United States District Court, D. Nebraska
COMPLETE NUTRITION FRANCHISING, LLC, and R2 DISTRIBUTION, LLC, Plaintiffs,
J. HOWELL, LLC, et al., Defendants.
MEMORANDUM AND ORDER OF PRELIMINARY
M. Gerrard United States District Judge.
matter is before the Court on plaintiff Complete Nutrition
Franchising, LLC's motion for a preliminary injunction
(filing 16). For the following reasons, the Court
will grant Complete Nutrition's motion.
Nutrition is a retailer of nutritional supplements that has
franchised retail stores across the country. Filing 18 at
4. Defendant J. Howell, LLC operated the
Complete Nutrition franchises in Knoxville, Tennessee and
nearby Alcoa, Tennessee starting in 2015, when it bought the
franchise rights from the previous owners. Filing 18 at
4. Defendants James C. Howell and James P. Howell are
the members of J. Howell. Filing 18 at 1.
Howell entered into two Franchise Agreements with Complete
Nutrition in 2015-one for each store. Filing 19-1 at
24-112. The Howells executed personal guaranties for the
stores agreeing to be personally bound by the Agreements.
Filing 19-1 at 114-118. The Agreements were
terminable by J. Howell only if J. Howell was in compliance
with the Agreements and Complete Nutrition was not.
Filing 19-1 at 47-48, 92-93. Complete Nutrition
could terminate the Agreements for a number of specified
reasons- including, as relevant, J. Howell's failure to
meet its obligations under the Agreements, closure or
abandonment of the stores, or sale of unapproved products.
Filing 19-1 at 48, 93.
of the Agreements, J. Howell promised that its stores would
be used for no purpose other than operation of Complete
Nutrition stores. Filing 19-1 at 31-32, 76-77. J. Howell
agreed that neither it nor its owners would "directly or
indirectly perform any services for, engage in or acquire, be
an employee of, lender or guarantor of, have any financial,
beneficial or equity interest in, or have any interest based
on profits or revenues of any" competing business.
Filing 19-1 at 43, 88. And J. Howell agreed that for
2 years after termination of the agreement, neither it nor
its owners, nor any member of their immediate families,
"will directly or indirectly perform any services for,
engage in or acquire, be an employee of, have any financial
interest in, loan money to, or have any interest based on
profits or revenues of any" competing business within a
25-mile radius of each store. Filing 19-1 at 51,
96. Nor would J. Howell, its owners, or their
immediate families "employ or seek to employ any person
who is at the time employed by [Complete Nutrition] . . . at
any other Complete Nutrition Store or otherwise directly or
indirectly induce or seek to induce one of these persons to
leave his or her employment." Filing 19-1 at 51, 96.
early 2017, J. Howell had fallen behind on royalty payments
for the Alcoa store and the telephone was disconnected.
Filing 18 at 18. A private investigator sent by
Complete Nutrition found the store closed. Filing 18 at
18. And in late October 2017, the Knoxville Complete
Nutrition store had been rebranded as "Alpha
Nutrition." Filing 18 at 18-19. Much (but not
all) of Complete Nutrition's trade dress was removed from
the store, and Alpha Nutrition began promoting itself as
such, touting its new products and the lower prices
purportedly made possible by no longer paying franchise fees.
See filing 18 at 19-22. Alpha Nutrition also
continued to sell its inventory of Complete Nutrition
products, at sharp discounts. Filing 18 at 22; see filing
19-1 at 122.
response, Complete Nutrition sent J. Howell a demand letter,
and when that received no response, initiated this
litigation. Filing 19-1 at 120; filing 1. Complete
Nutrition now seeks an injunction enforcing the non-compete
provisions of the Agreements. Filing 16.
deciding whether to issue a preliminary injunction, the Court
weighs the four Dataphase factors: (1) the threat of
irreparable harm to the movant; (2) the state of the balance
between this harm and the injury that granting the injunction
will inflict on other parties; (3) the probability that the
movant will succeed on the merits; and (4) the public
interest. Johnson v. Minneapolis Park & Recreation
Bd., 729 F.3d 1094, 1098 (8th Cir. 2013); (citing
Dataphase Sys., Inc. v. C L Sys., Inc., 640 F.2d
109, 114 (8th Cir. 1981) (en banc)). A preliminary injunction
is an extraordinary remedy, and the movant bears the burden
of establishing its propriety. Roudachevski v. All-Am.
Care Centers, Inc., 648 F.3d 701, 705 (8th Cir. 2011);
see also Winter v. Natural Res. Def. Council, Inc., 555 U.S.
7, 20 (2008).
OF IRREPARABLE HARM
preliminary injunction cannot issue without a showing of
irreparable harm. Dataphase, 640 F.2d at 114
n.9. To show a threat of irreparable harm, the
movant must show that the harm is certain and great and of
such imminence that there is a clear and present need for
equitable relief. Roudachevski, 648 F.3d at 706.
Stated differently, the harm "must be actual and not
theoretical." Packard Elevator v. I.C.C., 782
F.2d 112, 115 (8th Cir. 1986). And harm is not
irreparable when a party can be fully compensated for its
injuries through an award of damages. Gen. Motors Corp.
v. Harry Brown's, LLC, 563 F.3d 312, 319 (8th Cir.
Court finds that Complete Nutrition has shown a threat of
irreparable harm in this case. Alpha Nutrition's business
has been built, at least in part, on Complete Nutrition's
goodwill, which Alpha Nutrition is now arguably
misappropriating. Alpha Nutrition's business was also
built, at least in part, on education and instruction
provided to its employees by Complete Nutrition, as
consideration for services that are no longer being provided.
See filing 19-1 at 5. Alpha Nutrition's sale of
Complete Nutrition's products alongside new products of
unknown provenance, along with Alpha Nutrition's use of
its own trade dress along with remaining elements of Complete
Nutrition's trade dress, creates a likelihood of the sort
of confusion that has often been held to establish an
irreparable injury. Cf. United Healthcare Ins. Co. v.
AdvancePCS, 316 F.3d 737, 741-44 (8th Cir. 2002).
Nutrition's evidence also suggests that its efforts to
reestablish a franchise in the market will be impaired by the
presence in the market of a former franchise. Filing 19-1
at 9. And it is difficult to assess the effect on
Complete Nutrition's reputation and goodwill in the
relevant market while Alpha Nutrition uses the springboard it
received from Complete Nutrition as a basis to build its
business, and Complete Nutrition is denied the presence in
the market for which it contracted. It is also difficult to
quantify the degree to which the defendants will be unjustly
enriched by their use of the support they received from