In deciding whether to grant a preliminary injunction courts compare the expected irreparable harm if the injunction is not issued to the irreparable harm that would result if the injunction is issued. An injury is considered irreparable only as far as it “cannot be cured by a remedy after trial.” This Article demonstrates that to maximize social welfare (“efficiency”) the definition of irreparable harm must be modified. From a social-welfare perspective, harms to one party which do not correlate to corresponding benefits to the other party are deadweight-losses, regardless of the availability of a remedy that may merely reallocate them from one party to another. Consequently, the implementation of the current doctrine, which allows courts to disregard losses that can be compensated for, leads courts to grant, in some cases, inefficient preliminary injunctions, and to reject, in other cases, applications for efficient ones. Deadweight-losses must be considered as “irreparable harms,” and should thus be taken into account in deciding whether to issue a preliminary injunction, irrespective of the availability of an ex-post remedy.
The revised standard for determining irreparable harm would substantially mitigate the social costs associated with preliminary injunctions. The analysis also shows that these costs can be further reduced by an appropriate design of remedies for wrong preliminary injunctions. Efficiency-based considerations support the current practice of requiring the moving-party to compensate the defendant for only part of the harms inflicted due to the wrong preliminary injunction. Moreover, these considerations provide a firm support to the use of the remedy of restitution, which requires the moving-party to disgorge the benefits obtained at the expense of the defendant by the wrong preliminary injunction. This remedy, rather than compensation for harms, best fit for both minimizing irreparable harms and directing the plaintiff to avoid applying for preliminary injunction for improper purposes.
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