Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—11th Cir.: Contempt not on menu in bagel shop franchisor’s deceptive trade practices suit, (Mar 28, 2016)

By Greg Hammond, J.D.

A federal district court did not abuse its discretion in refusing to issue an order to show cause why a bagel franchisee should not be cited for contempt for prosecuting a series of state law claims in a Florida state court, after having been enjoined from doing so. The district court had previously vacated the injunction and was deprived of the power to enjoin the franchisee from prosecuting its state court suit, the U.S. Court of Appeals in Atlanta determined (The Original Brooklyn Water Bagel Co., Inc. v. Bersin Bagel Group, LLC, March 25, 2016, Marcus, S.).

Franchisee Bersin Bagel Group brought three claims against franchisor The Original Brooklyn Water Bagel Co., Inc. (OBWB) in state court, including: (1) fraud in the inducement; (2) negligent misrepresentation and omission; and (3) violation of the Florida Deceptive and Unfair Trade Practices Act (FDUTPA). In a separate action, the federal district court in West Palm Beach, Florida, barred Bersin from prosecuting those claims in state court. After the appellate court dismissed the case for lack of jurisdiction, however, the lower court vacated the injunction and lifted the order enjoining Bersin from pursuing its state court claims. OBWB nevertheless moved the district court for an order to show cause why Bersin should not be held in contempt for failing to comply with the now-vacated injunction. The district court denied the motion and OBWB appealed.

Anti-Injunction Act. The district court did not abuse its discretion, the appellate court concluded, because the district court properly vacated its injunction, leaving no basis to cite Bersin for contempt. In particular, the court noted that the Anti-Injunction Act explicitly bars a federal court from enjoining proceedings in a state court except as expressly authorized by Act of Congress, or where necessary in aid of its jurisdiction, or to protect or effectuate its judgments. The re-litigation exception to the Anti-Injunction Act was inapplicable because the separate action before the district court differed markedly from those raised in the state court.

Unrelated action. The appellate court also concluded that, even if it were to assume that the lower court had the power to enjoin Bersin, an injunction would still be inappropriate. Bersin’s claims were not related to false marking or false advertising claims that were previously before the district court in the separate action, and there was no basis to bind Bersin to a consent agreement entered into by entirely separate parties in an entirely separate case.

The case is No. 15-11748.

Attorneys: Eric Lee (Lee & Amtzis, PL) and Ira Marcus for The Original Brooklyn Water Bagel Co., Inc. Jan Douglas Atlas (Kopelowitz Ostrow, PA) for Bersin Bagel Group, LLC.

Companies: The Original Brooklyn Water Bagel Co., Inc.; Bersin Bagel Group, LLC

Cases: FranchisingDistribution StateUnfairTradePractices AlabamaNews FloridaNews GeorgiaNews