Roland MacHinery Company v. Dresser Industries, Inc.

This appeal requires us to consider both the standard for granting (and reviewing grants of) preliminary injunctions, and substantive issues of exclusive dealing under section 3 of the Clayton Act, 15 U.S.C. Sec. 14, which makes it unlawful to sell goods "on the condition, agreement, or understanding that the ... purchaser ... shall not use or deal in the goods ... of a competitor or competitors of the ... seller, where the effect of such ... condition, agreement, or understanding may be to substantially lessen competition or tend to create a monopoly in any line of commerce."

Roland Machinery Company, a substantial dealer (its gross revenues exceed $10 million a year) in construction equipment and related items, serving a 45-county area in central Illinois, was for many years the area's exclusive distributor of International Harvester's line of construction equipment. International Harvester got into serious financial trouble and in 1982 sold its construction-equipment division to Dresser Industries. Dresser promptly signed a dealership agreement with Roland. The agreement provided that it could be terminated by either party, without cause, on 90 days' notice. It did not contain an exclusive-dealing clause (that is, a clause forbidding the dealer to sell any competing manufacturer's construction equipment). Eight months after signing the agreement Roland signed a similar agreement with Komatsu, a Japanese manufacturer of construction equipment. Several months after discovering that Roland had done this, Dresser gave notice that it would exercise its contract right to terminate its dealership agreement with Roland without cause. Roland brought this suit shortly before the end of the 90-day notice period, charging that Dresser had violated section 3 of the Clayton Act and other provisions of federal and state law. The district judge granted Roland a preliminary injunction based solely on the section 3 charges, and Dresser has appealed under 28 U.S.C. Sec. 1292(a)(1). None of Roland's other charges is before us on this appeal.

At the hearing on Roland's motion for preliminary injunction, Dresser presented evidence that it had cut off Roland because it was afraid that Roland intended to phase out the Dresser line and become an exclusive Komatsu dealer, and because it believed that as long as Roland (a well-established firm) remained a Dresser dealer, no other dealer in the area would be willing to handle Dresser equipment, as this would mean competing with Roland. The usual practice in the industry is for dealers not to carry competing lines, and Dresser presented evidence that this makes for more aggressive promotion of each line. Roland, however, presented evidence that it had no intention of phasing out Dresser equipment, that it was terminated because the dealership contract contained what Roland at argument called a "secret" term requiring Roland to deal exclusively in Dresser equipment, and that the sudden termination would bankrupt it or at least cause it serious loss. But it seems that only about 50 percent of Roland's revenues are derived directly or indirectly from Dresser equipment, and only about 10 percent from selling new Dresser equipment (the other 40 percent coming from renting and servicing equipment, and from selling parts); and Dresser argues that Roland could survive simply by promoting Komatsu equipment aggressively--which it intended to do anyway.

After a two and a half day hearing, the district judge concluded that if Dresser were allowed to cut off Roland pending the trial of the case Roland would probably go out of business--an injury to Roland greater than the harm to Dresser from being forced to continue dealing with Roland in the interim. But because comments by Roland's general manager "raise some doubts as to the sincerity of Roland's current claims that it plans to aggressively distribute Dresser products both now and in the future," the judge conditioned the preliminary injunction on Roland's "maintain[ing], within normal economic fluctuations, the approximate market share which it now has obtained for Dresser products."

On the probable merits of Roland's section 3 claim, the judge found that while Dresser's contract with Roland contained no exclusive-dealing requirement, Roland "has adequately shown that an implied exclusive dealing arrangement existed between itself and Dresser. The Defendant's own evidence showed that it considered a distributor which carried a competing line as inimical to its own interest. In the mind of Dresser, a distributor must either live or die with the manufacturer's product." Having thus found an agreement (which is a prerequisite to liability under section 3 of the Clayton Act, see, e.g., Ron Tonkin Gran Turismo, Inc. v. Fiat Distributors, Inc., 637 F.2d 1376, 1389 (9th Cir.1981), and cases cited there), the judge considered whether Roland had raised a "substantial question" as to whether the agreement was likely to lessen competition substantially. Dresser manufactures 16 or 17 percent of the construction equipment sold in central Illinois (defined as Illinois south of Chicago and north of the latitude of St. Louis), and Komatsu only 1 percent. Roland accounts for all these sales. The judge found that Komatsu (which has no exclusive dealerships anywhere in the midwest) could not have gotten into this market except by persuading a dealer for another manufacturer, such as Roland, to carry Komatsu equipment as a second line.

The first bone of contention between the parties is the proper standard for granting a preliminary injunction and for appellate review of such a grant. Each party is able to cite numerous decisions in support of its view of the proper standard, simply because the relevant case law is in disarray in both this and other circuits. Many of our cases say that to get a preliminary injunction a plaintiff must show each of four things: that he has no adequate remedy at law or will suffer irreparable harm if the injunction is denied; that this harm will be greater than the harm the defendant will suffer if the injunction is granted; that the plaintiff has a reasonable likelihood of success on the merits; and that the injunction will not harm the public interest. See, e.g., Technical Publishing Co. v. Lebhar-Friedman, Inc., 729 F.2d 1136, 1138-39 (7th Cir.1984); Alexander v. Chicago Park District, 709 F.2d 463, 467 (7th Cir.1983); O'Connor v. Board of Education, 645 F.2d 578, 580 (7th Cir.1981). Although described in the cases as a four-factor test, the test actually involves five factors, unless "no adequate remedy at law" and "irreparable injury" mean the same thing. In ordinary equity parlance they do not. See 11 Wright & Miller, Federal Practice and Procedure Sec. 2944, at p. 401 (1973). But Fox Valley Harvestore, Inc. v. A.O. Smith Harvestore Products, Inc., 545 F.2d 1096, 1097 n. 1 (7th Cir.1976), suggests that they may mean the same thing in the preliminary-injunction setting. Further adding to the uncertainty is the fact that we usually say no adequate remedy at law or irreparable harm (as in Technical Publishing, Alexander, and O'Connor ), but sometimes no adequate remedy at law and irreparable harm, as in Fox Valley, supra, 545 F.2d at 1097. And our recent decision in American Can Co. v. Mansukhani, 742 F.2d 314, 325 (7th Cir.1984), states that the plaintiff must establish "the threat of irreparable harm for which there is no adequate remedy at law."

Maybe there is a sixth factor. Some cases, by stating that the purpose of a preliminary injunction is to preserve the status quo, see, e.g., EEOC v. City of Janesville, 630 F.2d 1254, 1259 (7th Cir.1980), imply that this is another thing the plaintiff must prove; and it is true that if the plaintiff asks for more than a return to the status quo he is apt to be turned down on that ground. See, e.g., SCM Corp. v. Xerox Corp., 507 F.2d 358, 361 (2d Cir.1974). But "status quo" is ambiguous. The preliminary injunction in this case maintained the status quo in one sense: it continued Roland as a Dresser dealer. But it changed the status quo in another: it made the dealership agreement no longer terminable by either party on 90 days' notice.

Some of our cases imply that although each of the four factors must be considered, the plaintiff need not prevail on all four. See, e.g., Reinders Bros. v. Rain Bird Eastern Sales Corp., 627 F.2d 44, 49 (7th Cir.1980); Fox Valley, supra, 545 F.2d at 1098. But other cases say that "a preliminary injunction is an extraordinary remedy which is not available unless plaintiffs carry their burden of persuasion as to all of the [four] prerequisites." Shaffer v. Globe Protection, Inc., 721 F.2d 1121, 1123 (7th Cir.1983). To the same effect see, e.g., Technical Publishing Co., supra, 729 F.2d at 1139; Singer Co. v. P.R. Mallory & Co., 671 F.2d 232, 234 (7th Cir.1982) ("All of these conditions must be satisfied before the drastic remedy of an injunction will be ordered."); but cf. Illinois Bell Tel. Co. v. Illinois Commerce Comm'n, 740 F.2d 566, 571 (7th Cir.1984) ("where the plaintiff seeks an injunction [preliminary or permanent] to prevent the violation of a federal statute that specifically provides for injunctive relief, it need not show irreparable harm"). Still other cases do not mention the four factors, see, e.g., Valley Liquors, Inc. v. Renfield Importers, Ltd., 678 F.2d 742 (7th Cir.1982), or propose a different standard, see Omega Satellite Products Co. v. City of Indianapolis, 694 F.2d 119, 123 (7th Cir.1982).

With respect to the individual factors, some cases imply that the first (first two, if no adequate remedy at law and irreparable harm are meant to be separate factors) is presumptively satisfied in any dealer-termination case, presumably because the dealer's loss of profits would be difficult to quantify. See Menominee Rubber Co. v. Gould, Inc., 657 F.2d 164, 167 (7th Cir.1981); Reinders Bros. v. Rain Bird Eastern Sales Corp., supra, 627 F.2d at 53. But these are alternative holdings, and the strongest statement of this position, in Milsen Co. v. Southland Corp., 454 F.2d 363, 366 (7th Cir.1971), appears to be a dictum. Fox Valley can be read to require that the plaintiff go much further and show that the termination has "crippled if not destroyed [its] ability to carry on [its] antitrust case." 545 F.2d at 1098. See generally Note, The Irreparable Harm Requirement for Preliminary Injunction Relief in Antitrust Distributor Termination Cases, 61 B.U.L.Rev. 507, 516-21 (1981).

It is in the dealer-termination cases, too, that we find an alternative formulation to "reasonable likelihood of success," another of the traditional four (or five, or six) factors. Fox Valley alternates "reasonable likelihood of success" with "some likelihood of success," 545 F.2d at 1098, while Milsen just says "success on the merits," 454 F.2d at 366, leaving unclear just how fair a prospect of success is necessary. The Supreme Court has said, "likely to prevail on the merits." Doran v. Salem Inn, Inc., 422 U.S. 922, 931, 95 S.Ct. 2561, 2567, 45 L.Ed.2d 648 (1975). "Some likelihood of success" seems to be an abbreviated version of the formula in Hamilton Watch Co. v. Benrus Watch Co., 206 F.2d 738, 740 (2d Cir.1953) (Frank, J.), that the plaintiff's contentions on the merits must be "so serious, substantial, difficult and doubtful, as to make them a fair ground for litigation and thus for more deliberate investigation." We adopted this formula in Mytinger & Casselberry, Inc. v. Numanna Laboratories Corp., 215 F.2d 382, 385 (7th Cir.1954), but later references are more gingerly. See Milsen Co. v. Southland Corp., supra, 454 F.2d at 366 n. 3; Mullis v. Arco Petroleum Corp., 502 F.2d 290, 293 (7th Cir.1974); Fox Valley, supra, 545 F.2d at 1097-98; W.A. Mack, Inc. v. General Motors Corp., 260 F.2d 886, 890 (7th Cir.1958); see also Benson Hotel Corp. v. Woods, 168 F.2d 694, 697 (8th Cir.1948). Most of our cases continue to speak of "reasonable likelihood," but as the appearance of both "reasonable" and "some" likelihood in Fox Valley suggests, it is unclear how much practical difference there is between these formulations.

With respect to the scope of appellate review, the picture is especially blurred, as pointed out by Judge Friendly in a dictum in Buffalo Courier-Express, Inc. v. Buffalo Evening News, Inc., 601 F.2d 48, 59 (2d Cir.1979), that Judge Eschbach of our court has called cogent. Shango v. Jurich, 681 F.2d 1091, 1097 (7th Cir.1982). Most cases in this and other circuits denote the standard of review either as abuse of discretion, see, e.g., SEC v. Suter, 732 F.2d 1294, 1301 (7th Cir.1984), or as "clear" abuse of discretion. See quotation in next paragraph from Alexander ; United States Steel Corp. v. Fraternal Ass'n of Steelhaulers, 431 F.2d 1046, 1048 (3d Cir.1970). The older cases, such as Mytinger & Casselberry, supra, 215 F.2d at 384-85, are especially emphatic about the limited scope of appellate review. Although the Supreme Court routinely employs the abuse of discretion formulation, see Doran v. Salem Inn, Inc., supra, 422 U.S. at 932, 95 S.Ct. at 2568; Brown v. Chote, 411 U.S. 452, 457, 93 S.Ct. 1732, 1735, 36 L.Ed.2d 420 (1973), and cases cited, it is not clear whether the standard of review was actually at issue in any of the Court's cases; the abuse of discretion standard seems to have been assumed rather than examined. One of our cases implies that there is broader appellate review of an order granting than of an order denying a preliminary injunction, Milsen Co. v. Southland Corp., supra, 454 F.2d at 369--but how much broader is unclear. Several of our cases do not specify a standard of review, but imply that it is the same standard as is used to review district court judgments involving the application of a substantive rule to the facts found by the district judge. Mullis, Valley Liquors, and Omega Satellite Products are all such cases.

One case says that an order denying a preliminary injunction will not be reversed "unless there is demonstrated to be a clear abuse of the trial court's discretion or clear error in the trial court's findings." Alexander v. Chicago Park District, supra, 709 F.2d at 467. A variant of this test, found in several cases, is that a grant or denial of a preliminary injunction will not be reversed unless there has been a clear abuse of discretion, "a certain mistake of law," or clearly erroneous factfindings. E.g., Atari, Inc. v. North American Philips Consumer Electronics Corp., 672 F.2d 607, 613 (7th Cir.1982). Now it might seem that if the trial judge's findings are not clearly erroneous and he has made no legal errors, there would be no basis for reversal, and hence no place for the abuse of discretion standard--unless the judge wasn't applying a standard; but we have seen that preliminary injunctions are supposed to be granted or denied in accordance with a standard, and not as a matter of judicial grace. Determinations that involve applying a legal standard to a state of facts are commonly treated as factfindings for purposes of the clearly-erroneous standard, see 9 Wright & Miller, Federal Practice and Procedure Secs. 2589-2590 (1971), but in any event are not considered discretionary determinations. The reference to "certain" mistake of law adds little, for any purely legal determination made by the trial judge in granting or denying a preliminary injunction is subject to plenary appellate review, see e.g., Pratte v. NLRB, 683 F.2d 1038, 1044 (7th Cir.1982); Delaware & Hudson Ry. v. United Transport. Union, 450 F.2d 603, 620 (D.C.Cir.1971), just as any purely legal determination underlying a final judgment is. Maybe, however, the formulation in Atari is intended to distinguish between ordinary factfindings (including findings resulting from the application of a substantive standard, such as that of negligence, to the who-did-what-to-whom facts), as to which the clearly-erroneous standard clearly applies, and the balancing of harms that is required in a preliminary-injunction decision. The striking of the balance often requires a comparison of imponderables that invites an exercise of judgment by the district judge to which the court of appeals will defer even more broadly than where the judge has applied a substantive standard such as negligence--provided the judge has not committed a clear error of fact, or an error of law.

Several other decisions in this circuit, however, suggest that the term abuse of discretion when used in the context of appellate review of orders granting or denying preliminary injunctions means just that there are no errors of law and no clearly erroneous findings of fact. Support for this position in this circuit is found in Hillhaven Corp. v. Wisconsin Dep't of Health & Social Services, 733 F.2d 1224, 1226 (7th Cir.1984) (per curiam) ("we can only reverse the district court's action [granting a preliminary injunction] if it is clearly erroneous or represents a mistake of law. The totality of the factors must point to a clear departure from the proper exercise of the district judge's discretion." ); Machlett Laboratories, Inc. v. Techny Industries, Inc., 665 F.2d 795, 798 (7th Cir.1981) ("The latter injury ... is plainly outweighed by the certain injury to Techny of going out of business, and therefore it must be deemed an abuse of discretion to find the opposite." ), and Charles v. Carey, 627 F.2d 772, 776 (7th Cir.1980) ("misapplication of the law to particular facts is an abuse of discretion" ). Other circuits have suggested that "abuse of discretion" means error, period: "What we mean, when we say that a court abused its discretion, is merely that we think that it made a mistake." Pearson v. Dennison, 353 F.2d 24, 28 n. 6 (9th Cir.1965); see also In re Josephson, 218 F.2d 174, 182 (1st Cir.1954) (Magruder, J.). Although neither of these was an injunction case, Clemons v. Board of Education, 228 F.2d 853, 857 (6th Cir.1956), was, and it says that "misapplication of the law to the facts is in itself an abuse of discretion" requiring reversal. See also Omega Importing Corp. v. Petri-Kine Camera Co., 451 F.2d 1190, 1197 (2d Cir.1971) (Friendly, J.). Finally, many opinions that say "abuse of discretion" appear to review the district court's order as searchingly as they would any nondiscretionary determination. See, e.g., Godinez v. Lane, 733 F.2d 1250, 1262 (7th Cir.1984); United Church of the Medical Center v. Medical Center Comm'n, 689 F.2d 693, 698-701 (7th Cir.1982); Dos Santos v. Columbus-Cuneo-Cabrini Medical Center, 684 F.2d 1346, 1349-52 (7th Cir.1982).

Our discussion of the standard for ruling on requests for preliminary injunctions, and of the standard for appellate review of such rulings, should have made clear that it is not possible to reconcile all the precedents, or even just all the ones in this circuit. But the apparent discord is mostly verbal. Beneath the welter of apparently conflicting precedents we sense agreement on the following principles:

1. In every case in which the plaintiff wants a preliminary injunction he must show that he has "no adequate remedy at law," and (unless the statute under which he is suing excuses a showing of irreparable harm, as in Illinois Bell Tel. Co. v. Illinois Commerce Comm'n, supra, 740 F.2d at 571) that he will suffer "irreparable harm" if the preliminary injunction is not granted. The absence of an adequate remedy at law is a precondition to any form of equitable relief. The requirement of irreparable harm is needed to take care of the case where although the ultimate relief that the plaintiff is seeking is equitable, implying that he has no adequate remedy at law, he can easily wait till the end of trial to get that relief. (On the distinction between "no adequate remedy at law" and "irreparable harm" see Fiss & Rendleman, Injunctions 59 (2d ed. 1984).) Only if he will suffer irreparable harm in the interim--that is, harm that cannot be prevented or fully rectified by the final judgment after trial--can he get a preliminary injunction. Where the only remedy sought at trial is damages, the two requirements--irreparable harm, and no adequate remedy at law--merge. The question is then whether the plaintiff will be made whole if he prevails on the merits and is awarded damages.

2. In saying that the plaintiff must show that an award of damages at the end of trial will be inadequate, we do not mean wholly ineffectual; we mean seriously deficient as a remedy for the harm suffered. See Semmes Motors, Inc. v. Ford Motor Co., 429 F.2d 1197, 1205 (2d Cir.1970) (Friendly, J.); 11 Wright & Miller, supra, Sec. 2944, at p. 396. A damages remedy can be inadequate for any of four reasons:

(a) The damage award may come too late to save the plaintiff's business. He may go broke while waiting, or may have to shut down his business but without declaring bankruptcy. Of course, even if the plaintiff declares bankruptcy, his trustee in bankruptcy can get a damage award; but probably it will not cover all the losses incident to the bankruptcy. The award may be inadequate even if the plaintiff leaves the business without becoming insolvent. As Judge Friendly noted in a case involving the termination of an automobile dealer, "the right to continue a business in which William Semmes had engaged for twenty years and into which his son had recently entered is not measurable entirely in monetary terms; the Semmes want to sell automobiles, not to live on the income from a damages award." Semmes Motors, Inc. v. Ford Motor Co., supra, 429 F.2d at 1205.

(b) The plaintiff may not be able to finance his lawsuit against the defendant without the revenues from his business that the defendant is threatening to destroy. But in an age of contingent-fee contracts this will rarely be a decisive consideration.

(c) Damages may be unobtainable from the defendant because he may become insolvent before a final judgment can be entered and collected. See discussion in Signode Corp. v. Weld-Loc Systems, Inc., 700 F.2d 1108, 1111 (7th Cir.1983).

(d) The nature of the plaintiff's loss may make damages very difficult to calculate. Consider a loss, but not a crippling loss (that would be case (a)), of business profits. In principle, any profits lost by Roland as a result of being terminated for breach of an implied exclusive-dealing contract can be monetized, and awarded as damages; but in practice it may be very difficult to distinguish the effect of the termination from the effect of other things happening at the same time, and to project that effect into the distant future. On the difficulties encountered in trying to calculate damages for lost profits, see, e.g., Taylor v. Meirick, 712 F.2d 1112, 1119-22 (7th Cir.1983); Hayes v. Solomon, 597 F.2d 958, 976-77 (5th Cir.1979); Note, Private Treble Damage Antitrust Suits: Measure of Damages for Destruction of All or Part of a Business, 80 Harv.L.Rev. 1566, 1577-86 (1967).

3. In deciding whether to grant a preliminary injunction, the court must also consider any irreparable harm that the defendant might suffer from the injunction--harm that would not be either cured by the defendant's ultimately prevailing in the trial on the merits or fully compensated by the injunction bond that Rule 65(c) of the Federal Rules of Civil Procedure requires the district court to make the plaintiff post. The cases do not usually speak of the defendant's irreparable harm, but the qualification is implicit; if the defendant will not be irreversibly injured by the injunction because a final judgment in his favor would make him whole, the injunction will not really harm him. But since the defendant may suffer irreparable harm from the entry of a preliminary injunction, the court must not only determine that the plaintiff will suffer irreparable harm if the preliminary injunction is denied--a threshold requirement for granting a preliminary injunction--but also weigh that harm against any irreparable harm that the defendant can show he will suffer if the injunction is granted.

4. Besides showing that he has no adequate remedy at law and that he will suffer irreparable harm unless the preliminary injunction is granted, the plaintiff has another threshold to cross: that of showing some likelihood of succeeding on the merits. It is not enough that the failure to get the injunction will be a disaster for him whereas the injunction would be only a minor inconvenience to the defendant. Equity jurisdiction exists only to remedy legal wrongs; without some showing of a probable right there is no basis for invoking it. But although unwilling therefore to go as far as the Ninth Circuit in Costandi v. AAMCO Automatic Transmissions, Inc., 456 F.2d 941, 943 (9th Cir.1972) (per curiam), which upheld the grant of a preliminary injunction without any consideration at all of the probable outcome of the trial, we agree that the threshold is low. It is enough that "the plaintiff's chances are better than negligible...." Omega Satellite Products Co. v. City of Indianapolis, supra, 694 F.2d at 123. See also Washington Metropolitan Area Transit Comm'n v. Holiday Tours, Inc., 559 F.2d 841, 842 n. 1, 842-44 (D.C.Cir.1977) ("substantial case on the merits" good enough for a stay pending appeal (analogous to a preliminary injunction), even though "ultimate success by the movant is [not] a mathematical probability," and the court's "own approach may be contrary to movant's view of the merits"); West Virginia Highlands Conservancy v. Island Creek Coal Co., 441 F.2d 232, 235 (4th Cir.1971) ("probable right," used interchangeably with "substantial issues"). And see the excellent discussion in Comment, Probability of Ultimate Success Held Unnecessary for Grant of Interlocutory Injunction, 71 Colum.L.Rev. 165 (1971).

5. If the plaintiff does show some likelihood of success, the court must then determine how likely that success is, because this affects the balance of relative harms (point 3 above). The more likely the plaintiff is to win, the less heavily need the balance of harms weigh in his favor; the less likely he is to win, the more need it weigh in his favor. This is a most important principle, and one well supported by cases in this and other circuits, and by scholarly commentary. See Hyatt Corp. v. Hyatt Legal Services, 736 F.2d 1153, 1159 (7th Cir.1984); Omega Satellite Products Co. v. City of Indianapolis, supra, 694 F.2d at 123; American Hospital Ass'n v. Harris, 625 F.2d 1328, 1331 (7th Cir.1980) ("The required showing of probability of success on the merits 'varies with the quality and quantum of harm that [the moving party] will suffer from the denial of an injunction,' " quoting District 50, United Mine Workers of America v. International Union, United Mine Workers of America, 412 F.2d 165, 168 (D.C.Cir.1969)); Dan River, Inc. v. Icahn, 701 F.2d 278, 283 (4th Cir.1983), and cases cited there; Roth v. Bank of the Commonwealth, 583 F.2d 527, 538 (6th Cir.1978); Washington Metropolitan Area Transit Comm'n v. Holiday Tours, Inc., supra, 559 F.2d at 843-44; Canal Authority v. Callaway, 489 F.2d 567, 576-77 (5th Cir.1974); Virginia Petroleum Jobbers Ass'n v. FPC, 259 F.2d 921, 925 (D.C.Cir.1958) (per curiam) (stay pending appeal) ("injury held insufficient to justify a stay in one case may well be sufficient to justify it in another, where the applicant has demonstrated a higher probability of success on the merits"); 11 Wright & Miller, supra, Sec. 2948, at pp. 453-55; Developments in the Law, Injunctions, 78 Harv.L.Rev. 994, 1056 (1965) ("Clear evidence of irreparable injury should result in a less stringent requirement of certainty of victory; greater certainty of victory should result in a less stringent requirement of proof of irreparable injury") (footnote omitted).

A variant of this "sliding scale" approach is illustrated by Charlie's Girls, Inc. v. Revlon, Inc., 483 F.2d 953, 954 (2d Cir.1973) (per curiam): "One moving for a preliminary injunction assumes the burden of demonstrating either a combination of probable success and the possibility of irreparable injury or that serious questions are raised and the balance of hardships tips sharply in his favor." See also William Inglis & Sons Baking Co. v. ITT Continental Baking Co., 526 F.2d 86, 88 (9th Cir.1975). This approach and the "sliding scale" approach are treated as identical in American Hospital Ass'n v. Harris, supra, 625 F.2d at 1331.

The idea underlying these equivalent approaches is that the task for the district judge in deciding whether to grant or deny a motion for preliminary injunction is to minimize errors: the error of denying an injunction to one who will in fact (though no one can know this for sure) go on to win the case on the merits, and the error of granting an injunction to one who will go on to lose. The judge must try to avoid the error that is more costly in the circumstances. That cost is a function of the gravity of the error if it occurs and the probability that it will occur. The error of denying an injunction to someone whose legal rights have in fact been infringed is thus mo