The Franchise Memorandum

A federal court in Missouri has granted in part a franchisee’s motion to enforce a settlement agreement and awarded the franchisee its attorneys’ fees as the “prevailing party.” Biologix Franchise Marketing Corp. v. Kay Logic, 2020 WL 33108 (E.D. Mo. Jan. 2, 2020). Biologix and its former franchisee, Kay Logic, entered into a settlement agreement whereby Kay Logic would make monthly installment payments to Biologix. A portion of each installment payment would serve as a credit toward the purchase of Biologix’s products, which Kay Logic was permitted to sell without restriction, using the Biologix trademark. After Kay Logic communicated its intention to sell Biologix products on Amazon and requested Biologix’s cooperation in creating an Amazon storefront (including providing a trademark registration certificate and safety data sheets meeting Amazon’s approval), Biologix verbally informed Kay Logic it could no longer sell products using the Biologix trademark. Kay Logic thereafter moved to “enforce” the settlement agreement seeking (1) termination of the settlement agreement and its payment obligation thereunder, (2) a refund of past payments, (3) attorneys’ fees and costs, and (4) damages in the form of its investment costs in the Amazon storefront.

The court found that Biologix breached the settlement agreement by attempting to restrict Kay Logic’s use of the Biologix trademark and sale of Biologix products. However, the court found the parties did not reach a meeting of the minds regarding the extent of Biologix’s “further assurances” obligation such that Biologix would be required to modify its safety data sheets to support Kay Logic’s Amazon fulfillment plans. The court therefore granted specific performance of the settlement agreement to the extent Kay Logic was entitled to use the Biologix trademark to sell Biologix products without restriction. The court found Biologix’s conduct did not, however, constitute a default sufficient to excuse the entirety of Kay Logic’s remaining debt under the agreement. Despite the narrow relief awarded, which maintained the former franchisee’s obligations under the settlement agreement, the court found Kay Logic to be the “prevailing party” and awarded its attorneys’ fees.