U.S. District Court for The Eastern District of New York Issues a Preliminary Injunction Against One of Mitsubishi’s Former Dealers

• Posted on: May 18 2018

In Mitsubishi Motors North America Inc. v. Grand Automotive, Inc. d/b/a Planet Mitsubishi, the United States District Court for the Eastern District of New York granted Mitsubishi Motors North America’s (“Mitsubishi”) request for a preliminary injunction pursuant to Rule 65 of the Federal Rules of Civil Procedure.

Mitsubishi distributes its vehicles through a network of authorized dealerships that are authorized to “sell and provide services relating to…Mitsubishi motor vehicles, parts, and accessories pursuant to Dealer Sales and Service Agreements [“DSSA”].”  Entering into the DSSA, entitled dealers to the limited use of Mitsubishi’s trademarks and related intellectual property (“IP”) in connection with the sale of Mitsubishi vehicles.  Significantly, the license is strictly “limited to the authorized location of the dealership from which the dealer operates.”

In 2016, Planet and Mitsubishi entered into a new three-year DSSA (the “Planet DSSA”), that, inter alia, authorized Planet to operate its dealership, and granted to Planet a non-exclusive license to use the IP (absent contrary prior written authority), exclusively at 265 North Franklin Street, Hempstead, New York (the “Location”).

The Location was leased from the fee owner (“Landlord”).  Planet failed to timely notify the Landlord that it intended to exercise a renewal option under the lease and, accordingly, the Landlord sent notice to Planet that its lease was terminated.  At the time, Mitsubishi was not notified of this development.  Thereafter, Planet advised Mitsubishi that it was considering a new location, which, for a variety of seemingly appropriate reasons, was not approved by Mitsubishi.  Mitsubishi denied Planet’s subsequent request to relocate to a different alternative location (the “Unauthorized Location”) – again for seemingly appropriate reasons.

Undaunted, despite Mitsubishi’s failure to approve same, Planet nonetheless relocated to the Unauthorized Location.  This move prompted Mitsubishi to serve a “cease and desist” letter to Planet demanding that it stop using the IP and otherwise comply with the Planet DSSA.  A “Notice of Termination” of the Planet DSSA was served as a result of Planet’s alleged failure to resolve the issues presented by the “cease and desist” letter.

Mitsubishi commenced action and moved by Order to Show Cause for a Temporary Restraining Order (“TRO”) prohibiting Planet from using the IP and from operating a Mitsubishi dealership at the Unauthorized Location.  The requested TRO was granted and the Court directed briefing on whether to issue a preliminary injunction.  Upon review and analysis of the parties’ submissions, the Court issued a preliminary injunction.

In order to establish entitlement to a preliminary injunction, the movant must demonstrate: 1. the likelihood of success on the merits; 2. irreparable harm absent preliminary relief; 3. that the balancing of equities tips in movant’s favor; and, 4. that injunctive relief is in the public’s interest.  The Court also noted that when “a preliminary injunction requires an affirmative act or mandates a specific course of conduct (as opposed to maintaining the status quo), the injunctive relief is understood to be mandatory requiring the application of a ‘clear’ and ‘substantial’ likelihood of success on the merits.”  (Citations and some internal quotation marks omitted.)

Irreparable Harm

The Court described irreparable harm as the “single most important prerequisite” for preliminary injunctive relief, and stated that to prove same, the movant must demonstrate that “absent a preliminary injunction they will suffer an injury that is neither remote nor speculative, but actual and imminent, and one that cannot be remedied if a court waits until the end of trial to resolve the harm.  (Citations and some internal quotation marks omitted.)  The factors to consider in determining whether irreparable harm exists are: 1. the likelihood of irreparable injury absent the requested injunctive relief; 2. remedies at law – such as monetary damages – are inadequate to compensate movant; 3. the balancing of hardships favors the movant; and, 4. the public interest would not be “disserved” if the injunctive relief is granted.     (Citations and some internal quotation marks omitted.)

The Court also recognized recent Second Circuit authority holding that courts “must not adopt a categorical or general rule or presume that the plaintiff will suffer irreparable harm” and, accordingly, must actually consider the consequences to the movant if the preliminary injunction is denied, but the movant prevails on the merits.  (Emphasis in original; citations and some internal quotation marks omitted.)

Based on the evidence, the Court determined that irreparable injury was likely absent the requested relief based on Mitsubishi’s “loss of control over its reputation and goodwill caused by Defendant’s continued use of [the IP] at the Unauthorized Location pending a final” merits determination.   Much of the Court’s analysis in this regard related to the contractual requirement that Mitsubishi approve the dealer’s location and the unsuitability of the Unauthorized Location for a Mitsubishi dealership.

Mitsubishi had no adequate remedy at law because “the losses of reputation and goodwill and resulting loss of customers are not precisely quantifiable.”  As to the balancing of the equities, the Court found, among other things, that “Planet has only itself to blame for its present predicament by failing to timely exercise the lease extension option at [the Location].”  In addition, the Court presumably agreed with Mitsubishi’s position that, among other things, Planet will not be burdened because the injunction would simply prevent Planet from engaging in conduct to which it has no right to engage and its performance was so poor it consistently lost money on the sale of new Mitsubishi vehicles.  Finally, the public interest would be served by the granting of the requested injunctive relief because such would alleviate the potential for the “consuming public” to be confused as to whether Planet is an authorized Mitsubishi dealer.

Likelihood of Success

As previously discussed, the Court determined that a heightened standard of proof because “the relief sought here requires Planet to engage in an affirmative act or specific course of conduct (i.e., removal of all [Mitsubishi IP] from the Unauthorized Premises as well as Planet’s website) which would alter the status quo ante.”

Applying the heightened standard, the Court found that Mitsubishi would likely succeed on its unfair competition claims because the Planet DSSA was properly terminated and, therefore, Planet’s continued use of Mitsubishi’s protectable IP is improper, unauthorized and would likely lead to confusion.  Even if the Planet DSSA was not properly terminated, the Court found that Mitsubishi would likely succeed on the merits of its unfair competition claims because the license to use the IP was contractually limited to the Location and, therefore, use of the IP at the Unauthorized Location was prohibited and might confuse the public into thinking such use was indeed permitted.

Similarly, the Court found that Mitsubishi would likely succeed on the merits of its contract claims because “Planet’s unauthorized relocation and subsequent continued use of the [IP] constituted the initial breach of the parties’ agreement giving rise to [Mitsubishi’s] damages.”