Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—D.S.C.: Partial summary judgment vacated sua sponte on review of surprising application for attorney fees, (Jun 2, 2025)

By Justin Marcus Smith, J.D.

The court concluded it had been an unwitting participant in abusive litigation intended to impoverish erstwhile franchisees to deter others from terminating their franchise agreements.

In a franchise dispute, the federal district court in Charleston, South Carolina, vacated a previously -granted partial summary judgment after review of the franchisor’s fee petition. The petition revealed the plaintiff-franchisor sought the judgment for an improper purpose. The court found the franchisor had pursued erstwhile franchisee-defendants simply to discourage other franchisees from terminating their franchise agreements. The court denied the franchisor’s motion for attorney fees and costs as moot and vacated the partial summary judgment against the former franchisees sua sponte for exceptional circumstances under Fed. R. Civ. P. 60(b). The court then dismissed the action because it was now clear that the franchisor had no further claims against the franchisees (YGM Franchise, LLC v. Wong, No. 2:22-cv-03553-RMG (D.S.C. May. 30, 2025)).

Background. In the court’s account of the case, in 2017, Moylam Wong, Raul Wong, and M & R Wong, LLC (collectively, the Wongs) bought a “You’ve Got Maids” franchise from plaintiff-franchisor YGM Franchise, LLC (YGM). YGM promised franchise training and promotion in consideration of franchise fees of more than $32,000 and ongoing payments to YGM. The franchise agreement permitted termination on 90-days notice with delivery of a general release.

Several franchisees, including the Wongs, provided termination notices. The franchisees alleged YGM did not live up to its brand support promises and had converted franchisee funds for personal use. YGM contended the franchisees failed to provide general releases and were attempting to violate an 18-month non-compete provision under the franchise agreement.

YGM sued the franchisees, but after amendment, the original attorney who jointly represented all of the franchisee-defendants had withdrawn, and the Wongs procedurally defaulted, probably due to a family tragedy. The court noted that a plaintiff would have ordinarily dropped the case or entered default judgment against the Wongs, but YGM continued to litigate the matter for another two years.

In 2023, YGM sought a preliminary injunction. A previously -assigned judge denied the motion because he found evidence that YGM principals may have improperly converted funds for personal use, and YGM might not have been able to show irreparable injury if the Wongs had no plans to participate in any competing business. Meanwhile, the other six franchisee-defendants settled on terms unknown to the court.

In early 2024, YGM moved for partial summary judgment. The Wongs finally retained new counsel and opposed the motion, but the court granted the YGM motion for declaratory and injunctive relief, and, accordingly, directed the Wongs to deliver a general release to YGM and to refrain from competing with YGM.

Seven months later, YGM moved for an $50,000 award of attorney fees and costs. However, after review of the fee application, the court concluded that YGM continued to pursue the matter “despite any evidence that [the Wongs] were in fact violating the non-compete provision of the franchise agreement, with the clear expectation that the Wongs would have to pay the attorney fees for this purposeless litigation.” The court explained that YGM’s detailed itemization of hours expended on the matter “gave this Court a far fuller picture of the abusive nature of this litigation and has now caused the Court to reconsider its prior order granting partial summary judgment.” The court footnoted that “disturbing aspects” of the fee petition included, among other things: (1) a request for attorney time spent on the denied preliminary injunction motion; (2) a request for reimbursement for attorney time spent on a marital dispute apparently between YGM principals; (3) a request for an award of extensive attorney hours on the motion for partial summary judgment even though the same relief could have been obtained through entry of default and a motion for default judgment.

R. 60(b) relief. The court found R. 60(b) relief appropriate under the exceptional circumstances of this case. The court granted the relief sua sponte. Less than a year had passed since the grant of partial summary judgment. The court found the Wongs had a meritorious defense inasmuch as the uncontested evidence in the record showed the Wongs quit the housecleaning business in March 2023. There was no evidence that the Wongs posed any potential injury to YGM such as would have justified the injunctive relief granted earlier. YGM actually admitted for the first time, in its motion for attorney fees, that the Wongs had not caused YGM any injury. The court said it would have denied injunctive relief if it had been aware of the lack of injury.

The court concluded the true purpose of the litigation was to “deter other franchisees from attempting to terminate their franchise agreements.” The court said the fee petition contained a statement that an adverse ruling would have “threatened the viability” of the YGM franchise system. The court concluded YGM wanted to make an example of the Wongs by “pounding them into submission and impoverishment by a $50,000 fee award so others would not attempt to follow their course.”

The Case is No. 2:22-cv-03553-RMG.

Judge: Gergel, R.

Attorneys: Brian C. Duffy (Duffy & Young LLC) for YGM Franchise, LLC. E. Brandon Gaskins (Moore & Van Allen PLLC) for Moylam Wong.

Companies: YGM Franchise, LLC

Cases: FranchisingDistribution SouthCarolinaNews GCNNews