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BASKIN-ROBBINS, INC. v. PATEL

March 3, 2003

BASKIN-ROBBINS, INCORPORATED, A DELAWARE CORPORATION, AND BASKIN-ROBBINS USA, CO., A CALIFORNIA CORPORATION, PLAINTIFF
v.
BALDEV S. PATEL, AN ILLINOIS RESIDENT, DEFENDANT.



The opinion of the court was delivered by: James B. Moran, Senior United States District Judge

MEMORANDUM OPINION AND ORDER

Plaintiffs Baskin-Robbins Inc. and Baskin-Robbins USA (Baskin-Robbins) bring this breach of contract action against defendant Baldev S. Patel seeking enforcement of a covenant not to compete. Plaintiffs now move for a preliminary injunction and defendant moves to strike portions of plaintiffs' complaint. For the following reasons, defendant's motion is granted in part and denied in part. We deny the motion for preliminary relief, for now, because we believe an evidentiary hearing is necessary for a limited purpose.

BACKGROUND

On March 21, 1996, Jay Bhavani, Inc. and Baskin-Robbins USA entered into a franchise agreement and sublease for a Baskin-Robbins retail ice cream store in Glenview, Illinois. Defendant signed the agreement as franchisee on behalf of Jay Bhavani, Inc. The agreement contains a non-compete provision:

FRANCHISEE further covenants that, except as otherwise approved in writing by BASKIN-ROBBINS, FRANCHISEE shall not, for a continuous and uninterrupted period commencing upon the termination or expiration of this Agreement and continuing for two (2) years thereafter, either directly or indirectly, for itself; or through, on behalf of, or in conjunction with any person, persons, partnership or corporation, own, maintain, operate, engage in, or have any interest in any business which is the same as or similar to the Retail Unit and which is located at the Premises or in the building or group of buildings in which the Premises are located.

DISCUSSION

We first address defendant's motion to strike all references in the complaint to the Lanham Act, 15 U.S.C. § 1051 et. seq. and to any references to protectable trademarks. The federal trademark statute cited in paragraph four of the complaint does not provide a basis for jurisdiction in this case. Defendant does not contest this conclusion. The references to federal question jurisdiction and the Lanham Act are accordingly stricken.*fn1 All other references to Baskin-Robbins trademarks and their protection, however, support plaintiffs' allegations of damage to the good will they have created and will remain intact.

To succeed on their motion for preliminary injunction, plaintiffs must demonstrate a likelihood of prevailing on the merits, that they have no adequate remedy at law, and that they will suffer irreparable harm if we do not grant the relief. Promater Industries, Ltd. v. Eguitrac Corp., 300 F.3d 808, 811 (7th Cir. 2002). If they meet these threshold requirements, we then balance the harm an injunction would cause defendant against the harm to plaintiffs if the injunction is denied. Finally, we consider the effect that granting or denying the injunction will have on the public. Id.

During the course of this litigation two sets of circumstances have emerged. One relates to plaintiffs' emerging franchise policies and their reaction to competition by Kaleidoscoops stores. The other relates to the relationship between Baskin-Robbins and defendant, leading up to this litigation. The parties put very different spins on those circumstances, although those circumstances have but a limited impact upon the legal rights and liabilities in this case.

There appears to be no dispute that plaintiffs have embarked upon a corporate policy to emphasize development of stores offering not only ice cream but also doughnuts and other products, a combination of Baskin-Robbins, Dunkin' Donuts and/or Togo sandwiches. Defendant's store was and is a stand-alone ice cream store. Further, in a number of instances in the past few years, plaintiffs' franchises have been replaced by Kaleidoscoops stores, a trend that has been noted in the media. In some instances, such as here, plaintiffs have sought to assert non-compete rights. These efforts appear to be relatively few in number. In others they have chosen not to litigate, perhaps influenced by a conclusion that they no longer wished to operate a stand-alone store in that location and had no plans to develop a multiple products store there. In still others, the former franchisee sold or lost its interest in the premises and assets — not including any of plaintiffs' proprietary rights — to a third party, who was not constrained by any non-compete obligations and could freely operate as part of the Kaleidoscoops system.

Plaintiffs' likelihood of success on their claim depends on whether the non-compete clause in the agreement is enforceable. To determine the applicable substantive law in analyzing this contract, we apply Illinois' choice-of-law rules. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941). In Illinois, a contract's choice-of-law clause is respected as long as the contract is valid. Kohler v. Leslie Hindman, Inc., 80 F.3d 1181, 1185 (7th Cir. 1996).

The parties both point to a choice-of-law provision in the agreement to support their differing conclusions of which state law governs the ...


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