Dealer Specialties, Inc. et al v. Car Data 24/7, Inc. et al
Filing
46
ORDER GRANTING PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT (Doc. 32 ). Signed by Judge Timothy S. Black on 9/23/2016. (mr)(This document has been sent by regular mail to the party(ies) listed in the NEF that did not receive electronic notification.)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION
DEALER SPECIALTIES, INC., et al.,
Plaintiffs,
v.
CAR DATA 24/7, INC., et al.,
Defendants.
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Case No. 1:15-cv-170
Judge Timothy S. Black
ORDER GRANTING
PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT (Doc. 32)
This matter is before the Court on Plaintiffs Dealer Specialties, Inc. and Dealer
Specialties International, Inc.’s Motion for Summary Judgment. (Doc. 32). Plaintiffs’
motion was filed March 31, 2016. Defendants have not filed a response to date. 1
Plaintiffs’ motion is accordingly ripe for consideration as unopposed. 2
1
Following Plaintiffs’ filing of their motion for summary judgment, Defendants’ counsel filed a
motion to withdraw (Doc. 34), which was granted by the Court on May 3, 2016. (See 5/3/16
Notation Order). The Court then set a new deadline of June 17, 2016 for the parties to respond
to the motion for summary judgment. (Id.). Notice of the motion was served upon the
unrepresented defendants in accordance with Paragraph A.5 of the Court’s Standing Order
Governing Motions for Summary Judgment. (Docs. 37, 38, 40). To date, no response to the
motion has been filed.
2
Despite the lack of opposition, Plaintiffs are still required to demonstrate a genuine absence of
material fact as to their claims to prevail on their motion for summary judgment. See, e.g.,
Miller v. Shore Fin, Servs. Inc., 141 F. App’x 417, 419 (“[The Sixth Circuit has] made it clear on
many occasions that a district court abuses its discretion when it grants summary judgment solely
because the non-moving party has failed to respond to the motion within the applicable time
limit.”) (citing Stough v. Mayville Cmty. Sch., 138 F.3d 612, 614 (6th Cir.1998); Carver v.
Bunch, 946 F.2d 451, 455 (6th Cir.1991)).
1
I.
UNDISPUTED FACTS
1.
DS and DSI are in the vehicle data distribution and marketing business.
DS's subsidiary, DSI, franchises to others a business system involving the
production of unique vehicle description labels that facilitate vehicle sales
along with the distribution of vehicle data, and the marketing and sale of
certain products and services offered to vehicle dealers. Through its
network of licensed franchises and other distribution channels, DSI
provides automobile dealers with window stickers or labels comparable to
those provided by manufacturers of new vehicles. (Doc. 32-3, at 1–2).
2.
These labels are generated through the Autostik software. The Autostik
software also transmits automobile data and photos related to the labels,
which can then be used in the marketing and sale of vehicles on a variety of
consumer websites and in printed publications. (Id. at 2).
3.
On April 17, 2011, DSI, as franchisor, and Car Data 24/7, Inc. ("Car Data
24/7"), as franchisee, entered into a franchise agreement ("Franchise
Agreement") for a non-exclusive franchise territory encompassing the
Florida Counties of Broward, Miami-Dade, Monroe, and Palm Beach.
(Id.; Doc. 19, at 11). The Franchise Agreement was a
renewal of an existing franchise relationship between DSI on the one hand
and Car Data 24/7 and Gary and Sherry Lindsey on the other hand. (Doc.
32-3, at 3).
4.
Contemporaneously with entry into the Franchise Agreement, Gary
Lindsey and Sherry Lindsey, as the owners of Car Data 24/7, gave their
personal guaranty ("Guaranty") of payment and performance of each and
every undertaking, agreement, and covenant of the Franchise Agreement.
(Id. at 2).
5.
Ten or more years ago, Gary and Sherry Lindsey began to involve their
son, Ell Jay Lindsey, in the franchised business. Ell Jay Lindsey eventually
assumed the title and duties of president of Car Data 24/7. (Id. at 3; Doc.
32-4 at 5–6).
6.
Under the Franchise Agreement, Car Data 24/7 and, by their guaranty, Gary
and Sherry Lindsey, promised that they would not own, engage or
participate in a "Competing Business", which is defined as a business or
enterprise that sells, markets or promotes products or services similar to
those offered by Dealer Specialties® franchisees, including especially
vehicle window labeling and vehicle data distribution. (Doc. 32-1, at 3).
They further promised that during the term of the Franchise Agreement and
for two years thereafter, they would not divert, or attempt to divert, any
2
customers of their Dealer Specialties® franchised business to any
Competing Business by direct or indirect inducement or otherwise. (Id.).
7.
Similarly, Ell Jay Lindsey entered into a Confidentiality/Non-Compete
Agreement (the "Non-Compete Agreement") with DS and its subsidiaries
and related business entities, including DSI. (Id.; Doc. 19, at 3; Doc. 32-4 at
9–10). Ell Jay Lindsey promised in the Non-Compete Agreement to keep
confidential the information he learned by his access to the franchised
business and promised not to provide services to any "Conflicting
Organization", which is defined as any person or organization engaged (or
about to become engaged) in the sale or service of "Conflicting Products",
which is in turn defined as products or services similar or competitive with
any Dealer Specialties® product. (Doc. 32-3, at 4).
8.
During 2014, Car Data 24/7 began defaulting on its payment obligations
under the Franchise Agreement. On February 3, 2015, DSI issued a formal
notice of default ("First Default Notice"). (Id.; Doc. 32-4, at 7–8).
9.
Within a few days of issuing the First Default Notice, DSI learned
Defendants had been attempting to convert Dealer Specialties® customers
to a different vehicle label and distribution system under a competitor's
brand called HomeNet (Doc. 32-3, at 4):
A. On November 25, 2014, Ell Jay Lindsey, as president of
Car Data 24/7, entered into a Mutual Nondisclosure
Agreement with HomeNet, Inc. for the purpose of "exploring
a mutually beneficial relationship." (Doc. 32-4, at 34–36).
The next day, Ell Jay Lindsey executed a Reseller Agreement
with HomeNet, Inc. (Id. at 15, 37). Ell Jay Lindsey
acknowledged that both HomeNet, Inc. and Dealer
Specialties® are vehicle inventory platforms, offer essentially
the same services, and he could not identify any difference
between HomeNet and Dealer Specialties®. (Id. at 17–18).
B. On February 9, 2015, Ell Jay Lindsey, using the e-mail
address "elljaylindsey@cardata247.com" sent an e-mail to a
Dealer Specialties® client notifying the client that "all of my
guys are going to start utilizing HomeNet to upload our
photographs. We will no longer be representing Dealer
Specialties at the end of this week." (Id. at 38).
10.
On February 13, 2015, DSI issued a second notice of default ("Second
Default Notice") to Car Data 24/7, Gary Lindsey, Sherry Lindsey, and Ell
Jay Lindsey, warning them that their conduct was in violation of the
3
restrictive covenants contained in the Franchise Agreement and NonCompete Agreement. (Doc. 32-3, at 4–5).
11.
Despite these warnings, Defendants refused to cease their competitive
activities:
A. On February 13, 2015, Plaintiffs received notification that
Mercedes Benz of Cutler Bay, a Dealer Specialties®
customer, intended to cancel its services and move to
HomeNet as an inventory provider based on the relationship
with Ell Jay Lindsey. (Id. at 5).
B. Three days later, on February 16, 2015, Ell Jay Lindsey
registered a new entity with the Florida Secretary of State
under the name "Car Data, Inc." only to dissolve it on
February 17, 2015. (Id. at 5–6; Doc. 32-4, at 39–42). On the
same day (February 17, 2015), though, Ell Jay Lindsey's high
school friend and "independent contractor" of Car Data 24/7,
John Finucane, formed a new company called "CarData, Inc."
(Doc. 32-3, at 5; Doc. 32-4, at 24).
12.
On February 27, 2015, DSI terminated the Franchise Agreement based on
Car Data 24/7's failure to satisfy its payment delinquency and also because
Car Data 247 had been in default under the Franchise Agreement two or
more times in the preceding twelve months. (Doc. 32-3, at 5).
13.
DSI has maintained a corporate location and serviced customers in the
same geographic area as Car Data 24/7 for more than a decade. Likewise,
another Dealer Specialties® franchisee (Mark Piper) had an overlapping
territory with Car Data 24/7 for many years. The Franchise Agreement
expressly allowed these additional Dealer Specialties® presences:
“B.
FRANCHISOR’s grant of the franchise in the Territory is
NON- EXCLUSIVE to its right to operate its own or
affiliated Dealer Specialties® Business or grant franchises
to other to do so.”
(Id. at 6).
14.
The South Florida area where the franchise territory is located is home to
nearly 8 million people and hundreds of car dealerships and well beyond
the capabilities of a single franchisee like Car Data 24/7. Still, DSI
refrained from calling on customers with established relationships with Car
Data 24/7 (or any other Dealer Specialties® franchisee) as it would be
4
confusing to the customer and not good for business in general. Plaintiffs
never deployed a salesperson or sales team into the South Florida area to
target Car Data 24/7's customers. (Id.).
15.
Ell Jay Lindsey, though claiming generally that Plaintiffs "infringed" on the
franchise territory, cannot provide any specific information on the alleged
encroachment:
Q. And who was part of that sales force?
A. I don't recall.
...
Q. And what dealerships were those?
A. I don't recall.
(Doc. 32-4, at 14).
Q. What dealerships did Dealer Specialties target?
A. All of them.
Q. But you don't remember the specific names of [] these
dealerships?
A. No.
Q. What about the contact information for whoever you dealt with at
the dealerships?
A. No.
Q. Which dealerships actually left Car Data 24/7?
A. I don't recall.
Q. Did any dealerships leave?
A. I don't recall.
...
Q. Do you remember anything else about losing these dealerships?
A. No.
Q. What about the dates when the dealerships left Car Data 24/7?
A. No.
Q. Do you have any documents showing that Car Data 24/7 lost
these dealerships to Dealer Specialties?
A. No.
Q. So you have no proof that you lost any business as a result of
Dealer Specialties coming into your territory?
A. No.
(Id. at 21–23).
16.
In fact, Defendants do not recall even the number of Dealer Specialties®
clients they serviced prior to termination of the Franchise Agreement:
5
Q. How many dealerships did Car Data 24/7 service in 2015?
A. I don't recall.
Q. Does 90-100 sound right?
A. I don't recall.
Q. Is there any document that would refresh your recollection on
this?
A. Not that I know of.
(Id. at 11).
17.
Also, Defendants performed all of the services provided to their dealership
clients on an informal basis:
Q. Did you have contracts with any of these dealerships that we've
talked about, Tech Auto Sales, Massey Yardley Chrysler, Toyota of
South Florida, Dadeland Dodge?
A. No.
Q. No contracts at all?
A. No.
Q. Not written? Not oral?
A. No.
Q. And by you, I mean, Car Data 24/7 had no contracts -A. No.
Q. -- with these dealerships? And you personally did not have any
contracts with these dealerships?
A. Correct.
(Id. at 12).
18.
Following the termination of the Franchise Agreement (that is, after
February 27, 2015), Plaintiffs contacted the Dealer Specialties® customers
formerly serviced by Defendants in an effort to salvage the customer
relationships. (Doc. 32-3, at 6; Doc. 32-5, at 2).
19.
On March 3, 2015, Plaintiffs sent a letter to the former customers of Car
Data 24/7 notifying them that, despite Defendants' representations to the
contrary, the customers did not need to change to a new vendor (such as
HomeNet) to obtain Dealer Specialties®-type products and services. The
letter also provided contact information and instructions for customers who
wished to re-establish their Dealer Specialties® products and services.
(Doc. 32-3, at 7).
20.
On March 10, 2015, Brett Nicholson, Plaintiffs' National Sales Director,
visited Lehman Hyundai Subaru. Ell Jay Lindsey arrived at the dealership
while Mr. Nicholson was present, but the General Manager asked Ell Jay
6
Lindsey to leave because he remained upset that Ell Jay Lindsey had
transitioned the dealership from Dealer Specialties® to HomeNet without
permission. (Doc. 32-5, at 2).
21.
Similar to his encroachment claim, Ell Jay Lindsey cannot recall vital
details about his claim that Plaintiffs defamed him:
Q. Who made these statements?
A. No specific names. I don't have any specific names right now that
I can think of.
Q. What about dates?
A. No specific dates.
...
Q. And were these statements verbal?
A. Yeah, verbal. Yeah. They're not going to put that on paper.
Q. So there were no statements in writing?
A. No. They're a billion-dollar company. They're not that dumb.
Q. What was the content of the statement? Exactly what they said?
A. Again, I wasn't there. They didn't say this to my face, so I don't
know the exact. All I know is through the grapevine. So, you know,
through several different sources that it was, you know, hey, you
know, you're not doing business right away; you're about to get
sued; you're about to be out of business, before any of this was true.
Again, I don't have a problem with the statement. I have a problem
with the time they did it.
Q. And who -- who was part of the grapevine?
A. I don't have any specific names.
(Doc. 32-4, at 28–29).
22.
Despite Plaintiffs' efforts to regain their customers, Plaintiffs ultimately lost
79 Dealer Specialties® customers as a consequence of Defendants'
violations of the restrictive covenants, and only five of the customers were
ever recovered. (Doc. 32-3, at 7).
23.
Plaintiffs initiated this action on March 11, 2015. (Doc. 1).
24.
Plaintiffs served Car Data 24/7, Ell Jay Lindsey, Gary Lindsey, and Sherry
Lindsey with the Complaint on March 16, 2015. (Docs. 5–8).
25.
On April 18, 2015, the Court entered an Agreed Temporary Restraining
Order enforcing the restrictive covenants of the Franchise Agreement and
Non-Compete Agreement. (Doc. 13).
7
II.
STANDARD OF REVIEW
A motion for summary judgment should be granted if the evidence submitted to
the Court demonstrates that there is no genuine issue as to any material fact, and that the
movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). See Celotex
Corp. v. Catrett, 477 U.S. 317, 322 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 247-48 (1986). The moving party has the burden of showing the absence of genuine
disputes over facts which, under the substantive law governing the issue, might affect the
outcome of the action. Celotex, 477 U.S. at 323. All facts and inferences must be
construed in a light most favorable to the party opposing the motion. Matsushita Elec.
Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).
A party opposing a motion for summary judgment “may not rest upon the mere
allegations or denials of his pleading, but . . . must set forth specific facts showing that
there is a genuine issue for trial.” Anderson, 477 U.S. at 248 (1986).
III.
ANALYSIS
Plaintiffs allege that Defendants violated the covenants to compete they entered as
part of their previous business relationship, in which Car Data 24/7 was a franchisee of
Dealer Specialties, Inc. The Complaint specifically accuses Defendant Ell Jay Lindsey,
president of Car Data 24/7 Inc. and the son of the other individual defendants, of taking
various actions to divert Dealer Specialties customers to competitor known as HomeNet.
Plaintiffs’ motion requests summary judgment on their claim for a permanent injunction
enforcing the terms of the covenants not to compete.
8
A.
Breach of Contract
To prove a breach of contract under Ohio law, a party must prove four elements:
(1) the existence of a valid contract; (2) performance by the plaintiff; (3) breach by the
defendant; and (4) resulting damages. Pavlovich v. Nat'l City Bank, 435 F.3d 560, 565
(6th Cir. 2006).
1. Existence of a valid contract
There are three contracts at issue in this case. The first is a franchising agreement
between Plaintiffs and Defendant Car Data 24/7, Inc. signed by a representative of
Plaintiffs and by Defendants Gary and Sherry Lindsey on June 6, 2011. (Doc. 1-1, at 1–
32). Gary and Sherry Lindsey also signed a personal guaranty agreement making them
personally liable under the franchise agreement. (Id. at 41). Pursuant to the agreement
and guaranty, Defendants Car Data 24/7 Inc., Gary Lindsey and Sherry Lindsey promised
that, for a period of two years following termination, “[d]ivert or attempt to divert, any
business of, or any customers of, the Dealer Specialties® Business franchised hereunder,
nor those of any other Dealer Specialties® franchise, or of [Plaintiffs’] affiliates, to any
Competing Business, by direct or indirect inducement or otherwise . . .” (Id. at 19). The
franchise agreement also stated that the bound Defendants would not, for a period of two
years following termination, own, engage, or participate in a competing business: (1) in
Car Data 24/7, Inc.’s territory or within 20 miles of its territory. (2) in the territory or
within 20 miles of the territory granted to another Dealer Specialties franchise, or (3) in
the territory or within 20 miles of the territory in which Plaintiffs or their affiliates sell
Dealer Specialties products or services.
9
The other contract at issue is a “Confidentiality/Non-Compete Agreement” signed
by Defendant Ell Jay Lindsey, current president of 24/7 Inc. and son of Gary and Sherry
Lindsey, on September 19, 2007. (Doc. 1-2). Pursuant to the non-compete agreement,
Ell Jay Lindsey promised he would not, for a period of one year following termination of
his access to the Dealer Specialties business system, directly or indirectly provide
services to a competing business in connection with the sale, promotion, or distribution of
any product or service that competes with any Dealer Specialties product or service. (Id.
at 2). Furthermore, Ell Jay Lindsey promised he would not, for a period of one year
following termination of his access to the Dealer Specialties business system, directly or
indirectly solicit any Dealer Specialties clients he had contact with or whose account he
serviced during his authorized use of Plaintiffs’ business system. (Id.).
The restrictive covenants are reasonable, and Plaintiffs are entitled to enforce
them. The covenants are supported by legitimate (and frequently recognized) business
interests, including loss of control of reputation, loss of goodwill, and consumer
confusion. See Economou, 756 F. Supp. at 1040. Here, Defendants had exposure to and
training involving the Dealer Specialties® trade secrets and business model, considerable
contact with Dealer Specialties® clients, and opportunities to develop industry
relationships. See Petland, 2004 WL 3406089, at *3. Defendants plundered this
information and used it to compete with Plaintiffs, which inevitably results in consumer
confusion and leaves Plaintiffs' goodwill, tradename, reputation, prospective business
opportunities, and proprietary information open to significant harm. See Economou, 756
10
F. Supp. at 1032; UZ Engineered Prods. Co. v. Midwest Motor Supply Co., 770 N.E.2d
1068, 1080 (Ohio Ct. App. 2001).
The Franchise Agreement makes clear the covenants not to compete are an
integral aspect of DSI's franchising model, which further supports the reasonableness of
the restrictive covenants and their enforcement. See Petland, 2004 WL 3406089, at *3;
Interstate Automatic Transmission Co. v. W.H. McApline, 1981 WL 2193, at *2 (N.D.
Ohio June 17, 1981). In particular, Car Data 24/7 acknowledged in the Franchise
Agreement "it would be impossible after having received extensive training and
consultation in the use of copyrighted software and the Dealer Specialties® System, to
operate any Competing Business, without using some or all of [DSI's] trade secrets and
information . . . or without disclosing . . . trade practices, secrets, methods of operation
and copyrighted information." (Franchise Agreement at § XII(B)). Further, the Franchise
Agreement required Car Data 24/7 to cause each of its employees to enter into and abide
by a confidentiality and noncompetition agreement. (Id. at § XII(E)).
In addition to supporting legitimate business interests, the covenants contain
appropriate spatial and temporal restrictions. The Franchise Agreement proscribes
competitive conduct within any territory, or within twenty miles of any territory, already
occupied by DSI or its franchisees. The Non-Compete Agreement proscribes competitive
conduct in Car Data 24/7's territory and in any other geographic area where Ell Jay
Lindsey had contact with Dealer Specialties® customers, or supervised Dealer
Specialties® employees who had contact with customers, during the twelve months
preceding termination of the Franchise Agreement. Courts in Ohio have upheld similar
11
and more expansive geographic restrictions. See, e.g., Try Hours, Inc. v. Douville, 985
N.E.2d 955 (Ohio Ct. App. 2013) (upholding nationwide covenant not to compete in
expedited freight industry); Am. Logistics Grp., Inc. v. Weinpert, 2005 WL 2240987
(Ohio Ct. App. Sept. 15, 2005) (enforcing seventy-five mile geographic restriction in
covenant not to compete); Blakeman's Valley Office Equip., Inc. v. Bierdeman, 786
N.E.2d 914 (Ohio Ct. App. 2003) (enforcing covenant not to compete that spanned three
counties); Klaus v. Hilb, Rogal & Hamilton Co. of Ohio, 437 F. Supp. 2d 706 (S.D. Ohio
2006) (holding customer restrictions may substitute for a geographic restriction).
Likewise, the two-year time period in the Franchise Agreement and one-year time period
in the Non-Compete Agreement are reasonable. Life Line Screening of Am., Ltd. v.
Calger, 145 Ohio Misc. 2d 6, 19 (2006) (collecting cases and observing "[n]umerous
Ohio decisions have upheld contracts calling for two-year periods or longer"); UZ
Engineered Prods., 770 N.E.2d 1068 (enforcing two-year restrictive covenant in
employment agreement); Procter & Gamble Co. v. Stoneham, 747 N.E.2d 268 (Ohio Ct.
App. 2000) (finding three-year non-compete with worldwide restriction was valid and
enforceable).
2.
Performance by Plaintiff
There is no genuine issue of material fact to dispute that Plaintiffs have performed
their obligations under the contracts at issue in this case. In their amended Answer,
Defendants claimed that Plaintiffs began sending sales people into the territory that had
been granted to Defendants under the franchise agreement to undercut Defendants and
directly sign client car dealerships. (Doc. 19, at 12). Defendants acknowledge that, per
12
the terms of the franchise agreement, Plaintiffs had the right to do this; however, they
also claim that a verbal agreement between the parties gave Defendants exclusive rights
to their territory, completely contrary to the written franchise agreement. (Id. at 11).
Defendants also claim that Plaintiffs had published false and defamatory statements about
Defendants to individuals including Defendants’ clients. (Id. at 13).
However, none of Defendants’ accusations regarding the Plaintiffs are supported
by any evidence. During his deposition, Ell Jay Lindsey was asked about Plaintiffs’
alleged breaches. Ell Jay Lindsey could not name any sales people who Plaintiffs had
sent to Defendants’ territory, could not name any dealership clients that had been lost as a
result of Plaintiffs’ alleged actions, could not name any individuals who defamed
Defendants, could not identify when any defamatory statements were made, and could
not even identify the individual who informed him about the defamatory statements, only
being able to state that he heard it through the “grapevine.” (Doc. 32-4, at 107–12).
Conclusory accusations from Defendants’ Answer without any supporting evidence will
not defeat Plaintiffs’ breach of contract claim at summary judgment.
Accordingly, Plaintiffs have demonstrated their own performance under their
contract as is necessary to support their breach of contract claim.
3.
Breach by Defendants
There is no genuine dispute that Ell Jay Lindsey, as president of Car Data 24/7
Inc., breached both contracts at issue in this case by exploiting his access to Plaintiffs'
confidential information and using it to solicit Dealer Specialties customers. Months
before the termination of the franchise agreement, Ell Jay Lindsey entered into a reseller
13
agreement with a company called HomeNet that he acknowledged provides the same
types of services as those offered by Plaintiffs. (Doc. 32-4, at 12–13). He also used his
e-mail address for the franchised business to contact Dealer Specialties clients to notify
them of his switch to HomeNet and informed them that he was no longer representing
Plaintiffs in Car Data 24/7's franchise territory. (See id. at 23). Without question, Ell Jay
Lindsey's conduct violated his obligation not to "solicit any Clients of Dealer Specialties
or its Franchisee(s) upon whom I called or with whom I had contact . . . ." (Non-Compete
Agreement at § IV). Car Data 24/7 Inc.’s breach of its franchise agreement with Plaintiffs
implicates Gary and Sherry Lindsey, as well, due to their status as guarantors.
Accordingly, Plaintiffs have demonstrated that Defendants breached both the
franchise agreement signed by Car Data 24/7 Inc.’s guarantors and the non-compete
agreement signed by Ell Jay Lindsey.
4.
Damages
Plaintiffs allege that as a result of Defendants’ breach of contract, Plaintiffs lost
over 70 dealership customers. (Doc. 32-1. at 6). The record contains testimony from Ell
Jay Lindsey that he wrote emails referencing his switching Plaintiffs’ customers to
competitors. (Doc. 32-4, at 23–24). The record also demonstrates that Plaintiffs have
had to make overtures to former clients that were converted by Defendants in an attempt
to regain their business. (Doc. 32-3, at 18).
Accordingly, Plaintiffs have demonstrated the damages element of their breach of
contract claims. Because Plaintiffs have shown each element of their breach of contract
14
claims without any genuine dispute as to the material facts, summary judgment on
Plaintiffs’ breach of contract claims is warranted.
B.
Defendant’s Counterclaim
Plaintiffs’ motion for summary judgment additionally requests summary judgment
on Defendant Ell Jay Lindsey’s counterclaim. The counterclaim alleges breach of
contract claims against Plaintiffs. As discussed in Part III.A.2, supra, there is absolutely
no evidence to support any breach of contract claim against Plaintiffs. Accordingly,
summary judgment in favor of Plaintiffs is warranted.
C.
Permanent Injunction
Plaintiffs’ Complaint requests that the Court issue a permanent injunction
preventing any of the Defendants from competing with Plaintiffs, providing services to
any of Plaintiffs’ competitors, or attempting to solicit or recruit any of Plaintiffs’
employees. (Doc. 1, at 10-11). Plaintiffs request this injunction be imposed for one year.
(Id.). The alleged basis for Plaintiffs’ request is Defendants’ breaching of the Franchise
Agreement and Guaranty as well as the Non-Compete Agreement that the parties jointly
entered into as part of their business relationship. 3
A court considers four factors when considering whether a permanent injunction
should issue: (1) whether the plaintiff has shown actual success on the merits; (2) whether
the movant would suffer irreparable harm without the injunction; (3) whether the
issuance of the injunction would cause substantial harm to others; and (4) whether the
3
The specific franchise agreement in question for purposes of this proceeding was actually a renewed franchise
agreement, as the parties had been business partners for several years prior to this action. (Doc. 1, at 3).
15
public interest would be served by the injunction. H.H. Franchising Sys., Inc. v. Aronson,
No. 1:12-cv-708, 2015 WL 401343, at *8 (S.D. Ohio Jan. 28, 2015); see also ACLU of
Ky. V. McCreary Cty., 607 F.3d 439, 445 (6th Cir. 2010) (recognizing the standard for a
permanent injunction is essentially the same as that for a preliminary injunction except
that a plaintiff must prove actual success on the merits rather than a likelihood of success
on the merits).
1.
Success on the merits
As this Court has already discussed in Part III.A, supra, summary judgment in
Plaintiffs’ favor is appropriate as to their breach of contract claims. Accordingly, this
factor weighs in favor of granting the permanent injunction.
2.
Plaintiffs’ irreparable harm
Plaintiffs have demonstrated that they would suffer irreparable harm should
injunctive relief not be granted. Evidence in the record indicates that Plaintiffs have
already lost several customers as a result of Defendants’ violation of the non-compete
agreements they signed. Even though Plaintiffs have since made overtures to their lost
clients, the vast majority of those lost through Defendants’ breach have not returned.
Allowing Defendants to continue to convert Plaintiffs’ clients in violation of the noncompete agreements in place would exacerbate the irreparable harm already done to
Plaintiffs.
Accordingly, this factor weighs in favor of granting Plaintiff permanent injunctive
relief.
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3.
Substantial harm to others/public interest
The injunctive relief requested by Plaintiffs will not bring any harm to third
parties. The only injunctive relief requested is for Defendants to be held to the terms of
their non-compete agreements with Plaintiffs for one year. Further, to the extent the
public has an interest at all, it is in seeing that reasonable restrictive covenants are
preserved and enforced. Id.; Bierdeman 786 N.E.2d at 920 ("Preserving the sanctity of
contractual relations and preventing unfair competition have traditionally been in the
public interest."). While Defendants may argue that granting this relief would harm their
business, Defendants may not benefit from their breach of contract.
Accordingly, this factor weighs in favor of granting Plaintiffs’ requested
permanent injunction. Because all of the relevant factors are in Plaintiffs’ favor,
Plaintiffs’ request for a permanent injunction is granted.
IV.
CONCLUSION
Accordingly, for the reasons outlined above, Plaintiffs’ motion for summary
judgment (Doc. 32) is GRANTED.
1.
Plaintiffs’ breach of contract claim against Defendant Ell Jay Lindsey is
GRANTED as to liability; 4
2.
Defendant Ell Jay Lindsey’s Counterclaim against Plaintiffs is DENIED;
3.
Defendants Car Data 24/7 Inc., Gary Lindsey, and Sherry Lindsey, along
with their agents, servants, employees, and those in active concert or
participation with them, are hereby RESTRAINED AND ENJOINED
from:
4
Plaintiffs have also succeeded on the merits of their claim for injunctive relief against Ell Jay
Linsdey, but the period of time requested for the injunction has already expired. Accordingly,
that request is now moot.
17
A. Owning, maintaining, engaging in, or participating in the operation of
any competing business within: (1) Car Data 24/7's territory or within
twenty miles of its territory, (2) in the territory, or within twenty miles
of the territory, granted to any other Dealer Specialties® franchise, or
(3) in the territory, or within twenty miles of any territory, in which DSI
or its affiliate offers and sells Dealer Specialties® products or services;
or
B. Diverting, or attempting to divert, any business of, or any customers of
the Car Data 24/7 franchise, any other Dealer Specialties franchise, or
DSI’s affiliate, to any competing business, by direct or indirect
inducement or otherwise;
until April 8, 2016.
IT IS SO ORDERED.
Date: 9/23/16
s/ Timothy S. Black
Timothy S. Black
United States District Judge
18
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