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

United States District Court, M.D. Tennessee, Nashville Division

November 15, 2019

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

          MEMORANDUM OPINION AND ORDER

          ELI RICHARDSON UNITED STATES DISTRICT JUDGE

         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 Background[1]

         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 Love Juice 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 fee of $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 Defendants[3] to 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 Fed.Appx. 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) trade dress 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. (Doc. No. 10 at 4-6). Defendants imply that because (according to them) the Franchise Agreements were terminated as of September 19, Defendants could not thereafter have breached the Franchise Agreements.

         The Court disagrees. Based on the existing record, the Court finds that the Termination Offer was never accepted; therefore, the purported termination agreement in fact never came into existence and thus did not terminate the Franchise Agreements.[5]

         Under basic principles of contract law, there must be a meeting of the minds regarding the terms of the contract. Sweeten v. Trade Envelopes, Inc., 938 S.W.2d 383, 386 (Tenn. 1996). Accordingly, “[a]cceptance of an offer must be exactly and precisely in accord with the terms of the offer.” Westfall v. Brentwood Serv. Group, Inc., No. E2000-01086-COA-R3-CV, 2000 WL 1721659, *5 (Tenn. Ct. App. Nov. 17, 2000) (citing Ray v. Thomas, 191 Tenn. 195, 232 S.W.2d 32, 35 (Tenn.1950)). “Unless an acceptance mirrors the offeror's terms, neither omitting nor adding terms, it has no legal effect as an acceptance and operates as a rejection and a counter offer.” Safeco Ins. Co. of Am. v. City of White House, Tenn., 36 F.3d 540, 546 (6th Cir.1994) (citing Canton Cotton Mills v. Bowman Overall Co., 149 Tenn. 18, 257 S.W. 398 (1924)).

         According to Defendants, shortly after providing them with the Termination Agreement, Ryan, acting in her capacity as CEO of Juice Bar, amended the terms of the Termination Agreement by authorizing the removal of the provision for a $5000 termination fee and the noncompetition provision. Defendants allege that “[i]n the case of [ILJB Charlotte], Ms. Ryan confirmed her intent to have her emails allowing the removal of these terms confirm her amendments to the agreement.” (Doc. No. 10 at 4). In further support of this assertion, Defendants cite to the Affidavit of Brian MacIntosh, which states:

In response to a request that Ms. Ryan waive the termination fee provision and the noncompetition provision, Ms. Ryan advised me that these provisions were to be stricken form [sic] the December 31, 2018 document and then provided email confirmation of this change.

(Doc. No. 10-1 ¶ 8). As discussed above, the Court ordered Defendants to file Dedria Ryan's “emails [plural]” referenced in the last full sentence of page four of the Response confirming her intent to have her emails amend the Termination Agreement and, if not encompassed among those emails, the “email confirmation” referenced in paragraph eight of Brian MacIntosh's affidavit. (Doc. No. 11). But the documents that Defendants filed in response to the Court's Order do not include any emails matching the description of the emails they referenced in the Response. Instead, Defendants filed an unsigned proposed affidavit of Dedria Ryan and an email chain between Dedria Ryan and Clif Gentle in February 2019 (before Gentle became a co-owner of ILJB Charlotte) regarding a termination offer for Gentle's Mooresville I Love Juice Bar franchise.

         As an initial matter, the Court will not consider the unsigned proposed affidavit.[6] As the Sixth Circuit has recognized, “an ‘unsigned affidavit' is a contradiction in terms. By definition an affidavit is a ‘sworn statement in writing made ... under an oath or on affirmation before ... an authorized officer.'” Sfakianos v. Shelby County Government, 481 Fed.Appx. 244, 245 (6th Cir. 2012) (quoting Mason v. Clark, 920 F.2d 493, 495 (8th Cir. 1990)). The unsigned proposed affidavit here is, therefore, simply a nullity.

         Furthermore, the emails discussing an unrelated termination agreement do not evidence the purported amendment to the Termination Offer. Based on the present record, Defendants' execution and return of the Termination Agreement striking the $5000 termination fee and the noncompetition provision effected a counteroffer, which Plaintiff never accepted and in fact expressly rejected. (Doc. No. 4-4). Therefore, the Franchise Agreements-the enforceability of which is not otherwise contested-was not terminated by the purported termination agreement, which in fact never became effective. Therefore, the Franchise Agreements remained in effect and enforceable until at least October 7, when Plaintiff sent Defendants a notification of termination. (Doc. No.4-5). By this time, Defendants had been operating independently of the I Love Juice Bar banner for some period of time, i.e., since on or about September 19. (Doc. No. 10-1 at 2). Thus, Plaintiff is likely to be able to show that Defendants' allegedly breaching conduct occurred during a period in which he Franchise Agreements were in effect.

         As to whether Defendants' conduct actually amounted to a breach of the Franchise Agreements, Defendants do not contest that they (1) failed to pay royalty fees and/or other amounts owed to Plaintiff; (2) opened and operated a “[c]ompeting [b]usiness” under the name Queen City Juicery and Wellness Bar; and (3) failed to grant Plaintiff access to its new Point of Sale system and sales and royalties data affiliated with Queen City Juicery. Instead, Defendants argue only that these actions did not amount to a breach of the Franchise Agreements because the Franchise Agreements had already been terminated. But the Court has already rejected the contention that the Franchise Agreements were terminated by the purported termination agreement. Thus, because Defendants do not contest that their actions violated the Franchise Agreements if (contrary to Defendants' unsubstantiated position) they were not terminated prior to October 7, the Court has little difficulty finding that, for the purposes of issuing a TRO, Plaintiff will likely succeed on the merits of its breach of contract claim.[7]

         In addition, the Court finds that Defendants likely have breached Section 32 of the Franchise Agreements, including, inter alia, Section 32(c), which requires Defendant ILJB Charlotte, upon termination or expiration of the Franchise Agreements, not to use or adopt the Franchise System or any of the Propriety Marks or Intellectual Property. (Doc. No. 4-1 at 24). The Franchise Agreements define Propriety Marks as “the registered and unregistered distinctive and characteristic trade names, domain names, trademarks, service marks, logotypes, and trade dress elements that we designate in written or electronic form or through usage from time to time as prescribed for use with the Franchised System.” (Id. at 32). Although, as discussed below, the Court does not find that Plaintiff has provided enough information to sustain a claim for trademark infringement under the Lanham Act, it is clear to the Court that Defendant continued to use certain of Plaintiff's marks and thereby breach of the Franchise Agreements. Specifically, Plaintiff has shown:

As of 4:25 p.m. on November 8, 2019, the first 14 pages of the Photos subpage of QCJ's Facebook page alone prominently featured at least 182 separate depictions of Juice Bar's marks, via Juice Bar-branded bottles, cups, growlers, carafes, shot capsules, product packaging, promotional advertisements, gift cards, internal and external store signage, smart phone apps and gift bags. See Exhibit 1 at 3-14. Similarly, as of 11:25 a.m. on November 5, 2019, the most recent posts on QCJ's Instagram feed featured no fewer than 29 separate depictions of Juice Bar's marks, via Juice Bar-branded cups, bottles, growlers, tee shirts and in-store signage. See Exhibit 2 at 3-9.

(Doc. No. 14 at 5). Accordingly, on the current record, the Court finds that although Defendants' use of Plaintiff's marks does not necessarily constitute trademark infringement under the Lanham Act, it ...


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