28. CPC alerted Fleet when it discovered the problem.
29. After it became aware of the problem, Fleet requested that CPC segregate the batches contaminated with MBC (approximately 42,000 containers of powder), so that Fleet could destroy it.
30. CPC did not comply with Fleet's request. It did, however, ship one of the fourteen contaminated batches, No. SPR-395, to Fleet. CPC's record of this batch indicated that it contained benzethonium chloride; it was only after Fleet conducted its own tests that it discovered that the batch actually contained MBC.
31. Through the date of the hearing, CPC had not definitively informed either Fleet or this court of the exact location of the contaminated batches.
32. Fleet has raised other complaints about CPC's manufacturing practices. On two occasions, the assays for certain batches of powder reflected improper levels of benzethonium chloride. On another occasion, two drums of an unrelated product, baby powder, were dumped into a hopper on the production line that CPC was using for Summer's Eve Feminine Powder.
33. Fleet had, at least once, accepted a batch after the assay reflected a low benzethonium chloride level.
34. Following the discovery of the MBC problem, CPC resumed production in late June, 1989. Fleet concurrently began collecting for itself the product samples for its quality control testing. In order to obtain product samples which were representative of the entire batch, Fleet collected one case from each of the three pallets which comprised a batch shipped by CPC to Fleet, and chemically tested two bottles from each of the three cases.
35. Fleet collected a second case from each of the three pallets for its cosmetic inspection.
36. Fleet followed this sampling procedure for the next fifty-two batches.
37. Fleet approved the contents of each of those batches, but five of them failed Fleet's cosmetic inspection.
38. Fleet is seeking a preliminary injunction against the sale of the last 38 batches of powder which CPC produced. The batches consist of about 11,645 cases, or 139,740 individual packages of powder. Fleet purchased the ingredients and packaging components for these batches for $ 41,000, and provided them to CPC.
39. In September, 1989, a dispute arose between Fleet and CPC about the cost of the 38 batches.
40. After various discussions, and a visit by Mr. Hricz, Fleet's Vice President of Operations, to CPC, the parties reached an agreement, which was memorialized in a letter sent by Mr. Hricz to Mr. Tom Conwell, CPC's president on September 21, 1989.
41. The letter states that "preshipment samples for each batch . . . must be sent to [Fleet] for Quality Assurance testing and release." The letter does not specify the number of samples to be sent, nor how they are to be collected.
42. Elliott Weller, CPC's Vice President of Finance, understood the agreement to mean that CPC should send one case per batch to Fleet, so that Fleet could perform whatever quality control tests were necessary to approve the entire batch. Mr. Conwell, who actually entered the agreement with Fleet, did not testify.
43. Neither the letter nor the testimony of the witnesses is conclusive as to the type or quantity of pre-shipment samples which CPC was to ship to Fleet for testing.
44. In fact, CPC sent one case per batch to Fleet for testing.
45. Whereas with its prior sampling procedure, Fleet was able to test samples produced at a variety of times and thus representative of the entire batch, the new procedure provided a sample of only a small portion of the batch, with each container of powder produced at nearly the same time.
46. Fleet performed chemical testing, but did not make a cosmetic inspection of those samples.
47. Whatever the parties understood as to pre-shipment testing, the parties did agree that CPC was to ship all the product to Fleet before it was distributed for sale to consumers.
48. Fleet will not approve the final 38 batches until it has determined that all fourteen batches contaminated with MBC have been accounted for and have not been mixed with subsequent batches.
49. Once it had satisfied itself that none of the remaining 38 batches is contaminated with MBC, Fleet intended to perform the same testing procedures it had performed on prior batches.
50. The "testing" issue was never resolved, and a chattel lien was eventually placed on the 38 batches of powder.
51. Despite Fleet's attempts to block it, a Sheriff's sale was held on December 26, 1989. CPC purchased all 38 batches at the sale for $ 25,000.
52. Although Fleet did send a representative to the sale, the representative was not authorized to bid more than $ 25,000.
53. At no time prior to January, 1990, did Fleet raise the question of trademark infringement.
CONCLUSIONS OF LAW
The standard for issuing a preliminary injunction in this circuit is clear. The plaintiff must show:
1. that it has no adequate remedy at law;
2. that it will suffer irreparable harm if the preliminary injunction is not issued;