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GNC Franchising LLC v. Sala

March 20, 2006

GNC FRANCHISING LLC AND GENERAL NUTRITION CORPORATION, PLAINTIFFS,
v.
NESTOR SALA, DEFENDANT.



The opinion of the court was delivered by: Arthur J. Schwab United States District Judge

FINDINGS OF FACT AND CONCLUSIONS OF LAW REGARDING MOTION FOR PRELIMINARY INJUNCTION

I. FINDINGS OF FACT

A. Background

1. GNC is a Pennsylvania limited liability company with its principal place of business at 300 Sixth Avenue, Pittsburgh, Pennsylvania 15222.

2. General Nutrition Corporation is a Pennsylvania corporation with a principal place of business at 300 Sixth Avenue, Pittsburgh, Pennsylvania 15222.

3. Defendant Nestor Sala ("Defendant Franchisee") is an adult individual currently residing at 2934 Capital Park Drive, Tallahassee, Florida 32301.

B. Court's Prior Findings of Fact

4. The Court incorporates by reference its prior Findings of Fact (doc. no. 22) relating to the denial of Defendant Franchisee's motion to dismiss on issues of jurisdiction, venue, and forum non conveniens.

C. Findings of Fact - GNC Franchise Agreement

I. In General

5. GNC has developed and owns a unique and comprehensive system relating to the opening and operation of retail nutrition, health and/or fitness stores ("General Nutrition Centers"), as a result of a substantial expenditure of time, skill, effort and financial resources. The General Nutrition Centers sell vitamin and mineral supplements, sports nutrition products, herbs, health foods, cosmetics and miscellaneous health care products, diet products, sports accessories, fitness products and specialty workout apparel and other products. The Centers employ individuals who focus on serving customers for these products and services ("the System").

6. GNC identifies the System by means of certain trademarks, trade names, service marks, logos, emblems and other indicia of origin, including, but not limited to the GNC(r), GENERAL NUTRITION CENTER(r), and GNC LIVE WELL(r) marks, and such other names, service marks, and trademarks as are designated by GNC for use in the System ("the Proprietary Marks").

2. Franchise Agreement

7. Pursuant to the terms of a comprehensive franchise agreement, GNC grants franchises to carefully screened and qualified individuals and/or business entities to operate GNC General Nutrition Center(r) stores on a nationwide basis.

8. On or about December 4, 1997, Defendant Franchisee executed a GNC franchise agreement to operate a store located in the San Pablo Family Center in Jacksonville, Florida (the "Franchise Agreement"). By addendum dated March 27, 1998, the location of Defendant Franchisee's store was changed to the Bradfordville Shopping Center in Tallahassee, Florida (the "Tallahassee Store"). On September 8, 1998, Defendant Franchisee executed a sublease with General Nutrition Corporation with respect to the Tallahassee Store.

3. Termination Provisions

9. The Franchise Agreement provides that GNC has the right to terminate the agreement immediately and without an opportunity to cure if Defendant Franchisee "fails to comply with the covenants in [Section XVII.B.] of the Franchise Agreement." (Franchise Agreement at § XV.B.6). See Findings of Fact 14 and 15 and Conclusions of Law 4.

10. The Franchise Agreement provides that upon termination of the Franchise Agreement, Defendant Franchisee is obligated to immediately cease operating the business franchised to him by GNC; immediately cease to use any of the Proprietary Marks licensed under the Franchise Agreement; immediately turn over to GNC all manuals and related documents owned by GNC and used in the operation of the GNC store; and grant GNC the right to purchase all inventory and merchandise from the store.

11. The Sublease for the Tallahassee Store provides that "any default by Sublessee under any Franchise Agreement to which Sublessee may be a party with any wholly owned subsidiary of Sublessor's parent corporation (namely General Nutrition, Incorporated), shall constitute a default under this Sublease and, if any such Franchise Agreement is terminated, the Sublease shall be deemed to be automatically terminated upon the same date as the Franchise Agreement is terminated."

12. The Sublease for the Tallahassee Store further provides that if Defendant Franchisee's "franchise agreement is terminated, then [GNC], besides other rights or remedies it may have, shall have the immediate right of re-entry and may remove all persons and property from the Premises . . . ."

4. Trademark Provisions

13. The Franchise Agreement provides, with respect to the Proprietary Marks, inter alia, that:

Franchisee expressly understands and acknowledges that: As between the parties hereto, [GNC] has the exclusive right and interest in and to the Proprietary Marks and the goodwill associated with and symbolized by them.

Franchisee's use of the Proprietary Marks pursuant to this Agreement does not give Franchisee any ownership interest or other interest in or to the Proprietary Marks, and all goodwill arising from Franchisee's use of the Proprietary Marks in its franchised operation under the System shall inure solely and exclusively to [GNC's] benefit, and upon expiration or termination of this Agreement and the license herein granted, no monetary amount shall be assigned as attributable to any goodwill associated with Franchisee's use of the System or the Proprietary Marks. (Franchise Agreement at § VIII.C.1 and 2).

14. The Franchise Agreement provides that Defendant shall refrain from engaging in any act injurious or prejudicial to the goodwill associated with the Propriety Marks and the GNC System. (Franchise Agreement at § XVII.B.1).

15. The Franchise Agreement provides that "Franchisee acknowledges that Franchisee's violation of the terms of . . . Section XVII [re: the Proprietary Marks] would result in irreparable injury to [GNC] for which no adequate remedy at law may be available, and Franchisee accordingly consents to the issuance, of, and agrees to pay all court costs and reasonable attorney's fees incurred by Franchisor in obtaining an injunction prohibiting any conduct by Franchisee in violation of the terms of this Section XVII." (Franchise Agreement at § XVII.G)

D. Findings of Fact - Sale of Ephedrine-Containing Product at Defendant Franchisee's Store

16. On February 2, 2006, a "mystery shopper" hired by GNC visited the Tallahassee Store and purchased an ephedrine-containing product at Defendant Franchisee's store. GNC was informed of this transaction (i.e., that a banned ephedrine-containing product was sold from Defendant Franchisee's store).

17. Seven (7) days later, on February 9, 2006, Brad Sudekum ("Sudekum"), a GNC Regional Sales Director, visited the Tallahassee Store to ascertain whether banned ephedrine-containing ...


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