Tk Services, Inc. v. Rwd Consulting, LLC

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
____________________________________
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TK SERVICES, INC., )
)
Plaintiff, )
)
v. ) Civil Action No. 17-1152 (ABJ)
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RWD CONSULTING, LLC, )
)
Defendant. )
____________________________________)
MEMORANDUM OPINION
Plaintiff TK Services, Inc. (“TKS”) has brought this breach of contract action against
defendant RWD Consulting, LLC (“RWD”). TKS alleges that RWD wrongfully breached an
agreement between the parties by excluding it from working on a government contract, and that
RWD converted TKS’s property by unlawfully removing contract funds belonging to TKS from a
jointly controlled bank account. Compl. [Dkt. # 1]. After the complaint was filed, TKS filed a
motion for a preliminary injunction. Pl.’s Mot. for Prelim. Inj. [Dkt. # 2] (“PI Mot.”); Mem. of P.
& A. in Supp. of Mot. [Dkt. # 2] (“PI Mem.”). Defendant opposed the motion, Mem. of P. & A.
in Opp. to PI Mot. [Dkt. # 10] (“PI Opp.”), and it also filed a motion to dismiss and to compel
arbitration. Def.’s Mot. to Dismiss Pl.’s Compl. & Compel Arb. [Dkt. # 8] (“Def.’s Mot.”).
Plaintiff filed a reply in support of its motion for a preliminary injunction, and an opposition to the
motion to dismiss and to compel arbitration. Pl.’s Reply Br. in Supp. of PI Mot. [Dkt. # 12] (“Pl.’s
Reply”); Mem. of P. & A. in Resp. to Def.’s Mot. [Dkt. # 13] (“Pl.’s Opp.”). For the reasons set
forth below, the Court concludes that the arbitration agreement is enforceable, that TKS must
arbitrate its claims against RWD, and that TKS is not entitled to an injunction in aid of the
arbitration. Therefore, it will grant defendant’s motions to dismiss and compel arbitration, and it
will deny the motion for a preliminary injunction as moot.
BACKGROUND
TKS is a Virginia corporation; its business is government contracting, and it specializes in
providing engineering, maintenance, and operational services for government facilities managed
by the General Services Administration. Compl. ¶ 7. In early 2016, TKS began to discuss a
proposal with RWD, a Virginia company owned and managed by Robert W. Dozier, Jr., to provide
operations and maintenance services for the EPA headquarters located at 1201 Constitution
Avenue NW in Washington. Id. ¶ 9. TKS was aware of the opportunity because it was the
incumbent subcontractor at the time, working as a subcontractor to Chimes DC. Id.
On February 23, 2016, in anticipation of RWD’s receiving a subcontract from Chimes,
TKS and RWD entered into a Mentor Subcontractor’s Service Agreement. Compl. ¶ 11; Decl. of
Robert Dozier, Jr. [Dkt. # 10-1] (“Dozier Decl.”) ¶ 7; Ex. A to Compl. [Dkt. # 1] (“Mentor
Agreement”). On July 1, 2016, Chimes awarded a subcontract to RWD, which the parties refer to
as the “Chimes Contract.” Compl. ¶ 12; Dozier Decl. ¶ 9. Under the Chimes Contract, RWD
became the prime subcontractor responsible for providing operation and maintenance-related
services for the EPA building. Compl. ¶ 12; Dozier Decl. ¶ 9. TKS and RWD then agreed that
any work performed under the Chimes Contract would be performed in accordance with the
Mentor Agreement. Compl. ¶ 12; Dozier Decl. ¶ 9.
Under the Mentor Agreement, TKS was responsible for managing the work required by
the Chimes Contract. Compl. ¶ 16; Dozier Decl. ¶ 15; Mentor Agreement at 8. TKS would receive
all of the profits under the Chimes Contract, but it was required to pay RWD a fee of $5,000 per
month. Compl. ¶ 16; Dozier Decl. ¶ 21; Mentor Agreement at 9.
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The Mentor Agreement required that all funds received under the Chimes Contract were to
be deposited into a joint bank account to which both TKS and RWD were signatories. Compl.
¶ 17; Dozier Decl. ¶ 10; Mentor Agreement at 9. Money could only be withdrawn from the joint
account under the terms provided for in the Mentor Agreement. Compl. ¶ 17; Mentor Agreement
at 9–10. TKS alleges that it was entitled to a payment of $275,051.47 for the profits attributable
to the Chimes Contract, but that it was only paid $210,000. Id. ¶ 20. 1
The contract also provided that TKS was required to provide “working capital” for the
work to be done on the Chimes Contract, and the agreement prohibited RWD from withdrawing
any portion of those funds. Mentor Agreement at 8. TKS alleges that it contributed over $140,000
in working capital to the joint account. Compl. ¶ 18.
The Mentor Agreement also governed the distribution of profits arising from “reimbursable
projects” that were separate from the Chimes Contract. Mentor Agreement at 9. Fifty-one percent
of those profits were to be distributed to RWD, and forty-nine percent of the profits were to be
distributed to TKS. Id. TKS alleges that it is entitled to its share of those profits for the period
between July 1, 2016 and March 24, 2017, which it calculates to be $38,121.13. Compl. ¶ 22. The
complaint states that TKS has not been paid its share of the profits for the reimbursable projects.
Id.
TKS also alleges that it supplied equipment valued in excess of $22,500 that was to be used
to fulfill the parties’ obligations under the Chimes Contract. Compl. ¶ 23.
1 The Chief Executive Officer of RWD, Robert Dozier, states in a declaration that TKS held
a debit card for the joint account, and that the Special Controller for TKS, William Arnold, signed
all checks related to the joint account. Dozier Decl. ¶¶ 2, 11. RWD’s principal also avers that it
was this TKS employee that was “responsible for protecting TKS’ interest in the Deposit Account
and ensuring that TKS received its share of profits and distributions under the Agreement.” Id.
3
According to TKS, on March 23, 2017, without prior warning or notice, RWD withdrew
all of the funds from the joint account – a total of approximately $35,000 – and it terminated TKS’s
online access to the joint bank account. Compl. ¶ 24. TKS alleges that RWD took actions to
exclude TKS from accessing the EPA building, and that RWD took steps to unilaterally terminate
the Mentor Agreement. Id. ¶ 25. 2 Based on these facts, TKS sued for breach of contract on June
13, 2017, and it states that – in addition to the value of its equipment – it is entitled to a minimum
of $34,000 per month of profit for the months of March and April 2017, and that it continues to be
damaged in that amount for each month that it is excluded from the EPA building. Id. ¶¶ 29–31.
Count I of the complaint alleges that RWD breached the Mentor Agreement by unilaterally
terminating it, and by not properly compensating TKS. Compl. ¶¶ 32–39. In Count II, TKS alleges
that RWD is liable for conversion of funds that rightfully belong to TKS. Id. ¶¶ 40–51. Count III
alleges that RWD has been unjustly enriched by its improper conduct. Id. ¶¶ 52–59. And Count
IV requests equitable and injunctive relief, including an accounting, an award of pre-judgment
attachment of funds, and an injunction that requires the profits from the Chimes Contract to be
sequestered, prevents RWD from excluding TKS from the EPA building and from the joint bank
account, and reinstates TKS to its prior role under the Mentor Agreement. Id. ¶¶ 60–66. Pursuant
to Federal Rule of Civil Procedure 62, TKS filed a motion for a preliminary injunction based on
the same factual allegations. PI Mot.
2 RWD paints a different picture in its pleadings. In a declaration submitted in opposition
to the motion for preliminary injunction, Robert Dozier, the Chief Executive Officer of RWD,
avers that the termination of the contract was due to complaints about TKS’s management of the
payroll system, and its failure to address certain issues at the EPA building. Dozier Decl. ¶¶ 18,
20. RWD admits that it terminated TKS’s access to the joint account, Dozier Decl. ¶ 29, but it
contests the allegation that it did so without notice. See id. ¶ 18.
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The complaint and motion for preliminary injunction are premised upon the Mentor
Agreement, but the contract contains an arbitration clause:
ARBITRATION. Any controversy or claim between the PARTIES arising
out of or in connection with this Agreement, including any claim concerning
an alleged breach hereof, shall be subject to final settlement by arbitration.
Notice of demand by any PARTY for arbitration of any matter must be
given to the other PARTIES within one (1) year from the date on which the
controversy occurred or the claim arose.
The arbitration shall be conducted by a single arbitrator in
accordance with the Rules of Arbitration of the American Arbitration
Association, as then in effect. If and to the extent that it is necessary or
appropriate to refer to and apply the law of a particular jurisdiction in
reaching a decision on any matter submitted to arbitration under this clause,
the arbitrator shall be authorized and directed to refer to and apply the laws
of the State where the FACILITY is located.
The award rendered by the arbitrator shall be final and binding on
all PARTIES and judgment may be entered upon such award by any court
having jurisdiction over the PARTY against which the award is sought to
be enforced. In no event shall this paragraph be construed as conferring
upon any court authority to inquire into and review any such award on its
merits. Each PARTY shall bear its own costs in connection with any
arbitration proceedings, except that fees or other charges of the arbitrator or
of the American Arbitration association shall be borne equally by the
Parties.
Mentor Agreement ¶ 11.
STANDARD OF REVIEW
I. Motion to compel arbitration
By enacting the Federal Arbitration Act, Congress adopted “a liberal federal policy
favoring arbitration agreements, notwithstanding any state substantive or procedural policies to
the contrary.” Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983). The
FAA provides that an arbitration agreement “shall be valid, irrevocable, and enforceable, save
upon any grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2.
However, since arbitration is a matter of contract, parties cannot be compelled to arbitrate their
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disputes unless they have agreed to do so. First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 943
(1995). When one party resists arbitration, the opposing party may petition any United States
district court that would otherwise have subject-matter jurisdiction “for an order directing that such
arbitration proceed in the manner provided for in [their written arbitration] agreement.” 9 U.S.C.
§ 4. When presented with such a motion, the court should bear in mind that the FAA creates a
strong presumption favoring the enforcement of arbitration agreements, and that “any doubts
concerning the scope of arbitrable issues should be resolved in favor of arbitration.” Moses H.
Cone, 460 U.S. at 24–25.
“The Supreme Court has set out ‘the proper framework for deciding when disputes are
arbitrable.’” Dist. No. 1, Pac. Coast Dist., Marine Eng’rs’ Beneficial Ass’n, AFL–CIO v. Liberty
Mar. Corp., 815 F.3d 834, 844 (D.C. Cir. 2016), quoting Granite Rock Co. v. Int’l Bhd. of
Teamsters, 561 U.S. 287, 296 (2010). “Under that framework, a court may order arbitration of a
particular dispute only where the court is satisfied that the parties agreed to arbitrate that dispute.”
Id. (emphasis in original).
Though defendant’s motion is styled as a motion to dismiss, a motion that seeks to compel
or preclude arbitration is evaluated under the summary judgment standard. Aliron Int’l, Inc. v.
Cherokee Nation Indus., Inc., 531 F.3d 863, 865 (D.C. Cir. 2008). “How the parties style the
motion seeking arbitration is not determinative.” Booker v. Robert Half Int’l, Inc., 315 F. Supp.
2d 94, 99 (D.D.C. 2004), aff’d, 413 F.3d 77 (D.C. Cir. 2005). Under this standard, the party
seeking to compel arbitration must first present “evidence sufficient to demonstrate an enforceable
agreement to arbitrate.” Haire v. Smith, Currie & Hancock LLP, 925 F. Supp. 2d 126, 129 (D.D.C.
2013), quoting Hill v. Wackenhut Servs. Int’l, 865 F. Supp. 2d 84, 89 (D.D.C. 2012). “The burden
then shifts to [the non-moving party] to show that there is a genuine issue of material fact as to the
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making of the agreement, using evidence comparable to that identified in Fed. R. Civ. P. 56.” Hill,
865 F. Supp. 2d at 89. The Court will compel arbitration if the pleadings and the evidence show
that “there is no genuine issue as to any material fact and that the moving party is entitled to
judgment as a matter of law.” Booker, 315 F. Supp. 2d at 99, quoting Fed. R. Civ. P. 56(c).
II. Motion for a preliminary injunction
A preliminary injunction is an “extraordinary and drastic remedy” that is “never awarded
as [a matter] of right.” Munaf v. Geren, 553 U.S. 674, 689–90 (2008) (internal citations omitted).
To obtain a preliminary injunction, a plaintiff must make a “clear showing that [it] is entitled to
such relief” by establishing that: 1) it is likely to succeed on the merits; 2) it is likely to suffer
irreparable harm in the absence of preliminary relief; 3) the balance of equities tips in its favor;
and 4) an injunction serves the public interest. Winter v. Natural Res. Def. Council, Inc., 555 U.S.
7, 20, 22 (2008).
The manner in which courts should weigh the four factors “remains an open question” in
this circuit. Aamer v. Obama, 742 F.3d 1023, 1043 (D.C. Cir. 2014). This Circuit has long adhered
to the “sliding scale” approach, where “a strong showing on one factor could make up for a weaker
showing on another.” Sherley v. Sebelius, 644 F.3d 388, 392 (D.C. Cir. 2011). But because the
Supreme Court’s decision in Winter “seemed to treat the four factors as independent
requirements,” the Court of Appeals has “read Winter at least to suggest if not to hold ‘that a
likelihood of success is an independent, free-standing requirement for a preliminary injunction.’”
Id. at 392–93, quoting Davis v. Pension Benefit Guar. Corp., 571 F.3d 1288, 1296 (D.C. Cir. 2009)
(Kavanaugh, J., concurring). The D.C. Circuit has not yet decided whether the “‘sliding scale’
approach remains valid after Winter.” League of Women Voters v. Newby, 838 F.3d 1, 7 (D.C.
Cir. 2016).
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In any event, it remains the law in this Circuit that a movant must demonstrate irreparable
harm, which has “always” been “[t]he basis of injunctive relief in the federal courts.” Sampson v.
Murray, 415 U.S. 61, 88 (1974), quoting Beacon Theatres, Inc. v. Westover, 359 U.S. 500, 506–
07 (1959). A failure to show irreparable harm is grounds for the court to refuse to issue a
preliminary injunction, “even if the other three factors entering the calculus merit such relief.”
Chaplaincy of Full Gospel Churches v. England, 454 F.3d 290, 297 (D.C. Cir. 2006); see also
GEO Specialty Chems., Inc. v. Husisian, 923 F. Supp. 2d 143, 147 (D.D.C. 2013) (“[A] court may
refuse to issue an injunction without considering any other factors when irreparable harm is not
demonstrated.”).
ANALYSIS
There is no dispute in this case that the parties entered into an enforceable agreement to
arbitrate. The contract plaintiff attached as an exhibit to its own motion for preliminary injunction
contains the binding arbitration clause, see Mentor Agreement ¶ 11, and plaintiff concedes that the
clause covers all of the claims in its complaint, except for Count IV, which requests equitable
relief. Pl.’s Opp. at 5 (“Plaintiff acknowledges that the counts for breach of contract, unjust
enrichment, and conversion that are set forth in the Complaint are subject to arbitration.”). But
plaintiff urges the Court to reach the merits of the motion for a preliminary injunction anyway,
arguing that the arbitration clause “does not specifically address injunctive or other equitable relief,
and it does not provide that arbitration is the sole and exclusive forum for determination of interim
injunctive relief.” Id. at 4.
This argument is not consistent with the broad, clear, mandatory language of the arbitration
clause. The parties agreed that “[a]ny controversy or claim between the [parties] arising out of or
in connection with this Agreement, including any claim concerning an alleged breach . . . shall be
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subject to final settlement by arbitration.” Mentor Agreement ¶ 11 (emphasis added). So the fact
that claims for injunctive relief are not specifically mentioned does not lead to the conclusion that
they were carved out; the plain reading of the provision suggests that any carve out had to be
explicit.
This conclusion is bolstered by the fact that an exception for injunctive relief was not
necessary because the rules of the arbitral forum provide for interim and injunctive relief. The
American Arbitration Association (“AAA”) – the entity to which the parties agreed in the Mentor
Agreement to submit disputes – has promulgated rules that govern its arbitrations, including that
“[a] party in need of emergency relief prior to the constitution of the panel shall notify the AAA
and all other parties in writing of the nature of the relief sought and the reasons why such relief is
required on an emergency basis.” Am. Arb. Ass’n., Commercial Arbitration Rules & Mediation
Process at 24 (Oct. 1, 2013), https://adr.org/sites/default/files/document_repository/
Commercial%20Rules.pdf; see also Mentor Agreement ¶ 11 (“The arbitration shall be conducted
by a single arbitrator in accordance with the Rules of Arbitration of the American Arbitration
Association, as then in effect.”).
Plaintiff also contends that the Court has the power to enter an injunction to maintain the
status quo while the arbitration is pending. Pl.’s Opp. at 5–6. But the cases cited by plaintiff limit
that authority to particular circumstances, and they call for a showing in addition to, and different
from, the sort of harm that would support preliminary injunctive relief. “When the parties have
agreed to arbitrate a dispute, a court may issue an injunction if, in addition to the usual equitable
concerns, the integrity of the arbitration process would be threatened absent interim relief.” Am.
Postal Workers Union, AFL-CIO v. USPS, 372 F. Supp. 2d 83, 90–91 (D.D.C. 2005), quoting Int’l
Bhd. of Elec. Workers, Local 1900 v. PEPCO, 634 F. Supp. 642, 643 (D.D.C. 1986). “[A]n
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injunction in aid of arbitration is appropriate . . . only when the actual or threatened harm to the
aggrieved party amounts to a frustration or vitiation of arbitration.” Id. at 91, quoting Local Lodge
No. 1266, Int’l Ass’n of Machinists & Aerospace Workers, AFL-CIO v. Panoramic Corp., 668
F.2d 276, 286 (7th Cir. 1981).
Plaintiff has not begun to make the necessary showing – indeed, it does not expressly argue
that there is some threat to the arbitration itself. In its memorandum in support of the motion for
a preliminary injunction plaintiff makes a passing statement that RWD is “permanently dissipating
the source of funds intended for payment to TKS.” PI Mem. at 5–6. But this unsupported
conclusory allegation does not constitute evidence that the integrity of the arbitration is at risk or
that RWD will be unable to fund an eventual award.
Plaintiff posits that the arbitration process will be “essentially meaningless” absent an
injunction because TKS will suffer irreparable harm in the meantime. Pl.’s Opp. at 6. But a
showing of irreparable harm is one of the “usual equitable concerns” that a party seeking an
injunction must establish in addition to the threat to the arbitration; it is not an independent reason
in support of an injunction in aid of arbitration. And, as noted above, if plaintiff is in dire financial
straits, it is free to seek interim relief from the arbitrators.
Moreover, it is not at all clear that TKS has met its burden to establish irreparable harm.
“First, the harm must be ‘certain and great,’ ‘actual and theoretical,’ and so ‘imminent that there
is a clear and present need for equitable relief to prevent irreparable harm.’ Second, the harm
‘must be beyond remediation.’” Newby, 838 F.3d at 7–8, quoting Chaplaincy of Full Gospel
Churches, 454 F.3d at 297.
Plaintiff argues that it has suffered irreparable harm based on “[t]he loss of funds and
equipment, the loss of access to the [EPA building], and the continued bad acts by the Defendant
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in depriving TKS of its lawfully owned property.” PI Mem. at 8. But because economic losses
are seldom beyond remediation, “[i]t is . . . well settled that economic loss does not, in and of itself,
constitute irreparable harm.” Wis. Gas Co. v. FERC, 758 F.2d 669, 674 (D.C. Cir. 1985); see also
Davis, 571 F.3d at 1295. Economic loss can constitute irreparable injury only in limited
circumstances: where “monetary loss . . . threatens the very existence of the movant’s business,”
Wis. Gas., 758 F.2d at 674, or where the claimed economic loss is “certain, imminent, and
unrecoverable.” Nat’l Mining Ass’n v. Jackson, 768 F. Supp. 2d 34, 53 (D.D.C. 2011); see also
Sterling Comm. Credit–Mich., LLC v. Phx. Indus. I, LLC, 762 F. Supp. 2d 8, 15 (D.D.C. 2011)
(“The critical consideration under this exception is the effect that the purported economic harm
will have on a movant’s business or its very existence – not any monetary amount per se.”).
In support of its motion for preliminary injunction, plaintiff submitted the declaration of
Chief Executive Officer James Kim, who predicted that because “[t]he income from the Mentor
Agreement constitutes a large percentage of TKS’s overall revenues[,] [w]ithout this income, TKS
will be forced to go out of business in a matter of months.” Verified Statement of James Kim, Ex.
B to PI Mot. [Dkt. # 2] ¶ 28. This did little to make the necessary showing of a threat to the
company’s very existence, but plaintiff submitted additional detail concerning its finances in its
reply.
Plaintiff’s financial records show that the loss of the revenue from the contract with RWD
will diminish its projected total annual revenue by 17.68%. See Ex. A to Verified Statement of
William Arnold [Dkt. # 12-1]. “A claim of substantial financial losses must be evaluated from the
perspective of the organization’s total revenues in order to determine if the harm is of a magnitude
that warrants injunctive relief.” ConverDyn v. Moniz, 68 F. Supp. 3d 34, 48 (D.D.C. 2014), and
the losses in plaintiffs’ projections do not necessarily rise to the level of irreparable harm. See
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Experience Works, Inc. v. Chao, 267 F. Supp. 2d 93, 96 (D.D.C. 2003) (finding that a reduction of
approximately 24% of the plaintiff’s funding would not constitute irreparable harm).
Plaintiff presented additional evidence showing that without the income from the
subcontract at issue, it will be facing a negative cash flow situation as of August 2017, and this
will affect plaintiff’s ability to meet its obligations under a Chapter 11 Reorganization plan filed
in the U.S. Bankruptcy Court for the Eastern District of Virginia. Verified Statement of William
Arnold, Ex. 1 to Pl.’s Reply [Dkt. # 12-1] ¶¶ 12–13. But the force of plaintiff’s request that the
Court respond to this claimed emergency is undermined by plaintiff’s own delay in bringing a
lawsuit. While TKS alleges that the contract was breached on March 23, 2017, it waited until June
13, 2017 – almost three months later – to file its complaint and motion for preliminary injunction,
and it assumed the risk of further delay by choosing this forum in the face of the binding arbitration
clause. See, e.g., Fund for Animals v. Frizzell, 530 F.2d 982, 987 (D.C. Cir. 1975) (finding a 44-
day delay in bringing a motion for injunctive relief to be “inexcusable”); Newdow v. Bush, 355 F.
Supp. 2d 265, 292 (D.D.C. 2005) (“An unexcused delay in seeking extraordinary injunctive relief
may be grounds for denial because such delay implies a lack of urgency and irreparable harm.”). 3
Moreover, defendant RWD has come forward with evidence that undercuts plaintiff’s
3 Plaintiff also contends that, in addition to economic damages, it has suffered “damage
. . . to [its] business reputation.” Pl.’s Mem. at 9. (“[I]n refusing to honor RWD’s legal, contractual
obligations . . . TKS’s business reputation continues to be harmed. Chimes and other government
contractors are all parties with whom TKS continuously conducts business. It has nurtured and
now greatly relies upon these critical relationships to be able to conduct business. Should those
relationships continue to be damaged, TKS will be irreparably harmed.”). But this allegation is
wholly conclusory, and it is not a sufficient basis for extraordinary injunctive relief. See Sampson,
415 U.S. at 90–91; Trudeau v. FTC, 384 F. Supp. 2d 281, 296–97 (D.D.C. 2005) (holding that “the
showing of reputational harm must be concrete and corroborated, not merely speculative”).
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characterization of its financial circumstances. See Def.’s Opp. at 14–15. But ultimately, the Court
need not resolve these factual questions because it has come to the firm conclusion that it may not.
In the end, the answer to the question posed by the motion to compel arbitration and the
opposition becomes clear upon a review of the proposed order that plaintiff would have the Court
enter, supposedly “to maintain the status quo.”4 Plaintiff has submitted a seven page proposed
injunction, which is chock full of findings about the terms of the contract and the strength of
plaintiff’s allegations concerning RWD’s alleged breach. See Proposed Order [Dkt. # 14] ¶ 5
(“Plaintiff has properly alleged, and supported by verified statement(s), that Defendant’s
termination of Plaintiff under the Mentor Agreement was effected without notice expressly
required under the terms and conditions of such agreement.”). And the order would impose the
following requirements, among others:
A. Defendant shall immediately reinstate Plaintiff to, and Plaintiff should
thereafter perform, its operational and financial oversight and management
of the building operational and maintenance related services provided for
the EPA Building.
B. Plaintiff shall perform all contract services required at the EPA Building
except those expressly intended for Defendant.
...
G. From time to time, follow on or supplemental work may be ordered or
requested with respect to the EPA Building (“Reimbursable Projects”).
4 A preliminary injunction is ordinarily sought to preserve the status quo pending the
resolution of the underlying litigation. City of Moundridge v. Exxon Mobil Corp., 429 F. Supp. 2d
117, 126 (D.D.C. 2006). It is questionable whether the proposed injunction can fairly be
characterized as such an order since plaintiff, which has not been working at the EPA’s
headquarters since late March, is asking to be “reinstated.” Proposed Order at 5. Courts have held
that a preliminary injunction that would change the status quo is an even more extraordinary
remedy. Exxon Mobil Corp., 429 F. Supp. 2d at 126–27; Spadone v. McHugh, 842 F. Supp. 2d
295, 301 (D.D.C. 2012) (“In this Circuit, the power to issue a preliminary injunction, especially a
mandatory one, should be sparingly exercised.”), quoting Mylan Pharms., Inc. v. Shalala, 81 F.
Supp. 2d 30, 36 (D.D.C. 2000).
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Income generated or received with respect to each and any such
Reimbursable Project shall be distributed as follows:
a. All G&A, direct costs and incidental costs associated with a
Reimbursable Project shall first be paid to Plaintiff on a monthly
basis after receipt of payment for services.
b. The net profits from any Reimbursable Project shall thereafter
accrue to the parties in the following percentages: 51% to Defendant
and 49% to Plaintiff, with such profits being distributable on a
monthly basis after payment of all G&A, direct and indirect
expenses associated with each such Reimbursable Project.
Proposed Order at 5–6.
While the Eighth Circuit stands alone in its view that any preliminary injunction in aid of
arbitration would be prohibited, the Court agrees with that court’s observation that “the judicial
inquiry requisite to determine the propriety of injunctive relief necessarily would inject the court
into the merits of issues more appropriately left to the arbitrator.” Merrill Lynch, Pierce, Fenner
& Smith, Inc. v. Hovey, 726 F.2d 1286, 1292 (8th Cir. 1984). The four-pronged analysis necessary
under Rule 65, and particularly, the inquiry TKS is asking the Court to undertake in order to grant
the specific relief it is seeking here, is a merits based inquiry. Since the merits of the contract
dispute and the preliminary injunction requested in this case are inextricably intertwined, the Court
cannot treat the motion for a preliminary injunction separately from the complaint to which it is
attached, and it must dismiss the case. For all of these reasons, the motion to compel arbitration
will be granted, and the motion for a preliminary injunction will be denied as moot.
AMY BERMAN JACKSON
United States District Judge
DATE: June 23, 2017
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