Full opinion text
OPINION AND ORDER-PRELIMINARY INJUNCTION PEREZ-GIMENEZ, District Judge. The parties, Wal-Mart Stores, Inc., Wal-Mart Puerto Rico, Inc., Supermerca-dos Amigo, Inc. (collectively “Plaintiffs”), and Anabelle Rodriguez, Secretary of Justice of the Commonwealth of Puerto Rico (“Defendant” or “the Secretary”), having appeared at a hearing held before this Court on December 12, 16 and 17, 2002, and the Court having heard testimony and having received evidence presented by the Plaintiffs on the issues before it, and having heard arguments from both Plaintiffs and Defendants on the related legal issues, does hereby issue and order the following Findings of Fact, Conclusions of Law and Preliminary Injunction. FINDINGS OF FACT During the Fall of the year 2001, Wal-Mart Stores, Inc. and Wal-Mart Puerto Rico, Inc. (collectively “Wal-Mart”) conducted due diligence examinations to assess the possibility of acquiring Supermercados Amigo, Inc. (“Amigo”), a supermarket chain in the Commonwealth of Puerto Rico. Both Wal-Mart Puerto Rico, Inc. and Su-permercados Amigo, Inc. are companies incorporated and having their principal place of business in the Commonwealth of Puerto Rico, while Wal-Mart Stores, Inc. is incorporated in the State of Delaware and has its principal place of business in the State of Arkansas. INVESTIGATIONS AND NEGOTIATIONS February 2002 — The Merger Executed On February 5, 2002 the merger agreement between Wal-Mart and Amigo was signed and this originated a number of procedures that needed to take place before the closing of the transaction as part of the companies’ integration process. This pre-closing process included negotiations with federal and state agencies that typically oversee this type of transaction in an effort to anticipate and remedy potential antitrust concerns. Plaintiffs’ lawyers negotiated at length several aspects of the transaction with the Federal Trade Commission and the Puerto Rico Department of Justice (“PRDOJ”), and its Office of Monopolistic Affairs (“OMA”). Luis D. Martinez Rivera (“Martínez”), a Special Prosecutor who has worked at the OMA since 1997, was the main PRDOJ representative working on this case and was assisted for the most part by two economists from his office. Martinez, in charge of conducting the investigation pertinent to compliance with local anti-monopolistic laws, began to get involved in the Wal-Mart/Amigo merger transaction on February 11, 2002. Deputy Attorney General (“DAG”) of the OMA, Irma Rodriguez-Justiniano (“Rodriguez-Justiniano”), supervised Martinez during the first months of the investigation and then, during the month of October 2002, José Diaz Tejeda (“Diaz-Tejeda”), who substituted Rodriguez as DAG of the OMA, began taking a much more active role in the investigation and negotiations with Wal-Mart. Soon after the agreement to merge was announced, the OMA served Plaintiffs with a Civil Investigative Demand (“CID”) which served as the basis for the OMA’s request of all information that was being provided to the FTC. Since both agencies were conducting parallel investigations, Plaintiffs provided information simultaneously to the FTC and the OMA. These materials were sent to both agencies under a waiver of confidentiality so that the agencies could also share information between themselves. Pursuant to this waiver, formalized in a letter sent by Plaintiffs’ lawyers to the FTC, the federal agency could provide the PRDOJ any materials they requested. (See Docket No. 21 at 178-179 & Pl.’s Ex. 8). The FTC is the federal antitrust enforcement agency instituted pursuant to the Federal Trade Commission Act of 1914. 15 U.S.C. §§ 41-51. While the FTC conducts its investigations with careful regard of the federal antitrust laws, the Sherman Act, 15 U.S.C. § 1 et seq., and the Clayton Act, 15 U.S.C. § 1 et seq., the PRDOJ conducts its investigations pursuant to Article 16 of the Puerto Rico Anti-Monopoly Act, Law 77 of June 25, 1964, codified at 10 P.R. LAWS ANN. § 257 et seq. (See 10 P.R. LAWS ANN. § 272). Unlike the FTC, however, the PRDOJ and OMA do not have regulations that govern or provide guidance in the conduct of divestiture investigations within a mergers and acquisitions context. Even Martinez, the main OMA investigator in this case, was not familiar with the FTC guidelines for divestiture and had not participated in the investigation of a divestiture in the past. On February 6, 2002 Wal-Mart filed a Hart-Scott-Rodino Application with the FTC. The application is a notice to the FTC explaining that a company intends to merge with another company. The FTC then initiated a review process and investigation of the transaction and during the next few months, Wal-Mart prepared many documents requested by the federal agency. Once the FTC initiates an investigation, it typically culminates in an agreement between the agency and the acquiring party that consists of several consent decrees and orders. A consent package prepared by the FTC addresses every competitive problem present in the transaction and every geographical market with potential problems, as well as the required divestitures, if any, that remedy these problems. April 2002 — Initial Contacts- On April 17, 2002, Rodriguez-Justiniano sent a letter to Anthony George (“George”), in-house counsel at Wal-Mart, requesting that they prepare a white paper addressing a number of issues the OMA was interested in exploring. (Pl.’s Ex. # 11). Mark Schmidt (“Schmidt”), Vice President of Development in Wal-Mart, prepared much of the response to this letter. A white paper together with a summary spreadsheet reporting on local purchases and local suppliers with whom Wal-Mart had dealt since it arrived in Puerto Rico was sent to the PRDOJ on May 3, 2002. Schmidt, who has worked with Wal-Mart since 1987 and is responsible for mergers and acquisitions, was the principal negotiator on behalf of Wal-Mart with the PRDOJ. Also in April 2002, a , meeting was held attended by William Berkowitz (“Berkow-itz”), attorney for Amigo,. Steve Lausell (“Lausell”), Martínez, and an economist from the PRDOJ. Lausell was Chairman of the Board of Directors and a stockholder at Amigo and is now President of the Board of Directors and a stockholder of Supermercados Máximo (“Máximo”), the company that bought the four Amigo stores divested. During this meeting the representatives of Amigo offered to provide the OMA with whatever information they needed and they left the meeting with the impression that to this point, things were running smoothly in the Department with regards to their investigation of the transaction. Finally, on April 22, 2002, Berkowitz wrote a letter addressed to Defendant, Rodriguez-Justiniano, and Martinez-Rivera detailing the legal and constitutional problems with their request for maintenance of local purchases from distributors, manufacturers,, and suppliers. He explained that there was no relationship between the antitrust laws and the purchase of goods from local or foreign-based distributors. He explained how the PRDOJ’s demands suggested facial discrimination against out-of-state distributors and, moreover, were not within the scope of the antitrust laws. Defendant claimed to have no recollection of seeing this letter and Plaintiffs' never heard from the PRDOJ in regards to the matters raised-in ft. May 2002 — FTC’s Expectations Revealed During the month of May, Wal-Mart came to an understanding of what the FTC’s expectations were before they would free the transaction of antitrust concerns. By then, the federal agency had identified the three geographical areas that raised monopolistic concerns: Cayey-Cidra, Ponce-Juana Díaz and Vega Baja-Manatí. The proposed plan, then, was to divest four stores in these areas, one in Cidra, one in Ponce, one in Manatí, and one in Vega Baja. Even though the FTC gathers information on possible divestiture buyers, the onus is on the company requesting approval of a merger to find a potential buyer for the stores- or locales that need to be divested. In order to comply with FTC expectations, Wal-Mart itself began looking, for buyers for the four stores. During the summer months, the idea of a group of Amigo stockholders, among others, getting together to incorporate a company that would become the divestiture-buyer began to emerge. Wal-Mart then submitted this group to the FTC as its selected buyer and once it received the FTC’s approval, the selling process began. Other potential buyers were not further investigated or considered because their initial interest never materialized into anything concrete. Also, some of the other candidates had a strong presence in the geographical areas where the four stores were located and thus posed a threat of competition in those areas. Finally, there was no evidence introduced in the record about any bids higher than that of the group of Amigo stockholders, who later incorporated as Máximo. Martínez testified that he never heard of any bids higher than that by Supermercados Máximo. The obstacles that led to a delay in implementing the FTC agreements were partly due to Plaintiffs’ interest in reaching a “global settlement,” that is, a settlement with all the parties involved. (Docket No. 21 at 183, In. 12). Plaintiffs had the impression that although the PRDOJ was satisfied with the divestitures imposed by the FTC, it still had additional concerns, which included reporting requirements during a period of several years after the merger was implemented, and the level of Wal-Mart’s purchases of goods from local versus foreign distributors and suppliers. (Docket No. 21 at 184, Ins. 10-15). But the PRDOJ had also communicated to the FTC that they believed the proposed divestiture of four stores was not enough for antitrust concerns. Nevertheless, the FTC ultimately approved the merger with the divestiture of only those four stores. (Pi’s Ex. # 6). A meeting to address all these issues was held in July between representatives from the PRDOJ and Wal-Mart, and by the beginning of August it was Plaintiffs’ understanding that an agreement had been reached with the PRDOJ. These issues were the subject of a Voluntary Assurance Letter (“VAL”) that the PRDOJ had demanded from Plaintiffs. Summer 2002 — Voluntary Assurance Letter The issue of the Voluntary Assurance Letter came up in early May 9, 2002, after receipt of the white paper, when the PRDOJ asked Plaintiffs to provide a letter addressing Wal-Mart’s intentions as to certain aspects of its business in Puerto Rico. The request for Plaintiffs’ intentions quickly shifted to the imposition of certain conditions on them that had been conceived by the PRDOJ pursuant exclusively to the public policy of the current administration of the Commonwealth of Puerto Rico. On June 4, 2002 a proposed text of the VAL was sent by Plaintiffs’ counsel to the PRDOJ. At that point, the subject of this letter contemplated the issue of the amount of purchases from Puerto Rico domiciled suppliers. Months later, this became one of the three conditions for approval of the merger to which Plaintiffs resisted, and the controversy ultimately led to the filing of the complaint in state court. In the early conversations on this topic between Plaintiffs and the PRDOJ, the PRDOJ requested a commitment from Plaintiffs to maintain a percentage of purchases from local suppliers as opposed to foreign based suppliers. In response to the June 4, 2002 letter from Wal-Mart, the PRDOJ sent Plaintiffs a letter on June 20, 2002 asking that it address and/or clarify certain issues in that letter. Specifically, the PRDOJ asked for more precise assurances with regards to the local purchases. (Pl.’s Ex. # 15). In good faith, Wal-Mart informed the PRDOJ that since 1999 it had substantially increased its local purchases in the Island and it intended to sustain that tendency. Soon thereafter, this issue was put aside and it was Wal-Mart’s understanding that it had reached a general agreement with the PRDOJ. In addition, Plaintiffs were required to assure the PRDOJ that they would submit certain sales reports, as well as copies of Wal-Mart’s contracts with local and foreign distributors, and any termination contracts with distributors for a five year period following the transaction. Whatever the parties agreed in this regard would be set out in the VAL. On July 1, 2002, attorney for Plaintiffs, Armando Lloréns (“Lloréns”), and Schmidt met with Martinez with the intent of reaching a final agreement for the VAL. After the meeting, four issues remained pending between the parties: first, the length of the reporting period; second, the format of the reporting; third, the PRDOJ’s request for copies of Wal-Mart’s past contracts with local suppliers; and finally, Wal-Mart wanted to ensure that these requests for assurances were not interpreted as its own failure to comply with similar information requests in the past. A follow-up letter was then sent by Martinez to Plaintiffs on August 5, 2002. Martinez states in it that Defendant has given her approval, or given her “good to go” approval, to the VAL, which at that point was entitled “Proposed text of letter to P.R. Department of Justice — on Wal-Mart letter head” (Pl.’s Ex. # 16). In the second paragraph of the letter, Martinez asks for a trivial change in the language of the document: the word “expects ” was to be substituted for the word “intends to continue these local purchasing policies and practices...” The message conveyed in this letter was that but for the change of the word expects to the word intends, the rest of the proposed VAL would remain unaltered and once this change was implemented, a final agreement between the parties would be reached. The first paragraph of that VAL states: ‘Wal-Mart Stores, Inc, is pleased that the Puerto Rico Department of Justice and the Federal Trade Commission are in agreement regarding the appropriate relief for resolving the competition issues relating to Wal-Mart’s proposed acquisition of the Su-permercados Amigos supermarket chain.” (Pl.’s Ex. # 14) (emphasis ours). Moreover, the first sentence of the last paragraph states: We trust that Wal-Mart’s voluntary assurance regarding the above matters demonstrates and confirms Wal-Mart’s commitment to be an integral part of the Puerto Rican economy and should resolve any remaining issues not addressed in the FTC/DoJ proposed settlement.” Id. Wal-Mart’s understanding upon receipt of this August 5, 2002 letter was that the merger transaction had the “green light” from the PRDOJ and that it signified the culmination of the issues that had originally emanated from, or after, the May 3rd white paper and had been negotiated throughout the summer. The August 5, 2002 letter, read in the context of what had transpired up to that point between the parties, can only be understood to mean that the outstanding issues between the PRDOJ and Plaintiffs had been taken care of. Martinez himself testified that all the issues raised in the July 1, 2002 meeting were taken care of by August 5, 2002. Nevertheless, he added that what the letter meant was that there were no objections to the proposed text of the VAL at the time, and not that the language of the agreement had been approved with finality. No such clarification is found in the letter, however, or in any subsequent clarifying correspondence sent to Plaintiffs. Meanwhile, on or around July 3, 2002, another meeting took place between Amigo representatives and the PRDOJ. This time Lausell and José Revuelta (“Revuel-ta”), President of Supermercados Amigo, Inc., informed Martinez about the group emerging to buy the divestiture supermarkets in Cidra, Ponce, Manatí, and. Vega Baja pursuant to the FTC’s expectations. In light of this new development, Lausell once again offered to provide the OMA with any information that was needed for the investigation of the transactions and for the agreements. August 2002 — September 2002 — The Divestiture After talks between all parties about the buyer that had shown the most interest in the four divestiture stores, on August 20, 2002 a letter of intent on behalf of NewCo Food Retailing, Inc. was sent by Lausell to Revuelta expressing their interest in buying certain assets and retaining certain liabilities pertaining to the four Amigo stores. (Pl.’s Ex. # B). The future buyers of these stores prepared a business plan and a capitalization plan under the name of NewCo Food Retailing, Inc. — NewCo for “new company” — but it was known to all that if they were approved, they would be incorporated under the name Supermerca-dos Máximo. As the “front buyers,” a term used by the FTC to describe an identified and accepted buyer, as a condition to the FTC’s approval Máximo had to produce other documents for the FTC, including its agreements with the landlords of the locales where the stores to be bought were located and information about its proposed management. After both the FTC and the PRDOJ had been provided with all available information regarding Máximo, conversations regarding the sale picked up steam towards the last week of August 2002. On August 22, 2002 attorney for Plaintiffs, Fionna Schaeffer (“Schaeffer”), wrote to the FTC on behalf of her clients informing them, among other things, of the purchase price negotiated with the “Amigo shareholders” that were incorporating Máximo for the purchase of the four stores to be divested. (Pl.’s Ex. #4). Another letter, dated August 26, 2002, was also sent to both the FTC and the PRDOJ in response to a request for information made by the FTC. (PL’s Ex. #5). Martinez testified that he had learned the “Amigo shareholders” would definitely be the divestiture buyers early in September 2002 and that even before that date, he had received information from Máximo, such as the capitalization, management, and business plans presented to the FTC. Even before August 2002 the PRDOJ had gained knowledge that the proposed divestiture buyers were associated with Amigo. Supermercados Máximo was incorporated on September 17, 2002. (PL’s Id. # 31). On or around September 18, 2002 Schaef-fer contacted Martinez to let him know that Wal-Mart was expecting to reach a final and formal settlement with the FTC within days. She wanted to know if he had any questions regarding the information sent about Máximo and was told by Martinez that the PRDOJ had no problem with Máximo. (Docket No. 21 at 201, Ins. 20-22). Indeed, Martinez also told Schaeffer that on that same day, he had communicated to Defendant his recommendation of Máximo as the divestiture buyer. On that day, Martinez expressed his interest in expeditiously finalizing all the agreements with Plaintiffs since his wife was about to give birth. The agreements would in essence “mirror” those that were being entered into with the FTC. Schaef-fer memorialized her conversation with Martinez in an electronic mail she sent George, as well as two of Plaintiffs’ other attorneys, Lloréns and Jay Tabor. (Pis.’ Ex. # 34) She communicated to them that from her conversation with Martinez she had learned that he had sent a favorable recommendation to Defendant on Máximo, that he was creating an OMA consent decree that essentially mirrored the FTC’s with minor modifications, and that OMA was clearly aware of the November 5, 2002 deadline to close on the merger agreement. The modifications Schaeffer and Martinez had talked about were in relation to the public comment period provided for in the FTC papers and the confidentiality of the consent documents with the PRDOJ. Since Máximo was less creditworthy than Amigo, Wal-Mart had to pay the landlords of the locales of the four stores a sum of $5.4 million dollars to compensate for the loss of a more creditworthy tenant. Amigo shouldered $500,000.00 of that figure. The execution of the agreements with the landlords to this effect took place at some point before November 21, 2002 since it was a requirement for the FTC’s approval of the merger. October 2002 — The Legislative Hearings The month of October was a turning point in many aspects of the investigations and negotiations that were taking place in reference to the Wal-Mart/Amigo merger. During the final days of that month, the Legislature of the Commonwealth of Puer-to Rico held hearings regarding the merger in which representative of both Wal-Mart and Amigo testified. The pressure began to build up on Defendant. By this time, Defendant had received many letters, white papers, and personal visits of concerned parties expressing their support or opposition to the transaction. This public pressure that kept building up towards the end of the month, close to what initially had been the closing date of the transaction — November 5, 2002 — was essentially what led to the new demands Defendant imposed on Wal-Mart. Moreover, the review of the transaction by the PRDOJ became a public policy decision subject to the input from various functionaries in the administration. Among these other functionaries were Ramón Cantero Frau, Secretary of Economic Development and Commerce, Cesar Miranda, Chief of Staff, and the Governor of Puerto Rico herself, Sila María Calderón. Defendant testified that like other decisions that were made at the PRDOJ, this one had created much tension on her as head of that Department. From October on, this tension affected the negotiations between the PRDOJ and the Plaintiffs, and these began to intensify. (Docket No. 25 at 375, In. 24). It was around this time that the maintenance of the labor force and purchase levels issues were raised. Lausell testified that in his third and last meeting with the PRDOJ, which took place on October 2002, the impression he got from the PRDOJ was “totally different [from the other meetings] in the sense that there was a lot of pressures being put in [sic] the transaction and that they were worried about ... how to find ways to satisfy all the parties...” (Docket No. 25 at 391, Ins. 19-23). Also in that meeting the PRDOJ asked Lausell for his advice with regards to the issue of local purchases and Lausell explained that one potential problem he saw revolving around that issue was the impact on distributors and suppliers of knowing that Wal-Mart had to buy from them. Towards the end of October, Martinez also participated in a conference call with Schmidt. They discussed the VAL that had been negotiated during the summer, and Martinez made mention of several things in that letter that would have to be renegotiated and changed. At that point Schmidt responded by stating that contrary to what Martinez apparently was suggesting, he did not see any legal issues involved in the proposed changes to the VAL. To that, Martinez responded that the issues were no longer “legal,” but instead a shift in their agenda had turned them into “political” issues. (Docket No. 21 at 111, ln.7). Wal-Mart associated this sudden swerve and the Defendant’s new demands to the legislative hearings that took place in late October and the pressure that these exerted on the PRDOJ. By this time in the negotiations, Defendant and the staff working for her on this matter began to solidify their ideas with regards to what they would bring to the bargaining table as an ultimatum for Plaintiffs. Before November 21, 2002, however, they had not raise any of these issues with the heightened concern they reflected after that date. On November 21, 2002 the FTC documents and agreements with Plaintiffs were signed suggesting that the merger transaction between Wal-Mart and Amigo and the mandated divestitures were in compliance with applicable federal laws. From thereon, Defendant personally took a much more active role in the negotiations as she attempted to please all those who were pressuring her against approving the transaction. November 2002 — Fairness Opinion & Labor Issues One of the three major issues that Defendant identified as the basis to her filing of the state court complaint was her request for a “fairness opinion letter” from Plaintiffs. (See Pl.’s Exs. 19-20). The parties explored the possibility of obtaining such opinion letter from Santander Securities Corporation for a fee of $150,000.00. The PRDOJ was allegedly requesting a fairness opinion letter to evaluate the divestiture of the four Amigo stores precisely because that divestiture had validated the merger for antitrust purposes. Defendant testified that she saw it as her duty to make sure the divestiture was done correctly, that it was not a sham, and that Máximo had the capacity to be a long term market competitor. (Docket No. 25 at 303, In. 2). Moreover, she wanted proof that the merger was an arm’s length transaction. It was Martinez’ understanding that the fairness opinion letter would reveal the value of the transaction and whether it was real under its particular parameters. The OMA thought that in addition to all the information they had received regarding the divestiture to Máxi-mo, the business, capitalization and management plans as well as the price paid and other documentation, they also needed a fairness opinion letter that would reveal the financial analysis sustaining the legality and legitimacy of the transaction. Clearly, all these concerns had been resolved by the FTC under the appropriate and applicable divestiture guidelines which were lacking in the PRDOJ. Martinez had no evidence that the divestiture transaction was a sham. (Docket No. 25 at 315, Ins. 4-7). He and the PRDOJ were concerned, however, because some investors of Supermercados Máximo were shareholders at Amigo. Yet, between August and September, Martinez had approved the transaction and communicated his approval to both Plaintiffs’ counsel, Schaef-fer, and also to Defendant. The PRDOJ knew about the divestiture requirements since approximately May 2002. It knew the possible genesis of Máximo since July 3, 2002 and that it had been chosen as the divestiture buyer for the four stores since mid-August 2002. The PRDOJ became aware that the chosen divestiture buyer was Supermercados Máximo in August 2002. (Docket No. 25 at 283, Ins. 6-7). Nevertheless, the request for a fairness opinion letter was first informally talked about, and not necessarily brought to Plaintiffs’ attention, in late October or beginning of November. It was brought by Defendant to the attention of one Plaintiffs’ attorney, Samuel Cés-pedes, on November 24 or 25, around the time when they also brought up the issue with the definition of an arm’s length transaction in the OMA proposed agreement. It became a heated point of interest around the same time that the labor force issue was brought up. The PRDOJ requested that the divestitures be an arm’s length transaction and unilaterally added a definition of that term to the agreements. Plaintiffs immediately objected to the late request and questioned the real reasons behind it, given that the PRDOJ had known since August 2002 that the proposed buyers were associated with Amigo. Moreover, a sale of this nature taking place under divestiture circumstances could not reflect fair market value because it is typically done within a short period of time and the value will be whatever best value is procurable within that short period of time. The PRDOJ recognized this particularity of the transaction. Nevertheless, Defendant claimed to have her doubts about the divestiture transaction and, specifically, how it affected the merger’s adherence to Articles 2 (Transactions in restraint of trade), 4 (Monopolies), and 5 (Mergers and acquisition) of the Puerto Rico Anti-Monopoly Act. Expert Testimony Re: Fairness Opinion Plaintiffs presented two expert witnesses in the hearings. The first was Rafael F. Martínez Margarida, Managing Partner of the San Juan Office of Price-waterhouseCoopers, LLP. Mr. Martinez holds a Master in Business Administration from Columbia University Graduate Business School. He is a Certified Public Accountant, a Certified Management Consultant, and a Certified Valuation Analyst, among other professional certifications. The other expert witness was Gregory Scott Vistnes. Mr. Vistnes holds a doctoral degree in economics from Stanford University. He specializes in the field of industrial organization, which is the study of how firms compete and interact with each other. As part of his professional experience, he served for several years in the Department of Justice, where he ultimately served as the assistant chief in the economic regulatory section. He also worked in the FTC, where he occupied the position of deputy director for the FTC’s Bureau of Economics for three years. The findings of fact in this section derive from the expert testimony of these two witnesses. Once there was evidence on record that the PRDOJ recognized that due to the nature of the transaction, a divestiture purchase frequently resulted in a sale for a price that did not reflect fair market value, its request for a fairness opinion became highly suspicious. A fairness opinion letter is a professional opinion rendered usually by an investment banker or a certified valuation professional regarding the reasonableness of the price of a sale in the context of a particular financial transaction. The opinion is usually provided to assure either the seller or the buyer that a transaction is fair. In cases of mergers and acquisitions, the opinion is typically prepared to provide the shareholders of a company reasonable assurances that management and/or their representatives have appropriately discharged their fiduciary duties to them. A fairness opinion letter does not reveal whether a transaction is fictitious or not; that could possibly be achieved through due diligence. Moreover, a fairness opinion letter does not address market issues or market protection. A business valuation of a comparable transaction in the market would best serve to determine whether a sale price is within the parameters of the real value in the market. A fairness opinion would not reveal either whether after a divestiture sale, the sold stores would represent competition to the acquiring company. (Docket No. 25 at 455 — 465). Finally, given the nature of this transaction and the structure of the deal, neither a fairness opinion letter nor any other type of financial evaluation would have been able to categorize it and evaluate it as an arm’s length transaction. For purposes of a divestiture investigation, the FTC would find it useless and inappropriate to entertain a fairness opinion letter since a divestiture frequently involves assets forced to be sold in a short period of time under duress. Hence, they usually will be sold at a very low price and requesting adherence to fair market prices would be senseless. The Agreements Final preparations of the FTC agreements were done during the Fall 2002 and a final version was ready by November 14, 2002. The agreements and orders were signed on November 21, 2002, and published in the Federal Register on November 27, 2002. (Pl.’s Ex. # 6). The FTC’s approval of the merger was a requirement to close the transaction and its effect was to remove the Hard-ScotWRodino waiting period. Against this background that included the FTC’s approval of the merger, previous agreements reached and previous assurances exchanged between the PRDOJ and Plaintiffs, and recent and unexpected references to the issues of maintaining the current labor force and producing a fairness opinion letter, on November 22, 2002 the PRDOJ sent to the Plaintiffs the first of four sets of proposed agreements exchanged between the parties from that date until December 5, 2002. (Pl.’s Exs. 27 (November 22, 2002 — PRDOJ to Plaintiffs); 23 (November 25, 2002— PRDOJ to Plaintiffs); 17 (.December J, 2002 — PRDOJ to Plaintiffs); and 18 (.December 5, 2002 — Plaintiffs to PRDOJ)). Some of the documents included in these exchanges were very similar to the FTC documents. (Pl.’s Ex. 6). On November 27, 2002, Defendant issued a press release containing statements that had been made by her on the preceding Sunday, November 24, 2002. She reiterated a list of the most important requirements the PRDOJ was using to evaluate the transaction. These were: 1) that Wal-Mart does not increase its concentration in local markets to an extent that reaches monopolistic levels; 2) that the divestiture of Amigo supermarkets is real and non-fictitious,; 3) that part-time jobs are as protected as full-time jobs are; 4) that sales of local agricultural products are not adversely affected; and 5) that the price paid for the four stores is within the parameters of the real market value for a transaction of this nature. During the two weeks following the Secretary’s press statements, the parties negotiated regarding the issue of the fairness opinion letter, the changes the PRDOJ had made to the VAL, and other language problems in the agreements regarding the affected geographical areas, the definition of arm’s length transaction, and the demand that Plaintiffs maintain the current labor force and the current level of purchases from local suppliers. Maintenance of Levels of Local Purchases The final versions of the proposed agreement that Plaintiffs received from the PRDOJ had the following provision: “... the respondents will not reduce or suspend its current volume purchases of local agricultural and/or food products.” (See Pl.’s Exs. 17, 23 & 27, cf. Pl.’s Ex. 18). With regards to this language the parties were not able to reach an agreement before the deadline for the closing. Wal-Mart was willing to make a commitment to buy as much locally as they could and they provided the PRDOJ with evidence that their purchases had in fact increased in recent years. But there was additional language in the agreement suggesting that these intentions were not enough and that Plaintiffs would subject themselves to legal enforcement if they were ever to reduce their volume of local purchases regardless of the reasons for such decision. This was unacceptable to Plaintiffs because it put them at a disadvantage with competitors who freely conducted their business while knowing Wal-Mart had these restrictions. Maintenance of Current Work Force vs. Maintenance of Current Work Force Levels The issue of guaranteeing the maintenance of the current work force versus the current levels of work force was brought up in late November as an amendment to the VAL in an attempt by the PRDOJ to protect the public policy of Puerto Rico. Indeed, the protection and preservation of existing jobs, as well as the creation of new ones, is the highest priority of the current administration. (Pl.’s Ex. 19 at 2). Within the framework of this policy, Defendant brought up the need to either require or negotiate with Wal-Mart the issue of maintaining the labor force at the time of the acquisition. With regards to labor issues, the new VAL included a provision that read: “Wal-Mart will continue to comply with all applicable labor laws and regulations and will not undergo a reduction of the current labor force of Supermercados Amigo nor will substitute its full time employees for part timers as a result of the transaction.” (Pl.’s Ex. 17). The controversy in the language of the agreements with regards to labor issue can be best summarized as follows: while the PRDOJ wanted to get Wal-Mart to agree not to alter the current labor force, that is, the employees that are currently working at the Amigo stores, Wal-Mart was willing to agree to maintain the current number of employees, leaving open the possibility that current employees could be terminated as long as their positions were not eliminated. (Docket No. 25 at 362, Ins. 6-14). But despite their lack of intention to downsize their current work force, Plaintiffs could not agree to maintain the current employees and forego the possibility of ever letting go of anyone who currently works at Amigo. Wal-Mart anticipated that just like in any other acquisition, there was a possibility that the integration process would reveal deficiencies in the labor force that would need to be remedied. Moreover, no layoffs in the stores were anticipated, but Wal-Mart could not make the same commitment with regards to positions in their administrative and home offices. The phenomenon of attrition, over which they have no control, was also raised as a concern for Wal-Mart. Finally, as with the levels of purchase condition, Wal-Mart would be at a disadvantaged with competitors if forced to maintain the current labor work force. December 2002 — Closing, Press Release, and State Lawsuit Plaintiffs negotiated in good faith the conditions which Defendant was attempting to impose on them and even on December 5, 2002, Plaintiffs were hoping to reach an agreement with the Secretary of Justice with regards to the terms of the VAL. The merger agreement originally had a deadline for closing the transaction on November 5, 2002, which was then extended to December 5, 2002, pending the Agreement and Order from the FTC. The Department of Justice was well aware of the closing date. Mr. Schmidt had personally assured Diaz-Tejeda, Director of the Office of Monopolistic Affairs, that the closing would take place on December 5, 2002. A telephone conversation was held between Lausell and the Defendant on December 3, 2002. On the basis of all the pressure she had and her sense that it was “very very very” likely that they would reach an agreement with Wal-Mart, she asked Lausell if they could postpone the closing until Friday, December 6, 2002. Lausell communicated to her that he was of the impression that Wal-Mart did not feel the same way about the likelihood of reaching an agreement, since there were still important issues to be resolved. At this point, it seemed that the most important and controversial pending issue was the fairness opinion letter. Still, Lausell offered to assist in mediating with Wal-Mart to reach an agreement regarding the language of that letter so Defendant could take it to Cantero Frau for his approval, even though Lausell understood that Cantero Frau inevitably would remain firmly opposed to the transaction. Defendant’s reaction to this last remark suggested that Lausell’s suspicions about Cantero Frau were correct. (Docket No. 25 at 402 Ins. 19-20). While Defendant asked Lausell for two more days to “negotiate,” at some point before December 5, 2002, she had ordered that a draft of a complaint be prepared. The idea of a potential lawsuit, or “going to court,” had been brought up once or twice during the final days of negotiations. Plaintiffs, however, were quite certain that they would be able to reach an agreement with Defendant with regards to the VAL. The public announcement made by the Defendant on Thursday, December 5, 2002, at 3:00 P.M., with regards to the filing of a lawsuit in state court came as an enormous surprise to Plaintiffs. The closing took place on the morning hours of Thursday, December 5, 2002. On that day, Diaz-Tejeda asked Plaintiffs’ attorneys to postpone the announcement of the closing until 3:00 p.m. that afternoon so that Defendant could make an announcement first. Plaintiffs acceded. In the press release issued by Defendant on December 5, 2002, and attached as Exhibit A to Plaintiffs’ complaint, Defendant expressed her intent to file a lawsuit against Plaintiffs. She explained that the transaction that took place on that same date between Wal-Mart and Amigo violated the Puerto Rico Anti-Monopoly Act and was contrary to the best interests of consumers, merchants and distributors in Puerto Rico. (Docket No. 1, Ex. A). Immediately thereafter, Defendant explained in the press release that Plaintiffs failed to consent to three issues that were essential for her to accept the transaction. The three conditions that Plaintiffs refused to agree to and Defendant had announced were the basis for her intent to ask a Court to enjoin the merger were: first, that the number of employees currently working at Amigo must remain at the current level; second, that at a minimum the purchase of local agricultural products must remain at current levels; and finally, that the transaction must be made in good faith in order to protect the local market. Martinez testified that his understanding of the press release was that because Wal-Mart had not complied with the PRDOJ’s labor force requirements, she would sue the parties to the merger. (Docket No. 25 at 329, In. 25). The state court complaint was filed by Defendant on December 6, 2002 at 2:36 p.m. and it only alleges violations of the Puerto Rico Anti-Monopoly Act. Together with the Complaint, Defendant filed a request for a preliminary injunction pursuant to Article 13 of Law 77. The injunction was granted that afternoon by the state judge. In the state court complaint, Defendant alleges for the first time that since May 2002 there existed antitrust concerns in another geographical area of the Island, the Municipality of Bayamón. However, two weeks earlier, on November 22, 2002, the PRDOJ had sent Plaintiffs a proposed draft of the agreements which included a provision that read: “[a]ll other relevant geographical markets of Puerto Rico [, besides Cayey-Cidra, Ponce-Juana Díaz, Bareeloneta-Manatí-Vega Baja] do not evidence any overlaps among the parties, higher concentration indexes, conditions that would result in unacceptable concentrations of market power as a result of the acquisition or the evidence is that existing competition or the lack thereof will remain essentially unaltered.” (Pl.’s Ex. 27 at 4, ¶ m). Three days later — and then again twelve days later — when the same documents were sent by the PRDOJ to Plaintiffs, that language had been taken out of Paragraph (m). Nevertheless, throughout the negotiating and in the agreements, reference to the problematic areas was always limited to the three geographical areas identified by the FTC in May 2002. Even though the PRDOJ and Plaintiffs thought that they would be able to reach an agreement before closing the transaction, the turn the negotiations took in the last month made it impossible to reach an agreement in principle. Wal-Mart could not agree to maintain the current labor force, they could not agree to a definite percentage of purchases from local versus foreign-based suppliers, and neither would they produce what was an unnecessary opinion letter that would not help the PRDOJ in executing its duties pursuant to Puerto Rico’s antitrust law. DISCUSSION Before examining the probability of success on the merits of Plaintiffs’ claims, we begin our discussion by setting forth what we glean from the findings of fact. In sum, we have identified a sequence of events from which we can discern that Defendant’s December 6, 2002 complaint presents pretextual and bogus claims against the Plaintiffs. These claims disguise conduct and motivation of an inherently spurious nature lacking any kind of authoritative or legal support. Moreover, the Secretary’s undertakings as the highest law enforcement agent of the Commonwealth elucidate a pattern of bad faith conduct in the negotiations, specially during the months of November and December, which violates Plaintiffs’ civil rights under the United States Constitution. A brief review of the events that took place within the ten month period from February 5 to December 6, 2002 shows that after October, and even more strikingly after November 21, Defendant engaged in a desperate attempt to extract Plaintiffs’ submissions to her imposed conditions as a result of public and political pressures put on her. These events culminated in the vindictive filing of a state antitrust lawsuit in an effort to coerce Plaintiffs to yield to the Secretary’s demands. We first look at the state court complaint and proceed backwards to February, 2002. The complaint alleges violations of the anti-monopolistic laws of Puerto Rico in two specific matters: that the geographical area of Bayamón created competition problems; and the allegedly fictitious divestiture of the four Amigo stores. Prior to the state court complaint, no mention was ever made of geographical areas that might raise antitrust concerns, other than the three areas identified by the FTC and remedied by the divestitures. Moreover, there is no evidence of any other independent investigation, or evidence gathered by Defendant in this regard, that would lead her to conclusions divergent from those reached by the FTC. Since May 2002, the FTC had approved the transaction pending the divestiture of the four stores. Plaintiffs successfully complied with this condition, thus gaining full FTC approval by November 21, 2002. Indeed, there was language in pre-November 25, 2002 drafts of the PRDOJ/Wal-Mart agreements that stated that no geographical areas — other than those where the four divestiture supermarkets were located — presented antitrust concerns. This language was taken out from the drafts on or around November 25, 2002. (See Pl.’s Exs. 23 and 27 at 4 ¶ m, cf. Pl.’s Ex. 17 at 4 ¶ m). In addition, all the drafts of agreements exchanged between November 22 and December 5, 2002 limited their discussion of the problematic geographical areas to Cay-ey-Cidra, Ponce-Juana Díaz, and Bareel-oneta-Manatí, Vega Baja — the three areas covered by the FTC’s divestiture findings. Aside from what the PRDOJ thought the fairness opinion would reveal, which the evidence suggested was an inaccurate and potentially feigned belief, absolutely no mention of other antitrust concerns was made prior to the December 5, 2002 press release. In her November 24, 2002 statements to the press, Defendant makes no reference to monopolistic or competition concerns raised by the transaction. Instead, the Secretary alleges that on the basis of the public policy of Puerto Rico, the scope of the OMA’s investigation is broader than that of the federal agency. Therefore, she was examining other issues related to Amigo’s labor force and Wal-Mart’s purchases from local suppliers. This shows that prior to the fabricated monopolistic concerns that allegedly form the basis of Defendant’s state court complaint, she had no legal substance on which to base that state lawsuit. Thus the real reason behind her bringing that action is unveiled: she is retaliating against Plaintiffs for not submitting to her public policy concerns, which were actually the concerns of those exerting pressure on her, and in doing so she abused her powers as a state actor to infringe upon the rights of the Plaintiffs guaranteed by the United States Constitution. Defendant uses her counterfeit alibi, the fairness opinion letter, to justify the PRDOJ’s inability to reach an agreement with Plaintiffs. Key to understanding the pretextual nature of this issue is that even though it was of utmost importance, to the point that there was a breakdown in the negotiations as a result of Plaintiffs failure to produce that letter, the PRDOJ did not raise the issue until after nine (9) months of negotiations, after six (6) months of knowledge of the divestiture, after four (4) months of knowledge of the identified buyers, and after the October legislative hearings which brought heavy political pressures on Defendant. The evidence showed that the PRDOJ had approved Máximo as the divestiture front buyer since September 2002 and was aware that this group of Amigo stockholders was interested in the four stores since early July 2002. No evidence was introduced to show why Defendant suspected the unfairness of the divestiture sale nor was there any evidence of an investigation taking place to this effect. No evidence was introduced either of any genuine and true purpose that a fairness opinion would serve within the context of a divestiture. Indeed, the evidence revealed that there is no relation between the issues and concerns typically addressed in a fairness opinion and those addressed by the anti-monopolistic laws of Puerto Rico. But once again, the best revelation of the bogus nature of the request for this letter is the fact that it was not solicited from Plaintiffs until late November 2002, even though the identity and relationship of the Máximo group had been known more than four (4) months earlier. Next, we consider the other two conditions, aside from the fairness opinion letter, that Defendant imposed on Plaintiffs during the last weeks of negotiations: 1) maintenance of current levels of local purchases, and 2) maintenance of the current labor force at Amigo stores. These were raised by Defendant as crucial matters that provoked her scrutiny of Plaintiffs’ transaction for several weeks prior to its closing. Yet, Defendant attempts to suggest now that these two conditions in no way instigated her state court lawsuit or were related to it. She alleges that other monopolistic concerns, of which no evidence was introduced at the hearing, form the basis of her complaint, including those she sought to uncover in requesting a fairness opinion letter. This seems unreasonable and unconvincing given the pattern of events that has transpired in this case and the fact that up until the last day of negotiations and hours before filing the state court compliant, Defendant persevered in her demands for these two conditions. The Secretary’s November 27 and December 5 press releases attest to this conclusion. (Pis.’ Exs. 19 & 20). Defendant admits that the labor and purchase requirements are unrelated to monopolistic and competition issues and, for this reason, they are not mentioned nor are they part of the state court lawsuit. If this is so, we wonder where she found the authority in the first place to demand these conditions. The Puerto Rico Anti-Monopoly Act does not provide the source for Defendant’s imposition of conditions unrelated to antitrust concerns, even if they were — as they are not in this case— legal and constitutional. Additionally, the evidence showed that in no other merger monitored by the OMA had there been demands for maintenance of the current workforce and current local purchases, nor had there ever been requests for fairness opinion letters. The Defendant testified that the imposition of the two conditions of local purchases and labor work force was done in the spirit of a negotiation and pursuant to the public policy of the Commonwealth of Puerto Rico. Given that this Court understands these conditions to be unconstitutional in that they violate Plaintiffs equal protection and commerce clause rights, we pause to address the implications of Defendant’s proposition. The Secretary claimed that just like any negotiator, she sat at the bargaining table in an attempt to leave that table with the best deal for those whose interests she was representing. It is absurd, however, to make such comparison when it is the State Attorney General demanding that a party not only relinquishes its constitutional rights but in addition, violates the law. If a private party made such demands at a negotiating table, the party receiving the demands would obviously feel less bulldozed than when they are made by a state official, who moreover has to pass muster over the transaction. Those who negotiated on behalf of the PRDOJ, namely Martínez, Diaz Tejeda and the Secretary herself, believed that once they invoked the public policy of the administration, and because they were assuming the roles of negotiators in their dealings with Plaintiffs, they were at liberty to engage in an unobstructed pursuit of potentially illegal concessions for the good of the people of the Commonwealth of Puerto Rico. Thus, they could get away with imposing those demands first because they were “simply negotiators” and second, because ultimately they found their support in the public policy of the Commonwealth of Puerto Rico. This, they thought, would get them around the unconstitutionality of the conditions. The public policy of Puerto Rico does not equate a carte blanche to government officials to impose illegal or unconstitutional conditions on parties entering a private transaction, nor to demand their acquiescence to those conditions. Much less can a state’s protection of its public policy go so far as to violate the federal constitution and other state laws, nor can it be used to amend by fiat existing laws. Moreover, it seems very convenient to focus on those public policy concerns that are apparent and not go beyond the face of those imposed conditions to unveil adverse public policy effects that result from their imposition. Defendant suggested in her various press releases that the people of Puerto Rico would be negatively affected by the merger of Wal-Mart and Amigo since there was no guarantee that they would buy the same level of merchandise and agricultural goods from local suppliers and distributors as Amigo had in the past. But Wal-Mart understood that these requests were not only unfair but contrary to the interest of the people of Puerto Rico. Knowledge of imposed quotas on Wal-Mart would limit its bargaining power with suppliers, who would end up selling goods at higher prices in light of the quotas, and that increment would have to be passed on to consumers, of course, the people of Puerto Rico. Moving on to the other condition, Defendant alleges that in a negotiating spirit and in an effort to uphold her administration’s primary public policy goal, the protection and creation of jobs, she conditioned her approval of the transaction on Plaintiffs’s assurances that they would retain Amigo’s current workforce. The Secretary’s genuine interest in protecting employment, however, becomes suspect when we consider that she did not raise this issue until the last month of negotiations, and after the legislative hearings took place, when things became “political.” (See Docket No. 26). The possibility of job reductions and changes in the work force existed since day one of the negotiations. Ever since Martinez became involved in the negotiations back in February 2002, the PRDOJ and OMA had every reason to know that the work force in the company that was being acquired could be affected. Yet, being as important as it is for the current administration, neither Defendant nor those working under her command, thought about it or brought it up until less than a month before the closing of the transaction. To be more precise, it was not until the third week of November that this requirement was presented to Plaintiffs. This absolutely shows the pretextual nature of the claims raised in the state court complaint. Once Defendant could not find any other way to delay and halt the merger pursuant to the anti-monopolistic concerns that she is entitled to protect, she tried to use as last resort the public policy of Puerto Rico. Pursuant to the language she was attempting to get Plaintiffs to agree to, they would not be able to discharge any employees who currently make up Amigo’s work force. Besides the bogus nature of this condition, we find that it moreover violates Plaintiffs’ rights to equal protection of the law. Plaintiffs are entitled to be free from state prosecution if they adhere to the established labor laws. But through these labor conditions Defendant is effectively imposing additional restrictions on Plaintiffs as to when they can or cannot discharge an employee. If they are unwilling to accede to these restrictions, then their merger transaction will not be approved and cannot take place. Under the labor laws of Puerto Rico, there are enumerated reasons that will constitute good cause for an employer to terminate an employee. Puerto Rico Law on Unjustified Dismissals, Law 80 of May 30, 1976, 29 P.R. Laws Ann. tit. 29, §§ 185a-185k (“Law 80”). Specifically, Law 80 sets out six (6) situations where good cause can be found for discharge of employees. 29 P.R. Laws. Ann. § 185(b). Nowhere in these provisions is it suggested that in cases of mergers and acquisition when the acquiring company is a foreign company, it will be forbidden from discharging employees or will ever be required to maintain its number of employees at the pre-merger level. Defendant attempts to amend the law to this effect as it applies to Plaintiffs. One of the good cause reasons for discharge is the “[technological or reorganization changes as well as changes of style, design or the nature of the product made or handled by the establishment, and changes in the services rendered to the public.” 29 P.R. Laws Ann. § 185(e). Clearly, a merger entails changes of this type. The integration process of two companies requires that they reorganize management and administration and with this, it is very possible that employees at both lower and higher levels of management and service, have to be either transferred to different positions or discharged. Law 80 contains a specific provision related to merger and acquisitions: “in the case of transfer of a going business, if the new acquirer continues to use the services of the employees who were working with the former owner, such employees shall be credited with the time they have worked in the basis under former owners. In the event that the new acquirer chooses not to continue with the services of all or any of the employees and hence does not become their employer, the former employer shall be liable for the compensation provided herein, and the purchaser shall retain the corresponding amount from the selling price stipulated with respect to the business. In case he discharges them without good cause after the transfer, the new owner shall be liable for any benefit which may accrue under sections 185a-1851 of this title to the employee laid off, there being established also a lien on the business sold, to answer for the amount of the claim.” 29 P.R. Laws. Ann. § 185f (emphasis ours). Clearly, this section of the law does not say that employees of a company being acquired cannot be discharged nor does it say that the new acquirer should bring in all new employees to substitute the old ones. Indeed, it does allow the possibility that none of the employees at the company being acquired are retained by the new acquirer. As the evidence showed, this was never Plaintiffs’ intent. In imposing on Plaintiffs the condition of retaining the current labor work force, and thus, effectively amending Law 80 by executive fiat, Defendant not only violates constitutional rights to equal protection of the laws but, moreover, reveals her desperate attempt to indulge all those who were exerting political and public pressures on her. Since no evidence was introduced to the effect that similar requirements are ever imposed on other companies, whether under the circumstances of a merger or not, Plaintiffs’ equal protection rights are implicated. Defendant is imposing requirements on Plaintiffs that go beyond what the law requires, while not imposing them on others similarly situated. With this factual and analytical background in mind, we proceed to examine Plaintiffs’ claims within the framework of a preliminary injunction standard. Preliminary Injunction Standard There are four elements necessary to grant injunctive relief: 1) there must be a substantial likelihood of success on the merits; 2) the preliminary injunction must be necessary to prevent irreparable injury; 3) the threatened harm must outweigh the harm a preliminary injunction would inflict on the nonmovant; and 4) the preliminary injunction would serve the public interest. New Comm Wireless Services., Inc. v. SprintCom, Inc., 287 F.3d 1, 8-9 (1st Cir.2002); Narragansett v. Guilbert, 934 F.2d 4, 5 (1st Cir.1991) see also Fed.R.Civ.P. 65. “The sine qua non of that formulation is whether the plaintiffs are likely to succeed on the merits.” Weaver v. Henderson, 984 F.2d 11, 12 (1st Cir.1993). Likelihood of Success on the Merits In this Section 1983 action, Plaintiffs allege that Defendant’s imposition of certain conditions on them before approving their transaction violates their civil rights to equal prot