Gus's Franchisor, LLC v. Terrapin Restaurant Partners, LLC

CourtDistrict Court, W.D. Tennessee
DecidedMarch 10, 2021
Docket2:20-cv-02372
StatusUnknown

This text of Gus's Franchisor, LLC v. Terrapin Restaurant Partners, LLC (Gus's Franchisor, LLC v. Terrapin Restaurant Partners, LLC) is published on Counsel Stack Legal Research, covering District Court, W.D. Tennessee primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Gus's Franchisor, LLC v. Terrapin Restaurant Partners, LLC, (W.D. Tenn. 2021).

Opinion

IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TENNESSEE WESTERN DIVISION

GUS’S FRANCHISOR, LLC, ) ) Plaintiff, ) ) ) Case No. 2:20-cv-2372-JPM-cgc v. ) ) ) TERRAPIN RESTAURANT PARTNERS, ) LLC, and MARK DAWEJKO, ) ) Defendants. )

ORDER ON DAMAGES FOR CONTEMPT

Before the Court is Plaintiff Gus’s Franchisor, LLC’s (“Gus’s”) Memorandum in Support of an Award of Damages for Defendants’ Contempt of Court, filed on September 11, 2020. (ECF No. 52.) In conjunction with this Court’s Order Granting Plaintiff’s Motion for Contempt (ECF No. 49), Gus’s seeks an award of “trebled damages either in the form of disgorgement of profits or anticipated royalty fees plus attorney’s fees and costs.” (Id. at PageID 1664.) Defendants Terrapin Restaurant Partners, LLC (“Terrapin”) and Mark Dawejko filed a Response on September 13, 2020. (ECF No. 54.) Defendants assert that Plaintiff’s memorandum improperly seeks a substantially greater amount of sanctions than Plaintiff originally sought and argue that the Court should “decline to award Plaintiff any amount based on alleged damages under the Lanham Act.” (Id. at PageID 1700.) Defendants also argue that the attorneys’ fees and costs must be limited to costs incurred by Plaintiff in bringing the Motion for Contempt and that “[a]ttorneys’ fees and costs related to the TRO, the Consent Permanent Injunction, or unnecessary trips to Maryland in furtherance of Plaintiff’s strategy to set Defendants up to be sanctioned for civil contempt are inappropriate.” (Id.) The Court held a Video Evidentiary Conference on September 14, 2020. (See Minutes,

ECF No. 56.) The Court heard testimony from Wendy McCrory, President of Gus’s. (Id.) For the reasons set forth below, the Court AWARDS Plaintiff damages in the amount of $33,148.93, attorneys’ fees in the amount of $22,932.00 and costs in the amount of $938.73. I. BACKGROUND Gus’s filed its Complaint on May 22, 2020. (See Compl., ECF No. 1.) Gus’s alleges that Defendants unlawfully used Gus’s trademarks, trade dress, trade secrets and proprietary business information in operating their Greenbelt, Maryland Gus’s franchise after Gus’s terminated its franchise relationship with Defendants on or about May 8, 2020. (See id. ¶¶ 1– 4.) Plaintiff filed a Motion for a TRO and Preliminary Injunction on May 26, 2020. (ECF No. 8.)

The Court held a hearing on May 29, 2020 on Plaintiff’s application for a TRO. (See Minutes, ECF No. 17.) After hearing testimony from Defendant Mark Dawejko the Court granted the TRO. (See TRO, ECF No. 20.) The TRO prevented Defendants from using any of Gus’s trademarks, service marks, or any “colorable imitation of” Gus’s marks. (Id. at PageID 660.) The TRO also prevented Defendants from operating their restaurant as if it was “in any way associated with Gus’s World Famous Fried Chicken or its franchise system,” among other restrictions. (Id.) Defendants were required to provide an affidavit of compliance within 15 days of the entry of the TRO. (Id.) On June 15, 2020, the Court entered a Consent Permanent Injunction as submitted by the Parties. (ECF No. 26.) Defendants were enjoined from operating as a Gus’s franchise and representing the restaurant as a Gus’s restaurant, and Defendants were required to remove all Gus’s proprietary information from the Greenbelt, Maryland restaurant. (See generally id.)

Defendants were required to file an affidavit demonstrating compliance with the Permanent Injunction by June 30, 2020. (Id. at PageID 675–76.) On June 23, 2020, Gus’s filed its Amended Complaint, alleging that Defendants continued to operate their restaurant as a Gus’s Fried Chicken franchise despite the TRO and Permanent Injunction. (See Am. Compl., ECF No. 29 ¶¶ 6–11.) Gus’s also filed a Motion for Contempt, claiming that Defendants have violated the Court’s TRO and Permanent Injunction. (ECF No. 29.) Defendants filed the Affidavit of Mark Dawejko (“Dawejko Aff.”), who asserted that Defendants complied with the Permanent Injunction and provided pictures demonstrating compliance with the Orders. (See Dawejko Aff., ECF No. 30.) Defendants’ responded to the Motion on July 10, 2020. (Defs. Resp., ECF No. 31.) Plaintiff filed a Reply Brief on July 17,

2020. (ECF No. 34-1.) The Court held a Hearing on the Motion on July 28, 2020 at which Mark Dawejko testified. (Minutes, ECF No. 40.) On August 31, 2020, the Court entered an Order Granting Plaintiff’s Motion for Contempt (“Contempt Order”). (ECF No. 49.) The Contempt Order found that Plaintiff “met its burden demonstrating Defendants’ noncompliance with the Court’s TRO and Permanent Injunction,” but that Plaintiff had not presented sufficient proof for the Court to determine the appropriate amount of damages. (Id. at PageID 1653.) The Court found that “Defendants’ failure to comply with the TRO and the Consent Permanent Injunction from June 1, 2020 to at the earliest June 20, 2020 demonstrates that an award is appropriate to coerce Defendants’ compliance with the Court’s Order.” (Id.) The Court noted that Plaintiff’s had not provided any proof in support of the requested $25,000 sanction, set an evidentiary hearing for September 14, 2020 and required Plaintiff to file an affidavit as to attorneys’ fees and costs. (Id. at PageID 1653–54.)

On September 11, 2020, Plaintiff filed its Memorandum in Support of an Award of Damages for Defendants’ Contempt of Court and Supporting Affidavits to Determine Amount to be Awarded. (ECF No. 52.) Plaintiff argues that the Court’s determination regarding damages should be guided by the Lanham Act and that it is entitled to a disgorgement of profits for the time period Defendants were in contempt. (Id. at PageID 1657–60.) Specifically, Plaintiff seeks $121,766.63, a figure that encompasses Defendants’ gross monthly sales for June 2020 and the expected monthly sales for July and August 2020 based on the the average of Defendants’ gross sales for the months of March, April, May and June 2020. (Id.) Plaintiff argues that Defendants have yet to submit adequate proof of compliance with the TRO and the Consent Permanent Injunction and therefore have not been in compliance for the months of

June, July and August 2020. (Id.) For its calculation, Plaintiff relies on the Declaration of Wendy McCrory (“McCrory Decl.”), in which McCrory states (1) Defendants’ average monthly gross sales from March through June 2020 were $44,308.85, (2) Gus’s lost access to Defendants’ sales reports as of July 2020, and (3) the March through June 2020 average monthly sales adequately establish Defendants’ expected sales in July and August 2020. (Id.; see also McCrory Decl., ECF No. 52-1.) Plaintiff also seeks $6,071.40 in royalty fees for the months of June, July and August 2020 but asks for the greater of the royalty fees or the disgorgement of profits if the Court finds that awarding the greater would consume and include the lesser. (Id. at PageID 1660–61.) Whatever award the Court grants, Plaintiff argues it should be trebled, because Defendants have both willfully operated as a Gus’s franchise even after termination from the Gus’s franchise system and because Defendants have continued to disregard the Court’s Orders. (Id. at 1661– 62.) Finally, Plaintiff seeks both attorneys’ fees and costs accrued in the investigation of

Defendants’ contempt, the filing of the Motion for Contempt, and related legal preparations. (Id. at PageID 1662–65.) Based on the McCrory Decl. and the attached affidavits of Plaintiff’s counsel, Plaintiff seeks $2,061.69 in costs and either $22,932.00 in combined attorneys’ fees or $66,644.50 if the Court “is inclined to also award the fees incurred as to obtain the TRO and Injunction which were ignored by Defendants and resulted in the Order Granting Contempt.” (Id. at PageID 1663.) Defendants filed a Response in Opposition to Plaintiff’s Memorandum on September 13, 2020. (ECF No.

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Gus's Franchisor, LLC v. Terrapin Restaurant Partners, LLC, Counsel Stack Legal Research, https://law.counselstack.com/opinion/guss-franchisor-llc-v-terrapin-restaurant-partners-llc-tnwd-2021.