An injunction is just about the most powerful weapon a litigant has. If a plaintiff manages to convince a court to forbid the defendant from doing something -- from firing a worker or terminating a dealership arrangement or concluding a merger -- the dispute is never likely to get to a trial on the merits of the charge. The defendant will be willing to give the plaintiff much of what he's asking in order to get a quick resolution of the issue. But if the defendant convinces the court not to issue the preliminary injunction, time is on his side. An out-of-court settlement is less likely, and if there is one it will be on terms much different from what the plaintiff wanted.
An Aug. 31 ruling from the U.S. Court of Appeals in Chicago, however, makes the trial judge's decision on whether or not to issue an injunction a lot less important than it was before. That's because the judges laid down new rules for appellate reviews of injunctions that treat them with much less deference than before. The new standard gives circuit court judges reviewing trial court decisions in Indiana, Illinois and Wisconsin a good bit more clout that most of their peers in other circuits.
Courts over the years have not been crystal clear about when a reviewing court should tell a trial court judge that he or she was wrong in issuing an injunction -- or in refusing to issue one. But the general rule was that the first order should be overturned only if it was an "abuse of discretion" -- if it was such an off-the-wall ruling that the appellate judges could not see how any rational person could have come to that conclusion. With that standard, it was awfully tough for anyone who lost at the district court level to win on appeal.
"This may be the appropriate formula when reviewing a determination as to whether a discovery order should have been sustained," appellate Judge Richard Posner explained in the new ruling in Roland Machinery Co. v. Dresser Industries. "But it is not the appropriate formula for reviewing orders granting or denying preliminary injunctions." Instead, the appeals court said the reviewing court should ask merely whether the trial court judge got it wrong -- in other words, whether or not the reviewing court judges would have come to a different conclusion. "If the reviewing court is firmly convinced that the trial judge erred in granting or denying a preliminary injunction, it must reverse," Posner explained.
There is lot of room for disagreement (and therefore a greater-than-usual chance for reversal) because the question of whether to grant an injunction is not really a matter of law but of equity -- in other words, of deciding what, given all the circumstances, is most fair. That, in fact, is just what happened in Roland v. Dresser. The appellate court told Dresser that it was free to cancel its dealership arrangement with Roland because the distributor had taken on a competing line of Japanese construction equipment. The trial court had enjoined the termination.
In other cases, courts ruled that:
* The Internal Revenue Service cannot force lawyers to help in the prosecution of their clients. The tax authorities disagreed with a lawyer who analyzed real estate tax-shelter deals for clients, and then advised that his fees were really brokerage charges that couldn't be written off on tax returns. In order to track down all the taxpayers who had deducted the fees, Treasury got a summons ordering the lawyer to turn over list of all the clients who had paid fees in connection with real estate investments. But the U.S. Court of Appeals in Philadelphia ruled the summons unenforceable, saying that it would allow too much government snooping into what are supposed to be confidential dealings between attorney and client. (U.S. v. Liebman, Sept. 13)
* Handicapped federal workers who think they have suffered from job bias must give the agency a chance to right the matter before going to court. The ruling, from the U.S. Court of Appeals in Cincinnati, is the first ever on the question, and greatly eases the burden for the government. The judges rejected the claims of a postal worker with cerebral palsy, who argued that the 1978 Rehabilitation Act amendments, which allow federal employes to sue if they were discriminated against because of handicaps, was a direct pass to the courthouse. Would-be plaintiffs still must try to settle matters through the administrative route before they can sue, the court ruled. (Smith v. USPS, Sept. 10)
* The government can continue to try to collect a criminal fine from a company that has filed for bankruptcy. The idea of filing for bankruptcy, of course, is to get protection from having to pay outstanding obligations, including court judgments in civil cases. But the U.S. District Court in Greensboro, N.C., ruled that the purpose of a criminal fine is not to get a monetary advantage over a company, but to punish it. As Chief Judge Hiram H. Ward explained, just as an individual who has declared bankruptcy still can be sent to jail for crimes, so a company in reorganization can be made to pay fines designed as punishment for misdeeds. (U.S. v. Troxler Hosiery Co., July 27)
* Accountants who come up with a wrong value for property being divided in a divorce proceeding can be sued for their mistake. The New Jersey Supreme Court okayed such a suit against a firm appointed by a divorce court judge to figure out the dollar worth of the husband's share of a closely held corporation. Both litigants had agreed to accept the accountant's figures, but the husband later decided they were far too high. Arbitrators appointed by a court to reconcile two sides cannot be sued if the deal they impose turns out to be unfair, but the state justices found the accountants to be more like appraisers than arbitrators. Appraisers can be forced to pay damages if their work is faulty. (Levine v. Wiss & Co., July 31)