DECISION AND ORDER
After a long journey through the federal judicial system, thiscase has at last reached its denouement. This Court is nowprepared to render its decision on the merits following a benchtrial. Plaintiffs (collectively, "Ross-Simons") allege thatdefendant Baccarat, Inc. ("Baccarat") breached the terms of asettlement agreement that disposed of an antitrust lawsuit filedby plaintiffs in 1993. To remedy these disputed contractviolations, plaintiffs seek equitable relief requiring Baccaratto live up to the terms of its promise. For the reasons outlinedbelow, this Court rules in favor of three plaintiffs and againstthe two others. The successful plaintiffs are entitled to apermanent injunction enforcing the bargain they made withdefendant.
I. Standard of Law for Bench Trials
Pursuant to Federal Rule of Civil Procedure 52(a), this Courtmay enter judgment following a trial without a jury. See Fed.R.Civ.P. 52(a). In crafting a decision following a bench trial,the Court "shall find the facts specially and state separatelyits conclusions of law thereon." Id. It is within the purviewof the trial court to weigh the credibility of witnesses for thepurpose of making findings of fact. See id. The followingfindings of fact are based upon the evidence presented during thethree days of trial conducted before this Court without a jury.
II. Findings of Fact
In 1992 Baccarat and Ross-Simons settled an antitrust suitfiled by Ross-Simons. The suit alleged that Baccarat, thenonpareil manufacturer of French lead crystal, improperly refusedto deal with Ross-Simons, a Rhode Island-based retailer of luxuryitems. In addition, Ross-Simons implicated two producers of fineFrench dinnerware and alleged that all three were conspirators ina horizontal pricing arrangement. The president of Baccarat atthe time, Francois-Hugues de Montmorin ("de Montmorin"),explained that Baccarat's refusal to sell its products toRoss-Simons was motivated by the manufacturer's dislike of theretailer's marketing and pricing policies. According to the termsof this agreement ("1992 Agreement"), titled "Agreement ofCompromise and Settlement" and dated November 24, 1992, the pactwas intended by the parties to resolve once and for all thebusiness dispute between the manufacturer and retailer.Accordingly, the document explained that the parties "desire toreach a compromise and settlement of the aforementioned legalaction."
The 1992 Agreement called for Ross-Simons to dismiss itslawsuit without prejudice in exchange for business concessionsfrom Baccarat. Baccarat agreed to recognize Ross-Simons as anauthorized dealer of Baccarat products, a status that entitledthe retailer to "purchase and resell such products at such pricesand upon such terms as are available to other authorizeddealers."
Significantly, Baccarat agreed to subject its relationship withRoss-Simons to several negative covenants included in thesettlement document. The most important provision stipulates thatBaccarat "will not terminate Ross-Simons' status as an authorizeddealer, nor otherwise discriminate against Ross-Simons in anymanner, as a result of any failure or refusal by Ross-Simons toadhere to suggested resale prices or due to Ross-Simons'marketing through direct-mail catalogs." Finally, Baccaratpromised to keep an open mind if Ross-Simons sought authorizeddealer status for new retail branches: "Baccarat . . . will inthe future consider all applications by Ross-Simons forappointment and authorization of additional store locations notexpressly covered by this Agreement under the same standardsgenerally applied to other authorized dealers. . . ."
The 1992 Agreement stated no term of duration. However, severalwitnesses at trial indicated that the parties intended toestablish a long-term relationship. De Montmorin testified thatBaccarat always entered into partnerships with retailers for thelong haul and that the arrangement with Ross-Simons was nodifferent from any other in this respect. In fact, thenegotiators discussed expanding their relationship in the futureand de Montmorin told Ross-Simons executives of Baccarat'slong-term philosophy of doing business.
This new arrangement was a marked change from Baccarat'slong-standing attitude towards Ross-Simons. De Montmorintestified that Baccarat had refused to sell its products toRoss-Simons for years because of Ross-Simons' discountingpractices, which were regarded as too déclassé by the grandedame of French crystal. According to its president, Darrell Ross("Ross"), Ross-Simons had developed a niche in the luxury goodsmarket as a discount retailer of high-end goods. Furthermore,approximately eighty-five percent of the retailer's sales aregenerated by its catalog business, although it also operatesseveral showrooms in Rhode Island and elsewhere. Each Ross-Simonscatalog lists prices for nearly all items at below suggestedretail along with "comparison" prices that show themanufacturers' suggested retail prices. In some cases, thediscounts reach fifty percent. The strategy works. With grosssales of nearly $150 million annually, Ross-Simons has become onethe nation's largest retailers of luxury goods such as jewelry,crystal, and dinnerware.
Yet for years before capitulating in 1992, Baccarat'smanagement was unswayed by the success of the merchant theydeemed a luxury goods parvenu. De Montmorin explained thatdiscounting was an anathema to an image-conscious company likeBaccarat. This faux pas by Ross-Simons motivated Baccarat'srefusal to sell. The managers of the crystal maker thought thatexposing its products to such resale tactics would cheapen theallure of the Baccarat name. Selling to Ross-Simons would alsointerfere with the "understanding" between Baccarat and itsretail dealers on resale prices. De Montmorin testified that allretailers with whom Baccarat dealt in 1992 understood thatabiding by the manufacturer's suggested resale prices was derigueur for members of Baccarat's list of suitable merchants.Baccarat never opened an account with a dealer who was known tosell at a discount. Ross-Simons was left outside this exclusiveclub because Baccarat knew the retailer wouldn't play along.Ross-Simons tried to change the rules of Baccarat's game when itfiled an antitrust lawsuit in 1992 alleging that Baccaratenforced an illegal resale price maintenance program.
With that history fresh in their minds, the parties executedthe 1992 Agreement and began a more amiable relationship. Neitherside expressed dissatisfaction with what soon became afinancially fruitful relationship for both manufacturer andretailer. Sales of Baccarat crystal by Ross-Simons reached $1million annually following the signing of the peace accord,making the discounter one of the largest sellers of Baccarat inthe eastern United States. This detente was suddenly disrupted inthe fall of 1994 when a new president took the helm of thecrystal maker.
Jean Luc Negre ("Negre") replaced de Montmorin as president ofBaccarat in October 1994. A veteran of the luxury goods business,he quickly decided that changes were necessary in the company'sstrategy. Negre believed that Baccarat products wereoverdistributed and when he saw Baccarat crystal in Ross-Simons'showroom in Atlanta, his suspicions were confirmed. Negre labeledthis store a catalog showroom and considered Ross-Simons amail-order company. Neither of these channels was an appropriatevenue for Baccarat products in Negre's mind.
The new president of the crystal maker soon became aware of the1992 Agreement. He was advised by counsel that the agreement wasterminable at will. At trial, he testified that he couldn'tbelieve that a distribution contract could be perpetual. Based onNegre's own trial testimony, it is clear that the new presidentbelieved that Ross-Simons was a drag on Baccarat's image and thathe intended to sever Baccarat's relationship with the retailer aspart of his overall goal of enhancing the company's image.
Negre revealed this hostile attitude toward the discounter atan industry meeting in New York at Baccarat's showroom in October1994. It was the first-ever tête-à-tête between Ross andNegre. When Ross approached Negre, the latter quickly took aim atwhat had been bothering him. Negre's opening salvo: "Why doesRoss-Simons discount?" Unsatisfied with Ross's explanations of asuccessful retail strategy, Negre pressed on with his attack,lecturing Ross about the inappropriateness of openly discountingluxury items and explaining that no one else in the businessadvertises such price departures. The two men reached nounderstanding regarding the future of their businessrelationship. The conflict deepened.
In the summer of 1995, Baccarat refused to approve anauthorized dealership for a new Ross-Simons' store slated to openin Raleigh, North Carolina. Negre and Howard Hyde, Baccarat'svice-president for marketing, testified that the company decidedto impose a moratorium on new dealership locations while it paredback its distribution system and developed the manufacturer'sfirst official authorized dealer program. Although Ross and Hydespoke in April of that year about the plans for the Raleighstore, there is no evidence in the record that Hyde guaranteedthat the new store would be granted authorized dealer status.Despite the moratorium, Baccarat allowed two new venues openingin 1995 to carry its products, a Nieman Marcus store and aBloomingdale's. Negre explained at trial that these exceptionswere made because both outlets had been planned for several yearsbefore the ban on new dealerships was implemented.
Ross-Simons encountered other problems during its impasse withthe crystal maker's new regime. Baccarat introduced several newstyles of stemware in 1995 and offered them only to a select fewretailers. Again, Ross-Simons failed to make Baccarat's "A-list."For example, Negre explained at trial that the "LaLande" patternwas offered to twenty-five to thirty dealers. According to Negre,all of these dealers operated proper showrooms. Ross-Simons, hemaintained, was ineligible for such a special product because itscatalog showrooms were inappropriate settings for the promotion.Negre also explained at trial that he did not believe it propertosell "LaLande" through catalogs. In addition to this snub,Baccarat refused to provide Ross-Simons with at least two othernew stemware patterns, "Lyra" and "Vega," and one decorativecrystal gift item, the "Golfer," in 1995. Baccarat officialsreferred to such items as "exclusives."
Based on the evidence adduced at trial, this Court finds thatBaccarat's refusal to provide Ross-Simons with these new productlines was motivated, at least in part, by the disdain forRoss-Simons' discount pricing harbored by Baccarat management,Negre in particular. On the witness stand, Negre vehementlyadvocated his view that luxury goods should not be sold at adiscount. At his first meeting with Ross, he badgered theretailer about Ross-Simons's discounting strategy. Negre couldnot understand why a company with "beautiful" stores woulddiscount. Despite his positive impression of the aesthetics ofRoss-Simons's Atlanta store, Negre conceded at trial that hethought Ross-Simons was bad for Baccarat's image. Negre notedthat having Baccarat items in Ross-Simons's catalogs created an"image problem" for the crystal manufacturer par excellence. Healso admitted that Ross-Simons did not receive "exclusives"because the retailer was a drag on the prestige of themanufacturer.
The coup de grace to the relationship came in October 1995 whenNegre unveiled a tactic that would dramatically alter thepartnership. Negre intended to alleviate two troublesome concernstout de suite: Baccarat's overdistribution and Ross-Simons. Anannouncement from Negre dated October 17, 1995 trumpeted thelaunching of the new management's pièce de résistance, an"Authorized Dealer Program" ("Proposed Agreement") aimed at"enhancing the overall image and prestige throughout the UnitedStates of [Baccarat's] world renowned name." Participation in thenew program was mandatory for all dealers who wished to continuebuying product from Baccarat. The deadline for submission of anexecuted Proposed Agreement was December 15, 1995. Ross-Simonsrefused to sign the document. Instead, Ross appealed to Negre forchanges in certain terms of the Proposed Agreement that hebelieved were inimical to Ross-Simons' way of doing business.Ross also argued that imposition of these terms on the retailerby Baccarat constituted a violation of the 1992 Agreement. Butthe new program was a fait accompli. Negre refused to budge onany issue and insisted that Ross-Simons participate in theprogram exactly as it had been designed by Baccarat or not atall.
The Proposed Agreement represented a substantial departure fromBaccarat's prior laissez-faire method of managing its dealerrelationships. Most disconcerting to Ross-Simons was paragraphnine of the new contract. Baccarat management understood that fora dealer in luxury goods, damage to reputation is often anirreparable injury. Therefore, they sought to protect theircompany's image through the new agreement. In this section, theparticipating dealer agrees not to "engage in any advertising orpromotional practices which are damaging to the image, prestigeand goodwill of Baccarat products and the BACCARAT trademark."The document reserves for Baccarat the exclusive right to judgewhether a practice damages Baccarat's image. Two subsections inparticular struck Ross-Simons hard. Paragraph 9(d)(i) provided:
Dealer shall not advertise or market Baccarat products in or through any of the following vehicles or media which shall be considered damaging to the Baccarat image and prestige:
(i) Any publication, catalogue, or broadcast media program which is more than twenty-five percent (25%) devoted to promoting sales of merchandise at off price, comparison price or discontinued items.
Given Negre's opinion that Ross-Simons's stores were catalogshowrooms, the retailerwas also concerned that paragraph 9(e) provided that dealers "notuse catalogue showroom merchandise formats" for the sale ofBaccarat products.
Violation of any of these terms entitled Baccarat to terminatethe dealer's authorized status. Ross-Simons management expressedspecific concerns with the Proposed Agreement to Baccaratofficials and suggested that the two parties negotiate acompromise. Ross-Simons, fearing that the Proposed Agreementwould be its own "suicide note," refused to sign after Negrerebuffed the retailer's attempt at a truce. The December 15, 1995deadline passed and in January 1996, Baccarat refused to fillorders from Ross-Simons.
Baccarat officials explained at trial that since the companylaunched the new authorized dealer program, all participatingdealers advertise Baccarat products at suggested retail prices.The advertising restrictions in the Proposed Agreement forcedseveral dealers to change their marketing approaches, includingBloomingdale's, Macy's, and Michael C. Fina, which changed itsentire corporate image. Ross-Simons remains as the only Baccaratdealer in the country selling the crystal goods at discountedprices and advertising them in catalogs with comparison prices.
This Court finds that Baccarat's refusal to negotiate any ofthe terms of the Proposed Agreement was motivated, at least inpart, by Baccarat's desire to rid itself of the successful, buttroublesome, retailer. As this Court explained above, Negre wasunable to overcome his contempt for a bourgeois retail strategycommitted to discounting all types of luxury goods. That hispersonal disdain for Ross-Simons's raison d'etre spilled overinto his dealings with the retailer is unsurprising and logical.
Because this Court's preliminary injunction, affirmed onappeal, requires Baccarat to continue dealing with plaintiffs,the retailer has suffered little harm so far. However,termination of its Baccarat authorized dealer status in thefuture would damage Ross-Simons's business in a serious, ifunquantifiable, way. As several witnesses, including Negre, Hyde,and Ross, attested to at trial, Baccarat is a premiere brand ofcrystal. The company also distributes in the United Statesseveral de luxe lines of dinnerware. Ross-Simons bills itself asa luxury goods merchant with a comprehensive menu of offerings.As Ross explained at trial, Baccarat rests at the pinnacle of thecrystal goods pyramid. As such, this Court agrees withRoss-Simons that the association of Baccarat with Ross-Simonslends an irreplaceable degree of prestige to the Ross-Simonsimage. Negre explained that Baccarat products are hand-craftedand held to exacting standards. But quality alone does notaccount entirely for the prestige of Baccarat's oeuvre. TheBaccarat president described the company's long history ofcatering to the world's social and financial upper crust bydesigning the finest and most fashionable crystalware. Asdefendant's president was eager to acknowledge, Baccarat is aunique item; no substitute can be found on the market for thesespecial products and the cachet attached to their label.Ross-Simons's inability to provide its customers with Baccaratproducts along with the absence of this brand from its catalogsand showrooms would harm the retailer's reputation within theimage-conscious luxury goods business.
Termination of Ross-Simons as an authorized Baccarat dealerwould harm the retailer in another way. Ross-Simons operates abridal registry with 10,000 to 12,000 participants. This programgenerates $50 million annually for plaintiffs. In 1996, over 260registry brides selected Baccarat items. These brides accountedfor slightly more than $100,000 in sales of Baccarat products.Mary Morris, Ross-Simons's vice-president for merchandising,explained that many participating demoiselles who select Baccaratcrystal products also order many other types of goods fromRoss-Simons, such as silverware and dinnerware.According to Morris, if Baccarat were removed as an option, manyof the brides who desire Baccarat items would choose to registerelsewhere. Furthermore, the registry program in many casescreates a lifelong retail relationship between Ross-Simons andthe bride's family. As years pass, individual items need to bereplaced, households expand and require additional products, andfamilies sometimes choose to upgrade their passé crystal,silverware, or dinnerware services. Therefore, loss of a bride'sparticipation in the registry program because of Ross-Simons'sinability to provide Baccarat products is likely to result in theloss of many years of that customer's business. Such losses,while real, are impossible to calculate with any degree ofreliability.
III. Procedural History
Cognizant of these potential losses, plaintiffs were unwillingto let Baccarat write le dernier mot. Ross-Simons filed suit in1996 in Rhode Island Superior Court alleging breach of the 1992Agreement and tortious interference by Baccarat. After defendantremoved the suit to this Court, Senior Judge Francis J. Boylegranted plaintiffs a preliminary injunction. The order granting apreliminary injunction required Baccarat "to immediately resumedealing with Ross-Simons in accord with the terms of the 1992Agreement." See Order of May 16, 1996, at 11. Baccarat's appealof Judge Boyle's order was rejected by the United States Court ofAppeals for the First Circuit. See Ross-Simons of Warwick, Inc.v. Baccarat, Inc., 102 F.3d 12, 20-21 (1st Cir. 1996) (affirmingthe grant of a preliminary injunction).
This writer was assigned this case in August 1997. In September1998, this Court issued a written decision disposing of severaldefense motions: a motion for summary judgment on all counts, amotion to strike plaintiffs' claim for punitive damages, and amotion to dismiss a count alleging violations of the preliminaryinjunction. See Ross-Simons of Warwick, Inc. v. Baccarat, Inc.,182 F.R.D. 386 (D.R.I. 1998). In that decision, this Courtdetermined that although one count of the Amended Complaint wasfatally defective, the central breach of contract claims ofplaintiffs' case would survive the challenge of defendant'sdispositive motion. The parties delivered opening statements in abench trial on February 17, 1999. At the close of plaintiffs'evidence, this Court granted defendant's motion to dismiss thetortious interference count.
Therefore, four counts remain for determination by this Court.Count I alleges that termination of Ross-Simons as an authorizeddealer constituted a breach of contract by Baccarat. Count IIalleges that Baccarat's refusal to approve authorized dealerstatus for new Ross-Simons locations also constituted a breach ofcontract. In Count III, plaintiffs assert that Baccarat's actionsviolated the covenant of good faith and fair dealing implicit inthe 1992 Agreement. The final surviving claim, Count V, seeks apermanent injunction prohibiting Baccarat from discriminatingagainst Ross-Simons as an authorized dealer. At the close of thetrial, the Court took these issues under advisement andadditional briefs were filed in preparation for this fin deguerre.
IV. Applicable Law
A. Breach of Contract
This Court explained in its previously published decision inthis case that Rhode Island courts favor the settlement ofdisputes outside of the litigation process. See Homar, Inc. v.North Farm Assocs., 445 A.2d 288, 290 (R.I. 1982); cf.Mathewson Corp. v. Allied Marine Indus., Inc., 827 F.2d 850, 852(1st Cir. 1987) ("As any litigator or judge can attest, the bestcase is a settled case."). Settlement agreements are treated ascontracts and enforced under the rules governing contractsgenerally. See Red Ball Interior Demolition Corp. v.Palmadessa, 173 F.3d 481, 484 (2d Cir. 1999); Mathewson Corp.,827 F.2d at 852-53; see also InterspaceInc. v. Morris, 650 F. Supp. 107, 109 (S.D.N.Y. 1986) (holdingthat under general contract principles, a settlement agreement"is binding despite the fact that it was never submitted forcourt signature and filing"). These agreements are "as binding asany contract the parties could make, and as binding as if itsterms were embodied in a judgment." 15A Am.Jur.2d Compromise andSettlement § 25 (1976).
At its first line of defense, Baccarat attempts to rehashfailed arguments initially made in support of its motion forsummary judgment. Defendant asserts that certain defects in the1992 Agreement undermine the vitality and circumscribe theduration of that contract. Au contraire. The 1992 Agreement is avalid contract, supported by sufficient consideration, anddefinite enough to be enforced according to its own terms by thisCourt. See Ross-Simons of Warwick, Inc., 182 F.R.D. at 395-98.Because the terms of the contract are clear and unambiguous, "thetask of judicial construction is over and the Court will enforcethose terms as they are written." Flanders + Medeiros Inc. v.Bogosian, 868 F. Supp. 412, 419 (D.R.I. 1994) rev'd on othergrounds, 65 F.3d 198 (1st Cir. 1995).
This Court's previously published decision in this case alsoexplained that the 1992 Agreement "falls within thewell-established category of contracts that terminate upon thehappening of a specific event." Ross-Simons of Warwick, Inc.,182 F.R.D. at 395. The plain language of the contract prohibitsBaccarat from terminating its relationship with Ross-Simonsbecause of the retailer's discount pricing policy or its catalogsales strategy. See id. at 396. However, "[w]ere Ross-Simons tomaterially breach [Baccarat's standard terms of doing business],Baccarat would be justified in terminating the agreement." Id.
The potentially long-term nature of this arrangement is not sounusual. Despite Negre's protestations to the contrary, the 1992Agreement is not a distribution contract. See id. at 395. Asthis Court, as well as the First Circuit, has explained, the 1992Agreement is "an agreement for the settlement of a lawsuit."Id.; see Ross-Simons of Warwick, Inc., 102 F.3d at 17 ("[T]heparties to the 1992 Agreement intended first and foremost tosettle the antitrust litigation.").
As a vehicle for the resolution of an antitrust dispute, the1992 Agreement is akin to a consent decree disposing of anantitrust prosecution brought by the government. As in the caseof public antitrust controversies, the complainant in this casewas concerned that the offending company was improperlyrestricting the free flow of the stream of commerce.Specifically, Ross-Simons alleged that Baccarat conspired withothers to prevent Ross-Simons, a discounter, from dealing incertain luxury goods and undermining the conspirators' scheme ofprice regulation. De Montmorin confirmed the basics of Baccarat'sscheme. The natural method of atoning for such an offense uponthe marketplace is to undertake a promise to deal fairly in thefuture with the victims of the improper business practice. Toachieve this end short of trial in the public sector, the federalgovernment often negotiates consent decrees with the targetedbusinesses.
As practitioners in the antitrust field know, consent decreesoften "continue in force for an indefinite and unlimited period."ABA Antitrust Section, Antitrust Consent Decree Manual 62 (1979).Although such agreements can also be limited to a finiteduration, such as ten or twenty years, they have traditionallyrequired compliance by the offending company for an unspecifiedtime. See Practicing Law Institute, Governmental AntitrustInvestigation and Enforcement by the U.S. Department of Justice,524 P.L.I./Corp. 341, 360 (1986); Note, Flexibility and Finalityin Antitrust Consent Decrees, 80 Harv. L.Rev. 1303, 1305 (1967).
Accordingly, enforcement of the 1992 Agreement for a longperiod of time, while Ross-Simons complies with its terms, is analtogether appropriate treatment of the settlement. While it istrue that in the abstract "the constructs of laissez-faire andfree enterprise" compel the common law to "legitimize the useof independent discretion by businesses to decide with whom theywill and will not do business," Mortgage Guarantee & Title Co.v. Commonwealth Mortgage Co., 730 F. Supp. 469, 472 (D.R.I.1990), that same common law heritage also defends the principlesof contract. The right to choose one's business partners may beself-circumscribed by a legitimately bargained-for exchangememorialized by a contract. In signing the 1992 Agreement,Baccarat agreed to modify its behavior and cease a course ofbusiness labeled anticompetitive by Ross-Simons. In doing so,Baccarat abdicated a portion of its autonomy, not unlikeantitrust defendants who agree to terms with the government. Theagreement mirrors a consent decree in several ways. Therefore, itis logical that it should also mimic the long-term effect of manyof those decrees.
B. Injunctive Relief
Plaintiffs petition this Court for equitable relief in the formof a mandatory injunction. Whether an injunction should begranted is a matter reserved to the sound discretion of a federalcourt. See Amoco Prod. Co. v. Village of Gambell, 480 U.S. 531,542, 107 S.Ct. 1396, 94 L.Ed.2d 542 (1987) ("`[A] federal judgesitting as chancellor is not mechanically obligated to grant aninjunction for every violation of law.'" (quoting Weinberger v.Romero-Barcelo, 456 U.S. 305, 313, 102 S.Ct. 1798, 72 L.Ed.2d 91(1982))); see also Women & Infants Hosp. v. City of Providence,527 A.2d 651, 654 (R.I. 1987); 42 Am.Jur.2d Injunctions §24 (1969). The authority to grant also encompasses the power todelimit the scope of any injunction issued. See DeNucci v.Pezza, 114 R.I. 123, 329 A.2d 807, 811 (1974). Although courtshave cautioned that mandatory injunctions are not to be grantedroutinely, it is entirely proper for a court of equity to awardsuch relief when a party's interests can be protected in no otherway. See St. Michael's Ukrainian Greek Catholic Church ofWoonsocket v. Bohachewsky, 48 R.I. 234, 136 A. 878, 880 (1927).
The criteria used to determine the merit of a plaintiff'srequest for a permanent injunction are largely the same as thoseused to judge the adequacy of a request for a preliminaryinjunction. See Amoco Prod. Co., 480 U.S. at 546 n. 12, 107S.Ct. 1396; Diva's, Inc. v. City of Bangor, 21 F. Supp.2d 60, 63(D.Me. 1998). Plaintiff must establish: (1) that irreparable harmwill result if the injunction is not granted; (2) that the harmplaintiff will suffer if the injunction is not granted outweighsthe harm the defendant will suffer if the injunction is granted;(3) that the plaintiff is entitled to a judgment on the merits ofthe case; and (4) that the injunction is not adverse to thepublic interest. See Diva's, Inc., 21 F. Supp.2d at 63; seealso AFL-CIO Laundry & Dry Cleaning Int'l Union v. AFL-CIOLaundry, 70 F.3d 717, 718 (1st Cir. 1995) (listing the criteriaused in considering a preliminary injunction).
Additionally, federal courts may only grant injunctive reliefafter determining that no available legal remedy would beadequate to compensate the plaintiff for its losses. See AmocoProd. Co., 480 U.S. at 542, 107 S.Ct. 1396; Infusaid Corp. v.Intermedics Infusaid, Inc., 739 F.2d 661, 668 (1st Cir. 1984);see also Ward v. City of Pawtucket, 639 A.2d 1379, 1382 (R.I.1994) (applying the same rule under Rhode Island law).Accordingly, an injunction is often a particularly appropriateremedy where the injury suffered by the plaintiff is to itsreputation or goodwill. See Valley v. Rapides Parish Sch. Bd.,118 F.3d 1047, 1056 (5th Cir. 1997) (holding that irreparableharm is established by a showing of a loss of reputation);Multi-Channel TV CableCo. v. Charlottesville Quality Cable Operating Co.,22 F.3d 546, 552 (4th Cir. 1994) (holding that irreparable harm isestablished by a showing of a loss of goodwill); Hypertherm,Inc. v. Precision Prods., Inc., 832 F.2d 697, 700 (1st Cir.1987) (same); 11A Charles Alan Wright & Arthur R. Miller,Federal Practice & Procedure § 2948.1, at 159 (1995) ("Injuryto reputation or goodwill is not easily measurable in monetaryterms, and so often is viewed as irreparable."). Such injuriesare irreparable in the sense that measuring their value in termsof dollars and cents is nearly an impossible task. An injunctionmay also be an appropriate remedy where the damage suffered by aplaintiff is too speculative, yet very real nonetheless, for amonetary award. See Basicomputer Corp. v. Scott, 973 F.2d 507,511 (6th Cir. 1992) ("[A]n injury is not fully compensable bymoney damages if the nature of the plaintiff's loss would makedamages difficult to calculate.").
When the relief sought is in the form of a mandatory injunctionrequiring that a party perform specific acts, the court shouldexercise even a further degree of caution in evaluating thepropriety of plaintiff's request. See St. Michael's UkrainianGreek Catholic Church of Woonsocket, 136 A. at 880 (warning that"the discretion to grant mandatory injunctions should beexercised sparingly, and only in cases where the right is veryclear"); see also Dahl v. HEM Pharm. Corp., 7 F.3d 1399, 1403(9th Cir. 1993) (holding plaintiff's request for a mandatoryinjunction to a standard of "heightened scrutiny").
In order to insure that Baccarat does not violate the 1992Agreement, this Court's issuance of a mandatory injunction is theproper method to enforce the specific performance of theAgreement. The rule governing the issuance of injunctions thatprevent breaches of contracts is stated as follows: "Aninjunction restraining the breach of a contract is a negativespecific enforcement of that contract. The jurisdiction of equityto grant such injunction is substantially coincident with itsjurisdiction to compel specific performance." Drew v.Socony-Vacuum Oil Co., 66 R.I. 170, 173, 18 A.2d 340 (1941)(quoting 4 Pomeroy's Equity Jurisprudence § 1341, at 3214 (2d ed.1919)). In short, where it is proper for a court of equity toaffirmatively specifically enforce a contract, the method so usedto prevent its breach is by injunction. The reason for this isbecause "restraining the breach of a contract by injunction ismerely a mode of specifically enforcing the contract." Drew, 66R.I. at 173, 18 A.2d 340.
If a federal district court determines that an injunction is aproper form of relief, the court must follow the guidelinesestablished by the Federal Rules of Civil Procedure in issuingthe injunction. For the purposes of this case, Rule 65(d) is mostpertinent. That rule provides that "[e]very order granting aninjunction . . . shall set forth the reasons for its issuance;shall be specific in terms; shall describe in reasonable detail,and not by reference to the complaint or other document, the actor acts sought to be restrained." Fed. R.Civ.P. 65(d).
V. Application of the Facts to the Law
With the factual and legal scaffolding in place, the Court maynow play the role of jury and test plaintiffs' proof against thecivil verdict standard of a preponderance of the evidence. Inshort, plaintiffs have carried the day. Despite the arduousnature of plaintiffs' trek through the legal bramble in theirquest for the fruits of a contract born years ago, plaintiffs'have long enjoyed the advantage of being in the right. Furtherstill, this Court will now grant plaintiffs a measure ofassurance that the privileges once negotiated for will not againbe so easily dismissed at the whim of defendant's agents. Equityempowers this Court to fashion relief that will stand the test ofdefendant's changing, and sometimes recalcitrant, hierarchy.
A. Baccarat breached the 1992 Agreement
Baccarat breached the 1992 Agreement in several respects. Themost significant breach occurred when Baccarat refused to dealwith Ross-Simons unless the latter agreed to the terms ofBaccarat's new authorized dealer program. Through this new pact,which deemed to govern the future relations between the twoentities, Baccarat sought to impose upon the retailer certainbusiness restrictions. As Baccarat demonstrated at trial, theprohibitions, such as the ban on catalog showrooms and the limiton off-price advertising, can be justified by a legitimatebusiness reason. Negre forcefully explained that Baccarat'ssurvival as a luxury goods manufacturer depends on the strengthof its image. The new Baccarat president hoped that the ProposedAgreement would insulate the company from associations withretailers who did not share Baccarat's disdain for off-priceadvertising. As a business plan, this Court is in no position tojudge the merits of the Proposed Agreement. However, as a legalmatter, the Proposed Agreement is no tour de force, failingentirely to account for the privileges won by Ross-Simons in1992.
The 1992 Agreement prohibited Baccarat from terminating itsrelationship with Ross-Simons because the retailer marketedBaccarat products through mail order catalogs and sold its goodsat discounted, or comparison, prices. Yet this is precisely whathappened when the crystal maker demanded that Ross-Simons changeits sales strategy. Baccarat officials, including Negre, werewell aware when the Proposed Agreement was distributed to dealersthat Ross-Simons sold the overwhelming majority of its productthrough its catalogs and that almost all of the products soldthrough the Ross-Simons catalogs were advertised at discountedprices. This had been the retailer's formula for success forseveral years, dating back to a time before the 1992 Agreementwas executed. Negre and his management team were also familiarwith the terms of the 1992 Agreement which prohibited terminatingRoss-Simons because of its discounting and cataloging practices.
Ross-Simons's discount catalog business could not have enduredthe Proposed Agreement given the twenty-five percent restrictionon discounted items that the new agreement would have placed onthe retailer's catalogs. This advertising limit falls squarelywithin the bounds of the 1992 Agreement — it addressesdiscounting and catalog sales. Since Baccarat could not haveterminated Ross-Simons expressly for its failure to comply withthe twenty-five percent limit, it also could not terminateRoss-Simons in compliance with the 1992 Agreement for its refusalto sign a contract containing such a clause.
Plaintiffs have also proven by a preponderance of the evidenceadduced at trial a second breach of the 1992 Agreement.Baccarat's failure to supply Ross-Simons with certain lines ofproduct violated the clause in the settlement agreement whichprohibits the crystal maker from discriminating against theretailer "as a result of any failure or refusal by Ross-Simons toadhere to suggested retail prices." As this Court explained inits findings of fact, Baccarat refused to provide Ross-Simonswith several styles of stemware, including "LaLande." Negreadmitted that Ross-Simons did not receive exclusives becauseBaccarat's association with the discount retailer tarnished thecrystal maker's image. Of course, Negre believed that Ross-Simonswas bad for Baccarat's image because he judged the retailer'shabit of selling luxury goods at a discount as gauche. This sinin Negre's eyes was compounded by the Ross-Simons catalog, whichbrazenly advertised Baccarat's baubles at reduced prices for allthe world to see. This practice especially upset elite retailerswho did not discount. Baccarat took the heat from these merchantsfor the success enjoyed by Ross-Simons in discounting Baccaratitems.
Defendant argues that Ross-Simons was not alone in being deniedcertain exclusives. In fact, some of the new product lines wereprovided to a small portion of the many authorized Baccaratdealers in this country. This argument ignores an important facetof the parties' relationship. Ross-Simons may not have been theonly outcast, but it was the only outcast with a contractguaranteeing that Baccarat would not discriminate against itbecause of its sales philosophy. This Court has already found asa matter of fact that Baccarat was at least partially motivatedby Ross-Simons' discounting to exclude the retailer fromparticipation in the "exclusives." In doing so, Baccarat violatedthe 1992 Agreement as alleged by plaintiffs in Count I.
Plaintiffs do not fare so well on Count II. Baccarat did notbreach the 1992 Agreement when it denied authorized dealer statusto the new Ross-Simons store in Raleigh, North Carolina. Thatstore, constituted as Ross-Simons of North Carolina, L.L.C., wasnot a party to the 1992 Agreement. Only three plaintiffs wereparties to that settlement pact: Ross-Simons of Warwick, Inc.,Ross-Simons, Inc., and Ross-Simons of Barrington, Inc. Therefore,only those three plaintiffs may allege causes of action forbreach of the 1992 Agreement.
Plaintiffs chose a corporate form in which each individualstore location is a separate and wholly-independent entity in theeyes of the law. Having constructed this corporate scheme, nodoubt to take advantage of the limited liability it affords eachentity, plaintiffs must now live with the consequences of theirhandiwork. The 1992 Agreement recognizes that Ross-Simons mayseek to establish new authorized dealer locations. However, thecontract refers to "additional store locations not expresslycovered by this Agreement." It does not refer to new corporateentities. For example, if Ross-Simons of Warwick, Inc. chose toopen a new store, that new location would enjoy the protection ofthe 1992 Agreement. But the new locations in Raleigh, NorthCarolina and Atlanta, Georgia were separately incorporated. Asstrangers to the 1992 Agreement, these two plaintiffs have nostanding to claim any of the benefits of the 1992 Agreement.Accordingly, on Count II, this Court rules in favor of defendant.Furthermore, neither the Raleigh nor the Atlanta company mayparticipate in any relief fashioned by this Court for thebreaches of contract discussed above.
Two issues remain to be decided. Plaintiffs advance in CountIII a cause of action alleging that defendant breached theimplied covenant of good faith and fair dealing contained in the1992 Agreement. Under Rhode Island law there is an "impliedcovenant of good faith and fair dealing between parties to acontract so that contractual objectives may be achieved." FleetNat'l Bank v. Liuzzo, 766 F. Supp. 61, 67 (D.R.I. 1991) (quotingIde Farm & Stable, Inc. v. Cardi, 110 R.I. 735, 739,297 A.2d 643 (1972)). The Rhode Island Supreme Court, however, has heldthat a breach of the duty of good faith and fair dealing givesrise only to a breach of contract claim, not to a tortious causeof action. See A.A.A. Pool Service v. Aetna Cas. & Sur. Co.,121 R.I. 96, 98, 395 A.2d 724 (1978). The applicable standard indetermining whether one has breached the implied covenant of goodfaith and fair dealing is whether or not the actions in questionare free from arbitrary or unreasonable conduct. See ThompsonTrading, Ltd. v. Allied Breweries Overseas, Trading, Ltd.,748 F. Supp. 936, 942 (D.R.I. 1990) (citing Psaty & Fuhrman, Inc. v.Housing Authority of Providence, 76 R.I. 87, 92, 68 A.2d 32(1949)); Landry v. Farmer, 564 F. Supp. 598, 611 (D.R.I. 1983)(Pettine, J.) (holding that defendant's actions did not breachthe implied covenant of good faith and fair dealing because suchactions were based on legitimate business considerations).
In this case, Baccarat's decision to no longer recognize the1992 Agreement was neither arbitrary nor unreasonable. As statedin the facts, Negre found Ross-Simons' marketing and salesmethods to be detrimental to Baccarat's premiere image. Inaddition, Baccarat was advised by legal counsel that the 1992Agreement was terminable at will. The combination of erroneouslegal advice and Baccarat's legitimate business concerns led tothe violation of the Agreement. Consequently, although Baccaratdid violate the terms of the 1992 Agreement, it did not breachthe implied covenant of good faith and fair dealing.
In short, while every breach of the implied covenant may giverise to a breach of contract claim, not every breach of contractis necessarily a breach of the implied covenant of good faith andfair dealing. This is because the implied covenant of good faithand fair dealing is a counter-promise implied in every contractthat the promisee will act in a manner consistent with thepurposes of the contract. See 17A Am.Jur.2d Contracts §380 (1991). In this case there was a breach of the express promisescontained in the contract, but not a breach of the impliedcovenant of good faith and fair dealing. Therefore, the Courtfinds for the defendant on Count III.
The final claim awaiting resolution is defendant'scounter-claim for declaratory relief, a claim that inspires about of déjà vu. Defendant argues for a second time before thisCourt that the duration of the 1992 Agreement was for areasonable time. Predictably, defendant estimates that just aboutsix and one-half years qualifies as a reasonable time. This Courtagain declines to follow defendant down that path. Baccarat'scounter-claim is denied based on the legal reasoning contained inthis Court's prior decision in this case. See Ross-Simons ofWarwick, Inc., 182 F.R.D. at 395-97.
B. Equitable relief is appropriate
Defendant's liability for breach of contract is established.However, plaintiffs are unable to quantify their damages.However, this Court concludes that this failing is not fatal,because plaintiffs' losses are not "a matter of simple mathematiccalculation," Graham v. Triangle Publications, Inc.,344 F.2d 775, 776 (3d Cir. 1965) (distinguishing between "ascertainable"business losses and "speculative elements that . . . are notsusceptible to ready ascertainment in damages"). Rather, thisfailure of proof is a result of the very nature of the breach andplaintiffs' business, and is not caused by any deficiency inplaintiffs' trial tactics. Accordingly, an injunction may be anappropriate remedy in this case.
The four factors that merit consideration all point to theconclusion that an injunction should issue. This Court hasalready decided that plaintiffs prevail on the merits of theirclaim. This Court also concludes that the balance of equitiesfavors plaintiffs. If the injunction is denied, plaintiffs willhave gained little for the dismissal of the antitrust suitbrought against Baccarat years ago. As Negre would readily admit,Ross-Simons cannot secure a substitute for Baccarat in themarketplace. The retailer would lose not only customers whodesire Baccarat products, but would suffer the incalculable lossof reputation and prestige resulting from being shunned by thepremiere crystal maker. On the other hand, an injunction forcesBaccarat to maintain a relationship that has been financiallylucrative for the manufacturer. Defendants did not explain attrial how a continuing association with Ross-Simons would damageBaccarat's international prestige in any substantial way.
Plaintiffs have also demonstrated to this Court's satisfactionthat the damage caused by termination of the Baccaratrelationship cannot be quantified, but that it is realnonetheless. Again, the Baccarat name cannot be replaced byanother crystal manufacturer. This Court has addressedthis factor above. Clearly, the loss is irreparable.
Finally, this Court is unable to identify any reason whyenforcement of the 1992 Agreement might be contrary to the publicinterest. In fact, holding Baccarat to its bargain is very muchin the public interest, especially since the manufacturer struckthe bargain out of concerns over potential antitrust liability.Clearly, this factor, like the others, militates in favor ofplaintiffs' position. The permanent injunction enforcing the 1992Agreement and prohibiting defendant's discriminatory behaviorshall issue.
C. Attorneys' Fees
Plaintiffs are not entitled to recover attorneys' fees. A courtmay award attorneys' fees "to the prevailing party in any civilaction arising from a breach of contract in which the court: (1)Finds that there was a complete absence of a justiciable issue ofeither the law or fact raised by the losing party; or (2) Rendersa default judgment against the losing party." R.I. Gen. Laws §9-1-45 (1997). Pursuant to this statute, attorneys' fees areawarded only if a Court determines that "there was a completeabsence of a justiciable issue of either law or fact." UXB Sand& Gravel, Inc. v. Rosenfeld Concrete Corp., 641 A.2d 75, 80(R.I. 1994). See also Hemingway v. Hemingway, 698 A.2d 228, 230(R.I. 1997) (holding that the trial court had discretion to denyprevailing party's request for attorneys' fees because ajusticiable issue was present). In UXB Sand & Gravel, theplaintiff had clearly not complied with the statute of frauds,but filed suit anyway. On appeal, the Rhode Island Supreme Courtheld that "the question of whether the statute of frauds wassatisfied presented a justiciable issue even though the evidenceeventually proved to be legally deficient." UXB Sand & Gravel,Inc., 641 A.2d at 80. As a result, the Court vacated the awardof attorneys' fees to the defendants.
In this case, while the defendant was unsuccessful it had anarguable defense. There was a justiciable issue as to whether the1992 Agreement continued to restrict Baccarat's subsequentbusiness decisions with respect to its distribution arrangementwith Ross-Simons. Although Baccarat ultimately failed in itsargument, there was a justiciable issue present. Consequently,plaintiffs are not entitled to attorneys' fees under R.I. Gen.Laws § 9-1-45.
For the foregoing reasons, this Court decides in favor ofplaintiffs on the breach of contract claim in Count I and therequest for permanent injunction in Count V. The Court decides infavor of defendant on Counts II and III.
Accordingly, this Court grants plaintiffs' request for apermanent injunction. Plaintiffs will submit a proposed form ofjudgment to the Court detailing the specifics of the injunctionto issue, mindful of the requirements of Federal Rule of CivilProcedure 65(d). Such injunction will run in favor of thefollowing plaintiffs only: Ross-Simons of Warwick, Inc.,Ross-Simons, Inc., and Ross-Simons of Barrington, Inc. Finally,this Court rejects defendant's counterclaim for declaratoryrelief.
It is so ordered.