17. Krzysztof Palezewski, Zywiec’s export manager, testified that in territories where Stawski
has been replaced by another distributor, Zywiec’s sales have increased.

18, Palczewski testified that if Zywiec were forced to continue ils relationship with Stawski,
Zywiec’s sales would remain stagnant and Zywiec will be deprived of sales increascs and
increased exposure and profits.

19. Sales of Zywiec products in the United States represent only about 1% of Zywiec’s sales

worldwide.
1 Conclusions of Law
A Inadequate Remedy at Law/Trreparable Harm

“A party seeking a preliminary injunction must demonstrate that [it] will suffer an
irreparable injury if the injunction is not granted for which [it has] no adequate remedy at law.”
Re/Max N. Cent. v. Cook, 272 F.3d 424, 432 (7th Cir. 2001). To demonstrate irreparable injury,
the moving party must show that it will suffer “harm that cannot be prevented or fully rectified
by the final judgment after trial.” Anderson v. USF. Logistics (IMC), Inc., 274 F.3d 470, 478
(7th Cir. 2001). “[A] conclusion that the injury is irreparable necessarily shows that there is no
adequate remedy at law.” Fleet Wholesale Supply Co, v. Remington Arms. Co., 846 F.2d 1095,
1098 (7th Cir. 1988).

In the October 6, 2003, memorandum opinion and order, the court noted that whatever the
amount of any lost profits Stawski would suffer as a result of the termination of the Import
Agreement, these amounts would not be difficult to ascertain and could be compensated based on
monetary damages. #.g., Praefke Auto Elec. & Battery Co., Ine. v. Tecumseh Prods, Co., Inc.,

255 F.3d 460, 463 (7th Cir. 2001) (“[Plaintiff's] losses are purely financial, easily measured, and


Based on the above, the balance of the harms weighs in favor of Stawski. While Zywiec
wores about money it may lose by continuing its relationship with Stawski, it will still at least
be able to distribute the products, even if through a distributor it does not prefer, Evidence also
showed that Zywiec's sales in the United States constitute only 1% of Zywiec’s sales worldwide,
and any restriction on this small amount of sales cannot be viewed as a serious blow to Zywiec,
By contrast, Stawski faces disruption and restructuring of its business, loss of goodwill and the
inability to exercise its statutorily protected right to cure breaches of its distribution agreement.
Combined with its high likelihood of success on the merits, the court believes that the balance of
the harms weighs in Stawski’s favor.

C. Public interest

‘The Illinois legislature has determined that the protections of IBLFDA are important to ils
regulation of alcoholic beverages. As stated, it is essentially a procedural statute, Without
injunctive relief, breweries will have no incentive to obey the law. Thus, public policy weighs in
favor of an injunction as well.

dD. Injunction Bond (Rule 65(c))

Federal Rule of Civil Procedure 65(c) provides that

No restraining order or preliminary injunction shall issue except on the giving of

security by the applicant, in such sum as the court deems proper, for the payment

of'such costs and damages as may be incurred or suffered by any party who is

found to have been wrongfully enjoined or restrained.

See also, Mead Johnson & Co, v. Abbott Labs., 201 F.3d 883, 887 (7th Cir. 2000) (“When
setting the amount of security, district courts should err on the high side.”). Zywiec argues that it

would lose an estimated $2.8 million over a two-year period (which it estimates as the time until


Stanley Stawski stated that other retailers may leave Stawski if it no longer distributes Zywiec
products, neither was sure, as Kociecki merely stated that “1 am not sure” if Okocim would stay
with Stawski if it lost Zywiec, and Stanley Stawski stated that he did not know if buyers would
be less likely to purchase other products from Stawski because it was “speculation.” (Stawski
dep. at 85.) Taking all of this evidence together, the court is simply not persuaded thal Stawski
would be pushed to the brink of insolvency if it were to lose the Zywiec products.

Simply because Stawski would not become insolvent if it lost the Zywiec products,
however, does not necessarily mean that Stawski has an adequate remedy at law or would not
suffer irreparable harm. Cf Roland Mach, Co. v. Dresser Indus., Inc., 749 F.2d 380, 386 (7th
Cir. 1984) (concluding that district judge was in error for finding that plaintiff would go out of
business if no preliminary injunction was granted but nevertheless concluding there was no
adequate remedy at law and proof of irreparable harm where “the nature of the losses . . . is such
as to make the calculation of these damages a difficult and not very satisfactory process—better
than nothing, but not so sure a method of rectifying the wrong . . . that we can be confident that
none of the harm  , . in the interim will be irreparable harm.”), Due to the loss of Zywiec
products, which account for nearly a quarter of Stawski’s profits, Stawski at the very least faces a
significant restructuring of its business. Moreover, this court previously found that Stawski had a
substantial likelihood of success because Zywiec failed to give Stawski a reasonable opportunity
to cure any breaches of the Import Agreement. Damages from this violation of IBIFDA are not
easily quantified.

More fundamentally, the notion that a later award of damages will suffice is unconvincing

in light of the purposes of IBIFDA. IBIFDA imposes procedure: notice of intention to terminate,


readily compensated.”); Chicago Typographical Union, No. 16 v. Chicago Newspaper
Publishers’ Ass'n, 620 F.2d 602, 604 (7th Cir. 1980) (“Allegation of the loss of monetary . . .
benefits does not constitute irreparable harm in that the adequate legal remedy of damages is
available.”). Moreover, the court is not persuaded that the loss of the Zywiec products would
push Stawski to the brink of insolvency.’ At the preliminary injunction hearing Kociecki
testified that the loss of Zywiec products would cause Stawski to lose profits in an
“insurmountable amount that may cause the company to go out of business, and most likely will
cause the company to go out of business,” (Hr. Tr. 11.) He further testified that Stawski could
not operate on a profitable basis if it loses the Zywiec products because a snowball effect would
be created in which Stawski will “lose employees” and “lose customers.”” (Hr. Tr. 11-12.) In his
deposition Stanlcy Stawski testified that the loss of Zywiec products would be “devastating.”
Nevertheless, thereafter he described certain actions his company could take if the Zywiec
products were Jost, including letting go five or six staff members and having “the salesman that
remained on call on more customers and sell fewer products.” (Stawski dep. at 81.)

In addition, the undisputed evidence is that Stawski distributes 150 beer, wine, and spirit
products from 14 countries. (Def. Exs. 23, 31.) Testimony at the hearing established that
Stawski sells Okocim, another Polish becr, and Kociecki did state that Stawski could use that

brand to make up for some of the lost sales of Zywicc. (Hr. Tr. 16-17.) While both Kociecki and

*Stuwski argues that the IBIFDA implicitly creates a 20% sales volume threshold for injunctive relief to be
afforded, which the court accepted at least for purposes of the October 6 memorandum opinion and order. However,
as noted by Zywiee, this minimum threshold is not contained in the IBIFDA itself and the only support provided for
it comes {rom one statement of a representative contained in the legislative history. Rather than view this as a solid
demarcation line, the court views the 20% sales volume threshold as a rough marker where injunctive relief may be
considered, Amounts less than that number have already been found insufficient to warrant a preliminary injunction,
E.g., Praefke Auto Elec. & Battery, 255 F.3d at 463 (finding 13% of total sales revenue too small a portion of a
plaintiff's business to warrant a preliminary injunction).



more the balance nced weigh towards its side.” Abbott Labs. v. Mead Johnson & Co., 971 F.2d
6, 11 (7th Cir, 1992), Further, the court must consider the public interest in granting or denying
the injunction. Roland Mach. Co,, 749 F.2d 388-89.

Zywiec argues that the harm it will suffer if'a preliminary injunction is granted is large
and difficult to calculate. Zywiec has presented evidence that in territories where Stawski has
been replaced by other distributors, Zywiec’s sales have substantially increased. Zywiec
maintains that if it is forced to continue its relationship with Stawski, it would lose these sales
which cannot be easily calculated, See, e.g., Dayton Heidelberg Distrib, Co. v. Vineyard Brands,
108 F. Supp. 2d 859, 865-66 (S.D, Ohio 2000).

This harm must be balanced against the harm to Stawski, namely, disruption of its
business, loss of goodwill, and the inability to exercise its statutory right to cure any alleged
breaches of the Import Agreement, The court notes, however, that the balance need weigh
toward Stawski only to a small degree because its likelihood of success, at least with respect to
its claim that Zywiec did not provide an opportunity to cure, is high. Zywiec does not argue that
it in fact provided Stawski an opportunity to cure. Instead, it maintains that Stawski was
terminated for reasons which do not require an opportunity to cure, namely making late payments
and “fraudulent” conduct. See 815 [LCS 720/3(3)(A) and (G). As Stawski points out, however,
{ate payments were not listed as a reason for the termination in the notice Zywiec provided to
Stawski and the alleged fraudulent conduct (concerning Zywiec’s trademark) took place after
Zywicc sent Stawski notice of the termination and therefore could not have been grounds for the

termination.


sttiste Gr deg orn (06/97)

‘ United States District Court, Northern District of Tlinois
same of Asin Sua Joan H, Lefkow Stang Judge One
CASE NUMBER 02 C 8708 DATE 11/10/2003
CASE Stawski Distributing Co., Inc. vs. Zywiec Breweries PLC
TITLE

Lin the following box (a) indicate the party filing the motion, ¢.g., plaintiff, defendant, 3rd party plaintiff, and (b) state bricfly the nature
of the motion being presented]

MOTION:

DOCKET ENTRY:

(1) Oo Filed motion of [ use listing in “Motion” box above.]

(2) Oo Brief in support of motion duc

(3) ao Answer brief to motion due___. Reply to answer briefdue____

(4) o Ruling/Hearing on set fora

(3) a Status hearing[held/continued to] [set for/re-set for] on__—sset fort

(6) Q Pretrial conference[held/continued to] [set for/re-set for] onset for at.
(7) a Trialf[set for/re-set for]on_ at

(8) Oo (Bencl/Jury trial] [Hearing] held/continued toa

(9) Oo This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]

COERCP4¢m) OLocal Rule 41.1 OPRCP41(a\(1) O FRCP41(a)(2).

qo [Other docket entry] Enter Memorandum Opinion and Order. Plaintiff's motion for a preliminary
injunction [31-1] is granted. Plaintiffis to submit to chambers a proposed draft order, agreed to in form,
no later than 11/19/03.

dl [For further detail see order attached to the original minute order.)

No notices required, advised in open court,

No notices required. ,
q ranber of nations

o | Notices mailed by judge's staff. sa.
NOV 4 2 dou
Notified counsel by telephone, oh fa GVO

Docketing to mail notices,

Mail AO 450 fonn.

tunes Lonsia’s'A 6’

docketing dempy i

Copy to judge/magistrate judge.

Wy ol hGH is] 11/10/2003

date mailed notice

courtroom \
MD deputy’s ON| (aise Led US Ss wo
initials tia fp
Date/time received in
central Clerk's Office sing pty iis



final adjudication of the case) if it is forced to continue an interlocutory relationship with Stawski
and, therefore, requests a bond at least in that amount. The court finds this amount exccssive for
a number of reasons. First, this case will likely proceed on a quicker pace than Zywicc predicts,
as the Seventh Circuit may order the case to arbitration and, if not, based on the level of progress
so far, this court will take a substantially Jess amount of time to enter final judgment, Second,
Zywiee’s calculation of damages appears speculative and assumes a seamless transition from one
distributor to another, Finally, as stated above, the court believes Stawski has a substantial
likelihood of success on the merits, which figures into the analysis herc. Based on all of this, the
court believes that an appropriate amount is $250,000, Thus, the court will require Stawski to
post a $250,000 bond.
CONCLUSION

For the reasons stated above, Stawski’s motion for a preliminary injunction is granted

[#31]. Stawski is to submit to chambers a proposed draft order for injunction, agreed to in form,

not later than November 19, 2003.

tne pln Fiber
AOAN HUMPHREY LEFKOW

United States District Judge

Dated: November 10, 2003

10


a statement of reasons, a good faith effort to resolve differences, and time to cure the deficiencies
asserted. If the injunction is denied, distribution of Zywiec products can be withdrawn
immediately. If Zywiec products are inumediately withdrawn, Stawski will, as indicated above,
suffer lost profits, loss of good will developed in distributing Zywiec’s products for upwards of
40 years, and loss of opportunity to cure. Any compliance by Zywiec with [BIEDA’s procedure
after final adjudication of the merits would be meaningless as it would by then certainly be too
late for Stawski, which would have to cure the matters sct out in the notice of termination and
further recapture the sales and good will that would inevitably follow the loss of distribution
rights.

Thus, for these reasons, the court believes Stawski’s has adequately shown an inadequate
remedy at law and irreparable harm.
B. Balancing of the harms

“[S]ince the defendant may suffer irreparable harm from the entry of a preliminary
injunction, the court must not only determine that the plaintiff will suffer irreparable harm if the
preliminary injunction is denied—a (hreshold requirement for granting a preliminary
injunction~but also weigh that harm against any irreparable harm that the defendant can show he
will suffer if the injunction is granted.” Roland Mach. Co., 749 F.2d at 387. In other words,
“[t]he court’s task in granting or denying a motion for a preliminary injunction is to minimize
errors: the error of denying an injunction to one who will in fact... go on to win the case on the
merits, and error of granting an injunction to one who is going to lose.” /d. at 388. A “sliding
scale” approach, “the more likely it is the plaintiff will succeed on the merits, the less the balance

of irreparable harms necd weigh towards its side; the less likely it is the plaintiff will succeed, the


11. Stawski’s sales of Zywiec products within Illinois for the year ended 2002 were 28.81% of
total company revenues,

12. Stawski’s sales of Zywice products within Illinois for the year ended 2002 were 25.77% of
Stawski’s total company profit.

13. Stawski’s sales of Zywiec products within Illinois for the year ended 2001 constituted
25.02% of Stawski’s total company revenues.

14. Stawski’s sales of Zywiec products within Illinois for the year ended 2001 constituted
24.04% of Stawski’s total company profil,

15. Robert Kociecki (“Kociecki”), Stawski’s gencral manager, testified that Stawski would lose
an “insurmountable” amount of profits if it no longer distributed the Zywiec products. He
testified a termination of the Import Agrcement “may cause the company to go out of business,
and most likely will cause the company to go out of business.” Kociecki further opined that if
Stawski lost Zywiec, it would have a snowball effect causing the company to lose employecs and
customers,

16, Stanley Stawski testified at his deposition, which was made part of the record at the hearing,
that the loss of Zywiec products would “devastating.” Thereafter, however, he described actions
his company could take if the products were lost, including letting go five or six staff members

and having the remaining salesmen selling fewer products to more customers.

1...continued)
nearly 10 percent increase in profits is not believable. At both the hearing and his deposition Kociecki admitted that
he failed t© make an adjustment for an inventory recount couducted in 2003 and that this recount inflated Stawski’s
gross profits. (Hr. Tr, 12-16.) In his deposition Kociecki clarified that with this adjustment, sales of Zywice
products made up 28.6% of Stawski's total gross profits in 2003. Therefore, after adjusting for those sales taking
place outside of Illinois, the court accepts the amount attributable to Illinois profits as approximately 26 percent.

3


I Findings of Fact

1, Stawski is an importer and distributor of beverages located in Chicago, Illinois.

2. Zywicc is a manufacturer of beers located in Zywicc, Poland.

3. In 1992, Stawski entered into an agreement with Zywiec to import its products into the
United States. Prior to 1992, Stawski imported Zywicc’s products into the United States under
an agreement with the Polish government export company.

4, On July 7, 1997, the parties entered into a second Import and Wholesale Distribution
Agreement, with Stawski to distribute Zywiec’s products into the United States excluding New
York, Now Jersey and Connecticut.

5. In November 2000, the parties modified their Import and Wholesale Distribution Agreement
and limited Stawski’s territory to six states: Illinois, Michigan, Wisconsin, Indiana, Ohio and
Minnesota.

6. On July 10, 2002, Zywiec notified Stawski that it intended to terminate the Import Agreement
effective July 10, 2003.

7. Zywiec has not yet appointed a distributor to replace Stawski in Illinois.

8. Zywicc does not know the identity of Stawski’s customers in Illinois.

9. Through August 29, 2003, sales of Zywiec products within Illinois were 28.92% of Stawski’s
total company revenues.

10, Through August 29, 2003, sales of Zywiec products within Mlinois wore approximately 26%

of Stawski’s total company profit.'

‘Robert Kociccki, Stawski’s sales manager, testified at the evidentiary hearing that through August 29,
2003, Zywicc products made up 34.25% of Stawski's grass profits. The court agrees with Zywiec, however, that this
(continued...)


UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION
)
STAWSKI DISTRIBUTING CO., INC., ) DOCKE TED
) NOV 12 2093
Plaintiff, )
)
vs. ) No. 02 C 8708
) Judge Joan H, Lefkow
ZYWIEC BREWERIES PLC, )
)
Defendant. )
)

MEMORANDUM OPINION AND ORDER

On October 10, 2003, this court held a hearing on the motion of plaintiff, Stawski
Distributing Co. (“Stawski”), for a preliminary injunction preventing defendant, Zywiec
Breweries, PLC (‘‘Zywiec”), from wrongfully terminating a beer distribution relationship under
the Illinois Beer Industry Fair Dealing Act, 815 LLCS 720 et. seq. (“IBTFDA” or the “Act”).
Previously, the court entered a memorandum opinion and order narrowing the issues to be
presented at the hearing, concluding that Stawski has made out the first portion of its burden for a
preliminary injunction in that it has a likelihood of success on the merits that is better than
negligible. See Stawski v. Zywiee Breweries, PLC, No. 02 C 8708, 2003 WL 22290412, at *4
(N.D. LL Oct. 6, 2003). The court lefl the issues of whether Stawski has an adequate remedy at
law, would suffer irreparable harm, and the balancing of the harms to be developed at the

hearing. The court, having considered and weighed the evidence, sets forth its findings of fact

and conclusions of law.