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The Maids International, Inc. v. Maids On Call, LLC

United States District Court, D. Nebraska

September 25, 2017

THE MAIDS INTERNATIONAL, INC ., a Nebraska corporation; Plaintiff,
v.
MAIDS ON CALL, LLC, a Connecticut limited liability company; MAIDS ON CALL II, LLC, a Massachusetts limited liability company; TIMOTHY SCUSSEL, an individual; MARYANNE SCUSSEL, an individual; SARA ROCK, an individual; STACEY SCUSSEL, an individual; and S.A.G. MANAGEMENT, INC., Defendants.

          MEMORANDUM AND ORDER

          Laurie Smith Camp, Chief United States District Judge

         This matter is before the Court on the Motion for Preliminary Injunction, ECF No. 21, filed by Plaintiff, The Maids International, Inc. (TMI). Plaintiffs have not sought a temporary restraining order in conjunction with the Motion for Preliminary Injunction. For the reasons stated below, the Court concludes that the Motion will be granted.

         BACKGROUND

         TMI is the franchisor of the “The Maids” franchise system that provides professional household maintenance and cleaning services to residential properties in the United States and Canada (the Franchise System). TMI alleges that it has developed a business system for its services using techniques, special equipment and processes, standards and specifications, products, and other methods (the Business System). TMI's Business System is associated with TMI's “The Maids” trademarks, trade names, service marks, and related marks (referred to collectively as the Marks). Kirwan Aff., ¶ 4, ECF No. 23-15 at Page ID 1342-43. TMI licenses franchisees to use its Business System and Marks pursuant to the terms of written Franchise Agreements. Id.

         From July 30, 2002, until on or about March 1, 2008, Defendants Timothy Scussel, and Maryanne Scussel (collectively referred to as the Scussel Defendants) entered into four separate Franchise Agreements in which they were granted the right to own and operate four different “The Maids” franchised businesses in the state of Connecticut and the Commonwealth of Massachusetts. Id. ¶ 9, ECF No. 23-15 at ECF. 1343-44; see also ECF Nos. 22-2 through 22-6.[1] The Scussel Defendants operated their former The Maids franchised businesses out of two locations: (1) 92 Weston Street, Suite 10A, Hartford, Connecticut 06120; and (2) 1680 Riverdale Street, Unit B, West Springfield, Massachusetts 01089. ECF No. 23-15 at Page ID 1344. Pursuant to the terms of the Franchise Agreements, the Scussel Defendants provided maintenance and cleaning services at customers' homes throughout central Connecticut and south-central Massachusetts. Defendants Sara Rock and Stacey Garon, daughters of the Scussel Defendants, were employees and/or managers of the franchised businesses and were involved in the operation of those businesses. ECF No. 23-15 at Page ID 1346.

         During the period that the Scussel Defendants operated their The Maids franchises, they received access to information that TMI regarded as proprietary and confidential. This information included instructions regarding TMI's Business System, copies of TMI's confidential operation manuals, proprietary software programs, information about TMI's products and services, customer information, buying patterns and needs of customers, audio and video training tapes, vendor information, pricing information, supplemental training bulletins and notices, marketing and advertising materials, business forms and other materials (collectively referred to as the Business Information). The Franchise Agreements prohibited the Scussel Defendants and their employees from “us[ing] the Manuals or any information contained therein in connection with the operation of any other business or for any purpose other than in conjunction with the operation of” their “The Maids” franchised businesses. See, e.g., ECF No. 22-2, Page ID 749-50. The Scussel Defendants also received training from TMI regarding the Business System and other marketing and cleaning techniques. Defendants Rock and Garon[2] had access to the Business Information as employees and managers within the Scussel Defendants' franchises.

         In Fall 2014, TMI investigated the Scussel Defendants' sales and reporting practices and concluded that the Scussel Defendants were providing services to customers outside of their territories and in the territories of neighboring “The Maids” franchisees in violation of Article 2.1 of the Franchise Agreements. Kirwan Aff., ¶ 18, ECF No. 23-15 at Page ID 1346. TMI discovered that the Scussel Defendants had failed to accurately report all sales to TMI and failed to pay all fees owed on those sales, as required by the Franchise Agreements. TMI notified the Scussel Defendants and provided them with an opportunity to cure the breaches. After the Scussel Defendants failed to cure the breaches, TMI terminated the Franchise Agreements. ECF No. 23-15 at Page ID 1346-47.

         By mutual agreement between the parties, TMI subsequently “stayed” the termination of the Franchise Agreements to allow the Scussel Defendants time to sell their The Maids franchised businesses. However, the Scussel Defendants failed to sell their businesses and, instead, abandoned those businesses in April 2017. Accordingly, TMI lifted its stay of the termination and terminated the Franchise Agreements by letter dated April 12, 2017 (the Termination Letter). ECF No. 23-3, Page ID 1288. In the Termination Letter, TMI described the Scussel Defendants' post-termination obligations, including the non-compete and non-solicitation provisions in Article 19.3 of the Franchise Agreements. Id., Page ID 1291.

         TMI alleges in its Complaint that the Scussel Defendants have failed to comply with the non-compete and non-solicitation provisions set forth in Article 19.3 of the Franchise Agreements and are now operating a directly-competitive residential maintenance and cleaning business. Defendants assert that in or around September 2016, Defendants Stacey Garon and Sara Rock established a new residential cleaning business, SAG Management, Inc. d/b/a Two Sisters Cleaning Service (Two Sisters). Garon Decl. ¶¶ 5-6, ECF No. 31-7, Page ID 1480. Two Sisters had a new website, new uniforms, and new telephone numbers. Id. In December 2016, Defendant Timothy Scussel sent a letter to customers of his The Maids franchise announcing his retirement (the Retirement Letter). See ECF No. 31-6, Page ID 1456. Scussel stated that “SARA, STACEY and MILLIE are ready to take over. (They really have been running the business for many years).” Id. The Retirement Letter further explained that although Timothy Scussel expected “most everything will remain the same, ” pricing would increase. Scussel explained that this was due to minimum wage increases in Massachusetts and Connecticut. Thus, according to Scussel, pricing “was going to change regardless of the start up of our new company or not.” Id., Page ID 1457.

         Two Sisters carried over several items from the Scussel Defendants' The Maids franchise. Two Sisters operates at the same Hartford, Connecticut, and West Springfield, Massachusetts, locations where the Scussel Defendants operated their The Maids franchised businesses and performs the same services. At the time TMI filed its Motion for Preliminary Injunction, Two Sisters continued to display a The Maids sign outside the West Springfield, Massachusetts location. The Two Sisters' Facebook page indicated that Two Sisters used the same email address in their Two Sisters business that the Scussel Defendants used in the operation of their former The Maids franchised businesses. See ECF No. 23-7. The Two Sisters website states that it is “family owned and operated” and has been “professionally cleaning homes and businesses since 2002.” Filing No. 23-9. Information from the Whois website registration service indicates that Tim Scussel is the “registrant, ” “admin, ” and “tech” for the Two Sisters website. Two Sisters continued to use the same yellow vehicles associated with The Maids franchises. ECF No. 23-6. Motor vehicle records indicate that two of the vehicles used by Two Sisters are still registered to Defendant Maids on Call, LLC. See ECF Nos. 23-12, 13.

         TMI alleges that Defendants conspired to operate a competing residential maintenance and cleaning service business under the Two Sisters name to circumvent and avoid the non-compete, post-termination, and non-solicitation provisions of the Franchise Agreements. TMI alleges that the Scussel Defendants breached the Franchise Agreements and Personal Guaranties by failing to pay lost future fees and failing to comply with post-termination obligations. Amended Compl., ECF No. 37, Page ID 1638-39. TMI further alleges that all Defendants violated the non-competition and non-solicitation provisions of the Franchise Agreements. Id., Page ID 1640. TMI also alleges trademark infringement, unfair competition, and civil conspiracy. Id., Page ID 1641-43, 46. Finally, TMI alleges that the Garon and Rock tortiously interfered with TMI's business relationships. Id., Page ID 1644-45.

         DISCUSSION

         Application of Injunction to All Defendants

         As an initial matter, the Court addresses whether each of the Defendants can be subject to an injunction in this case. Defendants imply that under Rule 65(d)(2), an injunction against all Defendants may only issue if the Scussel Defendants benefitted from or are significantly involved in the operation of Two Sisters. See Df. Br. at 27, ECF No. 32, Page ID 1497. Defendants provide no support for this contention and the plain language of Rule 65(d)(2) permits broader application. Under Rule 65(d)(2), a preliminary injunction may bind “(A) the parties; (B) the parties' officers, agents, servants, employees, and attorneys; and (C) other persons who are in active concert or participation with anyone described in Rule 65(d)(2)(A) or (B).” The Eighth Circuit has further described those acting in active participation, stating that “[a] decree of injunction not only binds the parties defendant but also those identified with them in interest, in ‘privity' with them, represented by them or subject to their control.” United States v. Yielding, 657 F.3d 722, 728 (8th Cir. 2011) (citing Thompson v. Freeman, 648 F.2d 1144, 1147 (8th Cir.1981)).

         Defendants argue that although Two Sisters, Rock, and Garon are named parties, they cannot be enjoined because Rock and Garon were not signatories to the Franchise Agreements that form the basis for TMI's claims. Therefore, according to Defendants, Two Sisters, Rock, and Garon cannot be not bound by the terms of the Franchise Agreements. Defendants also argue that Maids on Call and the Scussel Defendants cannot be enjoined for the acts of a separate business entity. The Court previously held that franchisees may be enjoined under Rule 65 based on the actions of those acting in concert with them. See Merry Maids, L.P. v. WWJD Enters., Inc., No. 8:06CV36, 2006 WL 1720487, at *12 (D. Neb. June 20, 2006). Conversely, those acting in concert with franchisees may be bound for actions that violate a franchise agreement, regardless of whether they signed the agreement. Id. In this case, all Defendants may be bound by a preliminary injunction if they are acting in concert or are in privity with each other. Accordingly, for a preliminary injunction to issue against all Defendants, the Court looks to whether (a) the Scussel Defendants are in privity or acting in concert with Two Sisters, Garon, and Rock, and (b) Garon, Rock, and Two Sisters are in privity or acting in concert with the Scussel Defendants.

         1. Scussel Defendants' Connection to Two Sisters

         The Scussel Defendants argue that a preliminary injunction against them and Maids on Call is improper because Two Sisters was created and operates as a completely separate entity. However, several shared characteristics demonstrate that the Scussel Defendants and Maids on Call are in privity with Two Sisters for purposes of a preliminary injunction. Two Sisters performs the same services and operates at the exact locations of the former The Maids franchises in Hartford and West Springfield. See ECF No. 23-15. As of the filing of this motion, the sign at the West Springfield location still employed the The Maids logo. ECF No. 23-16. The Two Sisters Facebook page uses the same email address that the Scussel Defendants used in operating their The Maids franchise. See ECF No. 23-7. At least two vehicles used by Two Sisters are registered to Defendant Maids on Call. Filing No. 23-12.

         Although the Scussel Defendants allege that Rock and Garon set up Two Sisters separately, the evidence shows references to the Scussel Defendants' involvement in the creation of Two Sisters. For example, Defendant Timothy Scussel is identified as the “Registrant”, “Admin.”, and “Tech.” for the Two Sisters website. ECF No. 23-10. Further, Defendant Timothy Scussel's personal email address is referenced as the address associated with the Two Sisters website. Id. Although Defendants argue that Two Sisters' corporate documents show no reference to The Maids or the Scussel Defendants, Two Sisters' Massachusetts registration indicates that it was faxed from Maryann Scussel from a fax number associated with the Scussel Defendants. ECF Nos. 33-1, 33-2. Timothy Scussel even admitted that he filled in for Two Sisters drivers on at least two occasions. ECF No. 34-8, Page ID 1468.

         Perhaps most telling of the Scussel Defendants' interconnected relationship with Two Sisters is the Retirement Letter. See ECF No. 31-6. In the letter, which Defendants submitted as evidence of Scussel Defendants' lack of privity, Timothy Scussel stated that Rock and Garon were not going to be a part of The Maids franchise and were going off on their own. However, the letter emphasized that Rock and Garon were “ready to take over. (They really have been running the business for many years).” ECF No. 31-6, Page ID 1456. The Retirement Letter described how Two Sisters intended to be a continuation of the The Maids business:

With the company that they are starting (TWO SISTER [sic] CLEANING SERVICE) most everything will be the same as you know it today. We will have the same employees that you may know cleaning your home, using the same products to clean your home, the same cleaning schedule, we have the same insurance, (workers comp, liability & bonding) that we currently have.
Now, you have a choice to make. 1. Choose TWO SISTERS CLEANING SERVICE as your cleaning company, and everything remains the same as you know it today. 2. Choose another cleaning service, or 3. Which may or may not happen is The Maids may start another franchise in this area. Hopefully you have been happy with our service and will remain with us.
I said that most everything will remain the same. There is one item that is going to change. Now this was going to change regardless of the start up of our new company or not. That item that is changing is our pricing. As many of you know the minimum wage is going up again beginning Jan. 1, 2017. In Massachusetts the minimum wage is going from the current $10.00 per hour to $11.00, and in Connecticut from the current $9.60 to $10.10. When the minimum wage goes up our workers comp, liability insurance and payroll tax all go up because they are all based upon our payroll. Our price increase is an average ...

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