Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—D. Mass.: RE/MAX not entitled to injunctive relief after franchisee terminated agreements, (Jul 9, 2014)

By Greg Hammond, J.D.

RE/MAX of New England, Inc. was not entitled to a temporary restraining order or preliminary injunction after a franchisee terminated its relationship with RE/MAX and started to do business under a different name. In denying RE/MAX’s motion for temporary restraining order and preliminary injunction, the federal district court in Boston determined that the real estate company failed to demonstrate a likelihood of success on the merits for any of its claims (RE/MAX of New England, Inc. v. Prestige Real Estate, Inc., July 7, 2014, O’Toole, G.).

Background. Prestige Real Estate, Inc. entered into 13 franchise agreements with RE/MAX, each for a different real estate office. Three of the agreements had expired prior to the controversy at issue and were continued on a month-to-month basis. The other ten agreements were active when, in April 2014, Prestige sent RE/MAX a demand letter terminating their relationship. Prestige subsequently started doing business as LAER Realty Partners.

RE/MAX filed suit and moved for a temporary restraining order and preliminary injunction requiring: (1) the halting of Prestige’s use of RE/MAX’s trademarks; (2) specific performance of the covenants against competition; and (3) specific performance of Prestige’s obligation to assign telephone numbers and domain names to RE/MAX.

Trademarks. In order to state a valid claim for trademark infringement, RE/MAX was required to show “(1) that its mark is entitled to trademark protection, and (2) that the allegedly infringing use is likely to cause consumer confusion.” However, the court determined that there was no serious trademark controversy in this case, as Prestige invested in rebranding to the LAER name and logo, which did not bear any resemblance to RE/MAX. Consequently, the court concluded that RE/MAX failed to demonstrate a likelihood of success on the merits or a prospect of irreparable harm.

Non-compete covenants. The in-term covenants not to compete, which were relevant to the ten active franchise agreements, required Prestige to “refrain from owning a non-RE/MAX real estate services business or affiliating with any other business that offers goods and services in competition” with RE/MAX. Although the court acknowledged there was a dispute in whether Prestige legitimately terminated its agreements with RE/MAX, it nevertheless concluded that Prestige persuasively argued that the non-compete provisions limit only “ordinary competition” and are thus unenforceable as a matter of law. In addition, the court noted that RE/MAX failed to show a prospect of irreparable harm.

The post-termination covenants, which were relevant to the three expired agreements, prohibited Prestige from operating any business that is a licensee or franchisee of any franchising organization or network that competes with RE/MAX. The court determined that there was substantial doubt the three relevant offices violated this provision, as LAER is not a licensee or franchisee of any franchising organization or network.

Phone numbers and domain names. According to the franchise agreements, Prestige was required, upon termination, to assign all of its telephone numbers and domain names to plaintiffs. However, because the domain names were already deactivated and there was no evidence of customer confusion with the telephone numbers, the court concluded that an injunction would be inappropriate. Consequently, the motion for temporary restraining order and preliminary injunction was denied.

The case number is 14-12121-GAO.

Attorneys: Arthur L. Pressman (Nixon & Peabody, LLP) for RE/MAX of New England, Inc. and RE/MAX, LLC. John R. Skelton (Bingham McCutchen LLP) for Prestige Real Estate, Inc.

Companies: RE/MAX of New England, Inc.; RE/MAX, LLC; Prestige Real Estate, Inc.

Cases: FranchisingDistribution MassachusettsNews