Roland Machinery Co. v. Dresser Industries, Inc., 84-1509

CourtUnited States Courts of Appeals. United States Court of Appeals (7th Circuit)
Writing for the CourtBefore BAUER and POSNER, Circuit Judges, and SWYGERT; POSNER; SWYGERT
Citation749 F.2d 380
Parties, 1984-2 Trade Cases 66,175, 1985-1 Trade Cases 66,329 ROLAND MACHINERY COMPANY, Plaintiff-Appellee, v. DRESSER INDUSTRIES, INC., Defendant-Appellant.
Docket NumberNo. 84-1509,84-1509
Decision Date21 December 1984

Lee N. Abrams, Mayer, Brown & Platt, Daniel Pope, Gregory Friedman, Susan Franzetti, Chicago, Ill., for defendant-appellant.

Michael W. Coffield, Coffield, Ungaretti, Harris & Slavin, Hatem El-Gabri, John Touhy, Kenneth Jurek, Chicago, Ill., for plaintiff-appellee.

Before BAUER and POSNER, Circuit Judges, and SWYGERT, Senior Circuit Judge.

POSNER, Circuit Judge.

This appeal requires us to consider both the standard for granting (and reviewing grants of) preliminary injunctions, and substantive issues of exclusive dealing under section 3 of the Clayton Act, 15 U.S.C. Sec. 14, which makes it unlawful to sell goods "on the condition, agreement, or understanding that the ... purchaser ... shall not use or deal in the goods ... of a competitor or competitors of the ... seller, where the effect of such ... condition, agreement, or understanding may be to substantially lessen competition or tend to create a monopoly in any line of commerce."

Roland Machinery Company, a substantial dealer (its gross revenues exceed $10 million a year) in construction equipment and related items, serving a 45-county area in central Illinois, was for many years the area's exclusive distributor of International Harvester's line of construction equipment. International Harvester got into serious financial trouble and in 1982 sold its construction-equipment division to Dresser Industries. Dresser promptly signed a dealership agreement with Roland. The agreement provided that it could be terminated by either party, without cause, on 90 days' notice. It did not contain an exclusive-dealing clause (that is, a clause forbidding the dealer to sell any competing manufacturer's construction equipment). Eight months after signing the agreement Roland signed a similar agreement with Komatsu, a Japanese manufacturer of construction equipment. Several months after discovering that Roland had done this, Dresser gave notice that it would exercise its contract right to terminate its dealership agreement with Roland without cause. Roland brought this suit shortly before the end of the 90-day notice period, charging that Dresser had violated section 3 of the Clayton Act and other provisions of federal and state law. The district judge granted Roland a preliminary injunction based solely on the section 3 charges, and Dresser has appealed under 28 U.S.C. Sec. 1292(a)(1). None of Roland's other charges is before us on this appeal.

At the hearing on Roland's motion for preliminary injunction, Dresser presented evidence that it had cut off Roland because it was afraid that Roland intended to phase out the Dresser line and become an exclusive Komatsu dealer, and because it believed that as long as Roland (a well-established firm) remained a Dresser dealer, no other dealer in the area would be willing to handle Dresser equipment, as this would mean competing with Roland. The usual practice in the industry is for dealers not to carry competing lines, and Dresser presented evidence that this makes for more aggressive promotion of each line. Roland, however, presented evidence that it had no intention of phasing out Dresser equipment, that it was terminated because the dealership contract contained what Roland at argument called a "secret" term requiring Roland to deal exclusively in Dresser equipment, and that the sudden termination would bankrupt it or at least cause it serious loss. But it seems that only about 50 percent of Roland's revenues are derived directly or indirectly from Dresser equipment, and only about 10 percent from selling new Dresser equipment (the other 40 percent coming from renting and servicing equipment, and from selling parts); and Dresser argues that Roland could survive simply by promoting Komatsu equipment aggressively--which it intended to do anyway.

After a two and a half day hearing, the district judge concluded that if Dresser were allowed to cut off Roland pending the trial of the case Roland would probably go out of business--an injury to Roland greater than the harm to Dresser from being forced to continue dealing with Roland in the interim. But because comments by Roland's general manager "raise some doubts as to the sincerity of Roland's current claims that it plans to aggressively distribute Dresser products both now and in the future," the judge conditioned the preliminary injunction on Roland's "maintain[ing], within normal economic fluctuations, the approximate market share which it now has obtained for Dresser products."

On the probable merits of Roland's section 3 claim, the judge found that while Dresser's contract with Roland contained no exclusive-dealing requirement, Roland "has adequately shown that an implied exclusive dealing arrangement existed between itself and Dresser. The Defendant's own evidence showed that it considered a distributor which carried a competing line as inimical to its own interest. In the mind of Dresser, a distributor must either live or die with the manufacturer's product." Having thus found an agreement (which is a prerequisite to liability under section 3 of the Clayton Act, see, e.g., Ron Tonkin Gran Turismo, Inc. v. Fiat Distributors, Inc., 637 F.2d 1376, 1389 (9th Cir.1981), and cases cited there), the judge considered whether Roland had raised a "substantial question" as to whether the agreement was likely to lessen competition substantially. Dresser manufactures 16 or 17 percent of the construction equipment sold in central Illinois (defined as Illinois south of Chicago and north of the latitude of St. Louis), and Komatsu only 1 percent. Roland accounts for all these sales. The judge found that Komatsu (which has no exclusive dealerships anywhere in the midwest) could not have gotten into this market except by persuading a dealer for another manufacturer, such as Roland, to carry Komatsu equipment as a second line.

The first bone of contention between the parties is the proper standard for granting a preliminary injunction and for appellate review of such a grant. Each party is able to cite numerous decisions in support of its view of the proper standard, simply because the relevant case law is in disarray in both this and other circuits. Many of our cases say that to get a preliminary injunction a plaintiff must show each of four things: that he has no adequate remedy at law or will suffer irreparable harm if the injunction is denied; that this harm will be greater than the harm the defendant will suffer if the injunction is granted; that the plaintiff has a reasonable likelihood of success on the merits; and that the injunction will not harm the public interest. See, e.g., Technical Publishing Co. v. Lebhar-Friedman, Inc., 729 F.2d 1136, 1138-39 (7th Cir.1984); Alexander v. Chicago Park District, 709 F.2d 463, 467 (7th Cir.1983); O'Connor v. Board of Education, 645 F.2d 578, 580 (7th Cir.1981). Although described in the cases as a four-factor test, the test actually involves five factors, unless "no adequate remedy at law" and "irreparable injury" mean the same thing. In ordinary equity parlance they do not. See 11 Wright & Miller, Federal Practice and Procedure Sec. 2944, at p. 401 (1973). But Fox Valley Harvestore, Inc. v. A.O. Smith Harvestore Products, Inc., 545 F.2d 1096, 1097 n. 1 (7th Cir.1976), suggests that they may mean the same thing in the preliminary-injunction setting. Further adding to the uncertainty is the fact that we usually say no adequate remedy at law or irreparable harm (as in Technical Publishing, Alexander, and O'Connor ), but sometimes no adequate remedy at law and irreparable harm, as in Fox Valley, supra, 545 F.2d at 1097. And our recent decision in American Can Co. v. Mansukhani, 742 F.2d 314, 325 (7th Cir.1984), states that the plaintiff must establish "the threat of irreparable harm for which there is no adequate remedy at law."

Maybe there is a sixth factor. Some cases, by stating that the purpose of a preliminary injunction is to preserve the status quo, see, e.g., EEOC v. City of Janesville, 630 F.2d 1254, 1259 (7th Cir.1980), imply that this is another thing the plaintiff must prove; and it is true that if the plaintiff asks for more than a return to the status quo he is apt to be turned down on that ground. See, e.g., SCM Corp. v. Xerox Corp., 507 F.2d 358, 361 (2d Cir.1974). But "status quo" is ambiguous. The preliminary injunction in this case maintained the status quo in one sense: it continued Roland as a Dresser dealer. But it changed the status quo in another: it made the dealership agreement no longer terminable by either party on 90 days' notice.

Some of our cases imply that although each of the four factors must be considered, the plaintiff need not prevail on all four. See, e.g., Reinders Bros. v. Rain Bird Eastern Sales Corp., 627 F.2d 44, 49 (7th Cir.1980); Fox Valley, supra, 545 F.2d at 1098. But other cases say that "a preliminary injunction is an extraordinary remedy which is not available unless plaintiffs carry their burden of persuasion as to all of the [four] prerequisites." Shaffer v. Globe Protection, Inc., 721 F.2d 1121, 1123 (7th Cir.1983). To the same effect see, e.g., Technical Publishing Co., supra, 729 F.2d at 1139; Singer Co. v. P.R. Mallory & Co., 671 F.2d 232, 234 (7th Cir.1982) ("All of these conditions must be satisfied before the drastic remedy of an injunction will be ordered."); but cf. Illinois Bell Tel. Co. v. Illinois Commerce Comm'n, 740 F.2d 566, 571 (7th Cir.1984) ("where the plaintiff seeks an injunction [preliminary or permanent] to prevent the violation of a federal statute that specifically provides for injunctive relief,...

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