Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-90-03151/USCOURTS-ca10-90-03151-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 

---

• 

FIL D 

UNITED STATES COURT OF APPEALS 

FOR THE TENTH CIRCUIT 

'J~·Htt--d 3ra~ v,)Utt of Appeal 

Tenth Cb:uit 

r ?R 3 O 19 

~OBERT L. HOEC~ 

CRAMER PRODUCTS, INC., ) Clerk 

) 

Plaintiff-counter-claim- ) 

defendant-Appellee, ) 

) 

v. ) 

) 

INTERNATIONAL COMFORT PRODUCTS, LTD.; ) 

and ALLOR MEDICAL, INC., ) 

) 

Defendants-counter- ) 

claimants-Appellants. ) 

ORDER AND JUDGMENT* 

No. 90-3151 

(D.C. No. 89-2488-0) 

(D. Kan.) 

Before ANDERSON, TACHA, Circuit Judges, and KANE,** District 

Judge. 

**Honorable John L. 

District Court for 

designation. 

Kane, Senior District Judge, United States 

the District of Colorado, sitting by 

After examining the briefs and appellate record, this panel 

has determined unanimously that oral argument would not materially 

assist the determination of this appeal. See Fed. R. App. P. 

34(a); 10th Cir. R. 34.1.9. 

submitted without oral argument. 

* 

The case is therefore ordered 

This order and judgment has no precedential value and shall 

not be cited, or used by any court within the Tenth Circuit, 

except for purposes of establishing the doctrines of the law of 

the case, res judicata, or collateral estoppel. 10th Cir. R. 

36.3. 

Appellate Case: 90-3151 Document: 010110105249 Date Filed: 04/30/1991 Page: 1 
Defendants appeal from the district court's order entering a 

preliminary injunction. Plaintiff Cramer Products, Incorporated, 

commenced this action in November 1989, asserting claims for 

breach of contract, tortious interference with contract rights, 

and tortious interference with current and prospective business 

advantages and relationships, all arising from the purported 

breach of an exclusive distribution agreement entered into by 

plaintiff and defendant International Comfort Products, Limited 

(ICP). 

ICP owns the patent to a protective heel cup, developed by 

ICP's president. The distribution agreement, executed in April 

1982, gave plaintiff "the exclusive and nontransferable right to 

market and sell the [heel cup] to the sporting goods, athletic 

training and physical therapy markets in the United States and 

overseas . " Dissatisfied with plaintiff's promotional and 

marketing strategies, however, ICP began selling its products to 

defendant Allor Medical, Incorporated (Allor) for distribution in 

the exclusive markets granted plaintiff by the distribution 

agreement. This litigation followed. 

After conducting an evidentiary hearing, the district court 

entered a preliminary injunction enjoining defendants from 

distributing and selling the heel cups, or from authorizing any 

party other than plaintiff to distribute or sell the heel cups, in 

"the domestic sporting goods, domestic athletic training, or 

domestic physical therapy markets in the United States of 

America." The district court did not include the "overseas 

markets" within the scope of the preliminary injunction. 

2 

Appellate Case: 90-3151 Document: 010110105249 Date Filed: 04/30/1991 Page: 2 
This court will review a district court order granting or 

denying a preliminary injunction for an abuse of discretion and 

will set aside the district court's determination only if it is 

based upon an error of law or constitutes an abuse of discretion. 

Tri-State Generation & Transmission Ass'n, Inc. v. Shoshone River 

Power, Inc., 805 F.2d 351, 354 (10th Cir. 1986). In order to be 

entitled to a preliminary injunction, the moving party bears the 

burden of establishing that 1) the moving party will suffer 

irreparable injury without the injunction; 2) the threatened 

injury to the moving party outweighs whatever damage the proposed 

injunction may cause the opposing party; 3) the injunction, if 

issued, will not be adverse to the public interest; and 4) there 

is substantial likelihood that the moving party will eventually 

prevail on the merits. Id. at 355. 

The district court determined that plaintiff had satisfied 

all four requirements and, therefore, issued the preliminary 

injunction. On appeal, defendants challenge only the district 

court's determination concerning the fourth requirement, that 

plaintiff established the substantial likelihood that it would 

prevail on the merits of its claims. 

An initial issue presented on appeal is what standard 

plaintiff had to meet to satisfy the fourth injunctive 

requirement. Plaintiff asserts that, where, as in the instant 

appeal, it had satisfied the first three requirements for 

preliminary injunctive relief, plaintiff need only establish that 

it had raised questions so serious, substantial, difficult and 

doubtful as to make them fair ground for litigation. See, e.g., 

3 

Appellate Case: 90-3151 Document: 010110105249 Date Filed: 04/30/1991 Page: 3 
id. at 358. Defendants argue, however, that, because the 

preliminary injunction issued by the district court was a 

mandatory, rather than a prohibitory, injunction, plaintiff was 

required to meet a heightened standard by establishing that the 

law and facts clearly favored plaintiff's success on the merits of 

its claims. See Zurn Constructors, Inc. v. B.F. Goodrich Co., 685 

F. Supp. 1172, 1180-81 (D. Kan. 1988). We need not determine 

which of these standards applied to plaintiff's request for 

preliminary injunctive relief because, under either standard, 

plaintiff satisfied the fourth requirement. 

The evidence before the district court established the 

following: Plaintiff and ICP entered into an agreement in April 

1982, which gave plaintiff exclusive distribution rights, in 

specific markets, to promote and sell ICP's protective heel cups. 

See Distribution Agreement, 1 2. ICP entered this agreement 

because ICP's president believed that plaintiff was "a huge, 

awesome, penetrating company that had the ability to penetrate all 

the retail sporting goods market .... " Transcript, Hearing on 

Request for Preliminary Injunction, 95. 

The distribution agreement included a provision requiring 

plaintiff to "use its best efforts to market and sell the Product 

into the sporting goods, athletic training, and physical therapy 

markets and to promote the Product to universities, high schools, 

and other groups and institutions which include or sponsor 

athletic programs, and to the sporting goods trade." Distribution 

Agreement, 1 5. A second provision of the agreement required 

plaintiff to "use its best efforts to advertise and promote the 

4 

Appellate Case: 90-3151 Document: 010110105249 Date Filed: 04/30/1991 Page: 4 
Product, including the following," then listing specific efforts 

plaintiff agreed to undertake to promote and market the heel cups. 

Distribution Agreement, 1 10. 

ICP's president disagreed with, and became disappointed in, 

some of plaintiff's marketing and promotional strategies, 

particularly those aimed at the retail sporting goods market. In 

the foreign retail market, for example, although plaintiff's 

president testified that plaintiff had "worked very hard in the 

foreign market," plaintiff experienced "less results that [sic] 

[plaintiff was] happy with." Tr. 62. ICP's president testified 

that, in light of plaintiff's lack of success in those foreign 

markets, ICP began selling its products to other companies for 

distribution in the foreign markets. Id. at 111. ICP asserted 

that plaintiff was aware of this and acquiesced. Id. Plaintiff's 

president acknowledged that plaintiff was aware of ICP's use of 

other distributors in other markets. Id. at 63. 

ICP's president further suggested that the parties' conduct 

concerning the foreign markets had served to modify the 

distribution agreement. See Byers Transp. Co. v. Fourth Nat'l 

Bank & Trust Co., 333 F.2d 822, 825 (10th Cir. 1964)(applying 

Kansas law)(parties to contract free to alter, modify, abrogate or 

rescind contract; agreement to do so may be implied from parties' 

conduct). 

Q. . .. Did you ever make anyone at Cramer aware that 

others were selling Tuli Heel Cups in the foreign 

markets? 

A. Yes. 

Q. Did anyone at Cramer ever object to the foreign 

sales? 

5 

Appellate Case: 90-3151 Document: 010110105249 Date Filed: 04/30/1991 Page: 5 
A. No. Because, as [Cramer's president] said, they 

hadn't developed the market, and I went ahead and 

developed it and the way we always had treated this 

type of area was they did the best they could where 

they did, and I tried to pick up the slack around 

them when they didn't perform in a certain area 

that was glaringly deficient. 

Tr. 111 (direct examination). 

Q. And as far as you're 

distribution contract 

Cramer Products? 

concerned, 

is still 

that exclusive 

in effect with 

A. With the modifications we've seemed to agree upon 

over the years, yes. 

Q. Right. And you admit that you are violating it by 

dealing with Allor who is selling in Cramer's 

product market? 

A. In the letter of the contract, yes, but not the 

intent that [Cramer's president] and I have had 

over the years. 

Id. at 127 (cross-examination). 

Although ICP asserted that it was disappointed with 

plaintiff's overall promotional and marketing efforts, ICP allowed 

the exclusive distribution agreement to be renewed twice, in 

August 1985 and August 1988, because ICP considered plaintiff 

a very important part of [ICP's] program ... they do a 

good job where they work. They work in The First Aider, 

which is trainers, coaches, schools and team sales. And 

there's probably nobody better. The only comparative 

company would be Meiller and why change. And I don't 

think a telemarketer could do as good in that particular 

market as they do. They are good at what they do. I 

never denied that. But for retail sporting goods, chain 

stores, they're not driven, and that's what it takes to 

break down these monstrous retail store programs. 

Id. at 118. 

ICP admitted that, although it considered the distribution 

agreement to remain binding on the parties, albeit perhaps in a 

6 

Appellate Case: 90-3151 Document: 010110105249 Date Filed: 04/30/1991 Page: 6 
modified form, id. at 127, because ICP continued to be unhappy 

with plaintiff's lack of success in the retail sporting goods 

market, it began selling its products to Allor for distribution in 

plaintiff's exclusive markets, in violation of the specific terms 

of the parties' agreement. Id. Immediately upon becoming aware 

of Allor's presence in its exclusive domestic markets, plaintiff 

complained to ICP, who assured plaintiff it would take care of the 

problem. ICP, however, did not request Allor cease its activity 

in plaintiff's markets but continued to sell to Allor with the 

intention that Allor distribute in these markets. See id. at 

128-29. Eventually, plaintiff again complained to ICP concerning 

Allor, and ICP acknowledged to plaintiff that ICP had no intention 

of preventing Allor's distribution in these markets, in light of 

Allor's successful results. See id. 

Defendants first argue that the district court based its 

issuance 

fact and 

plaintiff 

of the preliminary injunction on conflicting findings of 

conclusions of law. The district court determined 

had established a substantial likelihood it would 

succeed on the merits of its breach of contract claim, Memorandum 

and Order, 15-16, yet the district court also determined, in 

limiting the preliminary injunction to domestic markets, that 

plaintiff had not yet established the "likelihood of success with 

regard to foreign markets." Id. at 17. Defendants' second 

argument further asserts that the district court erred in dividing 

the distribution agreement into two separate areas, foreign 

markets and domestic markets. 

7 

Appellate Case: 90-3151 Document: 010110105249 Date Filed: 04/30/1991 Page: 7 
In light of the testimony of ICP's president asserting that 

the parties' conduct modified the distribution agreement as it 

pertained to the foreign markets, tr. 111, 127, the district 

court's two findings were not sufficiently contradictory to 

undermine the district court's determination that plaintiff would 

likely prevail on the merits of its breach of contract claim. 

Further, in light of plaintiff's president's testimony that, 

although plaintiff had worked the foreign markets very hard, it 

had not achieved successful results in those markets, id. at 63, 

the district court's attempt to tailor narrowly the scope of the 

preliminary injunction, to defendants' benefit, does not appear to 

have been an abuse of discretion. See Community Communications 

Co. v. City of Boulder, 660 F.2d 1370, 1380 (10th Cir. 1981), 

cert. dismissed, 456 U.S. 1001 (1982)(relief pending litigation 

must be tailored narrowly to minimize irreparable harm to both 

sides and at the same time to permit meaningful grant of whatever 

permanent relief warranted). 

Defendants next argue that the district court erred in 

ordering specific performance of the distribution agreement 

because plaintiff failed to establish that plaintiff had satisfied 

all of its obligations under the contract and, in particular, the 

"best efforts" provisions. This argument, too, lacks merit. 

First, the district court's order addressed only the issue of 

preliminary injunctive relief and, therefore, was not a final 

resolution of the merits of plaintiff's claims. See Penn v. San 

Juan Hosp., Inc., 528 F.2d 1181, 1185 (10th Cir. 1975). Even 

though the preliminary injunction required ICP to abide by the 

8 

Appellate Case: 90-3151 Document: 010110105249 Date Filed: 04/30/1991 Page: 8 
terms of the distribution agreement, the purpose was not to award 

plaintiff specific performance as final relief, but to preserve 

the status quo between the parties pending the final resolution of 

the litigation. Tri-State Generation, 805 F.2d at 355; cf. 

Ferry-Morse Seed Co. v. Food Corn, Inc., 729 F.2d 589, 593 (8th 

Cir. 1984)(where status quo is condition, not of rest, but of 

action, and condition of rest will cause irreparable harm, 

mandatory preliminary injunction proper). 

Secondly, ICP's president asserted 

disappointed with plaintiff's efforts, ICP 

that, although ICP was 

still considered the 

distribution agreement binding on the parties. Tr. 127. Contrary 

to its argument on appeal, therefore, ICP asserted to the district 

court that plaintiff had not breached the agreement. 

Thirdly, the district court made specific findings of fact 

concerning plaintiff's efforts to promote and market ICP's heel 

cups and, as a conclusion of law, determined that plaintiff had 

"presented substantial evidence demonstrating that it complied 

with the best efforts provision as to the domestic market." 

Memorandum and Order, 16. The record supports these findings. 

Defendants correctly assert that the district court did not 

make a specific finding concerning plaintiff's compliance with the 

best efforts provision concerning the foreign markets, but did 

determine that "[a]t this stage, [plaintiff] has failed to make 

the requisite showing of its likelihood of success with regard to 

foreign markets ... " Id. at 17. Nonetheless, in light of 

defendants' assertion that the agreement had been modified as it 

applied to the foreign markets, the lack of a finding that 

9 

Appellate Case: 90-3151 Document: 010110105249 Date Filed: 04/30/1991 Page: 9 
plaintiff satisfied the "best efforts" provisions in the foreign 

markets does not affect the district court's determination on the 

probability of plaintiff's success on the breach of contract 

claim. 

As further support for the previous argument, defendants next 

argue that the district court erred in interpreting the second 

"best efforts" provision to limit the first "best efforts" clause. 

The record supports the district court's interpretation of the two 

"best efforts" provisions in the agreement. 

The district court found that 

[s]ince [plaintiff's] marketing philosophy is one of 

creating demand through education and ICP prefers a more 

short term approach, paragraph 10 of the distributor 

agreement was added by [plaintiff] to further define and 

limit the "best efforts" requirement. Paragraph 10 

obligates [plaintiff] to: advertise in its First Aider 

magazine which is distributed to 100,000 coaches, 

athletic directors and trainers, conduct direct 

mailings, publicize Tuli's heel cups at listed shows and 

conventions, provide for promotion in [plaintiff's] 

catalogs and price lists, and to promote through 

[plaintiff's] sales force, which personally calls on 

dealers. 

Id. at 4. The district court's interpretation of the contract's 

language is reasonable. See Barnhart v. McKinney. 682 P.2d 112, 

120 (Kan. 1984)(in construing written instrument, law favors 

reasonable, rather than unreasonable, interpretation, quoting 

Garvey Center, Inc. v. Food Specialties, Inc., 519 P.2d 646, 649 

(Kan. 1974)). Cf. John Gruss Co. v. Paragon Energy Corp. (In re 

John Gruss Co.). 22 Bankr. 236, 240 (Bankr. D. Kan. 1982)(applying 

Kansas law)(in interpreting written instrument, all terms should 

be given reasonable effect, if possible, quoting Restatement 

(Second) of Contracts§ 229). 

10 

Appellate Case: 90-3151 Document: 010110105249 Date Filed: 04/30/1991 Page: 10 
Further, assuming the inclusion of two "best efforts" 

provisions was sufficiently ambiguous to allow admission of parole 

evidence, see NEA-Goodland v. Board of Educ., U.S.D. No. 352, 775 

P.2d 675, 679 (Kan. App. 1989)(where contract ambiguous, intention 

of parties may be determined by consideration of circumstances 

surrounding execution of contract), the uncontradicted testimony 

of plaintiff's president completely supported the district court's 

determination. Plaintiff's president testified that, because 

plaintiff's promotional and marketing strategies were conservative 

and very different from the ideas of ICP's president, plaintiff 

requested the inclusion of the second "best efforts" provision in 

order to make clear to ICP's president how plaintiff intended to 

promote and market ICP's heel cups. Tr. 25-26. Cf. Desbien v. 

Penokee Farmers Union Co-op. Ass'n., 552 P.2d 917, 923 (Kan. 

1976)("In ambiguous contracts where there is uncertainty between 

the general and the specific provisions relating to the same 

thing, the specific provisions ordinarily qualify the meaning of 

the general provisions, the reasonable inference being that the 

specific provisions express more exactly what the parties 

intended. " ) . 

Defendants' final argument on appeal is that the district 

court erred in determining plaintiff will likely succeed on its 

two tortious interference claims, asserted against Allor, because 

plaintiff cannot establish that ICP breached a valid and binding 

contract between plaintiff and ICP. In light of our determination 

that plaintiff did establish the likelihood of its success on the 

breach of contract claim, this appellate argument must also fail. 

11 

Appellate Case: 90-3151 Document: 010110105249 Date Filed: 04/30/1991 Page: 11 
The order of the United States District Court for the 

District of Kansas is AFFIRMED. 

Entered for the Court 

Stephen H. Anderson 

Circuit Judge 

12 

Appellate Case: 90-3151 Document: 010110105249 Date Filed: 04/30/1991 Page: 12