## Facts

- Merrill Lynch employed Kenneth Dale Bradley as an account executive in its Newport News, Virginia office beginning December 16, 1981.
- Bradley executed an Account Executive Agreement stating that customer records (including names and addresses) were Merrill Lynch property, could not be removed or disclosed except in the ordinary course of business, and could not be used after termination.
- The agreement also included a one-year post-termination restriction barring Bradley from soliciting Merrill Lynch clients he served or learned of during employment in the relevant locality.
- Bradley also signed an NYSE-related form requiring arbitration of disputes with a member organization.
- After resigning, Bradley allegedly contacted customers he had serviced at Merrill Lynch and urged them to transfer accounts to his new employer, purportedly using confidential client information.
- Merrill Lynch sued in federal district court for damages and injunctive relief, and Bradley moved to stay the action and compel arbitration under the Federal Arbitration Act (FAA).
- The district court granted a preliminary injunction restraining Bradley from using Merrill Lynch records and soliciting covered clients, denied Bradley’s request to stay or dissolve that injunction, and ordered expedited arbitration.
- Bradley appealed only the preliminary injunction order.

## Issues

1. Whether, consistent with the FAA and a binding agreement to arbitrate, a federal court may issue a preliminary injunction restraining conduct pending arbitration to preserve the status quo.
2. Whether the traditional requirements for preliminary injunctive relief (including irreparable harm and balance of hardships) were satisfied on this record.

## Decision

- The Fourth Circuit affirmed the preliminary injunction.
- The court held the FAA does not strip courts of authority to grant interim injunctive relief in aid of arbitration when necessary to prevent irreparable harm and preserve the meaningfulness of arbitration.
- The injunction was characterized as status-quo preservation rather than a determination of the merits, leaving ultimate resolution to the arbitrator.
- The court agreed that Merrill Lynch showed irreparable harm through threatened loss of customers and goodwill and difficulty of measuring damages.
- The balance of hardships favored Merrill Lynch because the injunction largely enforced restrictions Bradley had voluntarily accepted for a limited period.

## Legal Principles

- The FAA’s policy favoring arbitration permits courts to issue provisional equitable relief that preserves the status quo and prevents conduct that could render arbitral relief ineffective.
- A court may grant a preliminary injunction pending arbitration without deciding the merits, so long as the arbitrator retains authority to adjudicate the parties’ substantive rights.
- Traditional equitable criteria for preliminary injunctions apply in this setting, including irreparable harm and a balance of hardships supporting relief.

## Conclusion

The Fourth Circuit held that a district court may issue a preliminary injunction pending arbitration to prevent irreparable harm and preserve the status quo, and it upheld the injunction restricting a former broker’s use of customer records and solicitation of clients while the parties proceeded to expedited arbitration.


Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Bradley, 756 F.2d 1048 (4th Cir. 1985)