
shareholders are not suffering from an impermissible denial of a voice in
corporation's affairs brought about by managerial shenanigans. Any
loss of voice shareholders suffered occurred when PEWC pledged the APWC
shares as security for the loan between Swiss Re and PUSA. Because no
party disputes the validity of foreclosure on the APWC shares by Swiss
Re, and because no one argues that Set Top's acquisition of Swiss Re's
claim caused PEWC to default on its loan payments, plaintiff
and intervenor plaintiff cannot complain that Set Top is denying PEWC
shareholders a voice in management. Finally, Set Top is not denying any
party its means of livelihood. APWC is neither a small family owned
business nor a start-up venture where the key participants depend on the
business as a means of making a living. The concerns courts have
expressed regarding this category of cases, therefore, are not present
In support of its argument that the sale should go forward, Set Top
cites a Tenth Circuit case, Salt Lake Tribune Publishing Co. v.
AT&T Corp., 320 F.3d 1081 (10th Cir. 2003), in which the court
denied injunctive relief to a plaintiff corporation that had sold its
controlling interest in a newspaper to a subsidiary of defendant subject
to an agreement that plaintiff would retain managerial control of the
newspaper for a certain period, and that plaintiff would retain an option
to buy back its interest. Id. at 1084-85. The earliest
plaintiff could exercise its option to buy back the newspaper was a date
one day after the expiration of the period of managerial control.
Id. at 1084 When the plaintiff was faced with the gap of
several weeks between the end of the period of plaintiff's managerial
control and the actual closing of the transaction whereby plaintiff would
re-purchase the newspaper, plaintiff sought injunctive relief to prevent
defendant from controlling the newspaper during those several weeks.
Id. at 1085. The Tenth Circuit denied relief, saying that the
change of control "result[ed] from the express terms of
the contract [plaintiff] negotiated, and therefore the removal of
[plaintiff's] managers [was] a harm that [plaintiff] inflicted upon
itself." Id. at 1106. Because the harm was self-inflicted, the
court concluded, the harm could not be considered irreparable.
Id. Therefore, the change in management that plaintiff sought
to avoid did not constitute irreparable harm. Id.
Set Top likens the Salt Lake Tribnue scenario to the
situation at hand: Having pledged shares of APWC as collateral in return
for millions of dollars in loans, PEWC cannot now avoid the consequences
of its default. The harm PEWC seeks to avoid, Set Top says, is
self-inflicted and, therefore, not irreparable.
The Second Circuit has not issued an opinion that is on point with the
Salt Lake Tribune opinion. I find the Tenth Circuit's logic
persuasive, however, and a neat fit with the facts at hand. Because
plaintiff and intervenor plaintiff have failed to demonstrate more than
the imminent loss of a majority interest in APWC, and because the harm
plaintiff and intervenor plaintiff seek to avoid is self-inflicted, this
Court concludes that Set Top's foreclosure on any shares of APWC ...