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The Franchise Memorandum

Former Franchisee Held in Contempt of Preliminary Injunction Order

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 preliminary injunctive relief. The court granted BrightStar’s motion and ordered the Neffs to immediately cease operating a competitive business in the Carson City area and to stop their use of any telephone number associated with their former BrightStar franchise. The order also required the Neffs to transition their patients to other providers. Approximately one month after the order was issued, BrightStar filed a motion to show cause, arguing that the Neffs were still in violation of the order because they had not ceased use of the phone number and continued to provide care services to patients in the Carson City area.

While the court denied the request to hold the Neffs in contempt as to the telephone number, since the Neffs had cancelled the number and were no longer in control over its use, the court granted BrightStar’s motion in all other respects. In particular, the Neffs had disregarded their requirement to stop providing services to patients. The Neffs argued in response that they could not properly transition patients since the nearest BrightStar franchise had recently filed for bankruptcy and other providers were not allegedly licensed and qualified. The court disagreed with the Neffs, finding that they had never made the court aware of any difficulty complying with its injunction order. The court further found that the Neffs had not taken any meaningful steps to facilitate the transition. As a result, the court found that the Neffs’ disregard of the court’s injunction warranted a finding of contempt, set a deadline for compliance, and ordered the Neffs to pay BrightStar’s reasonable attorneys’ fees and costs incurred in the contempt proceedings.

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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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