Allegheny Energy, Inc. v. DQE, Inc.

171 F.3d 153 (1999)

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Allegheny Energy, Inc. v. DQE, Inc.

United States Court of Appeals for the Third Circuit
171 F.3d 153 (1999)

Facts

Allegheny Energy, Inc. (Allegheny) (plaintiff) entered into a merger agreement with DQE, Inc. (defendant) that would have resulted in DQE becoming a wholly owned subsidiary of Allegheny. Each party was a publicly traded utility company. The merger agreement provided that, between signing and closing of the merger, neither party could take any action that would disqualify the merger from receiving a certain beneficial accounting treatment. The parties filed a joint proxy statement with the Securities and Exchange Commission (SEC) that described multiple material benefits that the merger could achieve. Being regulated utility companies, the parties had to jointly seek and obtain approval of the merger by the Pennsylvania Utilities Commission (PUC) and the Federal Energy Regulatory Commission (FERC) prior to consummation of the merger. Both PUC and FERC found that the parties’ joint proposal was not acceptable without certain material modifications, including potential divestiture of assets. DQE deemed the PUC and FERC rulings to be a material adverse effect on the proposed merger and terminated the merger agreement. Allegheny sued for specific performance and filed motions for a temporary restraining order and a preliminary injunction to prevent DQE from taking actions prohibited by the merger agreement while the claim for specific performance was pending. Allegheny argued that specific performance was necessary because damages could not be quantified, as the proposed merger represented substantial, unique, and unquantifiable benefits to Allegheny and the failure to consummate the merger would cause Allegheny irreparable harm. The district court denied the preliminary injunction for specific performance. The district court concluded that a claim for damages would be an adequate remedy for Allegheny and, thus, that specific performance was not required. Allegheny appealed the denial of the preliminary injunction to compel specific performance.

Rule of Law

Issue

Holding and Reasoning (Pollak, J.)

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