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McCabe v. AIR-serv Group, LLC: US District Court : CIVIL PROCEEDURE | FRANCHISE - injunction denied; Minnesota Franchise Act claim unlikely to succeed

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
William McCabe and Service Station
Vending Equipment, Inc.,
Plaintiffs,
Civ. No. 07-4553 (RHK/JSM)
MEMORANDUM OPINION
AND ORDER
v.
AIR-serv Group, LLC, J. Gregory Muldoon,
and Thomas J. Bauer,
Defendants.
Mark A. Jacobson, Christopher R. Smith, Karla M. Vehrs, Lindquist & Vennum PLLP,
Minneapolis, Minnesota, for Plaintiffs.
Jon S. Swierzewski, Cynthia M. Klaus, Nicholas M. Lewandowski, Larkin Hoffman Daly
& Lindgren Ltd., Minneapolis, Minnesota, for Defendants.
INTRODUCTION
Plaintiffs William McCabe and Service Station Vending Equipment, Inc.
(collectively, “McCabe”) seek a preliminary injunction enjoining Defendant AIR-serv
Group, LLC (“AIR-serv”) from terminating distributor agreements between the parties.
For the reasons set forth below, the Court will deny the Motion.
BACKGROUND
I. The Parties
In the early 1980s, AIR-serv began manufacturing and selling coin-operated tireinflator
machines and coin-operated automobile vacuums, which were primarily installed
2
at service stations and convenience stores across the nation. (Bauer Aff. ¶¶ 4-5.) AIRserv
sold its machines directly to independent distributors, who were assigned various
territories throughout the United States. (Id. ¶ 5.)
McCabe is the owner of Service Station Vending Equipment, Inc., and he operates
two AIR-serv distributorships. (Compl. ¶ 2.) McCabe places and services machines
purchased from AIR-serv at different business locations; it shares revenue with the
business where the machines are located for the duration of the placement agreement.
(Id. ¶ 14.) He retains ownership of the equipment and he uses his share of the vending
revenue to pay off the financing for the equipment. (Id. ¶¶ 13-14.)
In the 1990s, AIR-serv shifted its focus to the development of chain accounts,
such as Exxon Mobil, 7-Eleven, and others, with locations in multiple states for the
placement of its machines. (Muldoon Aff. ¶ 7.) When AIR-serv secured a new chain
account, it gained the exclusive right to place and service air and vacuum machines at all
of the account’s locations. (Id. ¶¶ 8-10; Bauer Aff. ¶¶ 6-9.) AIR-serv currently services
over 23,000 machines and has over 100 contracts with chain accounts. (Bauer Aff. ¶¶ 7-
11.) After developing its chain-account business, AIR-serv turned over most of the
locations of each account to its distributors to service. Regardless of who services the
machines, the revenue collected on each machine is tabulated and the appropriate
commission is paid to each chain account by AIR-serv. (Id. ¶ 9.)
Over time AIR-serv found itself selling fewer and fewer machines to distributors.
(Id. ¶ 16.) By the mid-2000’s, very little of AIR-serv’s revenues came from the
manufacture and sale of machines. (Id.) When AIR-serv was primarily a manufacturer,
3
it had more than 130 distributors, but that number fell to 4 by the end of 2006, of which
McCabe is one. ( Id. ¶ 17.)
II. The Distributor Agreements Between McCabe and AIR-serv
AIR-serv entered into separate distributor agreements with McCabe on January
23, 1991 (covering specified territories in New York) and on January 2, 2001 (covering
the territory of Connecticut). (Bauer Aff. ¶ 3, Exs. A (New York) & B (Connecticut)
(“Distributor Agreements”).)1 The Distributor Agreements gave McCabe the right to
purchase machines from AIR-serv and to solicit locations to place those machines within
prescribed territories (seven counties in New York and the entire state of Connecticut).
(Id.) They also provide, with a few exceptions, that AIR-serv would not grant to another
distributor the right to place, sell, or lease AIR-serv products within the distributor’s
territory so long as the distributor has met the minimum quotas and terms of the
Distributor Agreements. ( Id. ¶ 2.) AIR-serv, however, expressly reserved the right to
sell and otherwise market machines to chain accounts without regard to whether or not it
had locations within McCabe’s territory. (Id.)
The Distributor Agreements also provide that “[a]ll Products . . . shall be
purchased by [McCabe] at ‘the bona fide wholesale price.’” ( Id. ¶ 6.) The Distributor
Agreements had two-year initial terms and “automatically renew for consecutive oneyear
periods . . . provided neither party gives notice to the other of its intent to terminate
[the agreement] at least ninety (90) days prior to the end of any term.” ( Id. ¶ 10.) They
1 The two distributor agreements are virtually identical. Therefore, the Court will refer to both
agreements as “Distributor Agreements.”
4
also contain a Minnesota choice-of-law clause.2 (Id. ¶ 20.) In addition, the Distributor
Agreements provide that “no alterations, amendments or further understandings are
binding unless reduced to writing and properly executed by [McCabe and AIR-serv].”
(Id. ¶ 22.)
In 1994, AIR-serv established Installation and Operation Procedures (“Operation
Procedures”) for each chain account, which were required to be accepted by a distributor
in order to service the account. (Bobert Aff. ¶¶ 27-28.) McCabe signed the Operation
Procedures for every chain account that had locations within his assigned territories.
(McCabe Aff. ¶ 55, Ex. 4.) The Operation Procedures generally specify the manner of
installation, type of equipment, and procedures for centralized collection, reporting and
payment. (McCabe Aff. Ex. 4; Muldoon Aff. ¶ 10.) They also provide that, upon
termination, if AIR-serv has a continuing agreement with the national account, it may
repurchase the distributor’s equipment installed at the chain-account locations based o n a
specified formula,3 unless the parties agreed that the equipment may be removed.
(McCabe Aff. Ex. 4, Addendum I.) AIR-serv charges McCabe a monthly management
fee for each machine installed at each chain-account location. (Id.; Def.’s Mem. at 8;
Pl.’s Opp’n Mem. at 8.) The monthly management fee was initially per machine, but
has increased to - per machine for most accounts. (McCabe Aff. ¶ 66.)
2 The Distributor Agreements also contain forum-selection clauses, in which the parties agreed to
submit to the exclusive jurisdiction of Minnesota courts.
3 The formula uses a five-year depreciation schedule based upon the actual cost of the
equipment. (McCabe Aff. Ex. 4, Addendum I; Bobert Aff. ¶ 28; Muldoon Aff. ¶ 16.)
5
III. AIR-serv’s Transition Out of Distribution
In July 1998, AIR-serv’s founder, David Bobert, sold the assets of AIR-serv to a
private equity firm, Prometheus LLC.4 (Bobert Aff. ¶¶ 2, 21.) After the sale, AIR-serv
continued to encourage its distributors, including McCabe, to aggressively work their
territories for AIR-serv, to continue to invest in the AIR-serv brand, and to increase
market share for AIR-serv products. (McCabe Aff. ¶ 76.) In September 1998, AIR-serv
informed its distributors, including McCabe, that it would be receptive to purchasing the
distributors’ businesses. (McCabe Aff. ¶ 77.) Between early 1998 and mid-2003, AIRserv
started to acquire the businesses of its distributors and its competitors. (Bauer Aff.
¶¶ 19-20.) When AIR-serv acquired a business, and with it, the contracts that the
business had with chain accounts and independent location owners, it would generally
service those locations itself. (Muldoon Aff. ¶ 14.)
By mid-2003, AIR-serv was servicing a majority of the chain-account locations.
(Id.) AIR-serv continued to assure McCabe that it valued the relationships it had with the
distributors, but it also indicated that its manufacturing business was no longer of primary
importance. (McCabe Aff. ¶¶ 84-85; Muldoon Aff. ¶ 23.) McCabe continued to make
additional investments in AIR-serv machines to be placed at locations within his
territories. (Id. ¶ 86.) In October 2003, McCabe was aware that AIR-serv was not
renewing all of its distributors’ agreements. (Muldoon Aff. ¶ 23.) AIR-serv also
4 In March 2003, a second investment firm, Wind Point Partners, purchased AIR-serv. In July
2006, a third investment firm, Macquarie Capital Alliance Group, purchased AIR-serv.
(McCabe Aff. ¶¶ 87, 93.)
6
indicated to him that it was only a matter of time before he would receive a non-renewal
letter. (Id.) In July 2006, AIR-serv reminded McCabe that it was getting closer to the
time when it would decide not renew his agreements because of the change in its business
model.5 (Id. ¶ 25.)
IV. Notice of Non-Renewal
On March 20, 2007, AIR-serv formally notified McCabe of its intent not to renew
the Distributor Agreements.6 As a result, the Distributor Agreement for Connecticut will
expire on January 1, 2008, and the Distributor Agreement for New York will expire on
January 22, 2008. (McCabe Aff. ¶¶ 101-02, Ex. 17.) On March 23, 2007, AIR-serv
notified McCabe that although the Operation Procedures allowed it to terminate
McCabe’s right to operate the machines at the national accounts upon termination of the
Distributor Agreements and to purchase his equipment upon termination, it would waive
that right, and allow him to operate the machines at those locations until the expiration of
each particular account, so long as he continued to comply with the terms of the
Operation Procedures. (Id. Ex. 18.) AIR-serv also indicated that it would give McCabe
the option of either selling the equipment under the terms of the Operation Procedures or
allow him to remove the equipment from the locations. (Id.)
McCabe never formally responded to either letter. The parties, however, held
numerous discussions about the possibility of AIR-serv buying McCabe’s distributorship.
5 McCabe asserts that “[t]he first time that AIR-serv told him it was changing its business model
and ceasing the manufacture of air machines was with its [notice of non-renewal] letter to [him]
in March of 2007.” (McCabe Suppl. Aff. ¶ 3.)
6 AIR-serv also sent its notice of non-renewal to the other three remaining distributors in March
2007. (Muldoon Aff. ¶ 19.)
7
(Bauer Aff. ¶ 18; McCabe Aff. ¶ 104.) AIR-serv ultimately offered McCabe over
million for his business, but he rejected this offer. (Bauer Aff. ¶ 18.) On October 29,
2007, AIR-serv reiterated to McCabe its decision not to renew the Distributor
Agreements, and that due to his non-response to the March 23 letter, the Operation
Procedures would terminate as of the expiration of the respective Distributor Agreements.
(McCabe Aff. ¶ 105, Ex. 19; Muldoon Aff. ¶17.)
On November 7, 2007, McCabe brought this action against AIR-serv for breach of
contract, violations of the Minnesota Franchise Act, Minn. Stat. § 80.C.01 et seq.,
violations of the Connecticut Franchise Act, Conn. Gen. Stat. § 42-133e(b), violation of
the Connecticut Unfair Trade Practices Act, Conn. Gen. Stat. § 42-110A, et seq., and
promissory and equitable estoppel. On November 15, 2007, McCabe filed the instant
Motion for injunctive relief.7
ANALYSIS
I. Factors for a Preliminary Injunction
In analyzing a motion for a preliminary injunction, the Court must look to the four
factors set forth by the Eighth Circuit in Dataphase Systems, Inc. v. CL Systems, Inc.,
640 F.2d 109 (8th Cir. 1981). Those factors are: (1) the movant’s likelihood of success
on the merits; (2) the threat of irreparable harm to the movant in the absence of relief; (3)
the balance between that harm and the harm that the relief would cause to the other
litigants; and (4) the public interest. Id. at 114.
7Briefing was completed on December 14, 2007 and oral argument was held on December 21,
2007.
8
When applying the Dataphase factors, the Court must “flexibly weigh the case’s
particular circumstances to determine whether the balance of equities so favo rs the
movant that justice requires the court to intervene.” Hubbard Feeds, Inc. v. Animal Feed
Supplement, Inc., 182 F.3d 598, 601 (8th Cir. 1999). The party seeking injunctive relief
bears the “complete burden” of proving all of the Dataphase factors. Gelco Corp. v.
Coniston Partners, 811 F.2d 414, 418 (8th Cir. 1987).
A. Likelihood of Success on the Merits
1. Applicability of Minnesota Franchise Act8
The Court begins its analysis with McCabe’s likelihood of success on the merits of
his claims. McCabe asserts that AIR-serv’s threatened non-renewal of the Distributor
Agreements violates the Minnesota Franchise Act (“MFA”) in numerous respects. At the
outset, the parties devote a substantial amount of time in their motion papers as to
whether McCabe’s business meets the definition of a “franchise” under the MFA and
whether the MFA even applies. The Court need not resolve this dispute at this stage of
the proceedings because even assuming McCabe’s business meets the definition of a
franchise under the MFA, he is unlikely to succeed on the merits of his claims.
8 McCabe has alleged various violations of the Minnesota Franchise Act (“MFA”), the
Connecticut Franchise Act (“CFA”), and the Connecticut Unfair Trade Practices Act
(“CUTPA”). The Distributor Agreements, however, contain a Minnesota choice-of- law clause
and the parties agree that Minnesota law should govern. Therefore, the Court does not address
McCabe’s claims under the CFA and CUTPA. The Court also notes, in any event, that the MFA
appears to offer more protection to franchisees than the CFA (for example, irreparable harm is
presumed under the MFA, see Minn. Stat. § 80C.14, subd. 1, whereas the CFA does not have this
presumption).
9
Therefore, the Court will assume for purposes of this Motion only that McCabe is a
franchisee under the MFA.
The Court notes, however, that “where the parties legitimately dispute whether a
product distributor is actually a franchisee under the Minnesota Franchise Act, the district
court is not required to grant a temporary injunction . . . . [Indeed,] [i]f there is a close
factual dispute which could go either way at a trial on the merits, a court should be
reluctant to issue a preliminary injunction.” See Pacific Equip. & Irrigation, Inc. v. Toro
Co., 519 N.W.2d 911, 915 (Minn. Ct. App. 1994).9
2. McCabe is Unlikely to Succeed on the Merits
First, McCabe argues that AIR-serv has violated the MFA’s prohibition on nonrenewal
for the “purpose of converting the franchisee’s business premises to an operation
that will be owned by the franchisor for its own account.” Minn. Stat. § 80C.14, subd. 4.
Yet, the record shows that AIR-serv’s decision not to renew was for legitimate business
reasons and not for the purpose of taking over McCabe’s business. McCabe was fully
aware that AIR-serv was changing its business model and would not be continuing its
distributor system. Additionally, AIR-serv indicated in its notice of non-renewal that it
would no longer be manufacturing compressed air and vacuum vending equipment and
9 In Pacific Equip., the parties had a series of one- year distributor agreements. 519 N.W.2d at
913. The manufacturer decided not to renew the agreements, and the distributor filed suit
under the MFA. Id. at 914. The Minnesota Court of Appeals upheld the denial of injunctive
relief primarily on the basis that the parties disputed whether the distributor was a franchisee.
Id. at 918. Although the Court will assume that McCabe is a franchisee under the MFA for
purposes of this Motion, there is no question that the parties legitimately dispute this issue. As
such, the Court is reluctant to issue a preliminary injunction under the circumstances presented
here. Id. at 918. Nonetheless, the Court will consider all of the Dataphase factors.
10
consequently would no longer have products to distribute through distributors. Indeed,
the record shows that AIR-serv went from having over 130 distributors to just 4
distributors in 2006 and that McCabe was aware of this fact. This is not evidence of a
discriminatory intent to take over McCabe’s business, but rather is evidence of AIRserv’s
intent to execute a change in its business model. Thus, McCabe is unlikely to
show that AIR-serv’s decision of non-renewal was for the purpose of taking over his
business, in violation of the MFA.
Next, McCabe argues that AIR-serv has not given him sufficient time to operate
the chain accounts to recover their fair-market value and that he still has significant debt
directly related to equipment purchases he made for the chain accounts. The MFA allows
a franchise agreement to expire as long as the franchisee receives at least 180-days’
notice of non-renewal and an opportunity to operate over a sufficient period of time to
enable the franchisee to recover the fair-market value of the business as a going concern.
Minn. Stat. § 80C.14, subd. 4. Here, AIR-serv provided McCabe with almost nine
months of notice of its intent not to renew the Distributor Agreements. Thus, AIR-serv
has complied with the 180-day notice requirement for non-renewal under the MFA.
Moreover, the Distributor Agreements each had two-year initial terms, with the New
York agreement starting in January 1991 and the Connecticut agreement starting in
January 2001. Both of these agreements have been renewed annually since then.
Although McCabe continued to make more investments during the terms of the
agreements, it is unlikely that he will be able to show that this was an insufficient amount
of time to recover the fair-market value of his business. The MFA requires only that
11
AIR-serv provide McCabe with sufficient time to operate the business, not that he be
debt-free at the time of non-renewal.10 McCabe’s contention that he has not had
sufficient time to operate his business to recoup the fair-market value of his investments
is undermined by the fact that AIR-serv and McCabe have had a long-term business
relationship.11 The Court concludes that McCabe is unlikely to succeed on the merits of
this claim.
Next, McCabe asserts that it is unfair and inequitable for a franchisor to “impose
on a franchisee by contract or rule, whether written or oral, any standard of conduct that
is unreasonable.” Minn. R. 2860.4400(G). McCabe argues that is true here because
AIR-serv imposed a five -year, straight-line depreciation schedule that would allow it to
acquire McCabe’s equipment without paying fair value. The Court determines that
McCabe is unlikely to show that AIR-serv violated the MFA here because there is no
evidence that AIR-serv “imposed” this depreciation schedule on McCabe. Indeed,
McCabe was free to decline participation in the servicing of the chain accounts.
Furthermore, AIR-serv is not enforcing the provision because it is allowing McCabe to
remove the machines. Thus, it is unlikely McCabe will succeed on the merits of this
claim.
10 The record also shows that AIR-serv would give McCabe the option of either selling the
equipment under the terms of the Operation Procedures or allow him to remove the equipment
from the locations. McCabe simply makes a conclusory assertion that these two options are
unacceptable because he would not receive enough money for selling the machines pursuant to
the Operation Procedures or it would be too costly to move them.
11 The Court also notes that AIR-serv has apparently offered McCabe over million for his
business.
12
McCabe also asserts that AIR-serv violated the MFA by discriminating between
him and other distributors. In particular, McCabe argues that AIR-serv discriminated
against him by refusing to turn over newly-acquired locations within his exclusive
territory even though it turned over new locations to other distributors. (McCabe Aff.
¶ 100.) In response, AIR-serv argues that even if that were true, such discrimination
would not impact AIR-serv’s right not to renew his agreement, but would merely give
him a right to damages. The Court agrees. The appropriate remedy for such a violation
would be money damages rather than injunctive relief that would force AIR-serv to
renew the Distributor Agreements.
Finally, McCabe asserts that AIR-serv violated the MFA by failing to register its
franchise, Minn. Stat. § 80C.02, and by failing to make required disclosures in the
mandatory public offering statement, Minn. Stat. § 80C.18, subd. 1. There is no dispute
that AIR-serv failed to comply with the MFA in this regard. The remedy for such failure,
however, is rescission or damages. Minn. Stat. § 80C.17. The Court assumes McCabe
does not wish to rescind his Distributor Agreements based on the fact that he is seeking a
preliminary injunction compelling AIR-serv to renew the agreements. And, if McCabe is
merely seeking damages for this violation, then this is not an appropriate basis for an
injunction that would force the parties to continue their relationship. Indeed, any
concession that damages are a sufficient remedy would negate his assertion of irreparable
13
harm.12 Accordingly, the Court finds that McCabe is unlikely to succeed on the merits of
his claims.
3. Promissory Estoppel and Equitable Estoppel Claims
McCabe also claims that AIR-serv should be estopped from ousting him from the
chain-account locations by non-renewal based on AIR-serv’s past representations that it
would continue its relationship with him. Promissory estoppel is an equitable doctrine
that implies a contract in law where none exists in fact. Martens v. Minn. Mining & Mfg.
Co., 616 N.W.2d 732, 746 (Minn. 2000). The application of promissory estoppel
requires that: (1) the promisor made a clear and definite promise, (2) the promisor
intended to induce reliance and such reliance occurred, and (3) the promise must be
enforced to prevent injustice. Olson v. Synergistic Techs. Bus. Sys., Inc., 628 N.W.2d
142, 152 (Minn. 2001). However, the parties in this case have a contract that deals with
the issue of non-renewal, namely, that either party has a right not to renew the agreement
as long as the y provide 90-days’ notice. Thus, it is highly unlikely that McCabe will be
able to show that promissory estoppel applies here because AIR-serv has a contractual
right not to renew the Distributor Agreements.
Equitable estoppel prevents a party from “taking unconscionable advantage of [its]
own wrong by asserting [its] strict legal rights.” Brekke v. THM Biomedical, Inc., 683
N.W.2d 771, 777 (Minn. 2004). To establish equitable estoppel, McCabe must show that
AIR-serv made a knowing misrepresentation or concealment of a material fact with the
12 The Court notes that if McCabe seeks damages for this claim, he will still need to overcome
the three-year statute of limitation provision contained in the MFA. Minn. Stat. § 80C.17.
14
intent to induce reliance and that McCabe was ignorant to the misrepresentation and
subsequently relied on it to his prejudice. Id. at 777. “A fact is material if it is germane
to the unconscionable conduct alleged and works a prejudice to the party.” Lunning v.
Land O’Lakes, 303 N.W.2d 452, 458 (Minn. 1980).
McCabe asserts that AIR-serv encouraged him to make more investments and led
him to believe that AIR-serv would continue its relationship and business model wi th him
so that he would realize the value of his investment if and when he determined to sell his
business. The record, however, shows that McCabe has been given plenty of time to
realize the fair-market value of his investment. Although AIR-serv encouraged McCabe
to continue making investments, it repeatedly told McCabe that it was changing its
business model and was interested in purchasing the distributors’ businesses. AIR-serv
also told McCabe that it was only a matter of time before he would receive a non-renewal
letter. Indeed, when AIR-serv was primarily a manufacturer, it had more than 130
distributors, but that number fell to four by the end of 2006, which included McCabe. In
essence, McCabe is arguing that he has a contract for a definite duration and that AIRserv
must continue with this relationship until he concludes that it is financially beneficial
to terminate his agreement with AIR-serv. But, that is not what AIR-serv promised and
certainly not what the parties agreed to. Thus, the Court finds that McCabe is unlikely to
prove his equitable-estoppel claim.
B. Irreparable Harm
Irreparable harm is presumed for violations of the MFA. See Minn. Stat.
15
§ 80C.14. That presumption, however, may be negated if a party delays in seeking
injunctive relief. See Tough Traveler, Ltd. v. Outbound Prods., 60 F.3d 964, 968 (2d Cir.
1995) (“any such presumption of irreparable harm is inoperative if the plaintiff has
delayed either in bringing suit or in moving for preliminary injunctive relief” and may,
standing alone, justify denial of a preliminary injunction). On March 20, 2007, AIR-serv
formally notified McCabe of its decision not to renew the Distributor Agreements and
that these agreements would expire in January 2008. McCabe asserts that he will go out
of business if the Court does not enjoin AIR-serv’s threatened non-renewal of the
Distributor Agreements. Yet, McCabe did not immediately file suit or seek temporary
injunctive relief. Instead, he waited until November 2007 -- over seven months -- to
commence this action and apply for a preliminary injunction. McCabe has offered no
explanation or justification for his delay other than discussions between the parties.
McCabe’s unreasonable delay in bringing this action weighs against any presumption of
irreparable harm.
The Court also notes that “the availability of money damages negates any
presumption of irreparable harm.” Best Vendors, Co. v. Win Stuff, LLC, No. 00-523,
2000 WL 34240391, at *3 (D. Minn. Mar. 13, 2000) (Frank, J.) (citing Pacific Equip.,
519 N.W.2d at 915); see also Morse v. City of Waterville, 458 N.W.2d 728, 729-30
(Minn. Ct. App. 1990) (to be irreparable, injury must be of such a nature that money
alone could not suffice). McCabe, however, argues that he will suffer irreparable harm
resulting in lost revenues, impairment of his goodwill, and disruption of his relationships
with customers. In particular, he argues that the chain accounts represent 30-40% of his
16
revenue, and without this revenue, he estimates that he would suffer a loss of over
0,000 in annual net revenues. (McCabe Aff. ¶ 70; McCabe Supp. Aff. ¶¶ 11-12.)
McCabe claims that this substantial reduction in income would cause him to default on
his monthly debt payments of ,000 and ultimately cause his business to fail. (Id.
¶ 12.) In response, AIR-serv argues that McCabe’s damages, if any, are compensable in
money damages. The Court agrees.
The circumstances of this case are similar to Crowley Beverage Co. v. Miller
Brewing Co., No. 4-85-443, 1985 WL 540 (D. Minn. Apr. 19, 1985), and SICK, Inc. v.
Motion Control Corp., No. 01-1496, 2001 WL 1640055 (D. Minn. Sept. 7, 2001). In
each case, this Court denied a distributor’s motion to enjoin a manufacturer from
terminating a distributor agreement because the distributor had an adequate remedy at
law. In Crowley, the court found that the incidental effects on the distributor’s
reputation, goodwill, and other accounts could be measured and included in a damages
remedy. 1985 WL 540, at *3; see also Best Vendors, 2000 WL 34240391, at *2-3
(finding that lost profits and lost business relationships from having to remove vending
machines are the types of injuries that may be remedied by monetary damages). Thus,
even if McCabe were to prevail on the merits of his claims, the Court finds that he has an
adequate remedy in the form of money damages to compensate him for any lost revenues,
impairment of goodwill and strained customer relationships.
Similarly, in SICK, the distributor argue d that his business would be destroyed if
the Court did not issue a preliminary injunction to enjoin the manufacturer from
terminating their distributor agreement. 2001 WL 1640055, at *4. Notably, the court
17
found that “the loss of a portion of a distributor’s business which was compensable in
money damages does not amount to irreparable harm.” Id. at *5 (citing Crowley, 1985
WL 540, at *2-3 (finding no irreparable harm from termination of distributor agreement
where sale of manufacturer’s products accounts for only 45% of distributor’s annual
sales); cf. Ryko Mfg. Co. v. Eden Servs., 759 F.2d 671, 673 (8th Cir. 1985) (finding
distributor would be irreparably harmed if the distributor agreement were allowed to
terminate because the sales and services of the manufacturer’s products accounted for
95% of the distributor’s business)). The Court is not persuaded that a loss of 30-40% of
McCabe’s business will force his business to fail in the absence of injunctive relief; in
short, he has not established the threat of irreparable harm. The Court notes that denial of
injunctive relief would be justified solely by McCabe’s failure to show irreparable harm.
Gelco Corp., 811 F.2d at 420 (the moving party’s failure to demonstrate irreparable harm
ends the inquiry “and the denial of the injunctive request is warranted.”)
C. Balancing the Harms
Although lack of “irreparable harm,” standing alone, would warrant denial of
McCabe’s request for injunctive relief, the balance of harms also warrants denial. If a
preliminary injunction were granted, it would force the parties to remain in an ongoing
business relationship that AIR-serv desires to terminate. See O.M. Droney Beverage Co.
v. Miller Brewing Co., 365 F. Supp. 1067, 1070 (D. Minn. 1973) (explaining that obvious
difficulties arise in the enforcement of an injunction that requires the parties to “remain
married”). It would also force AIR-serv to continue a business model it no longer wishes
to maintain despite giving ample notice to McCabe of its intent not to rene w the
18
Distributor Agreements. Therefore, the balance of harms favors denial of McCabe’s
Motion.
D. Public Interest
McCabe asserts that the public interest favors that the Court maintains the status
quo until a trial on the merits. As explained above, McCabe is unlikely to succeed on the
merits of his claims under the MFA and he has not established irreparable harm.
Furthermore, “[p]ublic policy would not support requiring the parties to remain in a
business relationship that is unsatisfactory.” Id. at 915-16.13 Accordingly, the Court
concludes that a preliminary injunction would not further the public interest.
CONCLUSION
A preliminary injunction is an extraordinary and drastic remedy. The Court has
carefully weighed all of the Dataphase factors and has determined that the balance of
equities does not so favor McCabe that justice requires the Court to intervene and issue
an injunction. Based on the foregoing, and all the files, records, and proceedings herein,
IT IS ORDERED that McCabe’s Motion for a Preliminary Injunction (Doc. No. 3) is
DENIED.14
Dated: December 28 , 2007 s/Richard H. Kyle
RICHARD H. KYLE
United States District Judge
13 McCabe asserts that the parties’ business relationship is harmonious and mutually beneficial.
The Court, however, is not persuaded that this business relationship, now impacted by the
current litigation, would continue amicably until a trial on the merits.
14 In accordance with Federal Rule of Civil Procedure 52(a), the foregoing Memorandum
Opinion and Order constitutes the Court’s findings of fact, conclusions of law and grounds for its
action.
 

 
 
 

  What day were you injured?

  / /


  What caused your injuries?
Traffic/Bicycle Accident
Work-Related Injury
Wrongful Death
Dog Bite
Slip and Fall
Other:


  How have your injuries affected

  your life?

 


  What kinds of medical care
  professionals have you seen?

 


  What has your treatment cost?

 

  Is Insurance Involved?
My insurance may cover
        this.

Someone else's insurance
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I already filed a claim.
I rejected a settlement
        offer.

I accepted a settlement
        offer.

  Were there any witnesses?
Bystanders Witnessed This.
Police Responded and Filed
        a Police Report

Police Responded but Did
        Not File a Police Report


 

 

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