I. PROCEDURAL HISTORY
Earlier in this action, GM filed a motion to disqualify the law firm of
Pepper Hamilton from representing Beilowitz, which this Court denied.
See Beilowitz v. General Motors Corp., Civ. A. No. 02-3870(SMO), 2002 WL
31409956 (D.N.J. Oct. 28, 2002). The parties conducted expedited
discovery, comprehensively briefed the issues presented, and this Court
heard lengthy oral arguments on Beilowitz's application for preliminary
injunctive relief at a November 22, 2002 order-to-show-cause hearing.
This Court has jurisdiction over this action based on the diverse
citizenship of the parties and the requisite amount in controversy,
pursuant to 28 U.S.C. § 1332 (2002).
3. THE PARTIES
E. IRREPARABLE HARM TO STEVENS BEIL CAUSED BY THE DMA PROGRAM
II. CONCLUSIONS OF LAW
N.J.S.A. § 56:10-4 (West 2002).
Whether a "Community of Interest" Exists Between Stevens Beil and
26. Based on the significant amount of Stevens Beil's franchise-specific
investments in AC Delco in the form of inventory, a computer system,
and goodwill, as well as on the economic interdependence of the two
entities, I conclude that a community of interest exists between
Stevens Beil and GM.
Whether AC Delco Granted Stevens Beil a "License"
27. The NJFPA requires a plaintiff to show that it has been granted "a
license to use a trade name, trade mark, service mark, or related
characteristic . . ." N.J.S.A. § 56:10-3(a) (West 2002).
28. In order to establish a "license" under the NJFPA, the franchisee
must, at a minimum, use the name of the franchisor "in such a manner
as to create a reasonable belief on the part of the consuming public
that there is a connection between the . . . licensor and licensee by
which the licensor vouches, as it were, for the activity of the
licensee." ISI, 130 N.J. at 352, 614 A.2d at 139 (citing Neptune
T.V., 190 N.J. Super. at 160, 462 A.2d at 599.
29. There is clearly some connection in the public mind between Stevens
Beil and AC Delco. In fact, many long-term clients of Stevens Beil
equate the Stevens Beil name with AC Delco parts. See Supp'l Counsel
Decl., Ex. B.
30. Under the terms of the 1999 Direct Account Supply Agreement between
Stevens Beil and AC Delco, Stevens Beil has the explicit authority to
use the AC Delco mark:
During the term of this Agreement, ACDelco hereby
grants to the Direct Account a royalty-free right
to use the trademarks, logos, emblems, and indicia
of origin, including but not limited to, those
indicated as Authorized Product Lines and such
other trademarks and service marks . . . solely in
connection with the marketing of the Product.
App. of Pl.'s Exs., Ex. 2, § 2(B).
31. Under the same agreement, "Direct Account agrees to purchase,
maintain and prominently display exterior and interior ACDelco
signage as allowed by local ordinance." App. of Pl.'s Exs., Ex. 2,
§ 2(D). Delivery vehicles are also directed to have "proper
ACDelco logo identification." Id.
32. For purposes of the NJFPA, a license may be found to exist based on a
longstanding business relationship, even absent an explicit
contractual grant of authority. See Cooper Distributing Co., Inc. v.
Amana Refrigeration Inc., 63 F.3d 262, 272-73 (3d Cir. 1995); see
also Lithuanian Commerce Corp. v. Sara Lee Hosiery, 179 F.R.D. 450,
471 (D.N.J. 1998) (Orlofsky, J.) ("LCC") (finding grant of license
based on evidence that plaintiff included trademark on billboards,
vehicles and brochures).
33. In addition to its explicit license to use the AC Delco mark per the
Direct Account Supply Agreement, Stevens Beil has liberally used the
AC Delco mark over the course of its history as an AC Delco
distributor. See, e.g., Supp'l Beilowitz Decl., Exs. A-C (showing
display of AC Delco mark alongside "Stevens Beil" at Beilowitz's
Pennsauken facility, the "Pocono 500" automobile race, and on a
parade float); Beilowitz Decl. ¶¶ 17, 20, Ex. E (showing display
of AC Delco mark on Stevens Beil business cards, stationery and
34. Based on the terms of the Supply Agreement and Beilowitz's
prominent, long-term use of the AC Delco mark, I conclude that
Beilowitz had a "license" within the meaning of the NJFPA.
Whether Stevens Beil Maintains a "Place of Business" in New Jersey
35. The NJFPA applies only to a franchise "the performance of which
contemplates or requires the franchisee to establish or maintain a
place of business within the State of New Jersey." N.J.S.A. §
56:10-4(1) (West 2002).
36. A "place of business" is "a fixed geographical location at which the
franchisee displays for sale and sells the franchisor's goods or
offers for sale and sells the franchisor's services. Place of
business shall not mean an office, a warehouse, a place of storage, a
residence or a vehicle." N.J.S.A. § 56:10-3.
37. Stevens Beil is located at 7101 Airport Highway, Pennsauken,
New Jersey. See Beilowitz Decl. ¶ 1.
38. At Stevens Beil's Pennsauken location, twenty-three sample products
of AC Delco product lines are displayed for sale. See Supp'l
Beilowitz Decl., ¶ 2, Ex. A.
39. Lancioni, who visited the Pennsauken facility, observed the
operations at Stevens Beil, which include: a warehouse, an order
processing center, an order preparation center, an expediting
department, an inventory record keeping group, a sales department,
administrative offices, a front sales desk, a computer center, and a
shipping and transportation department. See Lancioni Decl. ¶¶
40. The AC Delco contract itself requires Stevens Beil to maintain and
staff a "will call" counter to serve secondary customers. See
Beilowitz Decl., Ex. A, § 2D(3).
41. Customers who choose to pick up items at the front counter typically
call ahead so that the item and invoice are ready for them upon
arrival. Supp'l Beilowitz Decl. ¶ 3. Some customers show up
without having called ahead of time. Id.
42. In Cooper Distributing, the Third Circuit explained that a "place of
business" can exist even without the consummation of sales at the
facility or order taking. Id., 63 F.3d at 274-75, n. 14. The court
found that a facility used for regular product demonstrations
qualified as a "place of business" under the NJFPA. Id. at 274-75;
see also ISI, 130 N.J. at 351, 614 A.2d at 138 (finding place of
business where plaintiff gave demonstrations of defendant's software
product at its New Jersey facility).
43. GM contends that Stevens Beil's Pennsauken facility is nothing more
than a warehouse. As Lancioni observed, however, the warehouse is but
one component of the extensive business operations at Stevens Beil's
Pennsauken facility. See Lancioni Decl. ¶¶ 52(a)-(j).
44. Because customers regularly purchase and pick-up AC Delco products at
the facility, I find that Stevens Beil maintains a "place of
business" in New Jersey within the meaning of the NJFPA.
45. Additionally, like the plaintiffs in Cooper Distributing and ISI,
Stevens Beil hosted a number of instructional clinics at its
Pennsauken location, prominently sponsored by AC Delco, on topics of
automotive maintenance and repair. See Beilowitz, Ex. D. This
provides further evidence of Beilowitz's New Jersey place of
Likelihood of Success Under NJFPA
46. Having concluded that Stevens Beil is an AC Delco franchise within
the meaning of the NJFPA, I must now consider whether Beilowitz is
reasonably likely to ultimately prevail on the merits of his claims
under the NJFPA. See Tenafly Eruv, 309 F.3d at 157.
47. Under N.J.S.A. § 56:10-7(e), it is a violation of the NJFPA for a
franchisor "to impose unreasonable standards of performance upon a
48. I conclude that it is reasonably likely that the DDG program will be
found to impose an unreasonable standard of performance on Stevens
Beil because it requires Stevens Beil to sacrifice $11 million in
sales outside the Philadelphia DMA,
which constitutes approximately
forty percent of Stevens Beil's overall sales. See Lancioni Decl.
¶¶ 37, 49; Beilowitz Decl. ¶ 25.
49. Moreover, I also conclude that Stevens Beil is reasonably likely to
incur pre-tax operating losses between $1,000,000 and $1,612,069
during the first three years of operation under the DDG Program. See
Supp'l Kursh Decl. ¶ 7.
50. It is clearly an "unreasonable standard of performance" within the
meaning of the NJFPA to require a franchisee to operate at a
substantial financial loss while the franchisor attempts to implement
a new and unproven marketing strategy.
51. Additionally, under N.J.S.A. § 56:10-5, a franchisor's
termination, cancellation, or failure to renew a franchise without
good cause is prohibited. Id.
52. New Jersey takes a restrictive view of what constitutes "good cause"
for termination. "It is a violation of the NJFPA to cancel a
franchise for any reason other than the franchisee's substantial
breach, even if the franchisor acts in good faith and for a bona fide
reason." ACC&S, 14 F. Supp.2d at 658 (citing Westfield Centre Serv.,
Inc. v. Cities Serv. Oil Co., 86 N.J. 453, 469, 432 A.2d 48, 55
53. GM has not alleged that Stevens Beil substantially breached the
Direct Account Supply Agreement. Indeed, there is absolutely no
evidence of such a breach, and GM has generously lauded Beilowitz for
his successful sales achievements in one of GM's internal trade
publications, see, Sec. Supp'l Beilowitz Decl., Ex. H, and awarded
Beilowitz two prizes for his outstanding sales performance, see App.
of Pl.'s Exs., Exs. 51-52.
54. It is also undisputed that a change in business strategy was the
primary motivation behind GM's implementation of the DDG program.
See Payerle Certif., Ex. 149l; Supp'l Beilowitz Decl., Ex. N.
55. Because GM has offered no reason, other than a change in its business
strategy, for its failure to renew the AC Delco franchise with
Stevens Beil after their twenty-three-year-long business
relationship, I conclude that Beilowitz has a reasonable likelihood
of success on his claims under N.J.S.A. § 56:10-5.
B. IRREPARABLE HARM
56. The second area of inquiry which this Court must consider in deciding
whether to grant a preliminary injunction is whether the plaintiff
faces irreparable injury if injunctive relief is not granted. See
Tenafly Eruv, 309 F.3d at 157.
57. It is almost axiomatic that purely economic injury, compensable in
money, cannot satisfy the irreparable injury requirement. See Frank's
GMC Truck Ctr. v. General Motors Corp., 847 F.2d 100, 102 (3d Cir.
58. In some cases, however, economic injury can be so severe as to
warrant preliminary injunctive relief: "[T]he loss of business and
good will, and the threatened loss of the enterprise itself,
constitute irreparable injury to the plaintiff sufficient to justify
the issuance of a preliminary injunction." Carlo C. Gelardi Corp. v.
Miller Brewing Co., 421 F. Supp. 233, 236 (D.N.J. 1976); see also
Semmes Motors, Inc. v. Ford Motor Co., 429 F.2d 1197, 1205 (2d Cir.
1970) ("[T]he right to continue a business in which [plaintiff] had
engaged for twenty years . . . is not measurable in monetary
terms."); ACC&S, 14 F. Supp.2d at 667-68.
59. Moreover, the Third Circuit recognizes loss of market share as a form
of irreparable injury that may warrant the grant of a preliminary
injunction. See Novartis Consumer Health, Inc. v. Johnson &
Johnson-Merck Consumer Pharms. Co., 290 F.3d 578, 596 (3d Cir.
60. Under the DDG program, Stevens Beil cannot make sales to customers
outside the Philadelphia DMA and, thus, stands to lose at least $11
million dollars, which represents approximately forty percent of its
total revenue,. See Beilowitz Decl. ¶ 25; Lancioni Decl.,
¶ 49. Moreover, Stevens Beil is reasonably likely to incur
pre-tax operating losses of at least $1 million during the first
three years of operation under the DDG Program. See Supp'l Kursh
Decl. ¶ 7.
61. These are substantial losses. A forty percent reduction in revenue
would be insufficient to cover Stevens Beil's payroll, insurance, and
day-to-day operating expenses. See Beilowitz Decl. § 38.
Beilowitz would not be able to maintain the inventory and delivery
services upon which his business is based. Id.
62. In Beilowitz's view, the DDG program would immediately destroy his
business. Beilowitz Decl. ¶ 38. This is not an unreasonable
belief, considering the $11 million loss that Stevens Beil faces if
Beilowitz loses all customers outside of the Philadelphia DMA, a fact
which has not been rebutted by GM. Beilowitz is likely to suffer at
least $1 million in pre-tax operating losses during the first three
years of the DDG program. See Supp'l Kursh Decl. ¶ 7.
63. If Stevens Beil's AC Delco franchise is terminated or restricted,
this is also likely to result in Stevens Beil losing market share.
Already, competitors assigned to the Philadelphia DMA have begun to
solicit Beilowitz's existing customers. See Sec. Supp'l Beilowitz
Decl., Exs. A & C.
64. GM itself has recognized, perhaps unwittingly, that Stevens Beil is
unlikely to survive without AC Delco or "be a long-term survivor in
the DDG mix." App. of Pl.'s Exs., Ex. 10.
65. GM contends that Stevens Beil has sufficient assets to withstand,
pending a final determination of this action on the merits, any
adverse economic effect that the DDG program is likely to have on
Stevens Beil. See Tr. of Oral Arg., 90:13-15.
66. GM also argues that because Stevens Beil is an unincorporated sole
proprietorship, Beilowitz's personal assets are appropriately
considered in this Court's assessment of irreparable harm. See id.,
90:22 to 92:25; Def.'s Br. in Oppos. to Applic. for Prelim. Inj., p.
67. In essence, GM is asking Beilowitz, the owner of a successful
business, to transform his business into a money-losing operation at
his personal expense and risk, until a final determination of this
action on the merits. As Plaintiff's expert, Dr. Samuel Kursh,
explained, GM's position "requires Beilowitz, an individual, to
assume all risks and subsidize all potential losses of ACDelco's
untried business strategy." Supp'l Kursh Decl. ¶ 7.
68. GM has cited no case law to support its argument that Beilowitz's
personal assets may be considered in assessing the question of
irreparable harm for purposes of granting or denying a preliminary
69. GM's position, which would force Stevens Beil to operate at a loss,
is untenable as a matter of logic and public policy because it would
permit any powerful franchisor to make an end-run around the
protections that the NJFPA affords to franchisees. Under GM's
theory, a franchisor could drive a franchisee to financial
ruin by adopting a new, financially destructive, "business strategy."
70. A business may be faced with irreparable harm even if the sole owner
of the business, or, in the case of a corporation, the shareholders,
are individually wealthy. Beilowitz's personal wealth and the form in
which he does business are simply irrelevant considerations under the
71. Beilowitz has demonstrated a likelihood of irreparable injury if he
is not granted preliminary injunctive relief. Stevens Beil stands to
lose forty percent of its revenue if such relief is not granted.
Absent the grant of preliminary injunctive relief, Stevens Beil's
business operations would be severely impaired, if not destroyed.
C. HARM TO THE NON-MOVING PARTY
72. The third element of a preliminary injunction analysis requires this
Court to assess whether granting a preliminary injunction would harm
GM more than denying preliminary injunctive relief would harm
Beilowitz. See Tenafly Eruv, 309 F.3d at 157.
73. Beilowitz has quantified the amount of harm that the DDG program will
have on Stevens Beil's sales as at least $11 million dollars,
approximately forty percent of its total sales. See Beilowitz Decl.
¶ 25; Lancioni Decl. ¶ 49.
74. GM has not quantified the amount of harm, if any, that GM will suffer
if a preliminary injunction is granted in favor of Beilowitz.
75. As the world's largest vehicle manufacturer, see GM Company Profile,
supra, at ¶ 2, GM has sufficient assets to withstand any
negative impact that may befall it pending the final outcome of this
76. If anything, GM stands to derive an economic benefit if Stevens Beil
continues to sell AC Delco auto parts.
77. At oral argument, Mr. Payerle, GM's counsel, presented the DDG
program as a quid pro quo. See Tr. of Oral Arg. 85:5-9. A quid pro
quo refers to "the giving [of] one valuable thing for another."
Black's Law Dictionary 1248 (6th ed. 1990).
78. The record before this Court is very clear, however, that the DDG
program requires Stevens Beil to sacrifice "a lot of quid," to the
tune of $11 million, for an undetermined quo:
MR. PAYERLE: I am suggesting, yes, there is a
quid pro quo going on here and that that quid pro
quo follows from the restriction of sales by Mr.
Beilowitz outside of the DMA which he claims
represents 40 percent of his business.
THE COURT: Okay, well he's telling me that the quid is
MR. PAYERLE: That's right.
THE COURT: How much is the quo?
MR. PAYERLE: We don't have a quo yet, your Honor.
Tr. of Oral Arg. 85:5-14.
79. Accordingly, this third factor in the preliminary injunction calculus
tips in Beilowitz's favor. In this quid pro quo regime imposed by the
DDA, GM has not identified the amount of "quo" that Stevens Beil
stands to gain if it participates in the DDG Program at a substantial
financial loss. See Tr. of Oral Argument, 110:21 to 111:7.
4. PUBLIC INTEREST FACTORS
80. The fourth and final factor to be considered prior to granting a
preliminary injunction is whether granting such relief would serve
the public interest. See Tenafly Eruv, 309 F.3d at 157.
81. The NJFPA was enacted because "distribution and sales through
franchise arrangements in the State of New Jersey vitally affect
the general economy of the State, the public interest and the public
welfare." N.J.S.A. § 56:10-2.
82. As the Supreme Court of New Jersey has explained, "the Act reflects
the legislative concern over long-standing abuses in the franchise
relationship, particularly provisions giving the franchisor the right
to terminate, cancel or fail to renew the franchise." Shell Oil Co.
v. Marinello, 63 N.J. 402, 409, 307 A.2d 598, 602 (1973).
83. To the extent that a preliminary injunction in this case will
promote the policy behind the NJFPA, this furthers the public
84. A preliminary injunction would also serve the public interest to the
extent it prevents a successful New Jersey business from having to
close its doors and lay off employees. See Beilowitz Decl. ¶
85. In summary, all four of the factors this Court must consider in
deciding whether to grant preliminary injunctive relief warrant the
grant of such relief to Beilowitz, who has demonstrated both a
likelihood of ultimate success on the merits and irreparable injury
absent relief. GM will not suffer greater harm upon a grant of
preliminary injunctive relief than Beilowitz would suffer absent such
relief. Finally, relief in this case is consistent with the public
policy underlying the NJFPA.
For the reasons set forth above, the motion of Plaintiff, Steven I.
Beilowitz, for a preliminary injunction against Defendant, General Motors
Corporation, shall be granted, according to the terms specified in this
Court's accompanying Order. In addition, pursuant to Fed.R.Civ.P. 65(c),
Plaintiff shall post security in the amount of $2,500*fn17 with the
Clerk of this Court, "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." Id. The Court shall enter an appropriate form of
This matter having come before the Court on the motion of Plaintiff,
Steven I. Beilowitz d/b/a Stevens Beil, a sole proprietorship, for
preliminary injunctive relief pursuant to Fed.R.Civ.P. 65, Howard Langer,
Esq. and John J. Grogan, Esq., SANDALS & LANGER, LLP, and Don P.
Foster, Esq., Michael G. Petrone, Esq. and Jeffrey A. Carr, Esq., PEPPER
HAMILTON, LLP, appearing on behalf of Plaintiff, Steven I. Beilowitz
d/b/a Stevens Beil, a sole proprietorship; and Stephen M. Payerle, Esq.,
Michael S. Waters, Esq. and Lois H. Goodman, Esq., CARPENTER, BENNETT
& MORRISSEY, appearing on behalf of Defendant, General Motors
The Court having considered the submissions of the parties, as well as
the oral arguments of counsel, for the reasons set forth in the OPINION
filed concurrently with this ORDER;
IT IS, on this 3rd day of December, 2002, hereby ORDERED that
Plaintiff's application for a preliminary injunction is GRANTED; and,
IT IS FURTHER ORDERED that:
(1) Until further Order of this Court, Defendant shall continue to
conduct business with the Plaintiff as it did prior to the implementation
of the DDG program;
(2) Until further Order of this Court, Defendant is enjoined from
enforcing against Plaintiff the four-step termination process for
non-compliance with the DDG program;
(3) Defendant shall take no other adverse action against Plaintiff,
pending the final resolution of this action; and
(4) Plaintiff shall post security in the amount of $2,500.00 with the
Clerk of this Court, in accordance with Fed.R.Civ.P. 65(c).