QFA Royalties LLC v. ZT Investments LLC
1:17-cv-00507
D. Colo.Nov 17, 2017Background
- Quiznos (QFA Royalties, LLC and The Quiznos Master, LLC) sued former franchisee ZT Investments, LLC (ZTI) and owner Thomas Kamau for continuing to operate a restaurant as an unauthorized Quiznos after termination of the franchise agreement.
- Kamau originally appeared pro se; ZTI did not appear and the Clerk entered default against ZTI. Quiznos moved for default judgment.
- After termination in Oct. 2016, ZTI rebranded the store as "Toasty Subs/Toasty Grill Subs," covered Quiznos signage, but otherwise continued using Quiznos designs and operations.
- Claims included Lanham Act trademark and trade dress infringement, unfair competition, breach of contract, and breach of guaranty (against Kamau).
- The court found personal jurisdiction based on a forum-selection clause in the franchise agreement and ZTI’s assumption of Kamau’s obligations; the court awarded monetary damages and entered a permanent injunction against ZTI in part.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Personal jurisdiction over ZTI | Forum-selection clause in franchise agreement establishes Colorado jurisdiction | (No appearance by ZTI to contest) | Jurisdiction proper based on agreement and assignment of obligations to ZTI. |
| Liability for trademark/trade dress and breach | ZTI continued to use Quiznos marks/trade dress and violated post-termination obligations, supporting Lanham Act and contract claims | (Default; no merits defense) | On default, well-pleaded facts establish trademark and trade dress infringement and breach of contract. |
| Damages (past due and contractually‑calculated future losses) | Seek $11,279.69 past due + $204,928.49 net present value of post‑termination fees under contract formula | (No contest from ZTI) | Court accepts Quiznos’ calculations and awards $216,208.18 total (with post-judgment interest). |
| Scope of permanent injunction (use of marks, confidential materials, non‑compete, telephone listings) | Requests broad bar on confusing uses, non-compete within 5 miles for 2 years, return of proprietary materials, update telephone directories, and general anti‑competition language | Argues some requested relief is overbroad/vague or is an "obey the law" injunction | Court enjoins use of Quiznos marks/trade dress, passing off, and representations of affiliation; orders return/cessation of use of proprietary materials and update telephone directories; denies overbroad "obey the law" language and refuses to enforce the non‑compete absent sufficient showing of reasonableness/irreparable harm. |
Key Cases Cited
- In re Rains, 946 F.2d 731 (10th Cir.) (default judgment available to protect diligent parties when adversary process halts)
- Williams v. Life Sav. & Loan, 802 F.2d 1200 (10th Cir.) (personal and subject‑matter jurisdiction considerations before default judgment)
- Shook v. Bd. of Cnty. Comm’rs of Cnty. of El Paso, 543 F.3d 597 (10th Cir.) (injunctions that merely require obedience to law are impermissibly vague)
- eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (Supreme Court) (injunctive relief is an equitable remedy subject to traditional principles and discretionary review)
- Gold Messenger, Inc. v. McGuay, 937 P.2d 907 (Colo. App.) (Colorado disfavors covenants not to compete and construes exceptions narrowly)