Franlink v. BACE Services

Case: 21-20316 Document: 00516488262 Page: 1 Date Filed: 09/28/2022 United States Court of Appeals for the Fifth Circuit United States Court of Appeals Fifth Circuit FILED September 28, 2022 No. 21-20316 Lyle W. Cayce Clerk Franlink Incorporated, a Texas Corporation, Plaintiff—Appellee, versus BACE Services, Incorporated, a Florida Corporation, formerly known as Craig Wells Enterprises, Incorporated; Steven Bradley Morton, a Florida Resident; Payday Solutions, L.L.C., a Florida Limited Liability Company; JTL Staffing; Payroll, L.L.C., an Alabama Limited Liability Company, Defendants—Appellants. Appeal from the United States District Court for the Southern District of Texas USDC No. 4:19-CV-4593 Before Jolly, Smith, and Engelhardt, Circuit Judges. E. Grady Jolly, Circuit Judge: This case presents one primary question: whether non-signatories to a franchise agreement may be bound to the contract’s choice of forum provision under the equitable doctrine that binds non-signatories who are “closely related” to the contract. We conclude such non-signatories may be bound to a forum selection clause, as we will more fully set out below. Case: 21-20316 Document: 00516488262 Page: 2 Date Filed: 09/28/2022 No. 21-20316 Applying the doctrine here, we affirm as to non-signatory PayDay, but reverse as to non-signatories JTL and Morton. The other issues on appeal pertain to damages, attorneys’ fees, and costs. After this appeal, these awards only apply to the remaining defendants—the signatory, BACE, and the non-signatory, PayDay. With respect to these remaining defendant-appellants, we reverse and remand the money judgment to allow the district court to reconsider damages, attorneys’ fees, and costs in the light of this opinion. The imposed injunction, however, is affirmed and remains unaffected as to BACE and PayDay. We thus AFFIRM in part; REVERSE in part; VACATE in part; and REMAND. I. Amy and Craig Wells entered into a franchise agreement with Franlink Incorporated (“Link”) in 2007, which they renewed in 2017, allowing the Wellses to operate a franchise staffing company, BACE Services (“BACE”), in Jacksonville, Florida. The franchise agreement created a fee- sharing arrangement and authorized BACE to use Link’s trademarks and name. It specified several acceptable reasons for terminating the franchise and outlined post-termination obligations. The agreement also included a covenant not to compete and a non-solicitation provision that applied to BACE, Craig Wells, and Amy Wells (collectively, “BACE defendants” or “signatories”). By November 2018, BACE had become unhappy with the franchise arrangement and, according to the district court, “beg[a]n to explore options for exiting the Link Staffing system.” A ransomware attack in October 2019 on Link’s system seemed to provide a reason, and BACE purported to 2 Case: 21-20316 Document: 00516488262 Page: 3 Date Filed: 09/28/2022 No. 21-20316 terminate its agreement with Link on October 25, 2019. 1 Earlier, on October 21, 2019, Bradley Morton—Amy Wells’ son and Craig Wells’ stepson, who had been a manager at BACE but not a signatory to the franchise agreement—had left BACE to become a branch manager at JTL, a competing staffing business that operates in the same territory as the BACE franchise. JTL is owned and operated by a non-party in this …

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