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Thymer Consolidated Industries, Inc. v. Artromick International, Inc.

04-CV-319 (U.S. Dist. Ct. D. N.J. 2004) (Unpublished)

SALES REPRESENTATIVES; INJUNCTIONS — Where a sales representative stands to lose less than 20% of its business and both its claim that the manufacturer has breached the representation agreement and that it will suffer future losses are weak or speculative, it is not entitled to a preliminary injunction to preserve the status quo.

Two former competitors, each in the business of selling medication carts and related products for use in health-care facilities, entered into an agreement in which one would discontinue its own manufacturing operations to become an exclusive sales representative for the other. The agreement granted the sales company the exclusive right to sell certain products within a defined geographic area. In addition, the agreement identified the products that the representative was authorized to sell.

After a while, the manufacturer told the sales representative that it was no longer authorized to solicit sales for a specific product in a certain market because the product was not listed in the agreement. The manufacturer then created a new sales force dedicated to that market. In response, the sales representative claimed that by denying it the ability to sell that particular product in that particular market, the manufacturer had become a direct competitor. Additionally, the representative asserted that its non-competition agreement prevented it from representing any other manufacturer of that particular product. As a result, the sales representative sued the manufacturer, alleging breach of contract. It sought a preliminary and permanent injunction to prevent the manufacturer from selling the products covered by the agreement other than through its sales representative.

To grant the preliminary injunction, the Court needed to consider the likelihood that the sales representative would prevail on its merits; the extent to which the conduct at issue would cause the irreparable harm to the representative if the Court denied the injunction; the extent to which the manufacturer would suffer harm if the Court granted the injunction; and the public interest. Although the Court believed that the sales representative had demonstrated a probability of success in litigation, it found that the manufacturer failed to establish that irreparable injury would result if the Court denied the injunctive relief. It didn’t feel that financial injury alone constituted the kind of irreparable harm necessary to support an award of injunctive relief. The standard is that a party must demonstrate potential harm of the kind following a trial, that a legal or equitable remedy could not redress. The harm must be of a peculiar nature, so that compensation alone cannot atone for it, and it must constitute an immediate, irreparable injury or presently existing threat.

The sales representative alleged that the manufacturer’s actions would have excluded it from the “growth area” of “an emerging market.” The Court felt that this allegation mischaracterized the nature of the parties’ relationship. Here, the sales representative was only an agent for the manufacturer, and the Court believed that “sales” hardly constituted a new, growth industry. Furthermore, the claim was only a prediction of potential harm that might result at some point in the future. The Court held that such an uncertain injury failed to satisfy the burden of showing an “immediate or a presently existing” threat.

The sales representative also argued that its inability to access the market or sell the specific product would negatively impact its good-will and reputation with customers and limit its ability to service certain customers in need of the disputed product. The Court held that loss of customers did not constitute the kind of irreparable harm a preliminary injunction is designed to deter because a monetary award can adequately address such a loss. Additionally, sales forecasts for the product in question showed it to constitute less than twenty percent of the representative’s overall sales. The Court felt that this did not represent a hardship sufficient to overcome the presumption that economic damages were inadequate.

In addition, the Court held that granting a preliminary injunction could result in harm to the manufacturer. The sales representative argued that its application merely sought to preserve the status quo by compelling the manufacturer to fulfill its express obligations under the agreement. The manufacturer asserted that no such obligations existed, and that issuing the injunctive relief would substantially expand the scope of the sales representative’s rights under the agreement. Therefore, since the parties disputed the very nature and scope of the rights created by the agreement, the extent of injury potentially recognized by either party was dependent on the outcome of the proceedings.

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