Courts: 10th Circuit Court of Appeals Opinion from May 31

The 10th Circuit Court of Appeals

Editor’s Note: Law Week Colorado edits court opinion summaries for style and, when necessary, length.

Core Progression Franchise v. O’Hare, et al.

Chris O’Hare entered into a franchise agreement with Denver-based fitness chain Core Progression in September 2019. O’Hare agreed to open Core Progression’s first franchise in North Carolina, but after only a few months of operation, O’Hare stopped paying fees to Core Progression and prepared to open his own gym under a different name in the same location where he ran the franchise. In addition, he tried to access Core Progression’s clients and convert them to his new facility. When Core Progression learned of these violations, it terminated the franchise agreement on Jan. 29, 2021, after providing formal notices of default and time to correct material breaches. The complaint was officially filed on March 3, 2021, asserting a breach of contract and trademark infringement.  

O’Hare agreed to open the franchise, but he did not immediately sign a contract. Instead, Core Progression gave O’Hare the preliminary franchise agreement to review two months before execution. In the franchise agreement, O’Hare agreed to not operate a competing gym within 25 miles of his Core Progression franchise for one year after the termination of the franchise. When Core Progression presented the final agreement for signature, a few clauses, related to issues like equipment ownership, had changed. Both parties agreed that O’Hare would operate a Core Progression franchise and be subject to all benefits and limitations in the franchise agreement.

O’Hare claimed CEO Jonathan Cerf told him Core Progression’s fitness regimen was revolutionary, the franchise all but guaranteed high profit margins and O’Hare would surely recoup his initial investment quickly. Shortly after O’Hare opened his Core Progression franchise through his corporation CAO Enterprises, he decided the regimen was not so “revolutionary” after all. He wanted to end the franchise, claiming that it was “fake” and had provided him with nothing of value. 

Core Progression established that it provided O’Hare with valuable trade secrets, training and branding. O’Hare downloaded Core Progression’s client data, copied its website formatting for his new gym and used its goodwill to recruit his own clients. He started his new gym, Altru Fitness, by simply changing the names on Core Progression’s social media accounts, maintaining all of Core Progression’s photos and reviews. The new account titles, “Altru Fitness (formerly Core Progression),” implied that the business had only changed names.

The district court granted a preliminary injunction prohibiting O’Hare from operating Altru Fitness at the current location or using Core Progression’s trade secrets. O’Hare stipulated to an injunction preventing him from using the Core Progression brand and he agreed to return any items belonging to Core Progression. 

He appealed the preliminary injunction directing him to cease operating a gym at the current location (or within 25 miles) and to cease the use of Core Progression trade secrets and information, arguing abuse of discretion. 

The 10th Circuit affirmed the district court’s ruling. It determined that the district court did not abuse its discretion in issuing a preliminary injunction and that Core Progression showed a substantial likelihood of success on the merits, that irreparable injury would result absent the injunction, that the threatened injury outweighs the harm to O’Hare and that the injunction is not adverse to the public interest.

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