Ledo Pizza System, Inc. v. Singh

983 F. Supp. 2d 632, 2013 WL 5781580, 2013 U.S. Dist. LEXIS 153110
CourtDistrict Court, D. Maryland
DecidedOctober 24, 2013
DocketCivil No. WDQ-13-2365
StatusPublished
Cited by6 cases

This text of 983 F. Supp. 2d 632 (Ledo Pizza System, Inc. v. Singh) is published on Counsel Stack Legal Research, covering District Court, D. Maryland primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Ledo Pizza System, Inc. v. Singh, 983 F. Supp. 2d 632, 2013 WL 5781580, 2013 U.S. Dist. LEXIS 153110 (D. Md. 2013).

Opinion

MEMORANDUM OPINION

WILLIAM D. QUARLES, JR., District Judge.

Ledo Pizza System, Inc. and Ledo Pizza Carryouts, Ltd. (together “Ledo”) sued Tri-Bro, Inc. (“Tri-Bro”) and Inderjit Singh for violations of the Lanham Act, and other claims. ECF No. 1. Pending is Ledo’s motion for a preliminary injunction. ECF No. 2. On October 22, 2013, the Court held a hearing on the motion; no defendant opposed the motion or appeared at the hearing. See Fed.R.Civ.P. 65(a). For the following reasons, Ledo’s motion will be granted in part and denied in part.

1. Background1

On June 8, 2007, Ledo and Singh signed a franchise agreement, which authorized Singh to operate a Ledo pizza restaurant in Lorton, Virginia. ECF No. 1-2.2 The [635]*635same day, Singh signed an agreement sub-licensing the franchise to Tri-Bro so that Tri-Bro could serve as its operating company. ECF No. 1-3.3 Beginning in 2010, the defendants defaulted on several of their obligations under the agreements. ECF No. 1-4.4 According to Ledo, the defendants now owe Ledo $51,052.76 in overdue franchise and other fees. Ex. 7.5 On May 14, 2012, Ledo terminated the franchise agreement. ECF No. 1-5.6

On May 31, 2012, Ledo and the defendants entered into a forbearance agreement. ECF No. 1-6.7 Under this agreement, Ledo refrained from exercising its post-termination rights under the franchise agreement to give the defendants an opportunity to sell the franchise or dispose of its assets. Id. at 1. Although this agreement expired on November 1, 2012, id., Ledo agreed in June 2013 to extend the forbearance period to July 31, 2013. ECF No. 1-7.8 Beall testified that the defendants continued to operate the franchise following the termination of the franchise agreement and after the forbearance periods.

On August 14, 2013, Ledo filed a verified complaint against Singh and Tri-Bro alleging breach of contract, various violations of the Lanham Act, unfair competition, and common law trademark infringement. ECF No. 1. The same day, Ledo moved for a temporary restraining order (“TRO”) and a preliminary injunction. ECF No. 2. On August 15, 2013, Ledo filed an amended complaint, which noted that Tri-Bro had filed for bankruptcy. ECF No. 4. Both defendants were served on August 19,2013. ECF Nos. 7,8.

Ledo seeks to enjoin the defendants from further use of Ledo’s trademark and trade dress, allegedly in violation of the Lanham Act and Ledo’s common law trademark rights. ECF No. 2. at 6. Ledo also seeks the defendants’ compliance with the post-termination obligations in the franchise agreement,9 id. at 8, and the agreement’s covenant-not-to-compete, id. at 12-13.10

The amended complaint seeks a permanent injunction, see e.g., ECF No. 4 at 17, and specific performance, ECF No. 4 at 12-15. Ledo also requests damages for [636]*636breach of contract11 and costs and attorneys’ fees against defendant Singh only, because Tri-Bro has declared bankruptcy.12 See id. at 2, 12. The Court held a telephone conference with the parties on August 22, 2013, during which counsel for Tri-Bro confirmed that the company had filed for Chapter 11 Bankruptcy protection. The Court instructed counsel for both defendants to file their responses to Ledo’s motion by mid-day August 26, 2013. Only Tri-Bro’s counsel responded and, by letter, declined to file a response to the motion because Ledo no longer sought damages against Tri-Bro. ECF No. 10.

On August 30, 2013, the parties jointly stipulated to entry of a consent order that gave the defendants 30 days to wind down the business, after which the Court would order dismissal of the action or grant injunctive relief depending on whether the defendants had complied with the agreement. See ECF No. 11 at 6-9. On September 4, 2013, the Court informed the parties that, given its concern that the defendants would not have sufficient time to wind down the business, it would not enter the consent order. ECF No. 12. Instead, the Court would treat the consent order as a tentative settlement and request to stay the litigation. Id.

On October 7, 2013, Ledo renewed its request for injunctive relief, because Singh had not complied with the consent order.13 ECF No. 13 at 5. On October 10, 2013, 2013 WL 5604339, the Court granted Ledo’s request for a TRO against Singh only on Ledo’s trademark infringement claims; it otherwise denied Ledo’s requested relief.14 ECF No. 14. The Court also stayed Ledo’s suit against Tri-Bro, because of its bankruptcy filing. Id. On October 16, 2013, Ledo moved for sanctions and a contempt order against Singh, because Singh continued to operate the Ledo franchise after the entry of the TRO.15 See ECF No. 18.16

On October 22, 2013, the Court held a hearing on Ledo’s motion for a preliminary injunction. Singh did not appear. James Beall, Ledo’s President, testified. Beall described how Singh became a Ledo pizza franchisee and the subsequent deterioration of Singh’s business relationship with [637]*637Ledo. Beall testified about the assistance he gave Singh to attempt to help him to resolve the franchise’s financial difficulties,17 which included overdue fees to Ledo, late rent payments to Singh’s landlord, and back payroll and sales taxes owed to the State of Virginia. When it became clear to Beall that Singh could no longer operate as a successful Ledo franchisee, given the extent of his defaults under the franchise agreement, he advised Singh to sell the franchise and located several potential buyers — current Ledo franchisees looking to open additional franchise locations. Singh refused to consider these, buyers’ offers. This led Ledo to terminate its franchise agreement with Singh.

During the forbearance periods that followed, Singh again rejected Beall’s suggested buyers’ offers for the franchise. Singh finally accepted an offer from his general manager. To allow them to close the deal, Ledo agreed to a 30-day winding up period, which was formalized in the stipulated consent order submitted to this Court. That deal was not completed because the landlord refused to accept the buyer.

Beall testified that after the Court granted Ledo’s request for a TRO prohibiting Singh from further infringement of the Ledo trademark, Singh continued to operate as a Ledo pizza until October 14, 2013. Singh then closed the restaurant until October 19, 2013, when he reopened as a Stallion pizza — a different franchise. Beall did not authorize Singh to reopen as a competing pizza franchise. Singh continues to use Ledo’s proprietary software system to manage his sales, he uses the same decor and floor plan in his new restaurant that he used in the Ledo restaurant,18 he sells some food made using Ledo’s recipes,19 and he retains possession of Ledo’s operating manuals.

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983 F. Supp. 2d 632, 2013 WL 5781580, 2013 U.S. Dist. LEXIS 153110, Counsel Stack Legal Research, https://law.counselstack.com/opinion/ledo-pizza-system-inc-v-singh-mdd-2013.