New Jersey Lawyer Magazine

One of the most important considerations New Jersey practitioners encounter when seeking injunctive relief is where to file: state (Chancery Division) versus federal (district) court. In non-emergent complex litigation, this issue can be analyzed and researched over time as the complaint and other papers are being drafted. When seeking injunctive relief, however, time is often short and such strategic decisions have to be made quickly and without extensive research or analysis. In making this decision, a few critical factors to keep in mind are:

• The Chancery Division offers judges and law clerks who specialize in handling applications for injunctive relief whereas district court judges preside over varied civil and criminal cases.
• The Chancery Division offers greater predictability with respect to judicial assignments, as the vast majority of vicinages only have one general equity judge.
• The Waste Management decision seemingly lowered the bar for seeking injunctive relief in state court by holding that it was reversible error to deny an application for injunctive relief where the plaintiffs failed to establish a likelihood of success “without consideration of the other [Crowe] factors.”
• Fed. R. Civ. P. 65(c) mandates the posting of security when moving for injunctive relief, while there is no such requirement in state court.
• Immediate appellate review of a preliminary injunction order is available in federal court pursuant to 28 U.S.C. 1292(a), while there is no such right in state court.¹

These procedural and statutory distinctions were discussed in detail in the April 2014 issue of New Jersey Lawyer Magazine, in an article titled “Injunction Practice in New Jersey State and Federal Courts.” Therefore, this article will focus on another important factor that guides both the federal and state courts in deciding whether to grant injunctive relief: irreparable harm.

Standards of Irreparable Harm

Federal Court

Irreparable harm has been defined in the District of New Jersey as “potential harm which cannot be redressed by a legal or an equitable remedy following a trial.”² The harm “must be of a peculiar nature, so that compensation in money cannot atone for it.”³

“Establishing a risk of irreparable harm is not enough. A party seeking a preliminary injunction must make a clear showing of immediate irreparable injury.”⁴ “Mere speculation as to an injury that will result, in the absence of any facts supporting such a claim, is insufficient to demonstrate irreparable harm.”⁵

State Court

Just as in federal court, the showing of irreparable harm is an essential element of obtaining injunctive relief under New Jersey law. Indeed, the “object of an interlocutory injunction is to prevent some threatening irreparable mischief which should be averted until opportunity is offered for a full and deliberate investigation of the case.”⁶ And, as in federal court, harm is generally considered irreparable if it cannot be redressed with monetary damages, which may be inadequate because of the nature of the injury and the right affected.⁷

If the party opposing an injunction demonstrates the claimed harm will never occur—either by completely denying the allegations of the motion or pointing to another cause of the moving party’s harm—New Jersey courts may deny the request for an injunction.⁸

Given these rather generic and seemingly similar standards, another avenue of evaluation is to review some of the common factual contexts in which requests for injunctive relief have been made in both forums.

Harm to Trade Secrets and Customer Relationships

The disclosure of trade secrets and the interference with customer relationships have been considered irreparable harm warranting injunctive relief in both federal and state court.

Federal Court

Federal courts faced with requests for injunctive relief “have shown a willingness to issue injunctions to prevent the disclosure of trade secrets.”⁹ This willingness is based upon the theory that the disclosure of confidential information or trade secrets constitutes irreparable harm.”¹⁰

“The loss of good will, the disclosure of confidential and proprietary information, and the interference with customer relationships” form the basis for a finding of irreparable harm in federal court.¹¹ For instance, in Nat’l Reprographics, Inc. v. Strom, the court held that the plaintiff printing business would likely suffer irreparable harm to its business if its primary competitor was permitted to hire one of plaintiff’s high-level employees who participated in the plaintiff’s business decisions for several years, in violation of a noncompetition agreement.¹² However, a plaintiff must still make a prima facie showing that the information it seeks to protect is confidential and proprietary. If a plaintiff fails to show the information known to its former employee is “not common knowledge in the industry,” the court will have difficulty enjoining the former employee from using information obtained while working for the claimant.¹³

State Court

New Jersey courts generally recognize that disclosure of a business’s confidential information, unlawful exploitation of customer relationships, and damage to goodwill constitute irreparable harm.¹⁴

In the context of restrictive covenants that are designed to protect these interests, New Jersey courts will presume that irreparable harm ensues from the breach of a restrictive covenant where an employee has learned of business practices and methods of the employer.¹⁵ Of course, this requires proof that the information is actually confidential and that the former employee is in the position to exploit the relationships.¹⁶

At least one New Jersey Supreme Court case, however, has rejected the imposition of an injunction in this context, holding:

...Most of the plaintiff’s customers are governmental entities, along with prime contractors doing work for them, and most of the work involves public bidding. The industry as a whole is fully aware when public work is available and the determining factor is generally price rather than personal consideration. There appears to be little likelihood that Doyle would be in any position to harm the plaintiff’s relationships with the governmental entities or with prime contractors doing work for them. So far as any incidental private customers of the plaintiff are concerned there is a denial by Doyle of improper solicitation (cf. Blake, supra, 73 Harv. L. Rev. at 653-66) along with a denial of any unfair activities or practices on his part (cf. Corbin, supra § 1394 at 100). These matters may of course be dealt with fully at final hearing together with other issues which are referred to in the pleadings and briefs but which require no discussion or determination at this stage. Cf. Solari, supra, 55 N.J. at 585-586.¹⁷

Impairment of Franchise Rights

The impairment of franchise rights has been found to constitute irreparable harm in both forums.

Federal Court

In Carlo C. Gelardi Corp. v. Miller Brewing Co., a preliminary injunction case asserting antitrust violations, breach of a distributorship contract, and violation of the New Jersey Franchise Practices Act by a beer manufacturer against a beer distributor, the court held that “the loss of business and good will, and the threatened loss of the enterprise itself, constitute irreparable injury to the plaintiff sufficient to justify the issuance of preliminary injunction.”¹⁸

The reasoning of Carlo C. Gelardi Corp. was subsequently followed by the decision in Atlantic City Coin & Slot Serv. Co., Inc. v. IGT, where the district court held that: “[A] judgment for damages acquired years after his franchise has been taken away and his business obliterated is small consolation to one who, as here, has had a Ford franchise for many years…the loss of business and good will, and the threatened loss of the enterprise itself, constitute irreparable injury to the plaintiff sufficient to justify the issuance of preliminary injunction.”¹⁹

State Court

New Jersey courts have consistently found irreparable harm and issued injunctions to prevent interference with exclusive franchise rights, which are considered valuable property rights. The harm is irreparable because such rights could potentially yield substantial returns, which are very difficult to calculate when interfered with because the party with the right will never truly know how much could have been gained had they freely exercised it.²⁰

Indeed, “once the violation occurs, the character of the franchise as an exclusive property right is destroyed” because it will never know how much business has been subverted from the franchise.²¹

Litigation of Arbitration Pending Decision on Arbitrability

New Jersey’s federal and state courts are in accord with respect to requiring a party to arbitrate a dispute prior to a determination that the dispute is, in fact, subject to arbitration.

Federal Court

In Gruntal & Co., Inc. v. Steinberg, the court held that “the harm to a party would be per se irreparable if a court were to abdicate its responsibility to determine the scope of an arbitrator’s jurisdiction and, instead, were to compel the party, who has not agreed to do so, to submit to an arbitrator’s own determination of his authority.”²²

State Court

Several New Jersey courts have likewise found that requiring a party to arbitrate a dispute before a court has determined the proper scope of an arbitrator’s jurisdiction is “per se irreparable.”²³ Irreparable harm in this circumstance consists of the forced time and resources arbitrating a claim that, ultimately, may not be arbitrable in the first place.²⁴

Personal Inconvenience

Obtaining injunctive relief—and hence adequately demonstrating irreparable harm—based on personal inconvenience is an uphill battle in both forums.

Federal Court

As a general matter, personal inconvenience alone will not establish irreparable injury in federal court. For example, in Moteles v. University of Pennsylvania, the Third Circuit held:

At most, the plaintiff’s complaint describes an inconvenience easily compensable by damages. InFuller v. Highway Truck Drivers, 228 F. Supp. 287 (E.D. Pa. 1964), aff’d, 428 F.2d 503 (3d Cir. 1970), the plaintiffs complained of being subjected to less desirable work assignments requiring them to report for work earlier in the morning. The court determined that this inconvenience did not constitute irreparable harm and had “never been regarded as the type of damage immeasurable in dollars. Courts daily award damages for pain, suffering and far more serious inconveniences.” Id. at 290. In Oburn v. Shapp, 521 F.2d 142, 151 (3d Cir. 1975), this court found that the loss of benefits derived from state employment was not irreparable. See also Glasco v. Hills, 588 F.2d 179, 181 (3d Cir. 1977) (irreparable means more than merely serious or substantial).²⁵

State Court

In rare and compelling instances, New Jersey courts have found irreparable harm and issued injunctions to prevent personal inconvenience. For example, in Crowe the New Jersey Supreme Court granted an injunction to require continuing support payments to prevent the loss of a wife’s home, in which she had lived for 14 years, and her only means of support, finding that “neither an unwarranted eviction nor reduction to poverty” could be compensated adequately by monetary damages.²⁶

Similarly, in a case where female prisoners were moved to a male prison, the Appellate Division found that “deprivation of psychiatric and medical care, items of basic hygiene, and privacy from the guards when undressing, showering or using toilets constituted irreparable harm.”²⁷

Along the same lines, in an action to enjoin a county from enforcing a residency requirement in a county board resolution, the court found that employees having to “sell their homes, pull their children out of school, and move their families…prior to a final hearing” constituted immediate irreparable harm.²⁸

Given these extraordinary cases, it is not surprising that inconvenience in the form of having to travel with witnesses and evidence to New Jersey does not rise to the level of suffering imminent and irreparable harm.²⁹

Restrictions on Speech

Restrictions on First Amendment freedoms have been addressed in both forums with similar results. Such restrictions result in irreparable harm and warrant injunctive relief.

Federal Court

“It is well established that ‘[t]he loss of First Amendment freedoms, for even minimal periods of time, unquestionably constitutes irreparable injury.’”³⁰

State Court

Generally, restrictions on public and political speech automatically qualify as irreparable harm if they violate the First Amendment.³¹

Conclusion

There are several similar factual contexts in which the concept of irreparable harm has been raised in applications for injunctive relief and analyzed by the federal and state courts. As discussed above, both forums have, for the most part, reached the same conclusion regarding a demonstration—or lack thereof—of irreparable harm. Given the consistent approaches of the federal and state courts in analyzing the concept of irreparable harm, practitioners seeking a more favorable forum for injunctive relief applications should focus on the procedural and statutory distinctions discussed in the April 2014 New Jersey Lawyer Magazine article titled “Injunction Practice in New Jersey State and Federal Courts,” and monitor state court decisions to determine whether the Waste Management decision does, in fact, lower the bar for obtaining injunctive relief.

ENDNOTES

1. New Jersey Lawyer Magazine, April 2014, Injunction Practice in New Jersey State and Federal Courts (Alworth, Liss and Lamparello).
2. Trico Equip., Inc. v. Manor, 2009 U.S. Dist. LEXIS 50524, at *22 (D.N.J. June 13, 2009) (citing Instant Air Freight Co. v. C.F. Air Freight, Inc., 882 F.2d 797, 801 (3d Cir. 1989)).
3. Campbell Soup Co. v. ConAgra, Inc., 977 F.2d 86, 92 (3d Cir. 1992) (quoting ECRI v. McGraw-Hill, Inc., 809 F.2d 223, 226 (3d Cir. 1987)).
4. Spacemax Int’l LLC v. Core Health & Fitness, LLC, 2013 U.S. Dist. LEXIS 154638, **4-5 (D.N.J. Oct. 28, 2013) (internal citations omitted).
5. Id. at *5 (citing Grupo Mexicano De Desarrollo v. Alliance Bond Fund, 527 U.S. 308, 327-30 (1999)).
6. Outdoor Sports Corp. v. Amer. Fed’ of Labor, Local 23132, 6 N.J. 217, 230 (N.J. 1951).
7. Crowe v. De Gioia, 90 N.J. 126, 132-33 (N.J. 1982).
8. Whitmyer Bros., Inc. v. Doyle, 58 N.J. 35, 38 (N.J. 1971) (declining to affirm injunction where former employee comprehensively denied the claimed trade secret and confidential status of information the employer was attempting to protect); Lulevitch v. Roberts, 98 N.J. Eq. 373, 375 (E.&A. 1925)(declining to issue injunction where party opposing injunction denied allegations that there was an issue with surface water on neighboring property and opposing party had offered to drain if there was); Rissler v. Plumbers’ United Ass’n of J.P. & S., 109 N.J. Eq. 91, 93-93 (E.& A. 1931)(declining to enter injunction because the cause of the moving party’s harm was his own failure not to pay union dues, not the union’s interference with his business); Thomas P. Carney, Inc. v. Franklin Tp. Bd. of Educ., 365 N.J. Super. 509, 514 (Law Div. 2003) (finding no irreparable harm in action to enjoin award of services to another bidder because “the failure to award the bid to plaintiff…was not the cause of plaintiff’s injury; plaintiff’s failure to bid the lowest bid was the cause.”).
9. Apollo Techs. Corp. v. Centrosphere Indus. Corp., 805 F. Supp. 1157, 1209 (D.N.J. 1992).
10. ACE Am. Ins. Co. v. Wachovia Ins. Agency Inc., 2008 WL 4630486, at *9 (D.N.J. Oct. 17, 2008).
11. Laidlaw, Inc. v. Student Transp. of Am., Inc., 20 F. Supp. 2d 727, 766 (D.N.J. 1998).
12. 621 F. Supp. 2d 204, 229-30 (D.N.J. 2009).
13. Tatarian v. Aluf Plastics, 2002 WL 1065880, at *10 (D.N.J. May 13, 2002).
14. Sun Dial Corp. v. Rideout, 16 N.J. 252, 259 (1954); see Nat’l Starch & Chem Corp. v. Parker Chem Corp., 219 N.J. Super. 158, 162-63 (App. Div. 1987) (holding that “damages will not be an adequate remedy when the competitor has obtained the secrets. The cat is out of the bag and there is no way of knowing to what extent their use has caused damage or loss”).
15. A. Hollander & Son, Inc. v. Imperial Fur Blending Corp., 2 N.J. 235, 249 (1949).
16. See A.T. Hudson & Co. v. Donovan, 216 N.J. Super. 426, 433-34 (App. Div. 1987) (finding that “[e]ach client that [the employer] is able to attract represents a significant investment of time, effort and money, which is worthy of protection” and lost when an employee jumps ship and violates a covenant).
17. Whitmyer Bros., Inc. v. Doyle, 58 N.J. 35, 38 (1971); see Subcarrier Communications Inc. v. Day, 299 N.J. Super. 634, 547 (App. Div. 1997) (reversing grant of injunction where defendant denied using trade secrets and was only soliciting customers that did not have contracts with her former employer).
18. 421 F. Supp. 233, 236 (D.N.J. 1976).
19. 14 F. Supp. 2d 644, 667 (D.N.J. 1998) (internal quotations omitted).
20. Mantell v. Int’l Plastic Harmonica Corp., 141 N.J. Eq. 379, 390-92 (E.&A. 1947) (finding that “it would have been well nigh impossible to ascertain the full damages ensuing” from the failure to provide the goods for an exclusive harmonica franchise).
21. Morris Cnty. Transfer Station, Inc. v. Frank’s Sanitation Serv., Inc., 260 N.J. Super. 570, 575-77 (App. Div. 1992).
22. 854 F. Supp. 324, 341-42 (D.N.J. 1994) (quoting PaineWebber Inc. v. Hartmann, 921 F.2d 507, 515 (3d Cir. 1990), overruled on other grounds, 537 U.S. 79 (2002)).
23. Raritan Plaza I Assoc., L.P. v. Cushman & Wakefield, 273 N.J. Super. 64, 70 (App. Div. 1994) (holding that the “threshold issue is fundamentally a question of arbitrability and is uniquely within the province of the court”).
24. Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Cantone Research, Inc., 427 N.J. Super. 45, 55-56 (App. Div. 2012).
25. 730 F.2d 913 (3d Cir. 1984); see Bolger v. First State Financial Services, 759 F. Supp. 182 (D.N.J. 1991).
26. 90 N.J. at 132-33.
27. Jones v. Hayman, 418 N.J. Super. 291, 301 (App. Div. 2011).
28. Communications Workers of Am., AFL-CIO, Local 1040 and 1081 v. Treffinger, 291 N.J. Super. 336, 360 (Law. Div. 1996).
29. See B & S Ltd., Inc. v. Elephant & Castle Int’l, Inc., 388 N.J. Super. 160, 168-69 (Ch. Div. 2006) (finding that travel inconveniences alone is insufficient proof of harm to support an injunction).
30. Am. Broad. Cos., Inc. v. Wells, 669 F. Supp. 2d 483, 489 (D.N.J. 2009) (quoting Elrod v. Burns, 427 U.S. 347, 373 (1976); see also Citizens United for Free Speech II v. Long Beach Twp. Bd. of Comm’rs, 802 F. Supp. 1223, 1237 (D.N.J. 1992)).
31. Davis v. New Jersey Dep’t of Law and Public Safety, 327 N.J. Super. 59, 68-69 (Law Div. 1999).

“Seeking Injunctive Relief: How Irreparable Harm Has Been Analyzed in Federal and State Courts,” by David C. Kistler and Leigh Ann Buziak was originally published in the August 2015 issue of the New Jersey Lawyer Magazine, a publication of the New Jersey State Bar Association, and is reprinted here with permission.