Deceitful Behavior Not Enough to Warrant Preliminary Injunction

Upon a litigant’s motion, a court can enter a “preliminary injunction” preventing a party from pursuing a particular course of action until the conclusion of a trial on the merits. A preliminary injunction is considered an extraordinary remedy and requires the moving party to establish that (1) he is likely to succeed on the merits of the case at trial; (2) he is likely to suffer irreparable harm unless the injunction is granted; (3) the balance of the equities tips in his favor; and (4) an injunction is in the public interest. The party must make a clear showing that he is likely to succeed on the merits. Where a defendant has acted in an underhanded manner, but the plaintiff is unable to establish these factors, a court will deny the request for injunctive relief. In BP Products v. Southside Oil, the United States District Court for the Eastern District of Virginia considered and denied BP’s request for a preliminary injunction even though it was clear that Southside had acted deviously.

Defendant Southside owns gas stations and also has fuel supply agreements with independent gas stations. BP decided to stop owning stations and simply sell gas to BP stations through middlemen. As part of its strategic plan, BP sold many of its Virginia gas stations to Southside, and Southside agreed to continue to market BP products at BP’s former stations. The parties renewed the contract in 2010 and agreed that BP would have a Right of First Offer (ROFO) as to any proposed sale of any of Southside assets. Before Southside sold any BP stations or changed any BP stations to other brands, it was required to provide a term sheet outlining its goals; BP could then either negotiate with Southside or allow negotiation with other buyers. Southside was not required to accept any offer by BP to purchase its assets.

The 2010 agreement also gave BP a Right of First Refusal (ROFR) requiring Southside to give BP written documentation regarding any proposed sale so that BP could determine whether to buy Southside’s entire business. The 2010 contract expired on October 2, 2013. During renewal negotiations, BP sent a “notice of non-renewal” indicating that if the parties failed to reach a new agreement by October 2, 2013, the contractual relationship would end. Southside declined to renew the agreement and the relationship ended.

Previously, on August 1, 2013, an affiliate of Sunoco (ETC) and the company that owned Southside (Mid-Atlantic) signed an agreement under which ETC took ownership and control of Mid-Atlantic and therefore Southside. The contract specified that the deal would not close before October 4, 2013. Even though Southside had no intention of reaching a new agreement with BP, it continued to negotiate with BP. After the parties’ contract expired, Sunoco issued a press release noting ETC’s acquisition of Mid-Atlantic and Southside. BP suspected deceit and filed suit against Southside and Sunoco. From the time of fuelpumps.jpgclosing until the hearing on the preliminary injunction, Southside had rebranded all but two if its former BP stations from BP to Sunoco. As part of its relief, BP asked the court to enjoin both defendants from any further rebranding.

The court found that while Southside and Sunoco had acted disingenuously in concealing their agreement while Southside continued negotiations with BP, more than poor behavior was required to obtain an injunction – BP had to make a clear showing as to all four elements to succeed on its motion. The court first examined the likelihood of BP’s success on its underlying breach of contract claim which required BP to clearly show: (1) a legally enforceable obligation; (2) defendant’s material breach of the obligation; and (3) damage to it because of the breach. Southside and Sunoco did not dispute the existence of the agreement or the harm to BP, but it argued that Southside had not materially breached the agreement. BP had notified Southside that it would no longer supply gasoline after the contract expired, so it should not have been surprised that Southside was negotiating with another supplier. The court found it improbable that Southside breached the ROFR–although Southside was required to offer a ROFR to BP, BP’s right to purchase ended with the contract which was two days before the sale.

The court also doubted whether the ROFO even applied. The ROFO was contained in a contractual paragraph dealing with asset sales and envisioned the sale and purchase of some, but not all, of Southside’s assets whereas the ROFR contemplated the sale of all assets. Southside could make a good argument that the ROFO did not apply here. Even if it did apply, it only opened up negotiations between the parties but did not prohibit Southside from negotiating with others and did not guarantee any agreement for BP to purchase the assets. In short, the court had doubts about BP’s likelihood of success on the merits.

The court found that BP also had not shown irreparable harm. BP admitted that its damages were speculative, and Southside’s actions could harm BP only if BP would have purchased Southside’s assets. BP had sold its stations to Southside because it decided to go out of the gas station business, so it is unlikely that it would have purchased Southside’s business. The court noted that issuing a preliminary injunction based on a possibility of irreparable harm is not appropriate. Additionally, BP only asked for an injunction as to two stations which cannot add up to irreparable harm. Preliminary injunctive relief requires the plaintiff to demonstrate that irreparable injury is likely in the absence of an injunction. Here, any injury had already occurred and BP was not likely to suffer irreparable additional harm in the event that the final two stations were rebranded.

Finally, the court considered a balancing of the equities and the public interest which courts have characterized as a blended review of the respective hardships that injunctive relief would cause and the weightiness of the interests at stake. Here, Sunoco’s footprint in the area would either rise by two stations or remain the same and BP’s would either decrease by two or remain the same. Neither result would result in “consumer whiplash” or harden the public’s feelings for or against either company. The court held that neither the equities nor the public interest favored BP’s motion. Accordingly, the court denied BP’s motion for a preliminary injunction.

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