You may remember that in February 2008 the "auctions" that gave "auction-rate securities" their liquidity seized up.  Lots of people who'd bought ARSs thought they could sell them about as easily as they could unload shares in money market funds.  The slightly higher rate of return made the ARSs more attractive.  So they believed.

The auctions evaporated.  And so the buyers learned, to their chagrin, that they'd in fact taken on much bigger risks than they'd expected.

The folks at Braintree Laboratories, Braintree Holdings, and Braintree Real Estate Management Company blamed their broker-dealer, Citigroup Global Markets, for their misfortune in buying $41 million in now-illiquid ARSs between June and August 2008.  They sued Citigroup for securities law violations and demanded their money back.  They also asked for a preliminary injunction.

Not just any preliminary injunction.  One that would require Citigroup to refund the $41 instanter.

The district court denied Braintree's motion and — adding insult to injury — ordered the parties to arbitrate.

The First Circuit today affirmed.  It held that Braintree hadn't shown a key requirement for injunctive relief — irreparable injury:

On appeal, Braintree urges that its ongoing inability to liquidate its investments is generating incalculable losses from missed opportunities, including new product acquisitions, in-licensing activities, and research and development programs. . . . The district court did not abuse its discretion in rejecting this argument.  An investor could always claim that she could put money to better use than simply letting it accrue interest at the prevailing rate.  An asserted injury so ubiquitous cannot serve as the basis for the issuance of a preliminary injunction.

Braintree Laboratories, Inc. v. Citigroup Global Markets Inc., No. 09-2540, slip op. at 9 & 10 (1st Cir. Oct. 12, 2010).

The panel also held that it had no jurisdiction to consider a pro-arbitration order that stayed the case instead of dismissing it.

If you wonder how Braintree could complain about illiquidity in a market the froze up a few months before it bought the ARSs in question, we wondered the same thing.