SH Franchising, LLC v. Newlands Homecare, LLC, Civil Action No. CCB-18-2104

CourtUnited States District Courts. 4th Circuit. United States District Court (Maryland)
Writing for the CourtCatherine C. Blake United States District Judge
Docket NumberCivil Action No. CCB-18-2104
Decision Date28 January 2019


Civil Action No. CCB-18-2104


January 28, 2019


Pending before the court are plaintiff SH Franchising, LLC's motion for temporary restraining order and preliminary injunction and defendants' motion to dismiss. On November 16, 2018, the court held an evidentiary hearing on the motion for injunctive relief. For the reasons stated below, the court will deny the plaintiff's motion and provisionally will grant defendants' motion to dismiss in favor of mediation as explained below.


Plaintiff is SH Franchising, LLC, a Delaware company that franchises non-medical in-home care businesses primarily for senior citizens experiencing Alzheimer's disease or dementia. SH Franchising's franchises generally provide staff who assist clients with bathing, dressing, eating, and personal hygiene. One of SH Franchising's methods of advertising its services and identifying potential clients involves visiting senior home facilities and other institutions likely to have high numbers of a franchise's target clients to provide free educational services regarding how to care for individuals experiencing dementia. SH Franchising's businesses profit only from the hiring of their staff, not from the educational and informational services they provide to assisted living facilities.

Defendants are Ms. Cheryl Doyle as well as TruBlu, LLC and Newlands Homecare, LLC ("Newlands"), Ms. Doyle's current and previous businesses, respectively. Ms. Doyle owned and operated Newlands, a Tulsa, Oklahoma-based franchise of SH Franchising, from June 16, 2009

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until December 11, 2017, when she sold the franchise to Patrick Home Care, LLC. Ms. Doyle now owns and operates TruBlu.

On June 16, 2009, SH Franchising and Ms. Doyle executed a franchise agreement that contained, inter alia, a non-compete provision and a confidential information provision. The non-compete provision prohibited Ms. Doyle from owning, operating, or otherwise participating in a competitive business in the Tulsa area for two years after the termination of the franchise agreement. ECF 1-1 at pp. 44-45. The franchise agreement defined "competitive business" as

(i) any home health care or in-home care agency or business that offers or provides non-medical care, companionship services, personal assistant services, or any other product or service that is similar to the services and products authorized to be offered or sold under the Marks and the System; or (ii) any business granting franchises or licenses to others to operate the type of business specified in subparagraph (i)

ECF 1-1 at p. 25. The franchise agreement defined "Marks" as SH Franchising's trademarks, service marks, and other commercial symbols, and defined "System" as the system SH franchising developed "relating to the establishment and operation of in-home care agencies that provide various in-home non-medical care and personal assistance services, primarily for hygiene assistance, light housekeeping, meal planning and preparation, running errands, transportation, medication reminders, and Alzheimer's and dementia care." ECF 1-1 at p. 10. The confidential information provision prohibited Ms. Doyle from using any confidential information, such as computer software and digital passwords for accounts acquired from SH Franchising, and required Ms. Doyle to return all copies of the operations manual, client list, and other confidential materials upon the termination of the franchise agreement. ECF 1-1 at p. 44. Pursuant to the sale of Newlands, on December 11, 2017, Ms. Doyle and SH Franchising executed an Agreement and Consent to Transfer ("transfer agreement"), selling Newlands to the owners of Patrick Home Care. The transfer agreement terminated the balance of the franchise agreement, maintaining only those

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provisions intended to survive termination, specifically identifying the non-compete and confidential information provisions. ECF 1-2 at p. 3.

In May 2018, Ms. Doyle opened TruBlu in the Tulsa area. TruBlu provides dementia care training and consultation to senior care facilities and family members of individuals with dementia. TruBlu does not provide staff to care for individuals experiencing dementia, but instead provides informational services which educate senior care facilities or family members on how to care for such individuals. On July 10, 2018, SH Franchising initiated suit in this District, alleging breach of contract, misappropriation of trade secrets, and intentional interference with prospective advantage, and filed its motion for temporary restraining order and preliminary injunction.1 On August 1, 2018, defendants filed their motion to dismiss. Both motions have been fully briefed.


To enter a preliminary injunction, a court must find that 1) the plaintiff is likely to succeed on the merits; 2) absent injunctive relief, the plaintiff is likely to suffer irreparable harm; 3) the balance of equities tips in the plaintiff's favor; and 4) the injunction is in the public interest. Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 20 (2008) (internal citations omitted); see also Real Truth About Obama, Inc. v. Fed Election Comm'n, 575 F.3d 342, 346-47 (4th Cir. 2009) (applying the Winter factors and ruling that the previous Fourth Circuit test for preliminary injunctions should no longer be applied), vacated on other grounds, 559 U.S. 1089 (2010), reinstated in relevant part on remand, 607 F.3d 355 (4th Cir. 2010) (per curiam). "A preliminary injunction is an extraordinary remedy never awarded as of right." Winter, 555 U.S. at 24. A "clear

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showing" is required for each factor. Id. at 22.

Preliminary injunctions are either prohibitory or mandatory. A prohibitory injunction "aim[s] to maintain the status quo and prevent irreparable harm while a lawsuit remains pending." Pashby v. Delia, 709 F.3d 307, 319 (4th Cir. 2013). By contrast, a mandatory injunction alters the status quo, and is "in any circumstance disfavored " Taylor v. Freeman, 34 F.3d 266, 270 n.2 (4th Cir. 1994). The status quo is the "last uncontested status between the parties which preceded the controversy." League of Women Voters of North Carolina v. North Carolina, 769 F.3d 224, 236 (4th Cir. 2014) (quoting Pashby, 709 F.3d at 319).

A court may grant preliminary injunctive relief to preserve the status quo even if a dispute is otherwise subject to an arbitration clause. See Aggarao v. MOL Ship Mgmt. Co., Ltd., 675 F.3d 355, 376 (4th Cir. 2012) (citing Merrill Lynch, Pierce, Fenner & Smith v. Bradley, 756 F.2d 1048, 1053-54 (4th Cir. 1985) and Lever Bros. Co. v. International Chemical Workers Union, Local 217, 554 F.2d 115, 123 (4th Cir. 1976)). This preserves the integrity of the arbitral process by ensuring that a future arbitral decision could return the parties to the status quo, and thereby also ensuring that any decision rendered by the arbitral body is not a "hollow formality." Lever Bros., 554 F.2d at 123.


In its motion, SH Franchising claimed that the court should impose a temporary restraining order and preliminary injunction to prohibit Ms. Doyle from continuing to operate TruBlu. Specifically, SH Franchising requested a prohibitory injunction, which would return the parties to the status quo after the transfer of Newlands to Patrick Home Care but prior to Ms. Doyle's establishment of TruBlu. The court will deny the motion because SH Franchising has failed to establish that it is likely to succeed on the merits of its complaint and because SH Franchising has

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failed to prove that it likely will suffer irreparable harm if Ms. Doyle continues to operate TruBlu during the pendency of this case.2 In light of the denial of the motion for preliminary injunction, the court also will grant the motion to dismiss so the parties may mediate.

i. Likelihood of success on the merits

SH Franchising has not established that it is likely to succeed on the merits. SH Franchising claimed in its complaint that Ms. Doyle's creation and operation of TruBlu within two years after selling Newlands constituted a breach of contract and a violation of the Maryland Uniform Trade Secrets Act (MUTSA), Md. Code Ann., Comm. Law § 11-1201 et seq., or intentional interference with prospective advantage in the alternative. SH Franchising argued that TruBlu qualified as a competitive business under the franchising agreement, and that Ms. Doyle, in creating and operating TruBlu, was misusing SH Franchising's trade secrets and other proprietary information. The court does not find SH Franchising's arguments persuasive.

"To state a claim for breach of contract under Maryland law, the complaint must '... allege with certainty and definiteness facts showing a contractual obligation owed by the defendant to the plaintiff and a breach of that obligation by defendant.'" EndoSurg Med., Inc. v. EndoMaster Med., Inc., 71 F.Supp.3d 525, 540 (D. Md. 2014) (quoting RRC Northeast, LLC v. BAA Maryland, Inc., 413 Md. 638, 655 (Md. 2010) (internal citation and emphasis omitted)). The parties did not dispute that Ms. Doyle owed SH Franchising the contractual obligation of not owning or operating a competitive business for the two years after she sold Newlands, nor did the parties disagree regarding the general enforceability of the non-compete provision. See Ledo Pizza System, Inc. v.

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Singh, F. Supp. 2d 632, 641-42 (D. Md. 2013)...

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