Mister Softee, Inc. v. Amanollahi
| Decision Date | 01 July 2014 |
| Docket Number | Civ. No. 2:14-CV-01687(KM)(MCA) |
| Parties | MISTER SOFTEE, INC., MISTER SOFTEE SALES AND MANUFACTURING, LLC, and SPABO ICE CREAM CORP., Plaintiffs, v. REZA AMANOLLAHI, Defendant. |
| Court | U.S. District Court — District of New Jersey |
This matter comes before the Court on the motion (Docket No. 9) of the Plaintiffs, Mister Softee, Inc. ("MSI"), Mister Softee Sales and Manufacturing, LLC, ("MSSM") and SPABO Ice Cream Corp. ("SPABO") (collectively referred to as "Mister Softee" or the "Mister Softee Plaintiffs"), pursuant to Fed. R. Civ. P. 65, for a preliminary injunction against Defendant, Reza Amanollahi ("Amano").1 Plaintiffs request that the Court enjoin Amano from using Mister Softee's federally registered trademarks and from competing with Mister Softee, in violation of the non-compete clause in the Franchise Agreements entered into between Mister Softee and Amano.
I have reviewed the parties' submissions and heard oral argument on this matter on June 12, 2014. The parties agreed that an evidentiary hearing was not required. For the reasons set forth below, the Court is persuaded that Plaintiffs have met their burden of showing that an injunction is warranted. Plaintiff's motion for a preliminary injunction will therefore be granted.
As acknowledged by the parties during oral argument, the material facts are largely undisputed. Those facts, as outlined below, are gleaned from the parties' submissions as well as from oral argument.
MSI is a New Jersey Corporation and the franchisor of Mister Softee mobile ice cream trucks. Those trucks are set up to sell soft-serve and hard ice cream as well as frozen desserts, novelties, stick items, and other products. Docket No. 9-1 ("Pl. Br.") at 1; Docket No. 1 ("Compl.") ¶ 9. MSSM is a New Jersey limited liability company that customizes and sells Mister Softee trucks for use by licensees and franchisees of Mister Softee, Inc. Compl. ¶ 3. SPABO is a New York corporation and a sub-franchisor of MSI. SPABO has the exclusive right to sell Mister Softee franchises in certain areas, including the Bronx, New York. Compl. 14.
Mister Softee owns the trademarks "Mister Softee," related logos, and a musical jingle, all registered on the Principal Register of the United States Patent and Trademark Office (Registration Nos. 2128918, 0667335, 0663456, and 2218017). Pl. Br. at 2; Compl. ¶ 11. Mister Softee also owns a federal trademark registration for the overall design of the Mister Softee ice cream truck (No. 2906357). Mister Softee franchisees are licensed to use Mister Softee's trademarks and trade dress and to operate under the Mister Softee business system.
The Defendant, Mr. Amano, is a New Jersey resident, Compl. ¶ 5, and a franchisee of Mister Softee.2 On June 20, 2007, Amano entered into eight Franchise Agreements with SPABO. Pl. Br. at 3; Compl. ¶ 19. On January 1, 2012, he entered into fourteen more Franchise Agreements with SPABO. See Compl., Exhibit B ("Franchise Agreements"). All Franchise Agreements are substantially similar and the parties do not cite any material differences betweenthem. In total, Amano was granted the right to operate twenty-two Mister Softee franchises (each representing one truck) in Bronx County, New York. Pl. Br. at 3; Compl. ¶ 19, Exhibit B. Under the terms of the Franchise Agreements, Amano was authorized to park his trucks only at 337 Manida Street, Bronx, New York ("Manida Street Depot").
Amano also entered into two Truck and Equipment Sale Agreements with MSSM. Amano, as purchaser of the trucks, signed a promissory note requiring installment payments until the purchase price was paid in full. Compl. ¶ 21, Exhibit C.
Amano maintains that he was not given a prospectus at the time that he signed the various Franchise Agreements "with one possible exception." Def. Br. at 1; Docket No. 12 ("Amano Affidavit") ¶ 14 (); Amano Transcript at 46:17-47:5. Mister Softee submits that Peter Bouziotis, Secretary and Treasurer of SPABO Ice Cream Corp., offered Amano a Franchise Disclosure Document before Amano signed the Franchise Agreements, but that Amano refused to accept it "because he claimed he was a franchisee for approximately 10 years, and knew everything he needed to know about the Mister Softee system." Docket No. 18 (Pl. Reply") at 9-10; Docket No. 18-2 ("Bouziotis Affidavit") ¶ 2.
The Franchise Agreements contain various provisions that Plaintiffs maintain that Amano violated, resulting in termination of the agreements. Plaintiffs also submit that Amano voluntarily abandoned the agreements. Pursuant to Section 6.15 of the Franchise Agreements, Amano was required to park and store his Mister Softee trucks at a Mister Softee-sanctioned depot or storage yard. This requirement ensures that franchisees can store their trucks in a place that has electricity and running water so that franchisees can clean the trucks and ensure the safe storage of the ice cream products. Amano was assigned the Manida St. Depot in the Bronx. Pl. Br. at 4.
The Franchise Agreement also contains a non-compete provision. It provides that Amano cannot, for a two-year period, "directly or indirectly own, maintain, engage in, be employed by, lend money to, extend credit to, or have any interest in any other business which operates or licenses business featuring primarily the sale or ice cream or other frozen confections with the formerTerritory or within any System franchisee's territory."3 Franchise Agreement § 16.2.
Pursuant to Section 18.2, the Franchise Agreements can be terminated immediately upon delivery of notice of termination if Amano breaches an agreement with Mister Softee. Pursuant to Section 18.2.11, the Agreements can be terminated if Amano voluntarily abandons his franchises or if he does not park his trucks in the designated depot. Pl. Br. 4-5.
According to Plaintiffs, Amano clearly manifested his intent to abandon the Franchise Agreements and operate his trucks independent of Mister Softee. For instance, he has ceased making payments and has moved his trucks from the designated Manida Street Depot, in contravention of Section 6.15 of the Franchise Agreements. Pl. Br. at 5; Compl. ¶¶ 33-33.
Amano does not deny that he abandoned his Mister Softee franchises and maintains that he is out of the retail ice cream business. He states that he participates in the ice cream industry only at the wholesale level, and as manager of the Tsirkos depot. Amano does not deny moving his trucks from the designated Manida Depot. He submits that he moved his trucks to the Tsirkos depot in Long Island City in response to a dispute with Mister Softee owner James Conway. Docket No. 17 ("Def. Br.") at 1-2.
In 2009, Amano decided to sell his franchises to four men (the "four transferees")—Anthony Tsaros, Thomas Fotinakopoulos, Michael Vasiardis, andTommy Dalageorges4—who operated out of the Tsirkos depot. Amano and the four transferees met with James Conway of SPABO in New Jersey and Conway agreed to the transfer proposals.5 Amano submits that, though the Franchise Agreements are still in his name, he is the franchisee only "on paper," not in reality. Amano contends that Mister Softee never wanted to put these transfer agreements in writing, but that all parties have operated under these agreements de facto for the last five years. Thus, Amano says, he has been collecting royalties from the four transferees. He also collects note payments in cash from the men. Conway sends someone (oftentimes Conway's son) to Amano's place of business to Plck up the cash. Id. at 2-3. Amano says that he performs these functions, not in his role as franchisee, but in his role as manager of the Tsirkos depot.
Mister Softee, for its part, does not deny that it knew Amano intended to transfer his franchises to the four transferees. Mister Softee submits, however, that Amano is still in the process of an installment sale of his trucks, and continues to be the responsible franchisee. To secure the buyers' payment obligations, Amano retained title to the franchises until the final tenth annual payment was made in 2019. Docket No. 18 ("Pl. Reply") at 1. Once the final payments were made, Amano would transfer the franchises pursuant to Section 17 of the Franchise Agreements.6
On February 18, 2014, Mister Softee sent Amano a Notice of Termination, which he received on February 19, 2014. Compl. ¶ 35, Exhibit E. The Notice of Termination advised Amano that the Agreements were terminated because he: (1) moved his trucks to an unapproved depot; (2) failed to make payments under the various promissory notes; and (3) abandoned his franchises. Pl. Br. 5. The Notice of Termination and receipt thereof terminated the Franchise Agreements.
Under the Franchise Agreements, upon termination of an agreement, Amano is required to:
Plaintiffs submit that, because the franchises are now terminated, Amano is infringing the Mister Softee trademark by operating ice cream trucks using the Mister Softee Mark without permission. He has allegedly violated the Agreements by failing to de-identify his trucks (i.e., remove words and insignia identifying the trucks as Mister Softee trucks). He has also allegedly failed to return certain Mister Softee copyrighted material. See ...
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