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Allegheny Energy, Inc. v. DQE, Inc.

United States Court of Appeals for the Third Circuit

January 15, 1999, Argued ; March 11, 1999, Filed

NO. 98-3586

Opinion

 [*154] OPINION OF THE COURT

POLLAK, District Judge.

This is a diversity case in which an interlocutory appeal has been taken from the denial of a preliminary injunction. The appeal presents a question of Pennsylvania law. The question is whether, on the particular facts of this case, the loss by one publicly traded corporation [**2]  of a contractual opportunity to acquire another publicly traded corporation through a corporate merger constitutes irreparable harm. In concluding that the plaintiff -- the would-be acquiring corporation -- was not entitled to a preliminary injunction compelling specific performance of the merger agreement, the district court ruled that if the plaintiff prevailed on the merits it would have an adequate remedy at law in the form of an action for damages. Plaintiff's contention that the loss of the numerous expected benefits of the merger was not quantifiable as damages, and hence constituted irreparable injury, was rejected by the district court. On this appeal, plaintiff renews that contention. We conclude that, in the context of this case, plaintiff's contention is soundly based. Accordingly, we will vacate the judgment of the district court and remand for further proceedings.

I. Facts and Procedural History 

Allegheny Energy, Inc. ("Allegheny") 2 and DQE, Inc. ("DQE") -- both of which are utility companies whose shares are traded on the New York Stock Exchange -- entered into a merger agreement on April 7, 1997. The agreement envisioned a combined company in which DQE would [**3]  be a wholly-owned subsidiary of Allegheny. Allegheny is a utility holding company that provides electricity generation, transmission and distribution, chiefly in Pennsylvania, Maryland and West Virginia; its principal operating subsidiary is West Penn, a franchised electric service provider in western Pennsylvania. DQE is  [*155]  also a utility holding company; its principal operating subsidiary is Duquesne, a franchised provider in western Pennsylvania.

The merger agreement describes the context [**4]  in which the agreement was signed:

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171 F.3d 153 *; 1999 U.S. App. LEXIS 3944 **

ALLEGHENY ENERGY, INC., Appellant v. DQE, INC., Appellee

Prior History:  [**1]  On Appeal from the United States District Court for the Western District of Pennsylvania. D.C. No. 98-CV-1639. District Judge: Hon. Robert J. Cindrich.

Disposition: Vacated and remanded.

CORE TERMS

merger, specific performance, district court, merger agreement, cases, irreparable harm, preliminary injunction, combined, damages, accounting, parties, termination, pooling, consummation, benefits, shareholders, market power, generation, costs, public interest, strategic, publicly, changes, argues, injunctive relief, restructuring, irreparable, territories, conditions, injunction

Business & Corporate Compliance, Electric Power Industry, State Regulation, Stranded Cost Recovery, Energy & Utilities Law, Deregulation & Restructuring, Utility Companies, Ownership & Restructuring, Rates, General Overview, Civil Procedure, Remedies, Injunctions, Preliminary & Temporary Injunctions, Grounds for Injunctions, Public Interest, Appeals, Standards of Review, Clearly Erroneous Review, Standards of Review, Contracts Law, Equitable Relief, Specific Performance, Appellate Jurisdiction, State Court Review, Mergers & Acquisitions Law, Takeovers & Tender Offers, Preliminary Considerations, Federal & State Interrelationships, Erie Doctrine, Jurisdiction, Diversity Jurisdiction, Judgments, Preclusion of Judgments, Full Faith & Credit, Full Faith & Credit Statutes, Damages, Types of Damages, Liquidated Damages