Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—D. S.C.: Termination of machine tool distribution agreement not preliminarily enjoined, (Sep 22, 2015)

By Linda O’Brien, J.D., LL.M.

The federal district court in Columbia, South Carolina has denied a machine tool distributor’s motion for preliminary injunction, barring termination of its distribution agreement. The court found that the distributor failed to clearly show a likelihood of success on the merits or the likelihood of irreparable harm in its action against a machine tool manufacturer (Machinery Solutions, Inc. v. Doosan Corporation, September 18, 2015, Childs, J.).

Doosan Infracore American Corp., a subsidiary of South Korean conglomerate Doosan Corp., manufactures construction equipment, machine tools, and engines. Machinery Solutions, Inc. sells and services machine tools from other manufacturers. In 1997, Machinery Solutions entered into a distribution agreement with Doosan for the non-exclusive right to distribute new machine tools in North Carolina, South Carolina, and Georgia. Under the terms of the agreement, either party could terminate the agreement, at any time for any reason, upon at least 30 days written notice.

In August 2015, Doosan notified Machinery Solutions of its intent to terminate the distribution agreement. The notice stated that Machinery Solutions had 30 days to finalize all existing projects and thereafter would cease pursuing business as an authorized Doosan dealer. The notice also identified Ellison Technologies as the exclusive Doosan dealer in the U.S. Effective September 1, 2015, Ellison became a dealer of Doosan machine tools, serving customers in North Carolina, South Carolina, and Georgia. Subsequently, Machinery Solutions filed a complaint and motion for preliminary injunction.

Likelihood of success. The court determined that Machinery Solutions did not make a clear showing of the likelihood of success on the merits at trial. The plaintiff sought to enjoin Doosan from establishing any new dealer, including Ellison, in North Carolina, South Carolina, and Georgia, pursuant to South Carolina’s Fair Practices Act. In Carolina Trucks & Equip., Inc. v. Volvo Trucks of N. Am., Inc., 492 F.3d 484 (2007), the Fourth Circuit ruled that South Carolina statutes had no extraterritorial effect. Thus, Machinery Solutions was not entitled to an injunction that operates within North Carolina and Georgia, or restricts sales activity in South Carolina if the transaction takes place in North Carolina or Georgia, the court noted.

Machinery Solutions also was not entitled to an injunction against Doosan and Ellison in South Carolina. According to the court, the plaintiff did not show that it qualified as a dealer under the S.C. Fair Practices Act in order for the statutory protections to apply. Machinery Solutions was expressly defined as a “distributor” in the distribution agreement and did not purchase inventory from Doosan. Moreover, the distribution agreement was effectively terminated by Doosan in a manner that was consistent with the provision that either party could terminate the agreement at any time for any reason.

Irreparable harm. Machinery Solutions did not establish the likelihood of irreparable harm. The court noted that the plaintiff could continue in business through the sale of other competitive products and could be sufficiently compensated with monetary damages for any lost revenue or money spent developing its customer base. Furthermore, the plaintiff presented no evidence that Ellison has solicited any of its employees since being appointed a Doosan dealer or any losses from customer refunds for extended warranties that could not be sufficiently compensated with monetary damages.

The case is No. 3:15-cv-03447-JMC.

Attorneys: Mark Brandon Goddard,Jr. and Walker Duvall Spruill (Turner Padget Graham & Laney) for Machinery Solutions, Inc. Angus H. Macaulay,Jr., Marguerite S. Willis and William Camden Lewis (Nexsen Pruet Jacobs and Pollard) for Doosan Infracore American Corp. Paul T. Collins (Nelson Mullins Riley and Scarborough) for Ellison Technologies, Inc.

Companies: Machinery Solutions, Inc.; Doosan Infracore American Corp.; Ellison Technologies, Inc.

Cases: FranchisingDistribution SouthCarolinaNews