DUNKIN' DONUTS FRANCHISED RESTAURANTS, LLC, DD IP HOLDER, LLC BASKIN-ROBBINS FRANCHISED RESTAURANTS, LLC and DB REAL ESTATE ASSETS I, LLC, Plaintiffs,
CLAUDIA I, LLC, MANFRED P. MAROTTA and LYNNE K. MAROTTA, Defendants.
SPRING HILL REALTY, INC., Third Party Defendant.
LAWRENCE F. STENGEL, District Judge.
Plaintiff, Franchised Restaurants, LLC, DD IP Holder, LLC Baskin-Robbins Franchised Restaurants, LLC and DB Real Estate Assets I, LLC ("Dunkin' Donuts"). Dunkin' Donuts filed this action against a Defendant Franchisee seeking relief for breach of the franchise agreement. On January 22, 2013, Dunkin' Donuts file this motion for preliminary injunction. I heard oral argument on the motion on May 13, 2013. For the reasons set forth below, I will grant Plaintiff's Motion.
The Complaint alleges causes of action against Defendants for breach of a franchise agreement and Sublease, as well as claims for trademark infringement, unfair competition, and enforcement of restrictive covenant. Plaintiffs are the exclusive licensees of numerous federal registrations for the mark Dunkin' Donuts, Baskin-Robbins, or derivations thereof, as well as numerous other trademarks. On July 16, 2009, Defendant purchased an existing franchise in Jenkintown and took the predecessor's tenant interest and franchise agreement by assignment. Defendants and Plaintiffs then entered into a franchise agreement and a transfer agreement.
The franchise agreement required remodeling and refurbishment by December 21, 2012. Additionally, the terms of the agreement provided termination of the right to use the premises ends the franchise agreement: "Default occurs if franchisee breaches and obligation under another agreement necessary to the operation of the Store." (Franchise Agreement at § 14.0.1). Finally, the franchise agreement provides there is "No cure if your lease for the Store is terminated... (or)... you have received three or more previous notices to cure.'" (Id. at §14.2).
The transfer agreement provided that Defendants acquired by assignment a tenant's interest in the sublease at the Jenkintown location. The sublease contains a number of relevant paragraphs discussing details of the agreement. Paragraph 1.10 states that the term of the lease is 20 years from December 20, 2002. Paragraph 1.8 states that the payment of base rent is $9, 583.33. Paragraphs 6 and 7(a) state that tenant is responsible for failure to pay taxes and additional rent such as common area maintenance. Paragraph 18 states tenant shall be in default for failure to pay rent and 18(d) states that the tenant will have 10 day notice to cure and no notices required for more than one default within one year. Finally, paragraph 18(e) states that upon termination of the lease, the landlord is entitled to possession of the property.
II. Preliminary Injunction Hearing
At the hearing, Dunkin Donuts argued that beginning November 15, 2011, Defendant withheld all Base Rent and common area expenses (CAM expenses) obligated under the sublease for 18 consecutive months while continuing to operate at the location. Plaintiffs contend that the total amount owed for Base Rent, occupancy costs, with counsel fees, interest and costs is $304, 768.97 for the period contained in the Account Receivable Status Report. Additionally, Defendants failed to remodel as provided by the franchise agreement and have failed to pay sales and payroll tax liabilities as of December 31, 2012. Plaintiffs state that they sent multiple notices to cure the deficiencies, but Defendants have failed to do so. They contend that the brand image is being irreparably harmed by Defendants' actions.
Defendants argue that this case is merely about failure to pay rent and the permanent injunction will irreparably harm Defendants and will not benefit Plaintiffs. They contend that because Plaintiffs waited so long to request the injunction, there is no harm aside from money damages. Defendants contend that aside from the rent, they have complied with all other requirements of the lease.
III. Procedural History
On or about May 15, 2012, Defendants responded to the Complaint by filing a third party complaint against Spring Hill. The Third Party Complaint alleges causes of action against Spring Hill for fraud, civil conspiracy, breach of contract, tortious interference with contract and injunctive relief. The Third Party Defendants answered the third party complaint and denied all allegations. Defendants also asserted counterclaims against the Plaintiffs alleging bad faith and breach of the franchise agreement. Third Party Defendant filed a motion to dismiss and Defendants amended their Complaint on July 6, 2012. Third Party Defendant filed a subsequent motion to dismiss on October 19, 2012 and Plaintiffs filed a motion for preliminary injunction on January 22, 2013.
In ruling on a motion for a preliminary injunction, the court must consider four factors: (1) the likelihood that the applicant will prevail on the merits at the final hearing; (2) the extent to which the applicant is being irreparably harmed by the conduct complained of; (3) the extent to which the defendant will suffer irreparable harm if the preliminary injunction is issued; and (4) the public interest. Bimbo Bakeries USA, Inc. v. Botticella , 613 F.3d 102, 109 (3d. Cir. 2010); Opticians Ass'n v. Independent Opticians , 920 F.2d 187, 191-92 (3d Cir. 1990). While a preliminary injunction can be appropriate in franchise termination cases where the franchisee is terminated for nonpayment or compliance with the franchise agreement, S & R Corp. v. Jiffy Lube International, Inc. , 968 F.2d 371, 378 (3d Cir. 1992), it may only be granted where the plaintiff has ...