United States Court of Appeals
For the First Circuit
No. 08-2554
ROBERT WALDRON AND CHRISTOPHER MILLS,
Plaintiffs, Appellees,
v.
GEORGE WESTON BAKERIES INC. AND GEORGE WESTON BAKERIES
DISTRIBUTION INC.,
Defendants, Appellants.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE
[Hon. George Z. Singal, U.S. District Judge]
Before
Howard, Selya and Ebel,* Circuit Judges.
Catherine R. Connors, with whom James R. Erwin, Katharine I.
Rand, and Pierce Atwood LLP were on brief, for appellants.
Patrick J. Mellor, with whom Strout & Payson, P.A. was on
brief, for appellees.
June 19, 2009
*
Of the Tenth Circuit, sitting by designation.
SELYA, Circuit Judge. Faced with a motion for a
preliminary injunction, the district court held an evidentiary
hearing, reserved decision, and thereafter granted the requested
relief. Waldron v. Geo. Weston Bakeries, Inc., 575 F. Supp. 2d
271, 273 (D. Me. 2008). That ukase is the focal point of this
appeal.
We rehearse the facts as found by the district court,
consistent with record support. The plaintiffs, Robert Waldron and
Christopher Mills, are citizens of Maine who own exclusive rights
to purchase and distribute, within designated geographic
territories or "routes," baked goods purveyed by the defendants,
George Weston Bakeries Inc. and George Weston Bakeries Distribution
Inc. (collectively, Weston). Each of these affiliated firms is a
Delaware corporation that maintains its principal place of business
in Pennsylvania.
The terms of the arrangement between the parties are
limned in standard-form distribution agreements. Under these
agreements, each plaintiff agrees, in substance, to purchase from
Weston and re-sell bakery products; to develop and maximize sales;
and to cooperate with Weston in marketing programs. In turn,
Weston grants each plaintiff an exclusive route; agrees to supply
baked goods for sale along that route; and promises to assist in
the route-holder's marketing endeavors.
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The distribution agreements are of unlimited duration and
specify that the plaintiffs will work as independent contractors.
Nevertheless, the relationship is one of mutual dependence. It is
nose-on-the-face plain that each party must rely on the other's
performance.
Over time, the bond between the plaintiffs and Weston
became frayed. In April of 2005, a number of route-holders
(including the plaintiffs) accused Weston of a gallimaufry of
allegedly unfair business practices. For the most part, these
complaints grew out of the route-holders' conviction that Weston
was exercising a degree of operational control that was
inconsistent with its promise to treat them as independent
contractors. That lawsuit came to naught. See Gagne v. Geo.
Weston Bakeries Distrib., Inc., No. 05-77, 2006 WL 1636001, at *1
(D. Me. June 6, 2006).
Despite this defeat, the plaintiffs persisted in pursuing
their perceived plaints. In 2006, they sued Weston in a Maine
state court, alleging breach of contract, unconscionability, and
violations of various statutes.1 Once again, the action centered
on the degree of control that Weston was attempting to exercise
over the route-holders. After a bench trial, the state-court judge
upheld the distribution agreements against the claim of
1
The 2006 case was removed to the federal district court and
then remanded. These details need not concern us.
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unconscionability and concluded that Weston had not breached those
agreements. The plaintiffs filed a timely notice of appeal.
On July 10, 2008 — one day before the deadline for
submitting the plaintiffs' appellate brief — their counsel pressed
for settlement. The lawyer's efforts are chronicled in exquisite
detail in the district court's rescript, see Waldron, 575 F. Supp.
2d at 273-74, and it would serve no useful purpose to repastinate
that well-ploughed soil. We focus instead on the critical
communication: a voicemail message left by the plaintiffs' lawyer
for defense counsel. Having demanded $5,000 to settle the pending
litigation, the plaintiffs' lawyer warned:
My clients are not going to put this behind
them regardless of how the appeal comes out.
That is, there will be information provided to
the appropriate taxing authorities, workers
compensation board, etc. If we're not able to
come to a mutually agreeable settlement today,
and I understand that's quick but we're
talking about $5,000, Jim, which is much less
than what it'll cost your client to work on
this appeal. If the . . . settlement is not
agreeable then all bets are off. There will
be no offer of settlement beyond today and
your clients can expect to continue to be
involved in some type of hearings of some
nature, proceedings of some nature in the near
future regarding their status of an employer
as opposed to an independent business entity
or there can be a settlement. I hope that's
the way we go.
Weston did not accept the proffered settlement, and the record is
tenebrous as to the fate of the appeal.
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A few days after the proposed settlement cratered, Weston
pounced. It terminated the plaintiffs' distribution agreements on
the basis of section 8.2 thereof, which gave Weston a right to
terminate immediately, without an opportunity to cure, if the
route-holder's actions "involve[] criminal activity or fraud,
threaten[] public health or safety, or threaten[] to do significant
harm" to Weston. Each termination notice referred to the voicemail
and stated in pertinent part that: "It is the position of [Weston]
that your threat to do significant harm to [Weston] if it does not
meet your [settlement] demand constitutes a non-curable breach of
your Distribution Agreement." Weston proceeded to assume control
of the plaintiffs' routes.
The plaintiffs did not submit meekly to this preemptive
strike but, rather, sued Weston in a Maine state court. Their
complaint contained four substantive counts: breach of contract,
tortious interference with advantageous economic relations,
restraint of trade, and breach of an implied covenant of good faith
and fair dealing. A fifth count requested a declaratory judgment
on the claim of wrongful termination. The plaintiffs
simultaneously moved for a preliminary injunction.
Weston removed the action to the federal district court
on the basis of diversity of citizenship and the existence of a
controversy in the requisite amount. See 28 U.S.C. §§ 1332(a)(1),
1441. That court convened an evidentiary hearing on the motion for
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injunctive relief. Following that hearing and an exchange of legal
memoranda, the court issued a preliminary injunction restoring the
plaintiffs to their routes and suspending Weston's attempted
termination of the distribution agreements pendente lite. The
court found that the plaintiffs not only had established a
likelihood of success on their contract and implied covenant claims
but also had satisfied the other requirements for preliminary
injunctive relief. See Waldron, 575 F. Supp. 2d at 277-79. This
interlocutory appeal ensued. We have jurisdiction under 28 U.S.C.
§ 1292(a)(1).
When a party appeals from the grant or denial of a
preliminary injunction, review is for abuse of discretion. Ross-
Simons of Warwick, Inc. v. Baccarat, Inc., 102 F.3d 12, 16 (1st
Cir. 1996). Within that framework, we scrutinize the district
court's findings of fact for clear error and its handling of
abstract legal questions de novo. Coquico, Inc. v. Rodríguez-
Miranda, 562 F.3d 62, 66 (1st Cir. 2009); Air Line Pilots Ass'n,
Int'l v. Guilford Transp. Indus., Inc., 399 F.3d 89, 95 (1st Cir.
2005). In the gray area between those two poles, we afford
considerable deference to the trial court's balancing of equities.
Coquico, 562 F.3d at 66. We will set aside such judgment calls
only if the trier has "ignored pertinent elements deserving
significant weight, considered improper criteria, or, though
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assessing all appropriate and no inappropriate factors, plainly
erred in balancing them." Ross-Simons, 102 F.3d at 16.
We recently explained that "[t]he propriety of
preliminary injunctive relief depends on an amalgam of four
factors: (i) the likelihood that the movant will succeed on the
merits; (ii) the possibility that, without an injunction, the
movant will suffer irreparable harm; (iii) the balance of relevant
hardships as between the parties; and (iv) the effect of the
court's ruling on the public interest." Coquico, 562 F.3d at 66.
The first factor — likelihood of success — normally will weigh the
heaviest in this four-part decisional calculus. New Comm Wireless
Servs., Inc. v. SprintCom, Inc., 287 F.3d 1, 9 (1st Cir. 2002).
Here, another familiar principle comes to mind. We have
reiterated several times that when a district court adroitly takes
the measure of a case and articulates a persuasive rationale in
disposing of it, there is scant need for a reviewing court to write
at length merely to hear its own words resonate. See, e.g.,
Vargas-Ruíz v. Golden Arch Dev., Inc., 368 F.3d 1, 2 (1st Cir.
2004); Cruz-Ramos v. P.R. Sun Oil Co., 202 F.3d 381, 383 (1st Cir.
2000); Holders Capital Corp. v. Cal. Union Ins. Co. (In re San Juan
Dupont Plaza Hotel Fire Litig.), 989 F.2d 36, 38 (1st Cir. 1993).
This is just such an instance: the court below made supportable
findings of fact on the relevant issues, applied the law faithfully
to the discerned facts, and exercised its discretion in an
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appropriate manner. It set out these findings and conclusions with
admirable clarity and tied them together with a plausible rationale
justifying the issuance of a preliminary injunction. No more was
exigible. Hence, we affirm the judgment below essentially for the
reasons advanced in the district court's thoughtful rescript. We
add only a few comments directed to the plaintiffs' likelihood of
success on the merits.
First. Weston hinges its right to terminate the
distribution agreements on the voicemail "threat" to inform tax and
workers' compensation authorities about its treatment of the route-
holders as employees. Weston posits that this "threat"
transgressed section 8.2 of the agreements, quoted supra, because
it constituted extortion (and, thus, constituted a breach that
involved criminal activity). The district court rejected that
assertion, Waldron, 575 F. Supp. 2d at 277, and so do we.
Maine law defines extortion as a threat to do any act
that would "not in itself substantially benefit the person but that
would harm substantially any other person with respect to that
person's health, safety, business, calling, career, financial
condition, reputation, or personal relationships." Me. Rev. Stat.
Ann. tit. 17-A, § 355. Weston argues that the threatened acts
could not inure to the plaintiffs' benefit because (a) in an
earlier round of litigation, the state court had already determined
the plaintiffs' work status, and (b) even if the administrative
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agencies found the plaintiffs to be employees, the terms of the
distribution agreements would require that the parties adjust their
relationship to that of independent contractors.
In their breach of contract and breach of implied
covenant counts, the plaintiffs said, in effect, that this claim of
extortion was chimerical. In finding that the plaintiffs had
established a likelihood of success on these counts, the lower
court found that this unflattering characterization of the supposed
"extortion" was accurate. That finding was based upon neither an
error of law nor a clearly erroneous appraisal of the facts.
We begin by disposing of a straw man. Contrary to
Weston's importunings, the judgment in the earlier litigation did
not give rise to res judicata. We explain briefly.
Under Maine law, res judicata applies to an attempt at
relitigation of a claim that was previously determined (or which
could have been determined) by a final judgment in an earlier case
between the same parties or their privies, arising out of the same
transaction or set of facts. See, e.g., FPL Energy Me. Hydro LLC
v. FERC, 551 F.3d 58, 63 (1st Cir. 2008); Benjamin v. Aroostook
Med. Ctr., Inc., 113 F.3d 1, 2 (1st Cir. 1997). Here, no
governmental body was a party to the earlier case, and the prior
adjudication did not extend to rights and obligations under tax or
workers' compensation laws. See Waldron v. Geo. Weston Bakeries,
Inc., No. CV-06-502, slip op. at 21 (Me. Super. Ct., Apr. 8, 2008)
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(unpublished) (explaining that "no tax or labor or workers'
compensation laws are invoked in this case").
We deal next with the underpinnings of the lower court's
factfinding. The court supportably determined that the plaintiffs'
tax and workers' compensation allegations were colorable. See
Waldron, 575 F. Supp. 2d at 275 n.1. Moreover, should the
plaintiffs be reclassified as employees, Weston would be
responsible for paying a number of tax and related charges that
could potentially inure to the plaintiffs' benefit. See, e.g., 26
U.S.C. § 3301 (dealing with unemployment tax); id. § 3111 (dealing
with Social Security and Medicare). Finally, even if the state
agencies were to make no direct award, the plaintiffs would stand
to gain from the clarification of their work status — a
clarification that they had long been litigating to achieve. To
avoid characterization as extortion, the benefit received need not
be pecuniary. See, e.g., People v. Garland, 505 N.E.2d 239, 240
(N.Y. 1987) (deeming contractual rights "property" within purview
of similarly-phrased extortion statute).
We add a coda. Trying to transmogrify what was obviously
a settlement demand in a pending civil case into an act of extortion
is like trying to fit a square peg into a round hole. If given
widespread credence, that tactic would severely impede the salutary
policies favoring settlements in civil actions.
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Second. Alternatively, Weston asserts that the voicemail
"threat" justified repudiation of the distribution agreements
because section 8.2, quoted supra, allowed it to end the
relationship if a route-holder threatened to do "significant harm"
to Weston. Weston identifies the so-called "significant harm" as
the cost of defending against future administrative proceedings.
It also suggests that significant harm results from the quid pro quo
nature of the settlement demand.
The district court found these assertions baseless.
Waldron, 575 F. Supp. 2d at 277. That assessment is not clearly
erroneous.
We need not tarry. The cost of defending against future
administrative proceedings might be relevant if such proceedings
were initiated without any semblance of cause or in bad faith.2 Cf.
Cimenian v. Lumb, 951 A.2d 817, 820 (Me. 2008) (authorizing award
of attorneys' fees for frivolous claims in "extraordinary
circumstances"). Here, however, the district court supportably
found the opposite. See id. at 275 n.1, 277. Surely, a contractual
provision that allowed a party with superior bargaining power to
terminate simply because its distributor made a colorable, good-
faith complaint to a government agency would be unenforceable as an
2
Even so, the record here is devoid of any evidence that
Weston's anticipated defense would be costly or would otherwise
significantly harm the company.
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affront to public policy. See, e.g., Gilmer v. Interstate/Johnson
Lane Corp., 500 U.S. 20, 33 (1991).
Weston's insistence that the quid pro quo nature of the
proposal constitutes significant harm is equally untenable. By
definition, every settlement proposal embodies a quid pro quo. Like
any other party embroiled in a civil litigation, Weston was free at
all times to assess its options and accept or decline the settlement
offer as it saw fit.
To be sure, Weston also raises the specter of blackmail.
But this hyperbole is little more than a reconfiguration of its
claim that the voicemail amounted to extortion. The argument is no
more appealing in this new configuration.
Third. While calumnizing the conduct of the plaintiffs'
lawyer, Weston repeatedly refers to canons of ethics and rules of
professional responsibility. In our view, these canons and bar
rules are largely beside the point. Assuming without deciding that
an ethical lapse occurred and that it could be attributed to the
plaintiffs — both assumptions of dubious validity — Weston has not
convincingly explained how such a lapse would trigger section 8.2
of the distribution agreements. Certainly, a lawyer's unethical
conduct is not a fungible proxy for a client's criminal activity.
To sum up, the district court's judgment as to the
plaintiffs' likelihood of success is consistent with the law and the
discerned facts. That judgment represents a reasonable prediction
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of the probable outcome of the litigation. See, e.g., Narragansett
Indian Tribe v. Guilbert, 934 F.2d 4, 6 (1st Cir. 1991). The
district court's conclusions on the other three elements that enter
into the preliminary injunction calculus are plausible.
We need go no further. Given the district court's
findings, the issuance of a preliminary injunction was altogether
appropriate.
Affirmed.
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Waldron v. George Weston Bakeries Inc.
Court: Court of Appeals for the First Circuit
Date filed: 2009-06-19
Citations: 570 F.3d 5
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