Antitrust Law Daily Wrap Up, FRANCHISING DISTRIBUTION—E.D.N.C.: Baked goods distributor denied preliminary injunction barring termination, (Jun 3, 2014)

By Greg Hammond, J.D.

A baked goods distributor who allegedly “flushed” product within its territory was not entitled to a preliminary injunction against termination, the federal district court in Raleigh, North Carolina ruled. The distributor failed to clearly demonstrate a likelihood of success on the merits of his breach of contract claim and irreparable harm from the termination (Martin v Bimbo Foods Bakeries Distribution, Inc., May 30, 2014, Britt, W).

Background. John Martin entered into a distribution agreement with Bimbo Foods Bakeries Distribution, Inc., purchasing exclusive rights to sell and distribute Bimbo Foods’ bakery goods to grocery stores in designated territorial areas. According to the agreement, Martin was paid a percentage of sales or a margin on the sale of a product. He stated that he created over $140,000 in equity in his distribution route. After Martin and other distributors received notice that Bimbo Foods was reducing the margins paid to them, they established a committee to negotiate with the company. Martin argued that Bimbo Foods refused to negotiate and that he later received a notice of termination for engaging in the practice of “flushing” product by creating false sales and “buyback” invoices.

Martin consequently filed suit, bringing claims of unfair and deceptive trade practices under North Carolina law, breach of contract, and fraud. The case was before the district court on Martin’s motion for preliminary injunction and a hearing, as well as Bimbo Foods’ motion for leave to file a corrected declaration and motion to strike two of Martin’s affidavits.

Preliminary injunction. To obtain a preliminary injunction, Martin was required to establish: (1) a clear showing that he will likely succeed on the merits of his breach of contract claim; (2) a clear showing that he is likely to be irreparably harmed absent preliminary relief; (3) the balance of equities tips in his favor; and (4) a preliminary injunction is in the public interest. Because there was conflicting evidence on whether Bimbo Foods properly terminated the distribution agreement, the court determined that Martin failed to clearly show he would likely succeed on the merits of his breach of contract claim. Although the court noted that it was possible for monetary damages to be calculated in this case, Martin failed to allege such damages and therefore was unable to clearly show he was likely to be irreparably harmed. Because Martin was unable to make the requisite showing to justify preliminary injunction, the court denied his motion, as well as his request for a hearing.

Motion to strike. Bimbo Foods also moved to strike two affidavits that Martin filed, arguing that they were untimely. However, because the testimony in the two documents were cumulative of the testimony in other timely filed affidavits, the court determined that Bimbo Foods would not suffer any prejudice in the court’s consideration of the two untimely filed affidavits. Consequently, Bimbo Foods’ motion to strike was denied.

The case is No. 5:14-CV-17-BR.

Attorneys: Edgar R. Bain (Bain, Buzzard & McRae, LLP) for John T. Martin. Deborah L. Edney (Parker, Poe, Adams & Bernstein, LLP) for Bimbo Food Bakeries Distribution, Inc.

Companies: Bimbo Food Bakeries Distribution, Inc.

Cases: FranchisingDistribution StateUnfairTradePractices NorthCarolinaNews