Maryland Court Analyzes Use of 'Similar to' in Non-Compete

By: Matthew D. Kohel, Joseph B. Wolf | 2.26.19 | Media

In a recent decision, where our firm successfully represented the defendants, the United States District Court for the District of Maryland found that the plaintiff’s interpretation of a covenant not to compete in a franchise agreement rendered the clause overbroad and unenforceable. In SH Franchising, LLC d/b/a, Senior Helpers v. Newlands Homecare, LLC, et al., No. 1:18-cv-02104-CCB, (D. Md. Jan. 29, 2019), the court analyzed a non-compete that prevented the former franchisee from operating a “competitive business,” which the agreement defined as businesses which provide any “product or service that is similar to the services and products authorized to be offered or sold under the [franchisor’s] . . . System” of operating in-home care agencies.   

The plaintiff is a company that franchises non-medical income care businesses primarily for senior citizens experiencing Alzheimer’s disease or dementia. The defendants are a former franchisee and her new business, which provides dementia care training and consultation to senior care facilities and family members of individuals with dementia. The plaintiff filed suit, alleging that the new business breached the franchise agreement’s non-compete and sought to enjoin its operations.

After an evidentiary hearing and substantial briefing, the court ruled that the former franchisee’s new business was not “similar” because she provided training and educational services on how to care for a person with dementia, which is different from actually providing care to an individual. In denying the injunction, the court explained that the former franchisee could not be prevented from operating a business merely because its services may negate the need for some prospective clients to hire the plaintiff. The court determined that the former franchisee should not be prohibited from operating her new business simply because it may negatively impact the plaintiff’s profits, which is not a protectable legal interest.

In addition to denying the injunction, the court granted our motion to dismiss the case because the plaintiff failed to comply with the franchise agreement’s mandatory mediation requirement before filing suit.

The defendants were represented in this matter by Matthew D. Kohel and Joseph B. Wolf. Our firm represents franchisors and franchisees and handles nationwide litigation and arbitration. If your business is involved in a dispute, please contact us today.