BACKGROUND

7 On May 6, 2019, Cohn filed this action against Sprouts alleging claims for violation 8 of California’s Unfair Competition Law (Bus. & Prof. Code § 17200), breach of the 9 covenant of good faith and fair dealing, and tortious interference, among other claims. In 10 October 1990, Sprouts’ predecessor, Boney’s Services, Inc. entered into a Tradename 11 License Agreement with Cohn for the operation of a grocery store in Chula Vista, 12 California. Boney’s Services, Inc. and Cohn entered into a second Tradename License 13 Agreement in September 1995 allowing Cohn to open and operate a second store in Chula 14 Vista, California. In 1997, the two Tradename License Agreements were amended to 15 reflect a tradename change from “Boney’s Services, Inc.” to “Henry’s Marketplace, Inc.” 16 In 2011, Sprouts acquired the brand and again amended the two Tradename License 17 Agreements (together with its amendments and addendums, the “TLA”). 18 Cohn now seeks preliminary injunctive relief alleging that since the filing of this 19 action, Sprouts has taken increasingly aggressive retaliatory action against Cohn, including 20 but not limited to performing various unannounced safety audits based on undisclosed 21 standards and subsequently threatening to terminate the current TLA between the Parties. 22

LEGAL STANDARD

23 Pursuant to Rule 65 of the Federal Rules of Civil Procedure, the Court may grant 24 preliminary injunctive relief in order to prevent “immediate and irreparable injury.” Fed. 25 R. Civ. P. 65(b). 26 The Ninth Circuit recognizes two tests for demonstrating preliminary injunctive 27 relief: the traditional test or an alternative sliding scale test. Cassim v. Bowen, 824 F.2d 28 1 791, 795 (9th Cir. 1987). Under the traditional test, a party must show: “1) a strong 2 likelihood of success on the merits, 2) the possibility of irreparable injury to plaintiff if 3 preliminary relief is not granted, 3) a balance of hardships favoring the plaintiff, and 4) 4 advancement of the public interest (in certain cases).” Save Our Sonoran, Inc. v. Flowers, 5 408 F.3d 1113, 1120 (9th Cir. 2005). Where a party demonstrates that a public interest is 6 involved, a “district court must also examine whether the public interest favors the 7 plaintiff.” Fund for Animals, Inc. v. Lujan, 962 F.2d 1391, 1400 (9th Cir. 1992). 8 Alternatively, a party seeking injunctive relief under Fed. R. Civ. P. 65 must show 9 either (1) a combination of likelihood of success on the merits and the possibility of 10 irreparable harm, or (2) that serious questions going to the merits are raised and the balance 11 of hardships tips sharply in favor of the moving party. Immigrant Assistance Project of the 12 L.A. County of Fed’s of Labor v. INS, 306 F.3d 842, 873 (9th Cir. 2002); Sun Microsystems, 13 Inc. v. Microsoft Corp., 188 F.3d 1115, 1119 (9th Cir. 1999); Roe v. Anderson, 134 F.3d 14 1400 ,1402 (9th Cir. 1998). “These two formulations represent two points on a sliding scale 15 in which the required degree of irreparable harm increases as the probability of success 16 decreases.’” Roe, 134 F.3d at 1402 (quoting United States v. Nutri-cology, Inc., 982 F.2d 17 394, 397 (9th Cir. 1992)). “Thus, ‘the greater the relative hardship to the moving party, the 18 less probability of success must be shown.” Sun Microsystems, 188 F.3d at 1119 (quoting 19 Nat’l Ctr. For Immigrants Rights v. Immigration and Naturalization Service, 743 F.2d 20 1365, 1369 (9th Cir. 1984)). 21 The Ninth Circuit makes clear that a showing of immediate irreparable harm is 22 essential for prevailing on a request for preliminary injunctive relief. See Caribbean 23 Marine Services Co. v. Baldrige, 844 F.2d 668, 674 (9th Cir. 1988). “Speculative injury 24 does not constitute irreparable injury sufficient to warrant granting a preliminary 25 injunction.” Id. Thus, a plaintiff must show the presence of an “immediate threatened 26 injury as a prerequisite to preliminary injunctive relief.” Id. (citing Los Angeles Memorial 27 Coliseum Commission v. National Football League, 634 F.2d 1197, 1201 (9th Cir. 1980)). 28 /// 1 DISCUSSION 2 Cohn seeks to enjoin Sprouts from (1) taking any additional audits of its stores until 3 after Sprouts has (a) completely disclosed all current safety auditing standards to Cohn and 4 (b) allowed Cohn a reasonable period of not less than thirty (30) days to bring its stores 5 into compliance under those standards; (2) conducting additional safety audits based on 6 those standards not disclosed to Cohn; (3) terminating the TLA based on any safety audits 7 conducted on Cohn’s stores if the operative audit standards were not disclosed to Plaintiff 8 in advance; and (4) instructing its vendors, including its sign vendors, to cease doing 9 business with Cohn and advising each of its vendors of the Court’s order with respect to 10 this issue. (Doc. No. 22 at 3.) Sprouts opposed Cohn’s request, arguing that (1) the 11 requested relief is moot because Sprouts has already offered to meet with Cohn and hold 12 further audits in abeyance until at least 30 days following the meeting, (2) the requested 13 relief is contrary to public interest, (3) Cohn cannot demonstrate a likelihood of success on 14 the merits, and (4) Cohn cannot demonstrate irreparable harm. (Doc. No. 24 at pg. 7-12.) 15 The Court finds that the preliminary injunctive relief requested is not moot. The 16 Court is particularly concerned the actions taken by Sprouts appear to be retaliatory in 17 nature and counsel for Sprouts’ willingness to cooperate does not mitigate that retaliation. 18 Sprouts contends that issuance of a preliminary injunction is contrary to public 19 interest because it could prevent the Cohn stores from being audited during the duration of 20 this action. However, Cohn is not seeking a blanket prohibition on audits; rather, it seeks 21 disclosure of all audit standards in advance, along with a reasonable time to comply. 22 Cohn’s intent to continue to comply with Sprouts’ safety standards negates the public 23 interest concerns raised by Sprouts. Further, because the TLA is a private agreement 24 between Cohn and Sprouts, the reach of the preliminary injunction will be limited to Cohn 25 and Sprouts under the terms of the TLA. Thus, public interest is not a dominant 26 consideration and does not weigh against the issuance of a preliminary injunction. 27 Cohn has asserted claims for violation of California’s Unfair Competition Law, 28 breach of the covenant of good faith and fair dealing, and tortious interference, among 1 other claims. (See Doc. No. 1.) Sprouts has filed a motion to dismiss five of the six claims 2 for relief and a motion to strike as to one of the claims. (See Doc. Nos. 8 and 11.) Although 3 Sprouts contends Cohn has not demonstrated a likelihood of success on the merits, Cohn 4 nevertheless satisfies the minimum threshold of raising serious questions going to the 5 merits. 6 The balance of hardships tips sharply in Cohn’s favor. Alliance for the Wild Rockies, 7 865 F.3d at 1217; Immigrant Assistance Project, 306 F.3d at 873. Cohn has demonstrated 8 irreparable harm as a result of (1) Sprouts’ threats of imminent termination of the TLA due 9 to Cohn’s inability to pass audits based upon new, undisclosed audit standards and (2) 10 Sprouts’ instructions to its vendors to cease, temporary or otherwise, doing business with 11 Cohn. Sprouts’ actions are intended to cause business loss, damage, loss of prospective 12 customers, goodwill, and the demise of Cohn’s business, are indicative of retaliation, and 13 not speculative. Stuhlbarg International Sales Co. Inc. v. John D. Brush and Co., Inc., 240 14 F.3d 832, 840 (9th Cir. 2001); National Center for Immigrants Rights, 743 F.2d at 1369 15 (the greater the relative hardship to the moving party, the less probability of success on the 16 merits must be shown) (citation omitted). On the other hand, the harm to Sprouts in issuing 17 the preliminary injunction is minimal at best. It will continue to receive royalty payments 18 and could continue to conduct regular audits of the Cohn stores to ensure compliance so 19 long as the audit is based on standards disclosed to Cohn in advance. 20 Finally, because Cohn stands to imminently suffer the termination of the TLA, it 21 has established that a significant possibility exists it will suffer irreparable harm if the 22 Court does not issue a preliminary injunction. Sprouts’ continuous auditing of Cohn’s 23 stores based on undisclosed standards and threatening to terminate the TLA between the 24 parties is sufficient irreparable harm. See Stuhlbarg, 240 F.3d at 840 (“Evidence of 25 threatened loss of prospective customers or goodwill certainly supports a finding of the 26 possibility of irreparable harm.”). 27 /// 28 /// 1 The Court thereby GRANTS Cohn’s Motion for a Preliminary Injunction. (Doc. 2 || No. 22). Accordingly, IT IS HEREBY ORDERED that: 3 1. Sprouts and their agents, assignees, officers, attorneys, and representatives are 4 restrained and enjoined from undertaking any operational or safety audits of 5 Cohn’s stores based upon standards not disclosed in advance and without 6 allowing Cohn a reasonable time of not less than 30 days to bring its stores 7 into compliance with the new standards. 8 2. Sprouts is enjoined from utilizing the audit reports from September 2019 and 9 January 2020 to terminate the TLA during the course of this litigation. 10 3. Sprouts is enjoined from instructing its vendors, including its sign vendors, to 11 cease doing business with Cohn and must immediately advise each of its 12 vendors that any previously issued instructions to cease doing business with 13 Cohn are no longer in effect. 14 4. The Court’s Order will remain in full force and effect during the course of this 15 litigation or until further order of the Court. 16 IT IS SO ORDERED. 17 18 19 || DATED: March 6, 2020 20 Yn. John A. Houston 21 Jnited States District Judge 22 23 24 25 26 27 28