IN COURT OF APPEALS
Esberg Corp., et al.,
Hennepin County District Court
File No. 97-22954
Frank A. Taylor, Gregory J. Schaefer, Tanya Gisolfi, Hinshaw & Culbertson, Piper Jaffray Tower, Suite 3200, 222 South Ninth Street, Minneapolis, MN 55402, and
Richard K. Hocking, Richard K. Hocking, P.A. 7570 West 147th Street, Apple Valley, MN 55124 (for respondents).
Considered and decided by Shumaker, Presiding Judge, Peterson, Judge, and Amundson, Judge.
Appellant seeks review of the denial of a temporary injunction. Because appellant has an adequate legal remedy and has not shown that an injunction is necessary to prevent great and irreparable injury, we affirm.
Smith told Mermaid that he intended to purchase a non-Mermaid car wash in Bloomington. Smith and Mermaid disagreed as to whether the Bloomington car wash would have to be operated as a Mermaid Car Wash under the parties' existing franchise agreement. The franchise agreement states that, upon a franchisee's request to run a non-franchise car wash, Mermaid cannot unreasonably withhold consent.
Smith unsuccessfully sought permission from Mermaid to acquire and operate the Bloomington car wash as a non-franchise car wash. Smith claims that Mermaid unreasonably withheld its consent and thereby breached the franchise agreement.
Mermaid, on the other hand, claims that it reasonably withheld its consent "because of its legitimate business interest in protecting its confidential, proprietary and trade secret information from use in [a] competing car wash." Mermaid also complains that the other two Mermaid franchisees in Minnesota will terminate their franchises if Smith prevails.
Mermaid first unsuccessfully sought a temporary restraining order to prevent Smith from purchasing the Bloomington car wash. After the court denied the temporary restraining order, Smith purchased the Bloomington car wash and then informed Mermaid that, by unreasonably withholding consent, Mermaid had breached the franchise agreement and that Smith would terminate the Eagan, Savage, and Apple Valley franchises unless Mermaid remedied the breach. Mermaid did not attempt to remedy the alleged breach but rather sought a temporary injunction to prevent Smith and the other respondents from "breaching their existing multiple franchise relationships with Mermaid." The district court denied the injunction, and Mermaid seeks review.
Mermaid argues that the irreparable harm it will suffer is that its entire franchise network will unravel, apparently referring to not only the three franchises owned by Smith in this action, but also to the two other franchises in Rochester and Golden Valley. Mermaid also argues that Smith will inappropriately use confidential and proprietary Mermaid car wash information at the Bloomington car wash.
This is a contract dispute based on the parties' franchise agreement. The agreement contemplates the possibility that a franchisee might operate a non-franchise business. The agreement permits such operation upon the franchiser's consent. The franchiser cannot unreasonably withhold its consent. An action on the merits will determine if a breach of the franchise agreement occurred. If a breach occurred, damages will be ascertainable. Further, after reviewing the facts in a light favorable to Smith and considering the abuse of discretion standard we apply to the district court's decision, we conclude that Mermaid has not met its burden of demonstrating that it provided trade secret or confidential car wash information to respondents. Mermaid's concern about possible future actions by the other two Minnesota Mermaid franchisees is speculative and we do not consider it. The district court did not abuse its discretion when it denied the temporary injunction.