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Emergency Accessories & Installation, Inc. v. Whelen Engineering Co.

June 3, 2009

EMERGENCY ACCESSORIES & INSTALLATION, INC., PLAINTIFF,
v.
WHELEN ENGINEERING CO., INC., DEFENDANT.



The opinion of the court was delivered by: Honorable Joseph E. Irenas

OPINION

This lawsuit arises from a May 7, 2009 letter sent to Plaintiff Emergency Accessories & Installation, Inc. ("EAI") by Defendant Whelen Engineering Company, Inc.'s ("Whelen") Senior Vice President of Sales and Marketing, informing EAI that Whelan was terminating the "Master Distributor Agreement" between Whelan and EAI. (See Slipp Ex. B*fn1

EAI's request for injunctive relief seems to be primarily based on Whelen's asserted violation of the New Jersey Franchise Practices Act, although EAI's brief in support of their present application asserts that they will likely prevail on their other three claims, which are breach of contract, breach of the duty of good faith and fair dealing, and tortious interference with prospective economic advantage. EAI seeks a temporary restraining order essentially restraining Whelen from terminating the Master Distributor Agreement and compelling Whelen to honor its obligations under the Agreement.

I.

EAI sells and installs emergency lighting and other emergency response vehicle equipment. (Verif. Compl. ¶ 12) It maintains a "sales/service desk" in Cherry Hill, New Jersey, where it sells Whelen products and "trains technicians regarding the capabilities and use of Whelen products." (Id. at ¶ 31) "At any given time, EAI's inventory stock levels are approximately $600,000 to $1,000,000 of Whelen emergency lighting products, which as of May 18, represents approximately ninety-five percent of its emergency lighting products and fifty-three percent of EAI's entire inventory." (Id. at ¶ 27) "EAI receives its business primarily through the public bidding process" for government or quasi-governmental contracts. (Id. at ¶ 14-15) EAI also has a close relationship with Winner Ford of Cherry Hill,*fn2 whereby EAI provides quotes to Winner so that Winner may submit bids for government contracts related to emergency response vehicles and their equipment. (Id. at ¶ 16)

The parties' relationship dates back to "at least 2001," and is governed by The Master Distributor Agreement (hereafter "Agreement"). (Verif. Comp. ¶¶ 26, 36; Slipp*fn3 Ex. A) The Agreement's stated purpose is "to establish specific Policies, Discounts and Benefits for the purchase of Whelen products by the Whelen Master Distributor [i.e., EAI], and to define the relationship between Whelen and such Whelen Master Distributor in the promotion, sales, and distribution of these products." (Slipp Ex. A)

Specifically, the Agreement requires EAI to, among other things, "maximize the sale of Whelen Products;" "use its best efforts to promote, introduce, demonstrate, and solicit orders for, and sell products manufactured by Whelen;" and "protect and promote the good name of Whelen and avoid any activity that might be detrimental to Whelen's interest, reputation, or good will." (Slipp Ex. B at p. 2) If one or more of these "requirements" are not met, Whelen reserves the right to "terminate [the agreement] upon 30 days' written notice." (Id.)

With respect to termination, the Agreement provides, in relevant part, (a) Either party may terminate this Agreement without cause by giving thirty (30) days' prior written notice of termination to the other party.

(b) For cause, Whelen may terminate this Agreement effectively upon the mailing of written notice for any of the following reasons:

(1) [EAI's] breach of any provisions, terms or conditions of this Agreement.

(2) [EAI's] breach of any provisions, terms or conditions of the Whelen 'General Policies.'*fn4

(Slipp Ex. B ay p. 14)

The Agreement also "authorizes [EAI] to use those of Whelen's trademarks and trade names associated with the Whelen products." (Slipp Ex. A at p. 11)

The Agreement contains choice of law and choice of forum provisions: the Agreement shall be "interpreted and governed in accordance with the laws" of Connecticut; and "each party to this agreement... hereby irrevocably agrees that any suit, action, or other legal proceeding arising out of this agreement... shall exclusively be brought in any Connecticut or United States federal court located in the State of Connecticut." (Slipp Ex. A at p. 16)

With regard to the events and circumstances immediately giving rise to the termination letter, at this time, the Court only knows what is contained in the termination letter. Whelen states that it is terminating the Master Distributor Agreement because of a "frivolous" and "unworthy" bid protest by EAI, which Whelen asserts will cost Whelen "a significant amount of sales from many municipal and state agencies throughout [New Jersey]" because "[t]o unrealistically delay contracts, bids, or orders from being implemented usually drives sales to other manufacturers and suppliers," and "ultimately injures [Whelen's] reputation and good name." (Slipp Ex. B) While the letter does not reference any particular Master Distributor Agreement provision that EAI allegedly breached, as just noted, injury to Whelen's reputation is a ground for termination under the Agreement. (See Slipp Ex. A at p. 2)

II.

A party seeking temporary or preliminary injunctive relief must demonstrate that: (1) there is a reasonable probability of success on the merits; (2) the movant will be irreparably injured if relief is not granted; (3) the relative harm to the movant in the absence of relief is greater than the harm that will be sustained by the non-movant if relief is granted; and (4) the public interest favors the injunction. Central Jersey Freightliner, Inc., v. Freightliner Corp., 987 F. Supp. 289, 295 (D.N.J. 1997).

A.

"To establish a likelihood of success on the merits, the moving party need not demonstrate that its entitlement to a final decision after trial is free from doubt. Rather, the moving party must demonstrate a 'reasonable ...


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