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American Dairy Queen Corporation v. Ys&J Enterprises, Inc.

United States District Court, E.D. North Carolina, Western Division

April 2, 2014

AMERICAN DAIRY QUEEN CORPORATION, Plaintiff,
v.
YS&J ENTERPRISES, INC. and JOHN A. RIBET III, Defendants.

ORDER

W. EARL BRITT, Senior District Judge.

On 2 April 2014, the court held a hearing on plaintiff American Dairy Queen Corporation's motion for a preliminary injunction. (DE # 8.) Although defendants were notified of their briefing deadline and the hearing date, they have not responded to plaintiff's motion nor did they appear for the hearing. As announced at the hearing, the motion for preliminary injunction is ALLOWED. The following sets forth the court's opinion for this disposition.

I. BACKGROUND

Plaintiff franchises third parties to operate retail restaurants selling soft serve dairy products and other food products using its Dairy Queen® and Orange Julius® trademarks. (Beck Decl., DE # 11, ¶¶ 3-5.) In 2004, it entered into an agreement with defendant YS&J Enterprises, Inc. ("YS&J") to operate such a restaurant at Cross Creek Mall, Fayetteville, North Carolina (the "Store"). (Id. ¶ 6.) In 2012, plaintiff issued to YS&J a notice of default based on YS&J's failure to correct certain deficiencies identified in plaintiff's earlier visits to the Store. (Id. ¶¶ 8-9 & Ex. B.) YS&J failed to cure the default, and on 3 May 2013, plaintiff issued to YS&J a notice of termination of franchise. (Id. ¶ 10.)

Rather than shut down the Store at that time, plaintiff, YS&J, and YS&J's "principal stockholder, " defendant John A Ribet III, entered into a Mutual Cancellation and Release. Pursuant to that agreement, "in an effort to allow [defendants] the opportunity to recoup some of their investment in the Store, [plaintiff] agree[d] to allow [defendants] the chance to sell the Store's" assets in lieu of termination. (Id. ¶ 11 & Ex. D.) Defendants were permitted to continue to operate the Store. However, if they did not sell the Store's assets by 19 January 2014, any rights under the original operating agreement terminated, and they were required to remove all trademarked materials and proprietary products and ingredients from the premises and refrain from operating a business at the Store location with a deceptively similar name to that of plaintiff or operating a competing store in that location. (Id. ¶¶ 12-13 & Ex. D, ¶¶ 1, 3a, 3c.) On 21 January 2014, plaintiff notified defendants that it was terminating the franchise for failure to transfer the assets of the Store. (Id. ¶ 15 & Ex. F.) The notice further informed defendants: "You must IMMEDIATELY CLOSE THIS STORE and immediately remove all DQ'/Orange Julius' trademarks and proprietary products and ingredients from this store. This includes removal of all signage, point-of-sale materials, operations manuals, menu strips, logos, equipment identification, and all other items that bear any of the DQ'/Orange Julius' trademarks." ( Id., Ex. F (emphasis in original).)

Because defendants continued to operate the Store as a Dairy Queen®/Orange Julius® store, in February 2014, plaintiff twice sent defendants cease and desist letters. (Id. ¶ 18.) On 3 and 12 March 2014, a Business Consultant employed by plaintiff visited the Store and observed that the Store was still operating as a Dairy Queen®/Orange Julius® restaurant and the Dairy Queen®/Orange Julius® signs, insignia, proprietary products, and other materials had not been removed. (Piunti Decl., DE # 10, ¶¶ 8-9.)

On 13 March 2014, plaintiff initiated this action, asserting claims for trademark infringement pursuant to 15 U.S.C. § 1114, false designation of origin pursuant to 15 U.S.C. § 1125, breach of contract, and unjust enrichment. The following day, plaintiff filed the instant motion and also sought a temporary restraining order. The court denied temporary relief in order that defendants might be heard on the preliminary injunction motion on 2 April 2014. (DE # 12.) Defendants have been served with the complaint, the instant motion, all supporting documentation, and the order setting the hearing. (DE ## 13-14, 16-18, 24.) As noted previously, defendants have not filed a response to the instant motion and did not appear at the hearing.

II. DISCUSSION

Plaintiff requests that the court enjoin defendants

and all those in active participation with them (including officers, managers, guarantors, and employees) from:
1. Using or displaying the Dairy Queen® and Orange Julius® trademarks or any other marks similar to the Dairy Queen® and Orange Julius® trademarks;
2. Selling or distributing Dairy Queen® and Orange Julius® products;
3. Associating with the Dairy Queen® and Orange Julius® franchise system; and
4. Operating their store at Cross Creek Mall, 419 Cross Creek Mall, Fayetteville, North Carolina 28303, as a Dairy Queen® and/or Orange Julius® store or any other competing store, i.e[.] , a store ...

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