## Facts

- Dataphase Systems, Inc., a newer entrant in the automated library circulation systems market, competed with C L Systems, Inc. (CLSI), an established market leader.
- Dataphase alleged CLSI pursued anticompetitive conduct to block Dataphase’s market access, including below-cost bidding, interference with business relationships, and disparagement to customers.
- Dataphase asserted federal claims under Sherman Act § 2 and Robinson-Patman Act § 3, plus a state-law claim for interference with business expectancies, seeking damages and equitable relief.
- CLSI denied wrongdoing and maintained its statements about Dataphase were true and not misleading.
- After evidentiary hearings, the district court entered a preliminary injunction barring CLSI from making any false or misleading statements disparaging Dataphase, its products, its financial condition, or its ability to perform.
- CLSI appealed the preliminary injunction.

## Issues

1. What standard governs issuance of a preliminary injunction in the Eighth Circuit.
2. Whether the district court abused its discretion by issuing a broad injunction restricting competitor statements without sufficient findings of irreparable harm and probable falsity or misleadingness.

## Decision

- The en banc Eighth Circuit vacated the preliminary injunction without prejudice and remanded.
- The court restated the preliminary-injunction inquiry as a flexible four-factor balancing test.
- The district court abused its discretion by failing to make adequate findings that Dataphase faced irreparable harm absent an injunction.
- The district court also failed to make adequate findings that the challenged statements were probably false or misleading, despite issuing a broad restraint on speech in a competitive setting.

## Legal Principles

- Preliminary injunctive relief requires consideration of four factors: (1) threat of irreparable harm to the movant, (2) balance between that harm and harm to the nonmovant, (3) likelihood of success on the merits, and (4) the public interest.
- No single factor is determinative; likelihood of success must be assessed in context with the relative injuries to the parties and the public.
- Likelihood of success does not require proof of a greater-than-50% chance of prevailing; when equities strongly favor the movant, raising substantial and serious questions may suffice.
- Economic loss is typically compensable by damages and does not alone establish irreparable harm; a court must make specific findings tying the record to a noncompensable injury (e.g., certain losses of goodwill or market position).
- Broad preliminary restraints on competitor speech require careful, specific findings, including that the statements targeted are probably false or misleading, before imposing wide-ranging prohibitions.

## Conclusion

The Eighth Circuit established a flexible, four-factor balancing approach for preliminary injunctions and vacated a sweeping disparagement injunction because the record and findings did not adequately show irreparable harm or that the enjoined statements were probably false or misleading.


Dataphase Sys., Inc. v. C L Sys., Inc., 640 F.2d 109 (8th Cir. 1981) (en banc)