Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—D. Kan.: IHOP franchisee required to surrender restaurant, discontinue use of trademarks, (May 2, 2014)

By Edward L. Puzzo, J.D.

An IHOP franchisee was ordered to surrender the restaurant and discontinue use of IHOP licensed trademarks, after the federal district court in Kansas City, Kansas ruled that the franchisee had breached the franchise agreement by refusing to recognize IHOP's right of first refusal to acquire the restaurant (IHOP Franchising, LLC v. Tabel, April 30, 2014, Vratil, K.).

IHOP Franchising and related plaintiffs brought an action against franchisee Wajdi Tabel, alleging that he breached their franchise agreement by failing to recognize IHOP's right of first refusal to acquire the restaurant and instead secretly transferred the restaurant to a third party without IHOP's consent. IHOP sought an injunction ejecting Tabel from the restaurant and requiring Tabel to surrender the restaurant and licensed trademarks. The matter was assigned to a magistrate for finding of facts.

The magistrate found that IHOP was likely to succeed on the merits of the breach of contract, trademark infringement, and unfair competition claims. Specifically, the magistrate found that Tabel refused to recognize IHOP's right of first refusal; that IHOP was entitled to terminate the franchise agreement; that Tabel's continued unauthorized use of IHOP's marks would cause customer confusion; that Tabel no longer had any rights to the restaurant premises, fixtures and equipment; and that, absent a preliminary injunction requiring Tabel to surrender possession of the restaurant and discontinue its operation, IHOP would suffer irreparable harm to the reputation and good will associated with the IHOP name. Based on these findings, the magistrate entered a preliminary injunction against Tabel.

Subsequently, Tabel waived his right to appeal the magistrate's ruling, and neither party filed an objection to it. Consequently, the court adopted in full the report and recommendation of the magistrate. The court further ordered Tabel to vacate the restaurant premises and enjoined him from using IHOP's trademarks or otherwise present his goods or services as those of IHOP.

The case is No. 13-2641-KHV.

Attorneys: Joel D. Siegel (Dentons US, LLP) for IHOP Franchising, LLC; IHOP Property Leasing, LLC; IHOP IP, LLC; and Intl. House of Pancakes, LLC. Shahzad Nasim Ghafoor (Ghafoor Cook & Associates) for Wajdi Tabel

Companies: IHOP Franchising, LLC; IHOP Property Leasing, LLC; IHOP IP, LLC; Intl. House of Pancakes, LLC

Cases: FranchisingDistribution KansasNews