Another failed injunction

The streak of losses continues in federal court for distributors in their quests for preliminary injunctions pendente lite. In Nilo Watch Parts, Inc. v. Rado Watch Co., Ltd., 2023 WL 5814264 (D.P.R. Sept. 2023) (Vélez-Rivé, J.), a retail store of Rado-branded watches sued its supplier for termination of its exclusivity right established in a distribution relationship without a formal written agreement (which meant that the court had to discern the parties’ course of dealings). The principal argued that the retailer failed to grow the market for the brand and focused on lower price-point watches instead of newer models like the diver watch “Captain Cook” that had an acceptance in the United States. The dealer's years-long downward trend in sales did not help its case. Essentially, the dealer tried to control or override the supplier’s worldwide sales and marketing practices by arguing that the Puerto Rican consumer preffered cheaper watches. Although it was not discussed in the opinion, the court excluded the dealer’s proffer of expert economic testimony to prove that market or economic conditions or force majeure affected sales. It all came to naught since the court, applying the traditional criteria for injunctive relief but tailored to Law 75 cases, concluded that the dealer had not shown a likelihood of success on the merits to rebut a showing of just cause for termination of the retailer’s exclusivity. The termination was grounded on the dealer’s failure to meet Rado’s “worldwide distribution standards” governing the course of dealings, which the dealer did not contest during the hearing. And, because the dealer continues to operate and remains in business with the Swatch brand, it could not prove irreparable harm. Instead of seeking to appropriate the dealer’s creation of goodwill for Rado, Rado offered alternative terms to transition the business from distributor to retailer which showed that its business decisions were not made in bad faith or arbitrary. For other reasons too, the court denied the injunction.