Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—E.D. Pa.: 7-Eleven franchisee entity narrowly avoids default for failure to secure counsel, (Oct 22, 2025)

By Justin Marcus Smith, J.D.

The court found excusable neglect by a non-attorney franchisee owner who must now “work harder” to find a lawyer.

The owner of a 7-Eleven franchisee showed sufficient good cause to set aside entry of default against that franchisee entity by 7-Eleven, Inc., held the federal district court in Philadelphia, Pennsylvania. Although the owner only set forth general meritorious denials, the court did not find that vacating default would prejudice 7-Eleven, nor did it find culpable conduct by the franchise owner in allowing the entry of default. The owner, who attempted to proceed pro se on behalf of both himself and his franchisee (store entity), showed at worst excusable neglect in failing to secure the required counsel for the store limited liability company entity. That was so even in light of an earlier court warning that the store entity must have counsel to respond to the 7-Eleven complaint. The court concluded the store owner’s excusable neglect did not call for a sanction because the entry of default, itself, appeared to have been an effective wake-up call. The court granted the store owner’s motion to set aside entry of default and gave him 30 more days to find counsel for his store entity (7-Eleven Inc. v. Lakshmi Mini Mart, LLC, No. 2:25-cv-02945-MMB (E.D. Pa. Oct. 17, 2025)).

Background. Texas -based franchisor 7-Eleven, Inc. (7-Eleven) sued Pennsylvania-based franchisee Lakshmi Mini Mart, LLC (Lakshmi LLC) and its sole member (store owner), a natural person residing in New Jersey. According to the complaint, the parties entered into a franchise agreement in 2007. The store owner provided a personal guaranty. The owner then operated the store as a limited liability company under the franchise agreement from 2007 to 2024.

In March 2024, Lakshmi LLC informed 7-Eleven it planned to sell the store to a third party. When the instant parties agreed to terminate the Franchise Agreement as of April 2024, 7-Eleven said it provided a letter reminder to the owner to remove 7-Eleven branding, return equipment, and satisfy the termination-accelerated promissory note, all per the terms of the parties’ termination obligations. The owner sold the store; however, he allegedly refused to allow 7-Eleven to remove some of its equipment and did not satisfy $226,819 owed on the promissory note. 7-Eleven alleged the Lakshmi LLC defendants breached their termination obligations.

In June 2025, 7-Eleven asserted its claims in four counts: (1) breach of contract against Lakshmi LLC; (2) breach of promissory note against both Lakshmi defendants; (3) breach of guaranty against the owner; and (4) conversion against both Lakshmi defendants. The owner filed a pro se answer on behalf of both himself and the store entity, but the court struck the LLC’s answer for lack of required counsel. The court ordered Lakshmi LLC to secure counsel, but the owner failed to do so even after obtaining a deadline extension.

7-Eleven moved for entry of default against Lakshmi LLC, and the court entered default in August, 2025. The owner moved to set aside default, on the same day the clerk entered default, for an opportunity to defend the case on the merits. 7-Eleven opposed.

No prejudice. The court analyzed that vacating default would not prejudice 7-Eleven. The proceedings were at an early stage. There was also no indication of any loss of evidence, increased potential for collusion or fraud, or that 7-Eleven had substantially relied on the entry of default.

Merits. The court found the store owner did not establish a meritorious defense. The store owner argued meritorious defenses existed on the basis that the amounts owed under the promissory note and for the equipment were allegedly “inflated” and included “coerced or expired agreements.” The store owner also argued the complaint did not account for depreciation or inventory handling. However, he failed to allege specific facts to support his assertions that 7-Eleven claimed inflated amounts owed. The court said the owner’s arguments were best characterized as general denials.

Culpable conduct. The court did not find a straightforward case of culpability for entry of default. The store owner argued he was not culpable because Lakshmi LLC could not afford counsel and because he believed his prior filings would preserve Lakshmi’s defenses.

The court reviewed how it had warned the store owner that failure to secure counsel for Lakshmi LLC might result in entry of default against it. While the store owner apparently attempted to secure counsel and kept the court informed about efforts to comply with instructions, the court allowed that, as a non-lawyer, he might have miscalculated the cost of entry of default.

The court reasoned that the failure of Lakshmi LLC to respond through counsel was akin to negligence stemming from the store owner’s excusable neglect of trying to sort out the effect of default while he was focused on finding counsel. The store owner’s likely unfamiliarity with the gravity of default, when coupled with the Third Circuit’ preference for meritorious disposition, qualified as good cause to set aside default. The court gave the store owner an additional 30 days to secure counsel for Lakshmi LLC.

No sanction. The court elected not to impose a sanction on the store owner because he responded to entry of default on the same day the clerk entered default. The entry of default appeared to have been a sufficient “wake-up call” to obviate any need for a sanction. The court made it clear that the clerk would enter default again, and 7-Eleven could seek entry of judgment by default under Fed. R. Civ. P. 55(b)(2) if Lakshmi LLC does not respond.

The Case is No. 2:25-cv-02945-MMB.

Judge: Baylson, M.

Attorneys: Christian C. Burden (Quarles & Brady LLP) for 7-Eleven, Inc.

Companies: 7-Eleven, Inc.; Lakshmi Mini Mart, LLC

Cases: FranchisingDistribution PennsylvaniaNews