Saturday, January 15, 2011

Federal Court: Injunction Denied Where It Would Put Restaurant Out of Business

Franchisors often seek injunctions in situations where their franchisees are violating the terms of the operative franchise agreements. In a case pending before the United States District Court for the District of Maryland (Greenbelt) titled Prosperity Systems, Inc. v. Ali, the Pizza-Bolis franchisor (Prosperity) sued its franchisee (Ali) alleging various violations of the parties’ franchise agreement. Specifically, Prosperity alleged that Ali advertised outside of his limited territory and that he used an unauthorized website. Prosperity sought an injunction that would have shut down Ali’s restaurant. The Court found that Prosperity was likely to win the case, and that Ali almost certainly was in breach of the franchise agreement. Nevertheless, the Court denied the request for an injunction finding that that the damage that Ali would suffer if the injunction was entered and the restaurant was shut down would outweigh the damage caused to the franchisor, Prosperity, resulting from Ali’s breaches of the agreement. A copy of the opinion is found here.

This shows a litigant that even where one can prove a breach of contract that does not mean that the court will necessarily grant an injunction barring further breaches of that contract; nor will a court shut down a business if lesser restrictions are available.

Friday, January 14, 2011

Attorney's Fee Request Denied in Unusual Citizenship Case

On January 13, 2011, the United States Court of Appeals for the Fourth Circuit decided the case of Cody v. Caterisano. In this unusual case which deals with attorney’s fee awards, an Irish citizen enrolled at the United States Naval Academy. At the time, the Irish government was funding the cost of his attendance at the Academy. Once enrolled at the Academy, the Irish government indicated that it would not fund the cost of attendance. The student obtained alternative funding and continued to attend the Academy. Because the Irish government was not paying for his education, the student did not have any obligation to serve in the Irish military upon graduation from the Academy. The student decided that he wanted to serve in the United States Navy after graduation, and decided to apply for United States citizenship. His application for citizenship hinged upon whether or not attending the Naval Academy constituted serving honorably in an active-duty status during a period in which the Armed Forces of the United States were engaged in military operations involving armed conflict with a foreign force. The Naval Academy had initially completed a form indicating that the student’s attendance at the Academy constituted such “active-duty” status. Later, the Academy withdrew that form and reversed its position indicating that attending the Academy did not constitute active duty service. The USCIS, which decides immigration applications, failed to make a decision within the time allotted.

The student then sued to obtain a decision on his application. The United States District Court for the District of Maryland (Baltimore) found that the student qualified for naturalization and the United States government did not appeal.

The student then sought his attorney’s fees under the Equal Access to Justice Act (EAJA) and the District Court denied that request. Under the EAJA, a victorious party to litigation against the Government may be entitled to an award of counsel fees “unless the court finds that the position of the United States was substantially justified. . ..” The Fourth Circuit Court of Appeals affirmed, holding that the particular circumstances of the student’s case, the Government’s position in contesting naturalization, while ultimately unsuccessful, was “substantially justified.”

This is another example of courts being hesitant to award attorneys’ fees, and being restrictive in awards, whether the basis for the request for the attorneys’ fee award is statutory or contractual. The opinion is found here.