Details of Source's Temporary Restraining Order

Source Interlink filed a lawsuit last week accusing its rivals of a conspiracy to run it out of business by, among other things, cutting off its supply of magazines, including Soap Opera Digest and Soap Opera Weekly. The magazine wholesaler alleged that the defendants--which include Time Inc. and American Media--refused to do business with it after it attempted to impose a 7-cent-per-copy fee for retrieving unsold magazines at retailers. (It later dropped the charge.)

Last Wednesday, Source Interlink's lawyer Marc Kasowitz, faced off against the ten defendants in Manhattan federal district court. On Thursday,Judge Paul Crotty signed an order granting Source Interlink's request for a temporary restraining order (TRO) against eight of the defendants. His order required major magazine publishers and distibutors to supply Source with their titles on the same terms before they cut Source off in February.

AmericanLawyer.com has more details about the proceedings:

At the lively hearing, Kasowitz painted a bleak picture for Source Interlink's outlook if the TRO was not granted. "[If] things continue the way they are going, Source will not be able to make its payroll this Friday," he said, according to the transcript. "The result of that, your Honor, will be that the company will have no choice but to lay off thousands of employees."

Time Inc.'s lawyer, Rowan Wilson of Cravath, Swaine & Moore, argued that Source shouldn't get equitable relief because "this is a problem of Source's own making," referring to the plaintiff's attempted surcharge.

Judge Crotty concluded that Source had met the test for a TRO. "They are certainly at a competitive disadvantage because they are unable to supply their retail customers with the products that have been denied to them," said Judge Crotty about Source. "[The] balance of hardships tips very much in the favor of the plaintiff, at least at this particular stage, and there are grounds for litigation."

Judge Crotty denied a TRO against magazine wholesalers Hudson News Distributors and The News Group. He also set a hearing for Source's motion for a preliminary injunction on February 23.

I'll continue to follow this case and update as new developments arise.