Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—3rd Cir.: Permanent injunction against operation of expired AAMCO franchise upheld, (Apr 4, 2016)

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

A federal district court did not abuse its discretion when it issued a permanent injunction, barring a former franchisee from holding himself out as an AAMCO franchise, according to the U.S. Court of Appeals in Philadelphia. The appellate court affirmed the district court’s decision because all the factors necessary for granting permanent injunctive relief had been established (AAMCO Transmissions, Inc. v. Dunlap, April 1, 2016, Per Curiam.).

AAMCO and James Dunlap entered into a franchise agreement in 1981, which permitted Dunlap to operate a transmission shop under the AAMCO name for an initial term of 15 years. The franchise agreement was renewed in 1996 for an additional 15-year term, which expired in June 2011. Dunlap, however, continued to operate his repair center using the AAMCO name after the expiration of the franchise agreement.

AAMCO filed an action against Dunlap in federal district court for trademark infringement, followed by a motion for a preliminary injunction. The district court granted the preliminary injunction but stayed the litigation pending mandatory arbitration. The arbitrator ruled in favor of AAMCO, concluding that the franchise agreement had expired in June 2011. In March 2015, AAMCO filed a motion to convert the preliminary injunction into a permanent injunction. The district court granted the motion after determining that all the factors necessary for granting permanent injunctive relief were established.

The appellate court affirmed the district court’s decision, finding that: (1) AAMCO successfully demonstrated that it had already succeeded on the merits of its claim that the franchise agreement ended in June 2011; (2) AAMCO had shown that, absent the injunction, it would be irreparably injured to the extent that it might suffer a loss of business reputation and goodwill if customers were dissatisfied with the performance of Dunlap’s repair shop; (3) Dunlap would not be harmed by the injunction because it would merely prohibit him from engaging in an activity to which he had no legal right; and (4) public interest would be served because the injunction would prevent confusion and deception among business customers regarding whether Dunlop’s repair shop was an approved AAMCO franchise.

The case is No. 15-3013.

Attorneys: James Goniea (Einbinder Dunn & Goniea) for AAMCO Transmissions. James M. Dunlap, pro se.

Companies: AAMCO Transmissions

Cases: FranchisingDistribution DelawareNews NewJerseyNews PennsylvaniaNews