Mesa Petroleum Co. v. Unocal Corp.

United States District Court · 1985 · Corporations

CorporationsAntitrustPreliminary InjunctionsTakeovershostile takeoverSherman ActClayton Act section 16preliminary injunction

Facts

Unocal alleged that Mesa's takeover attempt, together with its prior takeover efforts against other major oil companies, was part of a conspiracy to restrain trade in domestic oil and gas leasing and exploration on the Outer Continental Shelf in the Gulf of Mexico in violation of §§ 1 and 2 of the Sherman Act. Unocal argued that Mesa's takeovers would "restructure" companies by greatly increasing debt, thereby reducing working capital available for lease purchases and exploration and lessening competition. Unocal sought injunctive relief under Clayton Act § 16 to stop the takeover and Mesa's voting of shares. The court reviewed declarations, exhibits, and hearing evidence on the claimed antitrust effects and threatened injury.

Issue

Whether Unocal showed entitlement to a preliminary injunction by clearly establishing a substantial likelihood of success on its Sherman Act claim and a substantial threat of irreparable injury from Mesa's takeover attempt. More specifically, the court asked whether Unocal was substantially likely to prove that Mesa sought to lessen leasing and exploration competition on the Outer Continental Shelf in the Gulf of Mexico.

Rule

A preliminary injunction is extraordinary relief and may issue only if the plaintiff clearly establishes by a preponderance of the evidence: (1) a substantial likelihood of success on the merits, (2) a substantial threat of irreparable injury absent the injunction, (3) that the threatened injury outweighs harm to the defendant, and (4) that the injunction will not disserve the public interest. In an antitrust case, proof that defendants agreed to acquire a company is insufficient by itself; the plaintiff must show that the purpose or effect of the combination is to restrain trade, and speculative evidence of reduced competition does not satisfy that burden.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Prairie Horizon Energy, based in Houston, sues Rivermark Holdings in federal court in New Orleans to stop Rivermark's hostile tender offer. Prairie Horizon claims the takeover will eventually reduce bidding for offshore wind leases, but its affidavits say only that future harm is 'possible' and do not show a substantial threat of irreparable injury.

How should the court rule on Prairie Horizon's request for a preliminary injunction?

Explanation. A preliminary injunction is extraordinary relief and may issue only if the plaintiff clearly establishes by a preponderance of the evidence the required elements, including substantial likelihood of success and a substantial threat of irreparable injury. Where asserted harm is only 'possible' and not clearly threatened, denial is proper. The court in the opinion also stated that once the first two prerequisites were not shown, it did not need to address the remaining factors. (Derived from Mesa Petroleum Co. v. Unocal Corp. (n.d.).)