United States District Court, S.D. Florida
TIM HORTONS USA, INC. and TIM DONUT U.S. LIMITED, INC., Plaintiffs,
TIMS MILNER LLC, et al, Defendants.
ORDER ON CROSS-MOTIONS FOR PRELIMINARY
M. McALILEY, UNITED STATES MAGISTRATE JUDGE
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
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”) that provided for Defendants'
ownership and operation of franchised Tim Hortons restaurants
at seven locations in Michigan (the
“Restaurants”). (ECF No. 32 at ¶¶
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).
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).
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
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).
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).
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. (May 14, 2019 Hrg. Trans., ECF No. 121 at
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.
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).
Standard for Preliminary Injunction
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)).
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
Plaintiff's Motion for ...