## Facts

- Allegheny Energy, Inc. and DQE, Inc., both publicly traded and heavily regulated electric-utility holding companies, executed a merger agreement under which DQE would become a wholly owned subsidiary of Allegheny.
- The agreement and related public disclosures framed the merger as strategically important in anticipation of electric-industry deregulation, with expected benefits including cost savings, operational efficiencies, and improved competitive position.
- Closing required multiple regulatory approvals, including from the Pennsylvania Public Utility Commission (PUC) and the Federal Energy Regulatory Commission (FERC).
- During regulatory review, PUC and FERC indicated approval would be conditioned on significant requirements, including potential divestitures and other modifications.
- DQE treated the regulators’ conditions as a “material adverse effect” and purported to terminate the merger agreement.
- Allegheny sued in federal court (diversity jurisdiction) seeking specific performance and interim injunctive relief to prevent actions inconsistent with the merger agreement.
- Allegheny argued that the merger was a unique, non-replicable corporate opportunity and that its benefits were non-quantifiable, making damages inadequate.

## Issues

1. Whether, under Pennsylvania law and on these facts, the loss of a contractual opportunity to consummate a merger between publicly traded corporations constitutes irreparable harm supporting preliminary injunctive relief.

## Decision

- The Third Circuit vacated the district court’s denial of a preliminary injunction and remanded.
- The court held that, on this record, the loss of the merger opportunity constituted irreparable harm because the anticipated benefits were not readily reducible to money damages.
- The court rejected the district court’s view that damages were necessarily an adequate remedy for the failed merger.

## Legal Principles

- Under Pennsylvania law, preliminary injunctive relief requires a showing of irreparable harm—an injury not adequately compensable by monetary damages.
- A lost business transaction may constitute irreparable harm when it represents a unique corporate opportunity whose expected benefits are interrelated, uncertain, and difficult to quantify with reasonable precision.
- The irreparable-harm inquiry is fact-specific; courts evaluate the nature of the transaction and the practicability of calculating damages.
- Parties’ own descriptions of a transaction’s strategic importance in disclosures to shareholders and regulators may be probative of uniqueness and the difficulty of valuation.

## Conclusion

The Third Circuit concluded that Allegheny’s loss of the merger opportunity, given the transaction’s asserted uniqueness and the speculative nature of valuing anticipated synergies and strategic advantages, could satisfy Pennsylvania’s irreparable-harm requirement; it therefore vacated the denial of preliminary injunctive relief and remanded for reconsideration under the proper standard.


Allegheny Energy, Inc. v. DQE, Inc., 171 F.3d 153 (3d Cir. 1999)