Abstract:
In BrightStar Franchising, LLC v. Foreside Management Co., No. 1:25-cv-08741 (N.D. Ill. Oct. 29, 2025), the court granted in part BrightStar’s motion for a preliminary injunction against a former franchisee. BrightStar sued Foreside Management and its principals, Mark and Claire Woodsum, for breaching post-termination obligations in their franchise agreements after they allowed their BrightStar Care franchises to expire and continued operating independently in the same territories. Judge Rowland held that Illinois law governed the contracts, rejecting defendants’ argument that California’s Business and Professions Code § 16600 barred enforcement of the non-compete and non-solicitation clauses. Relying on Ixchel Pharma v. Biogen, the court found franchise agreements are commercial, not employment, relationships subject to a “rule of reason,” and the restraints here were reasonable in scope and duration. The court concluded BrightStar showed a strong likelihood of success on its breach-of-contract claims, irreparable harm to its goodwill and confidential information, and that the balance of harms and public interest favored enforcement. Accordingly, the court enjoined defendants from competing with BrightStar, soliciting former clients, or using BrightStar’s marks and confidential information, but denied relief related to one office lease that was legally void.
I. Factual Background
BrightStar Franchising, LLC (“BrightStar”) is a national home-care franchisor that licenses franchisees to operate under its BrightStar Care system. Mark Woodsum, CEO of Foreside Management Company (“Foreside”), and his wife Claire operated BrightStar franchise agencies in Newport Beach and Mission Viejo, California under four franchise agreements entered in 2014–2015. Each agreement contained post-termination obligations, including 18-month non-compete and non-solicitation covenants, duties to return confidential materials, transfer phone numbers, and cease use of BrightStar marks. The agreements also included Illinois choice-of-law provisions and required franchisees to assign their office leases to BrightStar through Collateral Lease Assignments that allowed BrightStar to take possession upon termination.
As the franchise terms approached expiration in mid-2025, Foreside notified BrightStar that it would not renew. The agreements expired on July 26, 2025, and Foreside began operating independently, continuing the same in-home care services from the same offices under its own name. BrightStar alleged that Foreside failed to vacate its offices, refused to transfer telephone numbers, retained and used BrightStar’s confidential customer information, and continued using BrightStar’s goodwill, marks, and systems. Two days after expiration, BrightStar sued Foreside, Mark, and Claire Woodsum for breach of contract and sought a preliminary injunction to enforce the post-termination covenants and regain possession of the offices.
The Newport Beach office lease had been with a third-party landlord, while Foreside was its own landlord for the Mission Viejo office. This distinction became relevant because BrightStar claimed rights under both Collateral Lease Assignments, but Foreside argued the Mission Viejo assignment was void since a company cannot lease from itself. BrightStar’s CEO and witnesses submitted declarations that Foreside was still using BrightStar’s systems, client lists, and advertising continuity (“everything will remain the same”), and had not removed all BrightStar signage. Foreside denied wrongdoing but admitted some signage remained and that it continued operating in the same territory serving former BrightStar clients.
On August 4, 2025, BrightStar moved for a preliminary injunction to compel possession of the offices and to enforce the non-compete, confidentiality, and brand-removal provisions. Foreside opposed, contending California’s public policy barred enforcement of such restrictive covenants under Cal. Bus. & Prof. Code § 16600, while BrightStar argued Illinois law and, even under California law, the restraints were valid as reasonable business covenants under Ixchel Pharma, LLC v. Biogen, Inc.
The court ultimately found BrightStar had shown strong evidence that Foreside violated the post-termination obligations by continuing operations using BrightStar’s confidential information, customer base, phone numbers, and branding immediately after termination, causing potential irreparable harm to BrightStar’s goodwill and franchise system.
- Procedural Posture
The court noted that a preliminary injunction is an extraordinary remedy requiring the plaintiff to show a likelihood of success on the merits, irreparable harm, and inadequacy of legal remedies. The court also considered the balance of harms and public interest.
III. Choice-of-Law Analysis
The court considered whether Illinois or California law governed the enforceability of the post-termination restrictive covenants in BrightStar’s franchise agreements. Each agreement contained an Illinois choice-of-law clause, but the defendants argued California law should apply, asserting that California’s strong public policy under Business and Professions Code § 16600 renders non-compete clauses void.
Governing Standard
The court applied Illinois’ choice-of-law rules under Klaxon Co. v. Stentor Electric Mfg. Co., which follow the Second Restatement of Conflict of Laws § 187. Illinois courts generally honor a contractual choice-of-law provision unless (1) the chosen state has no substantial relationship to the parties or transaction, or (2) applying that law would contravene a fundamental public policy of a state with a materially greater interest in the dispute. The burden rests on the party seeking to avoid the contractual choice-of-law clause—in this case, the defendants—to show a true conflict that would affect the outcome.
Defendants’ Argument
The defendants contended that California’s Section 16600 voids any contract restraining lawful business activities, rendering BrightStar’s non-compete and non-solicitation clauses unenforceable. They maintained that California’s public policy interest in open competition should override the Illinois choice-of-law clause.
The Court’s Analysis
The court rejected defendants’ argument after analyzing Ixchel Pharma, LLC v. Biogen, Inc. (Cal. 2020), in which the California Supreme Court clarified that § 16600’s per se prohibition applies to employment relationships but not to commercial contracts between businesses. For such business-to-business agreements, including franchise relationships, California applies a “rule of reason” standard—upholding restraints that are reasonable in scope and duration. The court emphasized that Ixchel explicitly referenced franchise agreements as examples of commercial contracts not automatically void under § 16600.
The court further found no authority limiting Ixchel to covenants effective during a contract’s term; instead, federal district courts had applied Ixchel to post-termination covenants, reasoning that restraints in commercial contexts are analyzed for reasonableness rather than per se invalidity. Citing Vanguard Logistics Services (USA) Inc. v. Groupage Services of New England, LLC and OWLink Technology Co. v. Cypress Technology Co., the court predicted the California Supreme Court would extend Ixchel to post-termination non-competes.
- Preliminary Injunction Analysis
The court granted BrightStar’s motion for a preliminary injunction in part, enforcing post-termination obligations under the franchise agreements. Applying the Seventh Circuit’s framework, the court evaluated (1) likelihood of success on the merits, (2) irreparable harm and inadequacy of legal remedies, and (3) the balance of harms and public interest and (4) the scope of relief.
- Likelihood of Success on the Merits
BrightStar asserted two breach-of-contract claims—one under the Collateral Lease Assignments and one under the Franchise Agreements.
- Collateral Lease Assignments: The court found BrightStar likely to succeed only as to the Newport Beach office, since that lease involved a third-party landlord. The Mission Viejo lease, by contrast, was void because Foreside was both tenant and landlord and could not assign a lease to itself.
- Franchise Agreements: The court held BrightStar demonstrated a strong likelihood of success. The restrictive covenants (non-compete, non-solicitation, confidentiality, and post-termination duties) were reasonable in duration (18 months) and scope (limited to the franchise territory and 25-mile radius). BrightStar had legitimate business interests in protecting goodwill, confidential information, and its franchise system. Defendants clearly breached several provisions—continuing to operate in the same territory, using BrightStar’s confidential data, retaining telephone numbers, and displaying BrightStar branding—causing ongoing competitive harm.
- Irreparable Harm and Inadequate Remedy at Law
The court found BrightStar faced classic forms of irreparable harm if the injunction were denied. The continued misuse of BrightStar’s confidential information, customer base, and goodwill could not be quantified in money damages. Defendants’ operation in the same market under similar branding risked undermining the integrity of BrightStar’s entire franchise network by signaling to other franchisees that post-termination breaches would go unpunished. Loss of customer trust, brand control, and confidential data constituted injuries not compensable by damages, satisfying the irreparable harm and inadequacy prongs.
- Balance of Harms and Public Interest
Balancing the equities, the court held the harms weighed in BrightStar’s favor. Defendants claimed an injunction would force them to shut down operations and lay off 400 employees, but the court found this harm self-inflicted—they chose not to renew the agreements and continued operating in violation of clear post-termination covenants. Moreover, the restriction lasted only 18 months and allowed them to resume operations afterward. Public interest also supported enforcing valid contracts and maintaining integrity in franchising relationships. The court noted that nearby BrightStar locations were ready to serve affected clients, minimizing disruption to patient care.
- Scope of Relief
The court issued a partial injunction: enforcing the non-compete, confidentiality, and brand-removal provisions under the franchise agreements but denying relief regarding the Mission Viejo lease. It also declined to enjoin actions already completed, such as removing signage or providing client lists, reserving further enforcement details for a later status hearing.
- Reasonableness and Ancillarity of the Covenant
1. Ancillarity
The Court found that the restrictive covenants were ancillary to a valid, enforceable franchise agreement. There was no dispute as to the validity of the Franchise Agreements themselves. The covenants (including non-compete, non-solicit, and post-termination obligations such as confidentiality, return of information, and transfer of business-related phone numbers) were contractual obligations embedded within those agreements and directly related to the business relationship and interests conferred by the franchise structure. In this arrangement, the covenants serve as integral provisions tied to the franchise grant, license to use proprietary systems, and access to goodwill and confidential information. The Court supported this conclusion by citing both the language of the Franchise Agreements (Sections 11 and 14) and consistent case law that recognizes such covenants in franchises as inherently ancillary to valid agreements where they safeguard control over brand, goodwill, and proprietary systems.
2. Reasonableness Analysis
- Legitimate Business Interests
BrightStar established legitimate business interests meriting protection, specifically its goodwill, clientele, and confidential information developed and invested in over a significant period. The Court found these interests to be well-recognized within the franchise context, citing precedent that the protection of name, goodwill, reputation, and proprietary systems are classic protectable interests for a franchisor.
- Geographic Scope
The covenants restrict competition, solicitation, and other post-termination conduct in three ways:
- At the former franchise location,
- In the “protected territory” (consisting of specific zip codes where Defendants’ franchise operated),
- And within 25 miles of any other franchised or company-owned BrightStar location.
The Court found these restrictions to be reasonable and coextensive with the area in which BrightStar serves clients and Defendants operated the franchise. Precedent supports both zip-code-based and 25-mile-radius restrictions, given that the franchise typically draws customers from within those boundaries.
- Duration
The covenants restrict Defendants for an 18-month period following termination. The Court deemed this duration reasonable, identifying it as the minimum necessary to allow dissipation of advantages gained as franchisees, facilitate BrightStar’s transition to a new franchisee, and allow new operations to become established.
- Scope and Nature of Prohibitions
The post-termination covenants address:
- Non-compete and non-solicitation (business operations and solicitation of former clients within the defined area/time frame),
- Confidentiality and prohibition on use of proprietary information,
- Mandatory transfer of phone numbers,
- Returning confidential materials,
- Forbidding use of marks and indicia,
- Halting all use of the franchisor’s business program.
The Court held these obligations to be reasonable means of protecting the franchisor’s legitimate interests and did not consider them overbroad, especially since the covenants are limited in geographic, temporal, and subject-matter scope.
- Effect on Public and Defendant
The Court assessed the impact of enforcement on both Defendants and the public. It concluded that any hardship imposed on Defendants (including the argument that more than 400 employees would be out of work) was “self-inflicted”—they chose not to renew and disregarded post-termination obligations. Moreover, public interest weighs in favor of enforcing valid contractual arrangements and promoting adherence to franchise covenants; disruption to clients was not found to outweigh these considerations, as alternative providers were available.
- Conclusion
In the case of Brightstar Franchising, LLC v. Foreside Management Company, the court addressed the enforceability and reasonableness of restrictive covenants under Illinois law. The court determined that Illinois law applies to the Franchise Agreements, rejecting the defendants’ argument for the application of California law, which they claimed would render the covenants unenforceable. The court found that the restrictive covenants in the Franchise Agreements are enforceable under Illinois law, as they are reasonably necessary to protect BrightStar’s legitimate business interests and are limited in geographic scope and duration. The court granted BrightStar’s motion for a preliminary injunction in part, finding a strong likelih ood of success on the merits for Count I, which involved breaches of the Franchise Agreements. However, the court did not find a strong likelihood of success for Count II, related to the Mission Viejo Agreement, due to issues with the enforceability of the lease assignment. The court concluded that BrightStar demonstrated irreparable harm and a lack of an adequate remedy at law, justifying the issuance of a preliminary injunction. The balance of harms and public interest also favored granting the injunction, as the harm to BrightStar outweighed the self-inflicted harm to the defendants.
VII. Policy and Practical Ramifications
The policy ramifications of BrightStar Franchising, LLC v. Foreside Management Co. center on how courts treat non-compete and post-termination covenants in franchise agreements, particularly when California’s historically strict prohibition on such restraints intersects with other state laws. The court’s reliance on Ixchel Pharma, LLC v. Biogen, Inc. signals a broader acceptance of the “rule of reason” in evaluating commercial non-competes rather than automatic invalidation under California Business & Professions Code § 16600. By affirming that franchise relationships are business-to-business arrangements rather than employment relationships, the decision reinforces franchisors’ ability to protect legitimate business interests such as goodwill, proprietary systems, and brand integrity through reasonable restrictive covenants. This approach aligns federal and state jurisprudence around commercial fairness and predictability, limiting the reach of California’s public policy against restraints on trade in the franchise context.
Practically, the decision strengthens franchisors’ hands in enforcing post-termination obligations, such as non-solicitation clauses, territorial restrictions, and return of confidential information. The ruling affirms that a well-drafted franchise agreement governed by Illinois or similar law can survive challenges under California’s §16600 and can support injunctive relief to prevent ongoing competition or misuse of proprietary assets. It also underscores that franchisees who disregard renewal procedures or post-termination duties may face swift equitable enforcement, including injunctions, regardless of potential business disruption. For practitioners, BrightStar demonstrates the importance of precise choice-of-law provisions, clear definitions of “commercial relationship,” and evidence of reasonableness in scope and duration when drafting or litigating franchise covenants.
Finally, the decision is also significant for post-termination covenant not to compete (PTCNTC) disputes in franchising. It reinforces that such covenants—when tied to legitimate business interests and reasonable in scope and duration—remain enforceable even in jurisdictions sensitive to competition restrictions, like California. The court’s reliance on Ixchel Pharma confirms that post-termination restraints in commercial (not employment) contexts are judged under a reasonableness standard, not a per se ban. The ruling thus strengthens franchisors’ ability to obtain injunctive relief against former franchisees who continue operations using the franchisor’s goodwill and proprietary systems after termination.
