As previously reported in the August 5, 2009 issue of the Hedge Fund Law Report, in Citigroup Global Markets Inc. v. VCG Special Opportunities Master Fund Ltd., No. 08-CV-5520 (BSJ), 2008 WL 4891229 (S.D.N.Y. Nov. 12, 2008), the U.S. District Court for the Southern District of New York granted a motion by Citigroup Global Markets Inc. (CGMI) to temporarily enjoin arbitration proceedings involving a credit default swap dispute between a British hedge fund, VCG Special Opportunities Master Fund Ltd., and CGMI affiliate Citibank, N.A. (Citibank).  In so ruling, the district court found that VCG, as the party seeking arbitration, had not proved facts sufficient to demonstrate that it was a “customer” of CGMI, a requirement under relevant Financial Industry Regulatory Authority (FINRA) rules for its members to unilaterally compel arbitration proceedings.  See “Growing Wave of Credit Default Swap Litigation: Judge Rules Citigroup Did Not Cheat VCG Hedge Fund on Swap and Trims Claims in VCG/Wachovia Litigation,” Hedge Fund Law Report, Vol. 2, No. 31 (Aug. 5, 2009).  On March 10, 2010, the U.S. Court of Appeals for the Second Circuit affirmed the district court’s decision to grant CGMI a preliminary injunction.  It concluded that recent U.S. Supreme Court rulings had not invalidated the “venerable,” “long-standing” and flexible standard the Circuit has applied when considering motions for preliminary injunctions.  That standard requires the moving party to show “irreparable harm” absent injunctive relief, and either a “likelihood of success on the merits” or “sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping” in its favor.  It also rejected VCG’s alternative argument that the district court misapplied the “serious questions” standard by not construing FINRA arbitration rules in favor of arbitration absent “positive assurance” that its claim fell outside the scope of an arbitration agreement, because, it said, that standard was “inapposite.”  We summarize the background of the action and the court’s legal analysis.