Gimex Properties Corp., Inc. v. Reed , 2022 Ohio 4771 ( 2022 )

[Cite as Gimex Properties Corp., Inc. v. Reed, 2022-Ohio-4771.]
IN THE COURT OF APPEALS OF OHIO
SIXTH APPELLATE DISTRICT
LUCAS COUNTY
Gimex Properties Corp., Inc., Court of Appeals No. L-22-1049
d/b/a T.A.C.
Trial Court No. CI0202101519
Appellee
v.
Ashley Reed, et al. DECISION AND JUDGMENT
Appellants Decided: December 29, 2022
*****
Sarah K. Skow and Jennifer A. McHugh, for appellee.
Matthew A. Leibert and David A. Bressman, for appellants.
*****
ZMUDA, J.
I. Introduction
{¶ 1} Appellants, Thomas and Ashley Reed, appeal the judgment of the Lucas
County Court of Common Pleas, granting judgment in favor of appellee, Gimex
Properties Corp., Inc., on its claims for breach of contract and misappropriation of trade
secrets. Finding no error in the proceedings below, we affirm.
A. Facts and Procedural Background
{¶ 2} Appellee is a corporation headquartered in Toledo, Ohio, which issues
licenses to certain franchisees to operate automotive service shops known as Tuffy Auto
Service Centers. In exchange for its wide-ranging business support it provides, appellee
receives royalty payments from its franchisees. Appellants were previously among
appellee’s franchisees, and they were licensed to operate Tuffy Auto Service Centers in
the Orlando, Florida area.
{¶ 3} In early 2021, appellants were involved in an irreconcilable dispute with
their business partners, which led to the termination of their relationship with appellee.
Thereafter, appellants began working as employees of another automotive service shop in
the Orlando area, Fournier’s Performance Automotive (“Fournier’s”).
{¶ 4} On March 11, 2021, upon learning of appellants’ subsequent employment
with a business it considered a competitor, appellee filed its complaint in this action. In
the complaint, appellee alleged that appellants’ affiliation with Fournier’s constituted a
breach of the terms of the parties’ license agreement, namely the non-competition and
confidentiality provisions contained therein.1 Thus, appellee asserted claims for breach
of contract and “trade secret misappropriation/inevitable discovery,” and sought a
preliminary injunction, “to be made permanent at trial,” enjoining appellants from
1
A copy of the license agreement was attached to appellee’s complaint.
2.
operating Fournier’s or engaging in any other competitive activity for a period of two
years.
{¶ 5} On June 2, 2021, appellants filed their answer to appellee’s complaint.
Throughout the proceedings before the trial court, appellants proceeded pro se.
Following pretrial discovery and motion practice, appellants amended their answer on
December 8, 2021. In their amended answer, appellants admitted that they were
signatories to the license agreement attached to appellee’s complaint, and thus obligated
to refrain from competing with appellee within a geographical area of five miles of a
Tuffy Auto Service Center for a period of two years after the expiration or termination of
the license.
{¶ 6} Nonetheless, appellants asserted that their affiliation with Fournier’s was not
competitive in nature, because Fournier’s “specializes in Classic and Performance
Vehicles,” and does not “directly compete for work against [appellee].” Moreover,
appellants asserted that appellee was not entitled to the relief it requested because
appellee suffered no irreparable harm on account of their involvement with Fournier’s.
Appellants denied having any confidential information or trade secrets, and insisted that
the knowledge they possessed concerning operation of an automotive service business
was the product of decades of prior industry experience, not their association with
appellee.
3.
{¶ 7} On December 20, 2021, the matter proceeded to a trial before the bench. At
the outset of the trial, appellee made several motions in limine. In one such motion,
appellee sought an order from the court precluding appellants from calling any witnesses
or taking the stand in their own defense based upon appellants’ failure to file a witness
list in accordance with the trial court’s scheduling orders. Upon consideration, the trial
court denied appellee’s request to preclude appellants from testifying, and stated: “So I
will allow [appellants] to testify as on cross for the defense and if they would like to also
– you can’t ask yourself a question necessarily. It’s kind of awkward to do that. But if
you’d like to present any testimony you think would help on your side, I’ll allow that as
well.”
{¶ 8} The trial then proceeded to appellee’s case-in-chief. As its first witness,
appellee called its director of franchise development, Eric Schmitt. As director of
franchise development, Schmitt is responsible for creating the license agreements
appellee uses with its franchisees. According to Schmitt, these agreements specify the
responsibilities and obligations of franchisees as well as the support appellee provides to
its franchisees. Schmitt stated that appellee has continuously refined its business model
and practices since it was formed over 50 years ago, and thus “there’s just a lot that goes
into this business model. There’s operations manuals, there’s marketing manuals, it’s a
really a how-to kind of turnkey business.”
4.
{¶ 9} When asked to describe appellee’s business model more specifically,
Schmitt responded that appellee has developed proprietary materials that are provided to
franchisees in order to facilitate the sale of automotive services. Further, Schmitt
explained that appellee is engaged in the provision of automotive services involving
“[e]verything from exhaust to brakes to mufflers, oil change, * * * anything to do with
fixing a car is what we are involved in.”
{¶ 10} Later in his direct examination, Schmitt detailed appellee’s franchising
process. First, the prospective franchisee must complete an application. According to
Schmitt, appellants and one of their business partners completed such an application in
this case. Thereafter, appellee provides the prospective franchisee with a franchise
disclosure document for their review. The prospective franchisee is then “invited to
Toledo for a discover day and that’s a day that they meet with the current management
team.” Afterwards, appellee’s franchise review committee convenes and decides whether
to award the franchise. If the prospective franchisee is awarded a franchise, appellee
provides a license agreement for execution. Once the agreement is executed, the
franchise vetting process is complete and appellee considers the prospective franchisee as
an actual franchisee. Here, appellant executed such a license agreement, a copy of which
was admitted into the record as Plaintiff’s Exhibit H.
{¶ 11} At the outset of the franchise relationship, appellee invites the franchisee to
Toledo for “new dealer training,” which occurs over a period of eight to ten days and
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“consists primarily of business development and [training on] how to run a business.” At
this time, the franchisee is provided with proprietary information such as operations
manuals, payment plans, marketing techniques, training on financial documents such as
profit/loss statements and the like, disclosure of vendors used by appellee and the
agreements appellee has with such vendors, customer lists, information about appellee’s
pricing margins and labor costs. Schmitt testified that appellants attended new dealer
training at which they received this proprietary information. A certificate of completion
was admitted into the record memorializing appellants’ completion of new dealer training
on September 19, 2018.
{¶ 12} Once the franchise is up and running, franchisees are privy to continuing
education from appellee through Tuffy University and annual dealer meetings that
include breakout sessions where dealers discuss improving appellee’s brand and business
operations.
{¶ 13} Schmitt testified that the business practices and credibility appellee has
developed over several decades has enabled it to be competitive in the automotive
services industry. He indicated that it would be “very difficult today” to start an
independent automotive repair shop given the competitive market dynamics and the fact
that the “automotive business is very difficult.”
{¶ 14} Turning to the facts of this case, Schmitt testified that he first met
appellants when they arrived with a business partner, Nate Trombetti, at appellee’s
6.
Toledo headquarters for discover day on July 6, 2018. At the time, appellants were
interested in purchasing the Tuffy’s automotive service shop in Sanford, Florida.
Eventually, a franchise was awarded and a limited liability company, Sanford Tuff, LLC,
was formed to hold the franchise. The members of Sanford Tuff, LLC were TAR
Automotive, LLC (owned by appellants) and JNT Investments, LLC (owned by Ernest C.
Aulls, III). The ownership interest in Sanford Tuff, LLC was split evenly between TAR
Automotive, LLC and JNT Investments, LLC.
{¶ 15} The license agreement, which was executed by appellants in their
individual capacities, and by Thomas in his capacity as manager of Sanford Tuff, LLC,
became effective on October 24, 2018. In its introductory section, the agreement
references a franchise system, referred to throughout the agreement as the “Tuffy
System,” and states:
Licensor licenses a system for operation of an automotive repair
business that sells, installs and services automotive exhaust systems,
brakes, front end, steering and suspension, alignment, air conditioning,
engine diagnostics, batteries, tires and other automotive products and
services. The distinguishing characteristics of the system include the
Licensor’s trademarks and logos, training, operation procedures,
promotional techniques and materials, location analysis, building design
and layout, record keeping and reporting.
7.
{¶ 16} Schmitt reviewed certain portions of the license agreement and provided
explanation of its terms during the trial. One such section was labeled “Article Twelve –
Confidentiality and Non-Competition.” In it, the agreement indicates that appellants
would have access to certain “proprietary and/or confidential information relating to
developing and operating a Center.” Such confidential information was identified as
including, without limitation:
(a) Training manuals, policy manuals, operations manuals, operating
methods, sales promotion aids, business forms, products and services,
installation and service procedures, accounting procedures, marketing
reports, supplier discounts and inventory systems, techniques, processes,
policies, procedures, systems and data;
(b) Knowledge and experience relating to Centers;
(c) Advertising, marketing techniques and advertising programs used
in developing and operating Centers;
(d) All information regarding the identities and business transactions
of customers and suppliers;
(e) Computer software and similar technology that has been or may
be developed by or for Licensor or its agents, which is proprietary to
Licensor, including, without limitation, digital passwords and
8.
identifications and any source code of, and data, reports, and other printer
materials generated by, the software or similar technology;
(f) Knowledge of the operating results and financial performance of
Centers;
(g) Other aspects of the Tuffy System now or later revealed to
Licensee under this Agreement and all changes and enhancements in the
Tuffy System, even if developed by Licensee.
(h) Other property that Licensor describes as being Confidential
Information or trade secrets of the Tuffy System.
{¶ 17} The agreement went on to impose upon appellants an obligation to keep
this information confidential and to refrain from using the information in any business or
capacity other than in the franchise “for as long as the Confidential Information is not
generally known in the industry.” Moreover, Article Twelve of the agreement included a
non-compete clause, which provided in pertinent part:
12.5 Covenant Not to Compete After Term.
On the termination (including termination on transfer), expiration or
non-renewal of this Agreement, Licensee, its shareholders, officers,
directors, partners, owners and investors, must not, for a period of two
years commencing on the later of the effective date of termination,
expiration or non-renewal, or the date of any Court order enforcing this
9.
provision if necessary, have an interest, directly or indirectly, as an owner
(except ownership of no more than 1% of a publicly traded entity), partner,
director, officer, manager, employee, consultant, representative or agent, or
in any other capacity, or engage in any other capacity in any Competing
Business or in any business * * * within any “Geographic Areas” (defined
in Section 12.7).
***
12.6 Other Restrictions on Activities.
Licensee, its shareholders, officers, directors, partners, owners and
investors must not, during the term of this Agreement and for a period of
two years after the expiration or termination * * * of this Agreement: (a)
divert or attempt to divert any business or customer of the Franchise
Business or any other Center to any Competing Business by direct or
indirect inducements or otherwise (whether or not Licensee has a direct or
indirect interest in that business or person); (b) employ or seek to employ
any person who was, at the time, employed by Licensor or its affiliates or
by another Center, or directly or indirectly induce any person to leave their
employment with Licensor or its affiliates or with another Center; * * *.
10.
12.7 Definition of Competing Business and Geographic Areas.
For purposes of this Agreement, a “Competing Business” includes
any business that is the same or similar to a Center, including but not
limited to a business that sells installs and services automotive exhaust
systems, brakes, front end, steering, suspension, alignment, air
conditioning, engine diagnostics, batteries, or tires at retail or other
products or services that may be offered by Centers now or in the future.
For purposes of this Agreement, the “Geographic Areas” include the area
within five miles of the Licensed Location and the areas within five miles
of any other Centers existing at the time the Licensee or its shareholders,
officers, directors, partners, owners or investors begins to operate the
Competing Business.
12.8 Acknowledgements and Agreements Relating to
Restrictions on Competition.
Licensee agrees that the length of the term and the geographical
restrictions contained in this Article are fair and reasonable. The parties
have attempted to limit Licensee’s right to compete only to the extent
necessary to protect the reasonable competitive business interests of
Licensor and its franchisees. If the above restrictions or any part of these
restrictions are invalid, this Article will be considered as imposing the
11.
maximum restrictions allowed under the applicable state law in place of the
invalid restriction or part of the restriction.
{¶ 18} When asked to explain the purpose behind including the foregoing
competition provisions in the agreement, Schmitt testified that the provisions were a
necessary safeguard for appellee considering the resources it provides to its franchisees.
Schmitt explained that appellee “provide[s] the playbook” of resources and training to
enable the franchisee to take advantage of a “turnkey operation.” Schmitt agreed that
appellee’s enforcement of the covenants not to compete contained in its license
agreements was necessary to demonstrate appellee’s commitment to prevent unfair
competition from a former franchisee toward existing franchisees.
{¶ 19} Next, Schmitt referenced Article 17.2 of the agreement, which provides for
injunctive relief to appellee in the event its franchisees engage in competitive practices
that violate the provisions of Article 12 of the agreement. Schmitt explained that
injunctive relief is an important component of the license agreement because monetary
damages would be difficult to measure in cases involving unfair competition.
{¶ 20} After reviewing the terms of the license agreement, Schmitt turned his
attention to two letters that appellee sent to appellants upon learning of appellants’
involvement with Fornier’s Performance Automotive, a competing automotive service
12.
business located within five miles of a Tuffy franchise in Orlando, Florida.2 In the first
letter, dated January 26, 2021, appellee took the position that appellants’ involvement
with Fornier’s constituted a breach of the non-competition and confidentiality provisions
of the parties’ license agreement, and threatened to pursue legal action against appellants
if they refused to cease such involvement. Schmitt stated that appellants did not respond
to this letter. Consequently, appellee followed up with another letter dated February 3,
2021, again demanding that appellants refrain from any involvement in the operation of
Fornier’s Performance Automotive.
{¶ 21} In response to appellee’s letters, appellants sent an email to appellee’s
corporate counsel on February 4, 2021, informing him that they “are not doing business
at [Fornier’s Performance Automotive]. We were interested in purchasing that business
and have reconsidered.” In another email sent four days later, Thomas indicated that the
owner of Fornier’s Performance Automotive was “in poor health and unable to work on
the classic cars he is currently restoring. He has agreed to teach me so I’m taking the
opportunity to obtain his knowledge in classic car restoration while applying for
employment elsewhere. I am not an employee nor am I pursuing a purchase of this
store.”
2
According to maps admitted into the record in this case by appellee, Fornier’s
Performance Automotive is located 3.24 miles from the nearest Tuffy franchise “as the
crow flies,” and 4.8 miles in terms of driving distance.
13.
{¶ 22} Schmitt testified that Fornier’s Performance Automotive’s focus on classic
vehicles is inconsequential to whether it is a competing business under the terms of the
parties’ license agreement, because there is no distinction between working on classic
vehicles and any other vehicles. He stated that Tuffy works on all types of vehicles,
including performance and classic cars.
{¶ 23} During his testimony, Schmitt stated that the automotive repair service
industry was experiencing a shortage of good mechanics and employees amid the Covid-
19 pandemic. Given the market conditions, several Tuffy franchisees reached out to
appellee to voice their concerns about appellants’ involvement with Fornier’s
Performance Automotive and ask appellee to enforce its non-competition rights.
{¶ 24} Schmitt explained that such enforcement is important in this case because
failure to insist upon adherence to the non-competition and confidentiality provisions in
the license agreement “would show the franchisees in the system that any article or
provision could probably be challenged.” Furthermore, Schmitt surmised that other
franchisees would become “very upset” with appellee if it did not seek to prevent
appellants from having any involvement with Fornier’s Performance Automotive. This
could also have a chilling effect on appellee’s ability to attract new franchisees according
to Schmitt.
14.
{¶ 25} On cross examination, Schmitt was asked to identify the extent of
appellee’s damages attributable to appellants’ involvement with Fornier’s Performance
Automotive. He responded, “[t]here would be no way for me to qualify that.”
{¶ 26} Appellee next called Scott Linde, appellee’s district manager who oversees
all corporate-owned and franchised Tuffy automotive service centers in the state of
Florida.
{¶ 27} Linde testified as to the support and training appellee offers to its
franchisees, and also explained appellee’s “Tuffy Way” approach for providing services
such as oil changes in a manner that is unique in the industry. Additionally, Linde
testified that appellee services all types of vehicles, including classic cars and
performance vehicles.
{¶ 28} In his capacity as district manager, Linde interacted with appellants during
the period in which they owned and operated the Tuffy franchise located in Sanford,
Florida. When he first met appellants, Thomas was a manager of the Sanford location.
At the time, the previous owner of the franchise was having financial difficulties and
Thomas expressed a desire to purchase the franchise. Eventually, appellants secured the
necessary financing and purchased two franchise locations: the Sanford location as well
as the Oviedo, Florida, location.
{¶ 29} Linde testified that appellee provided appellants with proprietary
information, business development assistance, and training that was confidential in
15.
nature. He went on to indicate that appellee also shares its independent market research
information with its franchisees. While he acknowledged that Thomas was already a
“master technician” when he became a franchisee, Linde stated that appellee provided
Thomas with updated training to address “new developments” in the area of automotive
service, and also trained appellants on management and customer service techniques to
assist them with operating their automotive service business.
{¶ 30} Turning his attention to the events that transpired around the time of
appellants’ termination of their relationship with appellee, Linde authenticated a brief text
message exchange he had with Thomas. On November 16, 2020, Linde informed
Thomas that another Florida Tuffy’s franchise was looking for a master technician and
asked Thomas whether one of his former master technicians, Russ, was looking for a job.
Nearly one month later, on December 15, 2020, Thomas responded to Linde’s message
and told Linde that he “had a job waiting for [Russ] and all the rest of my employees.”
Although Thomas provided no further explanation to Linde concerning where he planned
to take Russ and the rest of his employees, Linde testified that Russ eventually began
working with Thomas at Fournier’s. By the time of trial, however, Russ had returned to
appellee’s employ at another Tuffy franchise location in central Florida.
{¶ 31} After appellants terminated their relationship with appellee, Linde
conducted an internet search to ascertain whether appellants were competing with
appellee. He discovered that appellants had formed a limited liability company, Reed
16.
Performance Automotive LLC, which was registered with the Florida Secretary of State.
According to it articles of organization, the limited liability company’s principal office
and mailing address was the address at which Fournier’s is located. Ashley is the
registered agent, and appellants’ personal address is listed in the articles of organization.
Linde authenticated a map he created in Mapquest that showed a driving distance of 31.4
miles from appellants’ address to Fournier’s.
{¶ 32} Upon discovering appellants’ registration of the aforementioned limited
liability company, Linde decided to drive by the address listed on the registration. When
he did so, he “saw a busy repair shop that works on cars” at that site. Despite Fournier’s
emphasis on performance vehicles, Linde testified that he did not recall seeing any
performance vehicles in the shop when he drove by. Linde observed “one or two classic
cars,” but mostly “late model vehicles like every shop works on.” Linde visited
Fournier’s on two additional occasions in 2021. While driving past the location, Linde
photographed the building and its parking lot. The photographs taken by Linde were
authenticated and admitted into the record at trial. Most of the vehicles depicted in those
photographs (including one vehicle that was parked inside the garage and elevated on a
car lift) are late model vehicles consistent with Linde’s prior testimony.
{¶ 33} Given his observation of the types of vehicles serviced at Fournier’s, Linde
concluded that Fournier’s was one of appellee’s competitors. At trial, he explained that
Fournier’s “work[s] on the same vehicles. Same automotive repair. It’s not like it’s a
17.
body shop. * * * The same oil changes, brakes and they’re in the circle of the way we
market, so the circles overlap. So yes, they are a [competitor].” As additional support for
his conclusion that Fournier’s serviced the same type of vehicles serviced by appellee’s
franchisees, Linde recounted a customer with a late model Honda CR-V who returned to
a Tuffy franchise, the “Semoran store,” after having brakes serviced at Fournier’s. On
cross examination, Linde acknowledged that he was unaware whether this customer was
actually solicited by appellants.
{¶ 34} Linde further testified concerning the impact of appellants’ affiliation with
Fournier’s on appellee and its franchisees in the Orlando area. Linde stated that these
franchisees, upon learning of appellants’ conduct, voiced concerns about the potential
loss of business they could suffer if appellee allowed appellants to continue to affiliate
with their regional competitors. The franchisees also questioned whether appellee’s
license agreements would protect their business interests moving forward if appellee
failed to enforce the non-competition and confidentiality provisions contained therein
against appellants. As to the Semoran store, which was the franchise located closest to
Fournier’s, Linde testified that the store was not performing as well as other stores in the
Orlando area, although he could not state with any certainty that the decline in
performance was due to appellants’ affiliation with Fournier’s. Nonetheless, Linde stated
that some franchisees were concerned that the Semoran store’s poor performance was
attributable to appellants’ involvement with Fournier’s.
18.
{¶ 35} Linde testified that there are automotive service shops near appellants’
residence that are located more than five miles away from any Tuffy shops. For example,
Linde stated that appellants’ residence is located approximately as close to Daytona as it
is to Orlando, and there are no Tuffy franchises in Daytona.
{¶ 36} Following Linde’s testimony, appellee called its chief financial officer,
Gary Swartzbeck, as its final witness. Swartzbeck first learned of appellants’ departure
from Tuffy in early 2021. At that time, Swartzbeck learned of a dispute between
appellants and their business partners that had caused the groups to decide to part ways.
{¶ 37} Sometime in the middle of 2021, Swartzbeck began to hear “a lot of chatter
from * * * franchisees in the Central Florida area” about appellants’ formation of a new
limited liability company and eventual employment with Fournier’s. Specifically,
Swartzbeck stated that the franchisees at two locations (including the Semoran store)
contacted him and asked for a conference call with him, Schmitt, and appellee’s chief
executive officer to “vent their displeasure of what was going on and really kind of
wanting us to know, hold up our end of the bargain of them being a family and protecting
them and their rights as franchisees of Tuffy.”
{¶ 38} Swartzbeck was asked to elaborate as to the likely financial ramifications to
appellee if it failed to enforce its license agreement with appellants in this case. He
responded:
19.
I think you’ll have a lot more turmoil in the franchisee community,
the dealer community. You know, people expect when they pay a fee to
become a member of a brand, in our case a Tuffy family, and then they pay
those ongoing royalty fees, they expect to have the protection, they expect
all the members of the Tuffy family to live up to their expectations. So if
that’s not honored, I think they all feel hurt. They all feel damaged. And I
think it makes it very difficult for us to have – to talk to our franchisees
because they kind of have a grudge against corporate for not enforcing
these things. I think it makes it difficult for [Schmitt] to go after and bring
new franchisees into the system.
***
It’s hard for me to say dollar-wise. It’s more about relationship
damage than it is about financial damage.
{¶ 39} Swartzbeck went on to testify that failure to enforce the license agreement
in this case would impact appellee’s ability to resolve future disputes with other
franchisees. Swartzbeck surmised that franchisees could attempt to use appellants’
competitive behavior, and appellee’s failure to challenge it, to justify a refusal to pay
franchise dues, claiming that appellee’s failure to protect them caused them to suffer a
loss in sales.
20.
{¶ 40} At the conclusion of Swartzbeck’s testimony, appellee rested. Following
admission of appellee’s exhibits, the following colloquy took place between the court and
the parties:
THE COURT: As I said before, I would anticipate having briefing begin
and I know, folks, that you want to take that opportunity to file a brief
before – on or before January 7th, correct?
[ASHLEY]: Yes. We don’t do any kind of like a closing?
THE COURT: I was going to provide you that opportunity, but I wanted to
make sure that we kind of make sure that we get there in the right order. So
the plaintiff is now resting with the admission of the exhibits?
[APPELLEE’S COUNSEL]: Right, yes.
***
THE COURT: And I believe, [Ashley], you said you’d like to give a
closing statement, correct?
[ASHLEY]: Yes, I would.
{¶ 41} Thereafter, the trial court heard closing arguments from the parties, ordered
the parties to file post-trial briefs, and continued the matter for a decision at a later date.
Appellants made no request to testify, and the trial court did not ask appellants if they
wished to testify, prior to offering their closing arguments.
21.
{¶ 42} Upon consideration of the evidence presented at trial, the trial court issued
a preliminary injunction on December 27, 2021. In its opinion, the trial court found that
the non-competition and confidentiality provisions contained in the parties’ license
agreement were fair and reasonable, and thus enforceable under Ohio law. Further, the
court found that appellants’ employment with Fournier’s constituted a breach of these
provisions, and that appellee’s witnesses provided adequate testimony to establish that
appellants’ continued breach of the licensing agreement “is likely to cause a negative
impact on [appellee’s] relationships with its existing franchisees that is difficult, if not
impossible, to quantify, and harms [appellee’s] good will with existing and prospective
franchisees alike.” Thus, the court concluded that appellee demonstrated it would suffer
immediate and irreparable harm as a consequence of appellants’ actions.
{¶ 43} In addition, the trial court found that enforcing the license agreement
against appellants would not impose any undue hardship on them, because they would
not be restricted from working in the automotive repair industry “so long as they are not
working for a competing business” greater than five miles from another Tuffy Auto
Service Center. Finally, the court concluded that enforcement of the license agreement
furthered the public interest by promoting fair competition, enforcing contractual
obligations, and preventing unfair competition. In light of its findings, the trial court
granted appellee’s request for a preliminary injunction and thereby enjoined appellants
22.
from engaging in competitive activity in violation of the parties’ license agreement,
including employment at Fournier’s.
{¶ 44} On February 7, 2022, after the parties submitted their post-trial briefs, the
trial court issued its “bench trial opinion, judgment entry and permanent injunction,” in
which the court largely reiterated the findings it set forth in its December 27, 2021
opinion and found that appellee was entitled to a permanent injunction barring appellants
from continued employment with Fournier’s, as well as an award of attorney’s fees and
costs associated with this action pursuant to the express terms of the license agreement
authorizing such an award. In total, the trial court awarded appellee attorney fees, expert
witness fees, and travel expenses totaling $81,457.09. Appellants do not separately
challenge this award on appeal.
{¶ 45} Following the trial court’s issuance of its February 7, 2022 judgment entry,
appellants filed a timely notice of appeal.
B. Assignments of Error
{¶ 46} On appeal, appellants assign the following errors for our review:
I. The trial court erred by refusing to let Ashley Reed and/or Thomas
Reed testify on their own behalf in the injunction hearing against them.
Plaintiffs/Appellees (sic.) would not have been either surprised or
prejudiced by Appellants’ testimony.
23.
II. The trial court erred by refusing to let Ashley Reed and/or
Thomas Reed testify on their own behalf in the injunction hearing against
them. Ohio has a pro-merits bias, and the court could not rule on the merits
of the injunction without the testimony of the people against whom the
injunction was sought to be enforced.
III. The trial court erred in ruling that Plaintiff would suffer
irreparable injury if the injunction was not granted.
{¶ 47} Because appellants’ first and second assignments of error are interrelated,
we will address them simultaneously.
II. Analysis
A. Appellants’ Ability to Testify
{¶ 48} In their first and second assignments of error, appellants argue that the trial
court erred by denying them the opportunity to testify on their own behalf at trial.
{¶ 49} The admission of evidence is within the discretion of the trial court and the
court’s decision will only be reversed upon a showing of abuse of that discretion. State v.
Barnes, 94 Ohio St.3d 21, 23, 759 N.E.2d 1240 (2002); State ex rel. Sartini v. Yost, 96
Ohio St.3d 37, 2002-Ohio-3317, 770 N.E.2d 584, ¶ 21. “The term ‘abuse of discretion’ *
* * implies that the court’s attitude is unreasonable, arbitrary or unconscionable.” State
v. Adams, 62 Ohio St.2d 151, 157, 404 N.E.2d 144 (1980).
24.
{¶ 50} Here, appellants do not challenge the trial court’s partial granting of
appellee’s motion in limine to prevent appellants from calling any non-party witnesses as
a consequence of appellants’ failure to file a witness list before trial. Instead, appellants
argue that the trial court erred in preventing them, as parties to the proceeding, from
testifying at trial. In response, appellee asserts that appellants’ argument is incompatible
with what transpired at the trial in this case. Having reviewed the record in its entirety,
we agree with appellee that the trial court did not prevent appellants from testifying at
trial. On the contrary, at the outset of trial, appellants were expressly informed by the
trial court that they would be permitted to testify if they wished to do so.
{¶ 51} This issue arose in the trial court within the context of appellee’s pretrial
motions in limine, in which it sought an order from the court precluding appellants taking
the stand in their own defense due to appellants’ failure to file a witness list in accordance
with the trial court’s scheduling orders. In their brief to this court, appellants focus their
attention on the arguments they raised in opposition to appellee’s motion in limine,
namely that appellee had ample notice of their intent to testify at trial notwithstanding
their failure to proffer a witness list before trial. Appellants contend that their “names
were listed in appellee’s witness list and in their discovery responses. Therefore,
appellant’s names were properly listed as witnesses for appellee to see and know.”
{¶ 52} Appellants’ arguments rest on the mistaken premise that the trial court
granted appellee’s motion in limine and thereby precluded them from testifying. In
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reality, precisely the opposite occurred. Indeed, the trial court denied appellee’s request
and affirmatively indicated that it would allow appellants to testify “as on cross for the
defense * * *. But if you’d like to present any testimony you think would help on your
side, I’ll allow that as well.” As such, there is no merit to appellants’ contention that they
were erroneously prevented from testifying at trial in their own defense.
{¶ 53} In their reply brief, appellants assert two additional bases for their
argument that they were precluded from testifying at trial. First, appellants argue that the
trial court’s use of the phrase “testify as on cross” was unclear. When read in its entirety,
we do not find that the trial court’s ruling on appellee’s motion in limine was unclear.
While appellants focus on the phrase “testify as on cross,” they ignore the trial court’s
following statement, wherein the court informed them, “if you’d like to present any
testimony you think would help on your side, I’ll allow that as well.” Even if the first
statement was unclear, the trial court’s follow-up statement was unambiguous.
{¶ 54} Second, appellants contend that the trial court should have directly asked
appellants if they wished to testify at the close of appellee’s case-in-chief. The record
confirms that the trial court did not expressly inquire of appellants as to whether they
wished to present testimony in their case-in-chief. Instead, the trial court moved from
admission of appellee’s exhibits right into a discussion about the filing of post-trial briefs.
Ashley then interjected and asked, “We don’t do any kind of like a closing?” The court
then assured appellants that they would be given an opportunity to make closing
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arguments at the appropriate time. Immediately thereafter, the trial court asked
appellee’s counsel if appellee was resting its case-in-chief. Counsel responded in the
affirmative and the trial court returned to Ashley and asked her if she would like to
provide a closing statement, to which Ashley responded, “Yes, I would.”
{¶ 55} Neither Ashley nor Thomas indicated any intent to testify after the trial was
underway. Actually, the record is devoid of appellants requesting to testify or asserting
their right to testify. Further, to the extent they were confused by the trial court’s initial
decision on appellee’s motion in limine, it is noteworthy that appellants sought no
clarification of that ruling as to, for example, what impact the ruling would have on their
case-in-chief. Admittedly, the trial court did not inquire as to whether appellants wished
to take the stand to testify. While such an inquiry may be a best practice for trial courts,
appellants cite no statutory requirement or authority in the case law that obligates a trial
court to ask a party if they wish to present testimony at a trial, and we have found no such
authority to support that proposition. Rather, appellants emphasize their status as pro se
litigants and suggest that “any reasonable pro se litigant would have believed that they
were not allowed to testify.” But the fact that a party proceeds pro se is not a reason to
impose an obligation on the trial court to discern the party’s wish to testify where no such
obligation applies in cases involving represented parties.
{¶ 56} Pro se litigants are presumed to have knowledge of the law and legal
procedures, and are held to the same standard as litigants who are represented by counsel.
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In re Application of Black Fork Wind Energy, L.L.C., 138 Ohio St.3d 43, 2013-Ohio-
5478, 3 N.E.3d 173, ¶ 22, citing State ex rel. Fuller v. Mengel, 100 Ohio St.3d 352, 2003-
Ohio-6448, 800 N.E.2d 25, ¶ 10. “[T]he trial court/magistrate is not there to try their
case or to exercise their rights for them.” Dupal v. Sommer, 5th Dist. Stark No.
2009CA00032, 2009-Ohio-5791, ¶ 19. Moreover, “a pro se litigant may not be given any
greater rights than a party represented by counsel and bears the consequences of any
litigation mistakes.” Walker v. Metropolitan Environmental Services, Inc., 6th Dist.
Lucas No. L-17-1131, 2018-Ohio-530, ¶ 4, citing HSBC Bank United States NA v. Beins,
6th Dist. Lucas No. L-13-1067, 2014-Ohio-56, ¶ 6. Appellants had the right to choose to
proceed to trial pro se, but they bear the consequences of that decision and may not now
rely upon their ignorance of courtroom procedure as a basis for their argument that the
trial court committed reversible error.
{¶ 57} In light of the foregoing, we conclude that the trial court did not refuse to
permit appellants to testify at trial. Rather, the trial court permitted appellants to testify,
but appellants failed to assert that privilege. Appellants have demonstrated no error on
the part of the trial court concerning this issue. Accordingly, we find appellants’ first and
second assignments not well-taken.
B. Irreparable Harm
{¶ 58} In their third assignment of error, appellants argue that the trial court erred
in granting appellee’s request for a permanent injunction because appellee did not
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demonstrate that it is likely to suffer irreparable harm as a result of appellant’s affiliation
with Fournier’s.
{¶ 59} The decision to grant or deny an injunction is within the discretion of the
trial court, and we review that decision on appeal for an abuse of discretion. Danis
Clarkco Landfill Co. v. Clark Cty. Solid Waste Management Dist., 73 Ohio St.3d 590,
653 N.E.2d 646 (1995), paragraph three of the syllabus. An abuse of discretion implies
that the trial court’s attitude is unreasonable, arbitrary or unconscionable. Blakemore v.
Blakemore, 5 Ohio St.3d 217, 219, 450 N.E.2d 1140 (1983).
{¶ 60} The grant of a permanent injunction is an “‘extraordinary remedy in equity
where there is no adequate remedy available at law.’” City of Toledo v. State, 154 Ohio
St.3d 41, 2018-Ohio-2358, 110 N.E.3d 1257, ¶ 15, quoting Garono v. State, 37 Ohio
St.3d 171, 173, 524 N.E.2d 496 (1988). Injunctive relief “is not available as a right but
may be granted by a court if it is necessary to prevent a future wrong that the law
cannot.” Garono at 498.
{¶ 61} A party seeking a preliminary injunction bears the burden of establishing,
by clear and convincing evidence, that “(1) there is a substantial likelihood that the
plaintiff will prevail on the merits; (2) the plaintiff will suffer irreparable injury if the
injunction is not granted; (3) no third parties will be unjustifiably harmed if the injunction
is granted; and (4) the public interest will be served by the injunction.” Keefer v. Ohio
Dept. of Job and Family Servs., 10th Dist. Franklin No. 03AP-391, 2003-Ohio-6557, ¶
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14, citing Procter & Gamble v. Stoneham, 140 Ohio App.3d 260, 267, 747 N.E.2d 268(1st Dist.2000). As is typical of the law of equity, these four factors must be balanced
and no individual factor in the analysis is dispositive. Id.{¶ 62} The test for the granting or denial of a permanent injunction is substantially
the same as that for a preliminary injunction. However, in the case of a permanent
injunction, the plaintiff must prove that he has prevailed on the merits, not merely that
there is a “substantial likelihood” of prevailing on the merits. Miller v. Miller, 11th Dist.
Trumbull No. 2004-T-0150, 2005-Ohio-5120, ¶ 11, citing Ellinos, Inc. v. Austintown
Twp., 203 F.Supp.2d 875, 886 (N.D.Ohio 2002) and Edinburg Restaurant, Inc. v.
Edinburg Twp., 203 F.Supp.2d 865, 873 (N.D.Ohio 2002).
{¶ 63} In actions involving covenants not to compete, courts have stated that “an
employer who seeks an injunction to enforce a noncompete clause must not only
establish the reasonableness of the noncompete clause at issue but must also show that
the employer is likely to suffer irreparable harm as a result of the employee’s breach of
that clause.” Brentlinger Enterprises v. Curran, 141 Ohio App.3d 640, 646, 752 N.E.2d
994 (10th Dist.2001), citing Levine v. Beckman, 48 Ohio App.3d 24, 27, 548 N.E.2d 267(10th Dist.1988).
{¶ 64} Here, appellants do not challenge the trial court’s determination that the
non-competition and confidentiality provisions in the parties’ license agreement, which
are limited both in terms of time and geographic scope, are reasonable and enforceable.
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Nor do appellants contest the trial court’s conclusion that their employment at Fournier’s
is a breach of those provisions, a finding that is supported by the testimony of appellee’s
witnesses summarized above. Moreover, appellants do not argue that the trial court’s
injunction unjustifiably harms third parties or frustrates the public interest. Instead,
appellants’ argument that appellee failed to show irreparable injury, is limited to the
second Keefer injunction factor. Therefore, our analysis will focus solely on that factor.
{¶ 65} A party seeking an injunction is not required to show actual harm, but must
prove the existence of a threat of harm. State v. City of Cincinnati Citizen Complaint
Authority, 2019-Ohio-5349, 139 N.E.3d 947, ¶ 26 (1st Dist.), citing e2 Solutions v.
Hoelzer, 6th Dist. Lucas No. L-08-1295, 2009-Ohio-772, ¶ 32. This threat of harm must
be “immediately apparent and concrete.” Id. at ¶ 33. Actual threat of harm in the context
of covenants not to compete “exists when the employee possesses knowledge of the
employer’s trade secrets and begins working in a position that causes [the employee] to
compete directly with the former employer * * *.” Jacono v. Invacare Corp., 8th Dist.
No. 86605, 2006-Ohio-1596, ¶ 38, citing Stoneham at 274. Further,
a threat of harm warranting injunctive relief can be shown by facts
establishing that an employee with detailed and comprehensive knowledge
of the former employer’s trade secrets and confidential information now
works for a competitor of the former employer in a position that is
substantially similar to the position held during the former employment.
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Id.{¶ 66} “‘It must be remembered that, in discussing “irreparable harm,” the proper
focus is not so much on what kind of damage the misappropriator has already inflicted,
but what damage the misappropriator may inflict in the future. * * * [I]njunctions
concern the prevention of future harm, not compensation for, or punishment of, past
harm.’” Litigation Management, Inc. v. Bourgeois, 8th Dist. Cuyahoga No. 95730, 2011-
Ohio-2794, ¶ 18, quoting Casagrande, Permanent Injunctions in Trade Secret Actions: Is
a Proper Understanding of the Role of the Inadequate at Law/Irreparable Harm
Requirement the Key to Consistent Decisions?, 28 AIPLA Q.J. 113, 132 (2000).
{¶ 67} In their pro se responses to appellee’s interrogatories, appellants
acknowledged that Thomas works at Fournier’s as a mechanic and Ashley works at
Fournier’s in a clerical position. In other words, the couple are presently engaged in
employment with Fournier’s in positions involving the business’s back office operations
as well as its customer-facing operations. While appellants are not presently owners of
Fournier’s, it is reasonable to infer from the evidence contained in the record that
appellants are using, or will at some point in the future likely use, the information they
received from appellee in their employment at Fournier’s. Therefore, the positions they
hold are substantially similar to their former positions for purposes of the present
analysis.
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{¶ 68} Next, we must examine the nature of the information appellants received
from appellee to determine whether it constituted trade secrets. Under R.C. 1333.61(D),
a trade secret is defined as
information, including the whole or any portion or phase of any scientific
or technical information, design, process, procedure, formula, pattern,
compilation, program, device, method, technique, or improvement, or any
business information or plans, financial information, or listing of names,
addresses, or telephone numbers, that satisfies both of the following:
(1) It derives independent economic value, actual or potential, from
not being generally known to, and not being readily ascertainable by
proper means by, other persons who can obtain economic value from
its disclosure or use.
(2) It is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy.
{¶ 69} At trial, appellee offered testimony from several witnesses who explained
the extensive training that appellee provided to appellants during their time as
franchisees. As part of its new dealer training program, appellee schooled appellants in
the Tuffy System, providing them with an abundance of proprietary information related
to appellee’s business processes, marketing techniques, pricing strategies, operational
procedures, and the like. Following new dealer training, appellants had access to further
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proprietary information through appellee’s provision of continuing education through
Tuffy University and annual dealer meetings.
{¶ 70} According to Schmitt, this proprietary information was developed and
continuously refined by appellee over a period of five decades, and was instrumental in
allowing appellee’s franchisees to be profitable in the highly competitive automotive
services industry. In his testimony, Schmitt explained appellee includes the non-
competition and confidentiality provisions in its license agreements with franchisees
because the information it provides to franchisees is sensitive and valuable. Indeed, this
information constitutes the “playbook” for franchisees to follow to operate a “turnkey
operation.”
{¶ 71} During his testimony, Linde testified that appellee’s training on the “Tuffy
Way” is unique in the automotive services industry. Further, Linde stated that the
information appellants received during their training and franchise operations was
confidential in nature. He explained that this information went beyond mechanical
training, extending into areas involving business operations and management.
{¶ 72} Taken together, the foregoing testimony contains facts to establish that
appellants possessed knowledge of appellee’s trade secrets. The trial testimony provided
by appellee’s witnesses demonstrate that appellants were provided with extensive
information about appellee’s business operations, marketing techniques, customer and
vendor lists, pricing procedures, all of which valuable because such information was not
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generally known outside appellee’s franchise network and was kept secret by virtue of
appellee’s efforts in demanding confidentiality from its franchisees.
{¶ 73} Schmitt testified that an injunction preventing appellants from continuing
to compete with appellee is necessary because the harm appellee would suffer on an
ongoing basis from such competition would be difficult to foresee, and thus a monetary
damage award would be difficult to fashion. Based upon the complaints he received
from other area franchisees, Schmitt surmised that appellee would have difficulty
attracting new franchisees and retaining existing franchisees if appellants were permitted
to continue working for Fournier’s. At least one other Ohio appellate court has found this
type of evidence demonstrative of irreparable harm. See ITS Financial, L.L.C. v. Gebre,
2d Dist. Montgomery Nos. 25416, 25492, 2014-Ohio-2205, ¶ 26 (“There is also evidence
in the record that if Gebre were permitted to breach the franchise agreements without
consequence it would be difficult for ITS to sell other franchises within that market area,
thereby resulting in lost revenue.”).
{¶ 74} Further, Schmitt deduced that existing franchisees would interpret
appellants’ ongoing competitive activity as an indication that their license agreements
were unenforceable, thereby encouraging them to withhold royalty payments to appellee
and ignore other requirements under their respective license agreements.
{¶ 75} Schmitt’s testimony regarding the harm caused by appellants’ affiliation
with Fournier’s was echoed by Swartzbeck. Swartzbeck testified that he was contacted
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by two franchisees who expressed their displeasure with appellants’ employment at
Fournier’s and demanded that appellee put a stop to such employment by enforcing the
covenant not to compete in its license agreement with appellants. In light of this reaction
from other franchisees, Swartzbeck was concerned that franchisees might attempt to use
appellants’ competitive behavior to justify a refusal to pay franchise dues, claiming that
appellee’s failure to protect them caused them to suffer a loss in sales. Like Schmitt,
Swartzbeck testified that a monetary award would be difficult to calculate, because the
damage caused by appellants’ breach of the license agreement is “more about relationship
damage than it is about financial damage.”
{¶ 76} For their part, appellants introduced no testimony supporting their
contention that their continued affiliation with Fournier’s does not threaten appellee with
irreparable harm. As a consequence of appellants’ failure to testify, the record is devoid
of any such evidence. Further, appellants failed to engage appellee’s witnesses in any
meaningful cross examination, which may have elicited such testimony and placed into
the record facts to support appellants’ assignment of error.
{¶ 77} In sum, we find that the record before us establishes by clear and
convincing evidence that appellants have detailed and comprehensive knowledge of
appellee’s trade secrets and confidential information, and are now working for one of
appellee’s competitors in a position that is substantially similar to the position they
formerly held with appellee. Consequently, we find that appellee demonstrated an actual
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threat of harm sufficient to show irreparable injury and thus meet the second Keefer
injunction factor. Since this is the only factor challenged by appellants, we find that the
trial court did not abuse its discretion in granting appellee’s request for a permanent
injunction.
{¶ 78} Accordingly, appellants’ third assignment of error is not well-taken.
III. Conclusion
{¶ 79} In light of the foregoing, the judgment of the Lucas County Court of
Common Pleas is affirmed. The costs of this appeal are assessed to appellants under
App.R. 24.
Judgment affirmed.
A certified copy of this entry shall constitute the mandate pursuant to App.R. 27.
See also 6th Dist.Loc.App.R. 4.
Mark L. Pietrykowski, J. ____________________________
JUDGE
Thomas J. Osowik, J.
____________________________
Gene A. Zmuda, J. JUDGE
CONCUR.
____________________________
JUDGE
This decision is subject to further editing by the Supreme Court of
Ohio’s Reporter of Decisions. Parties interested in viewing the final reported
version are advised to visit the Ohio Supreme Court’s web site at:
http://www.supremecourt.ohio.gov/ROD/docs/.
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