Dealer took no action to complain about unauthorized sales, then waited 10 months to request injunctive relief, and if granted, would confer exclusivity that it never had

Guess the result? In a thoughtful opinion, Innovair Corp. v. Factory Direct Sales, No. 23-1079 (GMM-GLS), slip op. (D.P.R. Jan. 16, 2026), the court gave de novo review to factual and legal challenges to a Magistrate’s report and recommendation denying, after an evidentiary hearing, a preliminary injunction in a Law 75 impairment case. The opinion has an extensive narrative of Law 75 injunctions and the interplay with the norm that federal procedural law governs in diversity cases. So, the standards for preliminary injunctive relief in federal court and those invoking Law 75 are not identical. (I published years ago a piece for the P.R. Federal Bar's Newsletter on this issue). On the one hand, Law 75 preliminary injunctions do not require a showing of irreparable harm. On the other, FRCP 65 and jurisprudence do, among other factors. Courts reconcile these norms holding that Law 75 tips the scale in favor of granting injunctive relief in light of the Act’s policies. While the absence of irreparable harm is not dispositive, courts may consider this factor among others in the balancing of interests under Law 75. On the key issue of likelihood of success, the court had to determine first, from a course of dealings, if a verbal agreement was probably exclusive when the distributor claimed exclusivity and the supplier denied it, citing CTA1’s Jose Santiago v. Smithfield. First, the court held that plaintiff’s status as the only seller of the products for four years did not establish legal exclusivity. The court drew a distinction that being the only one does not prove the supplier’s intent to limit direct sales or the right to appoint another distributor. Second, plaintiff took no action to sue when a competing air conditioning retailer sold the alleged exclusive products for years. Third, although plaintiff complained about unauthorized sales, it took no affirmative action, citing CTA1’s Irvine as persuasive on this point. Finally, apart from the contract’s terms, the supplier’s direct sales model did not impair the existing relationship because it restructured it in a format that would be more financially sustainable for plaintiff. Plaintiff’s unlikelihood of success weighed against issuance of an injunction. As to irreparable harm, while injury to goodwill and reputation from customers turning to competitors is the kind of harm that is irreparable, there was no such proof here. Finally, the court held that a delay of 10 months in seeking relief from the implementation of the challenged conduct weighs against finding irreparable harm. Balancing of the interests and Law 75’s public policy did not favor granting injunctive relief which would confer plaintiff an exclusivity it never had.