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.