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Maaco Franchising, LLC v. Ghirimoldi

United States District Court, W.D. North Carolina, Charlotte Division

July 28, 2015

MAACO FRANCHISING, LLC, Plaintiff,
v.
STEFANO GHIRIMOLDI, and LUMAT, LLC, d/b/a AMERICA BODY SHOP, Defendants.

ORDER

GRAHAM C. MULLEN, District Judge.

THIS MATTER is before the Court upon Plaintiff Maaco Franchising, LLC's ("Maaco") Motion for a Preliminary Injunction (Doc. No. 1), Maaco's Memorandum of Law in Support of its Motion for a Preliminary Injunction (Doc. No. 1-1), Defendants' Brief in Opposition to Plaintiff's Motion for Preliminary Injunction (Doc. No. 11), and Maaco's Reply Brief in Support of Motion for Preliminary Injunction. (Doc. No. 19). Maaco seeks to enjoin Defendants' alleged infringing use of protected Maaco trademarks and violation of a covenant not to compete set forth in the Franchise Agreement between the parties. For the reasons set forth below, the Motion is DENIED.

I. BACKGROUND

Maaco is a franchisor of automobile paint and body shops under the name "Maaco." It files this action on the basis of a Franchise Agreement entered into with Defendant Ghirimoldi on February 23, 2012. Ghirimoldi subsequently created Lumat LLC ("Lumat") and through it purchased an automobile paint and body shop called Complete Body with the intent to operate it as a Maaco franchise. After purchasing Complete Body, Defendants executed the Assignment and Assumption Agreement with Maaco, assigning Lumat the rights and duties under the Franchise Agreement.

At some point between February 23, 2012 and July 1, 2012, Ghirimoldi attended a Maaco training session at Maaco's headquarters in King of Prussia, Pennsylvania. Defendants opened the Maaco franchise at Complete Body's former location on July 1, 2012. Pursuant to the Franchise Agreement, Defendants purchased Maaco-branded exterior and interior signs to display in and around the shop, including one that spreads across the top of the exterior of the building reading "America's Body Shop."

Under the Franchise Agreement, Maaco had the sole right to create and maintain internet websites and a directory listing for Defendants' franchise. (Doc. No. 1 Exh. 1 at §6.1 ¶¶ D, H). Maaco did not establish internet advertising postings for the shop until sometime after September 1, 2012. Defendants learned of Maaco's failure to do so from a customer, who emailed Ghirimoldi about his inability to find the shop on Google. Defendants stopped paying franchise and advertising fees to Maaco in November 2012. On November 26, 2012, Maaco sent Defendants a Notice of Default for their failure to remit all franchise fees and advertising contributions and gave Defendants thirty days to cure their defaults or else be subject to termination of their franchise license. Defendants failed to cure their defaults, and on December 28, 2012, Maaco sent them a Notice of Termination informing them that their franchise was terminated as of that date.

Under the terms of the Franchise Agreement, Defendants had several duties to perform upon termination of the franchise. The duties include ceasing to use any "Proprietary Marks and distinctive forms" including "all signs" which display Proprietary Marks, canceling any assumed name or equivalent registration which contains any service mark or trademark of Maaco, notifying "the telephone company and all listing agencies of the termination or expiration of Franchisee's right to use all telephone numbers" of the Center, returning to Maaco "all manuals, including the [operations] Manual" and complying with the Franchise Agreement's covenant not to compete.[1] (Doc. No. 1 Exh. 1 at §16 ¶¶ B, D, G, H). A clause also authorized Maaco to direct the telephone company and all listing agencies to transfer the telephone number to itself should Defendants fail to do so. ( Id at ¶ D).

After receiving the Notice of Termination, Defendants continued operating as an automobile paint and body shop. They removed exterior Maaco signs, obscured interior Maaco signs, and changed the name of the business to "America Body Shop." They repurposed a sign originally purchased at Maaco's direction that read "America's Body Shop" to depict "America Body Shop" by removing the "'s." Defendants also retained the shop's phone number (602) 252-2455. Defendants allege they "put away" Maaco's confidential information, including the operating manuals. Defendants have not received any communication from Maaco until the filing of this lawsuit.

Since termination, Maaco has not attempted to get back its branded signs or confidential materials, such as the operations manual, and has not requested that Defendants transfer the telephone number. On an unstated date, Maaco's current regional director visited "America Body Shop" and took photos of the exterior of the shop, but did not speak to Defendants. The regional director also found that the shop was still listed as a Maaco franchise on both Yelp.com and YellowPages.com. Maaco filed this action on March 3, 2015, more than two years after it terminated the franchise.

II. LEGAL STANDARD

A preliminary injunction is an extraordinary remedy that "may only be awarded upon a clear showing that the plaintiff is entitled to such relief." Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7, 222 (2008); See also Mazurek v. Armstrong, 520 U.S. 968, 972 (1997). When considering whether to grant a preliminary injunction, the Fourth Circuit applies the standard articulated by the Supreme Court in Winter. See Real Truth About Obama, Inc. v. Fed. Election Comm'n, 575 F.3d 342, 345 (4th Cir. 2009) (overruled on other grounds). Under Winter, a plaintiff seeking a preliminary injunction must establish "[1] that he is likely to succeed on the merits; [2] that he is likely to suffer irreparable harm in the absence of preliminary relief; [3] that the balance of equities tips in his favor; and [4] that an injunction is in the public interest." 575 F.3d at 346 (quoting Winter, 129 55 U.S. at 20).

In considering a motion for a preliminary injunction, the Fourth Circuit has not adopted the view taken by other circuits that a "presumption [of irreparable harm] arises solely from the finding of [trademark] infringement." Lone Star Steakhouse & Saloon, Inc. v. Alpha of Virginia, Inc., 43 F.3d 922, 939 (4th Cir. 1995). See also Scotts Co. v. United Indus. Corp., 315 F.3d 264, 273 (4th Cir. 2002) ("This court has never spoken directly to the applicability of such a presumption of harm in Lanham Act cases."). Furthermore, the Fourth Circuit has explicitly rejected the notion that self-inflicted harm should be given less weight when considering the balance of hardships. In Scotts Co., the court held that "[i]f self-made harm is given substantially less weight... then the balance of the harms will almost always favor Plaintiff, thus transforming a preliminary injunction from an extraordinary remedy into a routine occurrence." 315 F.3d at 284. See also Prosperity Sys., Inc. v. Ali, 2010 WL 5174939, at *5 (D. Md. Dec. 15, 2010) ("The Fourth Circuit, however, bars a court from giving "short shrift" to the harm a defendant might suffer merely because it is self-inflicted.").

III. DISCUSSION

A. Demonstration of ...


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