Borman's, Inc. v. Great Scott Super Markets, Inc.

• Decision Date: 09 May 1975
• Docket Number: Civ. A. No. 4-72911.
• Citation: 433 F. Supp. 343
• Parties: BORMAN'S, INC., Plaintiff, v. GREAT SCOTT SUPER MARKETS, INC., Defendant.
• Court: U.S. District Court — Western District of Michigan

433 F. Supp. 343

BORMAN'S, INC., Plaintiff, v. GREAT SCOTT SUPER MARKETS, INC., Defendant.

Civ. A. No. 4-72911.

United States District Court, E. D. Michigan, S. D.

May 9, 1975.

COPYRIGHT MATERIAL OMITTED

Eugene Driker, Detroit, Mich., for plaintiff.

Irwin Alterman, Southfield, Mich., for defendant.

MEMORANDUM OPINION AND ORDER GRANTING DEFENDANT'S MOTION FOR PRELIMINARY INJUNCTION

PHILIP PRATT, District Judge.

Borman's has filed the instant antitrust action against Great Scott in an attempt to invalidate a restrictive lease provision in Great Scott's lease with the landlord of the Lincoln Park Shopping Center. The defendant had previously filed a motion to dismiss which was denied by this Court on February 3, 1975. In this earlier motion, the defendant argued that the lease provision which granted it a partial exclusive at the shopping center was per se legal. The Court held that no per se rule applied and that a violation of the antitrust laws in this case will turn upon the particular circumstances presented.

In its complaint, the plaintiff seeks an injunction restraining the defendant from compelling compliance with the lease provisions. In its answer, the defendant filed a counterclaim seeking to force compliance with the subject lease provisions. The defendant has filed the instant Motion for a Preliminary Injunction.

DISCUSSION

Both parties¹ agree that in determining the propriety of issuing a preliminary injunction the Court should look to:

a) the significance of the threat of irreparable harm to the movant;

b) the balance between the harm to the nonmovant vis a vis the movant if the injunction is granted;

c) the probability that the movant will succeed on the merits; and

d) the public interest.²

The Court will analyze each of these factors seriatum.

I. HARM TO MOVANT.

It is true, as contended by the plaintiff, that as a general rule the party seeking a preliminary injunction must show that he will be irreparably harmed if the court fails to grant his sought for equitable relief. However, there are two exceptions to the general rule. A showing of irreparable harm is unnecessary for the securing of equitable relief for a breach of contract:

"1. Where the subject-matter of the contract is of such a special nature, or of such a peculiar value, that the damages, when ascertained according to legal rules, would not be a just and reasonable substitute for or representative of that subject-matter in the hands of the party who is entitled to its benefit; or in other words, where the damages are inadequate;

"2. Where, from some special and practical features or incidents of the contract inhering either in its subject-matter, in its terms, or in the relations of the parties, it is impossible to arrive at a legal measure of damages at all, or at least with any sufficient degree of certainty, so that no real compensation can be obtained by means of an action at law; or in other words, where damages are impracticable." 4 Pomeroy, Treatise on Equity Jurisprudence § 1401, at 1033-34 (5th Ed. 1941) (emphasis in original). Cited in A. L. K. Corporation v. Columbia Pictures Industries, Inc., 440 F.2d 761, 763 (3rd Cir. 1971).

The defendant impliedly contends that he falls within these two recognized exceptions and thus is absolved from the requirement that he show irreparable injury.

It is important to note that the defendant-movant is seeking to assert his rights under state law to enforce the leasehold covenant. Thus, it would appear entirely proper for the Court to look to state law to determine when and whether a showing of irreparable harm must be made. In analyzing the various decisions which have arisen out of restrictive covenants in leases which bar competition as a matter of state law, the commentators have observed:

"Where the action for injunctive relief by the lessee-covenantee is founded upon the prohibited use of the restricted premises by a competing lessee, the attention of the courts has more often been directed to the question of the enforceability of the covenant as against a competing lessee than to the propriety of granting injunctive relief against such lessee. However, it is clear that the fact that the lessee-covenantee might have some remedy at law, at least as against the lessor-covenantor, will not in itself prevent the award of injunctive relief.

"It has been said that injunctive relief against a competing lessee with notice is proper, whenever the damages are irreparable and difficult of computation. And it has been held with reference to particular fact situations that the court should exercise its power to grant injunctive relief, since otherwise the injury to the lessee-covenantee would be irreparable, owing to the inability to ascertain with accuracy the amount of damages sustained by the covenantee. But in most cases injunctive relief has been granted without discussion as to the propriety of such relief in relation to the particular facts involved, apparently on the implicit assumption that if the lessor's covenant is enforceable as against the party violating it, then either the particular facts justify the granting of injunctive relief or the violation of a covenant against competitive use presents the sort of situation in which the court should exercise its power to award such relief." Anno: "Lease-Covenant Against Competition" 97 A.L. R.2d 4, 123-124 (1964).

From the foregoing citation it seems that the defendant-movant need not make a clear showing that he will be irreparably harmed.

It is apparent that any damages to be sustained by Great Scott are not susceptible to easy computation. Although the immediate lost profits it may suffer might well be given a dollar value (e.g. average profits over the preceding years), potential lost good will and lost customers are somewhat more difficult to ascertain. Thus, the movant's damages are at least arguably inadequate and/or impracticable. A recognition of this fact when dealing with real estate leases has undoubtedly led the various courts which have faced the issue to pass over the harm aspects and concentrate upon the clauses' enforceability. Id.

Several Michigan authorities appear to establish the broad general principle that, under Michigan law, no showing of irreparable harm need be made where the movant is enforcing a property right created by lease or contract. Pierce v. Riley, 16 Mich.App. 419, 422, 168 N.W.2d 309 (1969); Birmingham Park Imp. Ass'n v. Rosso, 356 Mich. 88, 99, 95 N.W.2d 885 (1959). Accordingly, further support is present for the proposition that the crucial issue as to the propriety of injunctive relief is the enforceability of the clause and not a showing of the existence of irreparable harm per se.

In J. M. Fields of Anderson, Inc. v. Kroger Co., 310 F.2d 562 (5th Cir. 1962), the lower court held, and the court of appeals affirmed, that irreparable harm had been shown and that a preliminary injunction could properly issue under similar circumstances. In that case, the movant had shown that irreparable damage occurred where the defendant would be "siphoning away of the business, profits, customers and good will of the plaintiff and that the loss of such business, profits, customers, and good will is not only irreparable, but manifestly difficult of computation and ascertainment." Id. at 564.³ The Fink affidavit, at ¶ 21, appears to touch closely the factors looked to by the lower court in J. M. Fields. Thus, it would appear that if a showing of irreparable harm must be made, that showing has been made in the instant case.

In summary, it is axiomatic that an individual seeking to have a preliminary injunction issue must show that he has or will be subjected to irreparable harm. However, an explicit showing is not required where those damages are impracticable or inadequate to ascertain. Further, when dealing with the enforcement of leasehold covenants, the damages of the party seeking to enforce the covenant and to obtain an injunction are generally held to be impracticable or inadequate. Accordingly, this defendant-movant need not make a factual showing of irreparable harm and the Court will proceed to scrutinize the enforceability of the clause in the context of the requirement of the likelihood of success on the merits.

II. SUCCESS ON THE MERITS.

The present case is somewhat unusual since it is the defendant which is seeking the injunction and not the plaintiff. In the normal case the plaintiff seeks the injunction and must therefore show a probable likelihood of success on the merits. It is somewhat unfair to impose a burden on the defendant-movant to show that this clause is probably enforceable under the antitrust law since the burden in the case in chief is clearly upon the plaintiff to show that the clause is unenforceable under those principles. Accordingly, an equitable allocation of the burdens in the case at bar with respect to the likelihood of success on the merits is: (1) the defendant-movant must show the likelihood of success that this clause is enforceable under state law; (2) the plaintiff then has the burden of going forward on the antitrust issue; (3) if the plaintiff meets his burden, then the burden is placed upon the defendant-movant to show that he has a likelihood of success on the merits in establishing that no antitrust law has been violated and that the subject provision is therefore enforceable.

A. Movant-State Claim.

Neither research nor the briefs have been able to discover any Michigan authority relative to the enforceability of restrictive covenants in shopping center leases. In the annotation "Lease-Covenant Against Competition" 97 A.L.R.2d 4 (1964), the commentators found that such provisions have generally been held to be enforceable. They have neither been found to be unreasonable nor void as against public policy nor void as violative of state antitrust law. Id. at 14-19. In light of the general trend of state authority permitting enforcement of...