Court Opinion

ID: 2995327
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:19:44.988589+00
Date Added: 2024-06-11T11:38:52.592812
License: Public Domain

In the
United States Court of Appeals
For the Seventh Circuit

No. 00-4212

Re/Max North Central, Inc.,

Plaintiff-Appellee,

v.

Patricia Cook, f/d/b/a Re/Max Lake and Country,

Defendant-Appellant.

Appeal from the United States District Court
for the Eastern District of Wisconsin.
No. 00-C-1314--John W. Reynolds, Judge.

Argued May 16, 2001--Decided November 13, 2001

  Before Harlington Wood, Jr., Coffey, and
Williams, Circuit Judges.

  Coffey, Circuit Judge. On May 1, 1993,
Re/Max North Central, Inc. entered into a
franchise agreement with Patricia Cook,
granting her the exclusive right to
operate a Re/Max real estate office
within a defined area that included
Mukwonago, Wisconsin. When the 1993
agreement expired in 1998, the parties
negotiated the terms of a successor
agreement. Cook, however, never signed
the successor agreement because she
continued to object to its terms. After
Re/Max made several attempts at
reconciliation in hopes of solving the
problem, it terminated her franchise
rights on August 11, 2000. In spite of
the termination Cook continued to use
Re/Max’s marks and logos, and Re/Max
consequently sought and received a
preliminary injunction in the United
States District Court for the Eastern
District of Wisconsin prohibiting Cook
from continuing to use its trademarks and
logos. Cook appeals the district court’s
imposition of the preliminary injunction,
arguing that Re/Max failed to comply with
the Wisconsin Fair Dealership Law when it
terminated her franchise rights. We
affirm.

I.   Factual Background
  On May 1, 1993, Cook entered into a
franchise agreement with Re/Max to
operate an exclusive Re/Max franchise in
the Mukwonago-East Troy area of
southeastern Wisconsin. The 1993
agreement was for an initial term of five
years and provided Cook with the
opportunity to renew the agreement for
two additional five-year terms, provided
that, among other things, Cook gave
Re/Max written notice of her intent to
renew not less than six (6) months prior
to the end of the agreement and further
that she was not in default under the
terms of the 1993 agreement. Section 6.C
of the 1993 agreement further provided
that if Cook chose to renew her franchise
rights beyond the initial period, she was
required to do so under the terms of the
franchise agreement being used at the
time of her renewal.

  In compliance therewith, Cook provided
Re/Max with both a verbal and written
notice of her intent to renew her
franchise rights in August 1997. Re/Max
did not immediately advise Cook that
renewal would be forthcoming, but on
April 10, 1998, Re/Max provided Cook with
a copy of the 1998 Re/Max Franchise
Offering Circular. Shortly after
receiving the 1998 circular, Cook
tendered to Re/Max a check in the amount
of $8,500, twice the amount required to
renew her franchise agreement. On May 1,
1998, Re/Max responded with a letter to
Cook expressing its concerns about the
renewal of Cook’s subfranchise rights due
to her failure to meet the sales
associate quota required in the 1993
agreement. Under the 1993 agreement Cook
had been required to retain a minimum of
five (5) sales associates in her office
by May 1996. Cook, however, was the only
sales associate operating out of that
location throughout the term of the 1993
agreement. Despite these concerns, Re/Max
nevertheless offered to extend the term
of the 1993 agreement for six months in
order that it might ascertain whether
Cook was willing and able to comply with
the sales associate quota.

  On November 25, 1998, Re/Max issued Cook
a notice of default because she had
failed to hire the requisite number of
sales associates (5) under the 1993
agreement. In the notice of default,
Re/Max expressed its intention not to re
new her agreement unless she cured her
default by expanding her office and
hiring the requisite number of sales
associates before January 26, 1999. In
order that she might comply with the
sales associate quota, Cook hired several
family members,/1 though none of them
had ever been a member of the Milwaukee
Metro Multiple Listing Service./2
Despite Cook’s questionable hires, Re/Max
accepted her identification of the sales
associates and began the renewal process.
Because Re/Max had not yet completed its
1999 franchise offering circular,/3 it
allowed Cook to operate her franchise on
a month-to-month basis under the terms of
the 1993 franchise agreement until Re/Max
had completed the 1999 circular.

  In April 1999, Re/Max registered its
1999 franchise offering circular with the
State of Wisconsin and provided Cook with
a copy to review and thereafter in June
forwarded a copy of the proposed 1999
franchise agreement to her for execution.
Cook was not interested in signing the
agreement at this time as she was in
hopes of negotiating the terms of the
agreement, particularly the term dealing
with the number of sales associates she
was required to employ in her office.
Re/Max desired that Cook retain at least
five (5), if not more, sales associates
in her sales office, while Cook wished to
retain only two (2). Re/Max acceded to
Cook’s wish and engaged in lengthy
negotiations with Cook and her counsel
about the terms of the 1999 agreement,
focusing almost exclusively on terms
related to the sales associate quota. In
September 1999 Cook and Re/Max ultimately
agreed that the sales associate quota
would remain at five (5).
  Shortly after Re/Max and Cook concluded
their negotiations, Re/Max provided Cook
with copies of the 1999 franchise
agreement for her to execute. By November
8, 1999, more than six weeks after the
1999 agreement had been forwarded to
Cook, Cook still had not signed it.
Re/Max inquired of Cook in writing,
asking her if her delay in signing the
franchise renewal agreement meant that
she did not wish to renew her franchise
rights. Cook responded to Re/Max’s
inquiry by returning the 1999 agreement
on or about November 17, 1999. But
instead of executing the negotiated 1999
agreement forwarded to her, Cook
unilaterally altered the term dealing
with the required number of sales
associates. Even though the parties had
previously agreed that the agreement
would require Cook to employ five (5)
sales associates, Cook instead suggested
that she only be required to retain two,
a suggestion that Re/Max had previously
rejected during negotiations. Re/Max
declined to accept Cook’s proposed
changes, and informed her that, unless
she executed the 1999 agreement by
December 20, 1999, as the parties had
negotiated it, it would be forced to
conclude that she was not interested in
renewing her franchise.

  On January 26, 2000, still awaiting a
response from Cook, Re/Max placed Cook’s
franchise agreement in default, provided
her with 90 days notice of termination.
The notice of termination gave Cook a 60-
day period, beginning on January 26,
2000, within which to cure the default by
completing the renewal requirements. In
the letter, Re/Max explained that the
1999 agreement expired on March 14, 2000
and would be replaced with the 2000
agreement. Re/Max provided Cook with two
options to cure her default--renew her
franchise rights under the 1999 agreement
by signing and returning it before March
14 or renew her franchise rights under
the 2000 agreement if she chose to do so
after March 14.

  Cook did not sign and return the 1999
agreement by March 14, 2000. Accordingly,
on March 20 Re/Max sent Cook a copy of
the 2000 Uniform Offering Circular by
overnight mail and also extended the time
within which Cook could cure her default
with the signing of the 2000 agreement,
in order to provide Cook the legally
mandated time to review the offering. But
instead of later signing the 2000
agreement, as instructed in both Re/Max’s
January 26 and March 20 correspondence,
Cook signed the expired 1999 agreement
and returned it to Re/Max on March 27,
2000.

  Re/Max did not countersign the outdated
1999 agreement because that agreement was
no longer registered in Wisconsin, having
been replaced by the 2000 agreement.
Re/Max informed Cook that it could not
sign the 1999 agreement because it was no
longer registered, but once more provided
Cook with additional time to sign the
2000 agreement. Cook again refused to
sign the 2000 agreement, without offering
an accompanying explanation. Despite
Cook’s obstinance, Re/Max attempted to
continue negotiations with Cook and
offered her the option of signing the
1999 agreement with an accompanying
release agreeing not to sue Re/Max for
allowing her to renew her franchise
rights under an expired agreement. Cook
refused, and once again refused to sign
the 2000 agreement, though she never did
express any reason for her refusal. On
July 5, 2000, Re/Max again extended
Cook’s time to cure the default and
established a final cure date of July 10,
2000 and notified Cook that her franchise
rights would be terminated effective
August 11, 2000 if she had not renewed
her franchise rights by executing an
effective agreement by July 10. Re/Max
offered Cook the choice between executing
the 2000 agreement or the 1999 agreement
accompanied by a waiver releasing Re/Max
from liability for allowing Cook to
execute an expired agreement. Cook failed
to cure her default, and Re/Max
terminated her franchise rights on August
11, 2000.

  Despite having refused to sign a
franchise agreement as well as refusing
to honor the termination of her franchise
rights on August 11, Cook took it upon
herself to continue to use the Re/Max
marks and continued to hold herself out
as a licensed provider of Re/Max real
estate services even after she had
received notice that her right to engage
in the real estate business under the
Re/Max name had been terminated. Re/Max
at that time filed this suit seeking an
injunction against Cook for trademark
infringement under the Lanham Act, 15
U.S.C. sec. 1065. In the district court,
Cook argued that Re/Max had terminated
her franchise rights in violation of the
Wisconsin Fair Dealership Law ("WFDL"),
Wis. Stats. sec.sec. 135.01 et seq.,
because it had not given her 60 days to
cure her default. According to Cook,
Re/Max’s requirement that she sign the
1999 agreement before March 14 gave her
only 48 days to cure her default and that
she should be given an additional 60 days
from March 14 to sign the 2000 agreement.
Cook reasoned that she should be given an
additional 60 days to sign the 2000
agreement because the 2000 agreement
contained a new term that was not
acceptable to her. Cook observed that the
1999 agreement had granted her the
exclusive right to operate a Re/Max
franchise in her protected territory and
thus prohibited Re/Max from granting any
other franchise in that territory. The
2000 agreement, however, allowed Re/Max
to issue a commercial-only franchise to
other potential franchisees within her
protected territory.

  Re/Max responded that it had given her
60 days to sign a then-existing
agreement, noting that both the 1999
agreement expired after March 14. Re/Max
argued that during the negotiations that
proceeded between April 2000 and July
2000, Cook never once informed it that
she objected to the term allowing Re/Max
to issue commercial-only franchises.
Re/Max also pointed out that since 1993
Cook had only two commercial listings,
and therefore the 2000 agreement did not
substantially change Cook’s competitive
circumstances.

  The district court rejected Cook’s WFDL
argument and found that Re/Max had given
Cook the required 60 days to cure her
default. Thereafter, the judge ruled that
since Cook had refused to execute a
franchise agreement within the time frame
allowed, Re/Max’s action in terminating
her franchise rights was proper.
Furthermore, the judge ruled that he was
convinced that Re/Max could demonstrate a
likelihood of success on the merits on
its Lanham Act claim that Cook’s
continued use of Re/Max’s marks and logos
infringed upon Re/Max’s trademark rights.
The court further determined that Re/Max
would suffer irreparable injury for which
it had no adequate legal remedy if
theinjunction were not granted. Finally,
the court ruled that Cook had failed to
establish that she would suffer any
irreparable harm if the injunction were
granted. Accordingly, the court granted
Re/Max’s motion for a preliminary
injunction.

II.   Issues

  Cook raises three issues on appeal.
First, she challenges the district
court’s determination that Re/Max is
likely to prevail on the merits, renewing
the WFDL argument that she raised below.
Second, Cook argues that the district
court erred in its conclusion that Re/Max
would suffer irreparable harm if the
injunction were not granted. Finally,
Cook contends that the district court
improperly weighed the relative harm to
Cook in granting the injunction.

III.   Analysis

  We review a decision denying or granting
a preliminary injunction under the abuse
of discretion standard. Wisconsin Music
Network, Inc. v. Muzak Limited
Partnership, 5 F.3d 218, 221 (7th Cir.
1993). We give "’substantial deference to
a district court’s decision to grant a
preliminary injunction insofar as that
decision involves the discretionary acts
of weighing evidence or balancing
equitable factors.’" Gateway Eastern Rwy
Co. v. Terminal R.R. Assoc. of St. Louis,
35 F.3d 1134, 1137 (7th Cir. 1994)
(quoting United States v. Baxter
Healthcare Corp., 901 F.2d 1401, 1407
(7th Cir. 1990)). "’The question for us
is whether the judge exceeded the bounds
of permissible choice in the
circumstances, not what we would have
done if we had been in his shoes.’"
Wisconsin Music Network, Inc., 5 F.3d at
221 (quoting Roland Machinery Co. v .
Dresser Indus., 749 F.2d 380, 390 (7th
Cir. 1984)).

  Before a court will grant a preliminary
injunction, the movant must demonstrate a
likelihood of success on the merits, the
existence of an irreparable harm without
the injunction, and an inadequate remedy
at law. Meridian Mut. Ins. Co. v.
Meridian Ins. Group, Inc., 128 F.3d 1111,
1114 (7th Cir. 1997); Gateway Eastern Rwy
Co., 35 F.3d at 1137; Wisconsin Music
Network, Inc., 5 F.3d at 221. If the
moving party meets this threshold burden,
then the court weighs the relative harms
to the respective parties and the
probability of the movant’s success on
the merits. Gateway Eastern Rwy Co., 35
F.3d at 1137; Wisconsin Music Network,
Inc., 5 F.3d at 221.

A.   Likelihood of Success on the Merits

  In its complaint in the district court,
Re/Max alleged that Cook continued to use
its marks after Re/Max had terminated her
franchise rights, in violation of the
Lanham Act, 15 U.S.C. sec. 1065. Cook
does not dispute that she continued to
use Re/Max’s marks, but argues instead
that Re/Max was not likely to prevail on
the merits because Re/Max had never
properly terminated her franchise rights,
relying primarily on various portions of
the Wisconsin Fair Dealership Law (WFDL).
Wis. Stats. sec.sec. 135.01 et seq.

  Cook rests her initial argument upon the
notice and cure provision of the WFDL,
which required Re/Max to provide Cook
with written notice of default 90 days
prior to terminating her franchise
agreements and also allow Cook 60 days to
cure any default. Wis. Stats. sec.
135.04. Cook contends that Re/Max failed
to comply with the notice and cure
provision of the WFDL because Re/Max’s
January 26 notice required her to sign
the 2000 agreement (instead of the
expired 1999 agreement) after March 14
and provided her with only 48 days within
which to cure her default. Cook’s
argument mistakenly assumes that the
default was her failure to execute the
1999 agreement. The January 26 notice,
however, clearly explains that Cook’s
default is her "failure to complete a
proper renewal of [her] Re/Max
franchise," not that Cook has failed to
execute the 1999 agreement.

  Re/Max gave Cook 60 days to cure her
default by executing a valid franchise
agreement. It allowed her to sign the
1999 agreement anytime during the 48 days
during which it was in effect or it
allowed her thereafter to sign the 2000
agreement once it became effective.
Furthermore, even after the 60-day period
had elapsed, Re/Max extended Cook’s cure
period until July 10, 2000 and did not
finally terminate her franchise rights
until August 11, 2000. Re/Max gave Cook
much more than the required 60 days, 167
to be precise, to cure her default by
signing an agreement registered with
Wisconsin, and she steadfastly refused to
do so.

  Cook argues that the WFDL required
Re/Max to issue separate cure and default
notices for both the 1999 and the 2000
agreement. She cites no precedent in
support of this argument and instead
offers only weak and unconvincing excuses
for her failure to sign an existing
agreement during the period Re/Max
provided her to cure her default. For in
stance, Cook makes much of the fact that
her 1993 agreement expired in early 1999
and she didn’t receive copies of the 1999
agreement until September 1999. Cook’s
argument is nothing more than a red
herring. Re/Max could not have sent Cook
copies of the 1999 agreement before
September 1999 because Re/Max continued
to negotiate with Cook from June 1999 to
September 1999 concerning the terms of
the 1999 agreement. Cook cannot now claim
that Re/Max failed to provide her with
the agreement in a timely fashion after
Re/Max accommodated her concern regarding
the terms of the agreement by negotiating
with her. Further, even after Re/Max
provided Cook with the agreement in
September 1999, Cook refused to sign it.
When Re/Max inquired into her refusal in
November 1999, Cook responded by
unilaterally amending the agreed upon
terms to ones more favorable to her.
Still, Re/Max did not immediately send
Cook a notice of default, but rather gave
her additional time to execute the 1999
agreement and did not send her a notice
of default until January 26, 2000. Cook
repeatedly refused to execute the 1999
agreement, a refusal motivated by her
desire to force Re/Max to assent to terms
more favorable to her. However, a
franchisee cannot hold hostage a
franchisor’s marks to force it to
negotiate terms more favorable to the
franchisee. Gorenstein Enterprises, Inc.
v. Quality Care-USA, Inc., 874 F.2d 431,
435 (7th Cir. 1989).

  Cook next suggests that Re/Max
terminated her franchise rights in
violation of Wis. Stats. sec. 135.03.
Under sec. 135.03 of the WFDL, "[no]
grantor . . . may terminate, cancel, fail
to renew or substantially change the
competitive circumstances of a dealership
agreement without good cause." (emphasis
added). Cook objects to a provision in
the 2000 agreement that allowed Re/Max to
issue commercial-only franchises in her
protected area. Cook devotes much of her
argument to establishing that Re/Max did
not have "good cause" to include this
provision in the 2000 agreement. Cook’s
argument is misdirected. The trial judge
found that the alleged change did not
"substantially change" the competitive
circumstances of Cook and Re/Max’s
agreement. See East Bay Running Store,
Inc. v. Nike, Inc., 890 F.2d 996, 999-
1000 (7th Cir. 1989) (holding that the
"good cause" requirement is not
implicated without an initial finding
that the franchisor terminated,
cancelled, failed to renew, or
substantially changed the competitive
circumstances of the dealership
agreement).

  Although Cook asserts that "commercial
sales in [the Mukwonago-East Troy] area .
. . continue[ ] to grow at among one of
the fastest rates in the entire state of
Wisconsin," she points to nothing in the
record to support this assertion. Spath
v. Hayes Wheels International-Indiana,
Inc., 211 F.3d 392, 397 (7th Cir. 2000)
("a party who fails to develop the
factual basis of a claim on appeal and,
instead, merely draws and relies upon
bare conclusions" has waived that claim).
In any event, the evidence in the record
recites a different story. Cook admits
that since 1993 she has had only two
commercial listings and has not gone to
closing on either. Further, between March
27, 2000 and July 10, 2000, Re/Max sought
to resolve the dispute with Cook, and she
never did inform Re/Max that she objected
to the provision of the 2000 agreement
that allowed Re/Max to issue commercial-
only franchises. Franchisors may make
system-wide nondiscriminatory changes in
order to adapt market conditions. Remus
v. Amoco Oil Co., 794 F.2d 1238, 1240-41
(7th Cir. 1986); East Bay Running Store,
Inc., 890 F.2d at 999-1000. We agree with
the trial judge that the 2000 agreement
arguably did not substantially change
Cook’s competitive circumstances.

  Finally, in a last ditch effort, Cook
reaches for straws and argues that she
"substantially performed her obligations
under the provisions of the January 26,
2000 notice." We need not spend much time
dealing with this argument. Certainly,
Cook cannot dispute that Re/Max was
entitled to require its franchisees to
operate with a valid franchise agreement.
See, e.g., Moodie v. School Bd. Fairs,
Inc., 889 F.2d 739, 745-46 (7th Cir.
1989). Cook suggests instead that her act
of signing the expired, 1999 agreement
should suffice. However, it is undisputed
that Re/Max required all franchisees
entering or renewing agreements after
March 14, 2000 to sign the 2000
agreement, not the expired 1999
agreement. Further, the 1993 agreement,
under which Cook had been operating,
specifically required that Cook renew her
franchise rights under the terms of the
then-current agreement. Moreover,
Re/Max’s offer to allow Cook to sign exe
cute the 1999 agreement accompanied by a
waiver clearly indicates that Re/Max
obviously did not consider Cook’s tardy
execution of the 1999 agreement to be a
substantial performance of her obligation
under the January 26 notice. Re/Max is
entitled to maintain uniform contract
terms with its dealers. Id. It is not
unreasonable for Re/Max to rewrite its
franchise agreements in an orderly
fashion. Wisconsin Music Network, Inc., 5
F.3d at 223.

  In the end, Re/Max waited more than two
years after the expiration of the 1993
franchise agreement to terminate Cook’s
franchise. When Cook disagreed with the
terms of the 1999 agreement, Re/Max
repeatedly attempted to negotiate with
her regarding the agreement’s terms. Even
after these negotiations, Cook had almost
7 months during which she could have
executed the 1999 agreement, and
shestubbornly refused to do so,
continuing to insist upon terms more
favorable to herself. As we noted
earlier, a franchisee cannot hold hostage
a franchisor’s marks to force it to
negotiate terms more favorable to the
franchisee. Gorenstein Enterprises, Inc.,
874 F.2d at 435. Although Cook paints
herself as someone who desperately wished
to retain her Re/Max franchise, her
actions speak louder than her words.
Re/Max made every effort to accommodate
her. We agree with the trial judge’s
ruling that Re/Max did not violate the
WFDL when it finally terminated Cook’s
franchise and therefore was likely to
succeed on the merits.

B. Irreparable Injury and Inadequate
Legal Remedy

  A party seeking a preliminary injunction
must demonstrate that they will suffer an
irreparable injury if the injunction is
not granted for which they have no
adequate remedy at law. Gateway Eastern
Rwy Co., 35 F.3d at 1137. Cook wildly
asserts, without any precedent to support
her assertion, that Re/Max cannot show it
will suffer an irreparable injury merely
because she has not "undertaken any
action that could be considered
deleterious to Re/Max’s marks nor . . .
is likely to do so in the future." We
have clearly and repeatedly held that
damage to a trademark holder’s goodwill
can constitute irreparable injury for
which the trademark owner has no adequate
legal remedy. Eli Lilly & Co. v. Natural
Answers, Inc., 233 F.3d 456, 469 (7th
Cir. 2000); Meridian Mut. Ins. Co., 128
F.3d at 1114; Wesley-Jesson Division of
Schering Corp., 698 F.2d 862, 867 (7th
Cir. 1983). "The most corrosive and
irreparable harm attributable to
trademark infringement is the inability
of the victim to control the nature and
quality of the defendants’ goods. Even if
the infringer’s products are of high
quality, the plaintiff can properly
insist that its reputation should not be
imperiled by the acts of another."
International Kennel Club of Chicago,
Inc. v. Mighty Star, Inc., 846 F.2d 1079,
1092 (7th Cir. 1988). While Cook
continues to use Re/Max’s marks and
logos, it has no quality over the
services she provides or potential harm
to its goodwill. Cook’s argument that
Re/Max has not established the existence
of an irreparable injury for which there
is no adequate remedy at law is without
merit.

C.    Balance of Harms

  Finally, Cook suggests that the trial
court failed to adequately weigh the
relative harm to the parties in granting
the injunction. Cook argues that the
injunction would "put [her] out of
business." Cook’s melodramatic
interpretation of the impact of the
assumption is without merit. The
injunction does not prohibit Cook from
maintaining relationships with existing
clients or developing relationships with
new clients--it only requires her to
remove Re/Max logos. The injunction
allows Cook to maintain her same office
and listings and to work as an
independent real estate agent or to
select another real estate company to
contract with. As noted above, Re/Max
clearly has an interest in the goodwill
it has in its marks and logos. Further,
the public also has an interest in
knowing with whom they do business and
whether or not the agent is a franchisee
of a given real estate corporation. We
are convinced that the trial court
carefully and properly weighed the extent
of harm to each party, and we find no
error in the court’s balancing process.

IV.    Conclusion
  We agree with the trial judge’s ruling
that Re/Max did not violate the WFDL when
it terminated Cook’s franchise rights.
Accordingly, we hold that the trial judge
properly found that Re/Max has a better
than negligible chance of prevailing on
the merits. We further hold that the
trial judge correctly ruled that Re/Max
has established that it will suffer an
irreparable injury if the injunction were
not granted. Finally, we hold that the
trial judge carefully and properly
weighed the harm to each party. We AFFIRM
the trial court’s grant of a preliminary
injunction, prohibiting Cook from using
Re/Max’s marks and logos.

FOOTNOTES

/1 The record does not disclose whether any of the
family members Cook hired had any real estate
experience or current real estate licenses.

/2 A multiple listing service (MLS) is a facility by
which a MLS member broker makes a blanket unilat-
eral offer of subagency to any other MLS member
who can find a buyer to complete the sale. The
MLS computer data base contains information about
homes listed for sale with its members. MLS
members and their home- seeking prospects can
review this data via computer terminals or by
reviewing printed compilations distributed to
members on a bi-weekly basis.

/3 Uniform franchise offering circulars are prospec-
tuses that a franchisor submits to the market-
place for consideration by potential franchisees.