Re/Max North Central v. Cook

• Decision Date: 13 November 2001
• Docket Number: No. 00-4212,00-4212
• Citation: 272 F.3d 424
• Parties: (7th Cir. 2001) Re/Max North Central, Inc., Plaintiff-Appellee, v. Patricia Cook, f/d/b/a Re/Max Lake and Country, Defendant-Appellant
• Court: U.S. Court of Appeals — Seventh Circuit

Page 424

272 F.3d 424 (7th Cir. 2001)

Re/Max North Central, Inc., Plaintiff-Appellee, v. Patricia Cook, f/d/b/a Re/Max Lake and Country, Defendant-Appellant.

No. 00-4212

In the United States Court of Appeals For the Seventh Circuit

Argued May 16, 2001

Decided November 13, 2001

Appeal from the United States District Court for the Eastern District of Wisconsin. No. 00-C-1314--John W. Reynolds, Judge. [Copyrighted Material Omitted] Before Wood, Jr., Coffey, and Williams, Circuit Judges.

Coffey, Circuit Judge.

On May 1, 1993, Re/Max North Central, Inc. entered into a franchise agreement with Patricia Cook, granting her the exclusive right to operate a Re/Max real estate office within a defined area that included Mukwonago, Wisconsin. When the 1993 agreement expired in 1998, the parties negotiated the terms of a successor agreement. Cook, however, never signed the successor agreement because she continued to object to its terms. After Re/Max made several attempts at reconciliation in hopes of solving the problem, it terminated her franchise rights on August 11, 2000. In spite of the termination Cook continued to use Re/Max's marks and logos, and Re/Max consequently sought and received a preliminary injunction in the United States District Court for the Eastern District of Wisconsin prohibiting Cook from continuing to use its trademarks and logos. Cook appeals the district court's imposition of the preliminary injunction, arguing that Re/Max failed to comply with the Wisconsin Fair Dealership Law when it terminated her franchise rights. We affirm.

I. Factual Background

On May 1, 1993, Cook entered into a franchise agreement with Re/Max to operate an exclusive Re/Max franchise in the Mukwonago-East Troy area of southeastern Wisconsin. The 1993 agreement was for an initial term of five years and provided Cook with the opportunity to renew the agreement for two additional five-year terms, provided that, among other things, Cook gave Re/Max written notice of her intent to renew not less than six (6) months prior to the end of the agreement and further that she was not in default under the terms of the 1993 agreement. Section 6.C of the 1993 agreement further provided that if Cook chose to renew her franchise rights beyond the initial period, she was required to do so under the terms of the franchise agreement being used at the time of her renewal.

In compliance therewith, Cook provided Re/Max with both a verbal and written notice of her intent to renew her franchise rights in August 1997. Re/Max did not immediately advise Cook that renewal would be forthcoming, but on April 10, 1998, Re/Max provided Cook with a copy of the 1998 Re/Max Franchise Offering Circular. Shortly after receiving the 1998 circular, Cook tendered to Re/Max a check in the amount of $8,500, twice the amount required to renew her franchise agreement. On May 1, 1998, Re/Max responded with a letter to Cook expressing its concerns about the renewal of Cook's subfranchise rights due to her failure to meet the sales associate quota required in the 1993 agreement. Under the 1993 agreement Cook had been required to retain a minimum of five (5) sales associates in her office by May 1996. Cook, however, was the only sales associate operating out of that location throughout the term of the 1993 agreement. Despite these concerns, Re/Max nevertheless offered to extend the term of the 1993 agreement for six months in order that it might ascertain whether Cook was willing and able to comply with the sales associate quota.

On November 25, 1998, Re/Max issued Cook a notice of default because she had failed to hire the requisite number of sales associates (5) under the 1993 agreement. In the notice of default, Re/Max expressed its intention not to re new her agreement unless she cured her default by expanding her office and hiring the requisite number of sales associates before January 26, 1999. In order that she might comply with the sales associate quota, Cook hired several family members,¹ though none of them had ever been a member of the Milwaukee Metro Multiple Listing Service.² Despite Cook's questionable hires, Re/Max accepted her identification of the sales associates and began the renewal process. Because Re/Max had not yet completed its 1999 franchise offering circular,³ it allowed Cook to operate her franchise on a month-to-month basis under the terms of the 1993 franchise agreement until Re/Max had completed the 1999 circular.

In April 1999, Re/Max registered its 1999 franchise offering circular with the State of Wisconsin and provided Cook with a copy to review and thereafter in June forwarded a copy of the proposed 1999 franchise agreement to her for execution. Cook was not interested in signing the agreement at this time as she was in hopes of negotiating the terms of the agreement, particularly the term dealing with the number of sales associates she was required to employ in her office. Re/Max desired that Cook retain at least five (5), if not more, sales associates in her sales office, while Cook wished to retain only two (2). Re/Max acceded to Cook's wish and engaged in lengthy negotiations with Cook and her counsel about the terms of the 1999 agreement, focusing almost exclusively on terms related to the sales associate quota. In September 1999 Cook and Re/Max ultimately agreed that the sales associate quota would remain at five (5).

Shortly after Re/Max and Cook concluded their negotiations, Re/Max provided Cook with copies of the 1999 franchise agreement for her to execute. By November 8, 1999, more than six weeks after the 1999 agreement had been forwarded to Cook, Cook still had not signed it. Re/Max inquired of Cook in writing, asking her if her delay in signing the franchise renewal agreement meant that she did not wish to renew her franchise rights. Cook responded to Re/Max's inquiry by returning the 1999 agreement on or about November 17, 1999. But instead of executing the negotiated 1999 agreement forwarded to her, Cook unilaterally altered the term dealing with the required number of sales associates. Even though the parties had previously agreed that the agreement would require Cook to employ five (5) sales associates, Cook instead suggested that she only be required to retain two, a suggestion that Re/Max had previously rejected during negotiations. Re/Max declined to accept Cook's proposed changes, and informed her that, unless she executed the 1999 agreement by December 20, 1999, as the parties had negotiated it, it would be forced to conclude that she was not interested in renewing her franchise.

On January 26, 2000, still awaiting a response from Cook, Re/Max placed Cook's franchise agreement in default, provided her with 90 days notice of termination. The notice of termination gave Cook a 60- day period, beginning on January 26, 2000, within which to cure the default by completing the renewal requirements. In the letter, Re/Max explained that the 1999 agreement expired on March 14, 2000 and would be replaced with the 2000 agreement. Re/Max provided Cook with two options to cure her default--renew her franchise rights under the 1999 agreement by signing and returning it before March 14 or renew her franchise rights under the 2000 agreement if she chose to do so after March 14.

Cook did not sign and return the 1999 agreement by March 14, 2000. Accordingly, on March 20 Re/Max sent Cook a copy of the 2000 Uniform Offering Circular by overnight mail and also extended the time within which Cook could cure her default with the signing of the 2000 agreement, in order to provide Cook the legally mandated time to review the offering. But instead of later signing the 2000 agreement, as instructed in both Re/Max's January 26 and March 20 correspondence, Cook signed the expired 1999 agreement and returned it to Re/Max on March 27, 2000.

Re/Max did not countersign the outdated 1999 agreement because that agreement was no longer registered in Wisconsin, having been replaced by the 2000 agreement. Re/Max informed Cook that it could not sign the 1999 agreement because it was no longer registered, but once more provided Cook with additional time to sign the 2000 agreement. Cook again refused to sign the 2000 agreement, without offering an accompanying explanation. Despite Cook's obstinance, Re/Max attempted to continue negotiations with Cook and offered her the option of signing the 1999 agreement with an accompanying release agreeing not to sue Re/Max for allowing her to renew her franchise rights under an expired agreement. Cook refused, and once again refused to sign the 2000 agreement, though she never did express any reason for her refusal. On July 5, 2000, Re/Max again extended Cook's time to cure the default and established a final cure date of July 10, 2000 and notified Cook that her franchise rights would be terminated effective August 11, 2000 if she had not renewed her franchise rights by executing an effective agreement by July 10. Re/Max offered Cook the choice between executing the 2000 agreement or the 1999 agreement accompanied by a waiver releasing Re/Max from liability for allowing Cook to execute an expired agreement. Cook failed to cure her default, and Re/Max terminated her franchise rights on August 11, 2000.

Despite having refused to sign a franchise agreement as well as refusing to honor the termination of her franchise rights on August 11, Cook took it upon herself to continue to use the Re/Max marks and continued to hold herself out as a licensed provider of Re/Max real estate services even after she had received notice that her right to engage in the real estate business under the Re/Max name had been terminated. Re/Max at that time filed this suit seeking an injunction against Cook for trademark infringement under the Lanham Act, 15 U.S.C. sec. 1065. In the district court, Cook argued that Re/Max had terminated her franchise rights in violation of the Wisconsin Fair Dealership Law ("WFDL"), Wis....