Court Opinion

ID: 3023526
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:29:09.35099+00
Date Added: 2024-06-11T12:05:37.706906
License: Public Domain

United States Court of Appeals
                           FOR THE EIGHTH CIRCUIT

                                    ___________

                                    No. 99-2417
                                    ___________

Bandag, Incorporated,                    *
                                         *
      Plaintiff - Appellant,             *
                                         * Appeal from the United States
      v.                                 * District Court for the
                                         * Southern District of Iowa.
Jack's Tire & Oil, Inc.,                 *
                                         *    [TO BE PUBLISHED]
      Defendant - Appellee.              *
                                    ___________

                               Submitted: July 13, 1999

                                   Filed: September 3, 1999
                                    ___________

Before RICHARD S. ARNOLD, BRIGHT, and LOKEN, Circuit Judges.
                           ___________

PER CURIAM.

       Bandag, Incorporated, appeals the district court’s1 denial of a preliminary
injunction requiring a former Utah franchisee, Jack’s Tire & Oil, Inc., to keep its
promise not to compete for one year following termination of its Bandag franchise.
Concluding that Bandag failed to demonstrate irreparable injury, we affirm.

      1
       The HONORABLE CHARLES R. WOLLE, United States District Judge for
the Southern District of Iowa.
      Bandag introduced its pre-cure method for retreading tires in 1957 and today is
a major international competitor in the tire retreading industry. In this country, Bandag
markets its products and services in part through a network of some three hundred
independent franchisees. Bandag franchisees use the Bandag pre-cure method of
manufacturing retreads and service Bandag’s national fleet accounts as well as their
own local customers.

       Jack’s has offered a wide array of tire services since 1940, including new tire
and wheel sales, tire balancing, and repairs. Jack’s became a Bandag franchisee in
1972. The 1978 franchise agreement gave Jack’s the exclusive right to manufacture
Bandag retreads in the two-county area surrounding Logan, Utah. In the covenant now
at issue, Jack’s agreed that if either party terminated the agreement Jack’s would not
use the “pre-cast or pre-cured tread rubber” method of retreading tires in this territory
for one year.

       In 1997, two Bandag-owned retreading shops began operating in Utah. Jack’s
responded by commencing talks with Michelin, Jack’s largest supplier of new tires,
about the possibility of converting Jack’s retreading operations to Michelin’s pre-mold
method. In March 1999, Jack’s informed Bandag of its intent to terminate the franchise
relationship. The following month, when Jack’s and two affiliates in other locations
started up as Michelin retreading distributors, Bandag commenced this lawsuit to
enforce the covenant not to compete in Logan. Bandag’s agreements with the other
two Jack’s affiliates did not contain such covenants, so only Jack’s activities in Logan
are at issue. On May 14, following an evidentiary hearing, the district court denied
Bandag’s motion for a preliminary injunction and set the case for trial on September
13, 1999. Bandag appealed. We have jurisdiction to review an interlocutory order
denying a preliminary injunction. See 28 U.S.C. § 1292(a)(1). We granted Bandag’s
motion for expedited review.

                                          -2-
        We review the denial of a preliminary injunction for abuse of discretion. See
Kirkeby v. Furness, 52 F.3d 772, 774 (8th Cir. 1995). In deciding a preliminary
injunction motion, the district court weighs (1) the threat of irreparable harm to the
moving party; (2) the movant’s likelihood of success on the merits; (3) the balance
between the harm to the movant if the injunction is denied and the harm to other parties
if the injunction is granted; and (4) the public interest. See Dataphase Sys., Inc. v. CL
Sys., Inc., 640 F.2d 109, 113 (8th Cir. 1981) (en banc). These factors are not a rigid
formula. However, “[t]he basis of injunctive relief in the federal courts has always
been irreparable harm and inadequacy of legal remedies.” Beacon Theatres, Inc. v.
Westover, 359 U.S. 500, 506-07 (1959). Thus, to warrant a preliminary injunction, the
moving party must demonstrate a sufficient threat of irreparable harm. See Adam-
Mellang v. Apartment Search, Inc., 96 F.3d 297, 299 (8th Cir. 1996).

      On appeal, Bandag argues that, absent a preliminary injunction enforcing the
covenant not to compete, it faces irreparable harm because Jack’s is “poised to
convert” existing Bandag customers to Michelin. In addition, Bandag argues that it will
have difficulty serving its national fleet accounts in sparsely populated northern Utah,
and that Jack’s breach of the non-compete clause, unless enjoined, will weaken
Bandag’s entire franchise system.

       Given the wide array of products and services that Jack’s offers in addition to
retreading, and the goodwill Jack’s developed before becoming a Bandag franchisee,
Bandag has failed to show that Jack’s post-termination competition will deprive
Bandag of customer loyalties it has earned, as opposed to simply maintaining customer
loyalties Jack’s has earned. On the other hand, the ability to service national fleet
accounts is an important part of Bandag’s goodwill, but Bandag has failed to show that
it is presently unable to provide emergency services to those customers from its
company-owned and other franchised operations located in Ogden and Pocatello, Utah,
some thirty miles from the Logan area. Finally, Bandag’s contention that failure to
enjoin Jack’s defection will irreparably injure its entire franchise system is belied by

                                          -3-
the fact that Bandag has not included such covenants in many of its franchise
agreements, including its agreements with two Jack’s affiliates. Compare Casey’s Gen.
Stores, Inc. v. Campbell Oil Co., Inc. 441 N.W.2d 758, 761 (Iowa 1989). On this
record, we conclude the district court did not abuse its discretion when it concluded
that “[a]ny harm Bandag sustains between now and a September trial will adequately
be compensated by an award of damages and permanent injunction.”

       The order of the district court denying Bandag’s motion for a preliminary
injunction is affirmed.

      A true copy.

             Attest:

                CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.

                                         -4-