The opinion of the court was delivered by: Judge Robert M. Dow, Jr.
MEMORANDUM OPINION AND ORDER
Plaintiff 7-Eleven, Inc. has filed suit against Defendants Violet Spear and Vianna, Inc. (collectively "Defendants") seeking legal and equitable relief from Defendants concerning the termination of a franchise agreement between the parties. In turm, Defendants have filed counterclaims alleging that 7-Eleven's conduct violated Section 6 of the Illinois Franchise Disclosure Act, 815 ILCS 705/6, and Section 2 of the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/2, and also constituted common law fraud. Currently before the Court is Plaintiff's motion for a preliminary injunction  seeking to enjoin Defendants from allegedly (i) breaching their post-termination obligations under Vianna's franchise agreement with 7-Eleven, (ii) infringing 7-Eleven's federally registered trademarks and service marks in violation of the Lanham Act, 15 U.S.C. § 1114(1), and (iii) unfairly competing with 7-Eleven in violation of the Lanham Act, 15 U.S.C. § 1125(a), and the Illinois Uniform Deceptive Trade Practices Act, 815 ILCS 510/2.
Plaintiff 7-Eleven is the owner of certain federally registered trademarks and servicemarks, including 7-Eleven , which are used in connection with the operation of authorized 7-Eleven stores. 7-Eleven grants franchises to qualified persons to own and operate 7-Eleven Stores. Defendant Vianna is a former 7-Eleven franchisee that operated a 7-Eleven store in Evanston, Illinois. Defendant Violet Spear is the owner of Vianna.
Pursuant to written franchise agreements, 7-Eleven licenses franchisees to operate under the 7-Eleven marks, and it leases the store premises to them, together with the fixtures, equipment, and signs needed to operate the store. 7-Eleven also provides financing to its franchisees, including financing for the store's inventory. According to 7-Eleven, and not disputed by Defendants, store inventory and other assets are subject to a perfected security interest in 7-Eleven's favor, which secures all the indebtedness of the franchisees to 7-Eleven. In exchange for the license and lease, and for various other services (e.g., advertising, merchandising assistance, bookkeeping, certain maintenance, payment of utility expenses, indemnification for specified losses), the franchise agreement entitles 7-Eleven to receive a specified percentage of the gross profits of the ongoing operation of the store. 7-Eleven asserts that this percentage of gross profits is its primary benefit under the franchise agreement.
On March 14, 2008, 7-Eleven and Defendant Spear entered into a written franchise agreement, pursuant to which 7-Eleven (i) granted Vianna a franchise, for an initial 15 year term, to operate a 7-Eleven store at 817 Davis Street in Evanston, Illinois (the "Store") and (ii) licensed Spear to use the 7-Eleven Marks in operating the franchise. Spear assigned the franchise agreement to Vianna, a corporation of which she was sole shareholder, but remained liable for all of Vianna's obligations under the franchise agreement pursuant to a written guaranty.
In addition to the obligations outlined above, Defendants agreed to operate their 7-Eleven store in compliance with all laws, and in conformity with 7-Eleven's standards and specifications. Vianna agreed to maintain a minimum net worth of $15,000 in the Store at all times and further agreed that failure to maintain the required net worth was a material breach of the Franchise Agreement. Vianna also agreed that in the event that 7-Eleven terminated the Franchise Agreement for cause, Vianna would, among other things, (i) immediately surrender the Store premises and all 7-Eleven equipment, (ii) transfer final inventory of the Store, (iii) deliver to 7-Eleven its operations guides and all trade secrets and confidential information, and (iv) comply with the franchise agreement's post-termination obligations. Vianna also agreed that, upon termination, it would immediately cease using the 7-Eleven Marks.
Although Vianna agreed in the Franchise Agreement to maintain a minimum net worth of $15,000 at all times, at the end of March, 2010, Vianna's net worth in the Store was about $6,500, a shortfall of nearly $8,500. According to Defendant Spear, when she and her daughter questioned 7-Eleven's field consultant regarding why the shortfall had occurred, he responded that it could be due to several factors, but that this Store always ran $20,000.00 short each month. See Spear Affidavit at ¶ 13.
By letter dated April 28, 2010, 7-Eleven notified Vianna that it had three business days to increase the net worth to the required level, as well as to cure another monetary default under the Franchise Agreement. Vianna cured the material breaches which were the subject of the April 28, 2010 notice of material breach, but soon thereafter again failed to meet the minimum net worth requirement under the Franchise Agreement. Vianna's May 2010 financial statements indicated that the Store's net worth was only $6,775.34, instead of the required $15,000. In June, the shortfall from the minimum net worth requirement was $27,000, and in July, it was more than $40,000. As a result of Vianna's failure to maintain the required minimum net worth, 7-Eleven sent a notice of material breach to Vianna dated August 27, 2010, advising Vianna that it had three business days to increase its net worth to the required level or 7-Eleven would terminate the Franchise Agreement. Defendants did not cure the minimum net worth material breach. At the end of August, the Store had a negative net worth of $43,962.09, which was approximately $59,000 under the minimum net worth required under the Franchise Agreement. 7-Eleven extended the termination date in order to allow Vianna more time to cure the net worth deficiency and preserve its franchise rights, but as of the end of September 2010, Vianna was still nearly $40,000 under the required minimum net worth. 7-Eleven terminated the Franchise Agreement effective September 27, 2010.
According to Plaintiff, and not contested by Defendants, Defendants have refused to surrender possession of the Store, equipment, and inventory and continue to use the 7-Eleven marks in connection with the operation of the Store.
Like all forms of injunctive relief, a preliminary injunction is "an extraordinary remedy that should not be granted unless the movant, by a clear showing, carries the burden of persuasion." Mazurek v. Armstrong, 520 U.S. 968, 972 (1997) (emphasis in original). A party seeking a temporary restraining order must demonstrate as a threshold matter that (1) its case has some likelihood of succeeding on the merits; (2) no adequate remedy at law exists; and (3) it will suffer irreparable harm if preliminary relief is denied. See Abbott Labs. v. Mead Johnson & Co., 971 F.2d 6, 11 (7th Cir. 1992); see also Girl Scouts of Manitou Council, Inc. v. Girl Scouts of the United States of America, Inc., 549 F.3d 1079, 1085-86 (7th Cir. 2008). If the moving party meets this burden, then the court must consider the irreparable harm that the nonmoving party will suffer if preliminary relief is granted, balancing such harm against the irreparable harm the moving party will suffer if relief is denied. Storck USA, L.P. v. Farley Candy Co., 14 F.3d 311, 314 (7th Cir. 1994). Finally, the court considers the public interest served by granting or denying the relief, including the effects of the relief on non-parties. Id.; see also Credit Suisse First Boston, LLC v. Vender, 2004 WL 2806191, at *1 (N.D. Ill. Dec. 3, 2004). The court then weighs all of these factors, "sitting as would a chancellor in equity" (Abbott, 971 F.2d at 12) and applying a "sliding scale" approach, under which "the more likely plaintiff will succeed on the merits, the less the balance of irreparable harms need favor plaintiff's position." Ty, Inc. v. The Jones Group, 237 F.3d 891, 895 (7th Cir. 2001).
A. Request for Expedited Discovery
Defendants asked the Court to grant them leave to conduct certain limited written discovery prior to a ruling on the pending preliminary injunction motion, and for leave to file a sur-reply after that discovery is tendered. Although the Court has already denied Defendants' motion without prejudice, the Court will again ...