DECISION AND ENTRY OVERRULING PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION (DOC. # 1)
Thе Plaintiffs are distributors in the Dayton and Cincinnati, Ohio, areas of wine imported by the Defendant from foreign wineries. By nearly identically worded letters dated April 28, 2000, the Defendant informed that Plaintiffs that it was canceling the distributorship relationships between parties, with the cancellation to become effective 60 days after receipt of the letters.
1
The Plaintiffs have brought this
I.Findings of Fact
1. Plaintiff Dayton Heidelberg Distributing Co., Inc. (“Dayton Heidelberg”) is the largest distributor of wines in the state of Ohio, and one of the largest distributors of beer in this state. Plaintiff Ohio Valley Wines Company (“Ohio Valley”) is a division of Dayton Heidelberg. Dayton Heidelberg and Ohio Valley distribute many popular, high volume wines, such as Gallo, Fetzer, Mondavi, Sutter Home, Glen Ellen and Berringer.
2. Defеndant is an importer of wines manufactured by foreign wineries. The wines imported by Defendant fall into two categories, to wit: fine wines which are quite expensive and other high quality wines which are known for their value.
3. The Plaintiffs’ sales of wines imported by the Defendant constitute at most .1% of their total sales.
4. Plaintiffs and their predecessor, Allied Wines, have distributed the wines imported by Defendant since at least 1983 or 1984.
5. In 1994, Dayton Heidelberg purchased Allied Wines and, thus, began to distribute Defendant’s wines, with the Allied Division of Dayton Heidelberg as the sole and exclusive distributor in the Dayton area and Ohio Valley as the sole and exclusive distributor for the Cincinnati area. At the time that Dayton Heidelberg acquired Allied Wines, Defendant expressed concern about its ability to perform satisfactorily, because Daytоn Heidelberg distributed large quantities of popular wines, while the Defendant imported different types of wines (i.e., expensive wines which are not sold in large volumes). The Defendant also indicated that increased sales of its products were needed. Plaintiffs assured the Defendant that they could distribute its wines and that sales would increase.
6. In early 1996, Defendant became disenchanted with Plaintiffs’ pеrformance as distributors of its wines and threatened to terminate the distributorship relationships. After receiving assurances from Plaintiffs that performance would improve, the Defendant decided not to terminate the distributorships.
7. Defendant sets goals for Plaintiffs’ sales of the various brands of wine it imports in each particular fiscal year. A fiscal year runs from the beginning of March in one year, through thе end of February the next year.
8. The Plaintiffs failed to meet their goals for the sale of Defendant’s wines for fiscal year 1996 (i.e., the period from March 1, 1996, through February 28,1997).
9. After Defendant had set Ohio Valley’s goals for fiscal year 1998, Ohio Valley unilaterally lowered those goals. Some of the unilaterally established goals called for Ohio Valley to sell less wine in fiscal year 1998, than had been its goal fоr fiscal year 1997. Ohio Valley failed to meet the goals it had unilaterally established for fiscal year 1998.
10. For fiscal year 1999, Defendant set goals for Ohio Valley which were identical to the goals that Ohio Valley had unilaterally set for itself for fiscal year 1998. Nevertheless, Ohio Valley unilaterally reduced
11. By rеducing its goals from one fiscal year to the next, Ohio Valley has implicitly told its sales staff that reduced sales of Defendant’s wines are acceptable.
12. Dayton Heidelberg failed to meet its goals for the sale of wines imported by the Defendant for fiscal years 1998 and 1999.
13. In fiscal year 1996, Dayton Heidelberg’s volume of sales of Defendant’s wines was $105,824. In that same fiscal year, Ohio Valley’s volumе of sales of Defendant’s wines was $107,726. By fiscal year 1999, Dayton Heidelberg’s sales had dropped to $90,580, while Ohio Valley’s sales had decreased more precipitously to $73,921.
14. During the period from fiscal year 1996, through fiscal year 1999, while the Plaintiffs were failing to meet their goals and their sales of Defendant’s wines were declining, the sales of Defendant’s other distributors in the state of Ohio were increasing. Indeed, given that the economy was strong between 1996 and 1999, sales were generally robust during that period.
15. By letters dated April 28, 2000, Defendant terminated the Plaintiffs’ distributorships, due to inadequate sales and failure to increase sales. The cancellation was to become effective 60 days after receipt of the letters.
16. The foregoing evidence demonstrates that the Defendant has еxercised its business judgment in deciding to terminate the Plaintiffs’ distributorships and that the exercise of that business judgment was neither arbitrary nor without reason. Plaintiffs sales have consistently decreased, while those of other distributors of Defendant’s products in Ohio have increased during the same period. Therefore, based upon the evidence presented, the Court finds that the Defendant had just cause to tеrminate the distributorships.
II. Opinion
In
Six Clinics Holding Corp., II v. Caf-comp Systems,
The factors to be considered by a district court in deciding whether to grant a preliminary injunction are well-established: “(1) the likelihood that the party seeking the preliminary injunction will succeed on the merits of the claim; (2) whether the party seeking the injunction will suffer irreparable harm without the grant of the extraordinary relief; (3) the probability that granting the injunction will cause substantial harm to others; and (4) whether the public interest is advanced by the issuance of the injunction.” [Washington v. Reno,35 F.3d 1093 , 1099 (6th Cir. 1994) ]. A district court is required to make specific findings concerning each of the four factors, unless fewer factors are dispositive of the issue. See In re DeLorean Motor Co.,755 F.2d 1223 , 1228 (6th Cir.1985).
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The four considerations applicable to preliminary injunction decisions are factors to be balanced, not prerequisites that must be met. See Washington,35 F.3d at 1099 . No single factor will be determinative as to the appropriateness of equitable relief, see In re DeLorean Motor Co.,755 F.2d at 1229 , and “the district court’s weighing and balancing of the equities is overruled ‘only in the rarest of cases.’ ” In re Eagle-Picher,963 F.2d at 858 (quoting N.A.A.C.P. v. City of Mansfield, Ohio,866 F.2d 162 , 166 (6th Cir.1989)).
Id.
at 399-400.
See also, Memphis Planned Parenthood, Inc. v. Sundquist,
A. Substantial Likelihood of Success on the Merits
Plaintiffs claim that the Defendant’s cancellation of the distributorship relationships violates Ohio Revised Code § 1333.84(A) and § 1333.85, which,
inter alia,
prohibit a manufacturer from canceling, without just cause, its agreement with a distributor.
2
As an initial matter, it cannot be questioned that the Plaintiffs are distributors, as that term is defined by the OABFA.
See
Ohio Rev.Code § 1333.82(C) (defining distributor as “any person who sells or distributes alcoholic bevеrages to retail permit holders in this state”). The term “manufacturer” is defined broadly by that statute to include a person who “supplies alcoholic beverages to distributors in this state.” Ohio Revised Code § 1333.82(B). Defendant, which does not dispute that it is a manufacturer, supplied alcoholic beverages to the Plaintiffs in this state.
3
The statute does not define just cause. In
AB & B, Inc. v. Banfi Products, Inc.,
In [Francis A. Bonanno v. ISC Wines of California,56 Ohio App.3d 62 ,564 N.E.2d 1105 (1989) ], supra,56 Ohio App.3d at 66 ,564 N.E.2d at 1109 , the Second Appellate District formulated a test for just cause:
“ * * * [T]he issue of just cause is whether the manufacturer commits acts of actual coercion or intimidation, or, in the alternative, whether such acts were honest and reasonable business decisions of any one of the acts authorized in the applicable sections of the statute.”
The Bonanno court also looked to Caral Corp. v. Taylor Wine Co., Inc. (July 15, 1980), S.D.Ohio No. C-l-80-215, unreported, to define “just cause.” The court in Caral Corp. found a manufacturer should remain free to exercise business judgment in determining whether to cancel a franchise agreement. This business judgment need not be a good one or a well-reasoned one. “The only legal requirement is that the decision not be arbitrary and without reason.” Bonanno, supra, 56 Ohio App.3d at 68 ,564 N.E.2d at 1106 , quoting Caral Corp., supra.
Id.
at 654-55,
Based upon Banfi Products and the cases cited therein, the Defendant had just cause to terminate the distributorships, as long as it has exercised its business judgment to reach that decision in a mannеr which was neither arbitrary nor without reason. The evidence has caused this Court to find that the Defendant exercised its business judgment and that it did not acted arbitrarily or without reason, when it decided to cancel the Plaintiffs’ distributorships. Therefore, the Defendant acted with just cause.
The testimony by Shyvawn Licorish (“Licorish”), Defendant’s District Manager for the states of Ohio, Michigan and Kentucky, and the exhibits introduced at the evidentiary hearing, showed that the Plaintiffs’ performance as distributors was sub-par. For instance, during the period from fiscal year 1996, through fiscal year 1999, the Plaintiffs’ sales of the Defendant’s wines dropped, while the performance of the Defendant’s other distributors in the state of Ohio increased. Indeed, given that the economy was strong between 1996 and 1999, wine sales were generally robust during that period. Moreover, neither Plaintiff met its goals for the years 1996, 1998 and 1999. In addition, Ohio Valley unilaterally lowered its goals for 1998 and 1999, yet failed to meet those lowered goals. During his cross-examination of Li-corish, Plaintiffs’ counsel was able to chip away at her testimony. For instance, Li-corish indicated on direct examination that the sales of wine in the Cincinnati area (Ohio Valley’s territory) should be 50% of those for Defendant’s Cleveland distributor. Since cross-examination demonstrated that the area serviced by the Cleveland distributor was much larger, covering all of northern Ohio (including the cities of Toledo, Cleveland, Akron and Youngstown), this Court has not relied upon Li-eorish’s testimony, that Ohio Valley’s sales in Cincinnati should be 50% of those of the Cleveland distributor, to support its finding that the Defendant had just cause to сancel the distributorships. The cross-examination of Licorish did not, however, weaken the core component of her testimony, which was amply supported by documentary evidence, that the Plaintiffs’ sales decreased at a time when other distributors were increasing their sales. Merely casting doubt on some areas of her testimony, however, did not cause this Court to conclude that Plaintiffs had demonstrated a probability or substantial likelihood of success on the merits of this litigation. In sum, the Defendant terminated the Plaintiffs’ distributorships, because of their poor performance and, in so doing, exercised its business judgment in a manner which was neither arbitrary nor without reason.
Plaintiffs presented evidence during the hearing that the Defendant has offered its distributors a price support plan which they contend violates Ohio Department of Liquor Control regulations. As amended, effective September 1, 1997, Ohio Administrative Code § 4301:1-1-49(K) provides that depletion allowance programs on the sale of wine are no longer permitted. Pri- or to that amendment, § 4301:1-1-49(K) allowed such programs. The Plaintiffs contend that the Defendant’s price support plan constitutes a prohibited deрletion allowance program, while the Defendant disputes that assertion. Under Ohio Revised Code § 1333.85(B)(1), the failure or refusal of a distributor to engage in an act or a practice which violates a rule of the state of Ohio does not constitute just cause for the cancellation of a distributorship. Therefore, if the Defendant was terminat
Accordingly, the Court concludes that the Plaintiffs have failed to establish a substantial likelihood of success on the merits of their claim that the cancellation of the distributorships will violate § 1333.84(A) and § 1333.85.
B. Irreparable Harm
Under the OABFA, the Plaintiffs will be able to recover any damages they may suffer, if it is determined, after a trial on the merits, that the Defendant’s cancellation of the distributorships violated § 1333.84(A) and § 1333.85.
See
Ohio Rev. Code § 1333.87. In
EBSCO Industries, Inc. v. Lilly,
C. Harm to Others and Balancing the Harms
If a preliminary injunction is granted, the Defendant will suffer substantial harm which would be difficult, if not impossible, to quantify. The evidence dem
D. Public interest
The public interest neither favors nor disfavors the granting of the requested injunctive relief.
III. Conclusions of Law
1. This Court has subject matter jurisdiction over this controversy pursuant to 28 U.S.C. § 1332 and § 1441.
2. Plaintiffs are distributors, as that term is defined by the OABFA.
3. Defendant is a manufacturer, as that term is defined by the OABFA.
4. Sections 1333.84(A) and 1333.85 prohibit a manufacturer from canceling a distributorship agreement without just cause. A manufacturer acts with just cause, as long as it has exercised its business judgment to cancel a distributorship in a manner which is neither arbitrary nor without reason.
5. The evidence has caused this Court to find that the Defendant acted with just cause when it canceled the Plaintiffs’ distributorships. Therefore, the Plaintiffs have failed to show a probability or substantial likelihood of success on the merits of their claim that the Defendant has canceled those distributorships in violation of §§ 1333.84(A) and 1333.85.
6. The Plaintiffs have failed to demonstrate that they will suffer irreparable harm, if the requested preliminary injunction is denied.
7. The Defendant will suffer substantial harm, if the requested preliminary injunction is granted.
8. Given that the Plaintiffs have failed to establish a substantial likelihood of success on the merits or that they will suffer irreparable injury in the absence of an injunction and, further, since the Defendant will suffer substantial harm, if the injunction is granted, balancing the familiar four factors leads to the inevitable conclusion that the Plaintiffs are not entitled to the requested injunctive relief.
Accordingly, based upon the foregoing, the Court overrules the Plaintiffs’ Motion for Preliminary Injunction (Doc. # 1).
Notes
. Defendant had previously sent letters, under date of March 20, 2000, to the Plaintiffs, informing them that the distributorship agreements were terminated аnd that the cancella
. As is indicated above, Defendant had previously sent letters to the Plaintiffs, under date of March 20, 2000, informing them that the distributorship agreements were terminated and that the cancellation would be effective in 60 days. Since those letters did not set forth the reason for the cancellаtion, the Plaintiffs, who filed this litigation shortly after they had received the March 20th letters, alleged that the Defendant had violated the portion of § 1333.85, which requires that a notice of cancellation include a statement of reasons for same. The April 28th letters, which included reasons why the Defendant was terminating the Plaintiffs' distributorships, rescinded those under date of March 20th; therefore, the Plaintiffs’ requеst for injunctive relief, arising out of the failure of the March 20th letters to contain such reasons, is moot.
Section 1333.84(A) also imposes upon a manufacturer the duty of acting in good faith in its dealings with its distributors. Ohio courts have indicated that a manufacturer acts without good faith when it coerces or intimidates a distributor.
See AB & B, Inc. v. Banfi Products, Inc.,
. In its post-hearing memorandum, Defen- • dant states that the Plaintiffs have suggested that it is not a manufacturer, as that term is defined in § 1333.82(B). Simply put, such a suggestion would contradict the allegation in the Plaintiffs' Complaint that the Defendant is a manufacturer. Moreover, since the provisions of § 1333.84(A) and § 1333.85 limit the аbility of manufacturers to terminate their distributors, the Plaintiffs would disprove their claim by demonstrating that the Defendant is not a manufacturer. In addition, the evidence demonstrated that the Defendant supplied wine to the Plaintiffs in the state of Ohio. For these reasons, this Court concludes that the Defendant is a manufacturer, as that term is defined by the OABFA.
. In
Basicomputer,
the Sixth Circuit noted that the loss of customer goodwill can cоnstitute an irreparable injury, since the damages flowing from such a loss are difficult to calculate.