Window Gang Ventures, Corp. v. Salinas (NCBC – Feb. 21, 2018)


Plaintiff Window Gang Ventures, Corp. (“Window Gang”) operates or franchises commercial facilities-cleaning outlets in twenty states.  Defendant Gabriel Salinas (“Salinas”) entered into a franchise agreement (the “Franchise Agreement”) with Window Gang in 1997, giving him the exclusive right to operate a Window Gang franchise in Wilmington, North Carolina, and the surrounding counties.  Among other things, The Franchise Agreement contained covenants against competition and solicitation, as well as provisions governing the return of Window Gang-related marks and telephone numbers.   After the parties signed the Franchise Agreement, Salinas opened nine other Window Gang franchises pursuant to oral agreements with Window Gang.  Window Gang and Salinas operated under the Franchise Agreement through September 2017, when he and Window Gang were unable to reach agreement on an extension to the agreement.

In December 2017, Salinas began to communicate with Window Gang’s customers on behalf of Defendant Window Ninjas, LLC (“Window Ninjas”).  In those communications, he stated that Window Ninjas was formerly known as Window Gang, and that the customers could now direct any inquiries regarding cleaning services to Window Ninjas.  Salinas continued to use an e-mail address and several phone numbers that he operated on behalf of Window Gang during the operation of the Franchise Agreement.  Window Gang has brought several claims against Window Ninjas, and now moves for a preliminary injunction under Rule 65, based on Defendants’ violation of the restrictions contained with the Franchise Agreement, andon Defendants’ alleged violations of N.C. Gen. Stat. § 75-1.1.  The court rules on the motion after reviewing the briefs, arguments, exhibits, and affidavits of the parties.

Notable Analysis:

  • Window Gang has a reasonable likelihood of success on the merits of its claims that Salinas has breached the Franchise Agreement by failing to return Window Gang’s marks, telephone numbers, training materials, operation procedures, and client lists; however, the Franchise Agreement does not expressly require the return of business records.
  • In North Carolina, covenants not to compete must be in writing in order to be enforceable, and the agreements permitting Salinas to open nine franchises were oral.  Window Gang therefore has not shown a reasonable likelihood of success on the merits for any claim that Salinas breached a covenant not compete arising out of his operation of the nine franchises that resulted from oral agreements with Window Gang.
  • North Carolina courts evaluate restrictive covenants contained within franchise agreements as hybrid situations under which the court should combine the elements used to evaluate covenants contained within the sale-of-business context and covenants contained within an employment contract.
  • In evaluating a covenant contained within a sale-of-business context, a court should evaluate whether the restriction reasonably protects the goodwill of the plaintiff’s business. Op. ¶ 62 (citing Outdoor Lighting Perspectives Franchising, Inc. v. Harders, 228 N.C. App. 613, 625, 747 S.E.2d 256, 264 (2013)).
  • “Injunctive relief is available to plaintiffs who bring private suits under N.C. Gen. Stat. § 75-1.1.” Op. ¶ 72.

Disposition (Motion(s)):

Motion GRANTED and Defendants ENJOINED from

  • using, disclosing, or distributing Plaintiff’s protected information;
  • representing that Window Ninjas is in any way related or connected to Window Gang
  • distributing any advertising representing that Window Ninjas is in any way connected to Window Gang, and ORDERED to remove any reference to Window Gang from their Facebook pages, Google pages, and websites;
  • using or referencing the phone numbers they used during the operation of the Franchise Agreement (provided by the court in a list), andORDERED to return the phone numbers to Window Gang; and
  • using Window Gang’s names and marks and accessing or using a certain e-mail address.

Defendants also ORDERED to return to Window Gang all of its protected information and certify with the court within sixty days that all information has been returned.

The order is to become effective upon Window Gang posting a bond of $10,000.

 

For additional detail, you can read the full opinion HERE.

Cite: Window Gang Ventures, Corp. v. Salinas, No. 18 CVS 107, 2018 WL 1046613 (N.C. Super. Ct. Feb. 21, 2018). 

 

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