Our posts of September 6, September 24, and October 16 covered cases involving holdover licensees, all in the context of hotel franchises.  The latest addition to the list of holdover licensee cases involves the restaurant business.

In a complaint filed in the Atlanta Division of the Northern District of Georgia on November 19, 2012, American Deli, Inc. (Deli) seeks to enjoin Boa Cho Corporation’s (Boa) allegedly improper use of proprietary marks, methods, systems, and techniques as violating the terminated franchise agreement between the parties, 15 U.S.C. §§ 1114 and 1125(a) (Trademark Infringement), 15 U.S.C. § 1125(c) (Lanham Act – Dilution), and 15 U.S.C. § 1125(c) (Lanham Act – Tarnishment).   Two principals of Boa, Ki Joon Koo and Hee Sook Kim are also named defendants.  Both Deli and Boa have their principal place of business in Georgia.

Deli asserts ownership of the following trademarks at issue in the case:

•  AMERICAN DELI with accompanying logo, registered on March 16, 2010 as U.S. Trademark Reg. No. 3,759,934, reciting a first use date of February 1989.  [This mark was erroneously designated with Registration Number 3741212 in the complaint.]  

• AMERICAN DELI word mark, registered on March 16, 2010 as U.S Trademark Reg. No. 3,759,938, reciting a first use date of February 1989.
• AMERICAN DELI word mark, registered on January 19, 2010 as U.S. Trademark Reg. No. 3,741,212, reciting a first use date of September 21, 2009.

The parties entered the franchise agreement (attached as Exhibit A to the complaint) on April 14, 2011, which included the following exhibit agreements executed by the defendant Ki Joon Koo:  Controlling Principals Personal Guaranty and Covenant and the Confidentiality Agreement and Ancillary Covenants Not To Compete.

Deli alleges that the Boa franchise was terminated due to the following seven intentional material breaches which are collected in three categories summarized below:^[1]

1. Competing during the term of the franchise by operating or selling restaurant locations with a menu similar to Deli (primarily focusing on chicken wings or philly cheese steak sandwiches), including competing directly with Deli and stores outside of Georgia;
2. Infringing Deli’s trademarks and using Deli’s proprietary marks and confidential materials in connection with the development building and sale of unauthorized locations; and
3. Inaccurately reporting store revenues and underpaying royalties.

Deli asserts that after termination of the franchise, Boa continued to use Deli’s proprietary marks and compete directly with Deli in violation of post-termination non-competition covenants.

The complaint accuses the defendants of operating the following Georgia restaurants in violation of their contractual obligations and Deli’s proprietary rights:  American Deli House, 801 No. Houston Rd., Warner Robins; American Deli, 919 Pio Nono Ave., Macon; American Deli House, 131 E. Solomon St., Griffin; and American Deli House, 5576 Bloomfield Rd., Macon.

Deli charges defendants with developing, building, and selling World Deli locations using Deli confidential information and propriety information including an almost identical menu  in other Georgia locations (Dublin and Claxton), as well as in Alabama and South Carolina.  Furthermore, Deli alleges that defendants use Deli’s preferred pricing with its food distributor, US Foods, for use at World Deli locations.

In addition to the injunction, Deli seeks a disgorgement of profits.  Should Deli be successful, a future blog may be entitled:  “Boa Constricted and Dewinged.”

The case is American Deli, Inc. v. Boa Cho Corporation, Ki Joon Koo, and Hee Sook Kim, No. 1:12-cv-4031, filed 11/19/12 in the U.S. District Court for the Northern District of Georgia, Atlanta Division, and has been assigned to U.S. District Judge Julie E. Carnes.

_{[1] Deli maintains that this list is not exhaustive of defendants’ material breaches.}