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Rescuecom Corp. v. Mathews

June 20, 2006

RESCUECOM CORPORATION, PLAINTIFF,
v.
MICHAEL MATHEWS, DEFENDANT.



The opinion of the court was delivered by: Scullin, Senior Judge

MEMORANDUM-DECISION AND ORDER

I. INTRODUCTION

Currently before the Court are Plaintiff's motion for a preliminary injunction enforcing the non-compete provisions of its Franchise Agreements with Defendant and its motion to hold Defendant in contempt of Court for violating a state court temporary restraining order. In addition, Defendant has filed a motion for a preliminary injunction restraining Plaintiff from enforcing those same non-compete provisions against him.*fn1, *fn2

II. BACKGROUND

Plaintiff, a New York corporation, is exclusively engaged in the offering and selling of franchised computer sales and services businesses nationwide and has more than ninety such franchises throughout the country. Defendant, a resident of New Jersey, is a former corporate franchisee of Plaintiff, who purchased two separately-issued franchises, one on April 25, 2004, and one on or about January 25, 2005, for sales territories in southern New Jersey and southeastern Pennsylvania.

Although the parties dispute the circumstances under which their relationship deteriorated and ended, there is no question that Plaintiff terminated Defendant's Franchise Agreements under a "Notice of Default Under Franchise Agreement" dated July 29, 2005, and a "Notice of Termination" dated August 31, 2005.

Originally Plaintiff filed this action in state court on September 9, 2005, and sought an ex parte temporary restraining order, which the state court granted on October 11, 2005. Before the state court could hold a hearing regarding Plaintiff's motion, Defendant removed the action to this Court on October 21, 2005. Subsequently, both parties moved for a preliminary injunction related to the non-compete provisions of the Franchise Agreements.

The Court held a hearing regarding the parties' preliminary injunction motions on May 23, 2006, and May 26, 2006, at which time David Milman, the Chief Executive Officer of RESCUECOM Corp.; Sabreen Kabeen, Director of Franchise Support for RESCUECOM Corp.; Thomas Dachelle, a RESCUECOM Corp. franchisee in the Philadelphia and Southern New Jersey areas; and John Walsh, a technician who worked for Defendant from September 2004 through August 2005, testified in support of Plaintiff's position; and Defendant testified on his own behalf. At the close of the testimony, the Court reserved decision on the motions but instructed Defendant that he was not to provide services to any of Plaintiff's former or current customers until the Court issued its written determination regarding the pending motions. The Court further instructed Defendant to provide Plaintiff with a copy of his customer list and provided Plaintiff with an opportunity to respond to that list.

The following constitutes the Court's written determination of the pending motions.

III. DISCUSSION

A. Preliminary Injunction Standard

A party that seeks a preliminary injunction must demonstrate "(1) that it is likely to suffer possible irreparable injury if the injunction is not granted and (2) either (a) a likelihood of success on the merits of the case or (b) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly in its favor." Dunkin' Donuts Inc. v. Dowco, Inc., No. CIV. 5:98-CV-166, 1998 WL 160823, *2 (N.D.N.Y. Mar. 31, 1998) (citation and footnote omitted).

The "irreparable harm" prong of the preliminary injunction requirement is the "'single most important prerequisite' for the issuance of injunctive relief and must be satisfied before the other issues in the preliminary injunction are addressed." Id. (quotation and other citation omitted). The party seeking the injunctive bears the burden to "show that the irreparable harm is imminent rather than remote or speculative, and it must demonstrate that the injury is 'one incapable of being fully remedied by monetary damages.'" Id. (quotation omitted). The second prong of ...


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