MY FAVORITE
MUFFIN, TOO, INC. v. WU,
00 C 7820
ORAL RULING,
April 20, 2001
Before
the court in Defendants Maosheng Wu and Pichu Wu’s Emergency Motion to Quash
or Modify Preliminary Injunction Order. On
December 14, 2000, My Favorite Muffin filed the complaint against the Wus
alleging trademark infringement in violation of the Lanham Act for the continued
use of My Favorite Muffin trademarks after the termination of the Franchise
Agreement, false advertising, unfair competition, and breach of the Franchise
Agreement. On February 6, 2001,
Plaintiff filed its Motion for a TRO and Preliminary Injunction requesting that
the court prohibit the Wus from using My Favorite Muffin trademarks and from
operating at the former franchise location as prohibited by the non-compete
provision of the Franchise Agreement. The
court entered a TRO on February 8, 2001, and on February 21, 2001 converted it
into a Preliminary Injunction. Plaintiff
subsequently filed a Petition for Rule to Show Cause on March 14, 2001 alleging
that the Wus had failed to follow the Preliminary Injunction Order and cease
operating a similar business on the premises.
After a hearing and live testimony, the court ordered that the Wus cease
operating the business at the former premises pursuant to the terms of the
Preliminary Injunction Order. The
Wus have filed the present motion alleging that M & P Corporation is an
indispensable party, that Rule 65(c) required a security bond to have been made
at the time of the entry of the Preliminary Injunction, and that the Preliminary
Injunction should be modified or quashed because the enforceability of the
Franchise Agreement is in question and the elements for injunctive relief have
not been satisfied.
First,
the Wus argue that they have operated the former My Favorite Muffin franchise
and their present bakery under the corporate entity, M & P Corporation,
which is incorporated and registered in Georgia.
They argue that their business license was issued by the State of Georgia
to M & P Corporation, not to the Wus personally, and that they have really
served as employees of the M & P Corporation.
Thus, they argue that complete relief cannot be granted among the
existing parties because the Preliminary Injunction is not applicable to M &
P Corporation. This argument is not
properly raised in a motion to modify a preliminary injunction, but is more
properly raised in a motion to dismiss. Federal
Rule of Civil Procedure 12(b)(7) states that a defendant may make a motion to
dismiss a claim for “failure to join a party under Rule 19.”
As this is not a motion to dismiss and the Wus are not seeking to add M
& P Corporation under Rule 19(a), the court will not quash or modify the
preliminary injunction on this ground.
Second,
the Wus argued that the posting of a bond is mandatory upon the issuance of
injunctive relief and that the court should not have enforced the provision in
the Franchise Agreement that said that the parties did not have to post a bond
for injunctive relief. The Seventh
Circuit has held that the amount of a bond rests within the discretion of the
district court and the posting of a bond is not mandatory under Rule 65(c).
Scherr v. Volpe, 466 F2d 1027,
1035 (7th Cir. 1972). Other
district courts have followed Scherr
and denied motions to modify a preliminary injunction based on the court’s
failure to require a bond. See e.g., Special Education Svcs. V. Rreef Perf. Partnership, 1996
WL 41251, 2 (N.D.Ill.Jan. 29, 1996). In
this case, where the Franchise Agreement waives the requirement of a security
bond at the time of the issuance of an injunction and where the plaintiff has
presented sufficient evidence of likelihood of success on the merits, a bond was
not required. The court will not
quash or modify the injunction on this ground.
Third,
the Wus argue that the Preliminary Injunction Order issued by the court is
broader in scope than necessary because it requires them to not only stop
operating a My Favorite Muffin store but also to refrain from operating a
bakery. The Wus argue that the
Bakery is their only source of income and enforcement of the Order as it stands
will force them into bankruptcy. They also argue that the non-compete clause does not prohibit
the operation of a bakery within a 25 mile radius of a former My Favorite Muffin
store, and that their current bakery is not operating near any My Favorite
Muffin stores and does not violate the clause.
The non-compete clause in the Franchise Agreement, however, applies to
former franchises. The court has
reviewed the Wus’ arguments and finds that the issuance of the Preliminary
Injunction as written was proper.
Therefore,
the Wus’ motion to quash or modify the preliminary injunction order is denied.