United States District Court, E.D. Michigan, Southern Division
LITTLE CAESAR ENTERPRISES, INC. and LC TRADEMARKS, INC., Plaintiffs,
CREATIVE RESTAURANT, INC., et al., Defendants.
OPINION AND ORDER DENYING DEFENDANTS' MOTION FOR
PARTIAL SUMMARY JUDGMENT 
STEPHEN J. MURPHY, III UNITED STATES DISTRICT JUDGE
Little Caesar Enterprises sued Defendants Creative
Restaurant, Mao Pao Lin, and En Lin for alleged breach of
contract, trademark infringement, unfair competition, and
trade dress infringement. Before the Court is Defendants'
motion for partial summary judgment. The Court has reviewed
the briefs and finds that a hearing is unnecessary.
See E.D. Mich. LR 7.1(f). The Court will deny the
entered into a Franchise Agreement ("Agreement")
with Plaintiff Little Caesar Enterprises, and the Agreement
contained a noncompete provision. The parties do not dispute
the terms of the noncompete provision. ECF 16-2, PgID 323;
ECF 18-2, PgID 462. The noncompete clause prohibits a former
franchisee from engaging in certain conduct for "a
continuous uninterrupted one (1) year period" within any
"Designated Market Area" and for "a continuous
uninterrupted two (2) year period with respect to" the
Designated Market Area where the franchise was located.
Id. In December 2016, the Agreement was terminated
and the noncompete commenced. ECF 16, PgID 255-56; ECF 18,
PgID 395-96. Defendants' filed a motion for partial
summary judgment arguing that the noncompete clause is
unreasonable and unenforceable.
Court must grant summary judgment "if the movant shows
there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law."
Fed.R.Civ.P. 56(a). The moving party must identify specific
portions of the record "which it believes demonstrate
the absence of a genuine issue of material fact."
Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).
Once the moving party has met its burden, the non-moving
party may not simply rest on the pleadings, but must present
"specific facts showing that there is a genuine issue
for trial." Matsushita Elec. Indus. Co. v. Zenith
Radio Corp., 475 U.S. 574, 587 (1986) (quoting
is "material" for purposes of summary judgment if
proof of that fact would establish or refute an essential
element of the cause of action or defense. Kendall v.
Hoover Co., 751 F.2d 171, 174 (6th Cir. 1984). A dispute
over material facts is genuine "if the evidence is such
that a reasonable jury could return a verdict for the
nonmoving party." Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986). In considering a motion
for summary judgment, the Court must view the facts and draw
all reasonable inferences in a light most favorable to the
nonmoving party. 60 Ivy St. Corp. v. Alexander, 822
F.2d 1432, 1435 (6th Cir. 1987).
to the Agreement's choice of law provision, Michigan law
governs the interpretation and construction of the Agreement.
ECF 16-2, PgID 329. Defendants rely upon the Michigan
Antitrust Reform Act's ("MARA") reasonableness
standard for noncompete agreements. Mich. Comp. Laws §
445.774a. But the Supreme Court of Michigan recently held
"that a commercial noncompete provision must be
evaluated for reasonableness under the rule of reason."
Innovation Ventures v. Liquid Mfg., LLC, 499 Mich.
491, 496 (2016) (emphasis added). The Innovation
Ventures court further noted that the MARA "does
not address the proper framework for evaluating a noncompete
agreement between businesses" but provides a
reasonableness standard appropriate only for "agreements
between employees and employers." Id. at
512-13. Further, the MARA instructs courts to rely upon
federal interpretation of comparable antitrust statutes.
Mich. Comp. Laws § 445.784(2).
federal courts assess commercial noncompete agreements under
the rule of reason. Innovation Ventures, 499 Mich.
at 514 (compiling cases). A contract clause "violates
the rule of reason if it 'may suppress or even destroy
competition, ' rather than promote competition.
United States v. Blue Cross Blue Shield of Mich.,
809 F.Supp.2d 665, 671 (E.D. Mich. 2011) (quoting
American Needle, Inc v. National Football League,
560 U.S. 183, 203 n.10 (2010)); see also Perceptron, Inc.
v. Sensor Adaptive Machs., Inc., 221 F.3d 913, 919 (6th
Cir. 2000) (noting that the rule of reason analysis focuses
on "whether under all the circumstances of the case the
restrictive practice imposes an unreasonable restraint on
competition"). To survive under the rule of reason, a
party challenging a contract must allege that the contract
"produced adverse anticompetitive effects within
relevant product and geographic markets." Blue
Cross, 809 F.Supp.2d at 671 (quoting Warrior Sports,
Inc. v. Nat'l Collegiate Ath. Ass'n, 623 F.3d
281, 286 (6th Cir. 2010)).
the antitrust rule of reason governs. The noncompete
agreement binds commercial entities-a franchisor and
franchisees-and not an employer and employee.Although the rule
of reason originates in antitrust law, the rule's
application is not limited, as Defendants assert, only
"to non-compete agreements against antitrust
claims." ECF 16, PgID 261. The text of the
Innovation Ventures opinion does not lend itself to
that limitation and Defendants point to no authority to
support the contention. Defendants cite federal court cases
employing the MARA's reasonableness standard; each case,
however, predates the Innovation Ventures decision.
Id. Moreover, Defendants' averment that
"most antitrust claims are analyzed under a rule of
reason" does not mean that the rule of reason applies
only to antitrust claims. Id. (quoting
State Oil Co. v. Khan, 522 U.S. 3 (1997)). In fact,
the Innovation Ventures court, by applying the
antitrust rule of reason to the interpretation of a
commercial noncompete covenant, dispels Defendants'
Defendants do not satisfy the rule of reason. They fail to
"produce evidence showing the absence of a genuine issue
of material fact" regarding the adverse, anticompetitive
effects in the overall pizza or quick-service food market of
the noncompete agreement. Celotex Corp., 477 U.S.
317, 325 (1986). In fact, Defendants' motion tends to
show healthy competition between pizza restaurants in the
relevant geographic location. ECF 16, PgID 273-74. Defendants
contend, however, that they have suffered an individual
injury as a result of the noncompete. That showing, even if
true, is insufficient. Antitrust laws such as the MARA and
the concomitant rule of reason provide for "the
protection of competition, not
competitors." Brooke Grp. Ltd. v. Brown
& Williamson Tobacco Corp., 509 U.S. 209, 224 (1993)
(emphasis in the original). The Defendants have not carried
their burden and the motion must be denied.
it is HEREBY ORDERED that Defendants'
motion for partial ...