Stenberg v. Cheker Oil Co.

• Citation: 573 F.2d 921
• Decision Date: 10 April 1978
• Docket Number: Nos. 76-2330 and 76-2689,s. 76-2330 and 76-2689
• Parties: 1978-1 Trade Cases 61,965 Vernon STENBERG, Sr., Plaintiff-Appellee, v. CHEKER OIL COMPANY and Marathon Oil Company, Defendants-Appellants (two cases).
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

Page 921

573 F.2d 921

1978-1 Trade Cases 61,965

Vernon STENBERG, Sr., Plaintiff-Appellee, v. CHEKER OIL COMPANY and Marathon Oil Company,

Defendants-Appellants (two cases).

Nos. 76-2330 and 76-2689.

United States Court of Appeals, Sixth Circuit.

Argued Feb. 16, 1978.

Decided and Filed April 10, 1978.

Sherwin J. Malkin, Malkin & Gottlieb, Chicago, Ill., for defendants-appellants.

Samuel D. Carpenter, Vandervoort, Cooke, McFee, Christ, Carpenter & Fisher, Battle Creek, Mich., for plaintiff-appellee.

Before CELEBREZZE, LIVELY and ENGEL, Circuit Judges.

LIVELY, Circuit Judge.

In this consolidated appeal Cheker Oil Company (Cheker) seeks to have vacated two orders of the district court: an order granting plaintiff Stenberg's motion for a preliminary injunction and one finding Cheker in contempt. Stenberg's case is related to a longstanding dispute between Cheker and a number of its former lessees of service stations in Michigan which have been converted to company-operated stations, usually featuring self-service. See Blaylock v. Cheker Oil Company, 547 F.2d 962 (6th Cir. 1976).

THE PRELIMINARY INJUNCTION

Stenberg first leased a station in Kalamazoo, Michigan from Cheker in October 1971. The lease was for one year with rent payable monthly at the rate of two cents for each gallon of gasoline sold during the month. The lease also provided for a minimum monthly rental and a cash security deposit by the lessee to guarantee the minimum rent in the event the gallonage failed to produce that amount. The lease did not set the price at which Cheker would provide petroleum products to Stenberg or require On February 21, 1974, Stenberg and a Cheker representative executed a "mutual termination agreement" by which the lessor-lessee relationship was ended. At the same time Stenberg was employed at a salary of $300.00 per week as the Portage station manager. Stenberg was permitted to continue to operate the station as lessee until self-service pumps were installed a few weeks later and then as manager until June 24, 1974 when he was discharged. The present action was commenced in the district court on December 11, 1974. In the complaint jurisdiction is claimed to rest on diversity of citizenship and federal questions under the Sherman and Clayton antitrust laws and the Emergency Petroleum Allocation Act of 1973 (1973 Act).

that he purchase such products from Cheker. Stenberg was a satisfactory lessee, and when a more desirable station was constructed in Portage, Michigan, Stenberg leased it in October 1972. Except for a higher minimum rent this lease was identical to the previous lease, some terms of which had been changed in June 1972. No new lease was executed in October 1973, but Stenberg remained in possession of the Portage station and operated as before.

Asserting that he had been induced to enter into the lease agreement and to expend extensive efforts to develop a substantial business "by representations, express and implied, that plaintiff would be able to continue in business in said location and would not be terminated except for good cause," Stenberg sought damages for breach of contract. He also claimed damages under the 1973 Act for failure of the defendant to supply him with his allocation of gasoline, and treble damages for various antitrust violations.

The prayer of the complaint was that the court either award damages as set forth, or in the alternative, if the court should determine that damages "are speculative or impossible of reasonably accurate determination," that it issue a permanent mandatory injunction reinstating Stenberg as lessee and awarding damages for the time he was wrongfully denied the right to operate as lessee. The complaint also sought a temporary restraining order and preliminary injunction for alleged violation of the 1973 Act. Cheker filed a motion to dismiss the complaint, relying on the mutual termination agreement.

On November 13, 1975, eleven months after filing the complaint, Stenberg made a motion for entry of a preliminary injunction. The district court held a hearing on the motion on November 24-25, 1975. On August 23, 1976 the court issued an opinion and order granting a preliminary injunction. Cheker was ordered to reinstate Stenberg as lessee of the Portage station as soon as suitable provisions could be made for transfer of the salaried manager then operating the station, but in no event more than 60 days after entry of the order. The preliminary injunction was premised upon findings that Stenberg had shown a likelihood of success on the merits and that he would suffer irreparable harm if such relief were not granted. The district court made specific "preliminary" findings on a number of disputed factual issues in concluding that the plaintiff had shown a likelihood of success on the merits. Among these were somewhat contradictory findings with respect to the mutual termination agreement. The district court first found that the agreement applied only to "the interim arrangement which was to last until the equipment was available" and later found that it was void as "a product of Cheker's superior bargaining power and economic duress."

A jury was demanded in this case and ultimate determination of the merits will depend upon the jury's resolution of many factual disputes. For this reason we have stated only those facts which appear to be undisputed and proceed to a discussion of the narrow issues presented by this appeal.

Emphasizing that the motion for a preliminary injunction was filed 21 months after Stenberg was terminated as lessee and the injunction was issued nine months later, Cheker argues that the district court wrongfully used a preliminary injunction to grant ultimate relief to the plaintiff rather We believe the record in this case supports the decision of the district court to grant a preliminary injunction. Stenberg was not required to establish his right to an injunction "wholly without doubt," Hamilton Watch Co. v. Benrus Watch Co., 206 F.2d 738, 740 (2d Cir. 1953); the district court was required to balance the hardships in determining whether or not to grant the injunction. Id. at 742-43. Without in any way indicating an opinion on the merits of this case we conclude that the plaintiff demonstrated sufficient likelihood of success on the merits, as defined by this court, to justify the issuance of a preliminary injunction. See Brandeis Machinery & Supply Corp. v. Barber-Greene Co., 503 F.2d 503, 505 (6th Cir. 1974). It is our further conclusion that irreparable harm may be established by a franchisee, or one situated as Stenberg, by proof of financial losses from withholding or revoking a franchise or lease. Other injuries, "not measurable entirely in monetary terms" may be included in the financial losses which result from the loss of such a business relationship. See Semmes Motors, Inc. v. Ford Motor Co., 429 F.2d 1197, 1205 (2d Cir. 1970). In this case the district court made no finding of irreparable harm other than that related to loss of income. Nevertheless, the plaintiff introduced proof of such severe financial hardship that, upon finding the requisite likelihood of success, the court could reasonably conclude that delay in granting interlocutory relief would render a later judgment on the merits meaningless. Under Stenberg's proof he would have been completely "wiped out" long before a final decision could be expected. The district court did not abuse its discretion in granting interlocutory relief.

than to preserve the status quo. It further points out that suit was not filed until ten months after the lease was terminated and six months after Stenberg was discharged as a station manager. Cheker also contends that Stenberg failed to establish that he would suffer irreparable harm if the injunction were denied since the only injury claimed was loss of profits from operation of the service station and resulting financial problems. Stenberg argues that the district court's findings of fact are not clearly erroneous and that there was no abuse of discretion in ordering Cheker to reinstate him as a lessee. He maintains that he was coerced to sign the mutual termination agreement...