Bluebonnet Sav Bank v. Dir, off of thrift ( 1995 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
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No. 95-10157
Summary Calendar
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BLUEBONNET SAVINGS BANK, et al.,
Plaintiffs-Appellees,
VERSUS
DIRECTOR, OFFICE OF THRIFT SUPERVISION, et al.,
Defendants,
FEDERAL DEPOSIT INSURANCE CORPORATION,
Defendant-Appellant.
_________________________
Appeal from the United States District Court
for the Northern District of Texas
(3:91-CV-1066-X)
_________________________
(July 21, 1995)
Before SMITH, EMILIO M. GARZA, and PARKER, Circuit Judges.
PER CURIAM:*
The Federal Deposit Insurance Corporation ("FDIC") ap-
peals a preliminary injunction that prohibits it, during the pen-
dency of the underlying action, from exercising its rights under
a warrant agreement. While we appreciate the district court's
*
Local Rule 47.5.1 provides: "The publication of opinions that have no
precedential value and merely decide particular cases on the basis of well-
settled principles of law imposes needless expense on the public and burdens
on the legal profession." Pursuant to that rule, the court has determined
that this opinion should not be published.
diligent efforts to resolve this matter, we conclude that it uti-
lized an incorrect test in issuing the injunction. Accordingly,
we vacate and remand.
I.
Our requirements for a preliminary injunction are well es-
tablished:
First, the movant must establish a substantial likeli-
hood of success on the merits. Second, there must be a
substantial threat of irreparable injury if the injunc-
tion is not granted. Third, the threatened injury to
the plaintiff must outweigh the threatened injury to
the defendant. Fourth, the granting of the preliminary
injunction must not disserve the public interest.
Cherokee Pump & Equip. v. Aurora Pump, 38 F.3d 246, 249 (5th Cir.
1994) (citation omitted). These requirements are indeed steep:
A preliminary injunction is an extraordinary remedy.
It should only be granted if the movant has clearly
carried the burden of persuasion on all four . . . pre-
requisites. The decision to grant a preliminary in-
junction is to be treated as the exception rather than
the rule.
Id. (citation and internal quotation omitted).
As to the first factor))likelihood of success))the district
court, citing only Cho v. Itco, Inc., 782 F. Supp. 1183, 1185
(E.D. Tex. 1991), states that "[i]t is enough that the movant
has raised questions going to the merits so substantial as to
make them fair ground for litigation and thus for more deliberate
investigation." This is not an accurate statement of the law,
for it would mean that almost any complaint that could withstand
a motion under FED. R. CIV. P. 12(b) would satisfy the likelihood-
of-success factor.
2
Aside from stating that substantial issues await trial, the
district court has not explained how the plaintiffs are likely to
prevail. Indeed, from the district court's opinion it is not
evident whether the court actually thinks the plaintiffs will
prevail or only that they might do so.
We have stated that the importance of the likelihood-of-suc-
cess element varies with the relative harm occasioned to the par-
ties from the issuance vel non of the injunction. See Canal
Auth. v. Callaway, 489 F.2d 567, 577 (5th Cir. 1974). While the
district court has found that the harm to Bluebonnet outweighs
the harm to the FDIC, the court overlooks the fact that while the
injunction is in effect, the FDIC is unable to exercise its
rights as a shareholder, such as being able to share in dividends
and to enforce the protections provided by the fiduciary duty
owed to Bluebonnet by its board of directors. In short, as the
FDIC avers, "[t]he preliminary injunction has deprived the FDIC
of the ability to protect the economic interest in Bluebonnet
that it presently possesses by virtue of its status as a warrant
holder."
We also note that while Bluebonnet, as movant, must show
irreparable harm, the FDIC only must show harm, whether or not
irreparable, that outweighs Bluebonnet's. And under the sliding-
scale analysis in Canal Authority, see, e.g., Apple Barrel Prods.
v. Beard, 730 F.2d 384, 389 n.11 (5th Cir. 1984), the likelihood
of success must be higher to the extent that the harm to the two
sides is not seriously out of balance.
3
In short, the district court, with the best of intentions,
has not properly considered the relationship between and among
the four factors or the proper meaning of "likelihood of
success." As the decision to enter an injunction is
discretionary, the district court should make the decision, in
the first instance, using the proper test. In other words, we
are not in a position, at this point, to second-guess the
district court and apply the factors on appeal.
II.
We also question whether the FDIC was given proper notice
that the December 1994 hearing was to be on a preliminary
injunction rather than just for a temporary restraining order
("TRO"). The FDIC argues that this seriously affected its ability
to present enough evidence to defeat the injunction. The parties
agree that there was inadequate notice under FED. R. CIV. P. 6(d).
Moreover, the district court gave several indications, during the
hearing, that all it was considering was a TRO. For example, the
court stated, "[F]or right now, this is just what it says it is.
It's a temporary restraining order because I don't know what's
really driving this."
If the district court elects, in light of this opinion, to
consider again the entry of an injunction, it should provide full
notice and the opportunity for a full hearing. Any such a
hearing, it should apply the standards for a preliminary
injunction that we have outlined above.
4
The order granting a preliminary injunction is VACATED, and
this matter is remanded for further proceedings. We express no
view on the ultimate merits of this litigation.
5