187 F. Supp. 3d 217
D. Mass.2016Background
- Arborjet sued Rainbow alleging Rainbow breached a sales agency agreement and the implied covenant of good faith by helping Rotam develop a generic version of Arborjet’s TREE-age product (ArborMectin).
- A December 2014 preliminary injunction barred Rainbow from selling/distributing/marketing ArborMectin; the First Circuit affirmed that relief as to sales/marketing.
- At trial Arborjet pursued only breach of contract and breach of the implied covenant; the jury found Rainbow breached the implied covenant and awarded Arborjet $325,000 in damages (but found no contract breach causing damages).
- Arborjet moved for a permanent injunction barring Rainbow from selling/distributing/marketing ArborMectin (or other emamectin benzoate tree-injection products made by Rotam) either forever or until February 2018; Rainbow moved for judgment as a matter of law, remittitur, or a new trial.
- The court found Arborjet prevailed on the implied-covenant claim, that Arborjet would suffer irreparable harm to goodwill absent injunctive relief, and that balance of harms did not support a perpetual ban but did support injunctive relief until February 2018.
- The court denied Rainbow’s renewed Rule 50 motion, denied remittitur and denied a new trial; it entered a limited injunction enjoining Rainbow and those acting in concert from selling/marketing/distributing ArborMectin or any emamectin benzoate tree-injection product manufactured by Rotam or affiliates until February 2018.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Arborjet prevailed on the merits of its implied covenant claim | Arborjet argued Rainbow breached the implied covenant by helping Rotam develop/sell a generic, causing damages | Rainbow disputed sufficient evidence of bad faith and of damages | Court: Arborjet prevailed; jury verdict finding breach of implied covenant stands |
| Whether permanent injunctive relief is warranted | Injunction needed to prevent irreparable harm to Arborjet’s goodwill and reputation; requested either permanent ban or injury-limited injunction until Feb 2018 | Injunction would unduly harm Rainbow’s business, be punitive/overbroad, and improperly restrict Rainbow’s offerings | Court: Irreparable harm shown; perpetual injunction denied but limited injunction granted until Feb 2018; scope includes Rainbow’s distribution and service arms regarding Rotam-made products |
| Whether judgment as a matter of law is required (contract formation/ambiguity) | Arborjet relied on the Agreement and evidence of Rainbow’s conduct | Rainbow argued the Agreement required dual signatures and was not binding; alleged insufficient evidence of bad faith | Court: Denied JMOL — signature clause ambiguous; sufficient evidence of bad faith to support jury verdict |
| Whether the $325,000 damages award should be remitted or a new trial ordered | Arborjet relied on projected sales and per-unit profit evidence to support damages | Rainbow argued damages were speculative, inconsistent, and should be nominal or produce a new trial; also sought instruction on construing ambiguities against drafter | Court: Denial of remittitur and new trial — award not grossly excessive or unsupported; jury instructions on ambiguity were adequate |
Key Cases Cited
- Asociación de Educación Privada de P.R., 490 F.3d 1 (1st Cir. 2007) (four-factor permanent-injunction test)
- Ross-Simons of Warwick, Inc. v. Baccarat, 102 F.3d 12 (1st Cir. 1996) (irreparable harm includes injury to goodwill and reputation)
- Chokel v. Genzyme Corp., 449 Mass. 272 (Mass. 2007) (implied covenant cannot add new contract terms)
- Anthony’s Pier Four, Inc. v. HBC Assocs., 411 Mass. 451 (Mass. 1991) (exercise of contractual rights in bad faith can breach implied covenant)
- Fortune v. Nat’l Cash Register Co., 373 Mass. 96 (Mass. 1977) (bad-faith actions that frustrate contract benefits can breach implied covenant)
- Zimmerman v. Direct Fed. Credit Union, 262 F.3d 70 (1st Cir. 2001) (standard for judgment as a matter of law; view evidence in plaintiff’s favor)
- Kolb v. Goldring, 694 F.2d 869 (1st Cir. 1982) (remittitur appropriate only when reduction is mechanical and does not interfere with the jury’s function)
- Koster v. Trans World Airlines, Inc., 181 F.3d 24 (1st Cir. 1999) (remittitur standards; award must be grossly excessive to be reduced)