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Enforcement of Quality Standard/Rejection of Claim of Pretextual Termination

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On July 28, 1998, the Eleventh Circuit Court of Appeals upheld a district court's grant of preliminary injunctive relief in favor of McDonald's Corporation and against a former McDonald's franchisee located in Jacksonville, Florida, whose franchise was terminated for failure to meet McDonald's quality, service and cleanliness ("QSC") standards. McDonald's Corporation vs. Robertson, et al., No. 97-3308. My colleague, Dean Fournaris and I represented McDonald's in this case; Robert Zarco and Robert Einhorn of Zarco and Pardo represented the franchisee.

In what it described as a case of first impression in the 11th Circuit, the Court squarely lined up behind the Third Circuit's decision in S&R Corp. vs. Jiffy Lube International, Inc. in holding that a franchisee who contends that its franchise was unlawfully terminated may not continue unauthorized use of the franchisor's marks and business system. In doing so, the Court wrote that demonstrating unauthorized trademark use for preliminary injunction application purposes "necessitates some type of showing (emphasis added) that the franchisor properly terminated the contract" . . . , "thus resulting in the unauthorized (emphasis in original) use of trademarks by the former franchisee."

In determining that the franchisor had shown a substantial likelihood of success on the merits of its post-termination trademark infringement claim, the Court discounted entirely the legal significance of the franchisee's contention that its termination resulted from the franchisor's ulterior, improper motive – the desire to relocate the franchisee's restaurant to a better location, which would be more profitable for the franchisor. Rather, the Court held as follows:

"Even assuming, arguendo, that this allegation is correct, however, we find that the Robertsons' failure to comply with McDonald's QSC and Food Safety Standards constituted a material breach of the Franchise Agreement sufficient to justify termination, and thus, it does not matter whether McDonald's also possessed an ulterior, improper motive for terminating the Robertsons' Franchise Agreement." (emphasis added).

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