United States Court of Appeals
For the First Circuit
No. 04-1321
MATRIX GROUP LIMITED, INC.,
Plaintiff, Appellant,
v.
RAWLINGS SPORTING GOODS COMPANY, INC.,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE
[Hon. D. Brock Hornby, U.S. District Judge]
Before
Torruella and Howard, Circuit Judges,
and Stearns,* District Judge.
Peter J. Brann, with whom Matthew P. Schaefer and Brann &
Isaacson were on brief, for appellant.
John W. Moticka, with whom Stinson Morrison Hecker LLP, was on
brief, for appellee.
August 6, 2004
*
Of the District of Massachusetts, sitting by designation.
TORRUELLA, Circuit Judge. This appeal brings before us
the denial of a motion for a preliminary injunction under unusual
jurisdictional circumstances. At the same time the district court
denied plaintiff-appellant's motion for a preliminary injunction,
it granted defendant-appellee's motion to transfer the case to the
Eastern District of Missouri. Finding our jurisdiction over
plaintiff-appellant's motion proper, we affirm the district court's
denial of the preliminary injunction.
I. Background
Matrix Group Limited, Inc. ("Matrix"), has sold personal
and team equipment bags under an exclusive license with Rawlings
Sporting Goods Co., Inc. ("Rawlings"), since 1994. Under the
licensing agreement, Matrix pays Rawlings a royalty, based on
minimum annual sales, and Matrix is required to "use its best
efforts to foster and develop the [personal and team equipment
bags] and to maximize sales thereof." Rawlings promised that it
would "not now or during the term of this Agreement manufacture,
sell, distribute, advertize, or promote any personal or team
equipment bags that compete with Matrix's [personal and team
equipment bags]."
Matrix has met Rawlings's minimum sales targets every
year and increased sales for Rawlings-branded personal and team
equipment bags from $425,000, prior to the licensing agreement, to
more than $2.1 million in 2000. Since then, sales have declined
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steadily, to $1.46 million in 2001 and to just over $800,000 in
2002 and 2003.
In March 2003, K2, Inc., purchased Rawlings and, later
that year, also purchased Worth, Inc., a competitor of Rawlings's.
By the end of 2003, Rawlings began to implement K2's plan to
consolidate the Rawlings and Worth sales force into a single
organization. Rawlings began to market Worth brand equipment bags
that compete with the personal and team equipment bags produced and
sold by Matrix.
A series of negotiations between the parties considering
the dissolution of the licensing agreement failed to reach an
accord. After Rawlings officially announced the consolidation of
Rawlings and Worth in January 2004, Matrix filed suit in the
District Court of Maine on January 30, 2004, alleging breach of the
licensing agreement.1 Rawlings thereafter filed an action in the
District Court for the Eastern District of Missouri on February 2,
2004, alleging a reciprocal breach of the licensing agreement,
namely Matrix's failure to use "best efforts" to sell the personal
and team equipment bags.
1
Matrix is a Florida corporation with its principal place of
business in Safety Harbor, Florida. Rawlings is a Delaware
corporation with its principal place of business in Fenton,
Missouri. Matrix's breach of contract suit relies on the parties'
diversity of citizenship, which confers subject matter jurisdiction
on the district court. 28 U.S.C. § 1332.
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On February 12, 2004, Rawlings filed a motion to transfer
the District Court of Maine action, instituted by Matrix, to the
Eastern District of Missouri, pursuant to 28 U.S.C. § 1404(a). On
February 17, 2004, Matrix filed a motion for a temporary
restraining order and a preliminary injunction in the District
Court of Maine to enjoin Rawlings from (1) wrongfully terminating
Matrix's exclusive license with Rawlings to sell the personal and
team equipment bags covered by the license, and (2) breaching its
contract with Matrix by selling equipment bags that compete with
the personal and team equipment bags produced and sold by Matrix
under the licensing agreement.
After hearing oral argument on both motions on the same
day, the district court ordered the transfer of the case and denied
Matrix's motion for injunctive relief. Matrix appeals from the
denial of the motion for a preliminary injunction.
II. Jurisdiction
Our jurisdiction to hear an interlocutory appeal from the
denial of a preliminary injunction is provided by 28 U.S.C. § 1292
(a)(1), which states in relevant part that "the courts of appeals
shall have jurisdiction of appeals from . . . [i]nterlocutory
orders of the district courts of the United States . . . refusing
. . . injunctions . . . ." Under 28 U.S.C. § 1294(1), "appeals
from reviewable decisions of the district and territorial courts
shall be taken to the courts of appeals . . . [f]rom a district
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court of the United States to the court of appeals for the circuit
embracing the district." Matrix's right of appeal under § 1292
(a)(1), therefore, can only be realized in the First Circuit, a
sensible result given this court's supervisory duty over the
district courts of our circuit. "As [Matrix] filed [its] appeal on
[February 27, 2004], before the papers were docketed in [Missouri],
this court had already acquired appellate jurisdiction before the
transfer was effective. Once jurisdiction is properly obtained by
the appellate court it is not terminated by the subsequent
completion of a section 1404 transfer." Lou v. Belzberg, 834 F.2d
730, 733 (9th Cir. 1987).
Since this case was docketed in the Eastern District of
Missouri on March 25, 2004, though, our power to enforce a reversal
of the district court's denial of the preliminary injunction --
should that be our judgment -- takes an unusual cast. We cannot
order the Eastern District of Missouri, embraced by the Eighth
Circuit, to enter a preliminary injunction. We can, however, order
the District Court of Maine to request that the Eastern District of
Missouri return the case file so that the District Court of Maine
may enter a preliminary injunction.2 Cf. In re Warrick, 70 F.3d
2
Such an order would interfere with the proceeding of the action
in the transferee district. We typically lack jurisdiction over
§ 1404 transfers. See Codex Corp. v. Milgo Elec. Corp., 553 F.2d
735, 737 (1st Cir. 1977) ("Ordinarily, no appeal can be taken from
district court orders on transfers between districts pursuant to 28
U.S.C. § 1404(a) . . . . Although mandamus may be available in such
cases, it will be granted, or even considered, only in 'really
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736, 740 (2d Cir. 1995) ("This Court's need to protect its
jurisdiction justifies the rule that when the transferred case has
been docketed in the transferee court despite the petitioner's
diligence, this Court can order a district court in this circuit to
request the transferee court to return the case.") (ellipses,
quotation marks, brackets, and citations omitted).
Suffice it to say that transferring a case outside the
circuit while an interlocutory appeal is pending should be
disfavored. The preferred procedure is for § 1404 transfer orders
to be stayed when issued until any available interlocutory appeals
arising from the case are resolved by this court or by expiration
of the notice of appeal period.3 In that manner, we would retain
unmediated authority to enforce all judgments that can result from
review. In the event, for example, that we should reverse the
denial of a preliminary injunction and order an injunction issued
by the district court, the stayed transfer order would safeguard
the protection against "irreparable injury" that federal courts as
courts of equity may provide. Fed. R. Civ. P. 1, 65.
extraordinary situations.'") (quoting In re Josephson, 218 F.2d
174, 183 (1st Cir. 1954)).
3
While the district court did not stay the transfer order, it did
retain the docket in Maine. The case was physically transferred
upon this court's March 18, 2004 order granting Matrix's motion for
expedited appeal and directing the district court to transfer the
file forthwith. On March 24, 2004, the Eastern District of
Missouri entered the case onto its docket.
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Neither Matrix nor Rawlings has called into doubt our
jurisdiction to hear this appeal. Under the circumstances,
however, we have deemed it appropriate to identify the difficulties
of this peculiar procedural posture with a view to protecting our
appellate jurisdiction and ensuring litigants in our district
courts the benefits of 28 U.S.C. § 1292(a)(1). See Bachowski v.
Usery, 545 F.2d 363, 367 (3d Cir. 1976) (Though appeals were only
permitted from final orders in the nineteenth century, "Congress
began to realize . . . that rigid application of the final judgment
rule in all cases might inflict irreparable harm upon litigants in
certain instances, and might actually have the effect of
unnecessarily prolonging the litigation."). We now turn to the
merits of Matrix's appeal.
III. Merits
The district court stated, following Matrix's briefing,
that two actions provoked the motion for preliminary injunction:
"One is the sale of the competing bags by the Rawlings sales
personnel, the other is the termination of the exclusive license."
The court correctly identified the four factors to be balanced in
deciding such motions: (1) irreparable injury to the plaintiff; (2)
balancing of harms to the defendant; (3) likelihood of success on
the merits; and (4) the public interest, if any. See Rosario-Urdaz
v. Rivera-Hernández, 350 F.3d 219, 221 (1st Cir. 2003). It found
that the public interest prong exerted negligible weight and that
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the harms to the defendant were minimal. Those findings are
neither questioned nor emphasized by the parties.
The district court concluded that Matrix had "a very
strong case on both issues" supporting its likelihood of success on
the merits. Despite the balance favoring Matrix on these three
prongs, the district court determined that "the plaintiff fails
. . . in getting injunctive relief from me because of the
irreparable injury hurdle."
This is a classic damage case with a
damage remedy, and damages can be assessed
both in terms of the sale of the competing
bags. There is a history here in terms of the
sales that have taken place, and it is not
difficult testimony to acquire in terms of
projecting that into the future by way of
damages with or without expert economists to
help.
It's perhaps slightly more difficult on
the termination. . . . I am satisfied that
ultimately, the plaintiff can recover the
damages that the defendant is causing to the
plaintiff's sales and income, that it will be
possible to look back in time and to project
forward in time to determine the impact of the
wrongful termination if that's what it's
concluded to be, and of the competing line if
the sale of the competing line violates the
agreement.
We review the district court's determination for an abuse of
discretion. Rosario-Urdaz, 350 F.3d at 221.
Matrix wishes to get leverage from the district court's
favorable view of its case on the merits, citing Ross-Simons of
Warwick, Inc. v. Baccarat, Inc., 102 F.3d 12, 16 (1st Cir. 1996),
for the proposition that "[l]ikelihood of success is the main
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bearing wall of the four-factor framework." But the granting of an
injunction is an exercise of equity, and the presence of a weak
link in the movant's chain would forestall our reversing the
district court's denial under the abuse of discretion standard.
Therefore, we concentrate on the district court's finding that a
damages remedy would prove adequate to compensate Matrix for any
injury. See Rosario-Urdaz, 350 F.3d at 222 ("Where a plaintiff
stands to suffer a substantial injury that cannot be adequately
compensated by an end-of-case award of money damages, irreparable
injury exists.").
The district court analyzed the irreparability prong in
two stages, tracking Matrix's allegations of Rawlings's breaches;
we will do the same.
A. Breach of Non-Compete Clause
The first breach alleged -- and the one that motivated
Matrix's complaint -- involves Rawlings's participation in the sale
of Worth's equipment bags and the concomitant breach of the non-
compete clause of the licensing agreement. This activity,
according to Matrix, injures (1) the value of the exclusive license
and (2) its good will and retail relationships. Matrix marshals
case law supporting the propriety of an injunction to redress a
contractual injury such as its asserted loss in the value of the
licensing agreement. E.g., Walgreen Co. v. Sara Creek Property
Co., B.V., 966 F.2d 273, 279 (7th Cir. 1992) ("[I]njunctions to
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enforce exclusivity clauses are quite likely to be justifiable by
just the considerations present here -- damages are difficult to
estimate with any accuracy and the injunction is a one-shot remedy
requiring no continuing judicial involvement."). Such authority is
insufficient under the procedural posture of this case in which the
district court denied rather than awarded the injunction. The
district court explicitly addressed the means through which a jury
might reach an informed judgment as to the quantum of Matrix's
loss, and "[i]t is well settled that the jury is given a good deal
of freedom in estimating damages against a defendant who created
the risk of uncertainty as to damages by its own wrongdoing."
Ocean Spray Cranberries, Inc. v. PepsiCo, Inc., 160 F.3d 58, 63
(1st Cir. 1998). We are satisfied that the district court
exercised sound discretion in denying the injunction as to this
claim of injury for want of irreparable injury.
It is more difficult to determine whether money damages
are ascertainable with regard to any injury to Matrix's good will
and relationships with its distributors caused by violation of the
non-compete agreement. The district court did not address this
point directly in its oral decision. Nevertheless, we find this
particular claim of irreparable injury too speculative and
unsubstantiated to warrant disturbing the district court's judgment
denying an injunction. See In re Rare Coin Galleries of America,
Inc., 862 F.2d 896, 902 (1st Cir. 1988) ("Speculation or
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unsubstantiated fears of what may happen in the future cannot
provide the basis for a preliminary injunction."). In its motion
for the preliminary injunction, Matrix supports the irreparability
of the injury as follows:
Rawlings's actions could severely and
irreparably harm Matrix's standing with
retailers. Rawlings's decision to have its
own sales force market competing bags may, by
itself, harm Matrix's reputation. Retailers
will view the Rawlings and Worth products --
now marketed together by the Rawlings sales
force -- as a single product line, and any
problems with quality, delivery, etc., related
to the Worth Bags are likely to damage Matrix
by association. (Emphasis added).
Later in the motion, Matrix argues that
In the short term, the sale of Worth bags by
the Rawlings sales force will dilute the
Rawlings sales force's efforts to sell
Rawlings equipment bags, and will cannibalize
Matrix's Rawlings brand equipment bag sales to
a degree that will be very difficult to
measure . . . .
These speculations regarding Matrix's fear of a possible injury
beyond the loss of sales do not make a prima facie case for a
preliminary injunction to stem damages to its reputation and good
will owing to Rawlings's breach of the non-compete clause. Matrix
did make a strong case that its business would suffer in terms of
lost sales, and the district court judged that such losses could be
redressed through money damages. This judgment fell within the
court's discretion.
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B. Breach through Termination of the Licensing Agreement
The second breach alleged by Matrix was Rawlings's
termination of the licensing agreement. The district court was
certainly correct that a damages remedy was adequate to redress
wrongful termination. After all, in the months leading up to the
parties' falling out, a buy-out of the license was discussed. Such
a sale would put a price on the value of the license to Matrix.
The district court, in essence, adjudged that a jury too could put
a price on the license, equipped with pertinent expert testimony
and historical sales figures. Again, the district court did not
abuse its discretion in denying an injunction to stem the damages
following from Rawlings's alleged unilateral termination of the
licensing agreement.
IV. Conclusion
Because we find no abuse of discretion by the district
court, the denial of Matrix's motion for a preliminary injunction
is affirmed.
Affirmed.
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