Arborjet, Inc. v. Rainbow Treecare Scientific Advancements, Inc.

• Decision Date: 16 July 2015
• Docket Number: No. 14–2324.,14–2324.
• Citation: 115 U.S.P.Q.2d 1677,794 F.3d 168
• Parties: ARBORJET, INC., Plaintiff, Appellee, v. RAINBOW TREECARE SCIENTIFIC ADVANCEMENTS, INC., Defendant, Appellant.
• Court: U.S. Court of Appeals — First Circuit

794 F.3d 168

115 U.S.P.Q.2d 1677

ARBORJET, INC., Plaintiff, Appellee

v.RAINBOW TREECARE SCIENTIFIC ADVANCEMENTS, INC., Defendant, Appellant.

No. 14–2324.

United States Court of Appeals, First Circuit.

July 16, 2015.

Scott P. Lopez, with whom Joshua M.D. Segal and Lawson & Weitzen, LLP were on brief, for appellant.

Kristen S. Scammon, with whom Michael S. Day and Torres, Scammon & Day, LLP were on brief, for appellee.

Before SELYA, Circuit Judge, SOUTER,^* Associate Justice, LIPEZ, Circuit Judge.

Opinion

SOUTER, Associate Justice.

This appeal challenges a preliminary injunction meant to enforce a contractual agreement and prohibit a trademark violation. We affirm in part and reverse in part.

I.

Plaintiff–Appellee Arborjet, Inc. manufactures and sells TREE-age, an emamectin benzoate solution used to protect trees from various pests. Through the period from August 2008 to February 2013, Arborjet granted Defendant–Appellant Rainbow Treecare Scientific Advancements, Inc. an exclusive right to distribute TREE-age. Their sales agency contract included this provision:

[Rainbow] agrees, in view of the confidential information regarding Arborjet's business affairs, plans, and necessities, that [Rainbow] will not engage in affairs intended to replicate [A]rborjet's products or processes.

After the termination of this agreement, Rainbow began marketing and distributing ArborMectin, another emamectin benzoate combination meant to compete directly with TREE-age. Arborjet sued Rainbow in Massachusetts trial court, seeking to enjoin Rainbow's sales of ArborMectin and claiming breach of contract, breach of implied covenant of good faith and fair dealing, false advertising under the Lanham Act and Massachusetts law, 15 U.S.C. § 1125(a)(1)(B) ; Mass. Gen. Laws ch. 266, § 91, false designation of origin under the Lanham Act, 15 U.S.C. § 1125(a)(1)(A), and common law unfair competition. Rainbow removed the action to federal court.

In the preliminary injunction proceedings from which this appeal comes, the district court did not find for Arborjet on the prospects of its Lanham Act or state law tort and statutory claims, but it did find likely success on those for breach of contract and implied covenant of good faith and fair dealing. The court said that Arborjet had “demonstrated a likelihood that it will be able to prove that [Rainbow] engaged in research and development to create a product very similar to TREE-age,” in violation of the sales agency agreement. In summarizing the support it found for this conclusion, the court described ArborMectin as the “defendant's own ... product” and stated that “Rainbow's website describes partnering with several institutions and companies to conduct research studies regarding ArborMectin's effectiveness,” at least one of which “took place while Rainbow was ... subject to the terms of the [sales agency a]greement.” The district court accordingly granted Arborjet an injunction to run during the litigation, with a principal order that “[Rainbow] and those acting in concert with it ... immediately cease and desist selling, distributing and/or marketing ArborMectin.”

II.

We start with the state law contract claims and a word about the deferential standard of review: whether the district court abused its discretion in issuing the preliminary injunction addressing breach of those obligations. See TEC Eng'g Corp. v. Budget Molders Supply, Inc., 82 F.3d 542, 544–45 (1st Cir.1996). Thus, we may “set aside [the district court's] ruling only if ... persuaded that [it] mistook the law, clearly erred in its factual assessments, or otherwise abused its discretion in granting the interim relief.” McGuire v. Reilly, 260 F.3d 36, 42 (1st Cir.2001). Our review recognizes “the preliminary nature of the proceeding; in the context of a preliminary injunction motion, the district court's findings need not be overly detailed, and they do not bind the court in subsequent proceedings.” TEC Eng'g Corp., 82 F.3d at 545 ; see also Narragansett Indian Tribe v. Guilbert, 934 F.2d 4, 6 (1st Cir.1991) (“[A] party losing the battle on likelihood of success may nonetheless win the war at a succeeding trial on the merits.”).

To grant a preliminary injunction, a district court must find the following four elements satisfied: (1) a likelihood of success on the merits, (2) a likelihood of irreparable harm absent interim relief, (3) a balance of equities in the plaintiff's favor, and (4) service of the public interest. See Voice of the Arab World, Inc. v. MDTV Med. News Now, Inc., 645 F.3d 26, 32 (1st Cir.2011) (citing Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 20, 129 S.Ct. 365, 172 L.Ed.2d 249 (2008) ). The second through fourth considerations are not disputed, so we focus solely on likelihood of success, and find no abuse of discretion in the conclusion that Arborjet was likely to succeed on its contract claims.¹

Rainbow argues first that it was clear error to find a likely showing that it contributed to the creation of ArborMectin, contending that the record undisputedly shows that a different company, Rotam, created ArborMectin on its own. The evidence before the district court, however, was not nearly as one-sided as Rainbow says. To be sure, the Environmental Protection Agency (EPA) lists Rotam as the approved creator of ArborMectin, but the question is whether Rainbow contributed to its creation. And, on that point, the district court was presented with two e-mails from a Rainbow sales representative describing ArborMectin as Rainbow's own product, and truly undisputed evidence that Rainbow conducted at least ten studies across the United States on the effectiveness of ArborMectin, some of them years before Rotam submitted its formula to EPA for approval. It was certainly plausible, then, for the court to infer that Rainbow played a role in the product's creation. Although Rainbow counters that the statements were false and that its studies were merely the practices of a sensible distributor, these arguments at best show only that, if the court had accepted them, it could reasonably have reached the opposite conclusion. But “where the facts can support two plausible but conflicting interpretations of a body of evidence, the factfinder's choice between them cannot be clearly erroneous.” deBenedictis v. Brady–Zell (In re Brady–Zell), 756 F.3d 69, 72 (1st Cir.2014).

Next, Rainbow argues that the district court fell into legal error when it interpreted the contractual language quoted earlier. Rainbow cites a dictionary definition of “replicate” to contend that “affairs intended to replicate” applies only to efforts to produce a compound that would be an exact copy of TREE-age. Thus, Rainbow concludes, the contractual prohibition does not apply to the development of ArborMectin, which both parties understand to differ from TREE-age in toxicity and other details.

The district court considered and rejected this argument, in faithfully applying Massachusetts contract law that “[t]he words of a contract must be considered in the context of the entire contract rather than in isolation.” Brigade Leveraged Capital Structures Fund Ltd. v. PIMCO Income Strategy Fund, 466 Mass. 368, 995 N.E.2d 64, 69 (2013) (internal quotation marks omitted). The phrase at issue here (“will not engage in affairs intended to replicate [A]rborjet's products”) is prefaced by language indicating Arborjet's concern about guarding information not available to the public and potentially damaging if disclosed to competitors (“in view of the confidential information regarding Arborjet's business affairs, plans, and necessities”). Accordingly, the prohibition was probably aimed at preventing efforts by Rainbow to place Arborjet at a competitive disadvantage, reflecting a concern broader than the mere creation of an exact copy.² That said, we need not determine here the exact scope of the generally worded prohibition; for now it is enough to say simply that the dictionaries do not confine “replicate” to exact duplication, and Rainbow's claims of superiority for “our” product (which Rainbow extensively tested) raise a likelihood that Rainbow will be shown to have made efforts to develop ArborMectin as a competing product in violation of the contractual restriction...