I Love Juice Bar Franchising, LLC v. ILJB Charlotte Juice, LLC

I LOVE JUICE BAR FRANCHISING, LLC, Plaintiff, v. ILJB CHARLOTTE JUICE, LLC; and BRIAN MACINTOSH, Defendants.

NO. 3:19-cv-00981

UNITED STATES DISTRICT COURT FOR THE MIDDLE DISTRICT OF TENNESSEE NASHVILLE DIVISION

November 15, 2019

JUDGE RICHARDSON

MEMORANDUM OPINION AND ORDER

Pending before the Court is Plaintiff's I Love Juice Bar Franchising, LLC's Motion for Temporary Restraining Order and Preliminary Injunction (the "Motion"), filed on November 4, 2019. (Doc. No. 4). Defendants ILJB Charlotte Juice, LLC ("ILJB Charlotte") and Brian MacIntosh have responded (Doc. No. 10, the "Response"); and Plaintiff has replied (Doc. No. 14, the "Reply").

For the reasons discussed below, the Motion will be granted (if and when Plaintiff posts security as required by the Court) as to Plaintiff's request for a Temporary Restraining Order. The scope of the Temporary Restraining Order is outlined below. As to Plaintiff's request for a preliminary injunction, a timely hearing will be scheduled.

BACKGROUND

A. Factual Background¹

Plaintiff, I Love Juice Bar Franchising, LLC ("Juice Bar"), is a Tennessee limited liability company engaged in the business of franchising independent businesspersons to operate I LoveJuice Bar franchised businesses throughout the United States. I Love Juice Bar franchisees are licensed to use the trade names, service marks, and trademarks of I Love Juice Bar and to operate under the I Love Juice Bar system, which involves the production, merchandising, and sale of blended-to-order fruit and vegetable juices and smoothies and related products. I Love Juice Bar Holdings, LLC ("ILJB Holdings") is the owner of the trademarks, service marks, logos, emblems, trade dress and trade name "I Love Juice Bar," and related marks.² Currently, there are approximately forty I Love Juice Bar shops across the southern and midwestern United States.

In or about May 2017, Juice Bar and ILJB Charlotte entered into two franchise agreements ("Franchise Agreements"), which authorized ILJB Charlotte to operate two I Love Juice Bar franchised businesses in Charlotte North Carolina—one at each of two different stores. At the time the Franchise Agreements were executed, Defendant Brian MacIntosh and Stanley Parrish jointly owned ILJB Charlotte. MacIntosh personally guaranteed ILJB Charlotte's obligations under the Franchise Agreements. In 2018, Defendant MacIntosh and Parrish began negotiations with one another to end their joint ownership of ILJB Charlotte.

In December 2018, Defendants requested an early termination of the Franchise Agreements. On December 31, 2018, Dedria Ryan, the former CEO of Juice Bar, sent Defendants an early termination letter ("Termination Offer"), which included a provision for a termination feeof $5000 and a noncompetition provision. According to Defendants, after sending Defendants the Termination Offer on December 31, 2018, Ryan effectively amended its terms by authorizing the removal of these two provisions. Notably, Plaintiff disputes that Ryan ever agreed to amend the terms of the Termination Offer.

Shortly thereafter, Ryan left her employment with Juice Bar and was replaced in the CEO position by Molly Murphy. On April 18, 2019, Murphy traveled to Charlotte and met with MacIntosh regarding his two franchised stores.

In or around the week of September 9, 2019, Defendants transitioned to a new Point of Sale System, to which Juice Bar requested access. Defendants informed Juice Bar that they would give it access to the new system and the franchised businesses' sales and royalties data. To date, however, Defendants have not provided Juice Bar with access to their new Point of Sale system and/or their sales and royalties data.

In September 2019, MacIntosh and Parrish resolved their ownership dispute, and the shares previously owned by Parrish were transferred to Clif Gentle. On or around September 19, 2019, ILJB Charlotte returned a signed copy of the Termination Offer to Plaintiff. On the Termination Agreement returned to Plaintiff, Defendant crossed through the provision requiring Defendants³to pay a $5000 termination fee and the provision prohibiting Defendants from operating a "[c]ompeting [b]usiness" as defined by the Franchise Agreements.

Thereafter, Defendants began operating Queen City Juicery & Wellness Bar ("Queen City Juicery") out of the each of the same two locations formerly operated as I Love Juice Bar franchises. Queen City Juicery sells fresh juices, smoothies, and plant-based products.

B. Procedural History

On November 4, 2019, Plaintiff commenced this action by filing a Verified Complaint (Doc. No. 1) and the Motion. Defendants responded in opposition to the Motion on November 7, 2019. On November 8, 2019, the Court ordered: (1) Plaintiff to file a reply to Defendants' Response, addressing only matters within the scope of the Response; and (2) Defendants to file (or explain why they are unable to file) an affidavit or declaration attaching and authenticating Dedria Ryan's "emails [plural]" referenced in the last full sentence of page four of the Response and (if not encompassed among those emails) the "email confirmation" referenced in paragraph eight of Brian MacIntosh's affidavit. (Doc. No. 11). In response to the Court's November 8 Order, Defendants filed an unsigned Affidavit of Dedria Ryan and emails between Dedria Ryan and Clif Gentle regarding a termination offer between Juice Bar and another I Love Juice Bar franchise. (Doc. No. 12).

LEGAL STANDARD

Temporary restraining orders ("TRO") and preliminary injunctions are considered preventive, prohibitory, or protective measures taken pending resolution on the merits, see Clemons v. Board of Educ. of Hillsboro, Ohio, 228 F.2d 853, 856 (6th Cir. 1956), and are considered extraordinary relief. See Detroit Newspaper Publishers Ass'n v. Detroit Typographical Union No. 18, Int'l Typographical Union, 471 F.2d 872, 876 (6th Cir. 1972). A TRO should be granted only if the movant carries his burden of proving that the circumstances clearly demand it.Overstreet v. Lexington-Fayette Urban County Gov't, 305 F.3d 566, 573 (6th Cir. 2002). The court must consider and balance four factors in determining whether to afford such relief: (1) the likelihood of the plaintiff's success on the merits; (2) whether the plaintiff will suffer irreparable injury without the injunction; (3) whether granting the injunction will cause substantial harm to others; and (4) the injunction's impact on the public interest. Nat'l Viatical, Inc. v. Universal Settlements, Int'l, Inc., 716 F.3d 952, 956 (6th Cir. 2013).

Although these four factors are "factors to be balanced, not prerequisites that must be met," Michael v. Futhey, 2009 WL 4981688, at *17 (6th Cir. Dec. 22, 2009) (quoting Six Clinic Holding Corp., II v. Cafcomp Systems, 119 F.3d 393, 400 (6th Cir. 1997), they do not carry equal weight. Regarding the third factor, irreparable harm, "even the strongest showing on the other three factors cannot 'eliminate the irreparable harm requirement.'" D.T. v. Sumner Cty. Schools, 2019 WL 5850408, at *2 (6th Cir. Nov. 8, 2019); Patio Enclosures, Inc. v. Herbst, 39 F. App'x 964, 967 (6th Cir. 2002) ("The demonstration of some irreparable injury is a sine qua non for issuance of an injunction."). Furthermore, "[a] finding that there is simply no likelihood of success on the merits is usually fatal." Gonzalez v. Nat'l Bd. of Medical Exam'rs, 225 F. 3d 620, 625 (6th Cir. 2000). In deciding whether to grant the requested TRO, the Court makes its evaluation of these factors based on the current record. The Court does not intend to suggest that any of its findings herein are not subject to potential change at later stages in this case based on a changing record.

DISCUSSION

A. Likelihood of Success on the Merits

Under the first factor, the court considers whether the movant has demonstrated a strong or substantial likelihood of success on the merits of its claims. NAACP v. City of Mansfield, 866 F.2d 162, 166-67 (6th Cir. 1989). Here, Plaintiff brings five claims against Defendants including: (1) breach of contract; (2) misappropriation of trade secrets; (3) trademark infringement; (4) tradedress infringement; and (5) unfair competition. (Doc. No. 4 at 15-16). The Court concludes that Plaintiff has shown a likelihood of success on the merits at least as to its claims for breach of contract and trade dress infringement.

1. Breach of Franchise Agreements

Plaintiff argues that Defendants breached the Franchise Agreements by (1) failing to pay royalty fees and/or other amounts owed to Plaintiff, (2) opening and operating a competing business under the name Queen City Juicery and Wellness Bar, and (3) failing to grant Plaintiff access to its new Point of Sale system and sales and royalties data affiliated with Queen City Juicery and Wellness Bar. (Doc. No. 4 at 15). Tennessee law governs this dispute. (Doc. No. 4-1 at 33 ("This Agreement shall be governed by the laws of Tennessee[.]"); id. at 92 (same)). Under Tennessee law, "a viable claim for breach of contract has three essential elements: (1) the existence of an enforceable contract; (2) nonperformance amounting to a breach of that contract; and (3) damages caused by the breach of the contract." Lewis v. MedAssets Net Revenue Sys., LLC, No. 3:11-cv-0387, 2012 WL 3061855, at *10 (M.D. Tenn. July 26, 2012) (citing Ingram v. Cendant Mobility Fin. Corp., 215 S.W.3d 367, 374 (Tenn. Ct. App. 2006))⁴.

Plaintiff claims that it has satisfied the first element, because the Franchise Agreements constituted an enforceable contract with particular provisions that Defendants breached. In response, Defendants argue that Plaintiff lacks "an enforceable franchise agreement" because the Franchise Agreements were terminated by Defendants' acceptance of the Termination Offer on (or about) September 19, 2019, thus creating a binding agreement (the "purported termination agreement") whereby the Franchise Agreements were terminated as of that date. (...