MCDONALD‘S CORPORATION v. ROGER ROBERTSON, MARILYN ROBERTSON, trading as McDonald‘s Restaurant
No. 97-3308
United States Court of Appeals, Eleventh Circuit
July 28, 1998
D. C. Docket No. 97-1189-CIV-J-10C
Plaintiff-Counter-defendant-Appellee,
versus
Defendants-Counter-claimants-Appellants.
Appeal from the United States District Court for the Middle District of Florida
(July 28, 1998)
Before CARNES and MARCUS, Circuit Judges, and MILLS*, Senior District Judge.
*Honorable Richard Mills, Senior U.S. District Judge for the Central District of Illinois, sitting by designation.
This appeal arises out of the district court‘s entry without an evidentiary hearing of a preliminary injunction enjoining defendant-appellants Roger and Marilyn Robertson from continuing to run a McDonald‘s restaurant previously franchised to them by plaintiff-appellee McDonald‘s Corporation. On appeal the Robertsons challenge the district court‘s denial of their motion for an evidentiary hearing on McDonald‘s motion for preliminary injunction. Additionally, the defendants argue that the district court erred in entering the preliminary injunction because, according to the Robertsons, McDonald‘s did not demonstrate that it had the right to terminate the Robertsons’ franchise agreement, and thus, McDonald‘s is not likely to succeed on the merits of its case. Because no issues of material fact were in controversy when the district court ruled on the motion for preliminary injunction, we find that the district court acted well within its discretion and did not err in declining to hold an evidentiary hearing. We also conclude that, based on this record, the district court properly found that McDonald‘s established all of the prerequisites necessary for a preliminary injunction. Consequently, we affirm.
I.
A detailed recitation of the operative facts is necessary to understanding our holding. McDonald‘s operates a well-known worldwide fast food business. Although it owns several of its own stores, McDonald‘s also sells franchises. By contract, all of McDonald‘s franchisees must operate their McDonald‘s restaurants in compliance with
A.
On September 1, 1971, the Robertsons acquired the McDonald‘s franchise restaurant located at 4227 Blanding Boulevard in Jacksonville, Florida. The Robertsons operated the Blanding Boulevard restaurant without incident for many years, and, on July 23, 1989, shortly before the parties’ original franchise agreement was due to expire, the parties entered into a new twenty-year franchise agreement, consisting of a franchise letter agreement, a license agreement, and an operator‘s lease to the real property upon which the restaurant is located. Among other provisions, the 1989 license agreement required the Robertsons to operate their franchise in accordance with quality, safety, and cleanliness (“QSC“) standards prescribed by the agreement and by McDonald‘s business and policy manuals. McDonald‘s QSC standards govern a wide array of its franchisees’ business affairs, including, and of particular relevance to this case, the procedures to be followed in preparing, cooking, storing, and serving food, and the cleanliness and maintenance of the physical structure.
The franchise agreement plainly gave McDonald‘s the right to inspect the Robertsons’ franchise “at all reasonable times” for compliance with McDonald‘s QSC standards. Additionally, it allowed McDonald‘s to terminate the contract if, among other contingencies, the Robertsons failed to operate the restaurant in compliance with McDonald‘s QSC standards. The franchise agreement and the lease contained cross-
B.
On October 3, 1997, McDonald‘s filed an amended complaint against the Robertsons, alleging claims for trademark infringement, dilution and false designation of origin in violation of the
C.
Based on the affidavits of Grass and Robertson, as well as other relevant evidence, the record reveals the following undisputed facts. As a Business Consultant, Grass serves as the liaison between certain McDonald‘s franchisees and McDonald‘s and ensures that the franchisees consistently comply with McDonald‘s QSC standards. In her capacity as a McDonald‘s Business Consultant, Grass had conducted several QSC audits on the Robertsons’ restaurant. Through 1994, McDonald‘s had rated the Robertsons’ restaurant generally satisfactory in terms of QSC compliance.
On February 24, 1995, McDonald‘s conducted an unannounced food safety audit of the Robertsons’ franchise. Notably, the audit disclosed that the Robertsons’ restaurant was producing undercooked meat patties, meat patties showing pink or red interiors, and meat patties with an average internal temperature nine degrees below the internal temperature required by McDonald‘s to reduce the risk of bacteria. Additionally, the audit revealed that the Robertsons’ restaurant had failed to complete and maintain daily food safety checklists in accordance with McDonald‘s standards, and it had failed to
Approximately one month later, on March 21, 1995, McDonald‘s conducted an announced follow-up audit. The Robertsons had failed to remedy some of the deficiencies identified in the February 24 food safety audit. The inspection also disclosed additional problems. Among others, the audit revealed the following: (1) cooked meat and poultry products were being held in staging cabinets at eight and three degrees below McDonald‘s prescribed temperatures, respectively, raising the risk of bacteria growth; (2) equipment, including a meat staging cabinet, was not maintained in good, clean, and operable condition and repair and in compliance with McDonald‘s standards; and (3) towels were not being sanitized.
On September 12, 1995, the Robertsons failed still another food safety audit.1 The auditors found several sanitation and food-handling violations, including the following: (1) the sundae machine refrigeration temperature was maintained twelve degrees above the maximum McDonald‘s recommended temperature, increasing the risk of bacteria growth; (2) the equipment was not kept in good, clean, and operable condition and repair (the sundae machine had bugs in it); and (3) the staff failed to maintain and use clean and
Twelve days later, on March 19, 1996, two McDonald‘s representatives visited the Robertsons and advised them that McDonald‘s had purchased property approximately one block away from their restaurant for the purpose of building a new restaurant. McDonald‘s told the Robertsons that the new location would be “much better” in terms of visibility, ease of access and physical condition.
On October 3, 1996, McDonald‘s conducted a “short restaurant visit” to the Robertsons’ restaurant. The Robertsons received their only passing grade since 1994—an overall mark of “C.” The visit revealed no significant QSC problems.
On October 31, 1996, McDonald‘s offered the Robertsons the opportunity to close their restaurant and to take the franchise at the new location. Because of the increased rent and service fees applicable to the new franchise, the Robertsons declined the offer.
On February 19, 1997, McDonald‘s conducted still another unannounced inspection of the Robertsons’ restaurant. This audit disclosed many of the same deficiencies uncovered during earlier audits, including, among others, improper sanitation practices that posed “serious public health concerns.” Additionally, McDonald‘s found that the Robertsons’ store failed to store raw Canadian bacon and biscuit products properly. Also, the audit revealed that the walk-in refrigerator contained several items with expired freshness codes that should have been removed and destroyed. On March 3, after several unsuccessful attempts to reach Mr. Robertson by telephone, McDonald‘s provided Robertson with a written summary of the restaurant visit. Grass requested that the Robertsons design an action plan for improving operations. On April 18, 1997, McDonald‘s again undertook an unannounced visit of the Robertsons’ restaurant. Once again McDonald‘s found numerous sanitation, hygiene, food-handling, and QSC violations. Indeed, Grass observed the same deficiencies identified during the February 19 visit. Grass testified in her affidavit that she asked Robertson whether he had created an action plan for improving operations, but he replied that he had not. Grass also discussed the Robertsons’ failure to have a manager certified in food safety through successful completion of the McDonald‘s ServSafe (or equivalent) food safety course.
During the sixty-day cure period, Grass visited the Robertsons’ store on two additional occasions. Both times she again observed numerous sanitation and other food safety violations. After the cure period expired, on August 26, 1997, along with other McDonald‘s employees, Grass visited the Robertsons’ store to conduct an unannounced comprehensive graded restaurant evaluation. During this visit, McDonald‘s agents recorded, among others, the following violations: (1) undercooked meat patties and meat patties with an internal temperature thirteen degrees below the required internal temperature for the safe cooking of raw meat, increasing the risk of bacteria growth; (2) improper handling of raw eggs and the failure to sanitize utensils used in the preparation of egg product, creating the risk of salmonella and cross-contamination; (3) failure to use separate Hutzler color-coded spatulas for raw and cooked egg product, posing the risk of
Finally, in reviewing the uncontested facts, we note that in his affidavit, Robertson did not in any way contest the accuracy of the inspection findings. Rather, he contended that the alleged violations were not serious and that they served as a pretext for McDonald‘s real reason for ending the franchise agreement—that McDonald‘s wanted the restaurant to occupy the different and better space at the end of the block.
D.
At the hearing on October 17, McDonald‘s withdrew its request for injunctive relief on its claim for breach of the non-competition covenant. Instead, McDonald‘s focused on its trademark infringement claim. The district court found that McDonald‘s was entitled to the relief sought and entered a preliminary injunction enjoining the Robertsons from using any of McDonald‘s trademarks, trade names, service marks, and trade dress, using any signs or printed goods bearing McDonald‘s names and marks, occupying and operating the McDonald‘s restaurant premises located at 4227 Blanding Boulevard, and using, duplicating, or disclosing any of McDonald‘s materials received by operation of the franchise letter agreement. Additionally, the district court required the Robertsons to return all materials received by operation of the franchise letter agreement.
II.
We review a district court‘s order granting or denying a preliminary injunction for abuse of discretion. See Baker v. Buckeye Cellulose Corp., 856 F.2d 167, 169 (11th Cir. 1988) (citing United States v. Jefferson County, 720 F.2d 1511, 1519 (11th Cir. 1983)).
A.
A district court may grant injunctive relief if the movant shows the following: (1) substantial likelihood of success on the merits; (2) irreparable injury will be suffered unless the injunction issues; (3) the threatened injury to the movant outweighs whatever damage the proposed injunction may cause the opposing party; and (4) if issued, the injunction would not be adverse to the public interest. See All Care Nursing Service, Inc. v. Bethesda Memorial Hospital, Inc., 887 F.2d 1535, 1537 (11th Cir. 1989) (citing Baker, 856 F.2d at 169 (citing Jefferson County, 720 F.2d at 1519)). In this Circuit, “[a] preliminary injunction is an extraordinary and drastic remedy not to be granted unless the movant clearly established the ‘burden of persuasion‘” as to the four requisites.2 Id.
1. Likelihood of Success on the Merits
McDonald‘s probability of success on the merits at trial depends on the validity of its trademark infringement claim. This Circuit has held that in order to prevail on a trademark infringement claim, a plaintiff must show that its mark was used in commerce by the defendant without the registrant‘s consent and that the unauthorized use was likely to deceive, cause confusion, or result in mistake. See Burger King Corp. v. Mason, 710 F.2d 1480, 1491 (11th Cir. 1983) (citing
In Computer Currents Publishing Corp. v. Jaye Communications, Inc., 968 F. Supp. 684 (N.D. Ga. 1997), the district court considered a case where a magazine
In Burger King Corp. v. Hall, 770 F. Supp. 633 (S.D. Fla. 1991), however, another district court in this Circuit found the question of alleged wrongful franchise contract termination irrelevant to a motion for preliminary injunction seeking to enjoin a former franchisee from continuing to use the franchisor‘s trademarks. Rather, the court determined, “[A] terminated franchisee‘s remedy for wrongful termination is an action for money damages, and not the continued unauthorized use of its franchisor‘s trademarks.” Id. at 638. For support, this opinion, which was issued prior to, and thus, without the benefit of Jiffy Lube, relied on Burger King Corp. v. Austin, Case No. 90-0784-Civ-Hoeveler (S.D. Fla. Dec. 26, 1990), and Cle-Ware Rayco, Inc. v. Perlstein, 401 F. Supp. 1231, 1234 (S.D.N.Y. 1975). Cle-Ware Rayco, in turn, simply found that the franchisee‘s argument that his compliance with the franchise agreement was excused by the franchisor‘s prior alleged breach of the franchise agreement “has little relevance on [sic] the immediate question of whether the defendant can continue to use the [trademark].” Id. at 1234.
We further find that the district court correctly concluded on the record before it that McDonald‘s had made a substantial showing of a likelihood of success on the merits of its claim. The record reflects that the parties did not disagree that McDonald‘s had conducted numerous inspections of the Robertsons’ restaurant. And Robertson acknowledged that these evaluations “questioned the procedures involving cleaning, sanitizing and procedural control,” Robertson Aff. ¶ 5, and that he “had a few QSC Reports in 1995 that McDonald‘s alleged did not meet its standards.” Robertson Aff. ¶ 6. He further did not contest the fact that the audits in 1996 and 1997 turned up additional deficiencies. Indeed, nothing in Robertson‘s affidavit alleged that McDonald‘s findings during these visits were not accurate.4 The closest Robertson‘s affidavit came to
Robertson instead focuses on the fact that McDonald‘s sought to secure his agreement to move to a new location, and the Robertsons rejected the offer. Thus, Robertson suggests, although the food safety issues identified by the numerous inspections and audits were really not that important to McDonald‘s, McDonald‘s nonetheless used the Robertsons’ alleged food safety deficiencies as “an excuse” for terminating the Robertsons’ franchise agreement because McDonald‘s wanted to make more money by moving the Robertsons’ McDonald‘s to another nearby location. Even assuming, arguendo, that this allegation is correct, however, we find that the Robertsons’
In the instant case, the district court correctly found preliminarily that the repeated alleged and unchallenged violations of McDonald‘s QSC and food safety standards resulted in a material breach of the franchise agreement by the Robertsons. First, in the franchise contract, the Robertsons agreed that “[t]he foundation of the McDonald‘s System and the essence of [the franchise contract] is the adherence by [the Robertsons] to standards and policies of [McDonald‘s] providing for the uniform operation of all McDonald‘s restaurants within the McDonald‘s System.” They also acknowledged the importance of uniformity of food specifications, preparation methods, quality and appearance, facilities, and service. The QSC and food safety standards produced by
2. Irreparable Injury
The Robertsons also contend that the district court erred in finding irreparable injury because, in other types of actions, district courts in this Circuit have held that loss of goodwill does not constitute irreparable injury. The Robertsons also argue that any
First, the cases the Robertsons cite from the district courts in this Circuit do not compel the conclusion the Robertsons propound. In Salsbury Lab, Inc. v. Merieux Lab., Inc., 735 F. Supp. 1537 (M.D. Ga. 1987), for example, a former lab employee allegedly improved upon the plaintiff lab‘s vaccine formula, which was a trade secret. The plaintiff lab sought to enjoin the defendant lab from continuing to use the improved vaccine, alleging that it would suffer lost profits and damage to its reputation. The district court found that these contentions did not state irreparable harm. The instant case is substantially different. Whereas the plaintiff in Salsbury stood to suffer injury as a result of competition from another lab that allegedly misappropriated trade secrets, an injury that could be compensated fully by looking to the defendant lab‘s profits, McDonald‘s faces damage to its own reputation and loss of customers caused by the Robertsons’ distribution of an allegedly inferior (and possibly dangerous) product held out to be McDonald‘s. Customers would believe that they were eating McDonald‘s sanctioned products when they consumed improperly cooked and unsanitarily maintained food products from the Robertsons’ store. We can conceive of no realistic way to determine the damages under these circumstances.
Moreover, trademark actions “are common venues for the issuance of preliminary injunctions,” Foxworthy v. Custom Tees, Inc., 879 F. Supp. 1200, 1219 (N.D. Ga. 1995) (citation omitted), and this Circuit has held that “a sufficiently strong showing of
likelihood of confusion [caused by trademark infringement] may by itself constitute a showing of ... [a] substantial threat of irreparable harm.6 E. Remy Martin & Co. v. Shaw-Ross Int‘l Imports, 756 F.2d 1525, 1530 (11th Cir. 1985); see also Power Test Petroleum Distributors v. Calcu Gas, 754 F.2d 91, 95 (2d Cir. 1985) (Irreparable harm exists in a trademark case when the moving party “shows that it will lose control over the reputation of its trademark pending trial.“); Foxworthy, 879 F. Supp. at 1219 (“When a plaintiff makes a prima facie showing of trademark infringement, irreparable harm is ordinarily presumed.“) (citation omitted). Obviously, in this case, such a substantial likelihood of confusion – indeed, a certainty of confusion – of the Robertsons’ substandard products with McDonald‘s certified products exists. Consequently, the district court correctly concluded that McDonald‘s made a sufficient showing of irreparable injury to justify entry of the preliminary injunction.
Finally, the Robertsons’ citation of a laundry list of cases purportedly supporting their contention that McDonald‘s claimed harm was speculative and thus insufficient to constitute irreparable injury, is inapposite. For example, the Robertsons cite Church v. City of Huntsville, 30 F.3d 1332, 1337 (11th Cir. 1994), for the proposition that “a party has standing to seek injunctive relief only if the party alleges, and ultimately proves, a real and immediate – as opposed to a merely conjectural or hypothetical – threat of future
B.
Nor do we find that the district court‘s decision not to conduct an evidentiary hearing on the motion for preliminary injunction warrants reversal.7 As we noted
In making their argument, the Robertsons first note that
Several problems with the Robertsons’ argument exist. First, Granny Goose does not stand for the proposition that all opponents of preliminary injunctions are entitled to evidentiary hearings. Rather, as stated above, the purpose of Rule 65‘s notice requirement is to provide the party opposing the preliminary injunction with a “fair opportunity to oppose the application and to prepare for such opposition.” Granny Goose, 415 U.S. at 432 n.7. So long as these goals are met, Rule 65 does not require an evidentiary hearing. Indeed, if the Robertsons were correct, no preliminary injunction could ever issue without an evidentiary hearing. This is plainly wrong. See All Care Nursing Service, Inc. v. Bethesda Memorial Hospital, Inc., 887 F.2d 1535, 1538 (11th Cir. 1989) (“An evidentiary hearing is not always required before issuance of a preliminary injunction.“).
We consider, therefore, the circumstances under which an evidentiary hearing under Rule 65 is necessary. Previously, we have stated, “Where the injunction turns on the resolution of bitterly disputed facts, . . . an evidentiary hearing is normally required to decide credibility issues.” All Care Nursing Service, 887 F.2d at 1538 (citing Forts v. Ward, 566 F.2d 849, 851 (2d Cir. 1977)). In All Care Nursing Service, the plaintiffs,
Conversely, in Kaimowitz v. Orlando, 122 F.3d 41 (11th Cir. 1997), amended, 131 F.3d 950 (11th Cir. 1997), we held that the district court did not err in declining to hold an evidentiary hearing on the plaintiff‘s motion for preliminary injunction where the preliminary injunction sought bore no relationship whatsoever to the underlying action. Because this recital effectively exhausts this Court‘s jurisprudence on the question of when it is necessary to hold an evidentiary hearing on a motion for preliminary injunction, we have considered cases from other Circuits for additional guidance. Based on review of these cases, certain principles are apparent. First, as noted in All Care Nursing Service, where facts are bitterly contested and credibility determinations must be made to decide whether injunctive relief should issue, an evidentiary hearing must be held. See All Care Nursing Service, 887 F.2d 1535; Forts v. Ward, 566 F.2d 849, 851 (2d Cir. 1977) (quoting Dopp v. Franklin National Bank, 461 F.2d 873, 879 (2d Cir. 1972) (quoting Sims v. Greene, 161 F.2d 87, 88 (3d Cir. 1947))) (“Generally, of course, a judge should not resolve a factual dispute on affidavits or depositions, for then he is merely showing a preference for “one piece of paper to another.““); Campbell Soup Co. v. Giles, 47 F.3d 467, 470 (1st Cir. 1995) (quoting SEC v. Frank, 388 F.2d 486, 491 (2d Cir. 1968))
We find based on the record here that this case falls into the second category of cases identified above -- that is, material facts are not in dispute, or the disputed facts are not material to the preliminary injunction sought. In this case no real controversy exists over whether the Robertsons engaged in repeated QSC and food safety violations.
Additionally, the Robertsons contend that the district court presumed irreparable injury, so, under this Court‘s precedent, it was therefore required to conduct an evidentiary hearing. We note that the Robertsons did not raise this issue below. Consequently, their argument fails. See Royals v. Tisch, 864 F.2d 1565, 1568 n.6 (11th Cir. 1989).
Nevertheless, even if the Robertsons had timely raised this point, it would lack merit. First, the holding in Baker v. Buckeye Cellulose Corp., 856 F.2d 167 (11th Cir. 1988), the case on which the Robertsons principally rely in making this argument, is, by its own language, limited to the facts of that case. In Baker, the plaintiff, who alleged
IV.
We therefore conclude that the district court did not err in denying the Robertsons’ motion for evidentiary hearing and in granting McDonald‘s motion for preliminary injunction. Accordingly, the judgment of the district court must be, and is, AFFIRMED.
I join all of the Court‘s well written and persuasive opinion in this case, except the part about whether a franchisor seeking to have a franchisee enjoined from continuing to use a trademark under a now terminated agreement must show that its termination of the agreement was proper. Resolution of that issue of first impression in this circuit is not necessary to the disposition of this appeal. As the Court holds, this franchisor has shown (or made a substantial showing, which is the applicable standard at this stage) that it was within its rights to terminate the agreement. Given that holding, it matters not at all to the disposition of this appeal whether a franchisor must show proper termination in
Dicta has its place and serves some purposes. See, e.g., Combs v. Plantation Patterns, 106 F.3d 1519, 1524, 1527, 1532 - 38 (11th Cir. 1997) (using dicta in an attempt to clarify confusion caused by dicta in another opinion, but leaving it up to the reader to decide if the attempt was successful), cert. denied, 118 S.Ct. 685 (1998). Somewhat like statements in a law review article written by a judge, or a judge‘s comments in a lecture, dicta can be used as a vehicle for offering to the bench and bar that judge‘s views on an issue, for whatever those views are worth. The persuasiveness of the rationale given can increase the weight accorded those views, but the fact that the views are formed and put forward in a context of a case in which they do not matter will always subtract from the weight given them.
It is the nature of judges, like most human beings, to be more cautious, deliberative, and judicious - characteristics that should be brought to bear in deciding important issues – when what they say makes a difference to someone before them. It is one thing to offer a view on an abstract or hypothetical question, to put forward a speculative comment, but quite another to decide an issue that will affect and allocate the competing interests of the parties in an actual case before the court. Deciding real
Views expressed in dicta are less reliable than those embodied in holdings for another reason. Unlike judicial holdings, dicta does not carry with it the added assurance of having survived what for the judiciary amounts to a kind of peer review. Dicta in a panel decision may be subject to comment, criticism, or disapproval by another member of that same panel, but it is effectively insulated from en banc or Supreme Court review. No matter how strongly other members of the Court are convinced that a panel‘s dicta is wrong, any suggestion that the whole Court grant rehearing to correct it will be met, quite properly, with the response that it is only dicta, that the issue addressed is not actually presented, and so it would be an improper use of en banc resources to examine and comment upon it. See
As the Court‘s opinion in this case points out, the two district courts in this circuit that have addressed (in published opinions) the issue in question have reached opposite conclusions concerning it. That might tempt us to express our views on the subject in order to “provide guidance,” but we cannot decide in this appeal which district court‘s view is the correct one. We can decide nothing more than that which is necessary to decide this appeal. Moreover, that two district court judges have differed over the question establishes it is one which is sufficiently difficult to cause reasonable jurists to disagree, and that argues in favor of withholding our views until the issue is squarely presented in an appeal which depends upon resolution of the issue.
Whether to include in an opinion dicta on related but unnecessary issues is a matter soundly within the discretion of each judge, to be exercised on a case by case basis, and I
