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COLUMBIA HOSP. FOR WOMEN FOUND. v. BANK OF TOKYO-M

December 23, 1997

COLUMBIA HOSPITAL FOR WOMEN FOUNDATION, INC., et al., Plaintiffs,
v.
THE BANK OF TOKYO-MITSUBISHI, LTD, Defendant.



The opinion of the court was delivered by: KOLLAR-KOTELLY

MEMORANDUM OPINION

 This case requires the Court to determine the scope of its power to issue a preliminary mandatory injunction against the Bank of Tokyo-Mitsubishi that would compel the Bank to release to the Plaintiffs $ 11.3 million dollars and a first deed of trust on real property that the Defendant holds as collateral. Because of the imminent harm that the Plaintiffs claim will follow if they do not obtain the relief that they seek, this Court ordered the parties to brief the issues on a highly expedited schedule. *fn1" Having carefully reviewed the pleadings and the affidavits in support thereof, the oral arguments presented by counsel at the court hearing on December 19, 1997, and the governing law, the Court is compelled to deny Plaintiffs' Application for a Preliminary Injunction.

 I. BACKGROUND

 Plaintiffs in the above-captioned action are three not-for-profit corporations in the District of Columbia: Columbia Hospital for Women Foundation, Inc. ("Foundation"); Columbia Hospital for Women Medical Center, Inc. ("Medical Center"); and Columbia Hospital for Women, Inc. ("Hospital"). For over 130 years, the Hospital has provided specialized medical services for women and newborns in the Washington metropolitan area. In 1988, the District of Columbia issued $ 25 million in variable rate demand/fixed rate hospital revenue bonds ("Bonds"). The District of Columbia, through its Trustee, American Security Bank, N.A., loaned the proceeds of the bond sale to the Hospital to finance its expansion and renovation. Under the agreement, the Hospital would pay the principal and interest on the Bonds when due. As a condition of this arrangement, however, the Hospital was required to provide a letter of credit to secure its payment obligations. Defendant Bank of Tokyo-Mitsubishi agreed to issue a satisfactory letter of credit in the amount of $ 25,513,699, upon which the Trustee could draw if the Hospital failed to pay the bondholders. Originally scheduled to expire on December 12, 1993, the letter of credit has been renewed subsequently on numerous occasions. The action before the Court challenges the validity and binding effect of two such extensions.

 A. The Pledge Agreement for $ 11.3 Million.

 On January 10, 1997, Susan Hansen, the President and Chief Executive Officer of Columbia Hospital for Women, entered into an agreement with the Bank to renew the letter of credit. In consideration for the Bank's decision to extend the letter of credit, the Hospital pledged approximately $ 11.3 million in collateral ("Pledge Agreement"). At issue in this litigation is the power, if any, that Ms. Hansen possessed to bind the Hospital to the terms of the Pledge Agreement. Plaintiffs claim that the three board's-of-directors, whose approval under the by-laws is essential, never formally sanctioned Ms. Hansen's proposal to enter into the Pledge Agreement. The principal bases for Plaintiffs' attack are that the boards "approved" the Pledge Agreement without a quorum of members and that some members cast proxy votes--a procedure that the by-laws expressly prohibit.

 B. The Receiver Pendente Lite's Decision to Grant the Bank a First Deed of Trust on the Hospital's Property.

 On March 4, 1997, certain board members filed an application in the Superior Court for the District of Columbia that was styled as an Application for Court Supervised Liquidation and Receivership. Judge Rafael Diaz appointed Dan J. Oldani as Receiver pendente lite until the court could conduct a full hearing on the application. In the interim, Mr. Oldani negotiated with the Bank to arrange another extension of the letter of credit, which was due to expire on April 3, 1997. Prior to finalizing any agreement, the Superior Court, Judge Ann O'Regan Keary presiding, entered an Order that explicitly conferred on the Receiver pendente lite broad powers "to enter an extension of the Letter of Credit." Mr. Oldani subsequently granted the Bank a first deed of trust on the Hospital's real property in exchange for a six-month extension on the letter of credit. After a full hearing, on March 28, 1997, Judge Keary determined that the court lacked jurisdiction to appoint a liquidating receiver because none of the jurisdictional prerequisites for liquidating a corporation existed. Accordingly, Judge Keary issued an Order that dismissed the application for liquidation and terminated the appointment of Mr. Oldani as Receiver pendente lite effective April 2, 1997. See Pl.'s Motion for Preliminary Injunction, Exh. 3.

 Because many of the Hospital's board members resigned during the receivership proceedings, Judge Keary's Order compelled the Hospital to reconstitute its boards. The Hospital's current regime claims that it has made great strides to ameliorate the past board's inefficiencies. Despite the new board's nascent success, it confronts an urgent liquidity crisis. According to the Plaintiffs, because the Bank has tied up its greatest liquid asset, the $ 11.3 million reserved as collateral pursuant to the Pledge Agreement, coupled with an unexpected obligation to satisfy a liability to Blue Cross/Blue Shield that forced the Hospital to deplete its cash reserves, the Hospital cannot "remain in operation if it cannot have access to its cash and property." Pls.' Mot. for Prelim. Inj. at 10. With negotiations having collapsed, the Hospital now petitions this Court "to ease [the Bank's] needless restraints and thereby permit the hospital to survive." Id.

 II. PLAINTIFFS HAVE NOT DEMONSTRATED A SUFFICIENT LIKELIHOOD OF SUCCESS ON THE MERITS OF THEIR CLAIMS TO WARRANT IMPOSING A MANDATORY INJUNCTION ON THE DEFENDANT.

 A. The Calculus for Evaluating Preliminary Mandatory Injunctions.

 Initially, the Court notes that there is a sharp disagreement over what the Plaintiffs must demonstrate in order to obtain the relief that they seek. Typically, the Court examines four factors to inform its judgment about the propriety of granting a preliminary injunction: whether the moving party can demonstrate (1) a substantial likelihood of success on the merits, (2) that it would suffer irreparable injury if the injunction is not granted, (3) that an injunction would not substantially injure other interested parties, and (4) that the public interest would be furthered by the injunction. See CityFed Fin. v. Office of Thrift Supervision, 313 U.S. App. D.C. 178, 58 F.3d 738, 746 (D.C. Cir. 1995); Sea Containers Ltd. v. Stena AB, 281 U.S. App. D.C. 400, 890 F.2d 1205, 1208 (D.C. Cir. 1989); Washington Metro. Area Transit Comm'n v. Holiday Tours, 182 U.S. App. D.C. 220, 559 F.2d 841, 842 (D.C. Cir. 1977). Both in court and on their papers, the Plaintiffs have vehemently asserted that because they have made strong showings on the second, third, and fourth factors, they need only raise a "serious question" going to the merits in order to justify a preliminary injunction. Seizing on language in CityFed, Plaintiffs observe that "if the arguments for one factor are particularly strong, an injunction may issue even if the arguments in other areas are rather weak." CityFed, 58 F.3d at 747. This formulation, according to Plaintiffs, militates in favor of issuing an injunction because they believe that they have presented a sufficiently strong case on the second, third, and fourth factors to relax their required showing on the merits.

 Plaintiffs' interpretation of the law of injunctions is myopic; it overlooks the extraordinary relief that they seek. As stated at the outset of this Memorandum Opinion, the Court is being called upon to issue a mandatory, not prohibitive, injunction. While even a motion for a preliminary prohibitive injunction should not be routinely granted, "the power to issue a preliminary injunction, especially a mandatory one, should be 'sparingly exercised'" Dorfmann v. Boozer, 134 U.S. App. D.C. 272, 414 F.2d 1168, 1173 (D.C. Cir. 1969) (emphasis added). Although it is an observation almost too unremarkable to warrant comment, it appears that Plaintiffs have ignored the fact that the CityFed Court reviewed the denial of a prohibitive preliminary injunction. *fn2"

 The party that moves for a mandatory preliminary injunction must do more than merely raise a serious question about the law under which its predicates the right of recovery. In such cases, "where a party seeks mandatory preliminary relief that goes well beyond maintaining the status quo pendente lite, courts should be extremely cautious about issuing a preliminary injunction." Stanley v. University of S. Cal., 13 F.3d 1313, 1319 (9th Cir. 1994). Thus, "where an injunction is mandatory--that is, where its terms would alter, rather than preserve, the status quo by commanding some positive act--the moving party must meet a higher standard than in the ordinary case by showing 'clearly' that he or she is entitled to relief or that 'extreme or very serious damage' will result from the denial of the injunction." Phillip v. Fairfield Univ., 118 F.3d 131, 133 (2d Cir. 1997). As a rule, "when a mandatory preliminary injunction is requested, the district court should deny such relief 'unless the facts and law clearly favor the moving party.'" Id. (quoting Anderson v. United States, 612 F.2d 1112, 1114 (9th Cir. 1979)) (emphasis added); accord Martinez v. Mathews, 544 F.2d 1233, 1243 (5th Cir. 1976). *fn3" Accordingly, the Court rejects Plaintiffs' invitation to dilute the burden they must bear in "clearly" demonstrating that the law and facts support their request for a mandatory preliminary injunction.

 B. The Balance of the Equities Militates Against Mandatory ...


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