A federal court recently denied a dealer's request for preliminary injunction to halt the termination of a dealership agreement with a manufacturer of liquor control systems. The dealer's acts and omissions during the relationship harmed its request for an injunction.
In Autobar Systems of N.J. v. Berg Liquor Systems, LLC, Autobar sold, installed, and serviced liquor control systems to restaurants and bars in New York and New Jersey. In February of 2023, the manufacturer, Berg, terminated its decades-long dealership agreement with Autobar. Autobar objected to the termination, claiming it violated the New Jersey Franchises Practices Act because it was "without good cause." Berg sent a second termination letter in April that year, giving Autobar sixty days' notice and citing: (1) Autobar's continuous failure to meet annual sales quotas, and (2) Autobar's prior violation of their non-compete agreement by working with Berg's top competitor to submit a project bid against Berg.
In June of 2023, Autobar filed suit in the U.S. Court for the District of New Jersey and sought a preliminary injunction to prevent termination of the dealership.
Denial of the Request for Preliminary Injunction
On August 16, 2023, the district court denied the request for preliminary injunction. Autobar claimed that loss of the dealership combined with the requirements of the pre-existing non-compete agreement, forbidding competition with Berg through May of 2027, threatened to force it into bankruptcy. Autobar argued this satisfied the requirement to show an imminent threat of irreparable harm. The Court, however, ruled that Autobar presented insufficient evidence that the termination would destroy its business and suffer irreparable harm.
Appeal and Remand
Autobar appealed. Over a year later, on September 10, 2024, the U.S. Court of Appeals for the Third Circuit remanded the case to the district court and ordered it to consider the impact of the non-compete agreement when analyzing the threat of irreparable harm.
The District Court Again Denies the Request for Preliminary Injunction
On June 5, 2025, the district court again denied Autobar's request for preliminary injunction and found that:
- Threat of harm was not immediate. Autobar did not seek an expedited appeal and remained in business, selling beer systems, beer coolers, and modular bars, while waiting two years for a final decision.
- Threatened harm was not irreparable. Autobar did not show that the termination and non-compete were the sole reasons for its failing business. Instead, the Court noted that Autobar did not engage in any marketing or advertising in the four years prior to termination or pursue other revenue streams after termination. A monetary award could fully compensate Autobar for lost profits.
- No breach of contract. The termination for cause likely did not violate the NJFPA because Autobar had not met its annual sales quota for the past ten years and Autobar had violated the non-compete by submitting a project bid with one of Berg's competitors prior to the dealership termination. Since the termination likely did not violate the NJFPA, the remaining claims for breach of contract were likely to fail as well.
Key Takeaways
- Litigation requires strategy. Distributors should understand that litigation strategy can affect outcomes. Here, Autobar undercut its own argument that the injunction was necessary to prevent bankruptcy when it did not seek expedited appeal.
- Litigation does not substitute for business acumen. Litigants should not stop efforts to grow their businesses while litigation is pending. To the contrary, the district court found Autobar failed to prove that the dealership termination and non-compete were solely responsible for Autobar's declining revenue. Autobar's failure to pursue other revenue streams outside of the Berg-manufactured products provided an alternative explanation.
- Compliance is continuous, breach is instantaneous. Autobar's failure to meet its sales quotas for a decade did not negate the annual sales requirement. Rather, it strengthened Berg's cause for ending the dealership agreement. Conversely, even though Autobar rescinded a project bid after discovering that it directly competed with Berg, the district court found Autobar's temporary violation of the non-compete likely constituted grounds for valid termination.
Special thanks to John Frey, a summer associate in Foley’s Miami office, for his contributions to this article.
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