In an April 11, 2016 Order, Department 9 of the Washoe County Business Court denied a preliminary injunction sought by a Nevada wine distributor against a California wine producer. The distributor then appealed this decision to the Nevada Supreme Court and sought a “stay,” i.e., the same preliminary injunction pending appeal. The Business Court entered a June 17, 2016 Order denying the stay as well.

Background

In January 2014, a wine and spirits distribution company (the “Distributor”) entered into an oral exclusive franchise agreement (the “Franchise Agreement”) with a wine producer (the “Producer”) located in the Napa region of California, to be the exclusive distributor of the producer’s products in Nevada. In February 2016, the wine producer sent the distributor letters terminating the Franchise Agreement effective in May 2016, partially out of concern for the distributor’s alleged failure to timely expand the producer’s product in the Las Vegas area. In March 2016, the distributor submitted purchase orders for wine. But the producer declined to fulfill the purchase orders.

The Distributor then filed a lawsuit against the Producer alleging claims for breach of contract, breach of the duty of good faith and fair dealing, and violation of the Nevada statutes regarding franchises between liquor suppliers and wholesalers. The Distributor also sought a temporary restraining order and injunction precluding the Producer from (1) terminating the Franchise Agreement; (2) appointing another wholesaler of product in the State of Nevada; and (3) refusing to fulfill the Distributor’s March 2016 purchase orders; (4) unreasonably refusing to accept the Distributor’s future orders and/or withholding Products from the Distributor; (5) restricting the retailers to which the Distributor may sell Products; and (6) dictating the price at which the Distributor may sell Products.

Legal Analysis

The Business Court denied the Distributor’s motion for a temporary restraining order and for a preliminary injunction, primarily because the Distributor had an adequate remedy in its claims for money damages. The Distributor’s claims for breach of contract, if successful, could be remedied by money damages. Moreover, the Distributor’s claims for price fixing and restricting the Distributor’s customers gave rise to a statutory claim for money damages.

The Distributor asserted that that the lack of a preliminary injunction would irreparably harm its business. However, the District Court called this assertion speculative. The Court noted that the Producer’s product comprised only 30% of the Distributor’s annual sales. Therefore, the Distributor still enjoyed the ability to carry on its business with product from other producers.

After the Distributor appealed to the Nevada Supreme Court and sought a stay, the District Court denied the stay motion as well. First, the Distributor did not show that a stay was necessary to preserve the object of the Distributor’s appeal. Second, the Distributor would not suffer irreparable injury. The District Court agreed that an exclusive franchise is a property right. However, the District Court declined to rule that every franchise termination involves irreparable harm. In this matter, the Distributor would not suffer irreparable harm because it had an adequate remedy in money damages and because it could continue to distribute product from other producers. Third, the District Court ruled that a stay pending appeal would irreparably injure the Producer by preventing the Producer from adequately developing the Las Vegas market for its wine. The Court observed: “This Court cannot impose contractual obligations not voluntarily assumed, nor can it mandate contractual obligations in perpetuity absent such terms written into the instrument itself.”