United States District Court, E.D. Missouri, Eastern Division
MEMORANDUM AND ORDER
A. ROSS UNITED STATES DISTRICT JUDGE
matter is before the Court on Plaintiff's Motion for
Temporary Restraining Order and Request for Preliminary
Injunction. (Doc. No. 2) The Court heard oral arguments on
September 9, 2016. For the following reasons, the motion will
be granted in part.
relevant facts, summarized herein, are set forth in
Plaintiff's complaint. Plaintiff Steamatic, Inc.
(“Steamatic”) is a franchisor in the carpet
cleaning, duct cleaning, and property restoration industry.
Defendant JJF&C, LLC (“JJF&C”) is a
former franchisee of Steamatic. James Finn and Kevin Finn,
additional defendants, are members of JJF&C. Steamatic
and Defendants operated under a Franchise Agreement (the
“Agreement”) from April 18, 2005 for an initial
term of ten years. Under the Franchise Agreement, Steamatic
provided Defendants with certain proprietary equipment,
manuals, and intellectual property to be used in furtherance
of Defendants' carpet cleaning and restoration business,
and which they agreed to return after the termination of the
Agreement. Both parties agreed to a territory in which
Defendants would have the right to operate exclusively. In
other words, Steamatic agreed not to grant another franchise
in this territory during the term of the Agreement. Moreover,
Defendants' agreed to pay royalties and fees to
Steamatic. Pursuant to another provision in the Agreement,
Defendants agreed to a covenant not to compete during the
term of the Agreement and for two years after its termination
in the exclusive territory provided for in the Agreement.
the parties dispute the exact timing of the termination of
the Agreement, Steamatic alleges that it sent a notice of
termination to Defendants on April 14, 2016 and subsequently
terminated the Franchise Agreement on July 15, 2016 due to
Defendants' defaults under the Agreement. In its July 15,
2016 letter, Steamatic reminded Defendants of their
obligations under the Franchise Agreement, including the
return of Plaintiff's proprietary information and
equipment, intellectual property, and Defendants'
obligation under the restrictive covenant. Steamatic contends
that despite the Agreement's termination, Defendants are
currently violating its obligations under the Agreement.
Steamatic asserts that Defendants have continued to operate a
business that provides the same or substantially similar
services as Steamatic after the termination of the Agreement
and in violation of a restrictive covenant contained therein.
Moreover, Steamatic asserts that Defendants have failed to
return Steamatic's propriety and confidential
information, including without limitation, its intellectual
property, equipment, and trade secrets, in violation of the
Agreement. Steamatic, for example, contends that Defendants
have operated a website called www.steamaticstl.com
that automatically directs visitors to their new business,
St. Louis Cleaning and Restoration.
a preliminary injunction should issue involves consideration
of (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
litigant; (3) the probability that movant will succeed on the
merits; and (4) the public interest.” Dataphase
Sys., Inc. v. CL Sys., Inc., 640 F.2d 109, 113 (8th Cir.
1981). “In balancing the equities no single factor is
determinative.” Id. These factors are also
considered to determine the propriety of a temporary
restraining order. See S.B. McLaughlin & Co., Ltd. v.
Tudor Oaks Condo. Project, 877 F.2d 707, 708 (8th Cir.
1989). The party requesting injunctive relief bears the
“complete burden” of proving that an injunction
should be granted. Gelco Corp. v. Coniston Partners,
811 F.2d 414, 418 (8th Cir. 1987).
Likelihood of Success on the Merits
Court notes that in their opposition to Plaintiff's
motion for a temporary restraining order and preliminary
injunction, Defendants rely solely upon Missouri law.
However, the Franchise Agreement clearly provides that the
Agreement “shall be interpreted and governed under the
laws of the state of Texas . . .” (Doc. No. 1-2, at
¶ 19.10) Plaintiff refers to the law of both states. The
Court is satisfied under the law of either state that
Steamatic is likely to succeed on the merits of its claim for
breach of contract - restrictive covenant. (Doc. No. 1, at
¶ 67) Under Missouri law, for a restrictive covenant to
be valid and enforceable, it must be reasonable as to time or
space. AEE-EMF, Inc. v. Passmore, 906 S.W.2d 714,
719 (Mo.Ct.App. 1995). The rules applicable to enforcing
non-compete agreements emanate from the purpose of such
agreements, to protect a business entity from unfair
competition by a former business associate without imposing
unreasonable restraint on the former business associate.
Id. at 719-20. Under Texas law, a covenant not to
compete is enforceable if it is ancillary to or part of an
otherwise enforceable agreement at the time the agreement is
made to the extent that it contains limitations as to time,
geographical area, and scope of activity to be restrained
that are reasonable and do not impose a greater restraint
than is necessary to protect the goodwill or other business
interest of the promisee. Tex. Bus. & Com. Code Ann.
Court finds that the covenant not to compete contained in
Article 8 of the parties' Franchise Agreement is valid
and enforceable. Here, the covenant not to compete at issue
limits Defendants' ability to operate the same or
substantially similar business for two years in twelve
counties in the Eastern Missouri and Southern Illinois
regions. The covenant not to compete was assented to by both
parties, appears not to be unconscionable or overbroad in
scope, and is reasonable in both duration and scope under
Missouri or Texas law. See AEE-EMF, 906 S.W.2d at
719-20 (finding a non-compete agreement lasting five years
and covering the continental United States to be reasonable);
see also Silvers, Asher, Sher & McLaren, M.D.s
Neurology, P.C. v. Batchu, 16 S.W.3d 340, 345-46
(Mo.Ct.App. 2000) (affirming the trial court's finding
that a non-compete agreement of two years and a
seventy-five-mile radius was enforceable).
though Defendants are no longer a Steamatic franchisee, they
continue to use www.steamaticstl.com as a landing
page. Defendants point out that the website makes clear that
Defendants' new business, St. Louis Cleaning and
Restoration, is not associated with Steamatic. However,
www.steamaticstl.com automatically diverts visitors
to the website of St. Louis Cleaning and Restoration after
fifteen seconds. Furthermore, the website for Defendants'
new business provides that the business is the “Same
Company, Same Employees, Same Owners, Same Quality, Just a
Different Name.” Consequently, Defendants' new
business, St. Louis Cleaning and Restoration, is in clear
violation of the covenant not to compete contained in Article
8 of the Franchise Agreement, as it engages in the same or
substantially similar activity that is covered in the
Franchise Agreement. The Court also finds that
Defendants' use of www.steamaticstl.com
facilitates actions which violate the enforceable covenant
not to compete. Consequently, Defendants' use of this
website also violates the covenant not to compete in Article
8 of the Franchise Agreement.
Irreparable Harm to Steamatic Absent an Injunction
harm occurs when a party has no adequate remedy at law,
typically because its injuries cannot be fully compensated
through an award of damages. Gen. Motors Corp. v. Harry
Brown's, LLC, 563 F.3d 312, 319 (8th Cir. 2009). The
Court finds that here, where the irreparable harm to
Steamatic is the violation of a binding covenant not to
compete designed to protect its interests, its remedy at law
is inadequate because the damages would be difficult, if not
impossible, to measure. Baker Electric Co-op, Inc. v.
Chaske, 28 F.3d 1466, 1473 (8th Cir. 1994);
Systematic Business Services, Inc. v. Bratten, 162
S.W.3d 41, 51 (Mo.Ct.App. 2005). For this reason, there is
sufficient likelihood of irreparable harm to justify the
imposition of injunctive relief.