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Arborjet, Inc. v. Rainbow Treecare Scientific Advancements, Inc.

United States District Court, D. Massachusetts

April 21, 2016

ARBORJET, INC., Plaintiff,
v.
RAINBOW TREECARE SCIENTIFIC ADVANCEMENTS, INC., Defendant.

MEMORANDUM & ORDER

Nathaniel M. Gorton, United States District Judge.

This case arises from allegations by plaintiff Arborjet, Inc. (“plaintiff” or “Arborjet”) that defendant Rainbow Treecare Scientific Advancements, Inc. (“defendant” or “Rainbow”) breached a sales agency agreement between the parties and the implied covenant of good faith and fair dealing. Arborjet designs and manufactures insect and pest control products, such as TREE-age, for direct injection into trees. Rainbow manufactures and sells treatments for the protection of trees and also distributes pesticides manufactured by other companies.

In November, 2015, a jury found through a special verdict form that although Rainbow breached the contract without causing Arborjet any damages, its breach of the implied covenant of good faith and fair dealing did cause Arborjet damages. The jury awarded $325, 000 in damages to Arborjet for Rainbow’s latter breach.

Pending before the Court is Arborjet’s motion for a permanent injunction (Docket No. 185) and Rainbow’s renewed motion for judgment as a matter of law or, in the alternative, for remittitur or a new trial (Docket No. 193). For the reasons that follow, Arborjet’s motion will be allowed, in part, and denied, in part, and Rainbow’s motion will be denied.

I. Background

The facts of this case have been described at length in previous Memoranda & Orders (“M&Os”) issued by this Court (Docket Nos. 34 and 132) and by the First Circuit Court of Appeals (“the First Circuit”) in Arborjet, Inc. v. Rainbow Treecare Scientific Advancements, Inc., 794 F.3d 168 (1st Cir. 2015). The following are the salient facts for the purpose of this M&O.

Arborjet filed its complaint in November, 2014 alleging, inter alia, that Rainbow helped third-party Rotam North America (“Rotam”) develop ArborMectin, a generic version of TREE-age, in violation of Rainbow’s contractual obligation to Arborjet not to engage in affairs intended to replicate Arborjet products or processes.

Shortly thereafter, Arborjet filed a motion for a preliminary injunction that would, inter alia, prevent Rainbow from selling, distributing and/or marketing ArborMectin. This Court allowed the motion and imposed preliminary injunctive relief in December, 2014. The First Circuit affirmed the entry of the preliminary injunction with respect to the sale, distribution and/or marketing of ArborMectin in July, 2015.

In November, 2015, the case proceeded to trial at which Arborjet pursued only its claims for breach of contract and breach of the implied covenant of good faith and fair dealing.

At the conclusion of Arborjet’s case, Rainbow moved for judgment as a matter of law on both claims for lack of sufficient evidence. The Court denied that motion without prejudice.

After the close of all evidence at trial, the Court asked Arborjet to address Rainbow’s contention that Arborjet had presented no evidence at trial of actual damages. Arborjet responded that it had introduced evidence of lost profits during its case-in-chief in the form of

profit calculations of TREE-age, per-unit calculations . . . [and] projected sales projections from Rainbow and the actual volume of the sales falling below those projections.

Arborjet added that it had also submitted evidence that it earned a profit of $225 per liter of TREE-age sold. The Court took the matter under advisement.

Arborjet then moved for judgment as a matter of law on its substantive claims. The Court took the motion under advisement as well.

At the charge conference, the Court informed the parties that it would submit the case in its entirety to the jury and ask it to consider the substantive charges and the issue of compensatory or nominal damages. Accordingly, the Court denied without prejudice Arborjet’s motion for judgment as a matter of law.

On the seventh day of trial, the jury returned a verdict in favor of Arborjet on its claim of breach of the implied covenant and awarded it $325, 000 in damages. Arborjet filed the pending motion for permanent injunctive relief and Rainbow moved for judgment as a matter of law or, in the alternative, for remittitur or a new trial.

II. Plaintiff’s motion for a permanent injunction

A. Legal standard

Before issuing a permanent injunction, a district court must find that 1) the plaintiff has prevailed on the merits, 2) the plaintiff would suffer irreparable injury without injunctive relief, 3) the harm to the plaintiff in the absence of injunctive relief would outweigh the harm to the defendant in the face of injunctive relief and 4) the public interest would not be adversely affected by injunctive relief. Asociación de Educación Privada de P.R., Inc. v. Garcia-Padilla, 490 F.3d 1, 8 (1st Cir. 2007).

B. Application

Arborjet seeks to enjoin permanently Rainbow from selling, distributing or marketing ArborMectin or any other emamectin benzoate product for tree injection manufactured by Rotam or any of Rotam’s affiliates, in perpetuity.

In the alternative, Arborjet seeks an injunction that would bar Rainbow from such activities until February, 2018, the date upon which ArborMectin purportedly would have reached the market if Rainbow had waited until after the termination of its contract with Arborjet and then begun to help Rotam develop and market a generic product.

1. Prevailing party

As the Court instructed the jury, to prove that Rainbow breached the implied covenant of good faith and fair dealing, Arborjet needed to show that 1) it had a contract with Rainbow, 2) Rainbow breached the covenant by acting with a lack of good faith in relation to the contract and 3) Arborjet suffered damages as a result of Rainbow’s actions.

The jury verdict confirms that Arborjet prevailed on its claim of breach of the covenant because the jury found that it had proved that 1) it entered into a contract with Rainbow, 2) Rainbow breached the implied covenant of good faith and fair dealing with respect to that contract and 3) the breach caused it to sustain damages.

The fact that Arborjet did not prevail on the merits of its separate claim of breach of contract is irrelevant. Although the implied covenant cannot broaden the scope of the contract or add new terms, rights or duties to it, see Chokel v. Genzyme Corp., 449 Mass. 272, 276 (2007), a party can violate the implied covenant of good faith and fair dealing without breaching the terms of the contract so long as it destroyed or injured the right of the other party to receive benefits under the contract, see Anthony’s Pier Four, Inc. v. HBC Assocs., 411 Mass. 451, 471-73 (1991)(affirming that the exercise of a contractual right by the plaintiff in bad faith and as a pretext constituted a breach of the implied covenant), and Fortune v. Nat’l Cash Register Co., 373 Mass. 96, 101, ...


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