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The Franchise Memorandum

The Franchise Memorandum

Posts in Preliminary Injunctions.

The Tenth Circuit Court of Appeals recently upheld a preliminary injunction awarded to fitness chain franchisor Core Progression, enforcing a post-termination noncompete against a former franchisee in North Carolina. Core Progression Franchise LLC v. O’Hare, 2022 WL 1741836 (10th Cir. May 31, 2022).

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A federal court in New York denied a franchisor’s preliminary injunction motion where it did not establish a likelihood of success on the merits or irreparable harm. JTH Tax LLC v. Agnant, 2022 WL 1556656 (E.D.N.Y. May 17, 2022).

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A Federal Court in Tennessee recently denied a franchisor’s motion for preliminary injunction and dissolved a temporary restraining order that had previously been put in place, because the franchisor could not demonstrate a likelihood of success on the merits of its claims, did not establish irreparable harm, and the customers of the defendant would be substantially harmed if the preliminary injunction were ordered. Freedom Franchise Sys., LLC v. CHOTO Boat Club LLC, 2022 WL 1206569 (E.D. Tenn. Apr. 21, 2022).

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A federal court in California recently denied a motion for a temporary restraining order against a franchisee of a pizza restaurant, concluding that there was not evidence that the franchisor would be irreparably harmed by a franchisee’s refusal to transfer its store back to the franchisor. Mountain Mike’s Pizza, LLC v. SV Adventures, Inc., 2021 WL 6136178 (E.D. Cal. Dec. 29, 2021).

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A federal court in California enjoined the brother of a former franchisee from continuing to use marks similar to the franchisor’s—even though the franchisor’s application to register the mark was denied, and even though the restaurant was in Miami while the franchisor’s system otherwise consists of a single forthcoming restaurant in California. Shawarma Stackz LLC v. Jawad, 2021 WL 5827066 (S.D. Cal. Dec. 8, 2021).

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A federal Court in Nebraska has recently denied a licensor’s request to enjoin a terminated licensee, concluding that there was no likelihood of irreparable harm where the licensor delayed in seeking injunctive relief. Stone Strong, LLC v. Stone Strong of Texas, LLC, 2021 WL 4710449 (D. Neb. Oct. 28, 2021).

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A federal court in Minnesota granted a distributor’s motion for a preliminary injunction to prevent a former licensee from continuing to use its trademarks after the distributor terminated the parties’ license agreement.

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A federal court in Colorado found a former franchisee of Core Progression Franchise in contempt and awarded sanctions for violations of the terms of a preliminary injunction.

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A federal court in Illinois denied a motion to temporarily restrain franchisor Seva Beauty from terminating franchise agreements based on the franchisee’s failure to pay weekly royalty payments while a dispute with the franchisor was pending.

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A Texas federal court has granted an injunction to a Bundt cake franchisor seeking to prevent a competitor from using its trademarked frosting pattern on her cake products. Denbra IP Holdings, LLC v. Thornton, 2021 WL 674238 (E.D. Tex. Feb. 22, 2021). Plaintiff Denbra IP Holdings, LLC d/b/a Nothing Bundt Cakes has over 300 franchises around the United States and Canada selling Bundt cakes topped with its trademarked frosting pattern. The frosting pattern consists of long strips of tubular ring-shaped frosting that expands outward from the center of the cake. Twenty-one of its ...

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A federal court in New Jersey has denied a franchisee’s motion for an emergency temporary restraining order. Sat Agiyar, LLC v. 7-Eleven, Inc., 2021 WL 147110 (Jan. 15, 2021). In September 2015, Agiyar signed a franchise agreement to operate a 7-Eleven store 24-hours per day in Princeton, New Jersey. At that time, Princeton prohibited the operation of retail food establishments from 2 a.m. to 5 a.m. The prohibition was set to expire in 2017 unless the city council extended it. To account for the local ordinance, Agiyar and 7-Eleven agreed to permit Agiyar to operate the location for ...

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A federal court in Wisconsin recently granted a distributor’s motion for a temporary restraining order and a preliminary injunction to enjoin a manufacturer from terminating a longstanding but unwritten exclusive dealership agreement. Keen Edge Co., Inc. v. Wright Mfg., Inc., 2020 WL 4926664 (E.D. Wis. Aug. 21, 2020). For over 20 years, Keen Edge enjoyed exclusive rights to sell Wright’s products in much of the Midwest. Wright’s products accounted for almost 95% of Keen Edge’s sales. After a change in Wright’s leadership, however, Wright required Keen Edge to ...

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A state court in Delaware denied a franchisor’s motion for a preliminary injunction based upon claims that a prospective franchisee misappropriated confidential information and started a competing business despite having signed a non-disclosure agreement. Smash Franchise Partners, LLC v. Kanda Holdings, Inc., 2020 WL 4692287 (Del. Ch. Aug. 13, 2020). Todd Perri was initially interested in potentially becoming a Smash Franchisee. Perri researched information that Smash published online about the company, spoke with franchise brokers about Smash, and participated in a ...

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The Sixth Circuit Court of Appeals recently upheld the district court’s grant of Little Caesar’s motion for a preliminary injunction preventing a holdover franchisee from continuing to operate its restaurants. Little Caesar Enters., Inc. v. Miramar Quick Serv. Rest. Corp., Case. No. 19-1860 (6th Cir. June 25, 2020). Lathrop GPM represented Little Caesar in this case. As we previously reported in Issues 244 and 246 of The GPMemorandum, this case involves a franchisee of four Little Caesars franchises in Connecticut and Massachusetts that was terminated for its failure to ...

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A federal court in Michigan granted a franchisor, Liberty Tax, a preliminary injunction against the owners of its former franchisee in JTH Tax, Inc. v. Magnotte, 2020 WL 127949 (E.D. Mich. Jan. 10, 2020). On January 16, 2018, after significant defaults, Liberty Tax terminated multiple franchise agreements with franchisee Reliable Income Tax. Liberty’s notice of termination reminded Reliable and its owners, the Magnottes, of their post-termination restrictive covenants regarding noncompetition, nonsolicitation, and return of customer information. Despite this, in ...

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In a 2-1 decision, the Eighth Circuit affirmed entry of an order enjoining enforcement of amendments to a North Dakota law governing contracts between dealers and manufacturers, finding that the amendments violated the rarely invoked Contracts Clause of the U.S. Constitution. Ass’n of Equip. Mfrs. v. Burgum, 2019 WL 3520578 (8th Cir. Aug. 2, 2019). The statutory amendments at issue prohibited manufacturers from imposing various contractual obligations, regulating dealership transfers, and imposing new requirements with respect to reimbursements to dealers for warranty ...

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In the continuation of a case that appeared in Issue 244 of the GPMemorandum, a federal court in Michigan denied the motion of former Little Caesar’s franchisees to stay the enforcement of a preliminary injunction order pending their appeal of the order to the United States Court of Appeals for the Sixth Circuit. Little Caesar Enters., Inc., v. Miramar Quick Serv. Rest. Corp., 2019 WL 3997161 (E.D. Mich. Aug. 23, 2019). As previously reported, in July 2019, the court granted Little Caesar’s motion for a preliminary injunction enforcing its termination of the franchisees’ ...

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In another case involving Little Caesar, a federal district court in Michigan granted the franchisor a preliminary injunction against a former multi-unit franchisee. Little Caesar Enters., Inc. v. Miramar Quick Serv. Rest. Corp., 2019 WL 3219844 (E.D. Mich. July 16, 2019). Gray Plant Mooty also represented Little Caesar in this case. Miramar was a franchisee of four Little Caesars franchises in Connecticut and Massachusetts. The franchise agreements required Miramar to purchase all products and supplies from Little Caesar’s affiliate, Blue Line Foodservice Distribution ...

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In another case, a Florida federal court granted a preliminary injunction against a former Tim Hortons franchisee who continued to operate under the Tim Hortons marks. Tim Hortons USA, Inc. v. Tims Milner, LLC, 2019 WL 2515006 (S.D. Fla. June 17, 2019). Tims Milner and its codefendants (collectively, “Milner”) entered into franchise and lease agreements with Tim Hortons and its affiliate in 2016 to own and operate seven locations in Michigan. Almost immediately after signing the Agreements, Milner began disputing Tim Hortons’ accounting and billing procedures and refused ...

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A federal court in New York granted Doctor’s Associates LLC and Subway IP LLC (collectively, “Subway”) a preliminary injunction prohibiting a former franchisee, Abdul Hai, from using Subway’s marks and materials after Hai’s franchise agreement had been terminated. Doctor’s Assocs. LLC v. Hai, 2019 WL 2385597 (E.D.N.Y. June 4, 2019). Subway commenced an action in April 2019 after Hai’s Subway franchise agreement was terminated, but Hai nonetheless continued operating a sandwich shop using marks and materials that Subway claimed were confusingly similar or ...

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Meanwhile, the Northern District of Texas has denied a request for a temporary restraining order against franchisor MMI-CPR, LLC in All Tech Repairs, Inc. v. MMI-CPR, LLC, 2019 WL 2286082 (N.D. Tex. May 5, 2019). MMI-CPR, a franchisor of cell phone and electronic device retail stores, sent a Notice of Termination of the Area Representative Agreement to All Tech Repairs. MMI-CPR wished to terminate the contract due to All Tech’s alleged failures to recruit enough franchisees and to properly support the existing franchisees within its territory. All Tech filed suit to force ...

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A federal court in Minnesota recently denied a Wisconsin franchisee’s motion for a temporary restraining order to prevent the termination of its license agreement. Izabella HMC-MF, LLC v. Radisson Hotels Int’l, Inc., 2019 WL 2067141 (D. Minn. May 10, 2019). After learning that Izabella was conducting unapproved renovations at its franchised hotel, Radisson issued a default notice giving Izabella an opportunity to cure. In the default notice, Radisson warned Izabella that if it did not cure the renovation default within 60 days, the license agreement would automatically ...

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Meanwhile, the U.S. District Court for the Western District of Kentucky has partially granted a tax preparation franchisor’s motion for a preliminary injunction against a former franchisee operating a competing tax return preparation business. JTH Tax, Inc. v. Freedom Tax, Inc., 2019 WL 2062519 (W.D. Ky. May 9, 2019). JTH Tax, the franchisor of the Liberty Tax Service system, sued the franchisee for, among other things, trademark infringement under the Lanham Act and violation of the Defend Trade Secrets Act. JTH alleged that the former franchisee was using logos and slogans ...

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The Court of Appeals of Texas recently affirmed a trial court’s decision to grant Eskimo Hut Worldwide’s request for a preliminary injunction against one of its franchisees due to the franchisee’s failure to comply with systemwide standards. South Plains Sno, Inc. v. Eskimo Hut Worldwide, Ltd., 2019 WL 1591994 (Tex. App. Apr. 12, 2019). Worldwide franchises Eskimo Hut convenience stores that sell frozen beverages to consumers and provides franchisees with a “base mix” and particular instructions on how to use that mix. When South Plains sued Worldwide for alleged ...

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The U.S. District Court for the Northern District of California granted a dealer’s motion for a preliminary injunction to halt the termination of its franchise in S.A. Mission Corp. v. BP West Coast Products LLC, 2019 WL 99042 (N.D. Cal. Jan. 3, 2019). S.A. Mission owned and operated a gas station as part of its franchise agreements with BP. The franchise agreements contained an “image standards” provision, under which S.A. Mission would need to conform to certain standards and its station would be subject to periodic inspections. S.A. Mission failed six consecutive ...

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An Illinois federal court ruled in favor of franchisor BrightStar Franchising, LLC, holding former franchisee Northern Nevada Care and its owners Stephen and Teresa Neff in contempt for failing to comply with the terms of a preliminary injunction. BrightStar Franchising, LLC v. N. Nevada Care, Inc., 2019 WL 194369 (N.D. Ill. Jan. 15, 2019). The Neffs previously operated a franchised BrightStar agency offering at-home personal care and medical services in Carson City, Nevada. BrightStar filed an action alleging a violation of the parties’ franchise agreement and sought ...

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The U.S. District Court for the Southern District of Ohio had no trouble preliminarily enjoining a franchisee and its principals (“Pivotal”) from violating a one-year covenant against competition, when Pivotal’s principals formed a competing company, hired Pivotal’s employees for the same roles in the new business, sent notices to industry contacts that Pivotal was “rebranding,” and declared the franchise agreement terminated. Relo Franchise Servs., Inc. v. Gilman, 2019 WL 324215 (S.D. Ohio Jan. 25, 2019). Pivotal attempted to avoid the injunction by arguing ...

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An Illinois federal court recently granted a franchisor’s motion for a preliminary injunction and two motions to compel arbitration against its former franchisee. BrightStar Franchising, LLC v. Northern Nevada Care, Inc., 2018 WL 4224454 (N.D. Ill. Sept. 4, 2018). BrightStar, a franchisor of home-based health services, entered into a franchise agreement with Northern Nevada Care (NNC) pursuant to which NNC had the right to provide in-home medical care in the Carson City, Nevada area. After BrightStar learned that NNC was providing services to a customer living in another ...

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After finding a group of terminated franchisees in contempt of court for violating a preliminary injunction enforcing their covenant against solicitation, the U.S. District Court for the Western District of North Carolina awarded a franchisor nearly $100,000 in attorneys’ fees and costs and extended the nonsolicitation covenant for an additional year. Atl. Pinstriping LLC v. Atl. Pinstriping Triad, LLC, 2018 WL 4265564 (W.D.N.C. Sept. 6, 2018). Atlantic terminated the parties’ franchise agreements and then filed a motion for a temporary restraining order seeking to ...

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The U.S. District Court for the District of Maine recently denied a franchisor’s motion for a temporary restraining order to stop its former franchisee from operating a new business following the expiration of the parties’ franchise agreement. Toddle Inn Franchising, LLC v. KPJ Assocs. LLC, 2018 WL 3676826 (D. Me. Aug. 2, 2018). The parties had entered into a franchise agreement that permitted KPJ to open and operate a Toddle Inn childcare center. When the franchise agreement expired in July 2016, the parties did not renew the contract. Nonetheless, KPJ continued to operate as a ...

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A federal court in the Eastern District of New York has granted a franchisor’s request for a preliminary injunction against a franchisee who continued to use the franchisor’s trademarks after moving to an unauthorized location. Mitsubishi Motors N. Am. Inc. v. Grand Automotive, Inc., 2018 WL 2012875 (E.D.N.Y. Apr. 30, 2018). The parties entered into a dealer sales and service agreement in which Mitsubishi granted Grand Automotive the right to use the Mitsubishi trademarks to sell new cars at an authorized location. The dispute arose when Grand failed to renew its lease and ...

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The U.S. District Court for the Middle District of Pennsylvania granted in part a motion filed by an independent distributor to stop the termination of its distribution agreements. Pella Products, Inc. v. Pella Corp., 2018 WL 2734820 (M.D. Pa. June 7, 2018). The distributor was a party to several agreements granting it the right to distribute Pella windows and doors to general contractors and businesses (i.e., the trade/commercial business), and to homeowners (i.e., the retail business). Based upon evidence of sexual misconduct by the distributor’s president, the ...

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An Ohio federal court granted a franchisor’s motion to preliminarily enjoin a franchisee from operating a competing business or suggesting any affiliation with the franchisor in Handel’s Enterprises, Inc. v. Schulenburg, 2018 WL 3077756 (N.D. Ohio June 22, 2018). In 2015, Handel’s Enterprises, an ice cream shop franchisor, and Schulenburg entered into a franchise agreement granting Schulenburg a franchise in Encinitas, California, and the option to open a second location in San Diego. The agreement contained a covenant not to compete with Handel’s during the term of ...

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A federal court in New Mexico recently denied a request for a temporary restraining order made by franchisees of the Wyndham hotel chain that would have reinstated their terminated franchise agreement. Presidential Hospitality, LLC v. Wyndham Hotel Grp., LLC, 2018 WL 2604831 (D.N.M. June 2, 2018). After the franchisees repeatedly defaulted on their obligation to pay royalties, Wyndham terminated their franchise agreement and cut off their access to the Wyndham central reservation system. The franchisees then filed a motion for a temporary restraining order (TRO) to reinstate ...

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The U.S. District Court for the Western District of Tennessee granted a motion for a preliminary injunction in favor of franchisor Amerispec, enforcing a one-year post-termination covenant against competition and rejecting the ex-franchisee’s argument that the covenant expired prior to the date on which he ceased operating his franchise. Amerispec, L.L.C. v. Omni Enters., Inc., 2018 WL 2248459 (W.D. Tenn. May 16, 2018). Gray Plant Mooty represented the franchisor in this case. When the parties’ franchise agreement expired in March of 2017, the franchisee failed to execute ...

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A federal court in Texas has denied a franchisor’s motion for a preliminary injunction, finding that the franchisor failed to show a likelihood of success on the merits. BL Rest. Franchises LLC v. 510 Park Inc., 2018 WL 2363606 (N.D. Tex. May 24, 2018). Restaurant franchisor Bar Louie filed suit against a group of franchisees and sought an injunction to require them to comply with the early termination procedures set forth in the parties’ franchise agreement before closing one of their restaurants.

As an initial matter, the court held that the motion was still ripe for review, even ...

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The U.S. District Court for the Eastern District of Michigan recently denied a franchisor’s motion to enjoin a franchisee from proceeding with its counterclaim in a related matter pending in Texas state court. Live Cryo, LLC v. CryoUSA Import & Sales, LLC, 2018 WL 2355662 (E.D. Mich. May 24, 2018). The Texas action was initiated by defendant-franchisor CryoUSA. A few days later, plaintiff-franchisee Live Cryo filed the related federal suit in the Eastern District of Michigan. After the Michigan court granted in part and denied in part a motion to dismiss filed by CryoUSA, CryoUSA ...

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A federal district court in New York denied a franchisee’s motion for a preliminary injunction that would have prevented its franchisor from installing a new software system in its stores. JDS Grp Ltd. v. Metal Supermarkets Franchising Am., Inc., 2017 WL 2643667 (W.D.N.Y. June 20, 2017). The dispute arose when the franchisor, Metal Supermarkets Franchising America (“MSFA”), developed and began installing an upgraded software platform in its franchise system. The franchisee, JDS Group, brought suit against MSFA, arguing that the requirement to utilize the new software ...

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A Virginia federal court partially granted Volvo Group North America’s motion for a preliminary injunction to stop the proposed sale of a group of truck dealerships. Volvo Grp. N. Am., LLC v. Truck Enters., Inc., 2016 WL 1479687 (W.D. Va. Apr. 14, 2016). Volvo initiated the suit against a group of truck dealers who owned and operated seven dealerships, four of which sold both Volvo and Kenworth trucks, two of which sold Kenworth and Isuzu trucks, and one that sold only Kenworth trucks. The dealers entered into an agreement with a third party to sell the dealerships in a package deal. In ...

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A federal court in Connecticut denied thirty-five franchisees' collective motion for a preliminary injunction against their franchisor in Family Wireless #1, LLC v. Automotive Technologies, Inc., No. 3:15-cv-01310 (D. Conn. May 4, 2016). The franchisees sought to enjoin their franchisor, Automotive Technologies, Inc. ("ATI"), from withholding a five percent royalty on certain funds paid to the franchisees by Verizon Wireless. As subagents of Verizon, the franchisees sold wireless devices and service plans at their stores and were compensated for those sales in the form of ...

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A California Court of Appeal recently affirmed a trial court’s ruling that subsequent evidence of franchisee misconduct warranted the dissolution of a preliminary injunction. Husain v. McDonald’s Corp., 2013 Cal. App. Unpub. LEXIS 9072 (Cal. Ct. App. Dec. 17, 2013). Early in the litigation, in which the franchisees were seeking to prevent the termination of three of their franchises, both parties moved for preliminary injunctions. The trial court granted the franchisees’ motion, concluding that there was a reasonable likelihood that the franchisees would prevail on the ...

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The United States District Court District for the District of Utah has granted a franchisor’s preliminary injunction motion to enjoin a derogatory website, even though the actual website operator had not signed the franchise agreement enforced by the court.  Homeworx Franchising, LLC v. Meadows, 2009 WL 211918 (D. Utah Jan. 26, 2009). The franchise agreement involved in this case precluded any unauthorized use of the franchisor’s trademarks and any business or marketing practice injurious to the franchisor’s business and goodwill associated with franchisor’s marks.

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A recent decision by the United States District Court for the Southern District of Indiana addressed a novel argument by a terminated franchisee to justify its continued use of its franchisor’s trademark. In Country Inns & Suites by Carlson, Inc. v. Nayan, LLC, 2008 WL 4735267 (S.D. Ind. Oct. 28, 2008), CIS had terminated the franchisee for failure to pay amounts owed under its license agreement. When the franchisee continued to operate using CIS trademarks, CIS brought suit. Gray Plant Mooty represented the franchisor.

The franchisee conceded that CIS was likely to succeed on the ...

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About this Publication

The Franchise Memorandum is a collection of postings on summaries of recent legal developments of interest to franchisors brought to you by Lathrop GPM LLP. 

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