Jack Kahn Music Co., Inc. v. Baldwin Piano & Organ Co., 959

• Citation: 604 F.2d 755
• Decision Date: 01 August 1979
• Docket Number: No. 959,D,959
• Parties: 1979-2 Trade Cases 62,785 JACK KAHN MUSIC CO., INC., Plaintiff-Appellee, v. BALDWIN PIANO & ORGAN COMPANY, Defendant-Appellant. ocket 79-7093.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

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604 F.2d 755 1979-2 Trade Cases 62,785 JACK KAHN MUSIC CO., INC., Plaintiff-Appellee,
v.
BALDWIN PIANO & ORGAN COMPANY, Defendant-Appellant. No. 959, Docket 79-7093. United States Court of Appeals,
Second Circuit. Argued May 14, 1979.
Decided Aug. 1, 1979.

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Howard Graff, New York City (Nemeroff, Jelline, Danzig, Graff, Mandel & Bloch, New York City, on the brief), for plaintiff-appellee.

Gary Lee Herfel, Cincinnati, Ohio (Frost & Jacobs, Cincinnati, Ohio, of counsel, and Whitman & Ransom, New York City, on the brief), for defendant-appellant.

Before MEDINA and TIMBERS, Circuit Judges, and SAND, District Judge. ^*

MEDINA, Circuit Judge:

Having failed in its opposition before District Judge Charles S. Haight, Jr., in the Southern District of New York, to the granting of a preliminary mandatory injunction in a private antitrust action, defendant Baldwin Piano & Organ Company appeals. The controversy between plaintiff, Jack Kahn Music Co., Inc., a seller at retail of pianos, organs and other musical instruments at various locations in Eastern Long Island, New York, and Baldwin arises out of the cancellation of a dealership contract by Baldwin. The preliminary mandatory injunction enjoins Baldwin from terminating Kahn's dealership until the final hearing of the antitrust suit.

In recent years there has been developing a substantial body of decisional law affecting a small but important segment of the law relating to the cancellation of retail dealerships by manufacturers. The procedural device employed in this group of cases is the service of a complaint in a private triple-damage antitrust action in which the retailer charges the manufacturer with various violations of the Sherman and Clayton antitrust laws and the simultaneous service of motion papers seeking a preliminary mandatory injunction preventing the manufacturer from cancelling the dealership agreement between the parties until the disposition of the antitrust suit. As the conclusion of the trial on the merits of the antitrust suit will in the normal course of events in all likelihood not take place for some years, if at all, the granting of such a preliminary mandatory injunction amounts as a practical matter, as here, to freezing plaintiff's revocable and hence temporary dealership into a dealership non-revocable for a substantial period. Thus here Baldwin thought it had entered into a two-year dealership, renewable from year to year and revocable on six months' notice. By the decision below it winds up with a non-revocable dealership of considerable duration, which is the very thing Baldwin thought the terms of the contract made impossible. The dealership contract was made on August 7, 1976. The notice of termination was given, one year, five months, and twenty-three days later, on January 30, 1978, to take effect on August 7, 1978. The complaint and the motion papers were served on July 20, 1978.

In this narrow field there are numerous opinions reporting decisions by many federal Courts of Appeals, including several in this, the Second Circuit. As is to be expected there is to be found in these opinions a certain amount of digressions and glosses, perhaps due to the circumstance that with overcrowded dockets and overworked judges there is always a feeling of urgency

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promptly to dispose of appeals involving injunctions.

As we are convinced that the decision below is wrong and that the result is not a just one and that we should reverse and vacate the injunction, we have given the appeal our most careful consideration and, in deference to the similar careful consideration below, by an able and conscientious judge, we shall try to explain in some detail our reasons for the view we take of the case. We start with an analysis of the fundamental principles involved.

I.

PRELIMINARY SUMMARY OF CONTROLLING FUNDAMENTAL PRINCIPLES.

A.

The Case is Before Us for "Full Review."

As a general rule, an appellate court will reverse the grant or denial of a preliminary injunction only upon a clear showing that the District Judge abused his discretion, Doran v. Salem Inn, Inc., 422 U.S. 922, 931-32, 95 S.Ct. 2561, 45 L.Ed.2d 648 (1975), or erred in his application of the relevant law, Triebwasser & Katz v. American Telephone & Telegraph Co., 535 F.2d 1356 (2d Cir. 1976). But as there was no evidentiary hearing in the District Court and the injunction was granted on a paper record containing only the affidavits, the pleadings and the briefs, we are, as stated by Chief Judge Kaufman, "in as good a position as the district judge to read and interpret the pleadings, affidavits and depositions." Dopp v. Franklin National Bank, 461 F.2d 873, 879 (2d Cir. 1972). As Judge Oakes noted in Forts v. Ward, 566 F.2d 849, 852 n.8 (2d Cir. 1977):

When a district court renders its decision without an evidentiary hearing, an appellate court is not limited to reviewing the district court's exercise of discretion.

And this is particularly true where, as here, the affidavits are replete with flat contradictions, discrepancies, and unsupported conclusory statements. The trial judge saw and listened to no witnesses and he had no demeanor impressions to affect his judgment. We think that there can be no reasonable doubt that in this Circuit we have appellate power of "full review" over the grant of this preliminary injunction. Judge Friendly has been hammering away at this point for years, and it is referred to in his most recent discussion of the powers of our Court in reviewing orders granting preliminary mandatory injunctions in Buffalo Courier-Express, Inc. v. Buffalo Evening News, Inc., 601 F.2d 48 (2d Cir. 1979). Numerous decisions in this Circuit support this view. Kampmeier v. Nyquist, 533 F.2d 296, 299 (2d Cir. 1977); Munters Corp. v. Burgess Industries, Inc., 535 F.2d 210, 211 n.4 (2d Cir. 1976); San Filippo v. United Brotherhood of Carpenters and Joiners, 525 F.2d 508, 511 (2d Cir. 1975); Concord Fabrics, Inc. v. Marcus Brothers Textile Corp., 409 F.2d 1315, 1317 (2d Cir. 1969) (Per curiam ).

B.

The Standard For Granting a Preliminary Injunction in This Circuit.

This Circuit has long provided two alternative tests for the grant of a preliminary injunction. The tests both require a finding of irreparable injury and differ regarding the potential for success on the merits which the plaintiff is able to demonstrate at this early stage of the litigation. A recent statement of these tests is found in Seaboard World Airlines, Inc. v. Tiger International, Inc., 600 F.2d 355, 359-360 (2d Cir. 1979), quoting Jackson Dairy, Inc. v. H.P. Hood & Sons, Inc., 596 F.2d 70, 72 (2d Cir. 1979) (Per curiam ):

Preliminary injunctive relief in this Circuit calls for a showing of "(a) irreparable harm and (b) either (1) likelihood of success on the merits or (2) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly toward the party requesting the preliminary relief."

Accord, Caulfield v. Board of Education of the City of New York, 583 F.2d 605, 610 (2d Cir. 1978); Triebwasser & Katz v. American

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Telephone & Telegraph Co., supra, 535 F.2d at 1358-59; Sonesta International Hotels Corp. v. Wellington Associates, 483 F.2d 247 (2d Cir. 1973); Mulligan, Foreword Preliminary Injunctions in the Second Circuit, 43 Brooklyn L.Rev. 831 (1977). In the present case Judge Haight granted the preliminary injunction on the basis of his findings of irreparable injury, a substantial question amounting to a fair ground for litigation, and a balance of hardships tipping decidedly in Kahn's favor.

This Court recognized in Jackson Dairy, Inc. v. H.P. Hood & Sons, Inc., supra, 596 F.2d at 72, that "(a)s to the kind of irreparable harm that the party must show, the language of some past cases has suggested to some a spectrum ranging from possible to probable, which is defined as 'not remote or speculative but . . . actual and imminent.' " ¹ Judge Haight relied on the formulation of the test stated in Caulfield v. Board of Education of the City of New York, supra, 583 F.2d at 610, in which appears the phrase "possible irreparable injury." The great Voltaire once wrote in Candide, his most entertaining and perhaps most influential philosophical novel, that anything is possible in this best of all possible worlds.

The basic statute we are construing here is Section 16 of the Clayton Act, 15 U.S.C. § 26, which requires "a showing that the danger of irreparable loss or damage is immediate," and the principles of "courts of equity, under the rules governing such proceedings" are made applicable. Ever since the establishment of the English Court of Chancery, hundreds of years ago, the basic rule has always been that there must be a showing that there is "no adequate remedy at law." We do not think that this fundamental rule has been changed so as to regard as sufficient proof of a lack of any remedy at law a mere speculation that there is a possibility that the party seeking the injunction may in some unproved way suffer loss or damage. In any event, Judge Mulligan's ruling in Triebwasser & Katz v. American Telephone & Telegraph Co., supra, disposes of this point, especially where, as here, the District Judge granted the preliminary injunction only on a showing of a fair ground for litigation. He wrote, 535 F.2d at 1359:

If the element of irreparable harm is prerequisite for relief where the plaintiff must show probable success on the merits, then A fortiori where the plaintiff establishes something less than probable success on the merits, need for proof of the threat of irreparable damage is even more pronounced.

As we shall demonstrate in a later section of the opinion, we believe that Kahn has wholly failed to meet its burden of proving the requisite probability of irreparable injury upon termination of its Baldwin dealership. The injuries which Kahn alleges that it will incur on...