Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION NEWS: Fitness franchisee sued over non-disclosure, non-compete violations, (Dec 15, 2015)

By Linda O’Brien, J.D., LL.M.

A franchisee of Anytime Fitness System fitness centers misappropriated proprietary information to form and operate competing Fit Body Boot Camp franchisees in violation of the non-disclosure and non-compete provisions of the franchise agreement, according to a complaint filed in the federal district court in Atlanta, Georgia (Anytime Fitness, LLC v. Stewart, December 11, 2015).

Anytime Fitness owns and licenses a system of operating co-ed fitness facilities, which offer a variety of fitness services under the trade name and service mark ANYTIME FITNESS®. The company has over 2,200 operating franchise fitness centers located across the United States and Canada.

The complaint states that, in June 2009, Anytime Fitness entered into a franchise agreement with Dacula Express Fitness for the operation of an Anytime Fitness center located in Dacula, Georgia. The franchise agreement contained non-disclosure and non-competition provisions. In June 2014, Anytime Fitness and Dacula Express Fitness entered into a renewal franchise agreement for a term of five years. Jeffrey Stewart and Jerry Martin each executed a personal guaranty that was attached to the renewal franchise agreement.

As Anytime Fitness franchisees, Stewart and Martin obtained the use of Anytime Fitness’ names and marks, marketing and advertising services, training programs, and confidential proprietary information used in connection with the operation of the fitness center. Stewart, Martin, and Dacula Express Fitness had the benefit of learning the entire ANYTIME FITNESS® system of methods, procedures, standards, and specifications, the complaint alleges.

According to the lawsuit, in August 2015, Martin attended a conference for Fit Body Boot Camp, a competing gym. In September 2015, Stewart and Martin’s wife Amy, opened a business called Fit Body Family LLC, which was used to operate Fit Body Boot Camp fitness centers. Additionally, Martin became employed and had an interest in Fit Body Boot Camp and franchise fitness centers owned by Fit Body Family LLC. Stewart and Amy Martin are charged with owning and operating three Fit Body Boot Camp fitness centers, two of which are within one mile of neighboring Anytime Fitness centers.

Stewart, Martin, and Dacula Express Fitness allegedly were aware of their obligations not to compete with Anytime Fitness when they entered into the renewal franchise agreement. However, the defendants use confidential information misappropriated from ANYTIME FITNESS® in the operation of Fit Body Family LLC and Fit Body Boot Camp, in breach of the franchise agreement, the complaint also states.

The plaintiff asserts claims for breach of contract, misappropriation of trade secrets, tortious interference, unfair competition, and unjust enrichment. The action seeks injunctive relief, damages, pre-judgment interest, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 1:15-cv-04306-WSD.

Attorneys: Richard A. Mitchell (Arnall Golden Gregory LLP) and James M. Susag (Larkin Hoffman Daly & Lindgren Ltd.) for Anytime Fitness, LLC.

Companies: Anytime Fitness, LLC; Dacula Express Fitness, Inc.

News: FranchisingDistribution GeorgiaNews