United States Court of Appeals
Fifth Circuit
F I L E D
April 14, 2003
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT Charles R. Fulbruge III
Clerk
__________________________
No. 01-31442
__________________________
LAKE CHARLES DIESEL, INC.
Plaintiff-Appellee,
versus
GENERAL MOTORS CORP.; ET AL,
Defendants,
GENERAL MOTORS CORP.,
Defendant-Appellant.
___________________________________________________
Appeal from the United States District Court
For the Western District of Louisiana
___________________________________________________
Before JONES, WIENER, and DeMOSS, Circuit Judges.
WIENER, Circuit Judge:
Defendant-Appellant General Motors Corp. (“GM”), through its
aftermarket automotive parts division, AC Delco (“Delco”), appeals
from the district court’s grant of a preliminary injunction to
Plaintiff-Appellee Lake Charles Diesel, Inc. (“LCD”), preventing
Delco from terminating its “ACDELCO Direct Account Supply Agreement
(“Parts Agreement”) with LCD. Delco contends, among other things,
that the district court erred when it concluded that LCD had a
substantial likelihood of success on the merits of its contention
that Delco’s putative termination of the Parts Agreement pursuant
to the termination provision of that contract was invalid because
it contravened applicable Louisiana law. Delco asserts that the
court mistakenly concluded that the termination provision of the
Parts Agreement is contravened —— and thus trumped —— by the
termination provision of Louisiana’s Repurchase of Farm,
Industrial, and Lawn and Garden Equipment by Wholesaler Act
(“Repurchase Act”).1 This statute specifies that a contract to
which it applies cannot be terminated by a party in Delco’s
position except for good cause after furnishing 90 days prior
written notice to a party in LCD’s position, and giving such party
the opportunity to cure the cause. Delco argues further that, even
if, as a general proposition, a termination provision like the one
in the Parts Agreement would be trumped by the mandated termination
provision of the Louisiana statute, the contract’s termination
provision is not barred in this particular case. This is so,
insists Delco, because the Parts Agreement is not a contract to
which the Repurchase Act applies. For the reasons expressed in the
1
La. Rev. Stat. Ann. 51:481-490 et seq. (West 2003).
2
remainder of the opinion, we agree with Delco that the Parts
Agreement is not a contract to which the Repurchase Act applies.
Absent such applicability, Delco’s termination in compliance
with the contract could not be invalidated by a provision in the
Repurchase Act that is “contravened” by the provision of the
contract. This, in turn eliminates LCD’s likelihood of success on
the merits and makes the district court’s grant of the instant
preliminary injunction improvident. We therefore reverse the
district court’s grant of the preliminary injunction and remand
with instructions to vacate that injunction and to conduct any
further proceedings in a manner consistent with this opinion.
I. Facts and Proceedings
Delco is a national supplier of automotive repair parts which
it markets through a nationwide network of warehouse distributors.
LCD has been a dealer in Delco automotive parts since 1977.
The instant controversy arose when Delco purported to
terminate the Parts Agreement by having a letter hand-delivered to
LCD, notifying it that Delco was terminating that contract
effective 30 days after delivery. At the time, Delco and LCD were
operating under the most recent version of their Parts Agreement,
which had been extended for an indefinite term by a letter mailed
less than two months prior to the delivery of the termination
notice. That extension letter was from Delco’s general manager and
3
included the statement that “[w]e intend to operate under this
extension until we execute new supply agreements with our warehouse
distributors, which will coincide with the implementation of the
Dedicated Distribution Group. Required standards and guidelines
must be achieved to enter into a new Dedicated Distribution Group
agreement.” Nevertheless, within a matter of weeks, Delco’s
regional manager personally delivered the 30-day termination notice
to LCD. That notice did not state or imply that the relationship
was being terminated for cause; neither did it offer any
explanation for Delco’s decision to terminate the Parts Agreement.
The Parts Agreement consists of a two-page document entitled
“General Motors Corporation, SERVICE PARTS OPERATIONS ACDelco
Direct Account Supply Agreement” appended to a copy of Delco’s 14-
page standard form dealership agreement. In the two-page
instrument, LCD is named as the “direct account” and is authorized
to sell each checked-off product line from among a list of 57 —— in
this case, 53 of the 57 listed product lines. One of the four
product lines not checked off is “Engines.” Among the 53
authorized product lines are a number that clearly are automotive
parts but just as clearly are not engine parts: radiators, shocks,
batteries, Durastop brakes, air conditioning, brake parts, steering
and drive systems, transmission parts, and lighting. In Delco’s
mission statement at the top of page 4 of its 14-page standard form
4
instrument, the product lines covered by the Parts Agreement are
referred to globally as “vehicle replacement parts.”
LCD’s business operations include, without limitation, the
repair and rebuilding of engines of numerous manufacturers. LCD
uses some of these Delco automotive parts in repairing and
rebuilding engines and other equipment, and sells some of the
stocked parts to third parties. The engine repair and rebuilding
aspect of LCD’s business, as well as the parts sales and
distribution aspect, have a substantial (but not exclusive)
connection with several significant Southwest Louisiana industries,
such as marine, agriculture, construction, and the like.
LCD is not in the business of selling, distributing or
retailing any new equipment, engines, implements, machinery, or
attachments that are wholesaled, manufactured or distributed by
Delco or GM. Rather, vis-à-vis GM and Delco, LCD maintains only a
stock of Delco’s vehicle replacement parts, which it either uses
itself or sells, distributes, or retails to third parties.2
Shortly after receiving Delco’s termination notice, LCD filed
this suit in state court. In addition to Delco, LCD named another
Louisiana distributor of Delco automotive parts as a co-defendant.
Delco removed the case to the district court, asserting fraudulent
2
At oral argument, counsel for LCD advised that the only
new engines marketed by LCD are Volvo’s.
5
joinder of the Louisiana defendant, and the district court denied
LCD’s subsequent motion to remand.
In its injunction suit, LCD complained that Delco’s
termination of the Parts Agreement violated both the Repurchase Act
and Louisiana’s Used Motor Vehicle Dealers and Marine Products
Dealers Act3 (“Marine Act”). In regard to the latter statute, LCD
alleged that some of the engines it repairs and rebuilds, and some
of the Delco parts it distributes, are used in the marine industry.
In its petition, LCD also complained that, by engaging in
misleading and disingenuous correspondence in the weeks preceding
delivery of its notice of termination, Delco breached an applicable
Michigan law that proscribes violations of express covenants of
good faith and fair dealing. In support of this charge, LCD
pointed to the parties’ mutual covenant in the Parts Agreement to
communicate with each other in an “honest, ethical and professional
manner.”
The district court rejected as inapplicable LCD’s attempt to
invoke the Marine Act; and the court mused without ruling that LCD
might well prevail on its claim that Delco breached the Parts
Agreement by violating its honest-communication covenant. In the
end, however, the court concluded that the Repurchase Act does
apply to the Parts Agreement, and that the termination provision of
3
La. Rev. Stat. Ann. § 32:771 et seq. (West 2003).
6
that statute governs, because the termination provision of the
Parts Agreement does not merely differ from that of the Repurchase
Act but directly contravenes it. As Delco’s 30-day, no-cause
termination notice failed to satisfy the applicable 90-day, good-
cause termination provision of the Repurchase Act, reasoned the
court, LCD met the likelihood-of-success prong of the temporary
injunction test. After addressing the three remaining prongs of
that test and concluding that LCD met them all, the district court
granted the preliminary injunction that prohibits Delco from
terminating the Parts Agreement. Delco timely filed a notice of
appeal.
II. Analysis
A. Standard of Review
We have jurisdiction to review grants of preliminary
injunctions under 22 U.S.C. § 1292(a)(1). We review such grants
for abuse of discretion.4 Even though “the ultimate decision
whether to grant or deny a preliminary injunction is reviewed only
for abuse of discretion, a decision grounded in erroneous legal
principles is reviewed de novo.”5
4
Mississippi Power & Light Co. v. United Gas Pipeline Co.,
760 F.2d 618, 621 (5th Cir. 1985).
5
Women’s Med. Ctr. v. Bell, 248 F.3d 411, 419 (5th Cir.
2001).
7
B. Requirements for Preliminary Injunction
To be entitled to a preliminary injunction, the applicant must
show (1) a substantial likelihood that he will prevail on the
merits, (2) a substantial threat that he will suffer irreparable
injury if the injunction is not granted, (3) his threatened injury
outweighs the threatened harm to the party whom he seeks to enjoin,
and (4) granting the preliminary injunction will not disserve the
public interest.6 We have cautioned repeatedly that a preliminary
injunction is an extraordinary remedy which should not be granted
unless the party seeking it has “clearly carried the burden of
persuasion” on all four requirements.7 Citing our opinion in
Martinez v. Mathews, Delco maintains that a mandatory preliminary
injunction that goes beyond the status quo is even more disfavored
and “should not be issued unless the facts and law clearly favor
the moving party.”8 We fail to see the relevance of that
proposition here, however, because the preliminary injunction
granted by the district court does precisely that; it maintains the
status quo by keeping in effect a contractual relationship that has
existed between the parties for almost a quarter century. The
6
Canal Auth. v. Callaway, 489 F.2d. 567, 572 (5th Cir.
1974).
7
Mississippi Power & Light Co., 760 F.2d at 621.
8
544 F.2d 1233, 1243 (5th Cir. 1976)(citations omitted).
8
court merely commanded Delco to maintain the status quo by
refraining from terminating the Parts Agreement.9
C. Likelihood of Success on the Merits
The principal thrust of LCD’s merits claim is that Delco’s 30-
day, no-cause letter, ostensibly notifying LCD of the termination
of the Parts Agreement, was ineffectual as a matter of law. The
legal syllogism that is the gravamen of LCD’s appeal goes: (1) The
choice-of-law provision of the Parts Agreement subjects that
contract to the substantive law of Michigan unless a provision of
the contract contravenes the law of Louisiana, being the state
where the agreement is to be performed; (2) the termination
provision of the Repurchase Act, which is the performance forum’s
suppletive law affecting every dealership contract to which it
applies, is contravened by the termination provision of the Parts
Agreement; ergo, (3) Delco’s use of the termination provision of
the Parts Agreement was ineffectual, leaving the Parts Agreement in
full force and effect.
On appeal, Delco counters, as it did in the district court,
that the Repurchase Act —— specifically, its termination provision
—— is different from, but is not contravened by, the termination
provision of the Parts Agreement, so that the contractual
9
The parties voluntarily continued to operate under the
Parts Agreement during the pendency of this litigation.
9
termination provision remains in effect. Delco continues by urging
that, even if this were not so, the law of Louisiana that the
termination provision of the Parts Agreement is purported to
contravene —— the Repurchase Act —— is not applicable to that
contract.
We shall assume for the sake of argument that the differences
between that contract’s termination provision and the termination
provision of the Repurchase Act are sufficient to trigger the
contravention exception of the Parts Agreement’s choice-of-law
stipulation,10 and proceed directly to test the Parts Agreement
against the requirements of the Repurchase Act to determine whether
that statute is even applicable to the Parts Agreement.
1. Methodology
Although appellate jurisdiction in this case rests on §
1292(A)(1) because we are reviewing the district court’s grant of
a preliminary injunction, federal jurisdiction rests on diversity
of citizenship pursuant to § 1332(a). We therefore consider the
10
Paragraph G. Applicable Law, of the General Provisions of
Delco’s 14-page standard form instrument, states:
This Agreement is to be governed by and construed
according to the laws of the state of Michigan,
excluding any such laws which direct the application of
laws of any other jurisdiction. However, any provision
which contravenes the laws of any state or jurisdiction
where this Agreement is to be performed will be deemed
not a part of this Agreement in such state or
jurisdiction. (emphasis added).
10
substantive law of Louisiana under the well-known standard of Erie
Railroad v. Tompkins.11 As the propriety of the district court’s
grant of a preliminary injunction turns on the applicability of a
particular Louisiana statute, our ultimate “Erie guess” requires
that we employ the appropriate Louisiana methodology to decide this
issue the way that we believe the Supreme Court of Louisiana would
decide it.
The primary sources of law in Louisiana are constitutions,
codes, and statutes; judicial decisions acquire the force of law
only when their numerosity and uniformity are sufficient to achieve
the status of jurisprudence constante.12 Here, we deal with neither
constitutions nor codes, but with the Louisiana Revised Statutes.
And, strangely enough, in this case we not only start with the
governing statute, we end there: Even though the Repurchase Act
was added to the Revised Statutes more than a quarer century ago,13
and even though the current version of the Repurchase Act is the
product of a comprehensive revision enacted more than a decade
ago,14 we have been able to locate only a handful of cases that
11
304 U.S. 64 (1938).
12
See Alvin B. Rubin, Hazards of a Civilian Venturer in
Federal Court: Travel and Travail on the Erie Raliroad, 48 La.
L. Rev. 1369, 1372 (1988).
13
1975 La. Acts 283, at 626-29.
14
1991 La. Acts 627, at 2012-18.
11
construe this legislation, none of which affects the outcome of
this appeal.15
2. Overview of the Repurchase Act
Title 51 of the Louisiana Revised Statutes addresses “Trade
and Commerce,” and Chapter 2 of that Title covers “Particular
Goods.” Part I-A of Chapter 2, entitled “Repurchase of Farm,
Industrial and Lawn and Garden Equipment by Wholesaler,” the
Repurchase Act, is the 10-section Part on which this appeal turns.
A brief overview of Part I-A reveals the framework within which we
must determine whether the Repurchase Act applies to the Parts
Agreement.
15
See Cherokee Pump & Equip., Inc. v. Aurora Pump, 38 F.3d
246, 252-53 (5th Cir. 1994)(finding that the Repurchase Act does
not constitute public policy and therefore does not override the
contractual choice-of-law provision at issue); Delta Truck &
Tractor, Inc. v. J.I. Case Co., 975 F.2d 1192 (5th Cir.
1992)(indirectly referring to Repurchase Act in discussing
whether farm implement dealership contract was breached);John
Deere Co. v. Slidell Tractor Co., Inc., Civ. A. No. 89-1953, 1992
WL 245609, at *12 (E.D.La. Sept. 15, 1992)(adjudicating the terms
and timing of inventory repurchase under the Repurchase Act, not
whether or not the law applies); John Deere Co. v. Slidell
Tractor Co., Inc., Civ. A. No. 89-1953, 1995 WL 758933 (E.D.La.
Dec. 20, 1995)(similarly inapposite); Int’l Harvester Credit
Corp. v. Seale, 518 So. 2d 1039, 1041-42 (La. 1988)(discussing
overall purpose of the Repurchase Act and in particular
explicating its damages provisions); Echo, Inc. v. Power Equip.
Distrib., Inc., 719 So. 2d 79, 91 (La. Ct. 1 App.)(finding that
because Power was in default of its obligations under the
collateral chattel mortgages, the notice and right to cure
provisions of the Repurchase Act were inapplicable); writ denied,
729 So. 2d 555 (La. 1998).
12
The title of the Repurchase Act presages a statutory mandate
requiring that a “wholesaler” (expanded in the statute to include
manufacturers and distributors as well) to “repurchase,” i.e., buy
back, “equipment” that it previously transferred to its vendee.
Although the title refers only to farm, industrial and lawn and
garden equipment, the list of covered industries is expanded in the
statute to comprise “farm, construction, heavy industrial material
handling, utility and lawn and garden” equipment.16 Likewise, the
term “equipment” in the title of the Repurchase Act is expanded in
the body of the statute to comprise “equipment, engines,
implements, machinery, attachments and repair parts for such
equipment.”17 Both statutory lists are finite rather than
illustrative.
Section 481, the initial section of Part I-A, serves two
functions. It describes the kind of conventional obligation to
which the Part applies, and it defines a few particular terms as
they are used in the statute. The remaining nine sections of Part
I-A lay out the substance of the Repurchase Act and together
reflect its nature, purpose, and function. In broadest terms, the
substantive sections of the Repurchase Act embody the Louisiana
Legislature’s determination to protect resident sellers,
16
La. Rev. Stat. Ann. § 51:481 (West 2003).
17
Id.
13
distributors, and retailers (defined by the statute and hereafter
referred to as “Dealers”18) who contract with wholesalers,
manufacturers, or distributors (defined by the statute and
hereafter referred to as “Agents”19) from two potential economic
risks that the Legislature perceived as likely to result from the
superior bargaining power of the Agents. First, Dealers are
protected from arbitrary and precipitous termination or
cancellation of dealership relationships without being furnished
adequate advance notice that specifies good cause and gives the
Dealer an opportunity to cure the cause. Second, former Dealers
are protected from being left holding large inventories of
equipment or spare parts, or both, with no choice but to incur
substantial economic losses by “fire-sale” dispositions of such
assets.20
The Legislature’s solution to the risk of precipitous
termination was to prohibit Agents from terminating, canceling,
failing to renew, or substantially changing the competitive
circumstances of such dealership agreements “without good cause.”21
18
La. Rev. Stat. Ann. § 51:481.B.(3).
19
La. Rev. Stat. Ann. § 51:481.B.(4).
20
Int’l Harvester Credit Corp., 518 SO. 2d at 1041 (“The
legislation is designed to protect the dealer in the event the
contract is terminated, for whatever reason, by requiring the
manufacturer to repurchase the dealer’s unsold inventory.”)
21
La. Rev. Stat. Ann. § 51:482.A.(1).
14
The Legislature first defined “good cause” in general terms of
failure to comply substantially with essential and reasonable
requirements of the dealership contracts,22 and identified nine
particular situations that constitute good cause.23 It then
provided pre-termination protection for the local Dealer by (1)
requiring the Agent to provide “at least ninety days’ written
notice of termination, cancellation, or nonrenewal of the
dealership agreement,” and (2) specifying the mandatory contents of
such notices, including cure provisions.24
To complement the pre-termination protection afforded by the
tightened notice requirement, the Legislature gave post-termination
protection to local Dealers by providing a source for disposing of
their leftover inventories of the Agent’s equipment or parts, or
both. Section 484 requires the Agent to buy back the terminated
Dealer’s inventory of all new and unused “complete” engines,
implements, equipment, machinery, and attachments that the Dealer
tenders to the Agent, at a price determined by a formula contained
in that section.25 Similarly, § 485 requires the Agent to buy back
the terminated Dealer’s inventory of the Agent’s “repair parts” at
22
La. Rev. Stat. Ann. § 51:482.A.(2).
23
La. Rev. Stat. Ann. § 51:482.B.(1-9).
24
La. Rev. Stat. Ann. § 51:482.C.
25
La. Rev. Stat. Ann. § 51:484.
15
a price determined by a slightly different formula.26 Sections 484
and 485 both state that they are not binding on the Dealer, who is
free to keep the inventory or dispose of it in some other manner.27
The final five sections of Part I-A —— §§ 486-490 —— supply a
number of details, such as passage of title, right of possession,
supplementary nature of the provisions, repurchase from heirs on
death of a Dealer, liability for failure to repurchase, and
reimbursement for handling costs.28
The perspective of the Repurchase Act that emerges from a
comprehensive reading of the statute as a whole is one of statutory
protection for the benefit of Louisiana Dealers in (1) specified
kinds of equipment (2) for use in one or more identified
industries. This is accomplished first by prohibiting short-
notice, at-will termination of dealership contracts by Agents and,
second, by ensuring that, if dealerships are terminated, the
Dealers are not left “holding a bag” of equipment or repair parts,
or both, without a ready source of liquidation at a fair price.
With this framework firmly established, we proceed to parse §
481.A, the applicability provision of the Repurchase Act.
26
La. Rev. Stat. Ann. § 51:485.
27
Although not expressed, it appears that a Dealer could
accept a termination other than for good cause and with or
without ninety days notice and an opportunity to cure; that is, a
non-complying termination by an Agent is voidable, not void.
28
La. Rev. Stat. Ann. §§ 51:486-90.
16
3. Section 481.A: Prerequisites to Applicability
Section 481 is entitled “Applicability of Part,” referring to
Part I-A of Title 51 of Louisiana’s Revised Statutes, the
Repurchase Act. As subsection B. of § 481 is entirely
definitional, the task of describing and delimiting the kinds of
contractual relationships to which the Repurchase Act applies is
left entirely to subsection A. —— in fact, entirely to the first
sentence of subsection A.
For reasons known only to the drafters of this legislation,
every delimiting feature of the types of contracts and agreements
to which the Repurchase Act applies is contained in this one, 91-
word, 14-comma, seemingly interminable, sentence. Nevertheless,
when a tediously exhaustive parsing of this serpentine sentence is
performed within the framework established by the substantive
provisions of the Repurchase Act, there emerges an unambiguous
catalog of every feature that a contract must have if the
Repurchase Act is to apply. In all its Gordian glory, the
applicability sentence of the Repurchase Act reads as follows (with
emphasis added to highlight the particular features that the Parts
Agreement must possess):
§ 481. Applicability of Part
A. The provisions of this Part shall apply to written
contracts or oral agreements of definite or indefinite
duration between [a.] any person, firm or corporation
17
engaged in the business of selling, distributing or
retailing [1] farm, [2] construction, [3] heavy
industrial material handling, [4] utility and [5] lawn
and garden [i] equipment, [ii] engines, [iii] implements,
[iv] machinery, [v] attachments and repair parts for such
equipment and [b.] any wholesaler, manufacturer or
distributor of such equipment and repair parts, whereby
the retailer agrees with the wholesaler, manufacturer or
distributor to maintain a stock of such [x] parts, or [y]
complete equipment or machines, or [z] attachments.29
Thus, for the Repurchase Act to be applicable to a dealership
arrangement, the following features must be present:
• There must be a contract or agreement (although it can be
either written or oral, and can be for either a definite or
indefinite duration).
• The contract or agreement must between a
1. “Dealer,” as defined in § 481B(3); and an
2. “Agent,” as defined in § 481B(4).
• The Dealer must be in the business of selling, distributing or
retailing.
• The Agent must be in the business of wholesaling,
manufacturing, or distributing.
• The tangible movable (personal) property that the Dealer
agrees to sell, distribute or retail and that the Agent agrees
to wholesale, manufacture or distribute, must pertain to one
or more of five industries only:
1. farming
2. construction
3. heavy industrial material handling
4. utility
5. lawn and garden
• The tangible movables that are the objects of the dealership
contract must be of one or more of the following types:
29
La. Rev. Stat. Ann. § 51:481.A (emphasis added).
18
1. equipment
2. engines
3. implements
4. machinery
5. attachments
• In addition to the type or types of equipment that are the
objects of the dealership contract, the Dealer must also agree
to sell, distribute or retail, and the Agent must also agree
to wholesale, manufacture or distribute,
1. repair parts
2. for such equipment.
• And, in the dealership contract, the Dealer also must agree to
maintain a stock [inventory] of one or more of the following:
1. repair parts for the subject tangible movables, or
2. the tangible movables themselves, or
3. attachments30
30
A cursory reading of the subject sentence appears to
reveal a slight ambiguity as a result of the punctuation of the
phrase “equipment, engines, implements, machinery, attachments
and repair parts....” Because there is neither an “and” nor an
“or” between the words “machinery” and “attachments” and no comma
between the words “attachments” and “and,” it is not absolutely
clear whether “attachments” (whatever that term might mean here)
is (1) a fifth category of basic tangible movables (“equipment,
engines, implements, machinery, attachments”) or (2) merely an
ancillary tangible movable (“attachments and repair parts”). The
final phrase in the first sentence of § 481A —— “parts, or
complete equipment and machines, or attachments” —— seems to
separate attachments from major pieces of equipment, but also to
separate attachments from parts as well; and never even mentions
engines or implements, two categories of movables that appear in
the initial list of the kinds of movables that must be covered by
contracts or agreements to which the Repurchase Act applies.
This putative ambiguity, evanesces, however, when read in context
with § 484, which creates the Agent’s obligation to repurchase
new unused “engines, implements, equipment, machinery, and
attachments (emphasis added), and § 485, which creates the
parallel obligation for repurchase of “repair parts” only.
Fortunately, it is not necessary to resolve this ambiguity to
decide the instant appeal.
19
Reduced to its essentials, the first sentence of § 481.A
requires a contract to have two key characteristics if the
Repurchase Act is to be applicable: (1) The contract must
establish a dealership that sells, distributes or retails the kind
or kinds of (a) equipment and (b) repair parts that are identified
in that sentence; and (2) in the contract, the Dealer must agree to
maintain an inventory of (a) such equipment or (b) such parts, or
(c) both.
The Parts Agreement obviously contains a number of the
features required by the first sentence of § 481.A.: It is a
written contract; it is of indefinite duration; it is between a
Dealer and an Agent; its objects are tangible movables
(specifically, 53 product lines of automotive parts); and the
Dealer agrees to maintain a stock of repair parts. The remaining
prerequisites to applicability of the Repurchase Act, however, are
problematical.
In the Parts Agreement, LCD as the Dealer and Delco as the
Agent do not agree that Delco will supply and LCD will sell,
distribute or retail any “equipment, engines, implements,
machinery, attachments” whatsoever. Yet § 481A only applies to
contracts under which the Agent supplies and the Dealer sells,
distributes or retails both (1) one or more categories of “such
equipment” (listed types of tangible movables for use in listed
20
industries) “and” (2) “repair parts for such equipment.” True, in
the Parts Agreement, LCD agrees “to maintain a stock of such
parts”; however, that requirement in the statute presupposes that
the Dealer is agreeing to sell, distribute or retail not just
repair parts, but one or more categories of tangible movables that
the Repurchase Act subsequently refers to globally as “equipment.”
The Repurchase Act literally requires that, for a dealership
contract to be covered by the statute, the Dealer must commit to
sell the Agent’s “equipment...and repair parts for such equipment.”
In sum, § 481.A. cannot be read to make the Repurchase Act
applicable to a contract that establishes only a freestanding
dealership in repair parts.
We acknowledge that the Repurchase Act could be applicable to
a dealership contract in which the Dealer in equipment manufactured
or wholesaled by the Agent does not agree to “maintain a stock” of
complete equipment or machines or attachments (presumably selling
equipment on special order only and not maintaining a “showroom”
inventory of equipment), but does agree to “maintain a stock” ——
keep an inventory —— of repair parts for such equipment. Crucial
to understanding the distinction between this hypothetical
arrangement and the Delco-LCD arrangement, however, is the
recognition that the term “such parts” refers to “repair parts for
such equipment”; and, in turn, that the term “such equipment”
21
comprises exclusively, and is limited to, the kinds of tangible
movables (“equipment, engines, implements, machinery, attachments”)
that appear in the statute’s exclusive list and are (1) wholesaled,
manufactured or distributed by the Agent and (2) sold, distributed
or retailed by the Dealer. In other words, if the dealership
contract commits the Dealer to deal in both equipment and parts for
that equipment, the Dealer need not keep an inventory of the
equipment as long as he keeps an inventory of parts. But the
obverse is not true: keeping a parts inventory without being a
dealer in the equipment itself is not sufficient to make the
Repurchase Act apply.
Albeit not without considerable effort, the picture finally
comes into crisp focus: The Repurchase Act can apply to a
situation in which the “stock,” i.e., the inventory, that the
Dealer “agrees to maintain” is repair parts only; but only if those
repair parts are for equipment of the Agent that the Dealer, in the
self-same contract, agrees to sell, distribute, or retail. For
example, if LCD contracted with John Deere to sell, distribute or
retail —— but not maintain a stock (inventory) of —— large and
expensive farm machines; and LCD further agreed to “maintain a
stock of” “repair parts for such equipment,” i.e., replacement and
repair parts for the farm machinery, the Repurchase Act could be
applicable. This is because the hypothetical dealership agreement
22
that requires the dealer to (1) sell but not stock the equipment,
but (2) maintain an inventory of repair parts for such equipment,
fits within the plain wording of the statute (and is commercially
realistic as well). Not so, however, for a Dealer that, without
contracting to sell, distribute or retail any of the Agent’s
underlying equipment, only contracts to “maintain a stock” of the
Agent’s repair parts.
As LCD has not contracted with Delco to sell, distribute or
retail any equipment, engines, or machinery that Delco (or any GM
division) wholesales, manufactures, or distributes, but has only
contracted to maintain a freestanding stock of generic “vehicle
replacement parts,” the Repurchase Act does not apply to the Parts
Agreement.31 Louisiana protects specified categories of Dealers in
specified categories of new equipment and new spare parts for the
equipment against the risks of precipitous terminations of
dealership contracts, provided that the Dealer also maintains an
inventory of the equipment or the parts, or both. In contrast,
31
Indeed, if the Repurchase Act were applicable to Dealers
who maintain a stock of an Agent’s repair or replacement parts
for equipment (including vehicles), engines, implements,
machinery or attachments, without contracting with that Agent to
sell, distribute or retail any of the Agent’s equipment for which
the repair parts are intended, the Repurchase Act would, at least
potentially, apply to virtually every NAPA store, Auto Rally,
PepBoys, Western Auto, Autolec, Sears or Penney’s TBA Shop, as
well as Home Depot, Wal-Mart, Ace Hardware, and so on ad
infinitum. That is clearly not what the Legislature intended and
not what the Repurchase Act says.
23
Louisiana has not demonstrated an intention to protect dealers like
LCD that stock and sell or distribute generic repair parts only.
The fact that a free-standing parts dealer like LCD might be an
equipment dealer for some unrelated —— or even competitive —— Agent
is irrelevant.
In summary, as the Repurchase Act does not apply to the free-
standing, parts-only Parts Agreement between LCD and Delco, LCD is
not entitled to the protection of the Repurchase Act. It follows
inescapably, therefore, that the termination provision of the Parts
Agreement, with its requirement of no more than a 30-day, no-cause
written notice, does not contravene any law of Louisiana that is
applicable to that agreement. LCD does not contend that Delco’s
hand-delivered 30-day termination notice failed to comply with
either the notice or the termination provisions of the Parts
Agreement —— indeed, Delco appears to have complied with those
provisions to the letter —— so LCD has no real likelihood of
prevailing on the merits of its claim of invalid termination of the
Parts Agreement. As alone, the absence of likelihood of success on
the merits is sufficient to make the district court’s grant of a
preliminary injunction improvident as a matter of law, we need not
address the three remaining prongs of the test for granting
preliminary injunctions.32
32
Similarly, as we have determined the Repurchase Act to be
inapplicable to free-standing, parts-only agreements between
24
III. CONCLUSION
The district court based its grant of LCD’s motion for a
preliminary injunction barring Delco’s termination of the Parts
Agreement on, inter alia, the conclusion that LCD had a substantial
likelihood of success on the merits. To reach that conclusion, the
court had to determine that the Repurchase Act applies to the Parts
Agreement. In combination, our review of the essentially
undisputed facts, our reading of the Parts Agreement, and our
construction of the Repurchase Act, satisfy us that the statute is
not applicable to the Parts Agreement (and, other than the
inapplicable Marine Act, LCD has proffered no other Louisiana law
that is contravened by the notice and termination provisions of the
Parts Agreement). Aware of nothing else in fact or in law that
would invalidate Delco’s termination of the Parts Agreement, we are
convinced that LCD has no real likelihood of success on the merits
Agents and Dealers that do not also sell, distribute, or retail
the Agents’ underlying equipment, engines, implements, machinery,
etc., we need not and therefore do not answer the question
whether the Repurchase Act would also be inapplicable because of
LCD’s alleged failure to meet the “industries” requirement of the
first sentence of § 481.A, i.e., that its “vehicle replacement
parts” be sold, distributed or retailed in one or more of the
five industries listed in that subsection. We cannot help but
observe, however, that inasmuch as § 481.B.(1) makes the
Repurchase Act inapplicable to “vehicles” unless they are
designed or adapted and “used exclusively” for operations in one
or more of the five applicable industries, stand-alone dealership
contracts for replacement parts for vehicles surely could not
come under the aegis of the Repurchase Act unless the vehicles
for which those parts are intended are themselves used
exclusively in one or more of the targeted industries.
25
of its claim that Delco did not effectively terminate the Parts
Agreement.
As the four prongs of the test for granting a preliminary
injunction are conjunctive, LCD’s failure of the likelihood-of-
success prong is fatal to its claim for such relief.33 We therefore
reverse the district court’s grant of a preliminary injunction
prohibiting Delco from terminating the Parts Agreement and remand
this case with instructions to vacate the preliminary injunction
and to conduct any further proceedings in a manner that is
consistent with this opinion.
REVERSED and REMANDED WITH INSTRUCTIONS.
33
As LCD’s breach of contract claim is not before us in
this appeal from the grant of the preliminary injunction, we do
not address that claim.
26