Deceitful Behavior Not Enough to Warrant Preliminary Injunction

Deceitful Behavior Not Enough to Warrant Preliminary Injunction

 Upon a litigant's motion, a court can enter a "preliminary injunction" preventing a party from pursuing a particular course of action until the conclusion of a trial on the merits. A preliminary injunction is considered an extraordinary remedy and requires the moving party to establish that (1) he is likely to succeed on the merits of the case at trial; (2) he is likely to suffer irreparable harm unless the injunction is granted; (3) the balance of the equities tips in his favor; and (4) an injunction is in the public interest. The party must make a clear showing that he is likely to succeed on the merits. Where a defendant has acted in an underhanded manner, but the plaintiff is unable to establish these factors, a court will deny the request for injunctive relief. In BP Products v. Southside Oil [an enhanced version of this opinion is available to subscribers], the United States District Court for the Eastern District of Virginia considered and denied BP's request for a preliminary injunction even though it was clear that Southside had acted deviously.

Defendant Southside owns gas stations and also has fuel supply agreements with independent gas stations. BP decided to stop owning stations and simply sell gas to BP stations through middlemen. As part of its strategic plan, BP sold many of its Virginia gas stations to Southside, and Southside agreed to continue to market BP products at BP's former stations. The parties renewed the contract in 2010 and agreed that BP would have a Right of First Offer (ROFO) as to any proposed sale of any of Southside assets. Before Southside sold any BP stations or changed any BP stations to other brands, it was required to provide a term sheet outlining its goals; BP could then either negotiate with Southside or allow negotiation with other buyers. Southside was not required to accept any offer by BP to purchase its assets.

The 2010 agreement also gave BP a Right of First Refusal (ROFR) requiring Southside to give BP written documentation regarding any proposed sale so that BP could determine whether to buy Southside's entire business. The 2010 contract expired on October 2, 2013. During renewal negotiations, BP sent a "notice of non-renewal" indicating that if the parties failed to reach a new agreement by October 2, 2013, the contractual relationship would end. Southside declined to renew the agreement and the relationship ended.

Previously, on August 1, 2013, an affiliate of Sunoco (ETC) and the company that owned Southside (Mid-Atlantic) signed an agreement under which ETC took ownership and control of Mid-Atlantic and therefore Southside. The contract specified that the deal would not close before October 4, 2013. Even though Southside had no intention of reaching a new agreement with BP, it continued to negotiate with BP. After the parties' contract expired, Sunoco issued a press release noting ETC's acquisition of Mid-Atlantic and Southside. BP suspected deceit and filed suit against Southside and Sunoco. From the time of closing until the hearing on the preliminary injunction, Southside had rebranded all but two if its former BP stations from BP to Sunoco. As part of its relief, BP asked the court to enjoin both defendants from any further rebranding.

Read the rest of the article at the Virginia Business Litigation Lawyer blog.

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