The opinion of the court was delivered by: JUDD
OPINION ON APPLICATION FOR PRELIMINARY INJUNCTION
The court has completed hearings on plaintiff's application for a preliminary injunction to prevent defendants Yoo-Hoo Chocolate Beverage Corp. (Yoo-Hoo) and Cott Corp. (Cott) from selling a chocolate drink on Long Island in alleged violation of an exclusive distribution contract made in 1962 between Yoo-Hoo and plaintiff Minck Bros. & Co.
The drink distributed by Cott is manufactured and bottled by Yoo-Hoo and is substantially similar to the Yoo-Hoo beverage, but is sold under the name Chocko. The labels and the bottles and packages in which Chocko is sold resemble the former Yoo-Hoo labels, bottles and packages, but Yoo-Hoo has recently adopted a different color scheme and package style for the products it now distributes under the Yoo-Hoo name.
The complaint charges both Yoo-Hoo and Cott with violation of its exclusive marketing rights and also charges Cott with unfair competition.
The court ruled in a memorandum after the original argument of the motion that the interpretation of the distribution agreement was open to doubt, particularly as to whether there was an implied covenant that Yoo-Hoo would not compete with its exclusive distributor by marketing a chocolate drink under a different name.
The determination whether to grant a preliminary injunction in order to maintain the status quo depends on a preliminary estimate of the plaintiff's chances of success, followed by a weighing of the relative hardship to the two sides in granting or denying temporary relief. Judge Frank said in Hamilton Watch Co. v. Benrus Watch Co., 206 F.2d 738, 740 (2d Cir. 1953):
"To justify a temporary injunction it it not necessary that the plaintiff's right to a final decision, after a trial, be absolutely certain, wholly without doubt; if the other elements are present (i.e., the balance of hardships tips decidedly toward plaintiff), it will ordinarily be enough that the plaintiff has raised questions going to the merits so serious, substantial, difficult and doubtful, as to make them a fair ground for litigation and thus for more deliberate investigation."
This ruling was reiterated in Checker Motors Corp. v. Chrysler Corp., 405 F.2d 319, 323 (2d Cir. 1969). It is also consistent with the recent decision in Packard Instrument Co., Inc. v. Ans, Inc., 416 F.2d 943 (2d Cir. June 18, 1969), where a preliminary injunction was sustained in connection with the alleged violation of an ambiguous licensing agreement, even though the Court of Appeals considered plaintiff's chance of ultimate victory to be somewhat less certain than the district judge believed.
The court directed the attention of the parties at the evidentiary hearing to two specific questions, in view of assertions at the oral argument that the plaintiff had known of a custom in the industry for manufacturers to bottle and distribute under private labels as well as in their own name, and in view of the possibility that plaintiff's rights under the distribution agreement might have been impaired by its transfer of actual selling responsibilities to New York American Beverage Corp.
The court heard testimony on plaintiff's behalf from Charles Wald, its president, Nathaniel Whitehorn, an attorney who assisted plaintiff in the preparation of the 1962 agreement, and George Franklin, one of the jobbers or routemen who distribute Yoo-Hoo in Brooklyn and Queens. For the defendants, Dr. Max Geller, chairman of the board and chief executive officer of the Yoo-Hoo corporation, was the only witness.
The answers to the two specific questions were clearly of no help to defendants. On the case as a whole, the testimony did not dispel the doubts expressed in the court's original memorandum concerning the interpretation of the distribution agreement, and it lent added force to the claim based on unfair competition.
Mr. Wald and Mr. Whitehorn testified that no mention was made during the negotiation of the 1962 agreement concerning any intent by Yoo-Hoo to reserve the right to sell a chocolate drink under a different label in competition with plaintiff, and Mr. Wald had no knowledge of any industry practice to use private labels for competitive marketing. The 1962 agreement was to some extent a "do-it-yourself" product of the two clients, with only sporadic participation by ...