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DOVER STEEL CO. v. HARTFORD ACCIDENT & INDEM. CO.

November 9, 1992

DOVER STEEL COMPANY, INC., et al., Plaintiffs
v.
THE HARTFORD ACCIDENT AND INDEMNITY COMPANY, et al., Defendants



The opinion of the court was delivered by: EDUARDO C. ROBRENO

 ROBRENO, J.

 Presently before the Court is plaintiffs' motion for a preliminary injunction. For the following reasons, the motion will be denied.

 I. BACKGROUND

 This is an action brought by plaintiffs Dover Steel Company, Inc. ("Dover") and A.M.B. Construction Company, Inc. ("A.M.B.") against two insurance companies, defendants The Hartford Accident and Indemnity Company ("Hartford") and New Hampshire Insurance Company ("New Hampshire"). Jurisdiction is predicated upon 28 U.S.C. § 1332. Plaintiffs, among others, have been named as defendants in a suit now pending in the United States District Court for the District of Delaware ("the Delaware action"). *fn1" In their complaint filed in the case now before this Court, plaintiffs contend that both defendants are obligated, under certain insurance policies which each issued to plaintiffs, to provide plaintiffs with a defense in the Delaware action and to indemnify plaintiffs for any damages that may result therefrom. Plaintiffs allege that the defendants are wrongfully refusing to provide such a defense, and are wrongfully refusing to acknowledge their obligation to indemnify.

 Plaintiffs filed the instant complaint in this Court on September 30, 1992, together with a motion for a preliminary injunction. In their motion, plaintiffs ask the Court to: 1) compel the defendants to immediately tender approximately $ 125,000 to plaintiffs, representing the amount that plaintiffs contend plaintiffs have already expended in defending the Delaware action, and 2) require the defendants to assume all costs that plaintiffs will incur in defending the Delaware action from this point forth. *fn2" In support of their motion, plaintiffs assert that Dover *fn3" will suffer irreparable harm if the injunction is not granted in that Dover is on the brink of financial collapse and will soon file for Chapter 11 bankruptcy if it is not reimbursed for the legal fees it has already expended in defense of the Delaware action. Plaintiffs also, of course, assert that their eventual success on the merits of their claim is likely. In essence, plaintiffs are proceeding on the theory that at least one of the two claims raised in the Delaware action comes squarely within at least one of the insurance policies issued by New Hampshire, and that, in any event, both defendants gave certain assurances and took various actions so that they are now both estopped from denying coverage.

 Following expedited discovery, this Court held a hearing on plaintiffs' preliminary injunction motion on November 3, 1992 and November 4, 1992. See Fed.R.Civ.P. 65(a). At the hearing, plaintiffs presented testimony from three witnesses. Only one of the three, Mr. Anthony Sinibaldi, president and one of the principal shareholders of Dover, offered testimony on the issue of whether plaintiffs will suffer irreparable harm if an injunction is not issued. *fn4" After the conclusion of Mr. Sinibaldi's testimony, the defendants urged the denial of plaintiffs' motion for a preliminary injunction on the ground that plaintiffs had failed to show irreparable harm. The Court denied defendants' request, but agreed to reconsider the issue at the conclusion of plaintiffs' case. After plaintiffs rested, defendants renewed their request, and have not yet had occasion to answer plaintiff's claims. For the reasons set forth below, plaintiffs' request for preliminary injunction is DENIED on the basis that they have failed to make the requisite showing that irreparable harm will ensue from the denial of the relief requested. To the extent that plaintiffs' motion includes a request for reimbursement of the attorneys fees that they have already expended, the motion is alternatively denied on the ground that such an award is in the nature of money damages which, under the circumstances of this case, are not available as preliminary injunctive relief.

 II. DISCUSSION

 The factors governing whether a preliminary injunction should be awarded are well established:

 
In order to support a preliminary injunction, plaintiff must show both a likelihood of success on the merits and a probability of irreparable harm. Additionally, the district court should consider the effect of the issuance of a preliminary injunction on other interested persons and the public interest.

 . . .

 Campbell Soup Company v. Conagra Inc., 977 F.2d 86, quoting Bradley v. Pittsburgh Board of Education, 910 F.2d 1172 (3d Cir. 1990). "[A] failure to show a likelihood of success or a failure to demonstrate irreparable injury . . . must necessarily result in the denial of a preliminary injunction." In Re Arthur Treacher's Franchisee Litigation, 689 F.2d 1137 (3d Cir. 1982). Ultimately, determining whether a preliminary injunction should issue is within the sound discretion of the district court. Kershner v. Mazurkiewicz, 670 F.2d 440, 443 (3d Cir. 1982) (en banc).

 Plaintiffs allege that they will suffer irreparable harm if they are denied the injunctive relief they request because without it they will be forced into bankruptcy. There is no doubt that, under certain circumstances, the prospect of imminent bankruptcy may constitute irreparable harm for purposes of awarding preliminary injunctive relief. See, e.g., Doran v. Salem Inn, Inc., 422 U.S. 922, 95 S. Ct. 2561, 45 L. Ed. 2d 648 (1975); Associated Producers v. City of Independence, Mo., 648 F. Supp. 1255 (W.D.Mo. 1986).

 As noted, plaintiffs seek two forms of injunctive relief. One is retroactive - immediate reimbursement for defense costs already expended; the other is prospective - an order requiring the defendants to undertake their defense in the Delaware action. ...


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