Preliminary Injunction

Today, in TAI Sports, Inc. v. Hall, the Business Court denied Plaintiff’s’ Motion for a Preliminary Injunction freezing Defendants’ assets and appointing a receiver to manage the business of the Defendants.

The claim made by Plaintiff was that one of the Defendants had used his position as an officer of one of the Plaintiff’s companies to misappropriate over $1 million in cash and inventory.  The Defendants had disputed the allegations.

Judge Diaz observed that the bulk of the damages sought by Plaintiff were lost profits, and that Plaintiff had not shown that it would be able to prove those with the required "reasonable certainty."  He held:

the Court notes that TAI is a relatively new enterprise, having been formed in 2005, and the record is silent on Plaintiff’s history of profitability, if any. And while North Carolina law has no per se rule precluding an award of damages for lost profits here a business has no recent record of profitability, such businesses, like established businesses, must prove such damages with reasonable certainty. . . .  Plaintiff’s evidence here falls short of proving its lost revenue or profits with reasonable certainty, and thus, Plaintiff has not shown a likelihood of success on the merits of a substantial portion of its claim.  

The Court concluded, in denying the Motion::

At bottom, this is a case where Plaintiff seeks money damages. Plaintiff is asking the Court to issue a preliminary injunction to prevent the Hall Defendants from rendering a monetary judgment against them unenforceable. Plaintiff, however, has not sustained its burden to show that it will suffer irreparable injury should the injunction not issue. Specifically, there is no evidence in this record that the Hall Defendants have fraudulently transferred assets (whether those purportedly belonging to Plaintiff or their own) to a third party or taken any other action to thwart Plaintiff’s ability to recover damages should it prevail on the claims.

Brief in Support of Motion for Preliminary Injunction

Brief in Opposition to Motion for Preliminary Injunction


Today, the Business Court denied Plaintiff’s Motion for a Preliminary Injunction in a state law trademark dispute between competing jewelry stores.  The Order in Windsor Jewelers, Inc. v. Windsor Fine Jewelers, LLC, 2009 NCBC 2 (N.C. Super. Ct. Feb. 16, 2009) dissolved a Temporary Restraining Order which had previously been entered in the case.  I wrote about the entry of the TRO back in November 2008.

Defendant bought two jewelry stores in Charlotte, planning to rename them "Windsor Fine Jewelers."  Plaintiff, which operates a single jewelry store in Winston-Salem under the name "Windsor Jewelers," sought to enjoin the use of the Windsor name in the Charlotte area.  It argued that it had sold jewelry there and that the use of the Windsor name would infringe on its common law trademark rights and its service mark registered under the North Carolina Trademark Registration Act.

Judge Diaz applied federal Lanham Act principles in deciding whether Windsor Jewelers had a sufficient market presence in the Charlotte area to warrant injunctive relief.  He said that "North Carolina’s common law is no different" from federal law in determining the rights of a senior user. Op. n.7.

The established tests for injunctive relief when a senior user sues a junior user are "(1) the ‘market penetration’ test, which applies where the senior user actually uses its mark in the market in which it seeks an injunction; or (2) the ‘zone of natural expansion’ test, which applies where the senior user has not actually penetrated the market, but may be likely to do so."  Op. ¶70.

Windsor Jewelers failed the market penetration test.  Although it had averaged annual sales in Mecklenburg County of $66,024 over a fifteen year period, the level of sales had fluctuated over that time and the sales were inconsequential when measured against the total sales of jewelry in that area. Mecklenburg County jewelery stores had sold $138,578,260 of jewelry in 2006, for example, much of it undoubtedly available for much less now in area pawnshops. 

Further leading to the Plaintiff’s lack of success was that it had completed only 88 transactions in Mecklenburg County in 2006, but the average jewelry store there completed 1,718 transactions.  Plaintiff also hadn’t done any advertising targeted at the Charlotte market. 

The Winston-Salem jeweler also struck out on the zone of natural expansion test.  Although it presented evidence that it had "considered" opening a Charlotte store, Judge Diaz found that Plaintiff had not taken any concrete steps to enter the Charlotte market. 

This opinion adds to the precious little bit of law under the North Carolina Trademark Act.   

Brief in Support of Motion for Temporary Restraining Order

Brief in Opposition to Motion for Preliminary Injunction

Reply Brief in Support of Motion for Preliminary Injunction 

The Defendant’s exercise of his Fifth Amendment right against self incrimination was the basis for the North Carolina Business Court’s entry of a Preliminary Injunction on October 29th in Amacell LLC v. Bostic.

Plaintiff asserted that its former employee, a senior research scientist, had misappropriated trade secrets and violated a confidentiality agreement.  The Defendant didn’t deny the misconduct alleged, but instead invoked his Fifth Amendment right against self-incrimination.

Judge Tennille drew an adverse inference as a result of the Defendant’s refusal to testify and entered the Preliminary Injunction, holding:

In a civil case, adverse inferences may be drawn against a party who asserts the Fifth Amendment and remains silent.  Baxter v. Palmigiano, 425 U.S. 308, 318 (1976) (“the Fifth Amendment does not forbid adverse inferences against parties to civil actions when they refuse to testify in response to probative evidence offered against them”); see Arminius Schleifmittel GMBH v. Design Indus., Inc., 2007 WL 534573 (M.D.N.C. Feb. 15, 2007) (granting injunction against defendant who asserted Fifth Amendment privilege because by asserting the privilege he rendered plaintiff’s factual presentation unrebutted). Because Bostic has not rebutted Plaintiff’s evidence, Plaintiff has established a likelihood of success on the merits of its claims for misappropriation of trade secrets and breach of his confidentiality agreement.

Order at 3.

The Business Court also dealt with the Fifth Amendment in the context of civil litigation in its opinion in Sports Quest, Inc. v. Dale Earnhardt, Inc., 2004 NCBC 3 (N.C. Super. Ct. Feb. 12, 2004), where the Court held that a plaintiff who refused to testify about certain matters could not testify about them at trial, and that it would give an adverse inference instruction.


Mitchell, Brewer, Richardson, Adams, Burge & Boughman, PLLC v. Brewer, April 9, 2008 (Jolly)(unpublished)

This is the second opinion from the Court in this case involving the dissolution of a law firm.  The principal issue is whether the plaintiffs, who left the law firm, are entitled to the proceeds of contingent fee cases resolved after their departure from the firm.  The earlier decision is summarized here.

Today, the Court denied the entry of a preliminary injunction preventing the defendants from distributing to themselves the proceeds from those cases.  Here is the key quote from the Court: "The Plaintiffs have not made a convincing showing that they either are likely to sustain irreparable loss unless the injunction is issued, or that such relief is necessary for the protection of their rights during the course of litigation.  Plaintiffs’ contentions in this regard are implausible.  Their claim for an accounting will not be affected by the issuance or denial of the injunction sought; and their claims for money damages are adequately provided for at law, and are weak grounds for the issuance of an injunction."

As with all of these posts, you can click on the case name above to see the full opinion.  I may start including the briefs of the parties in these posts, I’ve done that below.

Congratulations to my partners, Jim Phillips and Charles Marshall, who happen to represent the defendants in this case. 

Plaintiff’s Brief

Defendants’ Brief