JDLR LLC v. LLC (2011)

MEMORANDUM OF DECISION RE APPLICATION FOR TEMPORARY INJUNCTION

FACTUAL BACKGROUND

This vigorously contested action arises between the present assignees to a commercial lease originally entered into between The C & N Company, Inc. (“C & N”) and Howard D. Johnson Company (“HJC”) dated March 25, 1965 (“the 1965 lease”).   JDLR, LLC, the plaintiff, acquired HJC's interests pursuant to an assignment in February 2007.   The plaintiff owns and operates the Equinox Diner (“diner”).   Mystic Hospitality, LLC, the defendant, acquired C & N's interests pursuant to an assignment in January 1999.   The defendant owns and operates a Howard Johnson Inn (“inn”) on property located at 253 Greenmanville Avenue, Mystic, Connecticut.   The diner is located immediately adjacent to the inn.

Before the court is the plaintiff's application for a temporary injunction against the defendant.   The hearing on the application was held on March 16–17, 2011.   Both parties were well represented by counsel, presented evidence and advanced argument in support of their claims.   The plaintiff's motion for a temporary injunction is based upon alleged violations by the defendant of Article XII of the 1965 lease.   Although this lease was amended on occasion subsequent to March 25, 1965, it has been stipulated by the parties that Article XII has not been the subject of an amendment relevant to this action.

Pursuant to the 1965 lease, C & N and its assignee, the defendant, are designated as “lessor.”   HJC and its assignee, the plaintiff, are designated as “lessee.”   Article XII states:

“Except as consented to in writing by the Lessee or Howard Johnson's Motor Lodges, Inc., the Lessor covenants, for the benefit of the demised premises:  (a) that the Lessor will at no time use or permit the use on any property which is owned and controlled by the Lessor of any trade name, color, combination, sign, structure or form of advertising similar to those being used by the Lessee on the demised premises. (b) that the Lessor will not at any time during the term hereof, nor during any extension, let or permit any part of the entire area of other property now or hereafter owned or controlled by Lessor within 1500 feet of the demised premises to be used or occupied as and for a restaurant business or for the sale or furnishing free of charge of food, liquors, frozen desserts, ice cream, beverages or other edible products.   The provisions of this paragraph are covenants running with the land of Lessor and shall be binding upon the heirs, administrators, successors, and assigns of the Lessor.”

At the time of the lease's inception, and up to the present time, the defendant and its predecessors provided coffee machines and supplies in each of the 77 guestrooms, in addition to free coffee in the lobby of the inn.   Also, the defendant and its predecessors provided four vending machines for snacks or soda in common areas of the inn;  three on the first floor and one on the second floor.   The plaintiff's agents were aware of this practice at the time the plaintiff acquired its interest.

The evidence demonstrated that the plaintiff's manager understood, when it acquired its interest in 2007, that Article XII was being interpreted to provide that the plaintiff's diner would be the sole source of food and beverage service for the defendant's customers except for the coffee and vending machines discussed above, and that there were some limitations on advertising on inn property.   Moreover, the defendant's manager interpreted the lease to prohibit the inn from providing food or beverages to its guests other than the coffee and vending machines.

From the time the diner opened until in or around September 2010, the defendant was in large part conforming to the plaintiffs' interpretation of Article XII of the lease.   Among other things, the diner had been contracted to provide certain continental breakfast services to its guests and customers on a number of occasions.   The defendant was also cooperating with the plaintiff's offering of food and beverage service by providing its overnight guests a 10% discount coupon for the diner (“Equinox Coupons”) at check-in, as well as requesting Equinox Take–Out Menus to provide to its guests.   The Equinox Diner was realizing an economic benefit from these practices during that period of time, as evidenced by the receipt of approximately 30 Equinox Coupons per day during the busy months of the year.

Circumstances changed, however, after the plaintiff commenced a legal action against the defendant in or around late June 2010 to enforce its claimed rights to set-off or reduce its rent obligations, under a different article of the lease, by the more than $1,000,000 it expended during its reconstruction of the diner.   The relationship between the parties then became strained.

Thereafter, in or around September 2010, Equinox Coupon receipts at the diner dropped from about 30 per day to none.   The defendant had stopped giving its customers the Equinox Coupons and was instead providing discount coupons of one of the Equinox Diner's competitors, a Friendly's Restaurant.   Also at that time the defendant began the promotion of Friendly's and another nearby restaurant, Prontos, through placing their take-out menus in its guestrooms and by removing Equinox Menus from the guest rooms.

CLAIMS OF THE PARTIES

The application seeks the following temporary injunctive relief:  “A preliminary injunction enjoining defendant, including its members, employees, servants, agents, and all others acting on its behalf, from advertising, and from permitting others on the Property to advertise, in any form similar to advertisements used by plaintiff for the Equinox Diner premises ․ A preliminary injunction enjoining defendant, including its members, employees, servants, agents, and all others acting on its behalf, from using any portion of its Property within 1500 feet of the Equinox Diner, or permitting others on the Property within 1500 feet of the Equinox Diner from using such portion(s), for a restaurant business or for the sale or furnishing of free food, liquors, frozen desserts, ice cream, beverages, or other edible products.”   The requested relief is based upon the first, second and/or fourth counts of the complaint, which sound in breach of express contract, breach of the implied covenant of good faith and fair dealing, and violation of the Connecticut Unfair Trade Practices Act (“CUTPA”), respectively.

The defendant is a licensee or franchisee of Wyndham Worldwide Corporation that owns, licenses and/or franchises thousands of inns and hotels around the world including Howard Johnson, Ramada, Days Inn, Super 8, and Wyndham.   As a result, it argues that it is required to comply with The Howard Johnson Standards of Operation and Design Manual (“Manual”), which requires the defendant to provide coffee in guestrooms and soft drinks through vending machines.   The Manual also requires that the defendant provide its patrons with local information on restaurants.   The defendant contends these actions are not barred by the 1965 lease.   Moreover, the defendant claims that the doctrine of laches bars the injunctive relief sought in this case for the reason that it claims the evidence shows that it has provided free coffee and vending machines for many years and the plaintiff, knowing of this practice since it acquired its interest in the lease, did not complain until this litigation.

THE LAW

General Statutes section 52–471(a) states:  “Any judge of any court of equitable jurisdiction may, on motion, grant and enforce a writ of injunction, according to the course of proceedings in equity, in any action for equitable relief when the relief is properly demandable, returnable to any court, when the court is not in session.   Upon granting of the writ, the writ shall be of force until the sitting of the court and its further order thereon unless sooner lawfully dissolved.”

“The principal purpose of a temporary injunction is to preserve the status quo until the rights of the parties can be finally determined after a hearing on the merits.”  (Internal quotation marks omitted.)  Clinton v. Middlesex Mutual Assurance Co., 37 Conn.App. 269, 270, 655 A.2d 814 (1995).  “The standard for granting a temporary injunction is well settled.   In general, a court may, in its discretion, exercise its equitable power to order a temporary injunction pending final determination of the order, upon a proper showing by the movant that if the injunction is not granted he or she will suffer irreparable harm for which there is no adequate remedy at law ․ A party seeking injunctive relief must demonstrate that:  (1) it has no adequate remedy at law;  (2) it will suffer irreparable harm without an injunction;  (3) it will likely prevail on the merits;  and (4) the balance of equities tips in its favor ․ The plaintiff seeking injunctive relief bears the burden of proving facts which will establish irreparable harm as a result of that violation ․ Moreover, [t]he extraordinary nature of injunctive relief requires that the harm complained of is occurring or will occur if the injunction is not granted.   Although an absolute certainty is not required, it must appear that there is a substantial probability that but for the issuance of the injunction, the party seeking it will suffer irreparable harm.”  (Citations omitted;  internal quotation marks omitted.)  Aqleh v. Cadlerock Joint Venture II, L.P., 299 Conn. 84, 97–98, 10 A.3d 498 (2010).

ANALYSIS AND CONCLUSION

The application for a temporary injunction is denied.   First, if the court were to grant the plaintiff the relief that it requests, the defendant could not comply with The Howard Johnson Standards of Operation and Design Manual.   This could force the defendant to default on its agreement with its licensor/franchisor.   Specifically, the Manual requires that the defendant offer food, water, and Pepsi products for sale on the inn premises through vending machines, and provide coffee free of charge in its guestrooms and in the lobby.   The Manual also mandates that the defendant provide its patrons with menus, including take-out, of various local restaurants.   It states:  “Local information on ․ restaurants must be available at the front desk so that desk clerks can easily direct and assist guests.”

More significantly, the defendant's practice of providing free coffee and vending machines to its guests existed for many years prior to this litigation and was known to the plaintiff.   The revenue derived from all four vending machines in the defendant's inn amounted to only about $1,800 per year, a sum immaterial to the operation of the defendant's inn or the plaintiff's diner.

Further, at the time this suit was instituted in December 2010, the defendant already stopped giving out discount coupons for any restaurant including the plaintiff's.   Specifically, the defendant's practice of giving its guests Friendly's discount coupons had terminated by the commencement of this litigation.

In sum, the court's granting of a temporary injunction would negatively affect the defendant's ability to comply with the Manual and would give the plaintiff practically all of the relief it has requested in the case, not the maintenance of the status quo.   The purpose of a temporary injunction would be defeated by granting the plaintiff's motion, as the status quo would be undone and reversed, rather than preserved.

Under these circumstances, considering all of the evidence and claims of the parties and the equities relating thereto, the application is denied.

Robert C. Leuba, JTR

Leuba, Robert C., J.T.R.