Stellar Labs, Inc. v. FL3XX GmbH

Background

Stellar Labs, Inc. sued FL3XX GmbH and Online Delivery Technologies (ODT), asserting claims including breach of contract, breach of the implied covenant of good faith and fair dealing, and interference with contractual and prospective economic relations. Stellar alleged that FL3XX improperly terminated an agreement under which Stellar was the exclusive reseller of FL3XX software in the United States.

Stellar moved for a temporary restraining order, an emergency order intended to preserve the situation until the court can consider longer-lasting preliminary relief. Stellar sought to prevent the defendants from marketing, selling, or advertising FL3XX software in the United States, including at a Las Vegas convention scheduled for October 12–14, 2021. The defendants opposed the motion, arguing among other things that the court lacked subject-matter jurisdiction, Stellar had not shown irreparable injury, and the requested order would impose hardship on the defendants.

Jurisdiction and ODT

The court found that there was no diversity jurisdiction when Stellar filed the case because Stellar and ODT were both citizens of Delaware. The court did not dismiss the case for lack of subject-matter jurisdiction, however, because Stellar agreed to dismiss ODT so that complete diversity would exist. Applying Federal Rule of Civil Procedure 21, the court granted Stellar’s request to dismiss ODT from the action. Although the defendants suggested that ODT might be an indispensable party—one whose participation is required for the case to proceed—the court found no such showing on the record before it.

Temporary-restraining-order standard

To obtain a temporary restraining order, Stellar had to show a likelihood of success on the merits, a likelihood of irreparable harm without immediate relief, that the balance of hardships favored Stellar, and that an injunction would serve the public interest. The court explained that a weaker showing on the merits may sometimes suffice when the balance of hardships sharply favors the plaintiff, but the plaintiff must still show a likelihood—not merely a possibility—of irreparable harm.

Court’s reasoning

The court did not evaluate the balance of hardships or the merits because Stellar failed to establish likely irreparable injury at the outset. Stellar presented evidence suggesting that FL3XX’s alleged violations could cause substantial and increasing financial losses, but the court concluded that money damages were an adequate legal remedy.

Stellar relied on a declaration stating that it might be driven out of business if FL3XX continued marketing and selling its software in the United States. The court found that assertion conclusory and unsupported by specific facts. The court also noted that Stellar had not explained why it could not remain in business by selling its own software suite. The record indicated that Stellar existed before its relationship with FL3XX, that the relationship lasted about a year before FL3XX terminated the reseller agreement, and that Stellar had raised $38.5 million, including a $26.3 million Series A investment. The court stated that Stellar’s funding weighed against its claim that it would likely be driven out of business without a temporary restraining order.

The court further observed that the requested order would not permit Stellar to market or sell FL3XX products. Instead, it would only prevent FL3XX from marketing at the October convention. Thus, even if Stellar claimed irreparable injury from lost FL3XX sales, the requested order would not address that injury.

Disposition

The court denied Stellar’s motion for a temporary restraining order. The court stated that the ruling did not preclude Stellar from filing a regularly noticed motion for a preliminary injunction. The parties were also directed to report within two weeks which alternative-dispute-resolution process they wished to use, their proposed timeline, and any discovery needed to prepare. The order disposed of Docket No. 14.