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Jackson Dairy Inc. v. H. P. Hood & Sons Inc.

decided: March 23, 1979.

JACKSON DAIRY, INC., APPELLEE,
v.
H. P. HOOD & SONS, INC., APPELLANT.



Appeal from a preliminary injunction granted by the United States District Court for the District of Vermont, Albert W. Coffrin, Judge. Held, preliminary injunction vacated and judgment reversed because the plaintiff had not sufficiently shown irreparable injury.

Before Waterman, Mansfield and Oakes, Circuit Judges.

Author: Per Curiam

This appeal is from a preliminary injunction granted in a diversity action by the United States District Court for the District of Vermont, Albert W. Coffrin, Judge. Appellee, Jackson Dairy, Inc., is "the exclusive distributor" of appellant's "Schedule 3B" products under a contract dated March 7, 1967, in a certain Vermont-New Hampshire territory.*fn1 The injunction restrains appellant, H. P. Hood & Sons, Inc.,*fn2 a northeastern dairy products manufacturer and processor, from selling certain products*fn3 that it markets directly to two large chain store customers, Grand Union Co. (Grand Union) and First National Stores, Inc. (Finast), "knowing that they are being purchased for transshipment to retail establishments within Jackson's exclusive sales territory."*fn4 Jackson Dairy, Inc. v. H. P. Hood & Sons, Inc., No. 78 Civ. 234 (D. Vt. Nov. 13, 1978), at 4. Appellant argues that appellee failed to satisfy any of the requisites for issuance of a preliminary injunction, including probable success on the merits and a "clear showing of irreparable harm," and that the injunction as framed may cause appellant "immediate irreparable harm," "serious hardship," and "irreparable loss" because it threatens the continuation of the more than $4 million of business that it does with Grand Union and Finast. We reverse and remand.

Briefly stated, the facts are as follows. Grand Union has eleven stores in the Jackson territory and Finast at least three. Since 1967, Jackson has distributed Hood products to these stores as well as other chains and a number of "Mom & Pop" stores in the territory. Jackson's total sales to Grand Union and Finast in 1977 were in excess of $223,000. In early October 1978 Hood began supplying Grand Union and Finast with the "Schedule 3B" products at their central warehouses Outside Jackson's territory, and the two chains then commenced to supply their retail outlets Within Jackson's territory directly from those warehouses. Although the parties disagree as to whether the two chains or Hood itself conceived this idea of operation, the facts are that the warehousing system bypasses Jackson and that both chains, which are independent of and often competing with each other, adopted that system more or less simultaneously. Pricing arrangements do not appear in the record below. The complaint alleges breach of the exclusive distributorship agreement.

The standard in the Second Circuit*fn5 for injunctive relief clearly calls for a showing of (a) irreparable harm and (b) either (1) likelihood of success on the merits or (2) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly toward the party requesting the preliminary relief. See Caulfield v. Board of Education, 583 F.2d 605, 610 (2d Cir. 1978); See also New York v. Nuclear Regulatory Commission, 550 F.2d 745, 750, 755 (2d Cir. 1977); Triebwasser & Katz v. American Telephone & Telegraph Co., 535 F.2d 1356, 1358-59 (2d Cir. 1976). As to the kind of irreparable harm that the party seeking an injunction must show, the language of some past cases has suggested to some a spectrum ranging from possible*fn6 to probable, which is defined as "not remote or speculative but . . . actual and imminent."*fn7 We need not for present purposes delve into the abstract question whether the spectrum of language demonstrates a variance in the law or a sliding scale of judgment dependent upon external facts or factors, although we note that in one of the most recent cases, New York v. Nuclear Regulatory Commission, supra, the panel uses the probability formulation, expressly rejects mere possible injury as a sufficient basis for an injunction, and in fact finds imminent harm in the earlier cases even though they purported to apply only a possibility standard. For it has always been true that irreparable injury means injury for which a monetary award cannot be adequate compensation and that where money damages is adequate compensation a preliminary injunction will not issue. Studebaker Corp. v. Gittlin, 360 F.2d 692, 698 (2d Cir. 1966); Foundry Services, Inc. v. Beneflux Corp., 206 F.2d 214, 216 (2d Cir. 1948). And here we think that appellee did not demonstrate any likelihood that money would not be adequate compensation.

Clearly, money would be adequate compensation for the loss of Grand Union, Finast,*fn8 or other business if Jackson demonstrates that Hood breached its contract with Jackson. The only colorable allegation that Jackson made of harm not readily recompensable in monetary damages, upon which the district court relied, was "disruption of (Jackson's) sales and delivery relations with its customers." Jackson Dairy, Inc. v. H. P. Hood & Sons, Inc., supra, at 3. Jackson alleged that the loss of the profitable Grand Union and Finast line of sales may affect certain delivery routes disproportionately by making the entire route unprofitable and requiring its cancellation; in that case, Jackson would suffer because it would find it difficult to regain the business of customers along the cancelled route even if it were able to resume the route once it regained the right to supply Grand Union and Finast. Even if Jackson shows this injury, however, we do not see why it would not be rather readily compensable in monetary damages. We recognize that the parties provided for a long period of notice of termination of the underlying distributorship contract to give Jackson "sufficient time to provide substitute sources of supply."*fn9 But this, we think, has little bearing on the compensability of that loss of customers or business in dollars and cents, the traditional requirement for injunctive relief.

Accordingly we need not reach the other arguments that appellant raises, and we express no opinion on them. Nor do we express any opinion on whether the district court could appropriately award permanent injunctive relief at the trial on the merits if Jackson makes a sufficient showing of irreparable harm because of other injury, not before us now, for which money damages is inadequate compensation.

Judgment reversed; preliminary injunction vacated.

MANSFIELD, Circuit Judge (concurring):

I concur in the well-reasoned per curiam opinion but would prefer to base my decision on slightly different grounds.

I think it is unnecessary to second-guess the district court's findings as to irreparable injury or to get into that subject at all because Jackson has failed in the first place to satisfy either of the two prongs of the merits test for preliminary relief. Nothing in the contract between Hood and Jackson for an exclusive distributorship with respect to the Vermont area obligates Hood to police its customers in other areas or to stop them from selling or transshipping goods to their own stores in Vermont. Nor is there any evidence in the record that Hood controlled, instigated, encouraged or participated in such transshipments by First National or Grand Union from their warehouses elsewhere to their chain stores in Vermont. Jackson has therefore failed to make any showing that the exclusive distributorship contract has been violated.

Faced with a similar situation the Third Circuit found no breach of contract. Parkway Baking Co. v. Freihofer Baking Co., 255 F.2d 641 (3d Cir. 1958). Moreover, to imply an obligation of the type suggested by appellee, aside from its forcing Hood to run the risk of losing First National and Grand Union as customers altogether, would probably not be justifiable under Continental T. V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36, 97 S. Ct. 2549, 53 L. Ed. 2d 568 (1977), see generally, The Supreme Court, 1976 Term, 91 Harv.L.Rev. 231-41 (1977), since it might unnecessarily decrease intrabrand competition without any evidence that an increase in interbrand competition would be expected to follow.

Turning to the basis for reversal advanced by the majority, I do not disagree with his conclusion that an insufficient showing of threat of irreparable injury was made below. Proof of some threat of irreparable injury, i. e., harm that cannot otherwise be measured in damages, has always been necessary to the issuance of preliminary injunctive relief, regardless of whether it be labelled "probable" or "possible," "strong" or "weak," "actual" or "remote." Suggestions to the contrary appear to have been generated by semantical differences or misinterpretation of language in earlier opinions, e. g., Hamilton Watch Co. v. Benrus Watch Co., 206 F.2d 738 (2d Cir. 1953); Unicon Management Corp. v. Koppers Co., 366 F.2d 199 (2d Cir. 1966); Checker Motors Corp. v. Chrysler Corp., 405 F.2d 319 (2d Cir.), Cert. denied, 394 U.S. 999, 89 S. Ct. 1595, 22 L. Ed. 2d 777 (1969); Sonesta International Hotels Corp. v. Wellington Associates, 483 F.2d 247 (2d Cir. 1973); see Mulligan, Foreword Preliminary Injunction in the Second Circuit, 43 Brooklyn L.Rev. 831 (1977). As we have repeatedly observed, New York v. Nuclear Regulatory Commission, 550 F.2d 745, 750-51 (2d Cir. 1977); Caulfield v. Board of Education, 583 F.2d 605 (2d Cir. 1978), a grant of preliminary relief has in fact been upheld only where a threat of irreparable injury was shown.

In my view, the nature and extent of the threat of irreparable injury required for relief in any given case will vary according to the likelihood of success on the merits; the weaker the case on the merits, the stronger must be the showing of threat of irreparable injury. For instance, where a plaintiff can only raise serious questions providing fair ground for litigation, with a balance of hardships tipping decidedly in his favor if relief is denied, a greater threat of irreparable injury must be demonstrated than where he makes a strong preliminary showing on the merits. Since this process usually calls upon the nisi prius judge to engage in careful appraisal and weighing of the proof we will not ordinarily disturb his determination except for clear abuse of discretion. United States v. W. T. Grant Co., 345 ...


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