Preparing for the Sprint: Practical Tips for Litigating TROs and Preliminary

Injunctions

Presented by Lindsay C. Harrison, Partner, Jenner & Block LLP & Theresa Coetzee, Vice President and Assistant General Counsel - Dispute Resolution,

Marriott International, Inc.

April 9, 2014 12:00 – 2:00 PM EST

Your Presenters Theresa Coetzee Theresa Coetzee is Vice President and Assistant General Counsel - Dispute Resolution at Marriott International, Inc. where she manages a varied docket of general commercial, class action and patent litigation. Her practice involves a significant amount of international arbitration and covers all Marriott brands - worldwide. In this position she also teams with her business partners to assess and minimize risk in wide variety of transactions and initiatives. Additionally, with the Senior Director of the law department's technology and records management teams reporting to her, Theresa supervises the department's technology and records management initiatives. Prior to joining Marriott Theresa served as Assistant General Counsel for Litigation at Verizon Business. Her role at Verizon Business evolved from her work at MCI, Inc. Before beginning her in-house service, Theresa developed her litigation and antitrust expertise in private practice, including at the law firm of Collier Shannon Scott, PLLC (now Kelley Drye & Warren), in Washington, D.C. Theresa is a former Co-Chair of the Litigation Steering Committee of the District of Columbia Bar and has been an Adjunct Professor of Legal Research and Writing at George Washington University Law School. She is a graduate of Colgate University and the University of Denver, College of Law.

Your Presenters Lindsay C. Harrison Lindsay C. Harrison is a Partner at Jenner & Block LLP. She is a member of the Firm’s Appellate & Supreme Court Practice Group and co-leader of the Firm’s Hospitality and Gaming Group. She regularly participates in appellate litigation matters before the federal appellate courts and the Supreme Court in a wide variety of subject matters. Corporations and individuals turn to her for help with litigation in federal and state trial courts, as well as in arbitration, including international arbitration before the International Centre for Dispute Resolution. She has substantial experience litigating matters involving the hospitality industry, successfully representing hotel management companies in high-stakes, multi-million dollar lawsuits and arbitrations. In 2013, she was named to the BTI Consulting Group’s Client Service All-Star List. Ms. Harrison has a substantial pro bono practice, which has included a successful argument before the Supreme Court on behalf of an asylum-seeker and the ongoing representation of a death row inmate in Georgia. For her work in the landmark immigration case of Nken v. Holder, Ms. Harrison was awarded the 2008 Albert E. Jenner, Jr. Pro Bono Award. Ms. Harrison is a member of the Edward Coke Appellate Inn of Court. In 2010, Ms. Harrison received the inaugural Rosner and Rosner Young Professionalism Award from the American Bar Association. She has also chaired the Amicus Committee of the Women’s Bar Association of the District of Columbia. She is a member of the Firm's Finance Committee, Associate Development and Evaluation Committee, and Alternative Billing Committee.

Overview of Today’s CLE

• Part I – Legal Background

• Part II – Case Study: Moving Party

• Part III – Defensive Strategy

• Part IV – Specific Contexts

– Trademark/Copyright/Patent

– Trade secrets

– Non-compete

PART I:

LEGAL BACKGROUND

Temporary Restraining Orders

• For true emergencies only

• To preserve the status quo.

• Until the court has an opportunity to conduct an evidentiary hearing and rule on a motion for preliminary injunction.

• Irreparable harm is the sine qua non.

• The court will not decide disputed facts or the merits in the context of a motion for a TRO.

Temporary Restraining Orders

Two kinds:

–Without Notice (ex parte)

–With Notice

Temporary Restraining Orders

Without Notice -- FRCP 65(b)(1): – Disfavored, especially in commercial disputes – Must be supported by a verified complaint or affidavit(s). – Plaintiff’s attorney must submit a declaration indicating

the steps taken to attempt to notify the opposing party of the ex parte motion.

– Must demonstrate that “immediate and irreparable injury,

loss or damage will result before the adverse party can be heard in opposition”

Temporary Restraining Orders

TRO with Notice

–Where a TRO is entered with notice but without an evidentiary hearing, the TRO should be for a limited duration until an evidentiary hearing can be held.

–Notice, even made to the attorney rather than the adverse party, is preferred over no notice at all.

Temporary Restraining Orders

The Form of TRO:

– Shall contain the reasons for entry of the TRO

– Shall be specific in terms

– Shall describe in reasonable detail, without reference to other documents, the act sought to be restrained

Temporary Restraining Orders

The Form of Ex Parte TRO:

Same requirements as TRO With Notice plus it must: – be endorsed with the date and hour of signing – define the injury and state why it is irreparable – explain why no notice was given – expire by its own terms, not to exceed 10 days – set the motion for a preliminary injunction for

hearing at the earliest possible time – be filed immediately in the clerk’s office

Preliminary Injunctions

Federal Rule: FRCP 65(a) • Standard is same for TRO and PI. • Preliminary injunction requires notice to adverse party. • Duration of PI not restricted to minimal number of days. • Although Rule 65(a) does not expressly require an

evidentiary hearing, in practice one is usually held. • Preliminary injunction hearing may be consolidated with

the trial on the merits under FRCP 65(a)(2) provided the parties are given sufficient notice consistent with due process.

Temporary Restraining Orders

Factual Basis for TRO and Preliminary Injunction

– Verified Complaint and/or Affidavits – The verified complaint should allege the specific

facts that support injunctive relief. – Material allegations must be based on admissible

facts, not hearsay, speculation, or “information and belief.” Conclusory allegations are insufficient.

The Bond Requirement

A bond is required.

“The court may issue a preliminary injunction or a temporary restraining order only if the movant gives security in an amount that the court considers proper to pay the costs and damages sustained by any party found to have been wrongfully enjoined or restrained.”

FRCP 65(c)

The Bond Requirement

• The issuance of a bond is mandatory, absent extraordinary circumstances.

• The amount is left to the discretion of the court.

• The purpose is to guarantee payment of costs and damages incurred by a party who is wrongfully enjoined or restrained.

• The bond need not be presented with the request for TRO; however, the TRO will not be effective unless and until a bond has been posted.

The Legal Standard

1) Irreparable Harm

2) A Likelihood of Success on the Merits

3) Balancing of Hardships

4) Impact on Public Interest

Irreparable Harm

• Irreparable injury is defined as “harm that cannot be prevented or fully rectified by the final judgment after trial.”

• If the TRO is sought ex parte, the injury must be immediate and irreparable.

• Harm must be to a legally protectable interest.

Irreparable Harm

To qualify as irreparable harm, there must be no adequate remedy at law. • An adequate remedy is one that is clear, complete, and as

practical and efficient as the potential equitable remedy. • Inadequate damages does not mean wholly ineffectual;

means “seriously deficient as a remedy for the harm suffered.”

• Courts are unlikely to find irreparable harm where the complaint is for breach of contract and the trial court could award damages if a breach is found.

Irreparable Harm Examples: – Transgressions of a continuing nature (e.g., being forced to

continue operating a business under harmful conditions). – The damage award may come too late to save the plaintiff’s

business. – Damages very difficult to calculate (e.g., loss of customer goodwill

and reputational damage) – The plaintiff may not be able to finance its lawsuit against the

defendant without the revenues from its business that the defendant is threatening to destroy.

– Significant risk that defendant will become insolvent before

damages can be recovered. **Not every state recognizes the same kinds of harm as irreparable.**

Likelihood of Success

• How great a likelihood is required can vary.

• No court will require an action to have a certainty, or even near-certainty of success.

• “It is enough that ‘the plaintiff’s chances are better than negligible.’”

• The “threshold is low.”

• This standard “does not require a finding that it is more likely than not that one side will prevail.”

• The court must determine how likely the success is, because this affects the balancing of the relative harms.

Balancing of Hardships

• The irreparable harm the non-movant will suffer if an injunction is granted is weighed against the irreparable damage the movant will suffer if it is not.

• The balancing of the harms involves a “sliding scale” analysis – the greater the movant’s likelihood of success on the merits, the less strong a showing the movant must make that the balancing of harms weighs in its favor.

• In weighing the harm to the non-moving party, the court considers whether an injunction bond would compensate those harms.

Public Interest

• The primary concern here is to ensure that issuing an injunction will not disserve or harm the public interest.

• If the public interest would be harmed by the injunctive relief sought, then this factor weighs in favor of denying the TRO.

• If the public interest would be positively affected, then this factor weighs in favor of granting the TRO.

• An injunction may denied where it would disrupt state or local government functions.

• In most commercial disputes, this factor is a wash.

After the TRO Hearing

Expiration and Extension Motions to Dissolve Effect of Removal Appeals Damages for Wrongfully Issued TRO

Expiration and Extension

• Under FRCP 65(b)(2), a TRO entered without notice “expires at the time after entry—not to exceed 14 days—that the court sets, unless before that time the court, for good cause, extends it for a like period or the adverse party consents to a longer extension. The reasons for an extension must be entered in the record.”

• Expiration period in state courts vary. • A TRO may be extended by agreement of the parties.

Motions to Dissolve • If a TRO is entered ex parte, the defendant may file a motion to

dissolve the order. • The motion should be filed as soon as possible, and should

request a hearing within two days of the TRO being served. FRCP 65(b).

• Whether to dissolve a TRO is in the discretion of the trial court and circumstances justifying dissolution include: • Changed circumstances since issuance of TRO • Equity no longer justifies its continuance. • Non-movant demonstrates injury from continued

imposition of injunctive relief.

Effect of Removal to Federal Court

• If a case is removed after a TRO or preliminary injunction is issued, the TRO or preliminary injunction remains in effect under 28 U.S.C. § 1450: “Whenever any action is removed from a State court to a district court of the United States . . . [a]ll injunctions, orders, and other proceedings had in such action prior to its removal shall remain in full force and effect until dissolved or modified by the district court.”

• The party that removes the case can move to dissolve or modify the injunction shortly after the case is removed per FRCP 65(a).

Appeals

Federal court: TROs generally are not appealable. TROs are appealable only if they have the effect of a preliminary injunction (e.g., extended beyond 28 days). State courts: Grants and denials of TROs or preliminary injunctions may be appealed depending on the state.

Damages for Wrongfully Issued TRO

• To collect damages on a TRO bond, must prove (a) the TRO was wrongfully issued, and (b) damages suffered as a result of the wrongfully issued TRO.

• If the court enters a TRO but then later denies the preliminary injunction, that is strong but not definitive evidence that TRO was wrongfully issued.

• If a party demonstrates that its opponent wrongfully obtained a TRO, its right to damages is presumed and can only be rebutted by a showing of “good reason.” Good faith in seeking the TRO is not a “good reason.”

• The party seeking damages has the burden to prove what non-speculative damages were proximately caused by the TRO. Damages are limited to those actual damages suffered during the life of the TRO.

• Costs are recoverable, but attorney’s fees are usually not.

PART II:

CASE STUDY – MOVING PARTY

Case Study

Case Study – Facts

• Contract between a hotel operating company and a hotel owner permits operator to manage the Hotel for 50 years in exchange for management fees

• Hotel owner wants the operator out.

• Facts suggest that the hotel owner may be planning a hostile midnight raid to takeover the Hotel.

Case Study

Case Study

Case Study

Case Study - Facts

Hotel operator has strong incentive to avoid a hostile midnight raid:

• Recovering damages difficult - owner is an SPE

• Disruption to brand-loyal guests

• Reputational harm

• Proprietary information could fall into hands of competitors

Case Study - When to file

• Can you characterize the relief you seek as preserving the status quo?

• Do you have enough admissible facts to support a TRO?

• Is an existing lawsuit pending such that you may avoid undue delay?

Practice Tip: Have your local counsel call the Court or Clerk’s Office in advance to let them know an emergency filing is on its way and to

request a hearing date.

Case Study – Where to File

• If case could be brought in either forum, how favorable is federal vs. state court?

– How busy are the judges in your jurisdiction?

– Is there a duty judge on call to hear TROs?

• Confirm the court will have subject-matter and personal jurisdiction and that venue is proper.

Practice Tip: Good local counsel can make the difference when deciding where and how to file a motion for TRO or preliminary injunction.

Case Study – What to File

• A request for an ex parte TRO must be supported by a verified complaint or affidavits, but this is good practice for any request for any TRO. Consider the need for more than one “verifier.”

• Affidavit accompanying motion must be based on facts, not hearsay, speculation, or “information and belief.”

• Along with the verified complaint, present a motion and supporting brief for a TRO and a preliminary injunction with any necessary supporting affidavits. Make sure all factual statements are true and support a prima facie case for relief.

Practice Tip: Don’t over-reach with affidavits.

They are a road map for cross-examination.

Case Study – What to File

• Seek relief that is reasonable and narrowly tailored to preserve the status quo and prevent irreparable harm. Explain why harm is truly irreparable.

• Prepare a draft order with the required components and the requested relief plainly stated. Consider whether to include a timeframe for the duration of the TRO and a date for a PI hearing.

• If seeking a TRO without notice, be prepared to explain what efforts were made to give notice (this is required by declaration in federal court).

Case Study – Bond Strategy

• Argue why bond should not be required, but be prepared to post bond.

• Argue for a minimal bond by directing the court’s attention to: (1) the economic hardship to the moving party; (2) the public purpose for which the TRO was brought; (3) the fact that constitutional rights are in issue; and/or (4) that the likelihood of harm to the enjoined party is minimal. Make sure the facts supporting these arguments appear in the complaint.

Case Study – Discovery Strategy

• Prepare discovery needed for a preliminary injunction hearing or a trial on the merits.

• Consider filing a motion for expedited discovery if you will need it for the hearing.

• Anticipate discovery requests from the defendant and develop a strategy of quick response to discovery requests.

Practice Tip: If your filing for a TRO is likely to cause relevant witnesses or documents to disappear, consider seeking preservation or inspection as relief in your proposed TRO.

Case Study – Discovery Strategy

• TROs and Preliminary Injunctions are often fast-moving, but don’t forget to issue your own preservation notice.

• Remind businesspeople to be mindful even during the emergency that their communications may be discoverable.

Case Study – Hearing Strategy

• If the TRO is denied, press for a quick preliminary injunction hearing.

• Consider whether to seek to combine the preliminary injunction hearing with a trial on the merits.

• Consider a negotiated resolution at every stage.

Practice Tip: Check with your witnesses before filing for a TRO to confirm their availability for the preliminary injunction hearing.

PART III:

DEFENSIVE STRATEGY

Defensive Strategy – Immediate

• Remind outside counsel to run conflicts check as soon as they get the call so you don’t have to switch attorneys mid-case.

• Same preservation obligations as moving party – issue preservation notice immediately

Defensive Strategy - Jurisdiction

• Confirm that the litigation is in the right forum by considering issues of personal and subject-matter jurisdiction, and venue.

• Consider whether the case can and/or should be removed to federal court.

Defensive Strategy - Dismissal

• Determine if the complaint will survive a motion to dismiss. Consider filing a joint memorandum in opposition to the TRO and in support of a motion to dismiss.

• Focus on any conclusory allegations or allegations pled using hearsay or based on “information and belief.” These cannot support a TRO.

Defensive Strategy – The Court

• Inform the court of your intention to file a motion to dismiss or verified answer. If the complaint states a claim, present the verified answer at the TRO hearing or ASAP.

• Confirm ground rules with the court; the issue is whether the court should enter a short-term TRO until there can be an evidentiary hearing.

Defensive Strategy – Briefing the TRO

• Prepare a short brief opposing the TRO. Consider whether to file the brief or present it orally.

• Emphasize disputes of fact that should prevent entry of a TRO until after an evidentiary hearing.

• If the TRO will be for an extended period before the preliminary injunction hearing can be held, argue that the TRO effectively would be a preliminary injunction, and note that it would be reversible error to enter a preliminary injunction without an evidentiary hearing. The court should not enter a preliminary injunction (or its equivalent) without an evidentiary hearing.

Defensive Strategy - Submissions

• Think about the pros and cons of submitting counter-affidavits, keeping in mind that the hearing on the TRO should not be an evidentiary hearing.

• Prepare a verified answer denying the material allegations. If there is insufficient time to prepare a complete answer, deny the material allegations, if possible.

Defensive Strategy - Bond

• Be prepared to argue for a significant bond if a TRO is entered.

• Remind the court that it may only excuse a bond for “good cause,” and should only do so sparingly to avoid “spurious litigation.” In commercial cases, the moving party is presumed capable of bearing most bond requirements.

• Emphasize the potential damages of a wrongfully entered injunction.

Defensive Strategy – Delay and Discovery

• If the TRO is entered, press for a quick preliminary injunction hearing. If the TRO is denied, delay may be in your favor.

• Consider what discovery you need for a preliminary injunction hearing.

• Prepare discovery requests and consider whether to move for expedited discovery.

PART IV:

TROs & PRELIMINARY INJUNCTIONS IN SPECIFIC

CONTEXTS

Specific Contexts

– Trademark/Copyright/Patent

– Trade secrets

– Non-compete