LRY, LLC v. Lake County
1:17-cv-00675
D. Or.May 17, 2017Background
- LRY, a short-line railroad, leases ~55 miles of track (Lakeview Branch) from Lake County under a 2010 Lease and Operating Agreement, later extended to 2035.
- LRY invested about $700,000 to repair the line and provides service to two customers (a perlite mine and a lumber mill).
- The parties dispute responsibilities for rates, repairs, and improvements; County terminated the lease under Section 13.05, which provides $25,000 liquidated damages if termination is without reasonable cause, and invoked Section 13.04 requiring LRY to assist in transition to a new carrier.
- LRY has Connect Oregon grant funds that might have to be refunded if contractual conditions are violated.
- LRY sued for breach of contract and sought a preliminary injunction to block termination; the court had entered a temporary restraining order but later heard full argument on the injunction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether LRY is likely to succeed on breach of contract claim (interpretation of §13.05) | §13.05 liquidated-damages clause unenforceable; County admitted no cause to terminate | §13.05 permits termination without reasonable cause and limits recovery to $25,000 | Court: Serious questions go to the merits but plaintiff did not show likelihood of success |
| Whether the Court must defer to arbitration under §31 | LRY treated federal court as available forum; arbitration clause ambiguous | §31 requires arbitration in this District; filing in court breaches agreement | Court: Clause ambiguous; issue not resolved now; court nonetheless may consider injunctive relief |
| Whether LRY will suffer irreparable harm absent injunction | Loss of goodwill, disruption to interstate commerce, and possible grant repayment constitute irreparable harm | Harms are speculative and primarily monetary; damages will compensate | Court: LRY failed to make a clear showing of likely irreparable harm |
| Balance of equities and public interest for injunction | Equities favor LRY due to long-term lease extension and investments; public interest favors continuity of service | County harmed by being forced to continue a relationship it seeks to end | Court: Equities favor LRY but do not overcome lack of irreparable harm; injunction not in public interest without clear irreparable harm |
Key Cases Cited
- Winter v. Nat. Res. Def. Council, 555 U.S. 7 (2008) (four-factor standard for preliminary injunction and requirement of likelihood of irreparable harm)
- All. for the Wild Rockies v. Cottrell, 632 F.3d 1127 (9th Cir. 2011) (serious-questions alternative test for injunctions)
- M.R. v. Dreyfus, 697 F.3d 706 (9th Cir. 2012) (articulation of serious-questions test elements)
- Toyo Tire Holdings of Am., Inc. v. Continental Tire N. Am., Inc., 609 F.3d 975 (9th Cir. 2010) (court may consider injunctive relief despite arbitration clause)
- Ass’n des Eleveurs de Canards et d’Oies du Quebec v. Harris, 729 F.3d 937 (9th Cir. 2013) (preliminary injunction decision is not a merits determination)
- Mazurek v. Armstrong, 520 U.S. 968 (1997) (requirement that irreparable harm be clearly shown)
- Sampson v. Murray, 415 U.S. 61 (1974) (monetary injury ordinarily not irreparable)
- Los Angeles Mem’l Coliseum Comm’n v. NFL, 634 F.2d 1197 (9th Cir. 1980) (economic loss not usually irreparable)
- Stuhlbarg Int’l Sales Co. v. John D. Brush & Co., 240 F.3d 832 (9th Cir. 2001) (loss of goodwill can be irreparable if supported by credible evidence)
- Earth Island Inst. v. Carlton, 626 F.3d 462 (9th Cir. 2010) (economic harm may factor in balance of equities)