TJB, INC. v. Arundel Bedding Corp.

ROSALYN B. BELL, Judge. An order was entered by the Circuit Court for Baltimore County, granting an interlocutory injunction to certain franchise holders against T.J.B., Inc. (TJB), doing business as Mattress Discounters. Appellees, Arundel Bedding Corporation, Nubig, Inc., Dream World, Inc., and Benjies Ltd., Inc., are franchisees of TJB. Appellant TJB also operates a large number of company-owned stores under the Mattress Discounters name.

The other appellants are various individuals associated with TJB. The franchise holders sued TJB alleging that it violated the Franchise Disclosure Act, Md.Code Ann., Art. 56, § 345 et seq. (1980), in several ways. Following the filing of suit in February 1984, some additional issues arose.

In April 1984, counsel met to attempt to resolve some of these issues. They agreed to defer resolution of a dispute concerning termination of Arundel Bedding Corporation’s franchise until a later date, and the agreement was recited before the court. In addition, TJB's counsel specifically reserved taking any position with regard to prepayment of advertising costs by Arundel Bedding Corporation. ¹⁸⁹ A hearing was held in July 1984, to resolve a series of disputes between TJB and the franchisees, including: 1. TJB’s attempt to cancel one of the franchises; 2.

TJB’s refusal to turn over an advertising rebate it received; 3. The method of payment of advertising costs by the franchisees. In their amended bill of complaint, the franchisees had sought, along with other relief, an injunction concerning the advertising rebates. The circuit court granted the injunction and provided in pertinent part: “[t]hat the Respondent T.J.B., Inc. shall return the funds it now retains in its books of account representing the advertising rebates due and owing to Complainants in their respective amounts set forth in a letter dated April 10, 1984, less any monies advanced for advertising prior to the date of this Order; and [that the appellees] ... are to be afforded the same advertising as other franchise and company owned stores of the Respondent T.J.B. Inc. and ...

That all Complainants/Franchisees shall pay for advertising under the terms and conditions as set forth in the Franchise Agreement; and ... “That such funds now held in an Escrow Account by the Complainants/Franchisees shall be paid directly to Respondent T.J.B., Inc.; [1] and ... “That the Respondent T.J.B., Inc. shall not terminate the franchise of any franchisee including but not limited to [these appellees].” TJB appeals from this order and complains that 1. The court erred in granting the interlocutory injunction because (a) it failed to consider the likelihood that the franchisees would succeed on the merits of their claim, and (b) it did not weigh the relative harm which might be ¹⁹⁰ suffered by the franchisees if the injunction were not issued against the possible harm to TJB which might result from its issuance; 2. The court erred by not requiring the franchisees to post an injunction bond as required by Md.Rule BB75; and 3. The court erred when it altered the status quo ante litem and ordered TJB to return the franchisees various advertising rebates held in escrow.

Interlocutory Injunction The purpose of an interlocutory injunction is “to maintain the status quo until the court has either addressed and resolved the merits of the controversy or has otherwise determined that the claimant has no legal right to proceed.” General Motors Corp. v. Miller Buick, Inc., 56 Md.App. 374, 386 , 467 A.2d 1064 (1983), cert. denied, 299 Md. 136 , 472 A.2d 999 (1984). Generally, the “appropriateness of granting an interlocutory injunction is determined by examining four factors: “(1) the likelihood that the plaintiff will succeed on the merits; “(2) the ‘balance of convenience’ determined by whether greater injury would be done to the defendant by granting the injunction than would result from its refusal; “(3) whether the plaintiff will suffer irreparable injury unless the injunction is granted; and “(4) the public interest.” Department of Transportation v. Armacost, 299 Md. 392, 404-05 , 474 A.2d 191 , (1984), citing State Dep’t v. Baltimore County, 281 Md. 548, 554-57 , 383 A.2d 51 (1977). 2 ¹⁹¹ Appellant contends that the trial court failed to determine the likelihood that appellees would succeed on the merits of their claim. First, the court did not direct itself specifically to the merits of appellees’ case as set forth in the Bill of Complaint. Second, the basis for TJB’s attempt to terminate appellee Arundel Bedding Corporation as a franchisee is independent of appellees’ claim; therefore, Arundel Bedding Corporation will face termination as a franchisee even if it otherwise succeeds on the merits of that claim.

Appellees respond that there was substantial testimony from which the court could have determined that they were likely to succeed on the merits. While this may be accurate, it is not sufficient. The court must make its determination by balancing the relevant factors. In the present case, the court made no findings regarding the probability of success; it merely concluded that “it’s the responsibility of this Court of equity to protect the interests of all parties pending this litigation.” While this is not precisely wrong, it is incomplete.

The court has that responsibility insofar as it is consistent with the results reached upon balancing the aforementioned factors. This Court does not find facts; such questions are for the trial court to decide. We, therefore, reverse and remand the case to allow the court to complete that function. Bond Maryland Rule BB75a states as follows: “a.

Ex Parte or Interlocutory Injunction. Except as otherwise provided in section b of this Rule, an ex parte or interlocutory injunction shall not be issued unless there is filed a bond in such amount as may be determined by the court and with such surety as may be approved pursuant to Rule l-402(b) or with other security approved by the court, conditioned to answer to the adverse party for any damages which he may sustain by reason of the issuance of such injunc ¹⁹² tion if it shall ultimately be determined, when such action is heard on the merits, that such injunction should not have issued.” 3 Appellants contend alternatively that: (1) The court could not dispense with the bond under the Rule; (2) The court did not exercise its discretion; or (3) If the court exercised its discretion, it erred in failing to impose a bond in a specified amount on appellees. The appellate courts of this jurisdiction have not determined previously whether a trial court, in its discretion, may conclude that a bond or other security may be dispensed with under Md.Rule BB75a in a case involving an interlocutory injunction. 4 Both parties refer us to cases interpreting Fed.R.Civ.P. 65(c), since that Rule is similar to Md.Rule BB75a. The Federal Rule provides, in pertinent part: “No restraining order or preliminary injunction, shall issue except upon the giving of security by the applicant in such sum as the court deems proper----” The United States Court of Appeals for the Second Circuit explained the rule as follows: “In considering this language we have stated that, especially in view of the phrase — ‘as the court deems proper’ the district court may dispense with security when there has been no proof or