Forklift distributor Lilly Co of Memphis has won a legal round in its litigation with equipment manufacturer Yale Materials Handling Corp (YMHC).

Judge JG Breen granted Lilly a temporary injunction on November 23 that halted YMHC's efforts to terminate Lilly as a Yale dealer in the mid-south.

Greenville, North Carolina-based YMHC can appeal all, or parts of the ruling, or it can prepare for a trial that is set to begin in August 2005 in the US District Court in Memphis.

The judge issued the ruling slightly more than a year after he took testimony involving plaintiff YMHC and defendants Lilly and Toyota Material Handling USA (TMHU) of Irvine, California (Forkliftaction.com News #135).

In its July 2003 suit, Yale claimed Toyota interfered in Yale's long-time dealer relationship with Lilly (Forkliftaction.com News #121).

"We are pleased with the court's decision, and we will continue to go forward," said Craig Avery, chief operating officer for Lilly.

Avery said Lilly sites in Memphis; Jackson, Tennessee; Jonesboro, Arkansas; and Tupelo, Mississippi, represent both Yale and Toyota. Also, Lilly has a Toyota-only site in Jackson, Mississippi, and a Yale-only site in Nashville, Tennessee. The opinion mentioned Lilly's sales growth to USD22 million from USD7 million over nine years prior to the TMHU link.

But the case was not over, noted Jeffrey Smith, a Memphis attorney representing Lilly.

"This does not end it. We have a long way to go. Lilly Co thought the attempted termination was wrong under the law, and we are gratified to see we will be a Yale dealer through the end of this procedure," Smith said.

TMHU was also pleased.

"Toyota did nothing wrong as far as signing up Lilly as a dealer," said Ronald Harris, a Nashville attorney representing TMHU.

YMHC President Don Chance notified Yale dealers in a memorandum.

"This decision was not unexpected, given the more than a year that it has taken to render a decision," Chance said. "We are proceeding with this case and remain fully convinced that we will prevail on the merits."

Judge Breen's thorough 25-page opinion confirmed most Lilly positions and discounted most Yale arguments.

"The court finds that a preliminary injunction is appropriate due to Lilly's strong probability of suffering irreparable harm," the ruling said. "Yale does not appear likely to suffer any irreparable harm if it is enjoined from terminating the Memphis agreement."

As noted in the opinion, Lilly would expect to discharge 40 per cent of its employees if the Memphis dealership was ended. Under that scenario, Lilly said it would be unable to fulfill price-constrained maintenance contracts with customers and "a large part of the customer base would be lost", according to testimony of Lilly President Thomas J Clark III.

The supplier relationship between Yale and Lilly goes back 50 years. Their latest contract and two now-disputed dealer-marketing agreements were dated July 2, 2002.

One agreement grants Lilly exclusive rights to sell and service Yale products in Memphis, northern Mississippi and western Arkansas, and the other grants Lilly similar rights in middle Tennessee including Nashville. Both agreements are for three years and include a section prohibiting dealer Lilly from selling equipment that competes directly with Yale products.

Relations between Lilly and Yale deteriorated during the spring and summer of 2003, and Toyota began talking to Lilly about becoming a dealer in Memphis, according to Mr Clark's testimony. Toyota needed a replacement for former dealer CTK Inc of Memphis (Forkliftaction.com News #124).

During 2003, Lilly entered into a non-binding letter of intent with Toyota on July 9, and Toyota agreed on July 24 to indemnify Lilly for litigation expenses if Yale sued. The matter was soon in a Tennessee state court and then in the federal setting before Judge Breen.