Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—W.D. Va.: Garage door franchise breach of contract suit can proceed in part, (Aug 18, 2026)

By Donielle Tigay Stutland, J.D.

The court found that the franchisor adequately stated a breach claim for several pre-termination fees and liabilities, but the language of the agreement did not impose the alleged obligations for post-termination fees.

The federal district court for the Western District of Virginia granted in part and denied in part a motion to dismiss breach of contract claims brought by a garage door franchisor against a franchisee and its two business owners. Pro-Lift Doors Franchise, LLC brought suit against its franchisee, Arukah LLC and its two principals, alleging that the franchisee and its current or former owners failed to comply with several of their obligations under the franchise agreement. The court granted in part and denied in part the motion to dismiss, allowing the claims for unpaid pre-termination royalties, pre-termination call-center and technology fees, and a claim for an assignment of a membership interest without consent to proceed. The court granted the motion to dismiss the claims for unpaid post-termination royalties and fees, an alleged stop-payment violation, and failure to post a customer-warranty bond for lack of a contractual basis or pleaded injury (Pro-Lift Doors Franchise, LLC v. Arukah LLC, No. 3:25-cv-00087-JHY-JCH (W.D. Va. Jun. 26, 2026)).

Background. Pro-Lift Doors Franchise, LLC (“Pro-Lift”) is a franchisor that licensed its garage door installation and repair system, marketing and other services, and intellectual and other intangible property to Arukah LLC (“Arukah”) in exchange for royalties and various fees. The parties executed a franchise agreement (“Franchise Agreement” or “Agreement”) governing their business relationship for approximately ten years on March 5, 2020. As part of the Franchise Agreement, two principals of Arukah, Chris Finch and Miles Ghorley signed a Guaranty Agreement for Arukah’s performance and payment in their individual capacities.

In August 2021, Finch allegedly transferred his membership interest in Arukah to Ghorley without Pro-Lift’s knowledge or consent, allegedly in violation of the Franchise Agreement. Finch also removed himself from the franchisee’s daily operations. Arukah’s gross sales declined, and the franchise lagged behind Pro-Lift’s performance benchmarks. Pro-Lift provided additional training, coaching, and temporary royalty relief.

Following a May 22, 2025 meeting, Ghorley ceased communicating with Pro-Lift, stopped attending required monthly meetings, and stopped paying royalties and fees. On September 15, 2025, Pro-Lift sent a Notice of Default, which identified the franchisee’s failure to pay royalties and other fees under the Agreement and gave notice of the 10-day cure period under Section 22.3(i)(a). Ghorley responded that the “business was no longer viable in his market” and that “neither he nor Arukah would pay [Pro-Lift] any royalties from sales produced by the business.” On October 10, 2025, Pro-Lift terminated the Agreement for material breach. On November 3, 2025, Pro-Lift filed a complaint against Arukah, Finch and Ghorley. The franchisee and its principals moved to dismiss.

Royalties. The court began its analysis by reviewing the franchisor’s claim that the franchisee and its principals breached Section 4.2 of the Franchise Agreement by failing to pay royalties owed to Pro-Lift, and that those royalties accrued both before and after Pro-Lift terminated the Franchise Agreement.

With respect to pre-termination royalties, the court outlined that “the plain language of Section 4.2 obligates Defendants to pay royalties during the term of [the] Agreement.” While the franchisee attempted to argue that because there was no revenue the Agreement could be read to not require royalties, the court rejected this argument. The court concluded that after taking the franchisor’s allegations as true and drawing inferences in its favor, the franchisor sufficiently pleaded the existence of a pre-termination royalty obligation, the franchisee’s breach of that obligation, and damage to the franchisor caused by that breach. The court denied the motion to dismiss with respect to unpaid pre-termination royalties under the Agreement.

Turning next to post-termination royalties, the court found that the Agreement does not create any royalty obligations that accrue after it is terminated. Section 4.2 relating to royalties states that the franchisee shall pay the franchisor regular weekly royalty payments of the greater of 6% of Gross Sales or the listed minimum payment “[d]uring the term of this Agreement.” Further, Section 23.1, which governs “Obligations upon Termination or Expiration,” requires franchisee to “pay all sums owing to Franchisor... including... unpaid Royalty Fees,” but does not create any new royalty obligations that accrue after the Agreement is terminated. The court concluded that that “the plain and unambiguous language of the Franchise Agreement does not impose any obligation to pay royalties accrued after termination of the contract,” and it granted the franchisee’s motion with respect to post-termination royalties.

Call Center Fee and Technology Fee. Next the court addressed claims of the franchisor that the franchisee failed to pay call center and technology fees under Sections 4.6 and 4.7, respectively, of the Franchise Agreement—accruing both before and after the Agreement was terminated. Similar to the analysis with respect to the royalty fees, the court determined that the franchisee states a claim for fees accrued before the Agreement was terminated but fails to state a claim for fees accrued after termination. While the plain language of the Franchise Agreement requires the franchisee to pay unpaid fees to the franchisor upon termination of the Agreement, the court determined that the plain language of the Franchise Agreement does not, however, appear to provide for the accrual of call center and technology fees after the Agreement is terminated. The court denied the motion to dismiss with respect to pre-termination call-center fees and technology fees, but granted it with respect to post-termination call-center and technology fees.

Late Payments and Insufficient Funds. The franchisor also argued that, “on information and belief,” the franchisee breached Section 5.3 of the Franchise Agreement when Finch “provided a stop payment direction to Arukah’s financial institution in June 2025.” The court noted that Section 5.3 of the Franchise Agreement outlines consequences for overdue payments and for any requests for payment that are not honored by the franchisee’s financial institution. But it does not contain any language prohibiting the franchisee from requesting a stop payment. The court found that the franchisee failed to state a claim for breach of Section 5.3. As such, the court granted the franchisee’s motion to dismiss this claim.

Assignment by Franchisee. The franchisee also alleged that it was a violation of the Franchise Agreement when Finch assigned his membership interest in Arukah to Ghorley. The franchisor plead that the alleged transfer of Finch’s interest in the company without Pro-Lift’s consent occurred in August 2021, that Finch “disassociated himself from the company” after the transfer, which decreased the franchisee company’s sales and subsequent royalties to the franchisor, that Finch acknowledged the transfer when he responded that “he was permitted to transfer his membership interest by Arukah’s operating agreement,” and that Section 19.2 of the Agreement “expressly prohibits the transfer of an equity interest in the franchisee entity.”

The court found the franchisor’s allegations sufficient to show that the franchisee and its principals had an obligation under the Agreement not to transfer an interest in the company, that they breached that interest, and that the breach caused damage to the franchisor.

Obligations Upon Termination or Expiration. The franchisor alleged that the franchisee failed to pay “a $10,000 fee within fourteen (14) days of the termination of the Franchise Agreement to secure Defendants’ outstanding contracts and warranties owed to Pro-Lift customers as required by Section 23.1(xi).” Here, the court found that the franchisee failed to allege any facts to suggest it was injured in any way by Defendants’ failure to fulfill their obligations to customers under outstanding contracts, which is the reason why the term requires posting of a bond payment within 14 days of the Agreement’s termination. The court determined that the franchisee failed to allege any obligations that the franchisee owed to its customers upon termination, any failure to honor those obligations, or any expenses that the franchisor incurred fulfilling those obligations. Accordingly, the court granted the motion to dismiss this claim.

The Case is No. 3:25-cv-00087-JHY-JCH.

Judge: Yoon, J.

Attorneys: Evan Davis Mayo (Mayo Law Group PLLC) for Pro-Lift Doors Franchise, LLC. Michael D. Woolf (Boon Legal) for Arukah LLC.

Companies: Pro-Lift Doors Franchise, LLC; Arukah LLC

Cases: FranchisingDistribution VirginiaNews