Arthur Treacher's Franchise Litigation, In re

• Decision Date: 18 June 1982
• Docket Number: No. 81-2202,81-2202
• Citation: 689 F.2d 1150
• Court: U.S. Court of Appeals — Third Circuit
• Parties: In re ARTHUR TREACHER'S FRANCHISEE LITIGATION. MAGNESCO RESTAURANTS, INC., Appellee, v. ARTHUR TREACHER'S FISH & CHIPS, INC. and Mrs. Paul's Kitchens, Inc., Appellants. MDL 467.

Page 1150

689 F.2d 1150

In re ARTHUR TREACHER'S FRANCHISEE LITIGATION MAGNESCO RESTAURANTS, INC., Appellee, v. ARTHUR TREACHER'S FISH & CHIPS, INC. and Mrs. Paul's Kitchens, Inc., Appellants.

No. 81-2202. MDL 467.

United States Court of Appeals Third Circuit.

Argued March 18, 1982.

Decided June 18, 1982.

John M. Elliott, Edward F. Mannino (argued), John F. Stoviak, Thomas J. Elliott, Karen Marek McAlinn, Henry F. Siedzikowski, Edward S. Wardell, Timothy W. Callahan, II, Dilworth, Paxson, Kalish & Levy, Philadelphia, Pa., for appellants.

Franklin Poul, Judith R. Cohn (argued), Barry M. Klayman, Mark R. Rosen, Wolf, Block, Shorr & Solis-Cohen, Philadelphia, Pa., Weil, Gotshal & Manges, New York City, for appellee.

Before ALDISERT, VAN DUSEN and GARTH, Circuit Judges.

OPINION OF THE COURT

GARTH, Circuit Judge.

On this appeal, we are asked to determine whether the district court properly adjudged Arthur Treacher's Fish & Chips, Inc. (Arthur Treacher's) and its corporate parent, Mrs. Paul's Kitchens, Inc. (Mrs. Paul's), ¹ in contempt of a March 26, 1981 temporary restraining order, which enjoined Arthur Treacher's and Mrs. Paul's from inter alia "interfering with (appellee) Magnesco's sources of supply for the products necessary to the operation of its franchise" and "taking any other action which hinders or impedes the operation of Magnesco's business (A. 55a-57a). The temporary restraining order was thereafter extended by the consent of the parties.

We conclude that we have jurisdiction of this appeal, that Arthur Treacher's was afforded a proper hearing on the issue of contempt, and that the district court's findings which resulted in the court adjudging Arthur Treacher's and Mrs. Paul's in contempt, were not clearly erroneous. Thus, we affirm.

I.

Arthur Treacher's is the franchisor of Arthur Treacher's restaurants, and in addition owns and operates such restaurants. Magnesco Restaurants, Inc. (Magnesco) is a franchisee of Arthur Treacher's, owning and operating three Arthur Treacher's restaurants in the Bronx, New York (A. 12a). The facts underlying this case involve the same franchising dispute that is the subject of this court's decision in Arthur Treacher's Fish & Chips, Inc. v. A & B Management Corp., 689 F.2d 1137, No. 81-2306; 81-2562, which we have filed today. Arthur Treacher's franchise history and background (including its acquisition by Mrs. Paul's) is set out in detail in our opinion in A & B Management to which we have just referred. We therefore do not repeat those facts here, but limit this factual recitation to only those matters which involve the instant controversy between Arthur Treacher's and Magnesco.

On March 7, 1981, Magnesco received a letter from Arthur Treacher's terminating Magnesco's franchise. Arthur Treacher's gave as a reason for the termination that Magnesco had failed to make payments on amounts owed to Arthur Treacher's for loans, rent, and franchise fees (A. 47). Magnesco, while disputing the amounts of monies claimed, concedes that it, like many other Arthur Treacher's franchisees, had ceased paying royalties because of Arthur Treacher's failure to abide by its commitments to its franchisees (A. 22).

Subsequently, on March 12, 1981 Arthur Treacher's instructed its exclusive distributor for the Bronx, Worcester Quality Foods, to cease shipping supplies to Magnesco. Worcester supplied 90 percent of the food and other items necessary to the operation of Magnesco's franchise (A. 359a). Since Magnesco had no source other than Worcester for these supplies, its business was threatened with imminent destruction (A. 29, 52).

On March 19, 1981 Magnesco filed a complaint in the United States District Court for the Southern District of New York charging Arthur Treacher's and Mrs. Paul's with violations of the antitrust laws, breach of contract, breach of fiduciary duty to the franchisees and other claims. Magnesco alleged that Arthur Treacher's termination letter and instructions to Worcester were part of a scheme to coerce its franchisees into purchasing certain products either from Arthur Treacher's or Mrs. Paul's, or, from one or two other designated suppliers (A. 30-32). According to Magnesco, this scheme constituted a restraint of trade in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. Consequently, Magnesco's complaint sought an injunction prohibiting Arthur Treacher's and Mrs. Paul's from terminating Magnesco's franchise, from interfering with Magnesco's sources of supply and from attempting to collect monthly franchise fees from Magnesco (A. 37). Magnesco then sought a temporary restraining order which would prevent Arthur Treacher's from, among other things, interfering with Magnesco's sources of supply.

On March 26, 1981, District Court Judge Leonard Sand of the Southern District of New York entered a temporary restraining order restraining Arthur Treacher's from, "taking any ... action which hinders or impedes the operation of Magnesco's business," including "interfering with Magnesco's sources of supply ...." (A. 56). The relevant text of this order is set out in detail later in this opinion. Thereafter, Arthur Treacher's, by stipulation and without a hearing, consented to an extension (without specific date) of the March 26, 1981 order, which otherwise would have expired by its terms on April 3, 1981.

During the pendency of Judge Sand's order, Worcester Quality Foods had continued supplying Magnesco. On June 4, 1981, however, Arthur Treacher's terminated its distribution agreement with Worcester Quality Foods (A. 64a-68a, 79a, 81a-82a), so that Worcester, from that date forward, was no longer an approved supplier of Magnesco and could not supply Magnesco as an Arthur Treacher's franchisee.

On June 16, 1981 Magnesco filed a contempt motion in the Eastern District of Pennsylvania, where this case had been transferred by the Judicial Panel on Multidistrict Litigation. It sought to hold Arthur Treacher's and Mrs. Paul's in contempt of the order of March 26, 1981 as extended, claiming that Arthur Treacher's actions with respect to Worcester Quality Foods violated that order. Evidentiary hearings were held on Magnesco's contempt motion and on July 21, 1981, Judge Hannum of the Eastern District of Pennsylvania, after making findings of fact, held both Arthur Treacher's and Mrs. Paul's in contempt of Judge Sand's order.

This appeal followed. ²

II.

We initially turn to the question of our jurisdiction. Two jurisdictional problems are presented. First, Magnesco asserts that we do not have jurisdiction of Arthur Treacher's appeal because no appeal may be taken from a temporary restraining order. Second, Magnesco claims that an appeal from an adjudication of civil contempt does not vest us with jurisdiction.

A.

Although by its terms a temporary restraining order resembles an injunction, and thus a grant or denial of such an order would superficially appear to provide a basis for an appealable order reviewable by this Court, see 28 U.S.C. 1292(a)(1), it has generally been held that an appeal may not be taken from an order granting or denying a temporary restraining order. See, e.g., United States v. Crusco, 464 F.2d 1060, 1062 (3d Cir. 1972); Richardson v. Kennedy, 418 F.2d 235 (3d Cir. 1969) (per curiam). The fundamental reason for the difference in appealability between a temporary restraining order and all other injunctive orders is that a temporary restraining order is severely limited in duration. See, e.g., F.R. Civ. P. 65(b), (10 days); 29 U.S.C. § 160(l ), (5 days). Thus, the fact that a temporary restraining order is limited to short periods of time by the very authority which authorizes its issuance, and the fact that it expires by its own terms, or by court order when a preliminary injunction is entered, makes an immediate appeal unnecessary and generally futile.

By its very nature, before an appeal which challenged the provisions of a temporary restraining order could be perfected and heard, all restraints imposed in such an order would have expired. It is largely for that reason ³ that the doctrine has evolved that temporary restraining orders are not appealable. Thus, Magnesco urges upon us here that no appellate jurisdiction has attached because the injunctive order issued by Judge Sand was granted and remained in effect as a "temporary restraining order." We cannot agree.

Here, the temporary restraining order was entered on March 26, 1981. On March 31, 1981, it was extended by consent, without date. ⁴ Rather than a restraining order of short duration, the order restraining Arthur Treacher's extended for some eighty days and was continuing in effect when Magnesco's contempt motion was brought.

We recognize that Fed. R. Civ. P. 65(b) permits an extension of the operative terms of a temporary restraining order. The rule provides:

Every temporary restraining order ... shall expire by its terms within such time after entry, not to exceed 10 days, as the court fixes, unless within the time so fixed the order, for good cause shown, is extended for a like period or unless the party against whom the order is directed consents that it may be extended for a longer period.

We also recognize, as we have noted earlier, that Arthur Treacher's by stipulation consented to an extension of Judge Sand's March 26th order. ⁵ However, when a temporary restraining order is extended far beyond its statutory limits, even though it is authorized by the consent of the party against whom it is directed, ⁶ such an order begins to lose its character as a temporary restraining order and begins taking on characteristics of a preliminary injunction order which, under 28 U.S.C. 1292(a)(1), is appealable. Such an instance occurred in New York Telephone v. Communications Wkrs., 445 F.2d 39 (2d Cir. 1971).

In New York Telephone, the Second Circuit ruled that a temporary restraining order extended indefinitely by consent was nevertheless appealable under section...