trict court for an order compelling the parties to submit their disputes to arbitration pursuant to the provision in the Reinsurance Agreement and for a preliminary injunction enjoining Travelers from terminating and not renewing existing insurance policies issued to Dollar subsidiaries and licensees pending resolution of arbitration, and restraining Travelers from making further demand upon Dollar and Viking for letters of credit, from drawing upon existing letters of credit, and from proceeding against Dollar until the disputes are resolved through arbitration or otherwise. On July 20, 1984, the district court entered its order compelling arbitration. The order further prohibits Travelers from terminating or cancelling or attempting to terminate or cancel any existing insurance policies issued to any subsidiary or licensee pending resolution of the arbitration proceeding, prohibiting Travelers from making any further demand upon Dollar or Viking for additional letters of credit and from drawing upon existing letters of credit pending resolution of the arbitration proceeding, and requiring that Travelers maintain the status quo pending resolution of the arbitration proceeding. On August 2, 1984, Travelers appealed this order granting the preliminary injunction.
Thereafter, pursuant to motion brought by Dollar and Viking, the district court found Travelers in contempt for its failure to renew those insurance policies which had been terminated prior to entry of the preliminary injunction. Travelers also has appealed this contempt order.
B. Preliminary Injunction.
“The grant or denial of a motion for preliminary injunction lies within the discretion of the district court. Its order granting or denying the injunction will be reversed only if the district court relied on an erroneous legal premise or abused its discretion.” Sports Form, Inc. v. United Press International, Inc., 686 F.2d 750, 752 (9th Cir.1982). A district court’s order is reversible for legal error if, in applying the appropriate standards, the court misapprehends the law with respect to the underlying issues in the litigation. Wright v. Rushen, 642 F.2d 1129, 1132 (9th Cir.1981). To determine whether there has been an abuse of discretion, the reviewing court “must consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment…. The [reviewing] court is not empowered to substitute its judgment for that of the [district court].” Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416, 91 S.Ct. 814, 823, 28 L.Ed.2d 136 (1971). “Abuse of discretion may also occur when the district court rests its conclusions on clearly erroneous findings of fact.” Sports Form, Inc. v. United Press International, Inc., 686 F.2d at 752. A finding of fact is clearly erroneous when the reviewing court on the entire evidence is “left with the definite and firm conviction that a mistake has been committed.” Edinburgh Assurance Co. v. R.L. Burns Corp., 669 F.2d 1259, 1261 (9th Cir.1982) (quoting United States v. United States Gypsum Co., 333 U.S. 364, 395, 68 S.Ct. 525, 542, 92 L.Ed. 746 (1948)).[1]
The traditional equitable criteria for granting preliminary injunctive relief are (1) a strong likelihood of success on the merits, (2) the possibility of irreparable injury to plaintiff if the preliminary relief is not granted, (3) a balance of hardships favoring the plaintiff, and (4) advancement of the public interest (in certain cases). Sierra Club v. Hathaway, 579 F.2d 1162, 1167 (9th Cir.1978). “The moving party may meet its burden by demonstrating either (1) a combination of probable success on the merits and the possibility of irreparable injury or (2) that serious questions are
- ↑ Travelers urges this court to adopt the “full review” standard utilized in the Second Circuit in reviewing a preliminary injunction granted on a paper record containing only the affidavits, the pleadings and the briefs without an evidentiary hearing. See Jack Kahn Music Co. v. Baldwin Piano & Organ Co., 604 F.2d 755, 758 (2d Cir.1979). However, because we conclude that the district court abused its discretion under the standards applicable in the Ninth Circuit, it is unnecessary for us to decide this issue.
