Loveridge v. Pendleton Woolen Mills, Inc., 1041

• Decision Date: 25 April 1986
• Docket Number: No. 1041,D,1041
• Parties: Lee LOVERIDGE, Plaintiff-Appellee, v. PENDLETON WOOLEN MILLS, INC., Defendant-Appellant. ocket 86-7113.
• Court: U.S. Court of Appeals — Second Circuit

Page 914

788 F.2d 914

Lee LOVERIDGE, Plaintiff-Appellee, v. PENDLETON WOOLEN MILLS, INC., Defendant-Appellant.

No. 1041, Docket 86-7113.

United States Court of Appeals, Second Circuit.

Argued March 19, 1986.

Decided April 25, 1986.

James D. Crawford, Philadelphia, Pa. (Nicholas N. Price, and Schnader, Harrison, Segal & Lewis, Philadelphia, Pa., on brief), for defendant-appellant.

Arthur M. Wisehart, New York City (Stevin Lim, and Wisehart & Koch, New York City, on brief), for plaintiff-appellee.

Before TIMBERS, MINER and ALTIMARI, Circuit Judges.

TIMBERS, Circuit Judge:

Pendleton Woolen Mills, Inc. ("appellant") appeals from an order entered February 11, 1986 in the Southern District of New York, Vincent L. Broderick, District Judge, granting the motion of Lee Loveridge ("appellee") for a preliminary injunction. The court granted the relief requested on the grounds that appellee had demonstrated probable irreparable harm; that there were serious issues going to the merits which were disputed and litigable; and the balance of hardships tipped in appellee's favor.

On appeal, appellant's principal claim is that the court erred in finding irreparable harm because any loss appellee might sustain pending the outcome of the litigation can be redressed by an award of money damages. We hold that, since appellee has an adequate remedy at law, the court abused its discretion in entering a preliminary injunction based on its finding of irreparable harm. We reverse and vacate the injunction.

I.

We summarize only those facts believed necessary to an understanding of the issues raised on appeal.

In 1976 appellee began working as a sales representative for appellant. Appellant manufactures a line of woolen wearing apparel and accessories, which it markets to retail stores across the country through a staff of approximately 50 sales representatives. Appellant considers its sales representatives to be independent contractors.

Appellee sold womenswear for appellant. His exclusive territory was the New York metropolitan area. He was not a salaried employee. Instead, his compensation was in the form of a commission which appellant paid to him based on a percentage of the dollar value of his sales.

In November and December of 1985, appellee had several disputes with L.M. Bishop, III, appellant's national womenswear sales manager. On November 15, 1985, appellee sent Bishop a memorandum in which he severely criticized Bishop's behavior at a recent sales presentation with one of appellee's customers. Appellee expressed dissatisfaction with Bishop's selling style and told Bishop "to stay away from [his] customers." Bishop gave the memorandum to the manager of appellant's womenswear division, Richard E. Poth, who wrote a response memorandum to appellee dated November 27. In the memorandum Poth informed appellee that if he wished to remain a sales representative he would have to give written assurance that he would support management and adhere to appellant's business policies. Appellee responded to Poth in a memorandum dated December 23. Appellee failed to give the written assurance Poth requested; rather, he repeated his criticism of Bishop's selling skills.

On December 27 and 28, 1985, appellee's deposition was taken in connection with two separate but related antitrust actions which had been commenced against appellant by two other sales representatives. ¹ At his deposition, appellee produced a tape recording of a telephone conversation he had had with another sales representative. The conversation made direct reference to the involvement of Bishop in what the two sales representatives (including appellee) regarded as illegal price-fixing activities.

On January 21, 1986, Poth wrote appellee a letter informing him of appellant's decision to terminate his services as a sales representative. The letter told appellee that he was being fired because of his refusal to cooperate with management and his refusal to follow company policies and procedures. Poth sent this letter shortly after the transcripts of appellee's deposition were made available.

On January 27, 1986, appellee filed a complaint in the instant action in the district court alleging an antitrust claim, a breach of contract claim, and an illegal termination claim. With respect to the illegal termination claim, appellee alleged that appellant had fired him in retaliation for his having given adverse deposition testimony. By order to show cause, appellee moved for a temporary restraining order and a preliminary injunction enjoining appellant from interfering with appellee's business as a sales representative. A hearing was held on February 7, 1986 before Judge Broderick. At the conclusion of the hearing, in an oral opinion from the bench, Judge Broderick granted appellee's motion and ordered appellee's immediate reinstatement. A formal order granting the preliminary injunction and denying a stay was entered February 11. On February 18, we entered a stay pending appeal from the preliminary injunction.

II.

For the issuance of a preliminary injunction in this Circuit, the moving party has the burden of showing: "(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 injunctive relief." Kaplan v. Board of Education of the City School District of the City of New York, 759 F.2d 256, 259 (2 Cir.1985). The district court here entered the preliminary injunction upon findings of irreparable harm, of sufficiently serious questions going to the merits to make them a fair ground for litigation, and that the balance of hardships tipped decidedly in appellee's favor. Appellant's principal claim on appeal is that the court abused its discretion in finding irreparable harm because appellee has an adequate remedy at law, i.e., money damages. ² We agree.

The court's finding of irreparable harm was based on its subordinate finding that appellee functioned, in certain respects, more like an independent businessman than an employee. The court reasoned that, since appellant considered its sales representatives to be independent contractors, appellee's situation was more analogous to a dealership threatened with the destruction of its business than to an employee faced with the termination of his job. While we recognize that on occasion we have been willing to enjoin a manufacturer from canceling a dealership pending the outcome of litigation, in order to prevent the destruction of an ongoing business, Roso-Lino Beverages Distributors, Inc. v Coca-Cola Bottling Co. of New York, Inc., 749 F.2d 124, 125-26 (2 Cir.1984); Semmes Motors, Inc. v. Ford Motor Co., 429 F.2d 1197, 1205 (2 Cir.1970), we decline to do so on the facts of this case.

Appellee's relationship with appellant is significantly different from the relationship between a retail dealership and a manufacturer. Appellee, in contrast to a dealership, owns no inventory. Appellant ships all the merchandise ordered directly to the accounts, and the...