Antitrust Law Daily Wrap Up, FRANCHISING AND DISTRIBUTION NEWS—E.D. Mich.: Former Little Caesar franchisee alleged to have violated noncompetition covenants, (Jun 23, 2016)

By Michael Menzhuber, J.D., LL.M.

A former Little Caesar franchisee and its guarantor were liable for breach of contract, trademark infringement, unfair competition, and trade dress infringement arising from their failure to comply with the franchise agreement’s noncompetition covenants, according to a complaint filed by Little Caesar Enterprises, Inc. and LC Trademarks, Inc. in the federal district court in Detroit, Michigan (Little Caesar Enterprises, Inc. v. Zugare, Inc., June 21, 2016).

According to the complaint, Zugare, Inc. entered into a franchise agreement to operate a Little Caesars restaurant. Zugare’s obligations under the franchise agreement were guaranteed by Joseph Sciandra. The franchise agreement provided that: (1) the right to use Little Caesar’s proprietary marks was limited to uses authorized by the franchise agreement; (2) failure to comply with the franchise agreement’s noncompetition covenants would be grounds for immediate termination of the franchise, without opportunity to cure; and (3) in the event the franchise agreement was terminated, the restaurant would cease to operate and Zugare and Scianda would pay Little Caesar all sums owing, including damages, costs and attorneys’ fees.

The complaint alleges that the defendants committed a terminable and incurable breach of the franchise agreement because Scianda’s wife was operating a competing pizza business that was approximately ten miles from the defendants’ Little Caesars restaurant. The complaint further alleges that the defendants refused to comply with the Notice of Franchise Agreement Termination and their post-termination obligations.

According to the complaint, the defendants engaged in: (1) trademark infringement by their use of Little Caesar’s marks outside the scope of the franchise agreement; (2) unfair competition by having an interest in a competing pizza business and continuing to operate their restaurant as a Little Caesars’ restaurant after their franchise agreement had been terminated; and (3) trade dress infringement for continuing to present their restaurant as a Little Caesars restaurant after the franchise agreement had been terminated.

In addition to a declaratory judgment that the defendants’ conduct violated the terms of the franchise agreement and an award of damages, attorneys’ fees and costs, Little Caesar’s seeks injunctive orders: (1) ratifying and enforcing the termination of the franchise agreement as of the date of the Notice of Franchise Agreement Termination; (2) enjoining the defendants’ use of Little Caesar marks and from engaging in unfair competition with Little Caesar; (3) directing the defendants to comply with all its applicable post-termination obligations; and (4) directing the defendants to comply with the franchise agreement’s noncompetition covenants.

The case is No. 2:16-cv-12287-GSC-DRG.

Attorneys: Larry J. Saylor and Kimberly A. Berger (Miller, Canfield, Paddock & Stone P.L.C.) for LC Trademarks, Inc. and Little Caesar Enterprises, Inc.

Companies: LC Trademarks, Inc.; Little Caesar Enterprises, Inc.; Zugare, Inc.

News: FranchisingDistribution MichiganNews