                                                                      F I L E D
                                                                United States Court of Appeals
                                                                        Tenth Circuit
                      UNITED STATES CO URT O F APPEALS
                                                                       June 29, 2006
                                   TENTH CIRCUIT                   Elisabeth A. Shumaker
                                                                       Clerk of Court

 PROSPER, INC., a Utah corporation,
 successor in interest to Ethan and
 Randy, L.C., a Utah limited liability
 company,                                               No. 05-4176
                                                 (D.C. No. 05-CV-98-PGC)
          Plaintiff - Appellant,                         (D. Utah)

 v.

 INNO VATIVE SOFTW ARE
 TECHNOLOGIES, a California
 corporation,

          Defendant - Appellee.



                              OR D ER AND JUDGM ENT *


Before KELLY, T YM KOV IC H, Circuit Judges, and EAGAN, ** District Judge.




      Plaintiff-Appellant Prosper, Inc. appeals from the district court’s denial of

its motion for a preliminary injunction against Defendant-Appellee Innovative

Software Technologies, Inc. (“IST”). On appeal, Prosper argues that the district



      *
        This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. This court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
      **
       The Honorable Claire V. Eagan, District Judge, United States District
Court of the Northern District of Oklahoma, sitting by designation.
court abused its discretion in failing to grant injunctive relief and also by failing

to hold a hearing. Aplt. Br. at 2, 25. W e exercise jurisdiction pursuant to 28

U.S.C. § 1292(a) and affirm.



                                     Background

      IST, a company engaged in marketing technology, software services and

training applications, purchased the stock of Energy Professional M arketing

Group Corporation (“EPM G”) from James G arn and Ethan W illis, EPM G’s sole

shareholders. Aplt. App. at 95. Garn and W illis later asserted claims against IST,

which IST denied. Id. at 94, 107. On July 2, 2004, IST entered into a settlement

agreement (the “Agreement”) with Garn, W illis, and their separate company,

Ethan & Randy, L.C. (“E& R), the predecessor in interest to Prosper. Under the

terms of the Agreement, IST transferred EPM G assets to E& R and released

competition and solicitation restrictions previously imposed.

      Prosper’s underlying breach of contract claims arise out of this Agreement.

As we understand it, when EPM G products were sold to a customer, EPM G

recognized revenue, but also allowed for estimated returns and refunds (“EM PG

reserves”). EPM G also paid commissions to those procuring the sale, an EPM G

employee, and a client or “lead provider.” EPM G paid out most of the

commissions at the time of a sale (90% ), and recognized a potential obligation to

pay the remainder (“employee reserves” and “client reserves”). See id. at 401

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¶ 6, 408-409. EPM G did not pay out the entire amount of the commissions

because of the potential for customer returns and refunds.

      The parties dispute the nature of the unpaid or retained commissions

reflected in the reserve accounts. Prosper contends that IST obtained these

“funds” by withholding commissions owed to others. Aplt. Reply Br. at 19 (“The

funds were identified and accounted-for. IST promised to pay the funds to the

appropriate parties. Nevertheless, IST has kept the funds and ceased accounting

for them.”) (citations omitted). On the other hand, IST contends that there are no

separate funds or deposit accounts holding these amounts; rather, the reserve

amounts are future contingent liabilities that may exist pursuant to the

Agreement. Aplt. App. 536-37. W hatever the precise accounting classification of

the reserve accounts, nothing in this record suggests that the reserve amounts are

actual liquid assets segregated from the general assets of IST. The Agreement

obligated IST to pay the client reserves then existing in accordance with existing

contracts between IST and the clients, or if none, IST’s historical practice. Aplt.

App. 119-20. That said, we agree with IST that any such amounts w ould be paid

from the general assets of EPM G, not a specific fund. Id.; see also id. at 536-37.

      Prosper filed suit on February 4, 2005, alleging breach of contract and

unjust enrichment based on IST’s supposed failure to pay these client reserves as

specified in the Agreement. IST denied the claims and disputed its obligation to

pay. On M arch 25, 2005, Prosper moved for a preliminary injunction to prevent

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“IST from using or depleting the funds held in the reserves pending the resolution

of this controversy.” Id. at 9. Prosper did not request, and the district court did

not hold, a hearing on the matter, and the parties submitted testimony by affidavit

and provided w ritten materials.

      On June 24, 2005, the district court denied Prosper’s motion for a

preliminary injunction after considering the traditional four factors, concluding

that Prosper made an insufficient showing. Prosper appealed and moved for

expedited review, which w e now deny as moot. W e agree with the district court

that Prosper was not entitled to a preliminary injunction, but for somewhat

different reasons than those set forth by the district court. See Colorado Flying

Acad., Inc. v. United States, 724 F.2d 871, 880 (10th Cir. 1984) (we can affirm on

any grounds that find support in the record).



                                      Discussion

      W e review the district court’s denial of a preliminary injunction for an

abuse of discretion. W yandotte N ation v. Sebelius, 443 F.3d 1247, 1252 (10th

Cir. 2006); Schrier v. Univ. of Co., 427 F.3d 1253, 1258 (10th Cir. 2005). “A

district court abuses its discretion when it commits an error of law or makes

clearly erroneous factual findings.” W yandotte Nation, 443 F.3d at 1252. An

abuse of discretion is “an arbitrary, capricious, whimsical, or manifestly

unreasonable judgment.” Schrier, 427 F.3d at 1258 (quoting Coletti v. Cudd

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Pressure Control, 165 F.3d 767, 777 (10th Cir. 1999)). W e review the district

court’s legal determinations de novo. Greater Yellowstone Coal. v. Flowers, 321

F.3d 1250, 1255 (10th Cir. 2003).

      Here, the district court’s denial of a preliminary injunction was not an

abuse of discretion because such an injunction would be improper in this type of

situation. A district court has “no authority to issue a preliminary injunction

preventing [defendants] from disposing of their assets pending adjudication of

[plaintiff’s] contract claim for money damages.” Grupo M exicano de Desarrollo,

S.A., v. Alliance Bond Fund, Inc., 527 U.S. 308, 333 (1999). The requirement

“that the creditor obtain a prior judgment is a fundamental protection in debtor-

creditor law– rendered all the more important in our federal system by the

debtor’s right to a jury trial on the legal claim.” Id. at 330. A creditor with no

rights to a debtor’s property cannot restrain the debtor’s use of that property prior

to a final judgment. See id. at 333; see also Dateline Exp., Inc. v. Basic Constr.,

Inc., 306 F.3d 912, 914 (9th Cir. 2002) (per curium). W e recognize too the rights

of unsecured creditors, but they have a remedy in state attachment and

garnishment procedures, not a preliminary injunction. See Grupo M exicano, 527

U.S. at 330-31.

      Seeking specific performance of a contract, here a settlement agreement,

does not render G rupo M exicano immaterial. Prosper is, as a practical matter,

seeking to ensure that should it prevail on the merits, the general assets of IST are

                                         -5-
available to pay to third parties, i.e. employee and lead providers, who at best are

unsecured creditors, and indeed, have not even filed suit. As we have rejected the

idea that Prosper is seeking to litigate a specific asset or fund of IST, we do not

find applicable the notion that a district court has the power to grant an

interlocutory injunction to preserve a fund that might be subject to a final decree

or to enjoin conduct that might be enjoined under a final decree. See In re

Fredeman Litig., 843 F.2d 821, 827-28 (5th Cir. 1988). The fact that Prosper

seeks a specified amount of money to be paid to the third parties does not render

that same dollar amount of IST’s assets related to the underlying dispute for the

purposes of our analysis. See Aplt. App. at 588 (citing Rosen v. Cascade Int’l

Inc., 21 F.3d 1520, 1526-28 & n.19 (11th Cir. 1994)).

      Regardless, we find that even if the district court could have issued the

injunction, it did not abuse its discretion in deciding that Prosper had not

sufficiently demonstrated irreparable injury. See e.g. Greater Yellowstone, 321

F.3d at 1255 (party seeking preliminary injunction must show four factors, one of

which is that it w ill suffer irreparable harm absent issuance of the injunction).

There is no “fund” here that is threatened, and money damages could provide an

adequate remedy. See Prairie Band of Potawatomi Indians v. Pierce, 253 F.3d

1234, 1250 (10th Cir. 2001) (no irreparable harm when the injury can “be

adequately atoned for in money”). Irreparable injury must be “both certain and




                                          -6-
great, not merely serious or substantial.” Id. 1

      Of course, Prosper argues that the district court’s determination on lack of

irreparable injury should be rejected because the district court failed to hold an

evidentiary hearing. In pertinent part, Prosper argues that the IST’s own SEC

filings undercut an affidavit supplied by IST suggesting that “[b]ased upon

available cash and accounts receivable, IST has sufficient funds to pay the full

claims of the lead providers and Prosper.” A plt. App. at 542. Though the issue is

close, given the absence of a request for a hearing and some conjecture on what

that hearing would have demonstrated in this regard, we cannot conclude that the

district court abused its discretion. In addition, the district court’s finding that

Prosper failed to demonstrate irreparable harm to its business is supported by the

record.

      A FFIR ME D.

                                         Entered for the Court


                                         Paul J. Kelly, Jr.
                                         Circuit Judge




      1
         W e recognize that difficulty in “collecting a damage judgment may
support a claim of irreparable injury.” Tri-State Generation and Transmission
Ass’n, Inc. v. Shoshone River Power, Inc., 805 F.2d 351, 354 (10th Cir. 1986).
W e hold, rather, that in this case, the district court did not abuse its discretion in
finding that irreparable harm was not sufficiently certain.

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