The opinion of the court was delivered by: PRATT
JOHN H. PRATT, United States District Judge.
We have previously considered this case on several occasions
and will not, therefore, recite again the detailed background of this action. Suffice it to say that on May 13, 1986 we issued an order which, inter alia, permanently enjoined the defendants
and their representatives from issuing any notices of default under the Ground Lease without first obtaining the prior approval of this court, until plaintiffs obtained permanent financing for the construction and development of the 1250 24th Street project. Plaintiffs now move for a modification of that injunction since it now appears that certain recent acts of the defendants are designed to circumvent the purpose of our May 13, 1986 order. Specifically, plaintiffs request that we modify our injunction to 1) bar defendants from re-asserting in any statements, written or oral, the existence of 'defaults' and 'breaches' which have been previously resolved; 2) restrain defendants from asserting in any estoppel certificate or other document the existence of any default without first obtaining the approval of this court; 3) require defendants to promptly execute documents "reasonably required" in connection with leasing and financing the building, including estoppel certificates; and 4) restrain defendants from commencing any litigation based on the existence of alleged defaults, breaches, or irregularities in the Ground Lease without first obtaining the approval of this court. For the reasons stated below, we modify our prior order in the manner specified. Plaintiffs have also requested that we appoint a receiver or trustee to act on behalf of the defendants, or a special master to assist us in the administration of this suit. For the reasons set forth, infra, we deny this request.
In our May 13, 1986 order we, as previously indicated, granted plaintiffs' motion for a permanent injunction restraining defendants and their representatives from issuing future default notices on the Ground Lease without obtaining the prior approval of this court. We indicated in our accompanying order that such approval would be based upon a showing that the proposed notice of default was made in "good faith" and with a "substantial and reasonable basis."
We issued the injunction based upon our determination that plaintiffs had previously issued a series of "spurious" default notices, and had "utterly failed to prove" in their motion for permission to issue a third default notice
that plaintiffs had, as alleged, defaulted on the Ground Lease when they removed certain side walls. May 13, 1986 Memorandum Opinion at 5, 19. We indicated at that time that, from the whole of defendants' conduct, "defendants appear[ed] determined somehow to . . . torpedo the entire enterprise".
Id. at 19.
We found that the issuance of similarly invalid notices would irreparably harm plaintiffs and jeopardize the entire development of plaintiffs' project. This was so because a notice of default from the landlord would operate as a default on the Leasehold Deed of Trust securing the construction from American Security Bank, and unless plaintiffs could obtain judicial relief within thirty days of the notice, the bank would be entitled to cut off additional advances under the loan. This would curtail construction, and threaten to destroy plaintiffs' entire investment in the project. We also found that there was no adequate remedy at law, because financial compensation, even if it were available from defendants who were then in bankruptcy, would not compensate plaintiffs for the injury to their business reputation and for the extended, and perhaps permanent, delay of the full development of their project.
Plaintiffs allege that defendants have continued to disrupt their "quiet enjoyment" at each and every turn -- litigating and relitigating an expanse of issues in the Bankruptcy, Federal and District of Columbia courts, and the arbitration and public policy arenas.
Despite the sea of litigation which has indisputably accompanied the construction and development of this project, the building at 1250 24th Street is now nearly complete, and project financing is entering into its final and critical stage. Plaintiffs argue that unless defendants are further enjoined, the project financing and leasing may be severely jeopardized, due to the "atmosphere of commercial unreasonableness and irrationality" which defendants have and will continue to create. Plaintiffs' Memorandum in Support of their Motion to Modify May 13, 1986 Injunction (Pltf. Memo.), at 21.
We clearly possess the jurisdiction and power to modify our original injunction so as to effectuate its intended purpose and result. It is beyond challenge that the standard for determining whether modification is appropriate is whether the purposes of the litigation as incorporated into the injunctive decree have been fully achieved. See United States v. United Shoe Machinery Corp., 391 U.S. 244, 252, 20 L. Ed. 2d 562, 88 S. Ct. 1496 (1968) (if an injunction has failed to achieve its intended results, the district court has the power and the duty to modify the order). See also Exxon Corp. v. Texas Motor Exchange of Houston, 628 F.2d 500, 503-04 (5th Cir. 1980) (an injunction may be modified to impose more stringent requirements on the defendants when the original purposes of the injunction are not being fulfilled); U.S. v. City of Chicago, 663 F.2d 1354, 1360 (7th Cir. 1981); Coleman v. Block, 632 F. Supp. 997, 1002 (D.N.D. 1986); 11 C. Wright & A. Miller, Federal Practice and Procedure § 2961 at 600, 602 (1973). Our essential inquiry, then, is whether modification is necessary in order to fulfill the original purpose of our injunctive order. We find that it is.
The central purpose of our May 13, 1986 injunctive order was to ensure that defendants would not be allowed to disrupt the financing of the 1250 24th Street project with groundless and spurious allegations. We indicated at that time that "every notice of default, no matter how frivolous and without merit, threaten[ed] to destroy plaintiffs' entire investment in the property." May 13, 1986 Memorandum Order, at 20. To this end, we issued an order restraining defendants from asserting spurious default notices.
Our primary intent was to restrain defendants from "torpedoing" the project by the use of baseless or harassing litigation techniques. At the same time, we deliberately framed our order so that defendants would retain their ability to issue default notices, should their claims be asserted in good faith, and with a "substantial and reasonable basis." Defendants have not gotten our message.
It is apparent from the manner in which defendants have proceeded that their primary motive here is not vindication of their legal rights, but rather harassment,
in the hopes that the plaintiffs will ultimately retreat. We find from the whole of the record in the related cases
before us that defendants have, since the issuance of our May 13, 1986 Memorandum Opinion, conducted a relentless campaign to litigate every possible issue, no matter how repetitious
or lacking in merit,
in order to harass plaintiffs, and to make leasing and permanent financing much more difficult and burdensome, if not impossible. Accordingly, defendants' conduct continues to jeopardize plaintiffs' ability to obtain permanent financing and to complete leasing the building.
Thus, a modification of our May 13, 1986 order is necessary to fulfill our original purpose -- i.e. to ensure that the project is not sabotaged by extensive but baseless claims and litigation efforts which create an aura of commercial unreasonableness, and thus significantly discourage potential permanent lenders from investing in the project. The essential question before us then is what form the modification or our May 13, 1986 order should take. Acting as a court of equity we possess considerable flexibility in structuring an appropriate remedy. See Hecht Co. v. Bowles, 321 U.S. 321, 329-30, 88 L. Ed. 754, 64 S. Ct. 587 (1944) ("the essence of equity jurisdiction ...