Peterbrooke Franchising of Am., LLC v. Miami Chocolates, LLC

• Decision Date: 28 February 2018
• Docket Number: Case No. 16–20417–Civ–COOKE/TORRES
• Citation: 312 F.Supp.3d 1325
• Parties: PETERBROOKE FRANCHISING OF AMERICA, LLC, Plaintiff/Counter–Defendant, v. MIAMI CHOCOLATES, LLC, et al., Defendants/Counter–Plaintiffs.
• Court: U.S. District Court — Southern District of Florida

312 F.Supp.3d 1325

PETERBROOKE FRANCHISING OF AMERICA, LLC, Plaintiff/Counter–Defendant,

v.MIAMI CHOCOLATES, LLC, et al., Defendants/Counter–Plaintiffs.

Case No. 16–20417–Civ–COOKE/TORRES

United States District Court, S.D. Florida.

Signed February 28, 2018

Alaina Brooke Siminovsky, Robert Mitchell Einhorn, Melissa Ivy Softness, Zarco, Einhorn, Salkowski & Brito, P.A., Mikhael Ann Bortz, Bortz Law Firm, PA, Miami, FL, for Plaintiff/Counter–Defendant.

Leon Francisco Hirzel, IV, Adam Michael Samole, Hirzel Dreyfuss & Dempsey, PLLC, Patrick Glenn Dempsey, The PGD Law Firm, LLC, Miami, FL, for Defendants/Counter–Plaintiffs.

OMNIBUS ORDER ON MOTIONS FOR SUMMARY JUDGMENT

MARCIA G. COOKE, United States District JudgeThis is a breach of contract, trademark infringement, and unfair competition action under the Lanham Act, 15 U.S.C. § 1114, and Florida state law. Peterbrooke Franchising of America, LLC ("PFA") alleges that its former franchisee, Miami Chocolates, LLC ("Miami Chocolates") and its owners, Charles and Judy McDonald, breached the parties' franchise agreement by, inter alia , operating a competing business using valuable PFA business assets, including registered trademarks. I have jurisdiction under 28 U.S.C. §§ 1331 and 1367.

Pending are PFA's Renewed Motion for Summary Judgment on its Complaint and Defendants' Counterclaim (ECF No. 164), and Defendants' Motion for Summary Judgment (ECF No. 167). For the reasons that follow, I grant the Motions in part and deny them in part.

BACKGROUND

On August, 24, 2007, Miami Chocolates entered into a Franchise Agreement (the "Franchise Agreement" or "Agreement") with franchisor Peterbrooke Franchising, Inc. ("PFI") for the right to operate a Peterbrooke chocolatier shop in Miami (the "Shop"). (ECF No. 166 ¶ 1). The McDonalds purchased and assumed operation of the Shop in September 2010. (Id. ¶ 2).

The Agreement sets forth specifications and procedures for operating the Shop. It provides, inter alia , that the owner/operator shall use and record all sales using a computer register or point-of-sale ("POS") system. (ECF No. 1–1 at 14, § 4.6.1). In relevant part, the Franchise Agreement states that:

When so instructed by Us, You shall procure and install for the Shop such computerized cash register polling packages, a POS register station, designated accounting software and software options, associated computer hardware, required dedicated telephone and power lines, modem(s) for polling purposes, printer(s), and other related accessories or peripheral equipment, and bar coding equipment as We specify in our manual and otherwise. You shall provide any assistance required by Us to bring such system on-line with Our system at the earliest possible time and You expressly agree that We shall thereafter have the free and unfettered right to retrieve such data and information from Your system as We, in Our sole and exclusive discretion, deem necessary or appropriate. The cost of such retrieval shall be borne by Us. You shall bear the sole cost of the foregoing items to be installed or purchased and activities to be accomplished by You and the delivery and installation cost of all hardware and software.

(Id. at 14, § 4.6.2).

Section 4.6.3 further provides, inter alia :

You further understand that it may become necessary for You to replace or upgrade the entire cash register system with a larger system capable of assuming and discharging all the tasks and functions specified by Us. You further understand and agree that as designs and functions change periodically, We may be required to make substantial modifications to Our specifications or to require installation of entirely different systems during the term of this Agreement or during the term of any renewal Franchise Agreement.

(Id. at 14–15, § 4.6.3).

Section 4.6.4 continues:

You agree, at Your expense, to keep Your cash register system in good maintenance and repair. Following Our testing and determination that it will prove beneficial to You, You agree to install at Your own expense such additions, changes, modifications, substitutions and/or replacements to Your hardware, software, telephone lines, power lines and other related facilities as We direct on those dates and within those times specified by Us in Our sole and exclusive discretion in Our Operating Manual or otherwise.

(Id. at 15, § 4.6.4).

Section 18 specifies that failure to comply with any provision is a default:

If you or any of Your Owners fail to comply with any provision of this Agreement or any mandatory specification, standard, or operating procedure prescribed by Us, We may terminate this Agreement effective immediately upon delivery of written notice of termination to You....

(Id. at 50, § 18.1.1).

Section 19 spells out the parties' post-termination rights and obligations, including Miami Chocolates' obligation to stop using Peterbrooke trademarks:

19.2.1 Upon the termination or expiration of this Agreement, You shall:

(a) not thereafter, directly or indirectly, at any time or in any manner identify Yourself or any business as a current or former Peterbrooke Chocolatier Shop or as a current or former franchisee of or as otherwise associated with Us, or use any Mark, any colorable imitation thereof or any mark substantially identical to or deceptively similar to any Mark in any manner or for any purpose, or utilize for any purpose any trade name, trademark or service mark, Domain Name, or other commercial symbol or trade dress that suggests or indicates a connection or association with Us;

(b) remove all signs containing any Mark and return to Us or destroy forms and materials containing any Mark or otherwise identifying or relating to an Peterbrooke Chocolatier Shop;

* * *

19.2.2 You shall furnish to Us (a) within thirty (30) days after the effective date of termination or expiration, evidence satisfactory to Us of Your compliance with Subparagraphs (a) and (c) of the foregoing obligations, and (b) within thirty (30) days after the later of expiration of Our option to purchase the Shop as provided in Section 19.6 or receipt of notice that We elect not to purchase the Shop pursuant to Section 19.6, evidence satisfactory to Us of Your compliance with the foregoing obligations.¹

(Id. at 52–53, §§ 19.2.1–19.2.2).

Section 19 also includes a non-compete provision:

19.4.1 Upon termination of this Agreement by Us in accordance with its terms and conditions, or by You without good cause ... neither You nor any of Your Principal Owners shall directly or indirectly, through a member of the immediate family of You or a Principal Owner or otherwise for a period of two (2) years commencing on the effective date of such termination or expiration or the date on which You cease to operate the Shop, whichever is later: (a) have any interest as a disclosed or beneficial owner in any Competitive Business located or operating within a twenty five (25) mile radius of the Shop or any other Peterbrooke Chocolatier Shop....²

(Id. at 53–54, § 19.4.1).

Finally, the Agreement requires Miami Chocolates to de-identify the Shop as a former Peterbrooke franchise upon termination or expiration, specifically requiring that it:

[M]ake such modifications and alterations, including removal of all distinctive physical and structural features associated with the Trade Dress of Peterbrooke Chocolatier Shops, as may be necessary to distinguish the Site of the Shop so clearly from its former appearance and from other Peterbrooke Chocolatier Shops as to prevent any possibility that the public will associate the Site with Peterbrooke Chocolatier Shops and any confusion created by such association.

(Id. at 53, § 19.2.1(g) ).

PFA purchased PFI's rights and responsibilities under the Franchise Agreement in January 2012. (ECF No. 63 ¶ 14). Under a separate agreement with Peterbrooke Idea Company, LLC, PFA also possesses the right to use Peterbrooke trademarks worldwide to operate chocolate stores and to grant franchises and licenses to third parties to do the same. (ECF No. 63 ¶ 10), and to pursue legal action against third parties, including former franchisees, for infringement and unfair competition. (Id. ).

When the McDonalds purchased Miami Chocolates, Peterbrooke stores used an Iciniti Corp POS. (ECF No. 166 ¶ 6). According to Defendants, initial discussions about transitioning away from the Iciniti Corp POS began in 2012. (Id. ¶ 7). In November 2013, PFA sent Miami Chocolates a notice requiring it to change over to a Micros Simphony System (the "Micros System"). (Id. ¶ 8). Miami Chocolates refused, asserting that the Micros System was not appropriate for a chocolatier shop and did not meet Peterbrooke specifications. (Id. ¶ 10).

On October 14, 2015, PFA sent Miami Chocolates another notice requiring it to change its POS system, this time to the NCR Silver POS System with Simplebox software (the "New POS System"). (Id. ¶ 21; ECF No. 163 ¶ 10). Miami Chocolates refused for the same reasons it refused to install the Micros System. (ECF Nos. 163 ¶ 22, 166 ¶¶ 30–31). On December 2, 2015, PFA sent Miami Chocolates a Notice of Default. (ECF No. 163 ¶ 24). Miami Chocolates responded by confirming its refusal to change over to the New POS System (Id. ¶ 25), prompting PFA to send the Notice of Termination on January 28, 2015. (ECF Nos. 20, 163 ¶ 12).

Miami Chocolates continued operating following the termination (ECF No. 163 ¶ 16–17), but Defendants claim they took several steps to disassociate it from PFA and its trademarks.³ (ECF No. (ECF No. 166 ¶¶ 48–49). PFA disagrees:

It was not until PFA filed for emergency preliminary injunctive relief in this Court ... that Defendants made any effort to cease operating as a Peterbrooke shop. But even those efforts were woefully inadequate and ineffective. Defendants took half-hearted measures (e.g., sloppily spray painting over the word "Peterbrooke" on the distinctively shaped and colored outdoor Peterbrooke Chocolatier sign, placing a garbage bag over another prominent exterior sign) that

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