Opinion
Civil Action No. 05-0242-CG-C.
April 27, 2006
ORDER
This matter is before the court on plaintiff's motion for a preliminary injunction, defendants' objection thereto, and plaintiff's reply. (Docs. 2, 16 24). A hearing was held and testimony was taken on December 1, 2005. Upon consideration of the evidence presented at the hearing, as well as the parties' previous submissions, the court concludes that plaintiff has failed to meet its burden. Therefore, plaintiff's motion for a preliminary injunction is due to be denied.
I. BACKGROUND
On April 22, 2005, plaintiff, Pirtek USA, LLC (hereinafter "Pirtek"), filed its motion fora preliminary injunction. (Doc. 2). Plaintiff alleges that defendants, Fluid Services, Inc., a former franchisee, and its principal, Michael Whitehead, (collectively "the FSI parties") are acting in violation of the Trademark Act of 1946 ("Lanham Act"), 15 U.S.C. § 1051, et seq., a non-compete agreement, and the post-termination provisions of the franchise agreement (hereinafter "the agreement") between the parties. (Doc. 3 at 1). Currently, defendants operate a hose installation and repair business under the name, "Reliable Hose Company." Id. at 6. Plaintiff seeks to enjoin the FSI parties from violating its rights under the Lanham Act, the non-compete agreement, and the post-termination obligations set forth in Section 12 of the agreement. (Pl.'s Ex. 30 at 21-22).
This dispute arises from a six (6) year franchise agreement entered into between plaintiff and Fluid Services, Inc. (hereinafter "FSI") on or about November 2, 1998. Plaintiff asserts that defendant, Whitehead, executed a personal guarantee as part of the agreement, "pursuant to which he individually and personally agreed to be bound by the terms and conditions of the [f]ranchise [a]greement." (Arundel Aff. ¶ 8; see also Pl.'s Ex. 30 at A). The agreement granted the FSI parties a "license to operate a Pirtek franchise in the territory consisting of Mobile and Baldwin counties in the State of Alabama and in the promotional zone consisting of Escambia, Santa Rosa, and Okaloosa counties in the State of Florida, and Harrison County in the State of Mississippi." (Whitehead Decl. ¶ 4; see also Arundel Aff. ¶ 4). Plaintiff also permitted defendants to utilize Pirtek marks and the "unique business system" under the terms of the agreement. (Doc. 3 at 2). The franchise agreement calls for the application of Florida law. Additionally, in executing the franchise agreement, the FSI parties agreed to the following non-compete clause, marked 12.C, to protect plaintiff's rights and interests:
In connection with its custom hose installation and repair system, Pirtek USA has federally registered its Pirtek mark (Federal Registration No. 2,201,394) and Pirtek design (Federal Registration No. 2, 192, 554). (Arrundel Aff. ¶ 6).
Section 16.I of the franchise agreement states that "this Agreement and the relationship between the parties shall be governed by and interpreted in accordance with the laws of the state of Florida." (Pl.'s Ex. 30 at 30).
Franchisee (including specifically Principal Owner and Personal Guarantors) may not engage as an owner, partner, director, officer, franchisee, employee, consultant, agent or in any other capacity in any business within 15 miles of Franchisee's Territory or any Promotional Zone that sells products and services similar to the products and services sold by a "Pirtek" business for a period of (2) years after expiration or termination of this Agreement. In addition, for the same two (2) year period, Franchisee may not employ or seek to employ any person who is at that time employed by any other "Pirtek" franchise or otherwise directly or indirectly induce such person to leave his or her employment. Franchisee expressly agrees that the two (2) year period and 15 mile radius are the reasonable and necessary time and distance needed to protect Franchisor if the Agreement expires or is terminated for any reason.
(Pl.'s Ex. 30 at 21). Plaintiff submits that, for the duration of the agreement, it provided extensive training and support to the defendants, as well as "confidential, proprietary and competitively sensitive" information. (Doc. 3 at 4).
Plaintiff contends that the Pirtek "business system consists of the sale and custom assembly and installation of industrial and hydraulic hoses, fixed tube assemblies, fittings and related components and services." (Arundel Aff. ¶ 4). According to plaintiff, the Pirtek "business system involves a `mobile' concept where hose installation and repair services take place at the customer's location using a trademarked vehicle." (Doc. 3 at 3). Plaintiff avers that it makes "unique and distinctive services and products available to the public through authorized franchisees." Id. Defendants operated as an authorized franchisee from approximately January 1999, until plaintiff terminated the agreement on January 21, 2005. (Doc. 16 at 3).
The parties' accounts of the circumstances surrounding the termination of the agreement are somewhat varied. Defendants trace the demise of the agreement to a November 2004 demand for arbitration in which defendants sought monetary damages and other relief for plaintiff's alleged overcharging for products that plaintiff required defendants to stock and sell. (Doc. 16 at 3). Further, defendants suggest, "[o]n or about December 17, 2004, and in obvious retaliation for FSI having filed arbitration against [plaintiff]," Pirtek President, Morgan Arundel, sent defendants a letter of default advising defendants of $149,433.64 in past due monthly licensing fees. (Doc. 3 at 5). It is undisputed that the letter provided defendants with a thirty (30) day window within which defendants could cure the alleged default. (Id.; Doc. 16 at 5). Defendant Whitehead claims that he sent a letter to Mr. Arundel on or about January 14, 2005, contesting the amount plaintiff owed. (Doc. 16 at 4). Plaintiff does not mention any demand for arbitration or letter of protest from defendant Whitehead; rather, plaintiff simply cites defendants' failure to cure as the impetus behind the January 21, 2005, notice of termination of the agreement. (Doc. 3 at 5).
II. LEGAL STANDARD
The decision to grant or deny a preliminary injunction is a matter within the discretion of the district court and is reviewable only for abuse of discretion. Baker v. Buckeye Cellulose Corp., 856 F.2d 167, 169 (11th Cir. 1988). A district court may issue a preliminary injunction where the moving party demonstrates (1) a substantial likelihood of success on the merits; (2) that irreparable injury will be suffered unless the injunction issues; (3) the threatened injury to the movant outweighs whatever damage the proposed injunction may cause the opposing party; and (4) if issued, the injunction would not be adverse to the public interest. Nnadi v. Richter, 976 F.2d 682, 690 (11th Cir. 1992); Siegel v. LePore, 234 F.3d 1163, 1176 (11th Cir. 2000). "[A] preliminary injunction is an extraordinary and drastic remedy not to be granted unless the movant clearly established the `burden of persuasion'" as to each of the four prerequisites. McDonald's Corp. v. Robertson, 147 F.3d 1301, 1306 (11th Cir. 1998) (internal citations and quotations omitted); see also Texas v. Seatrain Int'l, S.A., 518 F.2d 175, 179 (5th Cir. 1975) (grant of preliminary injunction "is the exception rather than the rule," and movant must clearly carry the burden of persuasion).
In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc), this court adopted as binding precedent all of the decisions of the former Fifth Circuit handed down prior to the close of business on September 30, 1981.
III. ANALYSIS
A. Lanham Act Claims
Plaintiff claims that defendants are infringing upon Pirtek's trade name, trademarks, and service marks in violation of the Lanham Act. Plaintiff alleges that defendants operate a competing hose installation and repair business at the same location and territory as the former Pirtek franchised business. (Doc. 3 at 6). Specifically, plaintiff avers that defendants continue to utilize the telephone number and facsimile number associated with their former Pirtek business without plaintiff's authorization.Id. Defendants respond that they immediately ceased using the Pirtek marks upon the termination of the franchise agreement. (Doc. 16 at 13).
Initially, the court notes that plaintiff's probability of success on the merits at trial depends on the validity of its trademark infringement claim. "[I]n order to prevail on a trademark infringement claim, the registrant must show that (1) its mark was used in commerce by the defendant without the registrants's consent and (2) the unauthorized use was likely to cause confusion, or to cause mistake or to deceive." Burger King Corp. v. Mason, 710 F.2d 1480, 1491 (11th Cir. 1983) (citing 15 U.S.C. § 1114(1)(a)) cert. denied, 465 U.S. 1102 (1983). There is no dispute that defendants' right to use the Pirtek marks ceased; however, at the heart of the debate is whether defendants actually engaged in the unauthorized use of the Pirtek marks. Despite plaintiff's bare allegations that defendants continued to use a telephone and facsimile number associated with the former Pirtek franchise, plaintiff has failed to proffer any evidence in either the record or the preliminary injunction hearing to demonstrate any continued use of the Pirtek marks by the defendants. Defendant Whitehead testified that the Pirtek name has been removed from defendants' bins and vans. (Dec. 2005 Prelim. Inj. Hr'g R. at 109-10). Furthermore, Whitehead indicated that he discontinued any use of the subject marks in defendants' advertisements and on web sites. Id. As to any Pirtek brand hoses sitting in storage on defendants' site, plaintiff has produced no evidence to show that defendants have distributed the hoses or held themselves out as Pirtek dealers. Id. at 115-16. This court finds that plaintiff has failed to meet its burden to establish a likelihood of success on the merits vis-a-vis its Lanham Act claims. Accordingly, this part of plaintiff's motion is due to be denied.
The court declines to engage in further analysis regarding plaintiff's Lanham Act claims, but notes that plaintiff also failed to present any evidence of confusion, the sine qua non of trademark infringement.
B. Non-Compete Claim
Plaintiff must show that it satisfies each of the four requirements enumerated supra at Part II before a court may issue a preliminary injunction. The first element to be considered is whether plaintiff has demonstrated a substantial likelihood that it will prevail on the merits of its claims. Based on the evidence and arguments presented to the court, the court finds that the plaintiff has failed to meet this burden.
In accordance with the laws of the state of Florida (the applicable law under Section 16.I of the franchise agreement, [Pl.'s Ex. 30 at 30]), a restrictive covenant is enforceable if the party seeking enforcement can prove: (1) the existence of one or more legitimate business interests justifying the restrictive covenant; and (2) that the contractually specified restraint is reasonably necessary to protect the legitimate business interest or interests justifying the restriction. Fla. Stat. § 542.335(1)(b) and (c). "If the [plaintiff] can establish its prima facie case, the burden shifts to the [defendant] to show that the restriction is overbroad, overlong, or otherwise not reasonably necessary to protect the established interests of the [plaintiff]." Autonation, Inc., v. O'Brien, 347 F.Supp.2d 1299, 1304 (S.D.Fla. 2004).
Section 542.335(1)(b) of the Florida Statutes provides that "legitimate business interests" include: trade secrets, valuable confidential business information, substantial relationships with specific prospective or existing customers, customer goodwill, and extraordinary or specialized training. Fla. Stat. § 542.335(1)(b). Plaintiff claims that is has a legitimate business interest in:
(1) protecting the goodwill associated with P[irtek] [m]arks and business system in and around Mobile, Alabama and elsewhere; (2) protecting the confidential information provided to the FSI Parties in connection with their former franchise; (3) barring the FSI Parties from using the knowledge and customer contacts they acquired as a P[irtek] franchisee to compete against other P[irtek] authorized franchisees; (4) protecting the substantial relationships and customers that the P[irtek] name has developed in the Mobile, Alabama area; (5) re-franchising the relevant market free from interference from the FSI Parties, who have "inside information" about how Pirtek USA and its franchisees operate; and (6) preventing other franchisees from thinking that they simply can abandon their franchise agreements and immediately convert their franchises into independent, competing businesses.
(Doc. 24 at 18). In response, defendants state that the non-compete agreement is unenforceable because the plaintiff has failed to demonstrate any legitimate business interest. (Doc. 16 at 16).
Even if there is merit to plaintiff's contentions that it 1) has established goodwill associated with the Pirtek marks, 2) has provided defendants with specialized training and 3) possesses substantial relationships with existing customers, plaintiff's claim that the restrictive covenant is enforceable falls short. The Florida statute further provides that "[i]n determining the enforceability of a restrictive covenant, a court may consider as a defense the fact that the [party] seeking enforcement no longer continues business in the area that is the subject of the action. . . ." Fla. Stat. § 542.335(1)(g)(2). Defendant indicates, and the record reflects, that Pirtek is not currently operating a franchise in the Mobile area and, additionally, the closest Pirtek center is located in New Orleans, approximately one hundred and fifty (150) miles away from Mobile. (Doc. 16 at 6). Plaintiff suggests that Pirtek has not been able to re-franchise in the Mobile area because "no one is willing to come down [to Mobile] where Mr Whitehead is operating a competing business." (Dec. 2005 Prelim. Inj. Hr'g R. at 36). Pirtek President, Morgan Arundel, previously testified, however, that Pirtek has not had an opportunity to re-franchise in the Mobile area because it had "a lot of other things on the platter." (May 2005 Prelim. Inj. Hr'g R. at 112). Nonetheless, the absence of any Pirtek center in or around the Mobile area militates against a finding that the restriction is reasonably necessary to protect the established interests of the plaintiff. Accordingly, the plaintiff has failed to establish that it has a legitimate business interest in protecting against competition in the Mobile area; therefore, the court concludes that plaintiff has not demonstrated a substantial likelihood of success on the merits, as defined by the Section 542.335.
C. Post-Termination Obligations
Finally, the court finds no merit to the claim that defendants are in violation of the post-termination provisions of the agreement. The court notes that it has already ruled on the alleged continued use of the Pirtek marks, see supra at Part III.A, as well as any allegations in relation to the non-compete agreement, see supra at Part III.B. Furthermore, the parties resolved any dispute as to the assignment of the telephone number and facsimile number used in defendants' former Pirtek business. (Dec. 2005 Prelim. Inj. Hr'g R. at 68-69). To the extent that plaintiff's averment concerns defendants' failure to return any hoses, fittings or manuals, the court finds that plaintiff has failed to establish a harm which cannot be adequately redressed by final relief on the merits and for which cannot be undone by monetary remedies. Cate v. Oldham, 707 F.2d 1176, 1189 (11th Cir. 1983), citing Deerfield Medical Center v. City of Deerfield Beach, 661 F.2d 328 at 338 (5th Cir. 1981) and Spiegel v. City of Houston, 636 F.2d 997 (5th Cir. 1981). Thus, this portion of plaintiff's motion is due to be denied.
CONCLUSION
After due consideration of all matters presented and for the reasons set forth herein, the court finds that plaintiff's motion for preliminary injunction is due to be DENIED. DONE and ORDERED.