OPINION AND ORDER
GERALD S. LEVIN, District Judge.
This action was commenced in the Superior Court in Alameda County, California, by the Kaiser Aluminum & Chemical Corporation and its wholly owned subsidiary, The Kaiser Trading Company [hereinafter referred to collectively as "Kaiser"],
The Kaiser Trading Company is in the business of buying and selling commodities throughout the world. Kaiser Aluminum & Chemical Corporation is a leading manufacturer of aluminum, with plants throughout the United States; through its associates and subsidiaries, it also has interests in aluminum throughout the world. Defendant Associated is in the business of buying and selling metals, minerals, chemicals, and related commodities. One such commodity, which is the subject matter of the contract giving rise to this action, is cryolite, an indispensable chemical compound used in the production of aluminum.
In 1969, Kaiser and Associated entered into an agreement for the sale by Associated to Kaiser of 4,000 metric tons of cryolite produced in Italy by Industrie Chimiche Ing. Bonelli [hereinafter referred to as "ICIB"], from whom Associated has been purchasing cryolite for resale since 1951. This contract was similar to ones that had been entered into annually between Kaiser and Associated since 1964, all of which involved cryolite produced by ICIB. Under the terms of the 1969 contract,
In September, 1970, Associated informed Kaiser that it no longer considered itself obligated under the contract and that it did not intend to make any more deliveries of cryolite.
Presently before the court is Kaiser's motion for a preliminary injunction to restrain Associated from failing to perform under the contract. In opposition to such motion, Associated argues that (1) it was justified in repudiating the contract and thus is not in breach; (2) no showing of irreparable injury has been made; and (3) Kaiser is precluded from obtaining equitable relief because its activities with regard to ICIB tainted it with unclean hands.
I
REPUDIATION BY ASSOCIATED OF THE CONTRACT WITH KAISER
Associated contends that it was relieved of its obligation to perform under the contract with Kaiser on two grounds: (1) Kaiser's secret negotiations and subsequent agreement with ICIB constituted a tortious interference with Associated's contractual rights with ICIB and therefore a breach by Kaiser of its contract with Associated, relieving Associated of its obligation to make further deliveries of cryolite; and (2) Kaiser's activities in regard to ICIB were anticompetitive and monopolistic, rendering its contract with Associated illegal, against public policy, and thus unenforceable.
A. Tortious Interference
Even assuming in arguendo that Kaiser induced ICIB to breach its exclusive sales agreement with Associated and thereby committed actionable interference with Associated's contractual rights,
76 S.E.2d at 34; cf. Fibreboard Paper Prods. Corp. v. East Bay Union of Machinists, 227 Cal.App.2d 675, 39 Cal.Rptr. 64 (1964), discussed infra.
In other situations, the courts also have rejected defenses that are unrelated to the contract in suit. In Automatic Radio Mfg. Co. v. Hazeltine Research, Inc., 176 F.2d 799 (1st Cir. 1949), aff'd on other grounds, 339 U.S. 827, 70 S.Ct. 894, 94 L.Ed. 1312 (1950),
Id. at 805. Furthermore, courts have held that breach of a contract independent of the contract in suit is not a defense to breach of the latter. See Hal Roach Studios, Inc. v. Film Classics, Inc., 156 F.2d 596, 599 (2d Cir. 1946); Levi v. L. A. Thompson Scenic Ry. Co., 128 Misc. 465, 218 N.Y.S. 666 (App.T. 1926); William J. Dixon & Co. v. Bronston Bros. & Co., Inc., 171 App.Div. 552, 157 N.Y.S. 335 (App.Div.1916). See generally 17A C.J.S. Contracts § 525(1) at 1016-1017.
Associated also alleges that by secretly negotiating with ICIB, inducing ICIB to breach its agreement with Associated, and eliminating Associated as a future purchaser of cryolite from ICIB for Kaiser, Kaiser breached the implied covenant of good faith and fair dealing in its contract with Associated. Thus, Associated argues, Kaiser was in breach of the instant contract and Associated was not obligated to perform by delivering the cryolite.
It is of course true that if one party is in material breach of contract, the other party need not perform,
In sum, Associated was not justified in repudiating its contract with Kaiser because of Kaiser's alleged activities in regard to ICIB.
B. Alleged Illegality of the Contract
Associated also argues that it was not obligated to perform under the contract because it constitutes an illegal restraint on trade and therefore is unenforceable. Although the courts will not enforce a contract that is an illegal restraint on trade,
In the case at bar, all of Associated's arguments are directed to Kaiser's activities with ICIB and its alleged intent to monopolize the cryolite market. Even if these allegations were true, however, Associated has not indicated that its contract with Kaiser to sell 4,000 tons of cryolite is an illegal restraint on trade or gives rise to such a restraint.
II
ESSENTIAL FACTORS FOR THE GRANTING OF EQUITABLE RELIEF REQUESTED BY KAISER
The court is cognizant of the equitable principles required to be satisfied in order to justify the granting of a preliminary injunction. These principles were stated concisely in Coffee Dan's, Inc. v. Coffee Don's Charcoal Broiler, 305 F.Supp. 1210, 1213 (N.D.Cal.1969):
Associated has stressed the factor of irreparable injury as indispensable to the granting of the equitable relief requested by Kaiser and therefore it will be considered first in order.
A. Irreparable Injury
A prerequisite to issuance of a preliminary injunction is that in its absence
Specific performance as a buyer's remedy for breach of a contract to sell goods "may be decreed where the goods are unique or in other proper circumstances." Cal. Commercial Code § 2716(1). The enactment of this statutory provision broadened the availability of specific performance from those situations involving only ascertained or specified goods to situations involving "other proper circumstances." Compare Cal. Commercial Code § 2716(1) with Cal. Civil Code § 1788 (repealed Sales Act provision). Moreover, the comments to section 2716 state:
Although no California case has held explicitly that an inability to cover is sufficient justification for decreeing specific performance, the state supreme court in Bomberger v. McKelvey, 35 Cal.2d 607, 616, 220 P.2d 729, 734 (1950), did state that scarcity of goods constituting the subject matter of the breached contract is a very significant factor in determining whether to order specific performance. The court in Bomberger also noted the "`growing tendency' to allow specific performance where damages are not the equivalent of the performance." Id. at 616-617, 220 P.2d at 735.
Courts in other jurisdictions have ruled that specific performance will be decreed when the goods contracted for cannot be purchased on the open market or otherwise covered. See, e. g., Hogan v. Norfleet, 113 So.2d 437, 439 (Fla.Dist. Ct.App.1959); Heidner v. Hewitt Chevrolet Co., 166 Kan. 11, 199 P.2d 481, 483 (1948); Poltorak v. Jackson Chevrolet Co., 322 Mass. 699, 79 N.E.2d 285 (1948); Jaup v. Olmstead, 334 Mich. 614, 55 N.W.2d 119, 120 (1952); Likens v. Sourk, 263 S.W.2d 462, 465 (Mo.App. 1953); Boeving v. Vandover, 240 Mo. App. 117, 218 S.W.2d 175, 177-178 (1949); Paullus v. Yarbrough, 219 Or. 611, 347 P.2d 620, 635 (1959); Cochrane v. Szpakowski, 355 Pa. 357, 49 A.2d 692, 694 (1946); Thompson v. Virginia, 197 Va. 208, 89 S.E.2d 64, 67 (1955).
Finally, many cases have noted the trend toward relaxing the requirements for specific performance, particularly those decided since adoption of the Uniform Sales Act and its even more liberal successor, the Uniform Commercial Code. See, e. g., Hunt Foods, Inc. v. O'Disho, 98 F.Supp. 267, 270 (N.D.Cal. 1951); Bomberger v. McKelvey, 35 Cal.2d 607, 616-617, 220 P.2d 729, 735 (1950); Capaldi v. Levy, 1 Cal.App.3d 274, 281, 81 Cal.Rptr. 629, 633 (1969); Price v. McConnell, 184 Cal.App.2d 660, 666, 7 Cal.Rptr. 695, 698-699 (1960).
Despite the absence of California decisions interpreting the "other proper circumstances" phrase of Cal. Commercial Code § 2716(1), the Code comments, in conjunction with prior case law, decisions in other jurisdictions, and the general trend toward a more liberalized availability of specific performance, persuade this court that the remedy
2. Kaiser's Showing of Injury
Although a preliminary injunction in the case at bar is not prohibited by California law, its issuance is still in the court's discretion and requires a showing of irreparable injury. Dymo Industries, Inc. v. Tapeprinter, Inc., 326 F.2d 141, 143 (9th Cir. 1959); Coffee Dan's, Inc. v. Coffee Don's Charcoal Broiler, 305 F.Supp. 1210, 1212-1213 (N.D.Cal.1969). Moreover, if there is an adequate remedy in money damages, injunctive relief should not be granted. Parker v. Winnipiseogee Lake Cotton & Woollen Co., 67 U.S. (2 Black) 545, 551, 17 L.Ed. 333 (1862); Ogden River Water Users' Ass'n v. Weber Basin Water Conservancy, 238 F.2d 936, 942 (10th Cir. 1956); Clemons v. Board of Educ., 228 F.2d 853, 857 (6th Cir.), cert. denied, 350 U.S. 1006, 76 S.Ct. 651, 100 L.Ed. 868 (1956); Washington Capitols Basketball Club, Inc. v. Barry, 304 F.Supp. 1193, 1197 (N.D.Cal.), aff'd, 419 F.2d 472 (9th Cir. 1969); Thayer Plymouth Center, Inc. v. Chrysler Motors Corp., 255 Cal.App.2d 300, 306, 63 Cal.Rptr. 148, 152 (1967).
In the present case, the parties strongly contest the irreparability of the injury that Kaiser will sustain. Kaiser contends that there is no alternative supply of cryolite, and consequently, without the cryolite it had contracted for with Associated, it will be unable to meet contractual commitments to its associates, who then will be unable to start up and operate their aluminum reduction plants.
In determining whether to issue a preliminary injunction, a court is not required to decide difficult questions of fact. Dymo Industries, Inc. v. Tapeprinter, Inc., 326 F.2d 141, 143 (9th Cir. 1964); Coffee Dan's, Inc. v. Coffee Don's Charcoal Broiler, 305 F.Supp. 1210, 1213 (N.D.Cal.1969); Alpha Distributing Co., Inc. v. Jack Daniel's Distillery, Inc., 207 F.Supp. 136, 138 (N.D.Cal. 1961), aff'd, 304 F.2d 451 (9th Cir. 1962). Without attempting to resolve any factual disputes, however, it can be gleaned from the data before the court that the supply of cryolite is indeed very scarce. Associated claims, and Kaiser to an extent agrees, that some cryolite is available on the open market, but the instances of availability involve only a few hundred tons,
B. Probability of Success on the Merits at Trial
Even assuming, however, that Kaiser has not made as satisfactory a showing of irreparable injury as is generally desirable, an injunction may still issue. As the court stated in Flood v. Kuhn, 309 F.Supp. 793, 798 (S.D.N.Y. 1970):
See Unicon Management Corp. v. Koppers Co., Inc., 366 F.2d 199, 204 (2d Cir. 1966). See also Fletcher Co. v. Rock of Ages Corp., 326 F.2d 13, 17 (2d Cir. 1963). In light of the above discussion of Associated's alleged justification for repudiating its contract with Kaiser, it appears with reasonable certainty that Kaiser will ultimately succeed on the merits.
C. Balancing of Equities
In addition to weighing the relative showings of irreparable injury and probability of success on the merits, the court also must take into consideration the balance of hardships to the parties. See, e. g., King v. Saddleback Junior College Dist., 425 F.2d 426, 427 (9th Cir. 1970); Checker Motors Corp. v. Chrysler Corp., 405 F.2d 319, 323-324 (2d Cir.), cert. denied, 394 U.S. 999, 89 S.Ct. 1595, 22 L.Ed.2d 777 (1969); Unicon Management Corp. v. Koppers Co., Inc., 366 F.2d 199, 205 (2d Cir. 1966); Quon v. Stans, 309 F.Supp. 604, 607 (N.D.Cal.1970); Flood v. Kuhn, 309 F.Supp. 793, 798 (S.D.N.Y.1970); Washington Capitols Basketball Club, Inc. v. Barry, 304 F.Supp. 1193, 1197 (N.D. Cal.), aff'd, 419 F.2d 472 (9th Cir. 1969).
In balancing equities, the court should view the disadvantages incurred by the party sought to be enjoined and the advantages gained by the party seeking the injunction. Hamilton Watch Co. v. Benrus Watch Co., Inc., 206 F.2d 738, 743 (2d Cir. 1953); Coffee Dan's, Inc. v. Coffee Don's Charcoal Broiler, 305 F.Supp. 1210, 1216 (N.D.Cal.1969). The determination is whether "the burden of an interlocutory injunction [is] all out of balance with the benefit to be obtained by the plaintiff." Alpha Distributing Co., Inc. v. Jas. Barclay and Co., Ltd., 215 F.2d 510, 511 (9th Cir. 1954).
In the instant case, issuance of an injunction would benefit Kaiser to the extent of realizing the fruits of its contract with Associated; Associated would be disadvantaged to the extent of being required to comply with the contract, notwithstanding its allegedly justified repudiation. Furthermore, even if Associated were to prevail ultimately on the merits by justifying its repudiation of the contract, the probability of which is not substantial, it could be recompensed adequately in money damages. In contrast, by not issuing an injunction Associated would realize the advantage of being able to sell the cryolite at a price considerably in excess of the contract price with Kaiser, and Kaiser, not being able to cover, could be forced to curtail its aluminum production and breach contracts for sale of cryolite to its associate companies, possibly causing them to refrain from commencing operation of new aluminum reduction plants. In examining
D. Maintenance of the Status Quo
In Washington Capitols Basketball Club, Inc. v. Barry, 419 F.2d 472, 476 (9th Cir. 1969), the court defined this principle:
See Beverage Distributors, Inc. v. Olympia Brewing Co., 395 F.2d 850 (9th Cir. 1968); Tanner Motor Livery, Ltd. v. Avis, Inc., 316 F.2d 804, 808-809 (9th Cir.), cert. denied, 375 U.S. 821, 84 S.Ct. 59, 11 L.Ed.2d 55 (1963).
The last uncontested status of the parties in the instant case appears to embrace the performance of the contract by the parties. Associated delivered to Kaiser cryolite during the spring of 1970 in accordance with the terms of the contract, but failed to make deliveries in September, October, and November of 1970, which were required therein. In September, therefore, the contest regarding the obligation of Associated to comply with the terms of the contract came into existence.
Upon consideration of Kaiser's showing of possible irreparable injury, the probability of Kaiser's success on the merits, the relative hardships to the parties, and the maintenance of the status quo, this case presents an appropriate situation for issuance of a preliminary injunction, unless Kaiser is precluded from obtaining such equitable relief by the doctrine of unclean hands.
III
THE DOCTRINE OF UNCLEAN HANDS
It is a fundamental maxim that in order to invoke equity jurisdiction, the party seeking relief must come into court with clean hands. Precision Instrument Mfg. Co. v. Automotive Maintenance Mach. Co., 324 U.S. 806, 814, 65 S.Ct. 993, 89 L.Ed. 1381 (1945). The bad conduct, however, must pertain to the subject matter of the suit and affect the equitable relations between the litigants. Washington Capitols Basketball Club, Inc. v. Barry, 304 F.Supp. 1193, 1200-1201 (N.D.Cal.), aff'd, 419 F.2d 472 (9th Cir. 1969).
Republic Molding Corp. v. B. W. Photo Utilities, 319 F.2d 347, 349 (9th Cir. 1963), citing Keystone Driller Co. v. General Excavator Co., 290 U.S. 240, 245, 54 S.Ct. 146, 78 L.Ed. 293 (1933); see Morton Salt Co. v. G. S. Suppiger Co., 314 U.S. 488, 492-493, 62 S.Ct. 402, 86 L.Ed 363 (1942); cf. Toomer v. Witsell, 334 U.S. 385, 393, 68 S.Ct. 1156, 92 L.Ed. 1460 (1948).
In the instant case, Associated claims that Kaiser's tortious actions in interfering with Associated's contractual rights with ICIB tainted Kaiser with unclean hands in this suit against Associated for the latter's refusal to deliver cryolite to Kaiser under its contract with Kaiser.
Only one reported case could be found that involved a situation in which tortious interference with contractual rights was offered as a basis for the defense of unclean hands in an action unrelated to such interference. In Messenger Publishing Co. v. Mokstad, 257 Ill.App. 161 (1930), plaintiff sought an injunction to prohibit defendant from hiring away its salesmen, who were under contract with plaintiff. The court, refusing to find that plaintiff had unclean hands because allegedly he had in the past tried to hire away some of defendant's salesmen, stated that the clean hands rule "is limited to the misconduct of the complainant in regard to the matter in litigation." Id. at 167.
An analogous situation was presented in Fibreboard Paper Prods. Corp. v. East Bay Union of Machinists, 227 Cal.App.2d 675, 39 Cal.Rptr. 64 (1964), in which plaintiff sought an injunction to restrain defendants from obstructing access to plaintiff's plant and from threatening or harming persons attempting to enter or leave the plant. Defendants sought to raise the defense of unclean hands on the basis of plaintiff's alleged misrepresentations and breach of contract with defendants, which were the purported reasons for defendants' conduct. Rejecting defendants' arguments, the court explained the circumstances under which the clean hands doctrine may be invoked:
Id. at 728-729, 39 Cal.Rptr. at 97. The court then went on to apply this test to the facts in Fibreboard:
Id. at 729, 39 Cal.Rptr. at 97-98; see Hill v. Younkin, 274 Cal.App.2d 880, 884, 79 Cal.Rptr. 509, 512 (1969); Bradley Co. v. Bradley, 165 Cal. 237, 242, 131 P. 750, 752 (1913); Hamrick v. Hamrick, 119 Cal.App.2d 839, 847, 260 P.2d 188, 192-193 (1953); cf. Moriarty v. Carlson, 184 Cal.App.2d 51, 54-57, 7 Cal.Rptr. 282, 284-285 (1960); Carman v. Athearn, 77 Cal.App.2d 585, 598-599, 175 P.2d 926, 934 (1947).
Because the activities of Kaiser upon which Associated attempts to base the doctrine of unclean hands were independent of the contract Kaiser seeks to enforce and were in no manner responsible for Kaiser's acquiring the contractual rights it is now seeking to have protected, Kaiser is not tainted by unclean hands in the present action, even assuming Kaiser tortiously interfered with Associated's contractual rights and engaged in anticompetitive activity.
IV
CONCLUSION AND ORDER
The foregoing constitutes the court's findings of fact and conclusions of law as required by Rule 52(a) of the Federal Rules of Civil Procedure.
Plaintiff's application for a preliminary injunction is hereby granted.
FootNotes
Dear Sirs:
We take pleasure in confirming the following business transaction negotiated by us to-day:
We refer to our letter of March 3d and want to inform you that our Milan office has taken up contract with OTIM and agreed to work the shipment of the first 500 tons out in mutual cooperation.
Our supplier will make available additional lots of about 500 tons each as follows:
It would be advisable to select vessels which are scheduled about 5 or 10 days later than the end of the respective month in order to have some leeway, i. e., for the end of September lot a vessel should be nominated for October 5/10th. In case these additional lots are also being handled by you through OTIM then we shall ask our office to work together with OTIM in the same way as for the first lot. We, therefore, are looking forward to hearing from you as to whether our friends should contact OTIM.
You will have noticed that there will not be a lot available during August, but this is generally the vacation month in Italy and one can not expect too much during this month.
Just for order's sake, we mention that this schedule is being given to you under reservation that production will not be interrupted by strikes as this nowadays often happens in Italy and that operations will not have to be stopped from time to time due to delay in deliveries of raw material.
There remains 1500 tons for January/February/March 1971 for which you still have to give instructions.
We trust that everything can be worked out to your satisfaction.
We refer to our telephone conversations. We have advised our principal, the Associated Metals of New York, of your agreement to grant exclusive rights with respect to all consumers to whom we have already effected sales and with respect to those consumers with whom our client is under negotiations, specifically:
Thanking you and asking you to return to us a copy of the present letter signed by you in confirmation of your approval, we beg to remain,
To some degree, this conflict among the courts may be the result of two potentially inconsistent statements in Guaranty Trust. At one point the Supreme Court stated that "a federal court may afford an equitable remedy for a substantive right recognized by a State even though a State court cannot give it." 326 U.S. at 106, 65 S.Ct. at 1468. A few pages later, however, the Court, in attempting to clarify the substantive/procedural distinction established by Erie, noted that whether at law or in equity, "the outcome of the litigation in the federal court should be substantially the same, so far as legal rules determine the outcome of the litigation, as it would be if tried in a State court." Id. at 109, 65 S.Ct. at 1470. The inconsistency between these quoted passages becomes particularly apparent in an application for a preliminary injunction because such a remedy is often "so inextricably interwoven with the substantive right invaded that the denial of the remedy would be tantamount to the denial of the right." Port of New York Authority v. Eastern Airlines, Inc., 259 F.Supp. 745, 753 (E.D.N.Y.1966).
In the instant case, Kaiser is requesting that its contract with Associated be enforced —first by issuance of a preliminary injunction and ultimately by an order of specific performance—because a suit for damages would be inadequate. Such equitable relief, therefore, is the very essence of this action, and its availability cannot be considered merely a procedural matter that would not "substantially" affect "the outcome of the litigation." See Guaranty Trust Co. of New York v. York, 326 U.S. 99, 109, 65 S.Ct. 1464, 89 L.Ed. 2079 (1945). See generally 7 J. Moore, Federal Practice ¶ 65.18 [1] at 1683-84 (2d ed. 1970).
Consequently, since under California law the availability of a preliminary injunction to enforce a contract is limited to certain specified situations, see note 15 infra, the best approach would be to look to state law to determine if a preliminary injunction is permissible. Cf. Paramount Pictures Corp. v. Holden, 166 F.Supp. 684, 688-689 (S.D.Cal.1958). Then, because the issuance of a preliminary injunction is in the court's discretion according to both federal and state law, see Yakus v. United States, 321 U.S. 414, 440, 64 S.Ct. 660, 88 L.Ed. 834 (1944); Dymo Industries, Inc. v. Tapeprinter, Inc., 326 F.2d 141, 143 (9th Cir. 1964); Continental Baking Co. v. Katz, 68 Cal.2d 512, 527, 67 Cal.Rptr. 761, 770, 439 P.2d 889, 898 (1968), look to federal law to determine whether the court should exercise its discretion. Cf. General Electric Co. v. American Wholesale Co., 235 F.2d 606, 608 (7th Cir. 1956); Paramount Pictures Corp. v. Holden, 166 F.Supp. 684, 689 n. 10 (S.D.Cal.1958).
Subsequent to repudiating its contract with Kaiser, Associated stated that it would sell up to 500 tons of cryolite to Kaiser at approximately $595 per metric ton, an increase of more than $350 per ton over the price agreed upon in the 1969 contract. As stated in the letter proposing this offer, Associated's purpose was to prevent any irreparable harm to British Metals, which had contracted with Kaiser for the sale of cryolite, and, because Kaiser could not deliver, might have to close down its aluminum reduction plants. See Letter from Weyman I. Lundquist of Heller, Ehrman, White & McAuliffe, Counsel for Associated, to Thelan, Marrin, Johnson & Bridges, Counsel for Kaiser, Oct. 29, 1970.
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