The Franchise Memorandum

The United States District Court for the District of South Carolina recently denied a terminated distributor's request for a preliminary injunction against a manufacturer and a new distributor. Machinery SoIs., Inc. v. Doosan Corp., 2015 WL 5554357 (D.S.C. Sept. 18, 2015). Doosan and Machinery Solutions were parties to a distribution agreement for the sale and service of new and used Doosan machine tools in North Carolina, South Carolina, and Georgia. Doosan terminated the agreement and entered into a new distribution agreement with Ellison for North Carolina, South Carolina, and Georgia. Ellison had a dealership in Charlotte, North Carolina.

Machinery Solutions sued for wrongful termination under the South Carolina Fair Practices of Farm, Construction, Industrial, and Outdoor Power Equipment Manufacturers, Distributors, Wholesalers, and Dealers Act and sought a preliminary injunction preventing the termination. The court denied Machinery Solutions' request for two reasons. First, it found that Machinery Solutions failed to make a clear showing of likely success on the merits because the Act did not apply in North Carolina and Georgia, and there were open questions as to whether Machinery Solutions qualified as a "dealer" under the statute. Second, the court found that Machinery Solutions did not establish a likelihood of irreparable harm because all claimed harms, including loss of revenue from new sales and service sales, loss of employees through layoffs, and damage to its reputation among existing customers, were quantifiable.