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Executive Home Care Franchising LLC v. Marshall Health Corp.

United States District Court, D. New Jersey

March 26, 2015

EXECUTIVE HOME CARE FRANCHISING LLC, Plaintiff,
v.
MARSHALL HEALTH CORP., WELL-BEING HOME CARE, CORP., CLINT MARSHALL, an individual; and GREER MARSHALL, an individual, JOHN DOES 1-5, fictitious parties, Defendants.

OPINION

JOSE L. LINARES, District Judge.

This matter comes before the Court by way of the application of Plaintiff Executive Home Care Franchising LLC ("Plaintiff")'s Order to Show Cause pursuant to Federal Rule of Civil Procedure 65 and Local Rule of Civil Procedure 65.1 as to why Defendants Marshall Health Corp., Well-Being Home Care, Corp., Clint Marshall, an individual, and Greer Marshall, an individual, (Collectively "Defendants") should not be temporarily and preliminarily enjoined from, inter alia, continuing to operate an Executive Care franchise location due to the Marshall Defendants' alleged breach of payment obligations and restrictive covenants contained in the Executive Care Franchise Agreement. The Court has considered the submissions of both parties in support and in opposition to the present application, as well as the arguments presented by the parties at oral argument held on March 5, 2015. Based on the foregoing reasons, Plaintiff's application is denied.

I. BACKGROUND

Plaintiff is a New Jersey limited liability company, engaged in the business of selling and granting franchises for the operation of outlets under the trademark EXECUTIVE CARE YOUR HOME CARE COMPANY, for the purpose of operating an in-home care business. (Comp. at ¶¶ 5-6). Plaintiff is the owner of the trademark, service mark, and trade name EXECUTIVE CARE YOUR HOME CARE COMPANY™, "Executive Care", and related marks which it uses in connection with its franchise services since 2012. (Id. at ¶¶ 19-21). Defendant Marshall Health Corp. is a corporation located in New Jersey as well. (Id. at ¶ 7). Defendants Clint, Masaree, and Greer Marshall (the "Marshalls") are all residents of New Jersey who run the entity Well-Being Corp. ("Well-Being"), which is also named as a Defendant in this case. (Id. at ¶¶ 8-11). Plaintiff alleges that Well-Being is being used by Defendants for the purpose of operating a competing in-home care business to compete directly against the parties' Franchise Agreement.

On February 23, 2013, the Marshalls entered into a Franchise Agreement with Plaintiff to operate an Executive Care in-home care business in Morristown, New Jersey, which opened for business in August 2013. (Id. at ¶¶ 29-30). The Franchise Agreement contained acknowledgements and agreement by Defendants concerning the franchisee's duties under the agreement, including: (1) Royalties; (2) Interest on late payments; (3) Immediate termination upon Notice of Default; (4) Termination after five days' notice to cure; (5) Rights and obligations after termination or expiration; (6) Covenant not to compete; and a (6) Non-disclosure and noncompetition agreement, which called for the return of proprietary material in the franchisee's possession, the non-solicitation of employees, and a noncompetition clause after termination of the franchise. (Id. at ¶¶ 31-36).

On or about January 19, 2015, Defendants permanently abandoned and ceased operations of the Franchised Business without Plaintiff's authorization. (Id. at ¶ 40). On January 22, 2015, Defendants' counsel sent a letter to Plaintiff indicating that Defendants were unilaterally "terminating their relationship with [Plaintiff] and ceasing operations immediately. (Id. at ¶ 41). In Defendants' letter, Defendants state that their termination of the agreement was based upon a "decline" in their business and "inability to obtain new business." (Id. at ¶ 42). Plaintiff asserts that Defendants made representations to the contrary by indicating that their Morristown franchise achieved gross revenues of $500, 000 in the first full year of business. (Id. at ¶ 43). Plaintiff further asserts that on January 23, 2015, counsel for Defendants confirmed that the Marshall Defendants are operating their Executive Care franchise location as an independent entity and are servicing the same patients/customers as a new business that they have named "Well-Being". (Id. at ¶ 45). On January 28, 2015, Plaintiff presented Defendants with a "Mutual Termination and Release Agreement, " to which Defendants rejected the following day. (Id. at ¶¶ 47-48).

Plaintiff alleges that Defendants have failed and refused to pay the royalty fee that is due to Plaintiff pursuant to the Franchise Agreement for the month of January and February 2015, failed to cure their breach of their payment obligations, have abandoned their franchise. (Id. at ¶¶ 50-52). Additionally, Plaintiff states that despite Plaintiff sending Defendants a Notice of Termination and 15-Day notice consistent with the New Jersey Franchise Practices Act, Defendants have still failed to return proprietary business information and continue to operate their competing business. (Id. at ¶ 52-53). Similarly, Plaintiff contends that pursuant to the Franchise Agreement, Defendants agreed not to compete for a period of two (2) years within a ten (10) mile radius of Plaintiff's location or any Executive Care business, not to solicit employees, and to return proprietary information. (Id. at ¶ 54). However, Defendants continue to fail to meet these obligations and continue operate a competing business in direct violation of the Franchise Agreement. (Id. at ¶ 56-58). Plaintiff asserts four Counts against Defendant, including: (1) Declaratory Judgment - Termination of Franchise Agreement and Injunctive Relief; (2) Breach of Contract; (3) Unfair Competition and Violation of § 43 of the Lanham Act; and (4) Trade Dress Infringement.

In its Application for temporary restraints and injunctive relief, Plaintiff requested Defendants be enjoined from:

1. continuing to operate an Executive Care franchise location in Morristown, New Jersey, or anywhere else due to Marshall Defendants' breach of their payment obligations and the in-term and post-termination restrictive covenant contained in the Executive Franchise Agreement;
2. Operating a competing, "independent" in-home care business in violation of the express provisions of the parties' franchise agreement;
3. further violating the fair and reasonable non-disclosure, non-competition, and/or non-solicitation clauses in the Franchise Agreement and/or in separate the Non-disclosure and Non-Compete Agreement executed by Defendants; and,
4. from improperly failing to return or otherwise using the clients, caregivers, charts, phone numbers, proprietary materials, trademarks, trade names, trade dress of Executive Care and from holding themselves out to the public as, and operating as Executive Care franchisees or any entity in any way affiliated with Executive Care in order to divert business from Executive Care to Defendants.

II. LEGAL STANDARD

Federal Rule of Civil Procedure 65 permits District Courts to grant temporary restraining orders. Fed.R.Civ.P. 65(b). Injunctive relief is an "extraordinary remedy' and should be granted only in limited circumstances.'" Kos Pharms. Inc. v. Andrx Corp., 369 F.3d 700, 708 (3d Cir.2004) (quoting Am. Tel. & Tel. Co. v. Winback & Conserve Program, Inc., 42 F.3d 1421, 1427 (3d Cir.1994)). A court may grant an injunction only if a party shows: "(1) a likelihood of success on the merits; (2) that it will suffer irreparable harm if the injunction is denied; (3) that granting preliminary relief will not result in even greater harm to the nonmoving party; and (4) that the public interest favors such relief." Kos Pharms., 369 F.3d at 708. A party must produce sufficient evidence of all four factors - and a district court should weigh all four - prior to granting injunctive relief. Winback, 42 F.3d ...


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