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KFC Corp. v. Sanlin of Glassboro

April 7, 2009


The opinion of the court was delivered by: Irenas, Senior District Judge


This matter having appeared before the Court upon Plaintiff's Motion for the Entry of Final Judgment by Default pursuant to Fed. R. Civ. P. 55, (Dkt. No. 11), the Court having reviewed the motion, and it appearing that:

1. Plaintiff KFC Corporation ("Plaintiff") initiated this action on April 29, 2008, against Defendants Sanlin of Glassboro, Inc., Sanlin of Turnersville, Inc., John D. Monte, and Maurus N. Petruzzi (collectively "Defendants"), via a five count Complaint. Plaintiff captioned those five counts as: (1) Declaratory Judgment; (2) Breach of Contract - Franchise and Advertising Agreements; (3) Breach of Contract - Guaranty Agreements; (4) Trademark Infringement; and (5) Federal Unfair Competition.

2. Each Defendant was properly served with process in this matter. (See Dkt. Nos. 4-7)

3. Defendants have not answered the Complaint, nor have they filed any other responsive pleading. At Plaintiff's request, (Dkt. No. 8), the Clerk of Court entered default against all Defendants on July 18, 2008. As a result, this Court will "accept as true the well-pleaded factual allegations of the complaint," in evaluating the merits of Plaintiff's current motion for default judgment. Napp Techs., L.L.C. v. Kiel Labs., Inc., No. 04-3535, 2008 WL 5233708, at *3 (D.N.J. Dec. 12, 2008) (citing Comdyne I, Inc. v. Corbin, 908 F.2d 1142, 1149 (3d Cir. 1990)).

4. Plaintiff licensed Defendants Sanlin of Glassboro, Inc. and Sanlin of Turnersville, Inc. (collectively "Franchisees") to operate two Kentucky Fried Chicken franchise restaurants- one in Glassboro, New Jersey, and the other in Turnersville, New Jersey. (Compl. ¶¶ 6-8)

5. The business relationship between Plaintiff and Franchisees was generally governed by their respective Franchise Agreements. (See Compl. ¶¶ 6-9) Pursuant to those agreements, Franchisees were authorized to use Plaintiff's trademarks, service marks, and food preparation methods. (Compl. ¶ 8) In return, Franchisees were obligated to pay monthly royalties to Plaintiff. (Compl. ¶ 9)

6. Franchisees also executed advertising agreements with the KFC National Council and Advertising Cooperative ("National Co-Op"). (Compl. ¶ 10) Pursuant to those agreements, Franchisees were required to pay monthly advertising fees to the National Co-Op. (Compl. ¶ 11)

7. John D. Monte and Maurus N. Petruzzi each signed guaranty agreements with Plaintiff, therein agreeing to guarantee the performance of Franchisees' obligations to Plaintiff. (Compl. ¶ 12)

8. On June 26, 2006, Plaintiff terminated Sanlin of Turnersville's Franchise Agreement for failure to remit royalties and advertising fees. (Compl. ¶¶ 14-16) On November 22, 2006, Sanlin of Turnersville was reinstated by Plaintiff as a franchisee for the limited purpose of selling the Turnersville restaurant location, with such reinstatement to terminate on May 20, 2007. (Compl. ¶¶ 17, 20) Sanlin of Turnersville did not sell the location. (See Compl. ¶¶ 18-19) By letter dated June 8, 2007, Plaintiff advised Sanlin of Turnersville that its Franchise Agreement had terminated on May 20, 2007. (Compl. ¶ 20)

9. On January 25, 2008, Plaintiff terminated Sanlin of Glassboro's Franchise Agreement due to nonpayment of royalties and advertising fees. (Compl. ¶¶ 21-24)

10. Franchisees were required to take certain steps upon the termination of their franchise agreements, including: (1) to immediately cease doing business as Kentucky Fried Chicken restaurants; (2) return confidential materials to Plaintiff; and (3) de-image the Glassboro and Turnersville restaurant locations. (Compl. ¶ 25)

11. Franchisees continued to operate as Kentucky Fried Chicken restaurants after the termination of their authority to do so. (See Compl. ¶¶ 27-34) The Complaint states that "[u]pon information and belief," Franchisees continued to display Plaintiff's trademarks until April 16, 2008.*fn1 (Compl. ¶ 35)

12. On September 30, 2008, the parties filed a Permanent Injunction by Consent with this Court. (Dkt. No. 9) Therein, Defendants agreed to be permanently enjoined and restrained from a variety of conduct, including but not limited to: (1) use of Plaintiff's trademarks or food preparation methods; (2) occupation of any premises incorporating features or equipment distinctive to Plaintiff; and (3) the production and sale of chicken at a location within ten miles from the former Kentucky Fried Chicken restaurants in Glassboro or Turnersville for a period of one year. The permanent injunction ...

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