A Michigan state appeals court has reversed a lower court’s issuance of a preliminary injunction and sided with the owners of the Detroit Pistons — Palace Sports & Entertainment, LLC (PSE), and Detroit Pistons Basketball Corporation (the Pistons). The injunction had been issued at the request of a former sponsor, who sued the owners after the owners cancelled the contract with the sponsor.
In short, the appeals court found that the Michigan First Credit Union (MFCU) had failed to show the actual damage caused by the owners, and that the trial court’s failure to see this represented an abuse of discretion.
The contract in question was signed on Nov. 9, 2016. It provided for MFCU to become a sponsor of the Pistons, and remain so until Oct. 13, 2021. A little over five weeks later, it was publicly announced that, beginning with the 2017-2018 basketball season, the Pistons were moving from the Palace of Auburn Hills (the Palace) to a new arena, ultimately named Little Caesars Arena. The move by the Pistons was not unanticipated. In fact, the 2016 sponsorship agreement expressly contemplated such a possibility and provided for it. The agreement stated in relevant part:
“In the event that (i) the Pistons cease to play home games at the Palace, or (ii) PSE ceases to operate the Palace as a sports and entertainment venue, PSE shall have the right to terminate this Agreement by giving written notice to Sponsor, without payment or penalty and effective on the date of the final sports or entertainment event that occurs at the Palace. In the event that PSE exercises this termination right, PSE and Sponsor shall negotiate in good faith regarding a new agreement that would provide Sponsor with sponsorship opportunities that are comparable to those provided hereunder.”
On Aug. 27, 2017, PSE formally terminated the 2016 sponsorship agreement. MFCU commenced this action alleging breach of contract and other claims. At MFCU’s request, and following an evidentiary hearing, the trial court issued a preliminary injunction requiring the defendants to negotiate in good faith. The injunction also required PSE to continue providing MFCU with the “identical” sponsorship assets provided by the abrogated 2016 agreement, even though the agreement’s terms required only that PSE, following the agreement’s termination, negotiate in good faith toward the provision of “comparable” opportunities.
In entering the preliminary injunction, the trial court recited the familiar four-part test governing issuance of injunctions. The trial court held that “with respect to the first factor, it is likely that the plaintiff will prevail on the merits. The court makes the preliminary finding that the defendants’ actions constituted a breach of the Master Agreement because the defendants could not possibly negotiate in good faith with the plaintiff for comparable sponsorship opportunities when it had already signed a competing, exclusive agreement with Flagstar. The defendants’ actions in signing an exclusive sponsorship agreement with Flagstar before negotiating in good faith with the plaintiff for comparable sponsorship opportunities constitutes a material breach of the Master Agreement.”
The trial court also found that “the plaintiff will suffer an irreparable injury if the Injunction is not granted. It is apparent that neither party could say with any reasonable degree of certainty how to monetize the damages suffered by the plaintiff as a result of the defendants’ breach of the Agreement. This issue, in fact, will likely result in a battle of experts at a later date.”
The defendants appealed.
The appeals court wrote that to “obtain a preliminary injunction, the moving party bears the burden of proving that the traditional four elements favor the issuance of a preliminary injunction.” Hammel, 297 Mich App at 648. Under this four-part test, the trial court is to consider:
“(1) the likelihood that the party seeking the injunction will prevail on the merits, (2) the danger that the party seeking the injunction will suffer irreparable harm if the injunction is not issued, (3) the risk that the party seeking the injunction would be harmed more by the absence of an injunction than the opposing party would be by the granting of the relief, and (4) the harm to the public interest if the injunction is issued.” Id.
The appeals court also focused on the requirement to demonstrate “a particularized showing of irreparable harm”, which “is an indispensable requirement to obtain a preliminary injunction.” Pontiac Fire Fighters Union Local 376 v City of Pontiac, 482 Mich 1, 9; 753 NW2d 595 (2008)
The trial court seemed to gloss over the above requirement, which was the genesis for the appeals court’s decision that the trial court had exhibited an abuse of discretion.
“It appears to the court that the plaintiff is a substantial company and would not be driven out of business in the absence of injunctive protection,” wrote the appeals court. “Under these circumstances, the plaintiff has failed to show irreparable harm. (A) possible loss of customer goodwill does not threaten complete destruction of its business.
“MFCU likewise failed to demonstrate any injury to its overall economic wellbeing. Sue Postemski (MCFU executive) testified that she was unaware of any customers or potential customers that MFCU would lose as a result of the changes in MFCU’s sponsorship relationship with the Pistons, nor was she aware of any specific concrete business that MFCU had lost due to the sponsorship issue. Michael Poulos (MCFU executive) acknowledged that MFCU would not be destroyed because of the loss of the Pistons sponsorship and that there is no serious and immediate threat to MFCU’s economic existence if MFCU were unable to obtain a comparable sponsorship deal. Accordingly, in the circumstances of this case, MFCU has failed to establish that it is likely to suffer irreparable harm as a result of an alleged loss of customer goodwill. See Pontiac Fire Fighters Union Local 376, 482 Mich at 9.”
The trial court also overstepped its authority in another way by requiring that PSE “continue to provide identical sponsorship opportunities,” according to the appeals court
“The entry of such an injunction was erroneous because it changed the status quo rather than preserving it during the pendency of litigation. Moreover, by requiring PSE to continue providing the identical sponsorship opportunities which it had previously granted, the trial court granted MFCU the entire scope of relief which it was seeking. However, ‘a preliminary injunction will not be issued if it will grant one of the parties all the relief requested prior to a hearing on the merits.’ Bratton v DAIEE, 120 Mich App 73, 79; 327 NW2d 396 (1982), citing Epworth Assembly v Ludington & N R Co, 223 Mich 589, 596; 194 NW 562 (1923). Thus, even if injunctive relief was warranted, the present injunction could not stand.”
Michigan First Credit Union v. Palace Sports & Entertainment, LLC, and Detroit Pistons Basketball Company; Ct. App. Mich.; No. 340529, 2018 Mich. App. LEXIS 388; 2/27/18
