Prop. Mgmt. Bus. Solutions v. Averitte

• Decision Date: 10 September 2018
• Docket Number: Case No.: 2:18-cv-552
• Parties: PROPERTY MANAGEMENT BUSINESS SOLUTIONS d/b/a REAL PROPERTY MANAGEMENT, Plaintiff, v. RANDALL AVERITTE, Defendant.
• Court: U.S. District Court — District of Utah

PROPERTY MANAGEMENT BUSINESS SOLUTIONS

d/b/a REAL PROPERTY MANAGEMENT, Plaintiff, v. RANDALL AVERITTE, Defendant.

Case No.: 2:18-cv-552

UNITED STATES DISTRICT COURT DISTRICT OF UTAH—CENTRAL DIVISION

September 10, 2018

MEMORANDUM DECISION AND ORDER GRANTING MOTION FOR PRELIMINARY INJUNCTION

District Judge: Robert J. Shelby

Magistrate Judge: Evelyn J. Furse

Plaintiff Property Management Business Solutions, d/b/a Real Property Management (RPM), sued Defendant Randall Averitte for breach of contract, false advertising, and unfair competition. RPM moved for a preliminary injunction,¹ basing its Motion on the breach of contract claim. The court held an evidentiary hearing on the Motion on August 21, 2018. After full consideration of the parties' briefing and oral argument, the evidence presented, and the relevant legal authorities, the court finds RPM has met its burden for injunctive relief. The court GRANTS the Motion for Preliminary Injunction and ORDERS the injunctive relief specified below.

BACKGROUND

RPM is a property management franchisor with over 250 franchises in forty-six states.² Through its franchisees, RPM provides "third-party residential property management services,including the management of maintenance and repair management services, rent collection, and eviction services."³

In 2007, RPM entered into a Franchise Agreement with Averitte, covering the Phoenix, Arizona "territory."⁴ The Agreement contemplated an initial term of five years with an option to renew. Averitte renewed the Phoenix Agreement in August 2012.⁵ In December 2012, he entered into a second Franchise Agreement with RPM covering the Tucson territory.⁶ Each of the Franchise Agreements contains a forum selection clause, mandating legal claims be brought in a court "located in or serving Davis County, Utah."⁷ The Agreements also include a choice-of-law provision that calls for the application of Utah law.⁸

Averitte's Phoenix and Tucson Franchise Agreements expired by their terms in August and December of 2017, respectively. As explained below, the parties continued to operate -at least for a time—as if the Franchise Agreements remained in effect. On May 21, 2018, RPM mailed Averitte two letters stating the company would deem any "implied agreement" to continue the franchises to have expired on June 18, 2018.⁹ The parties dispute the nature of their communications during the time between the Agreement expiration dates and May 21, 2018. RPM claims the parties were actively negotiating terms for renewal, while Averitte maintains he expressed to RPM he had no intention of renewing his Agreements. Whatever the nature ofthose communications, the parties agree that Averitte continued to pay royalties to RPM and maintain his RPM affiliation until at least June 8, 2018.¹⁰

In March 2018, Averitte formed a new company, Zorion Real Estate & Property Management (Zorion Management). Zorion Management operates out of the same location as Averitte's Phoenix Franchise.¹¹ It provides property management services "including residential management, multi-family management, vacation rental management, professional house sitting, commercial property management, HOA management, and traditional real estate services."¹² Averitte maintains that several of the services Zorion Management provides are not offered by RPM.¹³

RPM alleges Averitte's operation of Zorion Management violates several provisions of the Franchise Agreements. Specifically, RPM claims Averitte is in breach of his obligations not to compete with RPM, to transfer property management accounts to RPM upon termination of the Franchise Agreements, to cease holding himself out as affiliated with RPM, and to assign his trade name, Real Property Management Pinnacle, to RPM.

I. Contract Provisions

Several provisions of the Franchise Agreements rest at the center of RPM's breach of contract claim. Their specific language informs the court's analysis. For that reason, the relevant provisions are recited below in their entirety. These provisions are found in both the Phoenix and Tucson Franchise Agreements.16.1 Actions to be Taken [Upon Expiration or Termination]

Except as otherwise provided herein, upon termination or expiration, this Agreement and all rights granted hereunder to Franchisee shall terminate and Franchisee shall:

16.1.1 immediately cease to operate the Franchised Business and the specifically developed Real Propertyware and transfer to franchisor the property management accounts, and shall not thereafter, directly or indirectly, represent to the public or hold itself out as a present or former franchisee of Franchisor[.]

* * * *

16.1.4 take such action as may be necessary to cancel or assign to Franchisor, at Franchisor's option, any assumed name or equivalent registration filed with state, city, or county authorities which contains the name "Real Property ManagementSM" or any other Mark, and Franchisee shall furnish Franchisor with evidence satisfactory to Franchisor of compliance with this obligation within thirty (30) days after termination or expiration of this Agreement[.]

16.2 Post-Termination Covenant Not to Compete

16.2.2 Except as otherwise approved in writing by Franchisor, neither Franchisee, nor any holder of a legal or beneficial interest in Franchisee . . . shall, for a period of two (2) years after the expiration or termination of this Agreement, regardless of the cause of termination, either directly or indirectly, for themselves or through, on behalf of or in conjunction with, any person, persons, partnership corporation, limited liability company or other business entity:

16.2.2.1 own an interest in, manage, operate or provide services to any Competitive Business located or operating (a) within a fifty (50) mile radius of the Approved Location, or (b) within a fifty (50) mile radius of the location of any other Real Property Management Business office in existence at the time of termination or expiration; or

16.2.2.2 solicit or otherwise attempt to induce or influence any customer, employee or other business associate of Franchisor to terminate or modify his, her or its business relationship with Franchisor or to compete against Franchisor.

22. Dispute Resolution

22.1 Choice of Law - Except to the extent this Agreement or any particular dispute is governed by federal law, this Agreement shall be governed by and construed in accordance with the laws of the State of Utah (without reference to its conflict of laws principles). . . .

22.2 Consent to Jurisdiction - Any action brought by either party, except those claims required to be submitted to mediation or arbitration, shall only be brought in the appropriate state or federal court located in or serving Davis County, Utah. . . . Claims for injunctive relief may be brought by Franchisor where Franchisee is located. . . .

Definitions

"Competitive Business" means any business that offers or provides . . . real property management services, or offers other services or products the same as or similar to those provided by Real Property Management Businesses, including, but not limited to, maintenance and repair management services and rent collection services for single-family and condominium properties, or in which the Trade Secrets or other Confidential Information could be used to the disadvantage of Franchisor, any Affiliate or its other franchisees.¹⁴

ANALYSIS

I. Forum

Before reaching the substance of RPM's Motion, the court must first address Averitte's challenge to the court's authority to decide the Motion. The Franchise Agreements contain forum selection clauses stating claims "shall only be brought in the appropriate state or federal court located in or serving Davis County, Utah."¹⁵ The provisions continue: "[c]laims for injunctive relief may be brought by Franchisor where Franchisee is located." Averitte relies on the latter sentence in arguing RPM is restricted from bring its Motion in this court. He maintains RPM may seek injunctive relief against him only in Phoenix or Tucson, where he is located.

Averitte's reading is at odds with the Agreements' plain language. Use of the word "may" in this context is permissive, not mandatory. That is, it gives RPM the option to bring its claim for injunctive relief either in an appropriate court located in Utah - under the forum selection clause - or alternatively "where the Franchisee is located." The permissive nature ofthe clause is further supported by the Agreements' contrasting use of "shall" in the prior sentence. RPM therefore appropriately brought its Motion in this court, and the court may decide it.

II. Preliminary Injunction Standard

The preliminary injunction RPM seeks is an extraordinary remedy that may only be awarded if the right to relief is "clear and unequivocal."¹⁶ A party seeking a preliminary injunction must make a clear showing that "(1) [it] is substantially likely to succeed on the merits; (2) [it] will suffer irreparable injury if the injunction is denied; (3) [its] threatened injury outweighs the injury the opposing party will suffer under the injunction; and (4) the injunction would not be adverse to the public interest."¹⁷

RPM's burden is higher here because some of the relief it seeks is mandatory and disfavored in the Tenth Circuit. Specifically, RPM asks the court to order Averitte affirmatively transfer property management accounts to RPM. A movant seeking a disfavored injunction "must make a strong showing both with regard to the likelihood of success on the merits and with regard to the balance of the harms.'"¹⁸ RPM meets its high burden here.

A. Likelihood of Success on the Merits

RPM must make a strong showing it is likely to succeed in demonstrating 1) the noncompete provisions are valid and enforceable, and 2) Averitte is in violation of the contract provisions at issue. Before reaching those issues, however, the court must decide what state's law governs the Franchise Agreements.

The Agreements contain a choice-of-law provision selecting Utah state...