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Swift Beef Co. v. Alex Lee, Inc.

United States District Court, W.D. North Carolina, Statesville Division

February 22, 2019

SWIFT BEEF COMPANY, Plaintiff,
v.
ALEX LEE, INC., Defendant.

          ORDER

          MAX O. COGBURN JR. UNITED STATES DISTRICT JUDGE.

         THIS MATTER is before the Court on the Mandate of the Fourth Circuit Court of Appeals (#70), vacating and remanding this Court's Amended Order (#18), granting plaintiff Swift Beef's Emergency Motion for a Temporary Restraining Order (#3). In conformity with the instructions of the appellate court, this Court directed additional briefing and conducted a hearing on February 15, 2019, at which oral arguments were heard. For the reasons that follow, the Court denies plaintiff's motion.

         FINDINGS AND CONCLUSIONS

         I. Factual and Procedural Background

         The facts underlying the request for injunctive relief and these proceedings were summarized by the Court in its earlier Amended Order, see Am. Or. (#18), and are incorporated herein by reference. Additional determinations, consistent with the decision of the appellate court, are discussed later in this opinion.

         A. The Amended Order Providing Injunctive Relief

         In its Response in Opposition to Plaintiff's Motion for Preliminary Injunction (#13), defendant Alex Lee argued that plaintiff failed to produce products in accordance with Section 3 of the Purchase Agreement, which in turn gave defendant the right to terminate under Section 18.3 of the Lease. See Motion (#13) at 9. The Court declined to address defendant's termination rights under Section 18.3 of the Lease because it concluded that Section 18.2 of the Lease was the appropriate termination provision and that defendant did not provide written notice of default or an opportunity to cure such default pursuant to its Section 18.2 obligations. See Am. Or. (#18) at 6. Based on this finding, this Court held plaintiff was likely to succeed at trial and granted the injunction.

         B. The Decision of the Fourth Circuit

         The appellate court vacated the imposition of injunctive relief and remanded this matter for full consideration of the scope of the landlord's rights of termination under the Lease. Specifically, appellate court instructed:

Under the plain language of Section 18.3, Alex Lee could “immediately terminate” the lease if Swift Beef failed to comply with Section 3 of the purchase agreement. That section of the purchase agreement set forth the pricing structure for the meat products supplied to Alex Lee, requiring Swift Beef to “use commercially reasonable efforts to produce the Product efficiently and at competitive cost.”
Although the district court did not cite Section 3 of the purchase agreement, the court referenced nearly identical language from that provision, finding that Alex Lee presented evidence “cast[ing] serious doubt” on whether Swift Beef used “commercially reasonable efforts to produce Case Ready goods efficiently and at competitive prices.” The court concluded nevertheless that any non-compliance by Swift Beef with the purchase agreement was not relevant to the issue whether Alex Lee validly terminated the lease under Section 18.2, because Alex Lee had failed to give the required notice and opportunity to cure.
We disagree with the district court's analysis. The disputed factual issue of Swift Beef's performance under the purchase agreement was directly relevant to the question whether Alex Lee could rely on Section 18.3 in terminating the lease without notice, and whether Swift Beef could succeed on the merits of its anticipatory breach claim. Thus, both the disputed facts at issue and the differing termination provisions of the lease necessitated consideration of Section 18.3 before any injunctive relief could be awarded in the case.

See (#70) at 3, 8. The Circuit thus vacated this Court's preliminary injunction prohibiting defendant from terminating the Lease and from initiating eviction proceedings, remanded the case for further proceedings, and instructed the Court to consider the applicability of Section 18.3 before awarding injunctive relief in the case. See id. at 8-9.

         II. Discussion

         Upon the further review conducted in compliance with the instructions above, the Court finds that Section 18.3 is the appropriate termination provision and that defendant was not required under the contract to given written notice of default and opportunity to cure under Section 18.2 of the Lease. For the reasons that follow, this Court concludes that plaintiff has not clearly shown that it is likely to succeed under Section 18.3 and will deny the injunctive relief sought.

         On remand, this Court is tasked with considering the forecast of evidence concerning plaintiff's alleged breach of Section 3 of the Purchase Agreement, which would trigger defendant's right to immediately terminate the lease under Section 18.3 under the Lease Agreement. In light of that review, the issue is whether plaintiff has satisfied the four Winter factors-particularly the element requiring a clear showing that plaintiff is likely to succeed at trial-with respect to each of defendant's breach claims that fall under Section 3 of the Purchase Agreement and Section 18.3 of the Lease.[1] After considering the Fourth Circuit's directives, the Court instructed the parties to brief the issues before the Court, see (##79, 80, 81), and held ...


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