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IN THE UNITED STATES DISTRICT COURT 

FOR THE SOUTHERN DISTRICT OF OHIO 

WESTERN DIVISION 

RELO FRANCHISE SERVICES, INC., 

 Plaintiff, 

 

 v. 

CONNOR GILMAN, et al., 

 Defendants. 

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Case No. 1:18-cv-578 

Judge Susan J. Dlott 

ORDER ADOPTING REPORT AND 

RECOMMENDATION 

This matter is before the Court on Defendants’ Objections (Doc. 48) to the Magistrate 

Judge’s Report and Recommendation (Doc. 33) that Plaintiff’s Motion for Preliminary 

Injunction (Doc. 7) be granted. Plaintiff opposes Defendants’ Objections (Doc. 51). For the 

reasons set forth below, the Defendants’ Objections will be overruled, and the Magistrate 

Judge’s Report and Recommendation will be adopted. 

I. BACKGROUND 

A. Facts 

The Magistrate Judge provided an excellent recitation of the facts in her Report and 

Recommendation (Doc. 33). The Court will summarize those facts here for ease of analysis. 

Plaintiff Relo Franchise Services, Inc. (“RFS”) is a commercial real estate relocation 

consulting and project management business headquartered in Ohio. On April 24, 2015, 

Defendants Connor Gilman, Charlene Gilman, and Incline Holdings, Inc. (“Incline”)1

 entered 

into a Franchise Agreement with RFS in which Defendants agreed to own and operate a 

Relocation Strategies, Inc. franchise in Denver, Colorado for a period of 10 years. In addition to 

 

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 Connor and Charlene Gilman created Incline for the sole purpose of purchasing the franchise license from RFS. 

(Hrg. Tr., Doc. 43 at PageID 1249.) 
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requiring Defendants to pay royalty fees, the Agreement contains non-compete and nonsolicitation clauses, as well as a non-disclosure requirement for confidential information. 

In exchange for “valuable specialized training and confidential information,” Defendants 

agreed not to: 

 “directly or indirectly . . . (c) Own, maintain, engage in, or have any 

interest in any business offering commercial relocation services or 

other services which are offered in the franchised business . . .or (d) 

Sell or perform for compensation any Permitted Products and 

Services, or otherwise operate the franchised business, within a 

franchise territory licensed to another franchisee . . . or otherwise 

infringe upon rights granted under franchise agreements with other 

franchisees.” 

(Franchise Agreement, Doc. 6 at PageID 202–203.) Defendants also agreed “during the term of 

this Agreement or thereafter” not to “communicate, divulge, or use for the benefit of any other 

person, persons, partnership, association or corporation, any confidential information, 

knowledge, or know-how concerning the system or the methods of operation hereunder.” (Id. at 

PageID 194.) 

Upon termination or expiration of the Franchise Agreement, Defendants agreed, among 

other things, not to “directly or indirectly, represent to the public or hold itself out as a present or 

former franchisee of Franchisor.” (Id. at PageID 201.) Section 15.3 of the Franchise Agreement 

contains a covenant-not-to-compete that continues for one year after the termination or 

cancellation of the agreement. (Id. at PageID 203.) 

Defendants specifically acknowledged that violation of the Agreement “will cause 

Franchisor irreparable injury, and Franchisee consents to the issuance of, and agrees to pay all 

court costs and reasonable attorneys’ fees incurred by Franchisor in obtaining . . . any injunction 

against a violation.” (Id. at PageID 194 (as to use of confidential information) and PageID 203 

(as to covenants-not-to-compete during and after termination of the Franchise Agreement).) The 
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“Enforcement” clause contained in § 16.1 again reiterates RFS’s entitlement to injunctive relief. 

(Id. at PageID 204.) 

In 2015, the Gilmans earned very little income from the new franchise, and they were 

disappointed in the training and level of support they received from RFS. However, they 

continued to operate the franchise, and profits grew. They hired additional employees in 2016, 

2017, and 2018, as their business expanded. By the end of 2017, the Gilman’s franchise had 

become the most profitable RFS franchise in the country. 

In May 2018, the Gilmans formed a new company, Pivotal Project Management, Inc. 

(“Pivotal”), because “we were offering a level of services that the franchisor did not support, so 

we made the business decision to break away from the franchisor.” (Ch. Gilman Dep., Doc. 24 

at PageID 926.) Pivotal employs all of the former franchise employees, who hold the same titles 

at Pivotal that they previously held at the franchise. Defendants sent notice of their new business 

name to multiple industry contacts, announcing that they were “rebranding” the prior franchise. 

Pivotal has three customers, all of whom are prior customers of their former franchise. 

On July 30, 2018, the Gilmans advised RFS that they were terminating the operation of 

the franchise in order to work for Pivotal, their new commercial real estate project management 

company. On August 2, 2018, RFS notified Defendants that they were in breach of the 

Franchise Agreement. 

B. Procedural Posture 

Plaintiff RFS initiated this action in the Court of Common Pleas in Hamilton County, 

Ohio, alleging in part that the Defendants breached their Franchise Agreement by abandoning 

their franchise and starting a competing business, Pivotal. Defendants removed this matter to 

United States District Court for the Southern District of Ohio based on diversity of citizenship, 
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pursuant to 28 U.S.C. §§ 1441 and 1332. This Court’s jurisdiction is undisputed, and all pretrial 

proceedings in this matter were referred to the Magistrate Judge (Doc. 5). 

Plaintiff RFS filed a Motion for Temporary Restraining Order and Preliminary Injunction 

(Doc. 7) which Defendants opposed (Doc. 21). The parties reached an agreed injunction that 

resolved the need for a temporary restraining order (Doc. 11), but the Motion for Preliminary 

Injunction remained unresolved. Pursuant to the Court’s referral order, the Magistrate Judge 

conducted an evidentiary hearing and issued a Report and Recommendation (Doc. 33) that 

Plaintiff’s Motion for a Preliminary Injunction be granted subject to “the appropriately narrow 

scope of the recommended injunction.” (Doc. 33 at PageID 1063.) 

Defendants filed Objections to the Report and Recommendation, alleging that the 

Magistrate Judge erred in concluding that RFS had a substantial likelihood of success on the 

merits because she failed to properly consider Defendants’ defenses to enforcement of the 

Franchise Agreement. Plaintiff responded that the Defendants’ alleged defenses to enforcement 

were waived and/or are not supported by the facts of this case. Thus, according to Plaintiff RFS, 

the Magistrate Judge correctly concluded that it has a substantial likelihood of success on the 

merits, and the Court should adopt the Report and Recommendation. For the reasons set forth 

below, the Court agrees. 

II. STANDARD OF REVIEW 

 Pursuant to Federal Rule of Civil Procedure 72(b)(3), “The district judge must determine 

de novo any part of the magistrate judge’s disposition that has been properly objected to. The 

District judge may accept, reject, or modify the recommended disposition; receive further 

evidence; or return the matter to the magistrate judge with instructions.” 
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III. ANALYSIS 

The standards guiding a preliminary injunction motion are well established: 

Four factors guide the decision to grant a preliminary injunction: 

“(1) whether the movant has a strong likelihood of success on the 

merits; (2) whether the movant would suffer irreparable injury 

absent the injunction; (3) whether the injunction would cause 

substantial harm to others; and (4) whether the public interest 

would be served by the issuance of an injunction.” Bays v. City of 

Fairborn, 668 F.3d 814, 818–19 (6th Cir. 2012). We have often 

cautioned that these are factors to be balanced, not prerequisites to 

be met. Certified Restoration, 511 F.3d at 542. At the same time, 

however, we have also held that “[a] preliminary injunction issued 

where there is simply no likelihood of success on the merits must 

be reversed[.]” Winnett v. Caterpillar, Inc., 609 F.3d 404, 408 (6th 

Cir. 2010) (bracketing omitted) (quoting Mich. State AFL–CIO v. 

Miller, 103 F.3d 1240, 1249 (6th Cir. 1997)). 

S. Glazer's Distributors of Ohio, LLC v. Great Lakes Brewing Co., 860 F.3d 844, 849 (6th Cir. 

2017). In the case at bar, Defendants contend that the Magistrate Judge incorrectly determined 

that Plaintiff had a strong or substantial likelihood of success on the merits because she failed to 

appropriately consider Defendants’ defenses to enforcement of the Franchise Agreement. The 

Court will address each alleged defense to enforcement below. 

A. Defendants’ Claim that the Ohio Business Opportunity Act Renders the Franchise 

Agreement Unenforceable 

Defendants allege that the Ohio Business Opportunity Act (“OBOA”) renders the 

Franchise Agreement unenforceable. RFS responds that Defendants waived any OBOA 

argument because they failed to present it to the Magistrate Judge in this case.2

 In addition, RFS 

 

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 The Defendants have expanded the OBOA and fraudulent inducement arguments quite dramatically on appeal to 

this Court, although they made mention of related arguments to the Magistrate Judge. In her Report and 

Recommendation, the Magistrate Judge states, “Specifically, Defendants argue that: . . . (2) Ohio’s Business 

Opportunities Act and/or the doctrine of fraudulent inducement make the entire Franchise Agreement cancellable or 

void.” (Doc. 33 at PageID 1072.) This Court concludes that Defendants may have waived their current claims that 

the OBOA and/or fraudulent inducement invalidate the Franchise Agreement but chooses to address those claims on 

the merits nonetheless. 
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alleges, the OBOA does not apply here, and—even if it did—RFS complied with its 

requirements. 

The OBOA is intended “to protect prospective purchasers of business opportunity plans 

by requiring that sellers provide the purchasers with the information necessary to make an 

intelligent decision about the business opportunity plan being offered.” Ohio Rev. Code § 

1334.15(A). However, “Except for division (H) of section 1334.03 and section 1334.043 of the 

Ohio Revised Code,” the OBOA does “not apply to: (A) Any transaction that complies in all 

material respects with the trade regulation rule of the federal trade commission, ‘disclosure 

requirements and prohibitions concerning franchising,’ 16 C.F.R 436.1 et seq., as may be 

amended from time to time, that is in effect on the date of the transaction.” Ohio Rev. Code § 

1334.13. 

Defendants contend that this exemption from the OBOA does not apply here because 

RFS: “(1) falsely claimed that it did not make financial performance representations; and (2) 

made financial performance representations regarding actual sales and profits outside the FDD 

[Franchise Disclosure Document] and without the required disclaimers.” (Doc. 48 at PageID 

1347.) Pursuant to the Federal Trade Commission’s Franchise Rule, if a franchisor declines to 

make financial performance representations in Item 19 of its FDD, then it is not permitted to 

provide information about the actual or potential financial performance of its franchise outlets. 

See 16 C.F.R. § 436.5(s). The Franchise Rule defines “financial performance representation” as 

“any representation, including any oral, written, or visual representation, to a prospective

 

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 These provisions prohibit a seller from representing that a purchaser’s initial payment is secured or that the seller 

provides a buy-back arrangement unless the seller has obtained a surety bond or established a trust account as 

outlined in Ohio Revised Code § 1334.04. There is no allegation that Plaintiff violated these prohibitions. 
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franchisee . . . that states, expressly or by implication, a specific level or range of actual or 

potential sales, income, gross profits, or net profits.” 16 C.F.R. § 436.1(e) (emphasis added). 

Defendants allege that Tim Haines—RFS’ President and CEO—admitted showing the 

Gilmans “profit and loss statements as it related to the job.” (Doc. 48 at 1347.) However, these 

statements were not shown to the Gilmans until their “training week” in Cincinnati which 

occurred AFTER they had become franchisees. (Hrg. Transcript, Doc. 43 at PageID 1172; Ch. 

Gilman Dep., Doc. 24 at PageID 922.) Because they were no longer “prospective franchisees” 

when Haines showed them the profit and loss statements, showing them the statements did not 

violate the Franchise Rule. See 16 C.F.R. §§ 436.1(e) and 436.5(s). As the evidence in the 

record demonstrates that RFS complied with the FTC’s regulations regarding disclosure 

requirements and prohibitions, RFS is exempt from the OBOA. See Ohio Rev. Code § 1334.13. 

Accordingly, Defendants’ contention that the OBOA renders the Franchise Agreement 

unenforceable is without merit. 

B. Defendants’ Claim that They Were Fraudulently Induced to Enter into the 

Franchise Agreement Rendering the Agreement Unenforceable 

Defendants next contend that the Franchise Agreement is unenforceable because they 

were fraudulently induced to sign it. It is well established that: 

[T]he elements of fraudulent inducement are: (1) an actual or 

implied false representation concerning a fact, or where there is a 

duty to disclose, concealment of a fact; (2) which is material to the 

transaction; (3) knowledge of the falsity of the representation or 

such recklessness or utter disregard for its truthfulness that 

knowledge may be inferred; (4) intent to induce reliance on the 

representation; (5) justifiable reliance; and (6) injury proximately 

caused by the reliance. 

Simon Property Group, L.P. v. Kill, No. 1-09-30, 2010–Ohio–1492, ¶ 17 (Ohio App. 2010). 

“[A] claim of fraud in the inducement arises when a party is induced to enter into an agreement 
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through fraud or misrepresentation . . . A classic claim of fraudulent inducement asserts that a 

misrepresentation of facts outside the [agreement] or other wrongful conduct induced a party to 

enter into the [agreement].” Aero Fulfillment Serv. Corp. v. Oracle Corp., 186 F. Supp. 3d 764, 

775 (S.D. Ohio 2016) (quoting Am. Coal Sales Co. v. N.S. Power Inc., No. 2:06cv94, 2009 WL 

467576 (S.D. Ohio Feb. 23, 2009)). 

In the case at bar, Defendants identify as “fraudulent” only statements made during 

“training week.” (Doc. 48 at PageID 1349–50.) However, “training week” did not occur until 

AFTER the contract had been signed. (Hrg. Transcript, Doc. 43 at PageID 1172; Ch. Gilman 

Dep., Doc. 24 at PageID 922.) Because the Defendants did not know about the allegedly false 

statements when they entered into the Franchise Agreement, those statements could not have 

fraudulently induced them to enter the agreement. Accordingly, Defendants’ contention that 

they were fraudulently induced to enter into the Franchise Agreement fails. 

C. Defendants’ Claim that RFS’s Own Material Breaches of the Contract Preclude 

Enforcement 

In their Objections to the Magistrate Judge’s Report and Recommendation, Defendants 

contend both that the Magistrate Judge failed to consider evidence that RFS breached the 

Franchise Agreement first and that Defendants “are prepared to present additional evidence of 

FRS’s material breaches of the Franchise Agreement.” (Doc. 48 at PageID 1353.) The 

Magistrate Judge conducted a two-day evidentiary hearing on the Motion for Preliminary 

Injunction, and she invited both parties to present any evidence they desired. (Doc. 46 at PageID 

1319.) If Defendants possess more convincing evidence that they chose not to present at the 

evidentiary hearing for some reason, they may not then fault the Magistrate Judge for failing to 

consider such evidence. On the state of the record as it currently exists, the Court finds no error 

in the Magistrate Judge’s Report and Recommendation. 
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D. Defendants Request a Bond 

Where a preliminary injunction is issued, a Court may require that the movant provide a 

bond in an amount “proper to pay the costs and damages sustained by any party found to have 

been wrongfully enjoined or restrained.” Fed. R. Civ. P. 65(c). However, the Court has no 

mandatory duty to impose a bond in such circumstances. Appalachian Reg’l Healthcare, Inc. v. 

Coventry Health & Life Ins. Co., 714 F.3d 424, 431 (6th Cir. 2013). The Franchise Agreement at 

issue in this case specifically provides, “Franchisor will be entitled, without bond, to the entry 

of temporary and permanent injunctions and orders of specific performance enforcing the 

provisions of this Agreement . . . .” (Doc. 6 at PageID 204 (emphasis added).) Under these 

circumstances, the Court sees no need to require a bond at this juncture. 

IV. CONCLUSION 

Accordingly, the Magistrate Judge’s Report and Recommendation (Doc. 33) is hereby 

adopted as the opinion of this Court. Plaintiff’s Motion for Preliminary Injunction (Doc. 7) is 

hereby GRANTED. Defendants’ Objections (Doc. 48) are hereby overruled. 

IT IS SO ORDERED. 

 Dated: January 25, 2019 S/Susan J. Dlott______________________ 

 Judge Susan J. Dlott 

 United States District Court