Bennington Foods LLC v. St Croix Renaissance ( 2008 )

Opinions of the United
2008 Decisions States Court of Appeals
for the Third Circuit
6-9-2008
Bennington Foods LLC v. St Croix Renaissance
Precedential or Non-Precedential: Precedential
Docket No. 07-2313
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"Bennington Foods LLC v. St Croix Renaissance" (2008). 2008 Decisions. Paper 942.
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PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
Nos. 07-2254/2313
BENNINGTON FOODS LLC,
d/b/a BENNINGTON GROUP
v.
ST. CROIX RENAISSANCE, GROUP, LLP,
Appellant in 2254
v.
MONTROSE GLOBAL ASSETS, INC.,
Intervenor in D.C./
Appellant in 2313
On Appeal from the District Court of the Virgin Islands
(Division of St. Croix)
(District Court No. 06-cv-00154)
Chief District Judge: Hon. Raymond L. Finch
Argued on December 10, 2007
Before: SMITH, NYGAARD and ROTH, Circuit Judges
(Opinion filed: June 9, 2008)
Kimberly L. Boldt, Esquire (ARGUED)
Alters, Boldt, Brown, Rash & Culmo
21 Southeast 5 th Street
Suite 200
Boca Raton, FL 33432
Counsel for Appellee Bennington Foods, LLC,
d/b/a Bennington Group
Joseph P. Klock, Jr. Esquire (ARGUED)
JuanCarlos Antorcha, Esquire
Epstein, Becker & Green
200 S. Biscayne Blvd
Suite 4300, Wachovia Financial Building
Miami, FL 33131-2398
Joel H. Holt, Esquire
2132 Company Street
Christiansted, St. Croix
USVI, 00820
Counsel for Appellant St. Croix Renaissance
Group, Inc.
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Kenneth A. Novikoff, Esquire
Rivkin Radler, LLP
Christiansted, St. Croix
USVI, 00820
Warren B. Cole, Esquire
Hunter, Cole & Bennett
1138 King Street, Suite 301
Christiansted, St. Croix
USVI, 00820
Counsel for Appellant Montrose Global
Assets, Inc.
OPINION
ROTH, Circuit Judge:
St. Croix Renaissance Group, LLP (SCRG), appeals the
imposition of a preliminary injunction that would allow
Bennington Foods, L.L.C., to remove scrap metal from SCRG's
property. SCRG is challenging the District Court's findings
under both the likelihood of success prong and the irreparable
harm prong of the preliminary injunction test.
We conclude that this injunction should be vacated
because the District Court erred in finding that failure to grant
the injunction would cause irreparable harm.
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I. BACKGROUND
This case arose out of the planned dismantling of an
aluminum processing plant on St. Croix, U.S. Virgin Islands.
The plant is on property owned by SCRG. Montrose Global
Assets, Inc., entered into an agreement with SCRG to find a
company to remove the plant structure from the property.
Montrose contracted with Bennington Group 1 to remove the
metals from the dismantled structure at a set price. SCRG,
Montrose, Bennington, and Bradford Welding & Truck
Equipment, Inc., then entered into the Dismantling Contract that
apportioned responsibility for the various tasks that needed to be
done in order for the dismantling to take place. In the clauses
that are relevant to this litigation, SCRG was required to obtain
the necessary permits for the demolition to take place, and
Bennington was required to comply with local laws.
SCRG applied for a Major Coastal Zone Management
(CZM) Permit on March 7, 2006. Before SCRG obtained a
permit, it requested that Bennington begin pre-demolition work,
without verifying that such work could be performed without a
permit. SCRG believed that Bennington could harvest the scrap
metal on the ground without a permit. Bennington's contractors
began this work on April 2, 2006.
On April 26, 2006, the Department of Building Permits
informed SCRG that permits, in fact, were needed to perform
1
Bennington does business under a registered, fictitious name
as Bennington Group, LLC.
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the pre-demolition activities. SCRG verbally instructed
Bennington to stop working. Bennington and its contractors
complied for about three weeks. They then resumed working,
notwithstanding SCRG's directive. The Department of Planning
and Natural Resources (DPNR) Division of Permits issued a
Stop Work Order on June 12, 2006. On June 15, the St. Croix
Committee of the Virgin Islands CZM Commission issued a
Cease and Desist order. After a hearing before DPNR, the CZM
Commission issued Notices of Violation and Assessment of
Civil Penalties to SCRG, Bennington, and Bennington's sub-
contractors.
Meanwhile, just after the Stop Work Order was issued on
June 13, Montrose determined that Bennington had never
provided any proof of insurance as required by the Demolition
Contract and that Bennington had defaulted on the contract by
failing to abide by the laws of the U.S. Virgin Islands
"governing demolition and removal of structures, waste disposal
and/or environmental protections" as required by the contract.
On June 19, SCRG forcibly evicted Bennington's contractors
from the property.
Prior to June 19, Bennington had completed preparations
to remove and ship approximately 30,000 tons of scrap metal
and 50 tons of copper. These metals are the subject of the
instant injunction.
Bennington initiated an arbitration proceeding against
SCRG in New York on June 28, 2006, pursuant to the Sales
Contract. SCRG responded by filing, in the Circuit Court of the
Eleventh Judicial Circuit in and for Miami-Dade County,
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Florida, a Complaint/Application To Stay Demand For
Arbitration. On September 26, the Florida circuit court judge
issued an order granting SCRG's application, finding that neither
Bennington nor SCRG was bound by the arbitration clause in
the Sales Contract because they were not parties to that contract.
On November 22, 2006, Bennington filed a complaint for
damages in the District Court for the Virgin Islands.
Bennington then sought a preliminary injunction, allowing it to
remove the scrap metal and copper that had already been
prepared for removal. The injunction was granted after
Bennington amended its complaint to seek equitable relief as
well as money damages. SCRG appealed.
We have jurisdiction over this appeal pursuant to 28
U.S.C. § 1291(a)(1). We review an order granting a preliminary
injunction for abuse of discretion, the factual findings for clear
error, and the determinations of questions of law de novo. See
NutraSweet Co. v. Vit-Mar Enterprises, Inc., 176 F.3d 151, 153
(3d Cir. 1999).
II. DISCUSSION
The District Court found that failing to issue a mandatory
injunction would cause irreparable harm to Bennington.
Specifically, it found that failure to issue the injunction would
harm Bennington's reputation for being able to deliver scrap
metal on time. However, a plaintiff in a breach of contract case
cannot convert monetary harm into irreparable harm simply by
claiming that the breach of contract has prevented it from
performing contracts with others and that this subsequent failure
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to perform will harm the plaintiff’s reputation. See Frank’s
GMC Truck Center, Inc. v. General Motors Corp., 847 F.2d
100, 102 (3rd Cir. 1989) (“[t]he availability of adequate
monetary damages belies a claim of irreparable injury”), In re
Arthur Treacher's Franchisee Litigation, 689 F.2d 1137, 1145
(3rd Cir. 1982) (“we have never upheld an injunction where the
claimed injury constituted a loss of money, a loss capable of
recoupment in a proper action at law”).
The inability to gain possession of the scrap metal at
issue here creates at most a monetary loss. In the event that
subsequent failure to deliver scrap metal to others might create
a cognizable risk of irreparable harm to the plaintiff’s
reputation, Bennington has not demonstrated, except by
Bennington’s president’s personal assertions, that the scrap
metal business is different from other types of commerce in such
a way that normal breach of contract remedies could not provide
a remedy. Nor has Bennington identified any contracts to resell
the scrap metal which it has been unable to perform, any third
parties with whom it has suffered a loss of reputation, or any
attempts – futile or otherwise – it has made to fulfill contracts to
deliver scrap metal by obtaining it from other sources.
In order to obtain a preliminary injunction we have
repeatedly held that the moving party must demonstrate “(1) the
reasonable probability of eventual success in the litigation and
(2) that the movant will be irreparably injured pendent lite if
relief is not granted. Moreover, while the burden rests upon the
moving party to make these two requisite showings, the district
court ‘should take into account, when they are relevant, (3) the
possibility of harm to other interested persons from the grant or
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denial of the injunction, and (4) the public interest.’” Instant Air
Freight Co. v. C.F. Air Freight, Inc., 882 F.2d 797, 800 (3rd Cir.
1989). Moreover, where the relief ordered by the preliminary
injunction is mandatory and will alter the status quo, the party
seeking the injunction must meet a higher standard of showing
irreparable harm in the absence of an injunction. Tom Doherty
Associates, Inc. v. Saban Entertainment, Inc., 60 F.3d 27, 33-34
(2 nd Cir. 1995).
As we find that Bennington has not met this heightened
standard and that there is no possibility of irreparable harm on
the record before us, there is no need to analyze the other prongs
of the test.
Bennington argues, however, that it has a reputation for
delivering scrap metal on time and that this reputation will be
irreparably harmed if it is not allowed to remove the scrap metal
at issue here. In particular, Bennington claims that its dealings
with its suppliers in India are particularly dependent on its
reputation. The District Court concluded that this represented
an irreparable harm analogous to those faced by the plaintiffs in
Pappan Enterprises, Inc. v. Hardee's Food Systems, Inc., 143
F.3d 800 (3d Cir. 1998) and Fitzgerald v. Mountain Laurel
Racing, Inc., 607 F.2d 589 (3d Cir. 1979). However, neither of
those cases is applicable here.
In Pappan, the defendant was enjoined from the
continued use of trademarks owned by the plaintiff, 143 F.3d at
803, while in Fitzgerald the defendant racetrack operator was
enjoined from suspending the plaintiff trainer and harness racer
for allegedly throwing races, 607 F.2d at 593. In both of those
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cases the reputation of the plaintiff was directly endangered by
the defendant's actions – the misleading use of trademarks and
a suspension based on suspicion of cheating can, in and of
themselves, harm plaintiffs’ reputations.
In contrast, any damage to Bennington's reputation will
result only indirectly from SCRG's actions. SCRG is not doing
anything (or refraining from doing anything) that will directly
harm Bennington's reputation with its suppliers in India. Rather,
the claim is a two-step one: (1) because SCRG is not delivering
(allegedly breaching the contract), Bennington is unable to
deliver, and (2) lack of delivery harms Bennington's reputation
with third parties with whom Bennington has contracted to resell
the scrap. There is nothing in this case to distinguish it from a
myriad of other breach of contract cases. Thus, there is no
reason to make the extended causal inferences necessary to find
irreparable harm to reputation. Any damage Bennington may
suffer as a result of SCRG’s alleged breach of contract – to the
extent it is not speculative – can be proven as an element of the
breach of contract claim against SCRG.
Bennington, however, cites to Blackwelder Furniture co.
of Statesville, Inc. v. Seilig Manufacturing Co., Inc., 550 F.2d
189, 197 (4 th Cir. 1977), a case in which the trial court denied a
preliminary injunction. The Fourth Circuit Court of Appeals
reversed, holding that the district court’s finding of no
irreparable harm was clearly erroneous. Id. at 196. In so
concluding, the court stated that
The harm posed to Blackwelder’s general
goodwill by its inability to fill outstanding and
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accumulating orders in excess of $15,000 for
furniture listed in its catalogues is incalculable not
incalculably great or small, just incalculable.
Id. at 197.
We are not bound by the holding in Blackwelder and we
question whether irreparable harm was sufficiently demonstrated
there. In addition, we note that Blackwelder has been
distinguished from other preliminary injunction cases on the
basis that Blackwelder “involved a manufacturer’s refusal to
supply its entire product line to a particular retailer, treatment
which discriminated against that particular dealer.” Advisory
Information and Management Systems, Inc,. v. Prime Computer,
Inc., 598 Fed. Supp. 76, 78 (M.D. Tenn. 1984). See also Jack
Kahn Music Co., Incl v. Baldwin Piano & Organ Co., 604 F.2d
755, 762 (2d Cir. 1979). As we mention above, there is nothing
in the record before us to demonstrate that Bennington was
unable to fulfill any contracts, was unable to find other sources
of scrap metal when the Virgin Islands scrap metal could not be
shipped, or lost reputation with any specific customers.
III. CONCLUSION
For the foregoing reasons, we will vacate the preliminary
injunction and remand this case to the District Court for further
proceedings consistent with this opinion.
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