Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION NEWS: Franchisor of embroidery businesses sues to enforce restrictive covenant, (Aug 16, 2013)

By Peter Reap, J.D., LL.M.

EmbroidMe.com, Inc., a franchisor of embroidery and logo-wear businesses which market and sell embroidered goods, has filed a complaint in the federal district court in Fort Lauderdale against one of its former franchisees, Georgia Achtermann, seeking to enforce a restrictive covenant in the parties’ agreement. In addition to injunctive relief, EmbroidMe is seeking compensatory damages stemming from the franchisee’s failure to pay royalties in accordance with her agreement.

According to the complaint, EmbroidMe terminated Achtermann’s franchise in January 2013, as a result of her abandoning her EmbroidMe store under the terms of their agreement by failing to keep it open for at least ten consecutive days and as a result of her failure to make royalty payments.

EmbroidMe asserts that the parties’ franchise agreement contains a restrictive covenant which, following EmbroidMe’s termination of the agreement, prohibits Achtermann from operating a competing business within ten miles of any other EmbroidMe store or any other business within the EmbroidMe network for a period of two years after termination. The franchisor alleges that Achtermann is in violation of the restrictive covenant due to her operation of an embroidery and promotional products business under the name “The Achtermann Group,” which is in competition with and is located within ten miles of an EmbroidMe store. The franchisor gave notice to Achtermann that she was violating the covenant and since her receipt of that notice she has failed to cease and desist the operation of her new store, the franchisor contends.

The franchisor declares that it has several legitimate business interests justifying the restrictive covenant. These include, without limitation: (1) the protection of its trade secrets; (2) EmbroidMe’s substantial relationships with prospective and existing customers; (3) EmbroidMe’s customer goodwill associated with the EmbroidMe trademarks and trade name, a specific geographic location, and a specific marketing and trade area; and (4) extraordinary and specialized training.

In addition to injunctive relief and damages, EmbroidMe asserts that it is entitled to recover its reasonable attorney fees pursuant to an attorney fee provision in the parties’ agreement.

The complaint in EmbroidMe.com, Inc. v. Georgia Achtermann, Case No. 9:13-cv-80813-KLR, was filed August 15, 2013.

Attorneys: Jacqueline F. Howe (Katz Barron Squitero Faust Friedberg English & Allen P.A.) for EmbroidMe.com, Inc.

Companies: EmbroidMe.com, Inc.

News: FranchisingDistribution FloridaNews