Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_19-cv-00848/USCOURTS-casd-3_19-cv-00848-2/pdf.json

Nature of Suit Code: 196
Nature of Suit: Franchise
Cause of Action: 

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19cv848-JAH (RBB)

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

RONALD COHN, INC. d/b/a SPROUTS 

FARMERS MARKET, a California 

corporation,

 Plaintiff,

v.

SPROUTS FARMERS MARKETS, INC., 

a Delaware corporation; f/k/a and d/b/a 

SPROUTS FARMERS MARKETS, LLC, 

a Delaware limited lability company,

 Defendants.

Case No.: 19cv848-JAH (RBB)

ORDER GRANTING 

PRELIMINARY INJUNCTION

INTRODUCTION

Before the Court is Plaintiff RONALD COHN, INC. d/b/a SPROUTS FARMERS 

MARKET’s (“Cohn”) Application for Temporary Restraining Order and Order to Show 

Cause Why Preliminary Injunction Should Not Issue against Defendant SPROUTS 

FARMERS MARKET, INC. f/k/a and d/b/a SPROUTS FARMERS MARKETS, LLC 

(“Sprouts”). (Doc. No. 22.)

Having found Cohn made a sufficient showing of irreparable harm and raised serious 

issues going towards the merit of Cohn’s claims, the Court issued a Temporary Restraining 

Order (“TRO”) and further ordered Sprouts to show cause why a preliminary injunction 

should not issue. (Doc. No. 23.)

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Sprouts filed its opposition on February 20, 2020 (Doc. No. 24) and Cohn filed its 

reply on February 25, 2020 (Doc. No. 25). On March 2, 2020, the parties, by and through 

their counsel, appeared before the Court and presented oral argument.

Good cause appearing and for the reasons discussed herein, including the Court’s 

previously-issued TRO, the preliminary injunction is GRANTED.

BACKGROUND

On May 6, 2019, Cohn filed this action against Sprouts alleging claims for violation 

of California’s Unfair Competition Law (Bus. & Prof. Code § 17200), breach of the 

covenant of good faith and fair dealing, and tortious interference, among other claims. In 

October 1990, Sprouts’ predecessor, Boney’s Services, Inc. entered into a Tradename 

License Agreement with Cohn for the operation of a grocery store in Chula Vista, 

California. Boney’s Services, Inc. and Cohn entered into a second Tradename License 

Agreement in September 1995 allowing Cohn to open and operate a second store in Chula 

Vista, California. In 1997, the two Tradename License Agreements were amended to 

reflect a tradename change from “Boney’s Services, Inc.” to “Henry’s Marketplace, Inc.” 

In 2011, Sprouts acquired the brand and again amended the two Tradename License 

Agreements (together with its amendments and addendums, the “TLA”). 

Cohn now seeks preliminary injunctive relief alleging that since the filing of this 

action, Sprouts has taken increasingly aggressive retaliatory action against Cohn, including 

but not limited to performing various unannounced safety audits based on undisclosed 

standards and subsequently threatening to terminate the current TLA between the Parties.

LEGAL STANDARD

Pursuant to Rule 65 of the Federal Rules of Civil Procedure, the Court may grant 

preliminary injunctive relief in order to prevent “immediate and irreparable injury.” Fed. 

R. Civ. P. 65(b). 

The Ninth Circuit recognizes two tests for demonstrating preliminary injunctive 

relief: the traditional test or an alternative sliding scale test. Cassim v. Bowen, 824 F.2d 

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791, 795 (9th Cir. 1987). Under the traditional test, a party must show: “1) a strong 

likelihood of success on the merits, 2) the possibility of irreparable injury to plaintiff if 

preliminary relief is not granted, 3) a balance of hardships favoring the plaintiff, and 4) 

advancement of the public interest (in certain cases).” Save Our Sonoran, Inc. v. Flowers, 

408 F.3d 1113, 1120 (9th Cir. 2005). Where a party demonstrates that a public interest is 

involved, a “district court must also examine whether the public interest favors the 

plaintiff.” Fund for Animals, Inc. v. Lujan, 962 F.2d 1391, 1400 (9th Cir. 1992). 

Alternatively, a party seeking injunctive relief under Fed. R. Civ. P. 65 must show 

either (1) a combination of likelihood of success on the merits and the possibility of 

irreparable harm, or (2) that serious questions going to the merits are raised and the balance 

of hardships tips sharply in favor of the moving party. Immigrant Assistance Project of the 

L.A. County of Fed’s of Labor v. INS, 306 F.3d 842, 873 (9th Cir. 2002); Sun Microsystems, 

Inc. v. Microsoft Corp., 188 F.3d 1115, 1119 (9th Cir. 1999); Roe v. Anderson, 134 F.3d 

1400 ,1402 (9th Cir. 1998). “These two formulations represent two points on a sliding scale 

in which the required degree of irreparable harm increases as the probability of success 

decreases.’” Roe, 134 F.3d at 1402 (quoting United States v. Nutri-cology, Inc., 982 F.2d 

394, 397 (9th Cir. 1992)). “Thus, ‘the greater the relative hardship to the moving party, the 

less probability of success must be shown.” Sun Microsystems, 188 F.3d at 1119 (quoting 

Nat’l Ctr. For Immigrants Rights v. Immigration and Naturalization Service, 743 F.2d 

1365, 1369 (9th Cir. 1984)).

The Ninth Circuit makes clear that a showing of immediate irreparable harm is 

essential for prevailing on a request for preliminary injunctive relief. See Caribbean 

Marine Services Co. v. Baldrige, 844 F.2d 668, 674 (9th Cir. 1988). “Speculative injury 

does not constitute irreparable injury sufficient to warrant granting a preliminary 

injunction.” Id. Thus, a plaintiff must show the presence of an “immediate threatened 

injury as a prerequisite to preliminary injunctive relief.” Id. (citing Los Angeles Memorial 

Coliseum Commission v. National Football League, 634 F.2d 1197, 1201 (9th Cir. 1980)).

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DISCUSSION

Cohn seeks to enjoin Sprouts from (1) taking any additional audits of its stores until 

after Sprouts has (a) completely disclosed all current safety auditing standards to Cohn and 

(b) allowed Cohn a reasonable period of not less than thirty (30) days to bring its stores 

into compliance under those standards; (2) conducting additional safety audits based on 

those standards not disclosed to Cohn; (3) terminating the TLA based on any safety audits 

conducted on Cohn’s stores if the operative audit standards were not disclosed to Plaintiff 

in advance; and (4) instructing its vendors, including its sign vendors, to cease doing 

business with Cohn and advising each of its vendors of the Court’s order with respect to 

this issue. (Doc. No. 22 at 3.) Sprouts opposed Cohn’s request, arguing that (1) the 

requested relief is moot because Sprouts has already offered to meet with Cohn and hold 

further audits in abeyance until at least 30 days following the meeting, (2) the requested 

relief is contrary to public interest, (3) Cohn cannot demonstrate a likelihood of success on 

the merits, and (4) Cohn cannot demonstrate irreparable harm. (Doc. No. 24 at pg. 7-12.)

The Court finds that the preliminary injunctive relief requested is not moot. The 

Court is particularly concerned the actions taken by Sprouts appear to be retaliatory in 

nature and counsel for Sprouts’ willingness to cooperate does not mitigate that retaliation. 

Sprouts contends that issuance of a preliminary injunction is contrary to public 

interest because it could prevent the Cohn stores from being audited during the duration of 

this action. However, Cohn is not seeking a blanket prohibition on audits; rather, it seeks 

disclosure of all audit standards in advance, along with a reasonable time to comply. 

Cohn’s intent to continue to comply with Sprouts’ safety standards negates the public 

interest concerns raised by Sprouts. Further, because the TLA is a private agreement 

between Cohn and Sprouts, the reach of the preliminary injunction will be limited to Cohn 

and Sprouts under the terms of the TLA. Thus, public interest is not a dominant 

consideration and does not weigh against the issuance of a preliminary injunction.

Cohn has asserted claims for violation of California’s Unfair Competition Law, 

breach of the covenant of good faith and fair dealing, and tortious interference, among 

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other claims. (See Doc. No. 1.) Sprouts has filed a motion to dismiss five of the six claims 

for relief and a motion to strike as to one of the claims. (See Doc. Nos. 8 and 11.) Although 

Sprouts contends Cohn has not demonstrated a likelihood of success on the merits, Cohn 

nevertheless satisfies the minimum threshold of raising serious questions going to the 

merits.

The balance of hardships tips sharply in Cohn’s favor. Alliance for the Wild Rockies, 

865 F.3d at 1217; Immigrant Assistance Project, 306 F.3d at 873. Cohn has demonstrated 

irreparable harm as a result of (1) Sprouts’ threats of imminent termination of the TLA due 

to Cohn’s inability to pass audits based upon new, undisclosed audit standards and (2) 

Sprouts’ instructions to its vendors to cease, temporary or otherwise, doing business with 

Cohn. Sprouts’ actions are intended to cause business loss, damage, loss of prospective 

customers, goodwill, and the demise of Cohn’s business, are indicative of retaliation, and 

not speculative. Stuhlbarg International Sales Co. Inc. v. John D. Brush and Co., Inc., 240 

F.3d 832, 840 (9th Cir. 2001); National Center for Immigrants Rights, 743 F.2d at 1369 

(the greater the relative hardship to the moving party, the less probability of success on the 

merits must be shown) (citation omitted). On the other hand, the harm to Sprouts in issuing 

the preliminary injunction is minimal at best. It will continue to receive royalty payments 

and could continue to conduct regular audits of the Cohn stores to ensure compliance so 

long as the audit is based on standards disclosed to Cohn in advance.

Finally, because Cohn stands to imminently suffer the termination of the TLA, it 

has established that a significant possibility exists it will suffer irreparable harm if the 

Court does not issue a preliminary injunction. Sprouts’ continuous auditing of Cohn’s 

stores based on undisclosed standards and threatening to terminate the TLA between the 

parties is sufficient irreparable harm. See Stuhlbarg, 240 F.3d at 840 (“Evidence of 

threatened loss of prospective customers or goodwill certainly supports a finding of the 

possibility of irreparable harm.”).

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The Court thereby GRANTS Cohn’s Motion for a Preliminary Injunction. (Doc. 

No. 22). Accordingly, IT IS HEREBY ORDERED that:

1. Sprouts and their agents, assignees, officers, attorneys, and representatives are 

restrained and enjoined from undertaking any operational or safety audits of 

Cohn’s stores based upon standards not disclosed in advance and without 

allowing Cohn a reasonable time of not less than 30 days to bring its stores 

into compliance with the new standards.

2. Sprouts is enjoined from utilizing the audit reports from September 2019 and 

January 2020 to terminate the TLA during the course of this litigation.

3. Sprouts is enjoined from instructing its vendors, including its sign vendors, to 

cease doing business with Cohn and must immediately advise each of its 

vendors that any previously issued instructions to cease doing business with 

Cohn are no longer in effect.

4. The Court’s Order will remain in full force and effect during the course of this 

litigation or until further order of the Court.

IT IS SO ORDERED. 

DATED: March 6, 2020

_________________________________

Hon. John A. Houston

United States District Judge

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