Antwerpen Dodge, Ltd. v. Herb Gordon Auto World, Inc.

EYLER, Judge. This case is an interlocutory appeal from a denial of a motion to dissolve an interlocutory injunction 1 enjoining ap ²⁹⁵ pellant Chrysler Corporation (Chrysler) from establishing or granting a new Dodge dealership in Clarksville, Maryland, and from negotiating with and making any commitments to appellant Antwerpen Dodge, Ltd. (Antwerpen Dodge) in connection therewith. Relying primarily upon Md.Code Ann., Transp. art. § 15-207 (1992 RepLVol., 1996 Supp.), the trial court held that appellee Herb Gordon Auto World, Inc. (Herb Gordon) had presented a justiciable issue regarding whether establishment of a Dodge dealership in Clarksville, eleven miles 2 from Herb Gordon’s Dodge dealership, violates § 15-207, and that a preliminary injunction was necessary to preserve the status quo pending trial. Given that appellee did not meet the requisites for the grant of a preliminary injunction, we shall reverse the trial court’s order.

Facts Herb Gordon is an automobile dealership operating from facilities located in the Montgomery Auto Sales Park in Silver Spring, Maryland. Although Herb Gordon’s mailing address is Silver Spring, the parties acknowledge that the actual location of its Dodge dealership is Burtonsville. Herb Gordon is a substantial business enterprise selling and servicing hundreds of new and used vehicles annually from five facilities in Silver Spring. In addition to Dodge vehicles, Herb Gordon sells Oldsmobile, Nissan, Mercedes-Benz, and Volvo vehicles.

In 1995 alone, Herb Gordon sold in excess of 1500 Dodge vehicles. Herb Gordon has a Dodge Sales and Service Agreement with Chrysler, dated October 10, 1988 (Dealer Agreement). Under the Dealer Agreement, Herb Gordon is required to sell a minimum number of Dodge vehicles as set by Chrysler. The Dealer Agreement further grants Herb Gordon a nonexclusive right to purchase Dodge vehicles from Chrysler and ²⁹⁶ to sell them at retail in a territory known as its • “Sales Locality.” The Dealer Agreement provides that Gordon’s Sales Locality may be shared with other Chrysler dealers as Chrysler determines to be-appropriate.

Herb Gordon’s Sales Locality is described in an addendum to the Dealer Agreement entitled “Notice of Sales Locality Description.” It lists approximately 55 cities and towns, not including Clarksville, Maryland. Although Dodge dealers, including Herb Gordon, are free to sell Dodge vehicles outside their designated Sales Localities, the Notice of Sales Locality provides as follows: The above Sales Locality is hereby designated as the territory of DEALER’S responsibility for the sale of [Chrysler] vehicles, vehicle parts and accessories therefor, and will be used by [Chrysler] to determine DEALER’S Minimum Sales Responsibility (MSR) and to measure DEALER’S sales performance in relation to such MSR, and to evaluate DEALER’S performance pertaining to other matters relating to DEALER’S operations. Herb Gordon has enjoyed great success as a Dodge dealership and, over the years, has been the recipient of a number of awards from Chrysler for outstanding sales and customer service. Chrysler recognized Herb Gordon as the seventh largest Dodge sales dealership in the nation for the calendar year 1991.

Until 1992, Herb Gordon was consistently the second highest volume seller of Dodge vehicles in the Washington Zone until he became the highest volume seller in 1992 and 1993. Appellant Antwerpen Dodge also has been a successful Dodge dealer. In January 1994, Jack Antwerpen, principal of Antwerpen Dodge, entered into a buy/sell agreement with the owner of a failing Dodge dealership in Randallstown, Maryland and ultimately transformed it into a successful operation. In 1993, the Randallstown dealership sold only 172 Dodge vehicles, but in 1995 Antwerpen Dodge sold 802 vehicles at that location.

Prior to Antwerpen Dodge’s purchase of the Randallstown location, Chrysler made the location available to ²⁹⁷ Antwerpen Dodge, Herb Gordon, and others, and informed them that, if the opportunity arose, it was Chrysler’s plan eventually to relocate the Randallstown dealership to Clarksville. Very soon after Antwerpen Dodge entered into the buy/sell agreement for the Randallstown dealership, and prior to Chrysler’s official approval of the sale, Chrysler began informing Herb Gordon that it intended to support a move of Antwerpen Dodge’s dealership from Randallstown to Clarksville once Chrysler determined that the Clarksville market was ready. From the very beginning, Herb Gordon expressed its opposition to such a move and indicated that if a new dealership were established in Clarksville, it should be awarded to Herb Gordon. Herb Gordon informed Chrysler that Clarksville constituted a significant portion of its market and that additional competition there would threaten its business.

Herb Gordon alleges that, at a meeting between it and Chrysler in January 1994, Chrysler informed Herb Gordon that it “would not establish a Dodge dealership in another dealer’s market area, if the conditions did not warrant it, or it was detrimental to the existing Dodge dealer.” Herb Gordon further alleges that, in May or early June, 1994, a Chrysler official, William Glaub, informed Herb Gordon that “Dodge in Columbia[ 3 ] is dead.” Mr. Glaub denies that he ever told Herb Gordon that the Columbia location was forever dead. Mr. Glaub does admit to having informed Herb Gordon, in or about February 1994, that Chrysler was prepared to delay establishment of a dealership in Clarksville for one year. Herb Gordon alleges that, based in part upon Chrysler’s representation that “Dodge in Columbia is dead,” Herb Gordon invested $750,000 to improve its facilities. Chrysler points out that the improvements to the facilities were necessary to accommodate Herb Gordon’s then existing business, ²⁹⁸ and that Herb Gordon had retained an architect in 1993, prior to the alleged representation.

Chrysler further notes that the expenditures were made by a separate corporate entity rather than by Herb Gordon, and that Herb Gordon already has realized $500,000 in additional net profits as a. result of the increase of service bays. In July 1995, Chrysler approved the establishment of a Dodge dealership in Clarksville and prepared a Letter of Intent to be issued to Antwerpen Dodge. Upon learning of the approval, Herb Gordon requested a meeting with Chrysler and a meeting was held on September 11, 1995. At that meeting, Chrysler informed Herb Gordon that it would not proceed with establishment of a dealership in Clarksville for another one year period, and after a year, it would review the market data for the area and decide whether or not to proceed with Dodge representation.

In a letter to Antwerpen Dodge, dated March 17, 1996, Chrysler informed Antwerpen Dodge that it planned to appoint a Dodge dealer in Clarksville after September 17, 1996, and that, assuming it meets all of Chrysler’s criteria regarding capital, facilities, and management, Antwerpen Dodge would be the dealer in Clarksville. The letter further informed Antwerpen Dodge that “should circumstances beyond Chrysler’s control, including State RMA [Relevant Market Area] legislation or litigation brought on by a third part[y], prevent the appointment of a Dodge dealer in Clarksville, the construction of a new facility prior to September 17,1996, is done at your own risk.” Jack Antwerpen, through another corporate entity, Antoy Limited Liability Company, began construction of a Dodge dealership and an adjoining Toyota dealership in Clarksville in June, 1996. On July 15, 1996, Herb Gordon filed, in the Circuit Court for Montgomery County, a verified complaint for injunctive and other relief against Chrysler based on breach of contract, breach of implied covenant of good faith and fair dealing, breach of fiduciary duty, deceit, negligent misrepresentation, promissory estoppel, negligence, and violation of the Maryland ²⁹⁹ Dealer’s Act. Along with the complaint, Herb Gordon filed, pursuant to former Rule BB72, a motion for ex parte, interlocutory, and permanent injunctions.

In support of its motion, Herb Gordon alleged that establishment of a Dodge dealership in Clarksville would result in a loss of 43% of its business and, ultimately, the likely “ruination” of its business. On the date suit was filed, the trial court entered an order granting an ex parte injunction enjoining Chrysler from “establishing or granting a new Dodge motor vehicle dealership in the Clarksville, Maryland area and from negotiating and making any commitments with Antwerpen Dodge in connection therewith.” Thereafter, Chrysler filed a motion to dismiss and an opposition to Herb Gordon’s motion for interlocutory injunction. After a hearing, the trial court denied Chrysler’s motion and upheld its prior ordering granting injunctive relief. In continuing the injunction, the trial court apparently accepted Herb Gordon’s representation that it would permanently lose 43% of its business if the injunction were not granted.

Further, although Antwerpen Dodge was not a party at the time, the trial court considered the potential impact of an injunction upon Antwerpen. With respect to such impact, the court stated as follows: Well, let me just say this with all due deference. It seems to me that if he’s [Jack Antwerpen] got the place up in Randallstown and he’s got the Toyota business in Clarksville, that the cry of irreparable harm to him tends to, in my view, fall on deaf ears. And so I am not — I simply am not going to withdraw the — I am denying the motion to set aside the injunction at this time.

Citing to a lack of evidence that Chrysler was losing any sales as a result of the injunction, the trial court further denied Chrysler’s request for a bond based on a finding that Chrysler was not suffering any harm. Thereafter, Antwerpen Dodge was permitted to intervene. On January 10, 1997, Antwerpen Dodge filed a motion to dissolve the injunction or, alternatively, to require Herb Gordon to post a bond. On February 20, 1997, the trial court ³⁰⁰ conducted a hearing on Antwerpen Dodge’s motion and denied the motion.

In support of its motion, Antwerpen Dodge cited evidence that, but for the injunction, it would be awarded a Dodge dealership in Clarksville, evidence that construction of the Dodge facility was expected to be completed by late March or early April, and evidence that Antwerpen Dodge had hired personnel and was required to begin stocking the facility 30 days prior to opening. Antwerpen Dodge further argued that, to the extent Herb Gordon does lose business as a result of the new Dodge dealership, he has a significant sales history that can be used as the basis to calculate damages. By contrast, Antwerpen Dodge has no sales history for a Dodge dealership in Clarksville. The trial court remained unpersuaded that Antwerpen Dodge would suffer any harm as a result of the injunction: THE COURT: Mr. Antwerpen is not going to the poor house in connection with this matter.

I mean, he has and is about to open, apparently, a good size Toyota dealership right there. [COUNSEL FOR ANTWERPEN DODGE]: He is just relocating his Toyota dealership. THE COURT: Well, whatever. I mean, but nonetheless — I mean, he didn’t do it because he thought that he was going to make less money there, did he? [COUNSEL FOR ANTWERPEN DODGE]: Absolutely not. THE COURT: He thought he was going to make more money there. [COUNSEL FOR ANTWERPEN DODGE]: Your Honor, it is two buildings.

THE COURT: All right. [COUNSEL FOR ANTWERPEN DODGE]: They have a wall between them. One is for Toyota and one is for Dodge. THE COURT: Okay. But the fact is that he will be making money on this — hopefully, and I hope he — I genuinely hope he does— ³⁰¹ # % ífe Jj4 THE COURT: No, I am denying that [request for bond], because at this stage — nothing has occurred.

There hasn’t been, as far as I can see, a dime lost by Antwerpen with regard to any of this. If in fact it comes to pass that there is — that it genuinely is occurring, that the party who is genuinely in this case is in fact at least arguably losing money, then you can revisit that issue, but not now. In denying Antwerpen Dodge’s motion, the trial court focused primarily on Herb Gordon’s argument that § 15-207 prohibited Chrysler from granting the Dodge dealership to Antwerpen: Gentlemen, on these issues I have heard enough. You are both going to go away with something and you both are not going to go away with something.

I am not convinced that I know why this — I simply don’t know why this event occurred. Chrysler and Antwerpen say that Gordon is just simply pernicious and that he just is stamping his foot; on the other hand, Gordon says, “Well, I can prove, if I ever get in front of a trier of fact, that I am— that this is going to materially affect my ability to do business,” and I don’t pretend at this stage to be able to divine who has it right. The question is whether or not there is a valid issue regarding these various arguments, and I think there is. I think it is something that has to be determined by a trier of fact.

I will accept that 15-207d or 15-207 in general applies to this situation, having heard nothing to the contrary with regard to it; notwithstanding that this lawsuit was filed before the enacting of this statute. Further, the legislature did not say, as defendant — at least defendant Chrysler, and joined by others — did not say that this is simply that the manufacturer, distributor, et cetera, may not coerce a dealer; they didn’t leave it at that, ³⁰² they put in another word, “require,” and that require then is followed by what? — “Require them to materially change the dealer’s facilities or method of conducting business if the change would impose substantial financial hardship on the business of the dealer.” * * * * But, in my view, 15-207 does apply, and the question is what has happened here with regard to what Chrysler has done, along with Antwerpen. It is a justiciable issue, and I am going to deny the motion to dissolve the injunction, because I think that if I were — no one addressed themselves to the analogy[ 4 ] that I put forward and I think it is fairly apt, and that once the edifice is done, once the dealership is an ongoing thing, it will be a total nightmare to try to undo that scenario, and be overwhelmingly financially detrimental to all sides. So, it seems to me that the better methodology is to continue the injunction until we can have this matter judged on the merits.

The trial court thereafter issued a written order and Antwerpen Dodge and Chrysler appealed. Questions Presented The parties present essentially four questions on appeal which we slightly rephrase for clarity: 1. Did the trial court err as a matter of law in determining that the potential for irreparable harm to Herb Gordon outweighed the harm that would result to Antwerpen Dodge by virtue of the continuation of the preliminary injunction? 2. Did the trial court err as a matter of law by interpreting Md.Trans. § 15 — 207(d)(2) to provide Herb Gordon with ³⁰³ a basis for preventing Chrysler from establishing a Dodge dealership in Clarksville, Maryland? 3.

Did the trial court err as a matter of law by giving § 15-207(d) retroactive effect? 5 4. Did the trial court abuse its discretion in refusing to condition the preliminary injunction upon the posting of a bond? Standard of Review While the grant or denial of an interlocutory injunction is a matter within the sound discretion of the trial court, such “ ‘discretion must be exercised by the [trial judge] upon a consideration of all the circumstances of the case.’ ” Lerner v. Lerner, 306 Md. 771, 776 , 511 A.2d 501 (1986) (quoting State Department of Health and Mental Hygiene v. Baltimore County, 281 Md. 548, 554 , 383 A.2d 51 (1977)). Further, the proper exercise of discretion requires the trial court to consider four factors: “(1) the likelihood that the plaintiff will succeed on the merits; (2) the ‘balance of convenience’ determined by whether greater injury would be done to the defendant by granting the injunction than would result [to the plaintiff] from its refusal; [footnote omitted] (3) whether the plaintiff will suffer irreparable injury unless the injunction is granted; and (4) the public interest.” Department of Transportation v. Armacost, 299 Md. 392 , 474 A.2d 191 (1984).

See also Fogle v. H & G Restaurant, 337 Md. 441, 455-56 , 654 A.2d 449 (1995); Lerner, 306 Md. at 776 , 511 A.2d 501 (quoting State Department of Health and Mental Hygiene, 281 Md. at 554 , 383 A.2d 51 ). Consideration of irreparable injury to the plaintiff can include the necessity to maintain the status quo pending litigation. Lerner, 306 Md. at 776 , 511 A.2d 501 (quoting State Department of Health and Mental Hygiene, 281 Md. at 554 , 383 A.2d 51 ). ³⁰⁴ Quoting favorably from a Fourth Circuit opinion, the Court of Appeals set forth the appropriate analysis in Lerner, 306 Md. at 783-85 , 511 A2d 501 (quoting Blackwelder Furniture Co. v. Seilig Manufacturing Co., 550 F.2d 189, 194-96 (4th Cir.1977)). A review of that discussion reveals that, of the four factors to be considered by the trial court, the balance of hardships is the most important.

The trial court must first balance the ‘likelihood’ of irreparable harm to the plaintiff against the ‘likelihood’ of harm to the defendant; and if a decided imbalance of hardship should appear in plaintiff’s favor, then the likelihood-of-success test is displaced by Judge Jerome Frank’s famous formulation: [I]t will ordinarily be enough that the plaintiff has raised questions going to the merits so serious, substantial, difficult and doubtful, as to make them fair ground for litigation and thus for more deliberate investigation. Id. at 783-84, 511 A.2d 501 (quoting Blackwelder, 550 F.2d at 194-96 , quoting Hamilton Watch Co. v. Benrus Watch Co., 206 F.2d 738, 740 (2nd Cir.1953)). “The importance of probability of success increases as the probability of irreparable injury diminishes [citations omitted]; and where the latter may be characterized as simply ‘possible,’ the former can be decisive. Even so, it remains merely one ‘strong factor’ to be weighed alongside both the likely harm to the defendant and the public interest.” Id. at 784 , 511 A.2d 501 (quoting Blackwelder, 550 F.2d at 194-96 ). Further, the trial court must also be mindful of the balance-of-hardship test as it evaluates the requirement of irreparable harm to the plaintiff.

Id. [W]hile “irreparability” may suggest some minimum of probable injury which is required to get the court’s attention, the more important question is the relative quantum and quality of plaintiff’s likely harm. The decision to grant preliminary relief cannot be intelligently made unless the trial court knows how much the precaution will cost the defendant. If it costs very little, the trial court should be more apt to decide that the threatened injury is “irrepara ³⁰⁵ ble” for the purposes of interlocutory relief. In addition, as we have noted above, even a “possible” irreparable injury has been held to suffice if there is strong probability of success on the merits.

Id. at 784-85, 511 A.2d 501 (quoting Blackwelder, 550 F.2d at 194-96 ) (emphasis in original). 6 Keeping the foregoing framework in mind, we now turn to the issues raised on appeal. Ordinarily, we will not disturb a preliminary injunction on appeal absent an abuse of discretion, Maryland Com’n on Human Relations v. Downey Communications, Inc., 110 Md.App. 493, 521 , 678 A.2d 55 (1996). Appellants contend that the trial court’s ultimate decision rested upon certain errors of law. If that is the case, we must merely determine whether the trial court’s rulings on the law were legally correct.

See Id. (quoting Alston v. Alston, 331 Md. 496, 504 , 629 A.2d 70 (1993)) (“[E]ven with respect to a discretionary matter, a trial court must exercise its discretion in accordance with correct legal standards.”). ³⁰⁶ Discussion A. Balance of Hardships It was Herb Gordon’s burden to prove the facts necessary to satisfy the requisite factors for imposition of the injunction. Fogle, 337 Md. at 456 , 654 A.2d 449 . Our review of the record reveals that it failed to meet its burden.

The trial court apparently accepted at face value Herb Gordon’s representation that it likely would lose 43% of its business if an injunction were not granted. Herb Gordon did not provide or proffer any evidence in support of its contention that the market in question is insufficient to support an additional Dodge dealer. Herb Gordon did not offer even anecdotal evidence in support of its assertion that establishment of a Dodge dealer in Clarksville will result in a loss of all of the business that Herb Gordon currently derives from that area. Herb Gordon’s essential premise is that consumers will not travel beyond their immediate environs in order to purchase a vehicle.

The trial court accepted this premise even though the record demonstrated that Herb Gordon sold vehicles to customers living in areas outside of Burtonsville, and sold vehicles to customers living in areas where other Dodge dealers are located. Even if we presume that Herb Gordon’s assertion is correct, its representation that it derives 43% of its business from the Clarksville area is overstated. The 43% figure was derived from information provided by Chrysler to Herb Gordon and includes sales in Burtonsville, the site of Herb Gordon’s dealership, Laurel, an area that is the site of another Dodge dealership, and Clarksville. More specifically, Chrysler’s compilation of Herb Gordon’s sales figures for 1994 reveal that, in 1994, Herb Gordon derived 21.3% of its sales from Burtonsville, 11.39% of its sales from Laurel, and only 10.82% of its sales from Clarksville.

Thus, the evidence does not support the finding that Herb Gordon is likely to lose 43% of its business. ³⁰⁷ The trial court further determined that Antwerpen Dodge would not suffer any harm as a result of the injunction. There is absolutely no support in the record for that determination. Although it is true that officially Chrysler has not yet granted a Dodge dealership in Clarksville to Antwerpen Dodge, the record is clear that the only thing preventing the official grant of the dealership is the prehminary injunction. Indeed, were this not