United States District Court, D. Minnesota
Anytime Fitness, LLC, a Minnesota Limited Liability Company, Plaintiff,
Edinburgh Fitness LLC, a Minnesota Limited Liability Company; Fit 12 Minnetonka, LLC, a Minnesota Limited Liability Company; Mark Ravich, an individual; and Harlen Mork, a/k/a Harley Mork, an individual, Defendants.
James M. Susag, Esq., and Susan E. Tegt, Esq., Larkin Hoffman Daly & Lindgren Ltd., counsel for Plaintiff.
Robert M. Smith, Esq., Robert M. Smith Law Office, counsel for Defendants.
MEMORANDUM OPINION AND ORDER
DONOVAN W. FRANK, District Judge.
This matter is before the Court on Plaintiff Anytime Fitness, LLC's ("AF") Motion for a Preliminary Injunction against Defendants Edinburgh Fitness LLC ("Edinburgh"), Fit 12 Minnetonka, LLC ("Fit 12 Minnetonka"), Mark Ravich ("Ravich"), and Harlen Mork, a/k/a Harley Mork ("Mork") (collectively, "Defendants") for alleged violations of the franchise agreement between the parties, as well as for trademark infringement. (Doc. No. 6.) For the reasons set forth below, the Court grants AF's Motion.
AF owns a franchise system of over 1, 300 fitness centers around the world which are owned and operated by franchisees and are under the commercial trade name and service mark ANYTIME FITNESS®. (Doc. No. 14 ("Yiangou Aff.") ¶¶ 2-3.) AF claims that members choose ANYTIME FITNESS® locations based on the following: the trademarks, trade names, service marks, logos, designs, and commercial symbols ("Names and Marks") that identify a high level of quality and service; the reciprocity amongst all ANYTIME FITNESS® clubs for all members; and member access to AF's proprietary website, Anytime Health. ( Id. ¶¶ 4-7.) When a franchisee joins the AF system, it has access to the AF Names and Marks, marketing and advertising systems, training programs, confidential proprietary manuals, and other materials to assist in operating the fitness centers. ( Id. ¶ 14.) Franchisees also receive information on how to start and operate a fitness business, such as what equipment to purchase, club layout, the "menu" of services offered and recommended pricing, training in operating methods, a membership agreement, and access to a comprehensive security system. ( Id. ¶ 15.) Finally, all franchisees and AF can communicate through an internet-based "Dashboard." ( Id. ¶ 16.)
Ravich has an ownership interest in a number of commercial properties in Minnesota, including Edinburgh Plaza in Brooklyn Park, Minnesota. (Doc. No. 19 ("Ravich Aff.") ¶ 3.) Ravich is a member of, and formed the entity, Edinburgh Fitness LLC. ( Id. ¶¶ 1, 4, 19.) On October 8, 2008, Edinburgh and AF signed a franchise agreement (the "Agreement") for a franchise located in Brooklyn Park, Minnesota, in Ravich's Edinburgh Plaza shopping facility. ( Id. ¶¶ 8-10, 13 & Ex. B.) Defendant Mork is a consultant to Edinburgh Fitness and worked with the Brooklyn Park ANYTIME FITNESS®. (Doc. No. 20 ("Mork Aff.") ¶¶ 2-3.) The primary provision relevant to this motion is paragraph 17 of the Agreement entitled "Your Covenants not to Compete, " which includes the following language:
B. After Expiration, Termination, or Transfer. You will not, directly or indirectly for a period of two (2) years after the transfer by you, or the expiration or termination of this Agreement, on your own account or as an employee, consultant, partner, officer, director, shareholder, lender, or joint venturer of any other person, firm, entity, partnership, corporation or company, own, operate, lease, franchise, conduct, engage in, be connected with, have any interest in or assist any person or entity engaged in any fitness center, which is located within the Protected Territory or within a twenty (20) mile radius of any Anytime Fitness center, wherever located, whether within the Protected Territory or elsewhere; provided, however, that in cities having a population of more than 50, 000 persons, the foregoing twenty (20) mile radius restriction will be limited to a radius of five (5) miles from any Anytime Fitness center (including the one you formerly operated under this Agreement).
( Id. ¶ 8, Ex. B at 17.B.)
The Agreement also includes two relevant additions: (1) a "Personal Guaranty and Agreement to be Bound Personally by the Terms of the Franchise Agreement" ("Guaranty"); and (2) an "Amendment to Franchise Agreement" (the "Amendment").
Under the Guaranty, Ravich agreed to "become surety and guarantor for the payment of all amounts and the performance of the covenants, terms and conditions in the Agreement" and "to be personally bound by each and every condition and term contained in the Agreement." ( Id. ¶ 8, Ex. B.)
The Amendment included a provision regarding the Agreement's covenants not to compete found at paragraph 17 of the Agreement. The relevant Amendment provision reads as follows:
Paragraph 17.A; Your Covenants Not to Compete, During Term. Add to the end of the paragraph: Notwithstanding anything in this Agreement to the contrary, we agree and acknowledge that the provisions of this section shall not be deemed applicable to, and shall not restrict, hinder or prevent the owners of membership or ownership interest in Franchisee from developing, acquiring or owning properties for the use as, or leasing as fitness centers, regardless of when and where built, acquired, or leased.
( Id. ¶ 22, Ex. C.) This provision was added at Ravich's request. ( See id. ¶¶ 5-15.) According to Ravich, as an owner and manager of shopping centers, he requires the ability to lease and operate fitness clubs in his other shopping centers, and he is also sometimes required to take over the business of lessees which could include fitness centers. ( Id. ¶¶ 5, 13.) Ravich and AF therefore negotiated the above Amendment to the parties' Agreement to enable him to meet these needs. ( Id. ¶¶ 5-16.) Ravich states that the parties drafted the Amendment, rather than amending the Agreement because AF states that it does not ever directly amend its franchise agreements. ( Id. ¶ 6.) Ravich further states that negotiations included three drafts of amendment language before the Amendment could acceptably accommodate his needs. ( Id. ¶¶ 8-15.) According to AF, Ravich did not have any experience in the health and fitness industry prior to franchising with AF and learned how to operate and run a fitness center through franchising an ANYTIME FITNESS® center. (Yiangou Aff. ¶¶ 17-18.)
The Agreement also includes a provision relating to ownership over information acquired through running an ANYTIME FITNESS®. ( Id. ¶ 8, Ex. B at 9.N.) The relevant provision includes the following language:
Ownership of Information. All of the information we or our affiliates obtain from you or about your Anytime Fitness Center or its customers ("the Information") and all revenues we derive from the Information will be our property. However, you may at any time during or after the term of this Agreement use, to the extent lawful and at your sole risk and responsibility, any information that you acquire from third parties in operating your Anytime Fitness Center, such as customer data. The Information (except for information you provide to us or our affiliates with respect to you and your affiliates, including your respective officers, directors, shareholders, partners or members) will become our property which we may use for any reason as we deem necessary or appropriate in our discretion.
( Id. )
In fall 2013, a fitness center named "Fit 12-24 Hour Health & Fitness" opened in Minnetonka, Minnesota. ( Id. ¶ 28.) Fit 12 Minnetonka is approximately 100 yards from an ANYTIME FITNESS® center. ( Id. ) AF alleges that Mork and Ravich are involved in Fit 12 Minnetonka. ( Id. ¶¶ 28-30.) Ravich denies any involvement in the Fit 12 Minnetonka. (Ravich Aff. ¶ 2.) AF alleges that employees and other individuals have confirmed Ravich and Mork's involvement with both Fit 12 centers. (Doc. No. 9 ("Junker Aff.") ¶¶ 3-7; Doc. No. 11 ("McPherson Aff.") ¶¶ 1-5 & Ex. A.) AF also alleges that Mork uses AF Names and Marks to advertise personal training services at both Fit 12 Minnetonka and the former Brooklyn Park ANYTIME FITNESS®. (Yiangou Aff. ¶ 30.)
Also in fall 2013, Ravich and Edinburgh informed AF that they did not intend to renew the Agreement for the Brooklyn Park ANYTIME FITNESS®, which was to expire on October 8, 2013. ( Id. ¶ 23.) Edinburgh and AF agreed to extend the Agreement's expiration date to January 8, 2014 so AF could find a buyer. ( Id. ¶¶ 24-25.) No buyer was found, and the Agreement expired. ( Id. ) Ravich then opened a Fit ...