Grout Doctor Global Franchise Corp. v. Swanson et al

Filing 23

ORDER granting 8 Motion for Preliminary Injunction; granting 15 Motion leave to file physical exhibit. Signed by District Judge Terrence W. Boyle on 5/6/14. (Moore, P. )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
SOUTHERN DIVISION
No. 7:14-CV-105-BO

GROUT DOCTOR GLOBAL FRANCHISE)
CORP.,
)
Plaintiff,
)
)
v.

)
)

ORDER

GROUTMAN, INC.; DOCTOR
)
PLUMBER, LLC; and GARY SWANSON, )
)
Defendants.
)

This cause comes before the Court on plaintiffs motion for temporary restraining order
and preliminary injunction pursuant to Rule 65 of the Federal Rules of Civil Procedure. A
hearing was conducted before the undersigned on June 6, 2014, at Raleigh, North Carolina at
which counsel for plaintiff and defendant Swanson appeared prose. For the reasons discussed at
the hearing and below, plaintiffs request for preliminary injunction is GRANTED.

BACKGROUND
This matter arises out of a terminated franchise agreement between plaintiff and
defendants. The complaint states that this is an action to prevent a terminated franchisee and its
owner and affiliate from engaging in illegal conduct intended to attack and damage plaintiff, the
franchisor. The actions allegedly taken by defendants in this regard include: infringing the
franchisor's trademarks and holding themselves out to be a franchisee after termination;
engaging in conduct which caused customers, who thought they were being served by an
authorized franchisee, to fear for their safety; making illegal disclosures of the franchisor's trade

secrets and confidential proprietary information; and repeatedly threatening and harassing the
franchisor's officers and employees.
Defendant Groutman, Inc. entered into a seven-year franchise agreement with plaintiff in
2006. A renewal agreement between the franchisor and franchisee was entered into on January
3, 2014. The agreement also included a limited, non-exclusive license to use Grout Doctor
trademarks, logos, and training materials, as well as providing for post-termination obligations.
Plaintiffterminated the franchise renewal agreement with Groutman on February 12, 2014, after
receiving two complaints from customers who complained both of faulty work as well as fear for
their safety due to the actions and statements of defendant Swanson, the sole shareholder of
Groutman. 1 Groutman, Inc. had further failed to pay the renewal fee or submit any gross sales
reports as required by the franchise agreement.
Following termination, defendant Swanson began what plaintiff contends is a vendetta
campaign against it. Swanson has left threatening voicemails for officers and employees of
Grout Doctor Global as well as for the web developer responsible for plaintiffs website,
www.groutdoctor.com. Plaintiff alleges that Swanson has continued to use plaintiffs trademarks
and continued to hold himself out as an authorized franchisee. Swanson has applied to the
United States Patent and Trademark Office for registration of marks already registered by
plaintiff, Cmp. Ex. M & N, and has published various e-books using plaintiffs marks and logos
on amazon.com.
DISCUSSION

"A preliminary injunction is an extraordinary and drastic remedy." Munaf v. Geren, 533
U.S. 674, 689 (2008) (quotation and citation omitted). A movant must make a clear showing of
each of four elements before a preliminary injunction may issue: ( 1) that he is likely to succeed
1

Groutman, Inc. is further believed to be the sole member of defendant Doctor Plumber, LLC.
2

on the merits, (2) that he is likely to suffer irreparable harm in the absence of preliminary relief,
(3) that the balance of equities tips in his favor, and (4) that an injunction is in the public interest.
Winter v. Natural Res. Def Council, Inc., 555 U.S. 7, 20 (2008); see also Real Truth About
Obama, Inc. v. Fed Election Comm 'n, 575 F.3d 342, 347 (4th Cir. 2009). 2

Plaintiff has demonstrated that it is entitled to a preliminary injunction in this instance.
Plaintiff has demonstrated that it is likely to succeed at a minimum on its claims for trademark
infringement under the Lanham Act. "In order to prevail under ... the Lanham Act for
trademark infringement and unfair competition, ... a complainant must demonstrate that it has a
valid, protectible trademark and that the defendant's use of a colorable imitation of the trademark
is likely to cause confusion among consumers." Lone Star Steakhouse & Saloon, Inc. v. Alpha of
Virginia, Inc., 43 F.3d 922, 930 (4th Cir. 1995). By holding himself out as a legitimate

franchisee of plaintiff and utilizing plaintiffs actual trademarks, defendant Swanson has and will
continue to cause confusion among customers who believe that they are contracting with a
representative of Grout Doctor. Irreparable injury regularly flows from trademark infringement.
Id at 939 (recognizing that infringement gives rise to irreparable injury as it causes a substantial

likelihood of confusion and loss of control of business reputation).
Of grave concern to the Court are the threats made by Swanson on voicemails left for
agents of plaintiff that were presented at the hearing. Through those statements Swanson has
demonstrated not only that he intends to continue to act in ways which would appear to be in
violation of his franchise agreement with plaintiffs and federal law, but which also call into
question his mental and emotional stability. The balance of equities clearly tips in favor of an

2

Plaintiff concedes that as notice has been supplied to defendants and a hearing has been held,
the remedy it seeks is a preliminary injunction and not a temporary restraining order.
3

injunction as Swanson has shown disregard for the law, and the public interest would only be
served by enjoining Swanson from engaging in this kind of behavior in the future.
It is for these reasons that plaintiffs request for preliminary injunction is granted.

Defendants are hereby PRELIMINARILY ENJOINED from:
a. Continuing to infringe on plaintiffs trademarks and holding themselves out to be a
franchisee of plaintiff,
b. Making illegal disclosures and otherwise misappropriating plaintiffs trade secrets or
proprietary information,
c. Continuing to breach post-termination obligations under the franchise agreement,
d. Harassing and threatening plaintiffs officers, employees, franchisees, and business
partners, and
e. Making false claims regarding plaintiffto agencies of the United States and the State
ofNorth Carolina.
Moreover, as stated in open court, defendant Swanson is to have no contact with plaintiff or its
officers, employees, or business partners during the pendency of this preliminary injunction.
Any communication by defendants necessary for the advancement of this lawsuit shall be limited
to counsel for plaintiff, who shall immediately report to the Court should they feel that threats
are being made against them. Defendants are CAUTIONED that any violation of this
preliminary injunction order shall be punishable by contempt. See Int'l Union, United Mine

Workers ofAm. v. Bagwell, 512 U.S. 821,833 (1994).
Finally, defendants are NOTIFIED that a business entity may not appear in this Court
without duly licensed counsel. Rowland v. Cal. Men's Colony, Unit II Men's Advisory Counsel,
506 U.S. 194,202 (1993); see also RZS Holdings AVVv. PDVSA Petroleo S.A., 506 F.3d 350,

4

354 n.3 (4th Cir. 2007). Swanson has confirmed that he is not an attorney authorized to practice
law in this district, and thus may only appear for himself without the assistance of counsel.
CONCLUSION

For the foregoing reasons, plaintiffs motion for preliminary injunction [DE 8] is
GRANTED. Plaintiffs motion for leave to file physical exhibit [DE 15] is also GRANTED.

SO ORDERED, this

L

day of June, 2014.

5