Blackwelder Furniture Co. of Statesville, Inc. v. Seilig Mfg. Co., Inc.

• Decision Date: 16 February 1977
• Docket Number: No. 76-2288,76-2288
• Citation: 550 F.2d 189
• Parties: 1977-1 Trade Cases 61,292 BLACKWELDER FURNITURE COMPANY OF STATESVILLE, INC., Appellant, v. SEILIG MANUFACTURING COMPANY, INC., Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 189

550 F.2d 189

1977-1 Trade Cases 61,292

BLACKWELDER FURNITURE COMPANY OF STATESVILLE, INC., Appellant, v. SEILIG MANUFACTURING COMPANY, INC., Appellee.

No. 76-2288.

United States Court of Appeals Fourth Circuit.

Argued Dec. 6, 1976.

Decided Feb. 16, 1977.

George L. Little, Jr. and Norwood Robinson, Winston Salem, N.C. (Douglas G. Eisele, Statesville, N.C., Hudson, Petree, Stockton, Stockton & Robinson, Winston Salem, N.C., Raymer, Lewis, Eisele & Patterson, Statesville, N.C. on brief), for appellant.

J. Melville Broughton, Jr., Raleigh, N.C. and Don G. Nicholson, Miami, Fla. (Broughton, Broughton, McConnell & Boxley, Raleigh, N.C., on brief), for appellee.

Before CRAVEN, BUTZNER and RUSSELL, Circuit Judges.

CRAVEN, Circuit Judge.

This is an appeal by Blackwelder Furniture Company of Statesville, Inc., from the refusal of the district court to issue a preliminary injunction under Rule 65(a). Fed.R.Civ.P. 65(a). At the same time we heard the appeal, we considered a Rule 8 motion and granted a temporary injunction pending our decision on the appeal. Fed.R.App.P. 8. Blackwelder's complaint seeks treble damages and injunctive relief under the Clayton Act, 15 U.S.C. §§ 15 & 16, on the theory that a decision by Seilig Manufacturing Company, Inc., to terminate Blackwelder as an authorized dealer violated the federal antitrust statutes. For reasons to be stated, we think the district court applied incorrect principles in undertaking to exercise its discretion to grant or deny a preliminary injunction and further that the application of correct principles requires that a preliminary injunction issue, restoring Blackwelder to its status as a Seilig dealer pending trial on the merits.

I.

Blackwelder contends that Seilig has violated Section 1 of the Sherman Act by combining to fix prices, rig retail territories, and oust a discounter from the competitive market. 15 U.S.C. § 1. From affidavits and certain agreed facts, it seems fair to say Blackwelder will be able to offer competent evidence at trial tending to show the following: ¹

Blackwelder was a successful distributor of Seilig furniture for over a decade; its purchases of Seilig furniture accounted for about 35% of its total purchases of "contemporary upholstered furniture"; Seilig was one of its top three lines of contemporary upholstered furniture; from January to June 1976, it ordered more than $52,000 worth of furniture from Seilig. Part of Blackwelder's sales were to mail-order customers in the Washington, D. C. area, who took advantage of Blackwelder's discount prices, ranging up to 30% below Seilig's suggested retail prices. Such potential customers often visit the showrooms of a local D. C. retailer, select a piece of furniture, and then place their order with Blackwelder to the great displeasure of the local retailer. Blackwelder alleges that as a result Seymour Woodnick of W. J. Sloane's, a large D. C. retailer of Seilig furniture, threatened to see to it that Blackwelder lose its Seilig line unless it quit the D. C. market. While Woodnick denies the threat, he admits his sales personnel were greatly aggravated over time wasted on Blackwelder customers.

In April of 1974 Seilig's regional sales director, Jim Robinson, on the authority of Jerrold Wexler, Executive Vice President of Seilig, warned Blackwelder that because of pressure from D. C. dealers like Sloane's it would be forced to terminate Blackwelder's dealership unless it stopped sales in the D. C. area. Robinson denies the threat, but he admitted to having asked Blackwelder to reduce the customary number of its salesmen at the Seilig space at the upcoming High Point Furniture market lest they "irritate" Seilig salesmen from D. C. The threats are said to have been repeated.

On May 4, 1976, Seilig wrote Blackwelder that it would be terminated on June 1 because "it occasionally becomes necessary to make certain changes in a company's distribution policy in order to better develop a particular area." No other or more concrete reason was given. Despite Seilig's contention that it acted unilaterally and that some 300 other dealers were terminated at the same time, the names of those dealers and a comparison of their respective sales records with Blackwelder's were not furnished the court.

The district court, in denying Blackwelder's motion for interlocutory relief, relied on the fourfold equitable rule of thumb set forth in Airport Comm. of Forsyth Co., N.C. v. CAB, 296 F.2d 95 (4th Cir. 1961):

1) Has the petitioner made a strong showing that it is likely to prevail upon the merits?

2) Has the petitioner shown that without such relief it will suffer irreparable injury?

3) Would the issuance of the injunction substantially harm other interested parties?

4) Wherein lies the public interest?

296 F.2d at 96 (emphasis added). Accord, First-Citizens Bank & Trust Co. v. Camp, 432 F.2d 481, 483 (4th Cir. 1970). It reasoned that a single adverse determination on any of the four questions would be fatal to the movant. The court found first that "neither side" had made a "strong showing" that Seilig's actions were either collaborative or unilateral for purposes of the Section 1 requirement of a contract, combination or conspiracy. 15 U.S.C. § 1. For this reason alone the court reasoned that relief should be denied; nonetheless, it also found that denial of interlocutory relief would occasion no irreparable harm to Blackwelder since its damages, if any, would be readily calculable and collectible. The court felt unable to decide the remaining two factors, viz., the public interest and the potential harm to the defendant, but did note that "it is hard to conceive" how Seilig could be economically damaged by continuing its business relationship with Blackwelder.

II.

When the grant or denial of interim injunctive relief is reviewed, it is simplistic to say or imply, as we sometimes do, that it will be set aside only if an abuse of discretion can be shown. Singleton v. Anson Co. Bd. of Education, 387 F.2d 349, 351 (4th Cir. 1967); Meiselman v. Paramount Film Distributing Corp., 180 F.2d 94, 97 (4th Cir. 1950). For there is, of course, the possibility that the court below has either failed to exercise its discretion in some respect, compare Paine v. St. Paul Union Stockyards Co., 35 F.2d 624 (8th Cir. 1929), with Mattox v. United States, 146 U.S. 140, 13 S.Ct. 50, 36 L.Ed. 917 (1892), or else exercised it counter to established equitable principles. Prendergast v. N.Y. Tel. Co., 262 U.S. 43, 50-51, 43 S.Ct. 466, 67 L.Ed. 853 (1923); Security Metal Products Co. v. Kawneer Co., 14 F.2d 569, 572-573 (8th Cir. 1926). A judge's discretion is not boundless and must be exercised within the applicable rules of law or equity. Petersen v. John Hancock Mutual Life Insurance Co., 116 F.2d 148, 151 (8th Cir. 1971). And our review of the lower court's application of the law is not limited by the same "clearly erroneous" rule which restricts our review of its findings of fact under Rule 52(a). Fed.R.Civ.P. 52(a). Delaware & Hudson Ry. Co. v. United Transp. Union, 146 U.S.App.D.C. 142, 450 F.2d 603, 620 (1971).

We reverse the district court because it failed to apply the settled principles which govern consideration of a Rule 65(a) motion in this circuit, as set forth in Sinclair Refining Co. v. Midland Oil Co., 55 F.2d 42 (4th Cir. 1932):

It is sufficient (to grant the motion) if the court is satisfied that there is a probable right and a probable danger, and that the right may be defeated, unless the injunction is issued, and considerable weight is given to the need of protection to the plaintiff as contrasted with the probable injury to the defendant.

55 F.2d at 45 (emphasis added). Accord, West Virginia Conservancy v. Island Creek Coal Co., 441 F.2d 232, 235 (4th Cir. 1971). The district court's reliance on the different standards of Airport Comm'n of Forsyth Co. and Camp, see p. 192 supra, was misplaced though understandably so. Even the treatise writers have mistakenly equated the stringent standards of those cases with the more flexible rule of Sinclair Refining, supra. See, e. g., 7 Moore's Federal Practice, P 65.04(1) at 65-39 n.7 (1975). But there is a difference. The cases relied upon by the district court deal with the question of the issuance vel non of an appellate stay pending review of an administrative order or a trial court decision that dealt with the merits of a controversy. ² Hence they propound an appellate standard and not one for use in the trial courts.

In cases like Airport and Camp a judicial or quasi-judicial body has already passed upon the merits of a question and typically has also denied a discretionary stay of its decision; only then is the motion made for an appellate stay. For a stay to issue under such circumstances, we adopted in Airport Comm'n of Forsyth, supra, 296 F.2d at 96, the requirement of Virginia Petroleum Jobbers Ass'n v. Federal Power Comm'n, 104 U.S.App.D.C. 106, 259 F.2d 921 (1958), that a "strong showing" of probable success on appeal be made, for otherwise there is "no justification for the (appellate) court's intrusion into the ordinary processes of administrative and judicial review." 259 F.2d at 925.

Likewise, Long v. Robinson, 432 F.2d 977 (4 Cir. 1970), another "strong showing" case from this circuit, involved a stay-pending-appeal situation, in which the district court had fully considered the merits of the controversy, rendered its final decree, and refused the request for an interim stay. Judge Winter explained in Long that the petitioner's burden in seeking injunctive relief is substantially greater on appeal. 432 F.2d at 979. See, e. g., Railway Express Agency, Inc. v. United States, 82 S.Ct. 466, 7 L.Ed.2d 432, 434 (1962) (Harlan, J.) (a "strong showing . . . must be made to justify reversal of the District Court's discretionary action"); Breswick & Co. v. United States, 75 S.Ct. 912, 100 L.Ed. 1510, 1513 & n.1 (1955); Magnum Import Co. v....