Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Tim Hortons USA, Inc. v. Tims Milner LLC

United States District Court, S.D. Florida

June 17, 2019

TIM HORTONS USA, INC. and TIM DONUT U.S. LIMITED, INC., Plaintiffs,
v.
TIMS MILNER LLC, et al, Defendants.

          ORDER ON CROSS-MOTIONS FOR PRELIMINARY INJUNCTION

          CHRIS M. McALILEY, UNITED STATES MAGISTRATE JUDGE

         Pending before the Court is Plaintiff/Counter-Defendant Tim Horton USA, Inc.'s (hereafter, “Plaintiff”) Motion for Preliminary Injunction, (ECF No. 27), and Defendants/Counter-Plaintiffs Tims Milner, LLC, Tims 12 Mile LLC, Tims 8 Mile, LLC, Tims Five-Mile, LLC, Tims Greenfield, LLC, Tims Evergreen, LLC, Tims Compuware, LLC, Nicole Wilski, Jimmy Rahaim, and Baby Buford Holdings, LLC (hereafter, “Defendants”) Motion for Preliminary Injunction, (ECF No. 62). The Motions have been fully-briefed. (ECF No. 29, 37, 45, 71). The Honorable Darrin P. Gayles referred the Motions to me upon the full consent of the parties. (ECF No. 49, 69, 122). The Court held an evidentiary hearing on May 13 and 14, 2019. Having carefully reviewed the parties' legal memoranda and the applicable law, and having considered the evidence presented at the preliminary injunction hearing, the Court GRANTS Plaintiff's Motion and DENIES Defendants' Motion.

         I. INTRODUCTION

         Defendants are a collection of business entities and their owners and guarantors. (ECF No. 32 at ¶¶ 4-13; ECF No. 62 at 1-2). Defendant Nicole Wilski is the sole member of each of the entity Defendants. (ECF No. 32 at ¶¶ 6-13). Her husband, Defendant Jimmy Rahaim is not a member of any of the defendant entities. Mr. Rahaim, however, entered into a Guarantee, Indemnification, and Acknowledgement Agreement in connection with each of the Franchise Agreements and signed certain of the Franchise Agreements as a Guarantor. (See ECF No. 36 at ¶ 201). Plaintiff is the franchisor of the Tim Hortons brand and franchises restaurants throughout the United States. (ECF No. 32 at ¶ 14). In 2016, Defendants and Plaintiff and its affiliate Tim Donuts U.S. Limited, Inc. (hereafter, “Plaintiff's Affiliate”) entered into Franchise Agreements and Lease Agreements (together, the “Agreements”)[1] that provided for Defendants' ownership and operation of franchised Tim Hortons restaurants at seven locations in Michigan (the “Restaurants”).[2] (ECF No. 32 at ¶¶ 38-73).

         Each of the Franchise Agreements grants Defendants the right to operate one Tim Hortons restaurant in a specific location and to use the Tim Hortons trademarks. (See, e.g. PX 1 at § 1.01). In return, among other terms and conditions, Defendants agreed to pay Plaintiff royalties, advertising and other fees. (Schaefer Decl., ECF No. 96 at ¶ 41; see, e.g., PX 1 at §§ 4.04 - 4.06). The royalty fee is calculated as a percentage of weekly gross sales, and is compensation for Defendants' use of Plaintiff's system and trademarks. (Schaefer Decl., ECF No. 96 at ¶ 41; PX 1 at § 4.04) The advertising fee is calculated as a percentage of monthly gross sales and provides for advertising, sales promotion, and public relations expenditures made by Plaintiff on behalf of all Tim Hortons restaurants. (Schaefer Decl., ECF No. 96 at ¶ 41; see, e.g., PX 1 at §4.05).

         Additionally, pursuant to the Lease Agreements, Defendants agreed to pay as rent a percentage of monthly gross sales, as well as to pay other charges associated with the leased premises, including taxes, utilities, common area assessments and charges, and other types of costs associated with the common areas of the leased premises. (Ostaszewicz Decl., ECF No. 97 at ¶ 8). Defendants, however, maintain that they reached a verbal agreement with two employees of Plaintiff prior to execution of the Agreements, that they are only required to pay rent based on a flat percentage of gross sales, and are not required to pay as additional rent all real estate taxes and assessments, sales taxes, common area maintenance charges and assessments, certain utilities, and personal property taxes (together, the “Additional Rent Amounts”). (Schaefer Decl., ECF No. 96 at ¶ 50; May 14, 2019 Hrg. Trans., ECF No. 121 at 62: 10-25).

         Per the Agreements, Defendants would report gross sales on a weekly basis through an online interface. (PX 1 at § 4.04). Based on the sales reported by Defendants, Plaintiff would calculate the amounts owed and invoice Defendants for the amounts due based on reported sales. Plaintiff also invoiced Defendants for all independently calculated amounts, such as taxes, utilities, and various fees, among others. The invoices were available to Defendants through an internet-based system called “Tim Zone” used by all of Plaintiff's franchisees. (Wilski Aff., ECF No. 95-1 at ¶ 9; Ostaszewicz Decl., ECF No. 97 at ¶ 22). If Defendants disagreed with or had questions regarding an invoice, they could dispute the invoice through an online dispute system called GBS. (Wilski Aff., ECF No. 95-1 at ¶¶ 9, 12; May 14, 2019 Hrg. Trans., ECF No. 121 at 104:14-19). Each Friday, if the invoices were not timely disputed, Plaintiff would deduct the amounts invoiced from Defendants' accounts. (Wilski Aff., ECF No. 95-1 at ¶ 9).

         From early in the relationship, Defendants were concerned with the accuracy of Plaintiff's accounting and billing procedures. (Wilski Aff., ECF No. 95-1 at ¶¶ 8, 11). Defendants disputed invoices through the GBS dispute system. (Id.). In this lawsuit, Defendants claim that many of their disputes were never addressed or resolved and that Plaintiff has, and continues to, incorrectly demand payment from the Defendants for amounts past due. (Wilski Aff., ECF No. 95-1 at ¶ 35; see generally Counterclaim, ECF No. 18 at ¶¶ 38-74). Ultimately, due at least in part to their issues with Plaintiff's operational systems, Defendants decided to sell the Restaurants and advised Plaintiff of such. (Wilski Aff., ECF No. 95-1 at ¶ 16). Plaintiff introduced Defendants to a potential buyer of Plaintiff's Restaurants, Kava Restaurants, LLC (“Kava”). (Wilski Aff., ECF No. 95-1 at ¶ 17).

         On or about June 19, 2018, Defendants entered into an Asset Purchase Agreement with Kava, for the sale of the Restaurants to Kava. (Wilski Aff., ECF No. 95-1 at ¶ 24). The Franchise Agreements give Plaintiff the right to approve any sale, however, before it can be final. (See, e.g. PX 1 at 11.02(a)). As is its standard procedure, Plaintiff conditioned its approval of the sale upon full payment from Defendants of all past-due amounts. (May 14, 2019 Hrg. Trans., ECF No. 121 at 8:14-25; see also, e.g. PX 1 at 11.03(b)(vii)). Defendants disputed that they owed the amounts Plaintiff sought. (ECF No. 62 at 2; May 14, 2019 Hrg. Trans., ECF No. 121 at 7:13-8:3). The sale of the Restaurants was repeatedly delayed while Plaintiff and Defendants negotiated payment of the past due amounts. (ECF No. 62 at p. 7, ¶ 7; Wilski Aff., ECF No. 95-1 at ¶¶ 25, 31). The parties were unable to reach a resolution and Plaintiff filed this action on October 9, 2018. (ECF No. 1). The next day Plaintiff issued Notices of Default to Defendants which stated that Defendants had breached the Agreements by failing to pay the past due amounts. (Schaefer Decl., ECF No. 96 at ¶ 52). The Notices gave Defendants ten days to cure their financial default, otherwise Plaintiff would terminate the Agreements. (Schaefer Decl., ECF No. 96 at ¶ 53; see also PXs 26-32). Defendants failed to cure the defaults during the cure period. (Schaefer Decl., ECF No. 96 at ¶ 54). On November 13, 2018, Plaintiff issued Notices of Termination of the Agreements to Defendants notifying them that the Agreements terminated effective November 12, 2018. (Schaefer Decl., ECF No. 96 at ¶ 55; see also PXs 33-39).

         Defendants nonetheless continued to operate the Restaurants and the parties continued their efforts to negotiate a resolution of their dispute. (Wilski Aff., ECF No. 95-1 at ¶ 38). Plaintiff continued to supply Defendants with approved supplies and Defendants continued to make certain payments for rent, royalties, and ad-fund contributions. (Id.) The parties were unable to resolve their dispute, however, and in January 2019 Defendants ceased making any payments to Plaintiff. (Wilski Aff., ECF No. 95-1 at ¶¶ 38). Shortly thereafter, in February 2019 Plaintiff cut off Defendants' supply of approved products. (Wilski Aff., ECF No. 95-1 at ¶¶ 40). On April 25 2019, Kava terminated the Asset Purchase Agreement. (Wilski Aff., ECF No. 95-1 at ¶¶ 44). Still, Defendants continued to operate, at first with stored supplies, and later using supplies from vendors not approved by Plaintiff. (May 14, 2019 Hrg. Trans., ECF No. 121 at 82:21-85:23, 100:1-9). With the exception of one location, all of Defendants' Restaurants were still in operation as of the evidentiary hearing on May 13 and 14, 2019.[3] (May 14, 2019 Hrg. Trans., ECF No. 121 at 80:1-8).

         The parties filed cross-motions for preliminary injunction now before the Court. (ECF Nos. 27, 62). Plaintiff asks the Court enjoin Defendants from using any of the Plaintiff's trademarks or service marks, and from representing the Restaurants as genuine and authorized Tim Hortons restaurants. (ECF No. 27 at 4-5). For their part, Defendants ask the Court to, inter alia, enjoin Plaintiff and Plaintiff's Affiliate so as to “maintain the status quo” as of February 2019. (ECF No. 62 at 3-4). This would include requiring the Plaintiff to supply Defendants with approved products and permit Defendants to use Plaintiff's marks, and barring Plaintiff and Plaintiff's Affiliate from evicting Defendants from any of the Restaurants or taking any other “self-help measures designed to drive [Defendants] out of business, ” until the resolution of this lawsuit. (Id. at 4)

         At the evidentiary hearing on the parties' cross-motions for preliminary injunction, Plaintiff presented testimony from Stephen Ostaszewicz and Robin Schaefer. Defendant Nicole Wilski testified for Defendants. The witnesses' direct testimony was presented through declarations and affidavits filed with the Court prior to the hearing. (See ECF Nos. 70 at ¶ 5; 95-97).

         II. ANALYSIS

         A. Standard for Preliminary Injunction

         A district court may grant injunctive relief if the movant shows the following: (1) a substantial likelihood of success on the merits; (2) that irreparable injury will be suffered unless the injunction issues; (3) the threatened injury to the movant outweighs whatever damage the proposed injunction may cause the opposing party; and (4) if issued, the injunction would not be adverse to the public interest. McDonald's Corp. v. Robertson, 147 F.3d 1301, 1306 (11th Cir. 1998) (citations omitted); see also Schiavo ex. rel Schindler v. Schiavo, 403 F.3d 1223, 1225-26 (11th Cir. 2005)).

         A movant seeking a preliminary injunction must show a substantial likelihood of success on at least one of its claims. Schiavo ex rel. Schindler v. Schiavo, 357 F.Supp.2d 1378, 1384 (M.D. Fla. 2005), aff'd, 403 F.3d 1223 (11th Cir. 2005). A preliminary injunction is an “extraordinary and drastic remedy not to be granted unless the movant clearly established the burden of persuasion as to the four requisites. McDonalds, 147 F.3d at 1306 (citation and quotation marks omitted).

         B. Plaintiff's Motion for ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.