Opinion
Case No. 09-2360.
September 10, 2009
ORDER GRANTING PLAINTIFF AMERISPEC, INC.'S MOTION FOR PRELIMINARY INJUNCTION
Before the Court is Plaintiff AmeriSpec, Inc.'s ("AmeriSpec") motion for preliminary injunction filed on June 15, 2009. (D.E. #3.) Defendants Anthony S. Psaris ("Psaris") and Codecon, LLC d/b/a All-N-One Inspection Service ("Codecon") filed a response in opposition on August 4, 2009. (D.E. #15.) On September 8, 2009, the Court held a hearing on AmeriSpec's motion, at which it heard testimony from two witnesses: Psaris and David Koeppel, AmeriSpec's Director of Business Development. For the reasons stated herein, AmeriSpec's motion is GRANTED, and the Court issues a preliminary injunction against Psaris and Codecon as described below.
The Court will refer to Psaris and Codecon collectively as "Defendants."
The Court had granted Defendants' unopposed motion for an extension of time to file a response. (D.E. #10, 11.)
This motion was previously set for a hearing on August 18, 2009, but the parties jointly sought and received a continuance to a new date. (D.E. #19, 20.)
AmeriSpec also relies upon the evidence contained in Koeppel's affidavit, which AmeriSpec submitted contemporaneously with its motion for preliminary injunction. (D.E. #5.)
I. BACKGROUND
AmeriSpec engages in the business of providing home and commercial property inspections and related services through independent franchisees. On October 9, 2003, AmeriSpec and Psaris entered into an agreement whereby Psaris would become a franchisee of AmeriSpec and operate in the area of Stark County, Ohio for a period of five years. (Ex. 2, Prelim. Inj. Hr'g of Sept. 8, 2009.) That franchise agreement contains a noncompete clause, which reads, in pertinent part, as follows:
The Franchisee acknowledges the Company must be protected against the potential for unfair competition by the Franchisee's use of the Company's training, assistance and trade secrets in direct competition with the Company . . . The Franchisee agrees that it shall not, for a period of one year following the effective date of termination or expiration of this Agreement . . . either directly or indirectly, operate, own, be employed by, or consult with, any business conducting any type of residential and commercial building inspections, or providing residential or commercial property inspection services, within the Designated Territory, within ten (10) miles of the Designated Territory, or within a radius of ten (10) miles from the location of any other AmeriSpec office in existence at the time of expiration, termination, or assignment of this Agreement.
(Id. at ¶ 15.) Thereafter, Psaris engaged in home inspections under the AmeriSpec name for five years. Psaris operated as a sole proprietorship and worked out of his truck as well as, to some extent, from an office in his home.
Psaris possessed no prior experience in performing residential or commercial property inspections.
In June 2008, AmeriSpec mailed Psaris a letter advising him that his franchise would not be renewed due to his failure to meet the requirements for revenue growth specified in the franchise agreement. (Ex. 3, Prelim. Inj. Hr'g of Sept. 8, 2009.) The letter, however, offered Psaris a way to obtain a fifteen month extension should he submit and have approved a business plan for increasing revenues during the extension period. (Id.) If Psaris could increase revenues by 15% during the first twelve months of the extension, the letter stated that his franchise agreement would be renewed. (Id.)
Upon receiving AmeriSpec's letter, Psaris concluded that AmeriSpec's demands for increased revenues were unrealistic and unattainable given the poor state of the real estate market in the Stark County area. He did not submit a business plan or make a counterproposal. Instead, Psaris allowed the term of his franchise agreement to lapse in October 2008. On October 22, 2008, AmeriSpec sent Psaris a letter confirming that his franchise agreement had expired. (Ex. 16, Prelim. Inj. Hr'g of Sept. 8, 2009.) The letter also set out certain requirements for Psaris to fully effect his separation from AmeriSpec and further reminded Psaris of the franchise agreement's noncompete provision. (Id.)
By his own admission, Psaris continued to operate a home inspection business in Stark County after termination of the franchise agreement. Although Psaris no longer works under the AmeriSpec name and no longer has the same telephone number that he did when affiliated with AmeriSpec, Psaris uses the same inspection forms and relies upon many of the same business contacts as when he was an AmeriSpec franchisee. In the time since termination of Psaris's franchise, AmeriSpec has not licensed another franchisee in the Stark County area. According to AmeriSpec's website, there are four franchisees within a 100 miles radius of the four main towns in Stark County (viz., Canton, Massillon, Alliance, and Louisville). (Exs. 1215, Prelim. Inj. Hr'g of Sept. 8, 2009.)
Psaris conducts his business through Codecon, LLC d/b/a All-N-One Inspection Service.
Psaris admits that the only difference between the forms he used then and those he uses now is that the forms no longer bear the AmeriSpec name. Psaris had purchased the computer software that generates these forms from an AmeriSpec-approved vendor during the term the franchise agreement.
AmeriSpec states that it learned of Psaris's continued operation of an inspection business in March 2009. Through use of a private investigator, AmeriSpec contacted Psaris and arranged for a home inspection, which Psaris had a colleague perform on his behalf as a favor. Psaris and his colleague shared the money received from the inspection. AmeriSpec filed its complaint on June 10, 2009. (D.E. #1.) It then filed its motion for a preliminary injunction a few days later on June 15, 2009. (D.E. #3.)
II. LEGAL STANDARD
Federal Rule of Civil Procedure 65(a) authorizes a district court to issue a preliminary injunction prior to a trial on the merits. Charles Alan Wright et al., Federal Practice and Procedure § 2947 (2d ed. 1995). "A preliminary injunction is the strong arm of equity," United States v. Michigan, 230 F.R.D. 492, 496 (E.D. Mich. 2005), because it is "an extraordinary and drastic remedy," Mazurek v. Armstrong, 520 U.S. 968, 972 (1997), that must be granted with great caution and that is "never awarded as of right," Munaf v. Geren, 128 S. Ct. 2207, 2219 (2008).
"A plaintiff seeking a preliminary injunction must establish [1] that he is likely to succeed on the merits, [2] that he is likely to suffer irreparable harm in the absence of preliminary relief, [3] that the balance of equities tips in his favor, and [4] that an injunction is in the public interest." Winter v. Natural Res. Def. Council, Inc., 129 S. Ct. 365, 374 (2008). Showing a mere possibility, as opposed to the likelihood, of irreparable harm is not sufficient. Id. at 375-76. Moreover, a harm is not irreparable if an award of money damages would provide the plaintiff adequate redress. Basicomputer Corp. v. Scott, 973 F.2d 507, 511 (6th Cir. 1992); cf. Golden v. Kelsey-Hayes Co., 73 F.3d 648, 662 (6th Cir. 1996) ("Implicit in the issuance of a preliminary injunction . . . indeed, in the granting of any form of equitable relief, is a conclusion that the plaintiff has no adequate remedy at law.").
The request for a preliminary injunction, as an equitable remedy, is addressed to the sound discretion of the trial court.See USACO Coal Co. v. Carbomin Energy, Inc., 689 F.2d 94, 98 (6th Cir. 1982); see also Tennessee Valley Auth. v. Hill, 437 U.S. 153, 193-94 (1978) ("[A] federal judge sitting as a chancellor is not mechanically obligated to grant an injunction for every violation of law[.]"). The court may grant the requested relief "only if the movant carries his or her burden of proving that the circumstances clearly demand it." Overstreet v. Lexington-Fayette Urban County Gov't, 305 F.3d 566, 573 (6th Cir. 2002).
III. ANALYSIS A. Factors for Issuance of a Preliminary Injunction
1. Likelihood of Success on the Merits
The Court finds that AmeriSpec has shown that it is likely to succeed on the merits of its claims against Defendants. Psaris admits that he is operating a competing business. Moreover, Psaris has not challenged the reasonableness of the restrictions contained in the franchise agreement's noncompete clause as to time or geographical scope. AmeriSpec is, therefore, likely to succeed in proving that Psaris has breached his post-termination duties under the franchise agreement, and this factor weighs heavily in AmeriSpec's favor.
2. Irreparable Harm
AmeriSpec has also shown that Psaris's continued operation of an inspection business in the area of Stark County hinders AmeriSpec's ability to obtain another franchisee in the area. Furthermore, Psaris is using proprietary information, professional contacts, and goodwill that he acquired while operating under the AmeriSpec name, depriving AmeriSpec of potential customers and revenue. Moreover, if AmeriSpec's franchisees were able to disregard their noncompete agreements with impunity, AmeriSpec's entire business model could be placed in jeopardy as franchisees would be able to depart and then immediately begin competing with AmeriSpec after having received its benefits and knowledge of its operations. It appears that it would be difficult to determine an amount of money damages that could fully and appropriately compensate AmeriSpec for these harms. Therefore, this factor also favors AmeriSpec.
3. Balancing of the Equities
To be sure, an injunction would be burdensome to Psaris. The evidence indicates that Psaris's work as a home inspector is his chief, if not only, source of income, and he has no other employment opportunities immediately available to him. Psaris, however, freely entered into the franchise agreement with AmeriSpec in 2003 and benefited from his relationship with it over that time. AmeriSpec has a right to enforce its contracts, and, in seeking to enforce the franchise agreement's noncompete clause, AmeriSpec is only seeking the benefit of terms to which the parties had previously agreed. Any harm to Psaris is thus of his own making. See, e.g., Jiffy Lube Int'l v. Weiss Bros., 834 F. Supp. 683, 693 (D.N.J. 1993) ("[T]he often painful harm which follows a defendant who willfully breaches a contractual undertaking is not a basis for denying a plaintiff the relief to which it is legally entitled."). The Court thus finds that a balancing of the equities favors AmeriSpec.
4. Public Interest
There is a general public interest in the enforcement of contracts. Furthermore, there is no evidence that the Stark County area will be deprived of inspection services should Psaris be enjoined as requested. Therefore, this factor likewise weighs in AmeriSpec's favor.
The Court also finds that there is no evidence to suggest that issuance of an injunction would result in significant harm to third parties.
B. Duration of Preliminary Injunction
Accordingly, the Court finds that an injunction preventing Psaris from competing with AmeriSpec in Stark County is warranted. AmeriSpec, however, seeks to have the injunction run for a period of one year from the date that the Court issues the injunction. One of Psaris's principal arguments in opposition to issuance of an injunction is that nearly eight months passed between the termination of the franchise agreement and AmeriSpec's filing of this action. While the Court finds that AmeriSpec's delay is not sufficient to entirely defeat its request for relief, AmeriSpec also cannot be allowed to benefit from sitting on its rights. The term of the injunction shall therefore run from June 10, 2009 — the date on which AmeriSpec filed its complaint in this case. This is a period of time which is sufficient, but not greater than necessary, to protect AmeriSpec from impermissible competition from Defendants.
IV. CONCLUSION
IT IS SO ORDERED.
GRANTS ENJOINS one year from June 10, 2009