Book Dog Books, LLC v. Cengage Learning, Inc. et al

Filing 15

ORDER denying 2 Motion for TRO. Signed by Judge James L. Graham on 1/4/13. (jlg6)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
EASTERN DIVISION
Book Dog Books, LLC, et al.,

Case No. 2:12-cv-1165

Plaintiffs,

Judge Graham

v.
Cengage Learning, Inc., et al.,
Defendants.
Opinion and Order

This matter came before the court on the motion of plaintiffs Book Dog Books, LLC and
SPL Management, LLC for a temporary restraining order and preliminary injunction requiring
defendants Cengage Learning, Inc. and Pearson Education, Inc. to supply plaintiffs with college
textbooks before the start of the 2013 winter semester at The Ohio State University.
The parties have briefed the motion and have submitted evidentiary materials. The court
conducted an evidentiary hearing on December 28, 2012 in which the parties examined fact
witnesses and presented legal argument. At the conclusion of the parties’ presentation on December
28, 2012, the court delivered its findings of fact and conclusions of law from the bench and denied
plaintiffs’ motion for a temporary restraining order and preliminary injunction. The following order
memorializes the court’s decision.
I.

Factual Findings
Plaintiff Book Dog Books is an Ohio limited liability company with its principal place of

business in Columbus, Ohio. Philip Smyres is the founder, sole member, and CEO of Book Dog
Books. Book Dog Books conducts business as Used Book Exchange (UBX) and Buckeye Books,
which are bookstores located near the Ohio State campus. Plaintiff SPL Management is a Florida
limited liability company, whose founder, managing member, and CEO is Philip Smyres. SPL is
engaged in the online sale of discounted college textbooks.

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Defendant Cengage Learning is a Delaware corporation with its principal place of business
in Connecticut. Defendant Pearson Education is a Delaware corporation with its principal place of
business in New Jersey. Both defendants are in the business of textbook publishing, supply, and
distribution.
UBX and Buckeye Books (“the Bookstores”) have had accounts with defendants for many
years, since as early as the mid-1990s. In advance of each academic term the Bookstores order text
books from many sources, including defendants. In July 2012, the Bookstores attempted to place an
order with defendants, but were unable to complete the order. They contacted defendants and were
given the impression that there was a technical problem that caused their orders not to be processed.
See Smyres Aff., ¶ 9.
The Bookstores communicated further with defendants from August to November 2012.
On August 8, 2012, Smyres sent an email to Pearson stating that the bookstores needed to place an
order before the fall semester. See Defs.’ Ex. 11. By this time Pearson, as well as Cengage, had
decided to close all accounts associated with Smyres, including those of the Bookstores. Pearson’s
Vice President and Senior Counsel, John Garry, testified that Pearson informed Smyres of the
closing of the accounts sometime in late July or early August 2012. In response to the August 8
email, Pearson responded to Smyres that it was no longer doing business with him. Cengage’s
witness, William Sampson, likewise testified that Cengage communicated to Smyres in July or
August 2012 that it would no longer do business with him.
At some point after these communications with Pearson, the Bookstores came to the
realization that their difficulties in placing orders with defendants were not technical ones, but were
related to an ongoing copyright infringement dispute between defendants and another business
belonging to Smyres, TextbooksRUs, which operated under the Book Dog Books umbrella.
In March 2008, defendants (as well as two other publishing companies) brought suit against
Smyres and TextbooksRUs in the United States District Court for the Southern District of New
York. The complaint alleged that Smyres and TextbooksRUs had unlawfully purchased, distributed,
and sold counterfeit copies of the publishers’ copyrighted works. Counterfeit copies are ones made
without authorization of the copyright owner and are also referred to as pirated copies. The
complaint further alleged that Smyres and TextbooksRUs had unlawfully imported, distributed, and
sold foreign edition prints of the publishers’ copyrighted works. Such foreign edition prints were
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not authorized for resale in the United States and are also referred to as gray market copies. The
parties settled that lawsuit through a settlement agreement dated July 11, 2008. See Defs.’ Ex. 4.
The parties to the agreement also included Book Dog Books, UBX, and Buckeye Books.
In August 2011, counsel for Pearson and Cengage notified Smyres that the publishers
believed that TextbooksRUs and Smyres were engaging in the unlawful distribution of counterfeit
textbooks. See Pls.’ Ex. 1; Defs.’ Ex. 9. Ensuing communications between counsel for the parties
included a disclosure of books distributed by TextbooksRUs. See Defs.’ Ex. 10. The parties then
engaged in mediation efforts, but the 2011 allegations of copyright infringement still remain
unresolved, though no legal action has been taken by the publishers against Smyres or his
companies.
In June 2012 Smyres attempted to open new accounts with Pearson and Cengage under the
name SPL Management. When representatives at those companies discovered that Smyres was
associated with SPL, the accounts were denied. See Defs.’ Ex. 8.
The parties engaged in discussions from August to November 2012 to resolve their dispute.
Neil Mooney, general counsel for the bookstores, testified that he had believed that the allegations
of copyright infringement concerned only TextbooksRUs. He further testified that he had believed
that the parties could resolve their dispute, such that the Bookstores would be able to order books
for the 2013 winter semester.

Mooney stated that it was not until December 2012 that the

Bookstores knew for certain that they would not be able to order books from defendants. See also
Smyres Aff., ¶¶ 10-15 (recounting the efforts made from August to December 2012 to resolve the
dispute).
Smyres states in his affidavit that he had received “assurances” from defendants during the
August to December 2012 timeframe that led him to believe that the “issues going on with the
Bookstores’ accounts . . . would be resolved prior to the winter semester rush.” Smyres Aff., ¶ 10.
Smyres states that absent an injunction requiring defendants to supply textbooks to the Bookstores,
they will “suffer significantly in terms of lost sales and also lost reputation as a reliable source of
discount college textbooks at Ohio State.” Id., ¶ 22. “If the Bookstores were forced to seek book
stocks from other sources at higher prices . . . [it] would result in the Bookstores’ inability to offer
discount sales, which is the entire basis of its retail model.” Id., ¶ 26. Smyres also states that absent

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an injunction he will be unable to purchase “custom books” – those course materials whose content
is made for particular courses at Ohio State.
Witnesses for defendants testified that Pearson and Cengage are not the exclusive sources
for obtaining the titles that the Bookstores seek to purchase. The books can be obtained through
wholesalers like Follett, Missouri Book Exchange, and Barnes & Noble. In particular, Barnes &
Noble’s policy is to sell custom books to other bookstores. Defendants’ witnesses testified that they
have never made any contract, promise, or policy guaranteeing that they will supply books to the
Bookstores. They offered evidence that the terms and conditions of their standard order forms state
that all orders are subject to acceptance and may be changed or cancelled by the defendants at any
time. See Defs.’ Exs. 1, 2. Defendants testified that they have refused to accept future orders with
Smyres and his businesses because their investigations have produced evidence that he has been
dealing in counterfeit books.
II.

Conclusions of Law
A.

Standard

Temporary restraining orders and preliminary injunctions are available under Rule 65 of the
Federal Rules of Civil Procedure.

They are extraordinary remedies that are governed by the

following considerations: “(1) whether the movant has a strong likelihood of success on the merits,
(2) whether the movant would suffer irreparable injury absent a stay, (3) whether granting the stay
would cause substantial harm to others, and (4) whether the public interest would be served by
granting the stay.” Ohio Republican Party v. Brunner, 543 F.3d 357, 361 (6th Cir. 2008); see also
Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7, 129 S.Ct. 365, 374 (2008).
“Although no one factor is controlling, a finding that there is simply no likelihood of success on the
merits is usually fatal.” Gonzales v. Nat’l Bd. of Med. Examiners, 225 F.3d 620, 625 (6th Cir. 2000);
accord Jolivette v. Husted, 694 F.3d 760, 765 (6th Cir. 2012).
“The party seeking the preliminary injunction bears the burden of justifying such relief,
including showing irreparable harm and likelihood of success.” McNeilly v. Land, 684 F.3d 611, 615
(6th Cir. 2012).

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B.

Likelihood of Success on the Merits

The Bookstores proceed on a theory of promissory estoppel. They argue that defendants
promised them that they would supply books on an ongoing basis. They further argue that the
parties have had a course of dealing whereby the Bookstores have always been able to use their
accounts with the defendants to order books.

Relying on those accounts being open, the

Bookstores have built a business model in which they offer discounted textbooks to college
students.
Promissory estoppel is an equitable doctrine for preventing the harm resulting from
reasonable reliance upon false representations. Karnes v. Doctors Hosp., 51 Ohio St.3d 139, 142,
555 N.E.2d 280 (Ohio 1990). The party asserting promissory estoppel bears the burden of proving,
by clear and convincing evidence, all of the elements of the claim. Swank v. Swank, 2011 WL
6966424, at *13 (Ohio Ct. App. 5 Dist. Dec. 30, 2011).
The elements necessary to establish a claim for promissory estoppel are:
(1) a promise clear and unambiguous in its terms;
(2) reliance by the party to whom the promise is made;
(3) the reliance must be reasonable and foreseeable; and
(4) the party claiming estoppel must be injured by the reliance.
Stull v. Combustion Engineering, Inc., 72 Ohio App.3d 553, 557, 595 N.E.2d 504 (Ohio Ct. App.
1991); Patrick v. Painesville Commercial Properties, Inc., 123 Ohio App.3d 575, 583, 704 N.E.2d
1249 (Ohio Ct. App. 1997); Restatement of the Law 2d, Contracts, Section 90 (1973).
The court finds that the Bookstores have failed to produce sufficient evidence of a promise,
either express or implied, that defendants would supply books for the 2013 winter semester.
Smyres’ statements that he received “assurances” are vague and do not support a theory of
promissory estoppel. He is unable to identify any specific promise made to him by defendants that
they would supply books to the Bookstores on a going-forward basis. At most, he received
assurances that defendants would try to resolve their differences with Smyres, not that they would
re-open his accounts to allow him to make future orders. See Smyres Aff., ¶¶ 9-10.
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Defendants, in contrast, offered testimony that they specifically told Smyres in July or
August 2012 that they were closing all of his accounts.

Moreover, their standard terms and

conditions made clear that they were making no promise or obligation to do ongoing business with
him or supply books in the future. Indeed, the parties’ past course of dealing included the 2008
copyright dispute in which defendants testified that they froze the accounts associated with Smyres
and refused to supply him with books until they reached a settlement.

Plaintiffs are unable to

overcome defendants’ clear showing that they had made no promise, express or implied, to supply
books to the Bookstores for the 2013 winter semester.
The course of the parties’ dealings during the 2008 dispute also undermines any claim by the
Bookstores that they reasonably relied on defendants’ alleged assurances. During that dispute the
defendants ceased supplying books to Smyres. A similar dispute arose in 2011 and Smyres was
informed no later than August 2012 that his accounts were closed. In light of the 2008 dispute and
the August 2012 notices that the accounts were closed, the Bookstores are unable to demonstrate a
likelihood of success on the merits that it was reasonable for them to proceed on the belief that
defendants would supply them with books for the winter semester. In other words, the parties’
course of dealing put the Bookstores on notice that if defendants lost confidence in Smyres, they
would simply stop doing business with him. And defendants made clear to Smyres from August to
November 2012 that they did not accept his protestations of innocence. They had a reasonable
basis for believing that he was dealing in counterfeit books and thus lost trust in him as a customer.
Though Smyres may have hoped to resolve the matter before winter semester, such a hope does not
suffice to support a claim for promissory estoppel.
Accordingly, the court concludes that the Bookstores have failed to demonstrate a likelihood
of success on the merits as to their promissory estoppel claim.
The court makes the same finding as to plaintiff SPL Management. In June 2012 Smyres
tried to open accounts in the SPL name with defendants. Defendants refused to allow Smyres to
open the accounts, and there is no evidence whatsoever that defendants ever made a promise to
supply SPL with books for the 2013 winter semester.

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C.

Irreparable Injury

The court also finds that plaintiffs have failed to demonstrate an irreparable injury absent
injunctive relief. The uncontroverted evidence is that the Bookstores have other sources from
which they could order the titles they would have ordered from defendants. The Bookstores have
always ordered books from multiple sources, and the titles published by defendants, including
custom books, are available through wholesalers. Moreover, the court finds that plaintiffs could
have taken steps to avoid the situation for which they now seek an injunction. Defendants gave
notice to Smyres in July or August 2012 that they were closing his accounts. He had four or five
months to make alternative arrangements in sourcing books.
Smyres does not deny that the books can be obtained through other avenues. He instead
argues that it will be more expensive and diminish the Bookstores’ reputation as a reliable source of
discounted books. See Smyres Aff., ¶¶ 22, 26. He fears that the lost sales will force him to lay off
employees and possibly close the stores.
It is well established that injuries which are compensable by monetary damages do not rise to
the level of an irreparable injury required for issuing injunctive relief. See Monsanto Co. v. Geerston
Seed Farms, __ U.S. __, 130 S.Ct. 2743, 2756 (2010); Sellers v. Univ. of Rio Grande, 838 F.Supp.2d
677, 680 (S.D. Ohio 2012). Thus, the fact that absent an injunction the Bookstores will pay higher
prices to obtain the books is not alone sufficient. As to the arguments concerning diminished
reputation and workforce reductions, plaintiffs have offered nothing more than pure speculation.
Plaintiffs provided no evidence from which a reasonable estimation or calculation could be made
regarding the likely loss of customers, lost revenue, or workforce reduction. See Winter, 555 U.S. at
22 (the movant must show that “irreparable injury is likely in the absence of an injunction”; a mere
possibility of injury is not enough) (emphasis in original).
D.

Other Considerations

Finally, the court finds that the public interest will be served by denying the request for
injunctive relief. It is not in the public interest to require defendants, who are the copyright owners
of their texts, to do business with entities associated with an individual for whom defendants have a
reasonable basis to believe has dealt in counterfeit books.

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III.

Conclusion
Accordingly, plaintiffs’ motion for a temporary restraining order and preliminary injunction

(doc. 2) is DENIED.
s/ James L. Graham
JAMES L. GRAHAM
United States District Judge
DATE: January 4, 2013

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