Reinders Bros., Inc. v. Rain Bird Eastern Sales Corp.

• Citation: 627 F.2d 44
• Decision Date: 30 July 1980
• Docket Number: No. 79-2251,79-2251
• Parties: REINDERS BROTHERS, INC., Plaintiff-Appellee, v. RAIN BIRD EASTERN SALES CORPORATION, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 44

627 F.2d 44

REINDERS BROTHERS, INC., Plaintiff-Appellee, v. RAIN BIRD EASTERN SALES CORPORATION, Defendant-Appellant.

No. 79-2251.

United States Court of Appeals Seventh Circuit.

Argued April 1, 1980.

Decided July 30, 1980.

Clay R. Williams, Milwaukee, Wis., for defendant-appellant.

Bruce C. O'Neill, Milwaukee, Wis., for plaintiff-appellee.

Before CUMMINGS, SPRECHER and CUDAHY, Circuit Judges.

CUMMINGS, Circuit Judge.

In this diversity case, defendant Rain Bird Eastern Sales Corp., a California-based manufacturer and supplier of turf and irrigation products, appeals from the district court's entry of a preliminary injunction in favor of plaintiff Reinders Bros., Inc., a Wisconsin seller of such products and since 1959 a Rain Bird distributor. Plaintiff originally filed suit in Wisconsin state court under the Wisconsin Fair Dealing Law (Wis.Stat.Ann. Ch. 135 et seq.) to enjoin defendant ¹ from discontinuing plaintiff as a dealer. Defendant removed the case to the district court for the Eastern District of Wisconsin where plaintiff pressed its request for a preliminary injunction to halt the attempted termination. On September 21, 1979, the district court ruled for plaintiff and directed it to submit proposed findings of fact and conclusions of law. After plaintiff complied, the court on October 18, 1979, filed a final order granting the preliminary injunction. Defendant filed its appeal to this Court the next day. Although we affirm the district court's orders in almost all respects, we nevertheless remand the case to the district court for the reason discussed below.

Rain Bird is the largest United States manufacturer of equipment and parts used in automatic irrigation and lawn sprinkler systems. Since at least 1959, Reinders Brothers has been distributing Rain Bird products in Wisconsin, acting during the last decade under a written dealership agreement with defendant. Between 1974 and 1978, when the present controversy arose, that agreement consisted of a contract entered into on an annual basis, permitting either party to terminate with or without cause upon ten days' notice. The agreement required plaintiff to undertake an "adequate and reasonable sales effort, in the active promotion of Rain Bird products" within a specified geographical area but did not grant plaintiff an exclusive dealership in that area (Rec. Item 10, Exh. A). There is in fact evidence in the record that two other Wisconsin dealers carry the complete Rain Bird line and as many as seventeen others carry up to 90 percent of the defendant's products (Tr. 154-155). Throughout the relevant period, Reinders sold a wide variety of lawn products and some sprinkler systems manufactured by other companies, and Rain Bird sprinkler systems apparently accounted for no more than four percent of Reinders' total sales in any one year. Until 1978, defendant never expressed dissatisfaction with plaintiff's sales efforts.

In March 1978, Reinders completed its acquisition, begun several months earlier, of R & S Parts, Inc. R & S Parts had previously been a Reinders competitor in several product markets, including that for sprinkler systems, where it served as a distributor for the Toro Company. Toro is Rain Bird's major rival in the manufacture of irrigation and sprinkler systems. Before the acquisition, Reinders had sold Toro lawn products and upon acquisition of R & S, it successfully persuaded Toro to permit Reinders to assume R & S's role as a franchisee for Toro sprinkler and irrigation products. ² The resulting dealership agreement between Reinders and Toro extended Reinders' distribution responsibilities from selling Toro lawn products to marketing Toro sprinkler products in a territorial area largely congruent with Reinders' territory for Rain Bird. A preliminary letter concluding the agreement between Toro and Reinders spoke simply of marketing goals and performance criteria for Reinders (Exh. 13), but Toro's standard contract calls upon its distributors to sell Toro products "aggressively by all legitimate means" and to "provide the necessary effort" to promote, demonstrate and sell Toro products and achieve "a reasonable share of market" (Exh. 10 at 4, 5).

After hearing of the Reinders-R & S negotiations, Rain Bird notified plaintiff that it had begun searching for a new distributor for its products. Its relationship with Reinders apparently deteriorated throughout 1978. In January 1979, defendant granted a dealership to Irrigation, Inc. ³ and at about the same time orally informed plaintiff that the latter's dealership was being terminated. During April and June 1979, Rain Bird renewed by written notice its efforts to terminate Reinders, citing alleged deficiencies in Reinders' sales performance as well as Reinders' disloyalty and alleged attempts to monopolize the turf sales market in Wisconsin.

In April 1979, plaintiff filed its complaint in Wisconsin state court, alleging that defendant's attempted termination of plaintiff violated Section 135.04 of the Wisconsin Statutes, which is part of the Wisconsin Fair Dealing Law (WFDL). In particular, plaintiff alleged that defendant did not have good cause for the termination, as required by the WFDL, ⁴ and that defendant had failed to meet the notice requirements of the statute. After plaintiff gained a temporary restraining order in state court, defendant removed the case to federal court in May 1979. Plaintiff there pressed its request for a preliminary injunction and, while the motion was pending, discovery commenced. Two incidents relevant to our consideration occurred during this discovery period. Immediately prior to the September hearing on the preliminary injunction motion, defendant twice attempted to depose Thomas Onasch, one of plaintiff's employees, but although Onasch appeared at the deposition, he refused to testify. Onasch did appear at the hearing although he was not called as a witness. Second, during the July deposition of Robert Emmerich, Toro's district manager, Emmerich refused to testify regarding certain Toro documents sought by defendant. Subsequently, defendant obtained a subpoena duces tecum for Emmerich to appear with the documents at the hearing. Upon motion of Emmerich, however, the district court summarily quashed the subpoena.

The district court conducted a hearing on the preliminary injunction motion over a three-day period in September 1979. On September 21, it ruled in favor of plaintiff, after expressly finding that plaintiff had met all four prerequisites of Fox Valley Harvestore, Inc. v. A. O. Smith Harvestore Products, Inc., 545 F.2d 1096, 1097 (7th Cir. 1976). In particular, Chief Judge Reynolds found that Rain Bird had discontinued Reinders solely "because the plaintiff acquired a competing dealership" (App. 7). Since, according to Judge Reynolds, the WFDL did apply to the dealership at issue and "(t)he acquisition of a distributorship of a competing manufacturer does not constitute good cause for termination within the meaning of the statute," he concluded that defendant had apparently violated the Wisconsin statute and that plaintiff had a reasonable likelihood of success on the merits (App. 8). Judge Reynolds also found that irreparable injury could be presumed under Section 135.065 of the WFDL (App. 8) and that the threatened injury to plaintiff in the prospective loss of 20 years' good will with its Rain Bird customers outweighed any harm to Rain Bird, which was free to contract with other distributors (App. 7, 8). Finally, the district court found that the Wisconsin legislature's statement of the purposes of the WFDL could serve as the requisite finding of the public interest served by the injunction (App. 8). The district court's order did not rule on or mention Rain Bird's request under Rule 65(c) of the Federal Rules of Civil Procedure for a bond to secure Rain Bird against any costs and damages should the issuance of the injunction ultimately prove improper.

Standard of Review

As the district court rightly noted, the granting of a preliminary injunction requires that the district court consider each of the four factors set forth in Fox Valley Harvestore, Inc. v. A. O. Smith Harvestore Products, Inc., 545 F.2d 1096, 1097 (7th Cir. 1976). Those factors are: (1) whether the plaintiff will have an adequate remedy at law or will be irreparably harmed if the injunction does not issue; (2) whether the threatened injury to the plaintiff outweighs the threatened harm the injunction may inflict on the defendant; (3) whether the plaintiff has at least a reasonable likelihood of success on the merits; and (4) whether the granting of a preliminary injunction will disserve the public interest. Upon appeal, a district court decision that, as here, preserves the status quo may be overturned only upon a showing of a clear abuse of discretion. Jordan v. Wolke, 593 F.2d 772, 773 (7th Cir. 1978); Banks v. Trainor, 525 F.2d 837 (7th Cir. 1975), certiorari denied, 424 U.S. 978, 96 S.Ct. 1484, 47 L.Ed.2d 748. Reviewing the district court's decision requires a reexamination of his findings on each of the four considerations. Yet no one of the factors is decisive, even though the likelihood of success on the merits often serves as a threshold requirement for entitlement to preliminary relief. Kolz v. Board of Education of the City of Chicago, 576 F.2d 747, 748-749 (7th Cir. 1978). As a result, not only must the district court's findings be allowed to stand absent evidence that they are clearly erroneous or represent a certain mistake of law (Sangmeister v. Woodard, 565 F.2d 460, 464-465 (7th Cir. 1977), appeal dismissed sub nom. Illinois State Board of Education v. Sangmeister, 435 U.S. 939, 98 S.Ct. 1516, 55 L.Ed.2d 535), but its decision as a whole must not be upset unless the totality of the factors points to a clear departure from the proper exercise of its discretion.

Likelihood of Success on the Merits

In considering the case on the...