Fetch_ Pet Care_ Inc. v. Atomic Pawz Inc._2025 U.S. Dist. LEXIS 132647 (July 2025)
Result:
In Fetch! Pet Care, Inc. v. Atomic Pawz Inc., the United States District Court for the Eastern District of Michigan considered a motion for a preliminary injunction by the plaintiff, Fetch! Pet Care, Inc., against multiple franchisee defendants accused of breach of contract, trademark infringement, misappropriation of trade secrets, and conspiracy to commit tortious interference with business relationships. The court’s reasoning centered on the application of established legal standards for granting a preliminary injunction, detailed factual findings as to each of the four governing factors, and the substantial influence of ongoing arbitration proceedings on the court’s analysis and ultimate disposition.
The court began by articulating the legal framework for preliminary injunctions, explicitly following precedent from the United States Court of Appeals for the Sixth Circuit. The four factors that courts must weigh in such cases are: whether the movant has a strong likelihood of success on the merits; whether the movant would suffer irreparable injury absent a stay; whether granting the stay would cause substantial harm to others; and whether the public interest would be served by granting the stay. The court emphasized that these are not prerequisites that must each be met independently, but are interrelated concerns to be balanced together. It also underscored that preliminary relief is “an extraordinary remedy” to be granted only if the movant clearly establishes entitlement. Further, the court noted that where a dispute is subject to arbitration, as in this case, preliminary injunctive relief is warranted only when necessary to prevent the arbitration process from becoming meaningless, citing circuit precedent including J.P. Morgan Sec., LLC v. Duncan.
Turning to the first factor—likelihood of success on the merits—the court applied the legal standards governing each of the plaintiff’s substantive claims, including breach of contract, misappropriation of trade secrets, trademark infringement, tortious interference, and civil conspiracy, carefully distinguishing between Michigan and Ohio law as applicable. For breach of contract, the court required proof by a preponderance of the evidence of the existence of a contract, breach, and resulting damages. For misappropriation of trade secrets, the standard required showing the existence of trade secrets, their acquisition via a confidential relationship, and unauthorized use. The court also set forth the elements for claims of tortious interference and civil conspiracy under both Michigan and Ohio law and articulated the elements of a trademark infringement claim.
The court’s application of these standards revealed a nuanced differentiation among the three types of defendants: legacy franchisees (Fetch! 1.0), 2.0 franchisees, and managed-services franchisees. As to the 2.0 and managed-services defendants, the court found that the plaintiff’s aggressive and arguably deceptive conduct in marketing and selling 2.0 franchises—particularly, in obscuring the unfavorable distinctions between older, more profitable franchises and newer, less profitable ones—constituted bad faith. The court concluded that this bad faith, evidenced through misleading disclosures and overstatements of likely financial performance, amounted to “unclean hands” sufficient to deny injunctive relief against all 2.0 and managed-services defendants. This conclusion rested on consistent, credible testimony that these franchisees were unaware of the two-tier structure until after joining and suffered chronic unprofitability as a result.
The court then evaluated the legacy (1.0) franchisees under the “first breach” doctrine, which prevents a party from enforcing a contract where it was the first to commit a substantial breach. The court determined that the legacy defendants’ breaches of noncompete provisions only occurred after the plaintiff itself effectively terminated their franchise rights by cutting off their system access whilst they were current in all obligations. This action, according to the court, rendered further performance impossible for the legacy franchisees and constituted a material first breach by the plaintiff, undermining the likelihood of success on the merits for the plaintiff’s contract claims. However, the court did find that, following their termination, the legacy defendants improperly used client lists to service customers in their new businesses, establishing a likelihood of success on misappropriation of trade secrets. On the trademark claims, the court found the plaintiff likely to succeed as well, particularly where defendants retained reviews and branding containing the Fetch! mark on their new business’s public profiles, which was likely to cause confusion as to affiliation. Conversely, the court concluded that the evidence merely pointed to a possibility, not a likelihood, of success on the conspiracy to tortiously interfere claims, citing significant factual disputes and credible testimony that the legacy defendants had not intended to compete prior to the plaintiff’s unilateral acts.
On the second factor—irreparable injury—the court required clear and convincing evidence of harm that is not compensable with monetary damages and that is both certain and imminent, as opposed to speculative or past. While loss of customer goodwill and competition from breach of noncompetes can, in some scenarios, qualify as irreparable, the court found that most harm had already occurred by the time the plaintiff sought injunction and that any further injury was speculative. Significantly, the court observed that after the legacy franchisees’ termination, mutual communications with customers had already led them to choose sides, thus entrenching any brand or goodwill loss before the motion was filed. Testimony suggested that the customers, having lost trust in Fetch!, would not return even if an injunction issued, and the plaintiff appeared unlikely to resume direct operations in those territories. Moreover, in light of the arbitrable nature of the dispute, the court insisted that irreparable harm must be so severe as to threaten the existence of the plaintiff’s business—merely suffering ordinary loss or difficulty in calculation of damages was insufficient to render arbitration meaningless. No such existential threat was found.
For the third factor—the balance of harms or hardship to others—the court found that while honoring contractual obligations is generally not an undue hardship, the equities here tipped in the defendants’ favor. The legacy and 2.0 franchisees had been effectively compelled to compete by the plaintiff’s own actions (either cutoff or misrepresentations), and enjoining their operation would likely put them out of business entirely, eliminating their sole sources of income, while for some, franchise operations had been their livelihoods for years. The practicalities also suggested that forcing defendants out of business before arbitration could harm the plaintiff as well, should the arbitrator ultimately determine some or all franchisees should be reinstated. Maintaining ongoing operation of profitable businesses, in the court’s view, could maximize any monetary award in the plaintiff’s favor in the event of later success.
With respect to the public interest, the court found this factor neutral. While enforcement of contracts generally serves the public, so too does continuity of business and franchise operations. Uncertainties as to which party’s conduct precipitated the mass exodus and competition meant the court could not find a clear public policy rationale tipping the scale either way.
The court’s approach to relief was also sharply influenced by the posture of the case in arbitration. The court explained that, under both Sixth Circuit and district precedent, federal courts may only issue preliminary injunctions in arbitrable disputes to the extent necessary to preserve the meaningfulness of arbitration—for example, to prevent the “complete loss of business” or other conditions that would render the arbitral process hollow. Here, the court repeatedly emphasized that the parties’ claims were pending in arbitration, and that granting more extensive injunctive relief would risk “fatally compromis[ing] the arbitration” by effectively deciding (and potentially rendering moot) the very issues delegated to the arbitrator. Because the plaintiff failed to establish the high degree of irreparable harm required, and the dispute was properly before an arbitrator, the court denied broad relief, finding that arbitration would not be rendered meaningless in the absence of an injunction. The only limited injunction the court continued in force (from a previous TRO) was a prohibition on use of the plaintiff’s federally-registered trademarks by defendants, except where old customer reviews incidentally referenced Fetch! and were not actively linked or promoted on the new businesses’ own websites.
In conclusion, the court’s reasoning reflected a careful weighing of both legal and factual factors, guided by the extraordinary nature of injunctive relief, respect for the parties’ arbitration agreement, and the need to preserve the neutrality and utility of arbitration. The only preliminary relief granted was narrowly tailored to the trademark context, leaving all other matters for resolution by the arbitrator.
