United States District Court, E.D. North Carolina, Western Division
JOHN T. MARTIN, Plaintiff,
BIMBO FOODS BAKERIES DISTRIBUTION, INC. formally known as GEORGE WESTON BAKERIES DISTRIBUTIONS, INC., Defendant.
W. EARL BRITT, Senior District Judge.
This matter is before the court on plaintiff's motions for a preliminary injunction and a hearing and defendant's ("defendant" or "BFBD") motions to strike affidavits and for leave to file a corrected declaration. (DE ## 9, 18, 27, 30.) The motions have been fully briefed and are ripe for disposition.
In 2006, for a total of $108, 000, plaintiff, as an "independent operator, " purchased exclusive rights to sell and distribute bakery goods manufactured and/or distributed by defendant to grocery store chains and independent grocers in specified territorial areas. (Compl., DE # 1-1, ¶¶ 6, 8; Pl. Aff., DE # 12, at 1; Vickers Decl., DE # 30-1, ¶ 6.) Around the same time, plaintiff entered into a Distribution Agreement with defendant. (Compl., Ex. 1, DE # 1-1; Pl. Aff., DE # 12, at 1.) The Distribution Agreement further defines plaintiff's distribution rights and the parties' mutual obligations. (See generally Compl., Ex. 1, DE # 1-1.) Plaintiff is "paid on a percentage of sales or a margin on the sale of product." (Compl., DE # 1-1, ¶ 8.) According to plaintiff, he has created equity in his distribution route, and it is currently worth in excess of $140, 000. (Id. ¶ 9.)
In June 2013, defendant informed plaintiff and other local independent operators that it was reducing the margins to be paid to them. (Id. ¶ 10.) Plaintiff and most of the other independent operators "united in an effort to fight the Defendant's effort to unilaterally reduce margins." (Id. ¶ 12.) A committee of six independent operators was formed to communicate and negotiate with defendant about the reduced margins. (Id.) Plaintiff was one of the committee members and took an active role in the committee, being "outspoken with regard to the sentiment of the 30 independent operators relative to the payment of commissions and/or reduction of margins received for services." (Id. ¶¶ 12, 18.) Various forms of communication between the committee, its counsel, representatives of defendant, and defense counsel occurred. (See id. ¶¶ 14-16.) According to plaintiff, defendant refused to negotiate. (Id. ¶ 15.)
In the meantime, plaintiff continued to operate his distribution route. (Id. ¶ 20.) On 21 December 2013, Brant Vickers, defendant's sales representative, called plaintiff into defendant's Raleigh office and delivered to him a document entitled "Notice of Termination of Distribution Agreement." (Id. ¶ 24 & Ex. 5.) In that document, defendant informed plaintiff that it recently discovered that plaintiff had "engaged in a practice of flushing' product by creating false sales and buyback' invoices, " for which plaintiff received approximately $2, 500 to which he was not entitled. ( Id., Ex. 5.) According to the document, such conduct constitutes a "material and non-curable breach" of the Distribution Agreement. (Id.) The document also refers to other "material violations" of the Agreement, which constitute a "chronic breach" of the Agreement. (Id.) Defendant terminated the Distribution Agreement effective immediately. (Id.) Plaintiff requested a hearing with management to produce evidence regarding the termination, but Vickers refused and informed plaintiff that he could not return to defendant's premises. (Compl., DE # 1-1, ¶ 25.) Since defendant's termination of the Distribution Agreement, defendant has been operating the distribution route in plaintiff's name at a loss. (Id. ¶¶ 33-34.)
On 8 January 2014, plaintiff filed the instant complaint in state court, asserting claims for breach of contract, fraud, and unfair and deceptive trade practices under Chapter 75 of the North Carolina General Statutes. Plaintiff seeks injunctive and compensatory relief, including punitive damages. On 9 January 2014, before the state court could hear plaintiff's application for a temporary restraining order, (Pl.'s Mem., DE # 11, at 5), defendant removed the action to this court.
On 5 February 2014, plaintiff filed the motion for preliminary injunction along with a supporting memorandum and affidavits. On 24 February 2014, plaintiff filed two additional supporting affidavits and the motion for hearing. On 26 February 2014, defendant filed its memorandum in opposition to the motion for preliminary injunction and supporting declarations. On 4 March 2014, plaintiff filed a counter-affidavit. On 6 March 2014, defendant filed the motion to strike the two affidavits plaintiff filed on 24 February 2014. On 14 March 2014, plaintiff filed a response in opposition to the motion to strike. On the same day, defendant filed the motion for leave to file a corrected declaration. On 20 March 2014, defendant filed a response in opposition to plaintiff's motion for hearing, to which plaintiff filed a reply on 3 April 2014. Plaintiff did not file a response to defendant's motion for leave to file a corrected declaration, and for good cause shown, the court will allow that motion.
A. Motion for Preliminary Injunction
Plaintiff requests that the court preliminarily enjoin defendant "from in any way interfering with Plaintiff['s]... operation of his bakery products distribution route... and from taking any action or invoking any timeline to force the sale of Plaintiff['s]... independent operator's agreement." (Mot., DE # 9, at 1.) "Federal decisions have uniformly characterized the grant of interim relief as an extraordinary remedy involving the exercise of a very far-reaching power, which is to be applied only in [the] limited circumstances which clearly demand it." Direx Int'l, Ltd. v. Breakthrough Med. Corp. , 952 F.2d 802, 811 (4th Cir. 1991) (internal quotation marks and citations omitted) (alteration in original). "To obtain a preliminary injunction, a moving party must establish the presence of the following: (1) a clear showing that it will likely succeed on the merits'; (2) a clear showing that it is likely to be irreparably harmed absent preliminary relief'; (3) the balance of equities tips in favor of the moving party; and (4) a preliminary injunction is in the public interest." United States v. South Carolina , 720 F.3d 518, 533 (4th Cir. 2013) (citation omitted). Each of these requirements must be satisfied. The Real Truth About Obama, Inc. v. FEC , 575 F.3d 342, 347 (4th Cir. 2009), vacated on other grounds, 559 U.S. 1089 (2010).
Plaintiff seeks a preliminary injunction only in regards to his breach of contract claim. Therefore, the court considers plaintiff's likelihood of success on the merits only as to plaintiff's claim that defendant breached the Distribution Agreement. To establish a breach of contract claim under North Carolina or Pennsylvania law,  a plaintiff must show (1) the existence of a valid contract and (2) breach of its terms or a duty imposed by it. See Sewer Auth. of Scranton v. Pa. Infrastructure Inv. Auth. of Commonwealth, 81 A.3d 1031, 1042 (Pa.Commw. Ct. 2013); Ahmadi v. Triangle Rent A Car, Inc. , 691 S.E.2d 101, 103 ( N.C. Ct. App. 2010). Neither party disputes the validity of the Distribution Agreement. Rather, their dispute centers on whether defendant breached that Agreement in its termination of the Agreement. Defendant may terminate the Agreement in the event of the distributor's "non-curable" or "chronic" breach. The pertinent provisions of the Distribution Agreement provide as follows.
§ 8.2 NON-CURABLE BREACH: If the breach by DISTRIBUTOR involves criminal activity or fraud, threatens public health or safety, or threatens to do significant harm to GWBD,  its affiliates, it operations, its trademarks or commercial reputation, GWBD may terminate this Agreement immediately upon written notice and DISTRIBUTOR shall have no right to cure.
§ 8.3 CURABLE BREACH: In the event of breach by DISTRIBUTOR other than under § 8.2, GWBD shall give DISTRIBUTOR three (3) business days written notice within which DISTRIBUTOR may cure the breach. If DISTRIBUTOR fails to cure such breach within said three (3) day period, GWBD may thereafter terminate this Agreement and DISTRIBUTOR shall have no further right to cure; provided, further, that the parties agree that repeated violations constitute a chronic breach and threaten significant harm to GWBD, its operations, its trademarks or commercial ...