A federal court in Arizona recently granted a franchisee’s motion for temporary restraining order preventing termination of its franchise agreement and the franchisor’s withdrawal of any funds from the franchisee’s accounts. S&G Elite LLC v. ST Nat’l Franchising LLC, 2025 WL 449268 (D. Ariz. Feb. 10, 2025).
After receiving a termination notice for breach of contract, the franchisee, S&G Elite, which operated a “The Mail Center” franchise, filed suit against franchisor ST National Franchising and Tamica Lachelle Goree, alleging that ST fraudulently induced S&G to sign the franchise agreement, that ST engaged in bad faith conduct including unauthorized money withdrawals from S&G’s accounts, and that ST entered its business without authorization and began shutting down key programs. ST responded by arguing that a TRO was unwarranted because the franchise agreement permitted the money withdrawals and termination of the franchise agreement, that S&G’s claims were barred by the contract’s integration clause, and that any alleged harm is purely financial and compensable through damages. ST also contended that granting a TRO would unfairly alter the status quo by forcing the parties to continue an unwanted business relationship.
The court was unmoved by ST’s responses and granted the TRO, finding that S&G showed sufficient evidence that (1) S&G was likely to succeed on the merits, (2) S&G was likely to suffer irreparable harm in the absence of the TRO, (3) the balance of equities tipped in S&G’s favor, and (4) the TRO was in the public interest. First, the court reasoned that S&G raised serious questions going to the merits of its claims of fraudulent inducement, breach of contract, and breach of the covenant of good faith and fair dealing. Next, the court explained that if the TRO was denied, S&G risked closing their business and suffering long-term financial and reputational consequences, versus ST only being required to maintain the status quo if the TRO was granted. Thus, the balance of hardships tipped sharply in S&G’s favor, and S&G showed a likelihood of irreparable harm if the TRO was not granted. Finally, the court held that the public interest favored granting the TRO since preventing the potential unfair termination of the franchise agreement and maintaining stability during litigation benefits both business owners and the public.