United States District Court, D. Arizona
LLC, Plaintiff, represented by Donna Howard Catalfio, Bergin
Frakes Smalley & Oberholtzer PLLC.
England Bath Incorporated, Defendant, represented by Andrew
Borders Turk, Clark Hill PLC.
Jennifer Bylo, Defendant, represented by Andrew Borders Turk,
Clark Hill PLC.
DOUGLAS L. RAYES, District Judge.
case involves a dispute between a franchisor of bathroom
remodeling products and services and its former franchisee.
Plaintiff ReBath LLC moves to preliminarily enjoin Defendants
New England Bath Inc. and Jennifer Bylo from using
confidential information obtained during operation of the
franchise, displaying trademarks and logos, and operating a
competing business in violation of a noncompetition clause.
(Doc. 4.) The Court held oral argument on the motion on July,
6, 2016. For the reasons stated below, the motion is granted.
purposes of this Order, the following facts are undisputed
unless otherwise noted. ReBath is a bathroom remodeling
franchisor. (Doc. 5 at 2.) It provides operational and
technical expertise to franchisees for use in marketing,
selling, and installing ReBath products within an exclusive
territory. ( Id. ) ReBath also provides confidential
and trade secret information to franchisees, including a
comprehensive operating manual to assist in opening and
operating the franchise. ( Id. )
2008 and 2009, Defendants entered into three separate
franchise agreements with ReBath, each with a term of seven
years. ( Id. ) The agreements prohibited
"Defendants from transacting business in any area
outside of their exclusive territory" and required them
to forward outside leads to the appropriate franchise. (
Id. at 4.) If Defendants violated this provision,
they would be required to pay liquidated damages in the
amount of gross profits received, and their franchise would
be subject to immediate termination. ( Id. ) Renewal
of the agreements was conditioned upon Defendants'
compliance with all provisions of the agreements and
execution of ReBath's renewal agreement. ( Id. )
addition, the agreements provide several post expiration
provisions. Upon expiration of the franchise agreements,
Defendants must immediately cease use of ReBath's
trademarks, logos, and service marks; turn over the manual;
and provide ReBath with copies of all pending customer
contracts. ( Id. at 5-6.) The agreements also
contain a noncompetition clause, which provides:
for a period of one year thereafter, [Defendants may not]
directly or indirectly, engage in or have any interest as an
owner, partner, director, officer, employee, member, manager,
consultant, representative, or in any other capacity, in or
with any similar or competing business located within the
Territory or 50 miles of the Territory.
( Id. ) Last, the agreements prohibit Defendants
from using or disclosing any confidential information for
five years after expiration. ( Id. )
October 2014, ReBath learned from another franchisee that
Defendants had transacted business outside their exclusive
territory. ( Id. at 5.) ReBath ultimately discovered
that Defendants had undertaken fifteen remodeling jobs
outside their exclusive territory and demanded payment of
liquidated damages. ( Id. ) Defendants refused. (
two of the franchise agreements expired on November 28, 2015,
and the other expired on May 3, 2016. ( Id. ) ReBath
twice notified Defendants of their post-expiration
obligations, but Defendants continued to use ReBath logos and
trademarks, failed to turn over the manual and customer
contracts, and began operating a competing business at the
same location under the name Bay State Kitchen & Bath. (
Id. at 7.) Defendants also continued to use websites
bearing the ReBath name and trademarks, as well as customer
testimonials that resulted from installing ReBath products. (
Id. at 8.)
31, 2016, ReBath filed suit against Defendants alleging (1)
trademark infringement, (2) false advertising, (3) breach of
contract, and (4) trade secret misappropriation. (Doc. 1.)
ReBath also moved to preliminarily enjoin Defendants from (1)
using its trademarks in its showroom and on its websites, (2)
suggesting that Defendants are affiliated with ReBath, (3)
engaging in unfair competition and trademark infringement,
(4) engaging in false advertising, (5) operating a competing
bathroom modeling business in violation of the noncompetition
clause, and (6) maintaining, using or disclosing the manual.
(Doc. 4 at 1-2.) ReBath also requests the Court order
Defendants to return the manual and all confidential
information in their possession, provide copies of pending
customer contracts, and modify the websites to remove all
references to ReBath. ( Id. at 2.)
plaintiff seeking a preliminary injunction must establish
that he is likely to succeed on the merits, that he is likely
to suffer irreparable harm in the absence of preliminary
relief, that the balance of equities tips in his favor, and
that an injunction is in the public interest."
Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7,
20 (2008); Am. Trucking Ass'n, Inc. v. City of
L.A., 559 F.3d 1046, 1052 (9th Cir. 2009). These
elements are balanced on a sliding scale, whereby a stronger
showing of one element may offset a weaker showing of
another. See Alliance for the Wild Rockies v.
Cottrell, 632 F.3d 1127, 1131, 1134-35 (9th Cir. 2011).
However, the sliding-scale approach does not relieve the
movant of the burden to satisfy all four prongs for the
issuance of a preliminary injunction. Id. at 1135.
Instead, "serious questions going to the merits' and
a balance of hardships that tips sharply towards the
plaintiff can support issuance of a preliminary injunction,
so long as the plaintiff also shows that there is a
likelihood of irreparable injury and that the injunction is
in the public interest." Id. at 1135. The
movant bears the burden of proof on each element of the test.
Envtl. Council of Sacramento v. Slater, 184
F.Supp.2d 1016, 1027 (E.D. Cal. 2000).
seeks to fully enforce the post-termination requirements of
the franchise agreements. Defendants have certified to the
Court that they have complied with several of these requests,
including returning the manual, removing ReBath logos from
service vehicles, removing signage from the showroom, ceasing
use of the www.yrebath.com website, removing ReBath marks and
logos from websites, removing testimonials from websites, and
providing information regarding business leads and service
calls. (Doc. 25 at 1-2.) Given Defendants' cooperation
and their apparent concession that they are prohibited from
using ReBath marks and logos in any fashion, the Court finds
it unnecessary to analyze whether ReBath is likely to succeed
on its trademark infringement and trade secret misappropriate
claims. The only remaining issues are whether Defendants must
comply with the covenant not ...