Washington Potato Company v. J. R. Simplot Company

Filing 60

ORDER DENYING 21 DEFENDANT'S MOTION FOR A PRELIMINARY INJUNCTION. Signed by Judge Rosanna Malouf Peterson. (AY, Case Administrator)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF WASHINGTON

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WASHINGTON POTATO
COMPANY,

NO: 4:17-CV-5032-RMP

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Plaintiff,
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v.

ORDER DENYING DEFENDANT’S
MOTION FOR A PRELIMINARY
INJUNCTION

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J.R. SIMPLOT COMPANY,
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Defendant.
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BEFORE THE COURT is a motion by Defendant J.R. Simplot Company

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(“Simplot”) for a preliminary injunction, ECF No. 21. The Court reviewed the

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parties’ briefing and attachments, heard oral argument from the parties on July 27,

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2017, and considered the relevant law. Finding that the standard for entry of a

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preliminary injunction has not been met, the Court denies Defendant’s motion for

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the reasons set forth below.

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BACKGROUND
Essentially, this matter concerns a multifaceted contract dispute between
Plaintiff Washington Potato Company (“WPC”) and Defendant and CounterORDER DENYING DEFENDANT’S MOTION FOR A PRELIMINARY
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Claimant Simplot regarding a vegetable processing facility that the parties have co-

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owned since 2008 as fifty percent members, Pasco Processing LLC (“Pasco

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Processing”). In addition to co-owning Pasco Processing with WPC, Simplot is a

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customer of the facility. WPC manages and operates Pasco Processing, including

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scheduling usage of the plant’s services.

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Simplot also states counterclaims against the Oregon Potato Company

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(“OPC”), with which Simplot owns another multimillion dollar food processing

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and food distribution business, Gem State Processing LLC. Both OPC and WPC

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are controlled by Frank Tiegs.

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On February 15, 2013, the parties entered into an “Amended and Restated

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Operating Agreement” for Pasco Processing (“Pasco OA”). ECF No. 26-1 at 2.

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Both parties seek declaratory judgments validating their divergent interpretations

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of the Pasco OA. ECF Nos. 1 at 15-16; 35 at 39-40. For its part, WPC seeks the

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Court’s endorsement of WPC’s purchase of Simplot’s interest in Pasco Processing

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which made it become the one hundred percent owner of the business. ECF No. 1

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at 4, 16. In addition, Plaintiff seeks damages from a breach of contract claim.

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ECF No. 1 at 16-17.

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Defendant Simplot is seeking to preserve its status as fifty percent owner

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and revert to the general state of affairs between the parties before WPC allegedly

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exercised its option to buy out Simplot’s share of the business. Defendant also

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raises the following additional counter claims against WPC and OPC: breach of
ORDER DENYING DEFENDANT’S MOTION FOR A PRELIMINARY
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contract; violations of the Washington Limited Liability Company Act’s records

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disclosure requirements, under Rev. Code Wash. § 25.15.136; and injunctive relief

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under the Washington Limited Liability Company Act, Rev. Code Wash. §

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25.15.136. ECF No. 35 at 34-39.

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STANDARD
A preliminary injunction is an “extraordinary and drastic remedy” that may be

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granted only upon a “clear showing” that the movant is entitled to such relief.

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Mazurek v. Armstrong, 520 U.S. 968, 972 (1997). To succeed in securing a

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preliminary injunction, the moving party must demonstrate “that he is likely to

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succeed on the merits, that he is likely to suffer irreparable harm in the absence of

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preliminary relief, that the balance of equities tips in his favor, and that an injunction

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is in the public interest.” Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 20

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(2008).

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Provided the Court considers all four parts of the Winter test, the Court may

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supplement its preliminary injunction inquiry by considering whether “the likelihood

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of success is such that ‘serious questions going to the merits were raised and the

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balance of hardships tips sharply in [the requesting party’s] favor.’” Alliance for the

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Wild Rockies v. Cottrell, 632 F.3d 1127, 1132 (9th Cir. 2011) (quoting Clear

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Channel Outdoor, Inc. v. City of L.A., 340 F.3d 810, 813 (9th Cir. 2003)).

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Otherwise stated, the Ninth Circuit’s “serious questions” consideration survives

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Winter, “so long as the [movant] also shows that there is a likelihood of irreparable
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injury and that the injunction is in the public interest.” Alliance for the Wild

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Rockies, 632 F.3d at 1135. Finally, as with any equitable relief, a preliminary

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injunction generally is not appropriate where adequate legal remedies are available.

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See Weinberger v. Romero-Barcelo, 456 U.S. 305, 312 (1982) (“The Court has

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repeatedly held that the basis for injunctive relief in the federal courts has always

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been irreparable injury and the inadequacy of legal remedies.”).

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DISCUSSION

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Simplot is seeking a preliminary injunction to preserve its fifty percent

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ownership in Pasco Processing pending resolution of the merits of this case. WPC

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claims that in early 2017 it bought Simplot’s stake in the company pursuant to a

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“Members [sic] Option to Purchase on Deadlock” in the Pasco OA.. See ECF No.

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1-1 at 22 (Pasco OA). Simplot contends that a deadlock never occurred.

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Likelihood of Success on the Merits

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Simplot emphasizes that the plain language of the Pasco OA demonstrates

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Simplot’s probable success on the merits. Both parties point the Court toward

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“dispositive” provisions of the contract. When called upon to resolve the meaning

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of words contained in a contract, courts consider each provision in the context of

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the entire contract and seek to “interpret the contract in a manner that makes the

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contract internally consistent.” Brobeck, Phleger & Harrison v. Telex Corp., 602

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F.2d 866, 872 (9th Cir. 1979). However, at this stage, each party has offered

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competing and contradictory interpretations of the contract, each of which appears
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meritorious. Therefore, for purposes of a preliminary injunction, Simplot has not

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demonstrated a strong likelihood of resolution of the merits in its favor.

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Likelihood of Irreparable Harm

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Defendant must “demonstrate,” rather than merely allege, the existence of

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an immediate threatened injury to support preliminary injunctive relief. See

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Caribbean Marine Servs. Co. v. Baldrige, 844 F.2d 668, 674 (9th Cir. 1988)

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(emphasis in original). “Speculative injury cannot be the basis for a finding of

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irreparable harm.” In re Excel Innovations, Inc., 502 F.3d 1086, 1098 (9th Cir.

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2007). Moreover, mere financial injury “will not constitute irreparable harm if

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adequate compensatory relief will be available in the course of litigation.”

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Goldie's Bookstore, Inc. v. Superior Court, 739 F.2d 466, 471 (9th Cir. 1984)

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(concluding that plaintiff's harm would be easily calculable in damages); see

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Sampson v. Murray, 415 U.S. 61, 90 (1974) (“The possibility that adequate

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compensatory or other corrective relief will be available at a later date, in the

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ordinary course of litigation, weighs heavily against a claim of irreparable harm.”).

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Defendant indicates that it has suffered injuries that are difficult to reduce to

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a monetary value by being deprived of its role as a co-owner of Pasco Processing.

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Defendant also alleges a number of injuries that are threatened by action that

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Plaintiff may take regarding decreasing or ceasing Pasco Processing’s production

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for Defendant, but fails to provide evidence of actual harm, including a decrease in

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having its products processed. Defendant’s submissions for purposes of its
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preliminary injunction motion arguably demonstrate that Defendant has suffered

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some harm during the unraveling of its co-ownership relationship with Plaintiff.

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However, Defendant fails to provide sufficient evidence to support irreparable

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harm. Rather, the irreparable harm that Defendant alleges is speculative and

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generally of a nature that can be reduced to monetary damages should Defendant

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prevail on the merits.

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Balance of Equities and the Public Interest

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While Defendant asserts that the “balance of equities and public interest

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strongly favor resolving this dispute over the ownership of a multimillion dollar

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business with thousands of employees in an orderly fashion in this Court rather

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than through unilateral action by WPC,” ECF No. 21 at 10, the Court finds no

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evidence at this point in the litigation that supports how a preliminary injunction

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would serve the public interest or how the equities tip sharply toward Defendant.

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CONCLUSION

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In sum, Defendant has not made a clear showing that it has suffered

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irreparable harm to date or that it is likely to experience irreparable injury in the

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absence of a preliminary injunction. Both parties raised “serious questions” going

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to the merits, and Defendant did not show that the balance of hardships tips sharply

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in its favor. Moreover, the “serious questions going to the merits” and the balance

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of hardships may be weighed particularly heavily in favor of the movant only

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where the movant already has shown “that there is a likelihood of irreparable
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injury and that the injunction is in the public interest. Alliance for the Wild

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Rockies, 632 F.3d at 1135. Here, Defendant showed neither a likelihood of

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irreparable injury nor the benefit to the public interest.

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Therefore, IT IS SO ORDERED that Defendant’s Motion for a Preliminary
Injunction, ECF No. 21, is DENIED.
The District Court Clerk is directed to enter this Order and provide copies to
counsel.
DATED August 1, 2017.

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s/ Rosanna Malouf Peterson
ROSANNA MALOUF PETERSON
United States District Judge

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