Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—E. D. Mich.: Former Domino’s franchisees enjoined from operating new pizza business at former store, (Jan 4, 2016)

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

Former Domino’s pizza franchisees were enjoined from operating a new pizza business at the site of their former Domino’s store by the federal district court in Detroit. The court also awarded Domino’s damages, lost royalties, attorney fees, and costs (Domino’s Pizza Franchising, LLC v. VTM Pizza, Inc., December 31, 2015, Edmunds, N.).

VTM Pizza, Inc. entered into a franchise agreement to operate a Domino’s pizza store. Terrence Williams, VTM’s sole shareholder, executed a Covenants of Owners documents under which he guaranteed performance by VTM under the franchise agreement.

After operational and financial breaches of the franchise agreement by VTM and Williams, Domino’s terminated the agreement. A post-termination provision of the franchise agreement prohibited the defendants from operating any pizza business within ten miles of their Domino’s store for a period of one year. Despite this provision, the defendants began operating a new pizza business in the same location as their Domino’s pizza store and in substantially the same manner as when it was a Domino’s store.

Domino’s filed an action, alleging that the defendants breached the franchise agreement. After a default judgment was entered against the defendants, Domino’s filed a motion for default judgment that sought injunctive relief, damages, and attorneys’ fees.

The court granted Domino’s request for injunctive relief after it determined that: (1) Domino’s would suffer irreparable harm if the defendants were not enjoined from operating a pizza business at the same location as their former Domino’s pizza store; (2) Domino’s would have a likelihood of success on the merits, in light of the defendants’ default on its breach of contract claims; (3) the injunction would not result in any greater harm to the defendants, in light of their failure to respond to the complaint; and (4) it was in the public interest to enjoin the defendants’ operation of their pizza store, in violation of the franchise agreement.

The court awarded Domino’s damages and lost royalties based on the calculations and declarations of Domino’s manager-unit controller. It also awarded Domino’s attorney’s fees and costs after determining that they were reasonable as required by the franchise agreement and in light of the attorneys’ work on the file.

The case number is 15-13312.

Attorneys: Edward J. Hood (Clark Hill) for Domino's Pizza Franchising LLC.

Companies: Domino's Pizza Franchising LLC; VTM Pizza, Inc.

Cases: FranchisingDistribution MichiganNews