Stile Software v. Mills

• Court: District Court, D. New Hampshire
• Decided: July 16, 1998
• Docket: CV-98-327-SD
• Status: Published

Opinion

Stile Software v. Mills CV-98-327-SD 07/16/98 UNITED STATES DISTRICT COURT FOR THE

DISTRICT OF NEW HAMPSHIRE

Stile Software, Inc.

v. Civil No. 98-327-SD

Charles A. Mills; Firesign Computer Company; Allen Systems Group, Inc.

O R D E R

The source of this litigation is a dispute over a contract

to distribute computer software. Following hearing, the matter

is before the court on plaintiff's motion for a preliminary

injunction.1

1. Background

Plaintiff Stile Software, Inc. (Stile) is a New Hampshire

corporation with a principal place of business in Orford, New

Hampshire. Paul Boone is the president and principal of Stile.

Defendant Charles A. Mills is a resident of San Francisco,

California. Defendant Firesign Computer Corporation (Firesign)

is a California corporation with a principal place of business in

1Plaintiff moved for a temporary restraining order, but the court directed that a hearing be held on a preliminary injunction. Due to time constraints, the parties were largely limited at such hearing to proceeding by offers of proof. The court has accepted, for the purposes only of the preliminary injunction proceedings, plaintiff's representation that it possesses jurisdiction over all named defendants. Defendants have, of course, reserved their right to contest such jurisdiction in the future. San Francisco.2 Defendant Allen Systems Group, Inc. (ASG) is a

Delaware corporation with a principal place of business in

Naples, Florida.

On January 26, 1991, Stile and Mills (who was then a sole

proprietor doing business as Firesign Computer Company) executed

a distributorship agreement which granted Stile the Northeast

distributorships for the "Outbound" computer programs developed

by Mills. Plaintiff's Exhibit 1. By "Addendum" of April 18,

1994, this agreement was reconfirmed as between Stile and

Firesign. Plaintiff's Exhibit 2.3

Apparently, business dealings among the parties ran smoothly

until November 1997, when Mills advised Boone that Firesign was

unhappy with Stile's distributorship efforts. Plaintiff's

Exhibit 4. Stile was informed that Firesign did not interpret

the 1991 agreement as amended as inclusive of newly developed

computer program features or platforms or new software. Id.

Firesign contended that it had "waived" the "Product" definition

of the agreement in the past, but that it would require new

agreements covering computer program enhancements in the future.

Id.4

defendants have represented that Firesign has been liquidated prior to the commencement of the preliminary injunction hearing. The court accepts that representation for the purpose of these proceedings.

3Mills assigned his right, obligations, and duties under the distributorship agreement to Firesign on or about September 1, 1992. Plaintiff's Exhibit 2.

4A1though the distributorship agreement of January 26, 1991, defines the "Work" involved as a "computer program and related 2 Further negotiations among the parties led to a proposal

that Firesign buy out Stile's distribution rights. While Stile

believed these negotiations were being finalized, ASG was

acquiring Firesign.

ASG subsequently advised Stile that its distributorship

agreement had been canceled. It offered to enter into a new

distribution agreement with Stile, which Stile found to be

unsatisfactory. Contacts have been made by defendants directly

with Stile's customers, indicating to said customers that Stile

no longer represents the product, and Stile has accordingly

commenced this litigation.

2. Discussion

In the First Circuit, there exist four well-established

criteria for the granting of preliminary injunctive relief: (1)

the likelihood of success on the merits; (2) the potential for

irreparable harm if the injunction is denied; (3) the balance of

hardships; and (4) the effect (if any) of the court's ruling on

documentation described in the specifications dated June 8, 1990," Plaintiff's Exhibit 1, § 1.1, it describes "Product" as "any portion or combination of computer code and user documentation which is based on the Work. Product will consist primarily of object code and user documentation but may, at the discretion of [Mills], include portions of source code and development document which are necessary and desirable to increase the marketability of the Product." Id. § 1.2. Additionally, Mills agreed "to modify and enhance the Product from time to time so as to insure its continued viability in the Mainframe Software Market, insofar as that is possible." One may reasonably ask whether this language does not include enhancements to and modifications of the product, but that question does not require any answer by this court at this stage of the proceedings. 3 the public interest. Ross-Simons of Warwick, Inc. v. Baccarat,

Inc., 102 F.3d 12, 15 (1st Cir. 1996) (citations omitted). Of

these four factors, likelihood of success is the "main bearing

wall," id. at 16, having in mind that this court "need not

predict the eventual outcome on the merits with absolute

assurance." Id.

The agreement provides that so long as Stile meets its sales

quotas of $90,000 per quarter, it will be entitled to continue

performance thereunder. Plaintiff's Exhibit 1, § 19.3(a). There

has been no claim made that Stile ever failed to comply with

these requirements, or indeed with any other term or condition of

the agreement.5 The court finds that there is a likelihood of

success on the merits for breach of the distributorship agreement

as against at least one of the named defendants.6

The factor of irreparable harm is also, the court finds,

here established. It is clear that a plaintiff "need not

demonstrate that the denial of injunctive relief will be fatal to

its business . . . [as] it is usually enough if the plaintiff

shows that its legal remedies are inadequate." Ross-Simons,

supra, 102 F.3d at 18 (citations omitted). "If the plaintiff

suffers a substantial injury that is not accurately measurable or

5Indeed, the thrust of the November 1997 complaint of Mills appears to be the failure to Stile to perform at the higher rate at which it has performed in earlier years.

6ASG may or may not ultimately be found legally at fault on a theory of successor liability. For the purpose of these preliminary injunction proceedings, however, the court finds it unnecessary to attempt to resolve this issue. 4 adequately compensable by money damages, irreparable harm is a

natural sequel." Id. at 19 (citations omitted).

Furthermore, the law is clear that, by its very nature,

injury to good will and reputation is not easily measured or

fully compensable in damages, and accordingly is often held to be

irreparable. See Ross-Simons, supra, 102 F.3d at 20 (and cases

cited); Iowa Utilities Bd. v. Federal Communications Comm'n, 109

F.3d 418, 426 (8th Cir. 1996); Tom Doherty Assoc., Inc. v. Sabin

Entertainment, Inc., 60 F.3d 27, 37-39 (2d Cir. 1995);

BasiComputer Corp. v. Scott, 973 F.2d 507, 511-12 (6th Cir.

1992). As Stile is here threatened with a loss of all customers

for the Outbound program, the court finds that it has established

the factor of irreparable harm.

The balance of hardships is also in favor of Stile, as the

defendants will retain some 60 percent of the market for the

Outbound program, and the court finds that there is no adverse

public interest which will be affected by the granting of a

preliminary injunction.

This brings into play the requirement of Rule 65(c), Fed. R.

Civ. P., that plaintiff provide security.7 Addressed to the

7Rule 65(c), Fed. R. Civ. P., provides:

No restraining order or preliminary injunction shall issue except upon the giving of security by the applicant, in such sum as the court deems proper, 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. No such security shall be required of the United States or of an officer or agency thereof. 5 discretion of the court, the purpose of such security is to

guarantee payment of costs and damages incurred by a party who is

wrongfully enjoined. 13 M o o r e 's F e d e r a l P r a c t i c e § 65.50[1], at 65-

92; § 65.50[3], at 65-94, 95 (3d ed. Matthew Bender 1997).

Defendants argue that a bond in the amount of $300,000

should be required, but the court finds that, given the right of

defendants to terminate the distributorship on failure of

plaintiff to meet his quarterly sales quota of $90,000, that sum,

$90,000, is the proper and sufficient amount of security to be

required. Accordingly, entry of the preliminary injunction will

be conditioned on the furnishing of a $90,000 security bond by

Stile.

3. Conclusion

For the reasons outlined, the court has granted plaintiff

Stile a preliminary injunction as against the defendants Mills

and Allen Systems Group. The entry and effectiveness of this

injunction is conditioned on a security bond in the amount of

$90,000.

SO ORDERED.

Shane Devine, Senior Judge United States District Court

July 16, 1998

cc: Thomas J. Donovan, Esq. W. Wright Danenbarger, Esq.

6 UNITED STATES DISTRICT COURT FOR THE

Charles A. Mills; Firesign Computer Company; Allen Systems Group, Inc.

ORDER OF INJUNCTION

Following hearing on a preliminary injunction, the court

finds and rules that plaintiff Stile Software, Inc., is entitled

to such preliminary injunction as against the defendants Charles

A. Mills and Allen Systems Group, Inc., and accordingly said

defendants and their agents, servants, and employees are enjoined

from contacting (a) existing Outbound clients of Stile Software,

Inc., or (b) potential clients of Stile Software, Inc., within

the territory as defined in the distribution agreement of 1991

and any amendments thereto, except that defendants may have

routine technical support and maintenance contacts with said

existing or potential clients so long as no reference is made as

to any post-June 30, 1998, change in invoicing or in the role of

Stile Software, Inc. Defendants are further here enjoined from

collecting or attempting to collect any payments from existing or

potential Outbound customers which would in the ordinary course

have been paid to Stile. Defendants are ordered to perform pursuant to the 1991

distribution agreement and 1994 addendum thereto pending further

order of this court.

This preliminary injunction becomes effective only on the

furnishing of security in the amount of ninety thousand dollars

($90,000) by plaintiff Stile.