Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—D. N.J.: Injunction barring franchisee’s operation of 7-Eleven stores denied, (Feb 10, 2016)

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

A motion for a preliminary injunction to require a franchisee and its employees to surrender possession and vacate its 7-Eleven stores was denied because there was no evidence of irreparable harm to 7-Eleven in absence of the injunction, according to the federal district court in Trenton, New Jersey (7-Eleven, Inc. v. Sodhi, February 9, 2016, Shipp, M.).

After filing suit against franchisee Karamjeet Sodhi and two of his employees for alleged violations of the Racketeering Influenced and Corrupt Organizations Act (RICO) and its New Jersey analog, trademark infringement, and various common law claims, including breach of the franchise agreements, 7-Eleven brought a motion for a preliminary injunction to compel the defendants to vacate all six of their franchise locations.

7-Eleven requested relief on the basis that Sondi’s conduct resulted in a breach of the franchise agreements in five of the six stores that he operated and trademark infringement. Specifically, 7-Eleven alleged that Sodhi had wrongfully taken funds received as sales which resulted in the stores’ net worth falling below the contractually obligated threshold levels.

Preliminary injunction. The court noted that certain equitable factors need to be considered in determining whether to grant injunctive relief: (1) likelihood of success on the merits; (2) irreparable harm in the absence of preliminary relief; (3) the balance of equities tips in favor of the movant; and (4) the injunction is in the public interest. The court determined that: (1) 7- Eleven demonstrated a likelihood of success on the merits with respect to both its breach of franchise agreement claims and its trademark infringement claims; (2) an injunction would be in the public’s interest, based on there being a likelihood of success on the merits; and (3) the balance of equities was neutral.

Despite these findings, the court found that 7-Eleven did not carry its burden of demonstrating entitlement to a preliminary injunction because there was no evidence of irreparable harm to reputation or to property if injunctive relief were not granted. The only evidence 7-Eleven presented with respect to harm to reputation was customer complaints regarding the condition of one of Sodhi’s stores. However, because many of these complaints were made prior to the likely breach of the franchise agreements, this implied that there had been no change in 7-Eleven’s reputation. 7-Eleven did not present any evidence of irreparable harm stemming from the continued unauthorized use of its property. Because a preliminary injunction must be the only way of protecting a plaintiff from harm, the court determined that 7-Eleven’s failure to demonstrate irreparable harm was fatal to its request for injunctive relief.

The case is No. 13-3715.

Attorneys: Adrienne Noel Gittens (Duane Morris LLP) for 7-Eleven, Inc. Evan Matthew Goldman (Hill Wallack LLP) for Karamjeet Sodhi.

Companies: 7-Eleven, Inc.

Cases: FranchisingDistribution NewJerseyNews