Satellite Receivers, Ltd. v. Household Bank (Illinois) N.A.

922 F. Supp. 174, 1996 U.S. Dist. LEXIS 5876, 1996 WL 182235
CourtDistrict Court, E.D. Wisconsin
DecidedApril 12, 1996
DocketNo. 96-C-161
StatusPublished

This text of 922 F. Supp. 174 (Satellite Receivers, Ltd. v. Household Bank (Illinois) N.A.) is published on Counsel Stack Legal Research, covering District Court, E.D. Wisconsin primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Satellite Receivers, Ltd. v. Household Bank (Illinois) N.A., 922 F. Supp. 174, 1996 U.S. Dist. LEXIS 5876, 1996 WL 182235 (E.D. Wis. 1996).

Opinion

DECISION AND ORDER

STADTMUELLER, Chief Judge.

On February 7, 1996, Satellite Receivers, Ltd. (Satellite) filed this action in Brown County Circuit Court under the Wisconsin Fair Dealership Law (WFDL), Wis.Stat. §§ 135.01-07. On February 13, 1996, the defendant, Household Bank (Illinois) N.A. (Household), removed the case to federal court on the basis of diversity jurisdiction. On April 4,1996, this court held a hearing on Satellite’s motion for a preliminary injunction.1 The motion is now ready for decision.

I. BACKGROUND

Satellite is a Wisconsin corporation with its principal place of business in Green Bay, engaged in wholesale and retail sales and distribution of home television satellite receiving equipment and programming. Household is a federally chartered bank located in Wood Dale, Illinois, which provides financing for consumer purchases. Household is a division of Household International, a Forbes 500 company with 1995 calendar year-end managed interest earning assets of $36.7 billion and annual revenues of $4.6 billion.

Prior to 1992, Satellite did not offer any credit card financing for its dealers. On January 2, 1992, Satellite and Household entered into a written contractual agreement creating a private-label credit card financing program for Satellite to offer to its customers. Household marketed its private-label credit program as a “Value-Added Service” which would “offer convenience and value to each product sold.” It also described the credit program as “one of the most powerful, productive assets that [merchants can] employ to gain market share and margins with relatively minimal financial outlay.” Essentially, under the agreement Satellite could offer its own credit card, known as “CommC-ard” and financed by Household, to its customers through Satellite’s dealers. This allowed Satellite’s retail customers to make their purchases using the CommCard. Satellite’s dealers provide the credit card application for the customer to fill out, review and verify the information provided, and then forward the application to Household for approval. If approved, the customer can use the CommCard to pay for the initial purchase and future purchases. Household collected interest on the CommCard purchases, and Satellite hoped to increase its sales by offering credit card financing to its customers.

Satellite invested about $2 million in Household’s credit program. It set up a financing department, hired and trained employees, leased computers from Household, advertised and marketed the credit program, and paid start-up fees to Household. Satellite was obligated to pay Household for all “charge-backs,” i.e., if a customer application was not filled out correctly, if the sale was fraudulent, if a customer disputed the sale, etc. Satellite also used its resources to train and supervise its dealers with regard to the credit program, and to communicate with its dealers on behalf of Household.

The program was profitable for both Satellite and Household. Satellite’s net sales increased by approximately $3.5 million in [177]*1771992, $8.5 million in 1993, and another $8.5 million in 1994. Satellite’s net sales decreased in 1995, but the 1995 figure still was 52 percent above 1991’s net sales. Fully 70 percent of Satellite’s sales are made using the CommCard, of which more than 20,000 are in circulation.

In addition, although not found in any written agreement, beginning July 1, 1994 Household began to pay Satellite “merchant participation fees,” or four percent of the finance charges Household billed the CommCard holders. Between July 1994 and February 1996, Household paid Satellite $236,728.57 in merchant participation fees. Presumably, then, Household received almost $6 million ($236,723.57/0.04 = $5,918,-089.20) in finance charges from Satellite’s customers-during that same period.

Satellite’s employees and dealers increased along with its sales. In 1991, before its agreement with Household, Satellite had 175 dealers and 25 employees. In 1992, with the creation of its financing department, the number of Satellite’s employees rose to 42. By 1995, Satellite had 643 dealers and 79 employees.

In the fall of 1995, Household notified Satellite that it intended to terminate the private-label credit program. In a letter to Satellite’s Chairman David Charles dated November 13, 1995, Household’s Vice President of Sales, Doug Stuber, confirmed an October 13, 1995 phone call between Charles and Household’s Assistant Vice President Frank Nardi regarding Household’s plan to terminate Satellite’s credit program as of March 7, 1996. The letter did not provide notice of any deficiency on Satellite’s part. Indeed, it did not provide any specific reasons for the termination. In response to an inquiry by Charles, Stuber notified Charles in a letter dated December 14, 1995, that Household would not pay Satellite any merchant participation fees after termination of the credit program. Satellite suggests that Household terminated its credit program in order to avoid paying Satellite its four-percent merchant participation fees. Household disputes this, noting that there is no written contractual agreement to pay a merchant fee in the first instance.

II. DISCUSSION

A. Preliminary Injunction Standard

The Seventh Circuit has held that a party seeking preliminary injunctive relief must show that (1) no adequate remedy at law exists; (2) the moving party will suffer irreparable harm absent injunctive relief; (3) the irreparable harm suffered in the absence of injunctive relief outweighs the irreparable harm the defendant will suffer if the injunction is granted; (4) the moving party has a reasonable likelihood of success on the merits; and (5) the injunction will not harm the public interest. Nalco Chem. Co. v. Hydro Technologies, Inc., 984 F.2d 801 (7th Cir.1993); United States v. Rural Elec. Convenience Coop. Co., 922 F.2d 429, 432 (7th Cir.1991); Somerset House, Inc. v. Turnock, 900 F.2d 1012, 1014 (7th Cir.1990); Baja Contractors, Inc. v. City of Chicago, 830 F.2d 667, 675 (7th Cir.1987), cert. denied, 485 U.S. 993, 108 S.Ct. 1301, 99 L.Ed.2d 511 (1988).

In order to prevail, the plaintiff must satisfy each element of this five-part test, Somerset, 900 F.2d at 1015 (citing Roland Mach. Co. v. Dresser Indus., Inc., 749 F.2d 380, 386-87 (7th Cir.1984)), and the district court weighs each of these factors. Somerset, 900 F.2d at 1015. However, the Seventh Circuit has stated that of the five factors, the likelihood of success on the merits usually weighs most heavily in a court’s determination. O’Connor v. Board of Educ., 645 F.2d 578 (7th Cir.), cert. denied, 454 U.S. 1084, 102 S.Ct. 641, 70 L.Ed.2d 619 (1981). With respect to this prong, Satellite only need show that its chances of succeeding on the merits are more than negligible. The greater that showing, the less the balance of harms need weigh in plaintiffs favor. Roland, 749 F.2d at 387.

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Bluebook (online)
922 F. Supp. 174, 1996 U.S. Dist. LEXIS 5876, 1996 WL 182235, Counsel Stack Legal Research, https://law.counselstack.com/opinion/satellite-receivers-ltd-v-household-bank-illinois-na-wied-1996.