Thank You For Submiting Feedback!
The grant of injunctive relief is a remedy whose basis in the federal courts has always been irreparable harm and inadequacy of legal remedies.
A stock purchaser failed to comply with the disclosure provisions of 13(d) of the Securities Exchange Act of 1934 when he acquired more than 5 percent of a corporation's outstanding stock. When the purchaser continued to purchase the corporation's stock without complying with the disclosure provisions, the corporation's board chairman wrote to the purchaser and informed him that the purchases were giving rise to numerous rumors and that there seemed to be problems under federal securities laws. The purchaser then stopped placing orders for the corporation's stock, consulted his attorney, and filed a disclosure statement. The corporation then brought an action in the United States District Court for the Western District of Wisconsin alleging that the purchaser was engaged in a scheme to defraud the corporation and its shareholders in violation of the securities laws, that shareholders who had sold shares without the information required to be disclosed, lacked information material to their decision to sell or hold, and that the corporation was unable to communicate such information to its shareholders and to take such actions as their interest required. The corporation prayed for damages and an injunction prohibiting the purchaser from voting or pledging his stock and from acquiring additional shares and requiring the purchaser to divest himself of the stock he already owned. The purchaser conceded that he had violated the Securities Exchange Act, but contended that the violation was due to a lack of familiarity with the securities laws and that neither the corporation nor its shareholders had been harmed. The District Court found that the corporation had not shown the irreparable harm necessary to support an injunction and entered summary judgment against the corporation. The United States Court of Appeals for the Seventh Circuit reversed, concluding that harm to the corporation had been shown, and that in any event, the corporation need not show irreparable harm as a prerequisite to obtaining permanent injunctive relief.
Was a showing of irreparable harm necessary in order for a private litigant to obtain injunctive relief for a violation of 13(d)?
The Court held that a showing of irreparable harm was necessary in order for a private litigant to obtain injunctive relief for a violation of 13(d), and that no such showing had been made in the instant case. The Court ordered that the district court's judgment be reinstated.