Federal Court Enjoins Former Franchisees and Two Related Entities from Competing Against Franchisor
A federal court recently granted in part and denied in part a franchisor’s motion to enjoin the post-termination activities of its former franchisees and two related entities. Rooterman, LLC is a plumbing services franchisor. Belegu and Quality Air Corporation (“QAC”) were Rooterman franchises in New Jersey, New York, and Pennsylvania. Rooterman terminated the franchise agreements after the franchisees did not pay royalties and other fees. Rooterman then sued the former franchisees and two other companies Belegu operated for infringing on Rooterman’s trademarks and violating restrictive covenants in the franchise agreements. On April 11, 2025, U.S. District Court for the District of Massachusetts granted in part and denied in part Rooterman’s motion for a preliminary injunction.
Key Holdings
Trademark Infringement. The court denied Rooterman’s motion to enjoin the defendants’ use of Rooterman’s trademarks. The court determined Rooterman suffered no irreparable harm as the defendants stated they would stop mark usage and changed their internet advertising to remove Rooterman marks.
Employee Non-Solicitation Provision. The court also denied Rooterman’s motion to enjoin the employee non-solicitation provision because Rooterman offered no evidence that the defendants solicited Rooterman’s employees to work for the defendants.
Non-Compete Provision. The court granted Rooterman’s motion to enforce the non-compete provision prohibiting the employees from engaging in any service that overlaps with services offered by Rooterman franchises. The court based this decision on whether the provision had a reasonable duration, geographic scope, and a protected legitimate business interest. The court determined a three-year term on the non-compete was unreasonable and modified it to two years. The court then found the provision’s geographic limitation based on zip codes to be reasonable. Last, the court held that the defendants’ possession of Rooterman operating manuals gave rise to a legitimate business interest in protecting confidential information.
Applicability to Non-Parties of Franchise Agreements: The court extended Rooterman’s motion to enforce the non-compete clause to include non-parties to the franchise agreement. The court reasoned that because Belegu formed the companies to compete with Rooterman while operating his franchise, it was reasonable to extend the injunction to include them.
Lessons Learned for Franchisors
Injunctions require injury: Before moving for a preliminary injunction, franchisors should have evidence that franchisees have actually violated or intend to violate the franchise agreement.
Non-competition provisions must be reasonable: Courts will evaluate the reasonableness of non-competition provisions and may change them accordingly.
Non-parties can be enjoined: Franchisors can enforce provisions against related non-parties if they are participating in the conduct the franchisor seeks to enjoin.
Special thanks to Malvika Mahendhravarman, a summer associate in Foley’s Dallas office, for her contributions to this article.
