Master Tax LLC v. Ultimate Software Group, Inc.

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
MASTER TAX LLC,
Plaintiff-Appellee,
v.
ULTIMATE SOFTWARE GROUP, INC.,
Defendant-Appellant.
No. 18-16792
D.C. No. 2:18-cv-01463-DLR
MEMORANDUM*
Appeal from the United States District Court
for the District of Arizona
Douglas L. Rayes, District Judge, Presiding
Submitted May 14, 2019**
San Francisco, California
Before: WALLACE and IKUTA, Circuit Judges, and MOLLOY,*** District
Judge.
Ultimate Software Group, Inc. appeals from a preliminary injunction. We
have jurisdiction under 28 U.S.C. § 1292, and we vacate and remand.
* This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
** The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
*** The Honorable Donald W. Molloy, United States District Judge for
the District of Montana, sitting by designation.
FILED
MAY 16 2019
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS

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“We review the grant of a preliminary injunction for abuse of discretion.”
Network Automation, Inc. v. Advanced Sys. Concepts, Inc., 638 F.3d 1137, 1144
(9th Cir. 2011). “In deciding whether the district court has abused its discretion,
we employ a two-part test: first, we ‘determine de novo whether the trial court
identified the correct legal rule to apply to the relief requested’; second, we
determine ‘if the district court’s application of the correct legal standard was (1)
illogical, (2) implausible, or (3) without support in inferences that may be drawn
from the facts in the record.’” Pimentel v. Dreyfus, 670 F.3d 1096, 1105 (9th Cir.
2012) (quoting Cal. Pharmacists Ass’n v. Maxwell–Jolly, 596 F.3d 1098, 1104 (9th
Cir. 2010)).
A party can obtain a preliminary injunction by showing that (1) it is “likely
to succeed on the merits,” (2) it is “likely to suffer irreparable harm in the absence
of preliminary relief,” (3) “the balance of equities tips in [its] favor,” and (4) “an
injunction is in the public interest.” Winter v. Nat. Res. Def. Council, Inc., 555
U.S. 7, 20 (2008). Typically, an injunction is prohibitory—it enjoins a party from
acting. In contrast, the injunction here requires Ultimate to provide affirmatively
various information to Master Tax LLC. This type of relief is a “mandatory”
injunction because it “orders a responsible party to ‘take action.’” Garcia v.
Google, Inc., 786 F.3d 733, 740 (9th Cir. 2015) (en banc) (quoting Marlyn
Nutraceuticals, Inc. v. Mucos Pharma GmbH & Co., 571 F.3d 873, 879 (9th Cir.

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2009)). Mandatory preliminary injunctions are subject to a heightened standard.
Park Vill. Apartment Tenants Ass’n v. Mortimer Howard Tr., 636 F.3d 1150, 1161
(9th Cir. 2011). Master Tax “must establish that the law and facts clearly favor
[its] position, not simply that [it] is likely to succeed.” Garcia, 786 F.3d at 740.
Moreover, Master Tax must also show that “‘extreme or very serious damage’ will
result from the denial of a preliminary injunction.” See Am. Freedom Def.
Initiative v. King Cty., 796 F.3d 1165, 1173 (9th Cir. 2015) (quoting Marlyn, 571
F.3d at 879).
The district court abused its discretion when it did not apply the heightened
standard governing mandatory injunctions. See Pom Wonderful LLC v. Hubbard,
775 F.3d 1118, 1123 (9th Cir. 2014) (“[A] district court abuses its discretion if the
court rests its decision on an erroneous legal standard”).
Our holding that the district court applied an erroneous legal standard is
sufficient to resolve this appeal. However, we address one other issue raised by
the parties because it could arise again on remand and because it has been fully
briefed. See United States v. Mancuso, 718 F.3d 780, 796 (9th Cir. 2013); United
States v. Van Alstyne, 584 F.3d 803, 817 n.14 (9th Cir. 2009). The district court
concluded that Master Tax was likely to suffer irreparable harm under the Winter
standard. This was an error because there is “no evidence in the record that could
support a finding of irreparable harm” in this case. adidas Am., Inc. v. Skechers

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USA, Inc., 890 F.3d 747, 759 (9th Cir. 2018). The materials requested through the
injunction are preserved by order of the district court, and Ultimate stopped using
the software after May 31, 2018. In other words, Master Tax would not suffer
irreparable harm in the absence of a preliminary injunction because all relevant
materials have been preserved, and Master Tax could litigate the case and obtain a
permanent injunction requiring the audit, thus exercising its audit right.
VACATED and REMANDED.

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