Spice Merchants Entities Corp. et al v. Pretty Colorado, LLC et al

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Civil Action No. 24-cv-00371-RMR-NRN
SPICE MERCHANTS ENTITIES CORP., a Michigan corporation,
STM Properties, LLC, a Michigan limited liability company, and
LISA FREEMAN, a Michigan individual,
Plaintiffs,
v.
PRETTY COLORADO, LLC, a Colorado limited liability company,
CORINNE WINSLOW, a Colorado individual, and
ELLIS YOUNG (USA), LTD, a Colorado limited liability company,
Defendants.
ORDER ON PLAINTIFF’S MOTION FOR PRELIMINARY INJUNCTION
(ECF No. 8)
N. REID NEUREITER
United States Magistrate Judge
I. PROCEDURAL BACKGROUND
This matter comes before the Court on Plaintiffs’ Motion for Preliminary
Injunction, filed February 22, 2024. ECF No. 8. The Parties consented Magistrate Judge
jurisdiction on May 3, 2024. ECF No. 28. Judge Regina M. Rodriguez issued an order of
reference pursuant to 28 U.S.C. § 636(c) on May 6, 2024. ECF No. 29.
On May 8, 2024, the Court set a scheduling conference and an evidentiary
hearing on Plaintiffs’ Motion for Preliminary Injunction for May 28, 2024. ECF No. 30.
The Court held the first of three days of evidentiary hearings on the motion on May 28,
2024. See ECF No. 45 (Courtroom Minutes). A second day of evidence was presented
on June 7, 2024. See ECF No. 52 (Courtroom Minutes). The presentation of evidence
Case No. 1:24-cv-00371-NRN Document 67 filed 09/24/24 USDC Colorado pg 1
of 18

2
concluded on June 14, 2024, followed by closing arguments. See ECF No. 54
(Courtroom Minutes). Perhaps preoccupied by the lengthy evidentiary presentations,
the Court never got around to having a formal scheduling conference and no scheduling
order has yet been entered in this case.
At the conclusion of the preliminary injunction proceedings, the matter was
referred to Chief Magistrate Judge Michael E. Hegarty for settlement. The Court has
been informed that those negotiations failed to bear fruit, thereby necessitating a
decision on Plaintiff’s Motion for Preliminary Injunction.
Over the course of preliminary injunction presentations, the Court heard from the
following seven witnesses: Michael Carl, Theo Foote, Plaintiff Lisa Freeman, Ja-Lene
Postema, Sue Kelly, Trevor Ellis (principal of Defendant Trevor Young), and Defendant
Corinne Winslow. Dozens of exhibits were entered into evidence. More than 12 hours of
court time was devoted to hearing evidence and argument. All Parties had a fair chance
to present their respective positions.
Based on the Court’s hearing and weighing of the testimony, its review of the
exhibits entered into evidence, and consideration of the authorities presented, Plaintiff’s
Motion for Preliminary Injunction will be GRANTED IN PART and DENIED IN PART.
Specifically, the request for return of materials (including operating manuals and recipe
books) will be GRANTED. The request to enforce the non-compete provisions of the
franchise agreement, and for the Plaintiffs to be restored to the disputed property in
Breckenridge, Colorado will be DENIED.
Case No. 1:24-cv-00371-NRN Document 67 filed 09/24/24 USDC Colorado pg 2
of 18

3
II. SUMMARY OF THE DISPUTE
This is a trademark, franchise, and breach of a real estate lease fight between
Plaintiffs Spice Merchants Entities Corp., STM Properties, LLC, and Lisa Freeman
(collectively “Plaintiffs” or “Freeman”) on the one hand, and Defendants Pretty Colorado
LLC and Corinne Winslow (“Winslow Defendants” or “Winslow”) and Ellis Young (USA)
LTD (“Ellis”) on the other.
Briefly, Plaintiffs are involved in franchising the Spice & Tea Merchants brand to
owners of spice and tea shops. Defendant Pretty Colorado, through owner Corinne
Winslow, was a franchisee running a franchised store (the “Store”) in downtown
Breckenridge which sold tea, spices, and other items. Trevor Ellis (through his entity
Ellis Young (USA) LTD) was the landlord who initially had an executed lease with STM
Properties (Ms. Freeman’s real estate entity) as lessee for the Breckenridge location.
Ms. Freeman then subleased the Store property to Winslow under a sublease
arrangement. Winslow had originally been a Store employee or manager when
Freeman owned and ran the Store, but eventually Winslow transitioned to being the
Store owner, as a franchisee of Freeman. The sublease between STM Properties and
Winslow expired in March 2022. Plaintiffs represent that STM Properties tendered a
new sublease to Winslow that she refused to sign. Nevertheless, it is essentially
undisputed that there was a month -to-month sublease arrangement between STM
Properties and Winslow and Pretty. The head lease was between Ellis (through his
entity Ellis Young) as landlord, and STM Properties as lessee.
This dispute came to a head in February 2022 when Ms. Freeman insisted on
payment from Winslow for more than $35,000 in inventory and furnishings that had
Case No. 1:24-cv-00371-NRN Document 67 filed 09/24/24 USDC Colorado pg 3
of 18

4
been transferred to Winslow when Winslow began running the Breckenridge Store as a
franchisee. This inventory debt was never formally recorded via a promissory note. Nor
was there any formal agreement as to the value of the inventory and furnishings or the
schedule to pay for that inventory and furnishings. But it is undisputed that Winslow
owed (and still owes) some amount of money for the inventory and furnishings
transferred to the Winslow Defendants. It might have been $20,000 and it might have
been $39,000, but it was not an insubstantial sum.
After more than a year and half without payment for the inventory, coupled with
Winslow’s failure to execute a formal promissory note to repay the debt, a frustrated
Freeman gave notice to Winslow that she was going to start withdrawing money ($1,500
a month) from Winslow’s bank account via automatic fund transfer (an “ACH” or
“automated clearing house” transfer). See generally Ex. MM (email of November 7,
2023, from Lisa Freeman to Corinne Winslow). Winslow had authorized Freeman to
make such automatic collections to satisfy monthly franchise royalty payments pursuant
to the franchise agreement. But Winslow had never authorized Freeman to take money
automatically to satisfy the claimed inventory/furnishings debt.
Distraught by the use of the automatic fund transfer process for unauthorized
purposes, Winslow cancelled the ACH authorization with her bank and insisted that
Freeman return the $1,500. Rather than returning the $1,500, Freeman (through her
lawyer) said she would allocate that money toward the October 2023 royalty obligation
which, based on the Store’s sales for that month, would have been $2,259.00. this left
Winslow owing $759.24 for the October 2023 royalty payment.
Case No. 1:24-cv-00371-NRN Document 67 filed 09/24/24 USDC Colorado pg 4
of 18

5
Winslow did not reinstate the ACH transfer authorization , which was a
requirement of the franchise agreement. Winslow says she was prepared to pay the full
October royalty payment if Freeman returned the $1,500 that had been improperly
withdrawn. Winslow also says she was willing to negotiate proper documents to reflect
the inventory debt, which she recognized that she owed, but she disagreed on the
valuation and was not willing to sign the documents that Freeman had prepared, which
reportedly had errors. On November 20, 2023, Freeman’s lawyer sent a letter to
Winslow’s counsel listing supposed franchise agreement defaults, including a supposed
inventory deposit default, a failure to pay the remaining $759.24 royalty for October
2023, the failure to provide the ACH authorization , breach of an advertising requirement
which required a certain expenditure per month , and a failure to provide certain required
financial reports. The payment defaults needed to be cured by November 30, 2023, and
the other defaults cured by December 20, 2023, or the franchise agreement would be
terminated.
This dispute culminated at the end of November 2023 with Freeman coming to
Breckenridge, effectively unannounced, to do an inspection of the Store, which she says
she was entitled to do under the franchise agreement. Fearful about a confrontation,
and with just a few minutes’ notice of Freeman’s impending arrival, Winslow closed the
Store early. Freeman arrived and Ms. Winslow says that she blocked Winslow’s car in
the parking spot. Freeman demanded entry into the store. Winslow refused. Winslow
says that Freeman told her during that confrontation that the franchise was terminated.
The Court finds Winslow credible on this point. Freeman, who was subleasing the Store
property to Winslow, had law enforcement post notices to quit on the door of the Store.
Case No. 1:24-cv-00371-NRN Document 67 filed 09/24/24 USDC Colorado pg 5
of 18

6
All this was done on November 28 and 29, 2023 -- before the deadline specified by
Freeman’s lawyer to cure the franchise agreement defaults.
But on December 8, 2023, Winslow turned the tables on Freeman . Trevor Ellis
terminated the headlease with Freeman’s STM Properties. One claimed basis for
terminating the headlease was that Freeman did not have a valid sublease with
Winslow; instead, the sublease had gone to a month -to-month arrangement. Ellis
terminated the headlease without talking to Freeman and without giving any opportunity
to cure. The same day that Ellis terminated Freeman ’s headlease, he signed a new
lease with Winslow’s company, thereby freezing out Freeman and Spice Merchants.
After closing the Store for two months (December 2023 and January 2024), with
a new lease in her own company’s name, Winslow reopened the tea and spice shop
under a new brand (“Breckenridge Tea and Spice”)—printing up her own stickers to
cover the “Spice & Tea Merchants” logo on older spice packages. By starting her own
tea and spice shop within just months of having her Spice & Tea Merchants franchise
terminated, Winslow is arguably in breach of the franchise agreement’s non-compete
provisions.
Hence, we get Freeman’s claim that Winslow has effectively stolen the tea and
spice shop franchise. In Freeman’s telling, Winslow acquired over $35,000 of inventory
and furnishings without paying or executing a promissory note. Winslow got Freeman’s
training manuals, customer lists, and proprietary recipe and mixing books, which have
not been returned. Winslow was trained by Freeman how to run the Store. Winslow has
garnered all the goodwill associated with Spice & Tea Merchants brand and is now
competing directly in violation of the non-compete provisions of the franchise
Case No. 1:24-cv-00371-NRN Document 67 filed 09/24/24 USDC Colorado pg 6
of 18

7
agreement. Freeman says that to protect the franchise brand and to protect other
franchisees and their investments in the brand, the Court should restore the physical
store property to Freeman (presumably by cancelling Ellis’s lease to Winslow and
restoring the headlease to STM Properties); order Winslow to return all manuals,
recipes, and customers lists; and enforce the non-compete provisions of the franchise
documents by shutting Winslow down.
Winslow, for her part, argues that it is Freeman who is trying to take unfair
advantage. Winslow says that she always paid her royalties on time—until Freeman
used the ACH transfer process to try to take money for the inventory where there was
never any written agreement to pay for the inventory and there was a dispute about the
amount owed for the inventory and furnishings. More significantly, Winslow, through
counsel, takes issue with the notion that Freeman has any legitimate protectable
interest in the “Spice & Tea Merchants” mark in connection with a spice or tea shop. In
a partial motion to dismiss, ECF No. 17, filed April 4, 2024, Winslow makes the
argument, repeated in the response brief and at the preliminary injunction hearing, that
the Spice & Tea Merchants franchise is effectively based on a fraud—the promise of an
enforceable federal trademark for spice and tea shops—when, in fact, the mark is for
“on-line retail store services featuring cookware and cooking accessories, namely
kitchen and culinary equipment, salt and pepper shakers, kitchen and culinary utensils
and accessories, and a wide variety of other cooking accessories; Retail store services
featuring cookware and cooking accessories, namely, kitchen and culinary equipment,
salt and pepper shakers, kitchen and culinary utensils and accessories, and a wide
variety of other cooking accessories.” ECF No. 18-1 at 4. Per Winslow, it is unlikely that
Case No. 1:24-cv-00371-NRN Document 67 filed 09/24/24 USDC Colorado pg 7
of 18

8
the United States Patent and Trademark Office (“USPTO”) would have granted the
federal trademark registration “Spice & Tea Merchants” for a spice and tea shop
because it is too generic and descriptive. Yet, the franchise agreement was based on
the promise that Freeman was giving Winslow a franchise in a company with a
protected and protectable mark for the purpose of selling tea and spices.
III. STANDARD FOR PRELIMINARY INJUNCTION
A preliminary injunction is an equitable remedy that invokes the sound discretion
of the district court. See Lundgrin v. Claytor, 619 F.2d 61, 63 (10th Cir. 1980). The
function of a preliminary injunction is to preserve the status quo pending a final
determination of the rights of the parties. Penn v. San Juan Hosp., Inc., 528 F.2d 1181
(10th Cir. 1975); Cont’l Oil Co. v. Frontier Refining Co., 338 F.2d 780 (10th Cir. 1964).
The grant or denial of a preliminary injunction is within the sound discretion of the trial
court. Lundgrin, 619 F.2d at 63 .
Preliminary injunction is an extraordinary remedy—an exception rather than the
rule. See GTE Corp. v. Williams, 731 F.2d 676, 678 (10th Cir. 1984). Thus, the right to
relief must be clear and unequivocal. See Penn., 528 F.2d at 1185. The burden is on
the movant to make a prima facie showing of a probable right to the ultimate relief and a
probable danger of injury if the motion is denied. Big O Tires, Inc. v. Bigfoot 4x4, Inc.,
167 F. Supp. 2d 1216, 1221 (D. Colo. 2001). The Supreme Court has observed “that a
preliminary injunction is an extraordinary and drastic remedy, one that should not be
granted unless the movant, by a clear showing, carries the burden of persuasion.”
Mazurek v. Armstrong, 520 U.S. 968, 972 (1997) (per curiam) (quotation omitted).
Prevention of harm to the movant is one purpose of a preliminary injunction , O Centro
Case No. 1:24-cv-00371-NRN Document 67 filed 09/24/24 USDC Colorado pg 8
of 18

9
Espirita Beneficiente Uniao Do Vegetal v. Ashcroft, 389 F.3d 973, 977 (10th Cir. 2004),
but it is not the “paramount purpose,” which is, instead, “the need to prevent the judicial
process from being rendered futile by defendant’s action or refusal to act.” Id. (quoting
11A Charles Alan Wright et al., Federal Practice and Procedure § 2947 (2d ed. 1995)).
In determining whether to issue a preliminary injunction, a court is to consider
whether the movant has established the following: (1) a substantial likelihood of success
on the merits; (2) irreparable injury unless the injunction issues; (3) the threatened injury
to the movant outweighs whatever damage the proposed injunction may cause to the
opposing party; and (4) that the injunction; if issued, is not adverse to the public interest.
Big O Tires, Inc., 167 F. Supp. 2d at 1221–22; Lundgrin, 619 F.2d at 63.
The following types of injunctions are disfavored: (1) a preliminary injunction that
disturbs the status quo; (2) a preliminary injunction that is mandatory as opposed to
prohibitory; and (3) a preliminary injunction that affords the movant substantially all the
relief she may recover at the conclusion of a full trial on the merits. O Centro, 389 F.3d
at 975. Any preliminary injunction fitting within one of the disfavored categories must be
more closely scrutinized to assure that the exigencies of the case support the granting
of a remedy that is extraordinary even in the normal course. Id. Because a historically
disfavored preliminary injunction operates outside of the normal parameters for interim
relief, movants seeking such an injunction “must make a strong showing both with
regard to the likelihood of success on the merits and with regard to the balance of
harms.” Id. at 976, 980.
IV. ANALYSIS
Case No. 1:24-cv-00371-NRN Document 67 filed 09/24/24 USDC Colorado pg 9
of 18

10
The Court finds that, generally, the Plaintiffs in this case, Freeman and her
companies, have failed to meet their burden of proving a clear entitlement to preliminary
injunctive relief. Plaintiffs have not shown that the injuries they may have suffered or
may suffer cannot be addressed via an award of money damages. Enough questions
have been raised about the potential validity of the trademark “Spice & Tea Merchants”
that the Court questions the fairness of enforcing a non-compete based on a franchise
agreement that includes, as a large part of its consideration, the validity of the “Spice &
Tea Merchants” trademark. The Court also finds that the requested preliminary
injunction would disrupt and not preserve the status quo. Finally, The Court finds that
Freeman has not acted in the most equitable way in relation to this dispute. She
terminated the franchise prematurely, before the cure period had even run. The Court
credits Winslow’s testimony that Freeman appeared at the store, effectively
unannounced, and ended up blocking Winslow in the parking, demanding to be allowed
into the store. She also had the Sheriff start posting notices to quit on the door of the
store before the cure period had expired. “One who seeks equity must do equity.” Cont’l
Oil co. v. Osage Oil & Refining Co., 57 F.2d 527, 531 (10th Cir. 1932). Freeman did not
act equitably in this instance.
This is not to say that Winslow is without fault here. It is apparent from the
evidence that she owes something for the inventory. She says that she was going to
pay the outstanding October royalty amount, but was insistent on getting her $1,500
back first, which arguably makes little sense.
All that said, given that the franchise has terminated, there is no reason for
Winslow or Pretty Colorado to retain any of the proprietary documents or materials that
Case No. 1:24-cv-00371-NRN Document 67 filed 09/24/24 USDC Colorado pg 10
of 18

11
she was given (or that were in the Store) when she started running the franchise.
Winslow does not dispute that she does not own those materials and professes not to
use them. The Court finds that Freeman has proven her entitlement to the return of
those materials, and Winslow is ordered to return those materials within five (5) days
from the date of this Order.
a. Plaintiffs have not established that a preliminary injunction would
preserve, rather than disrupt, the status quo.
Preliminary injunctions that do not simply preserve the parties’ position pending
trial are particularly disfavored. Free the Nipple-Fort Collins v. City of Fort Collins, Colo.
916 F.3d 792, 797 (10th Cir. 2019). Disfavored injunctions are ones that mandate action
rather than prohibit it, change the status quo, or grant all the relief the movant would be
entitled to if victorious at trial. Id. The status quo is defined as “the last peaceable
uncontested status existing between the parties before the dispute developed . . . .” Id.
at 798, n.3 (internal citations omitted.)
Here, the “last peaceable uncontested status existing between the parties” was
that Winslow was running a tea and spice shop out of the store location in Breckenridge
and paying rent directly to Ellis. While Freeman’s company, STM Properties, was
technically the lessee and held the lease, STM Properties was not even acting as a
pass-through; instead, Winslow paid Ellis the rent directly. Winslow had possession of
the store property. Although Ellis terminated the lease with Freeman ’s STM Properties
and signed up Winslow’s Pretty Colorado as a new tenant, that was arguably merely
formalizing the informal situation that existed before—Winslow in possession and
paying rent to the landlord, Ellis. Freeman is the one who upset the status quo by
terminating the franchise agreement and trying to evict Winslow. Therefore, the relief
Case No. 1:24-cv-00371-NRN Document 67 filed 09/24/24 USDC Colorado pg 11
of 18

12
sought in this case would not preserve the status quo pending a decision on the merits;
it would upset it.
Similarly, the status quo at the time this lawsuit was filed was that Winslow was
running a spice and tea shop in downtown Breckenridge. Enforcing the non-compete
provision of the franchise agreement by evicting Winslow would upset that status quo
and eliminate the prospect of any tea of spices being sold in the near future from a
specialty shop in Breckenridge. Evicting Winslow and enforcing the non -compete would
effectively give Freeman all the relief to which she would be entitled after a full trial on
the merits—which is another form of disfavored injunction.
b. Plaintiffs have not clearly established irreparable harm.
“[A] showing of irreparable harm is the single most important prerequisite for the
issuance of a preliminary injunction.” Dominion Video Satellite, Inc. v. Echostar Satellite
Corp., 356 F.3d 1256, 1260 (10th Cir.2004) (quotation and alteration omitted).
“Irreparable harm, as the name suggests, is harm that cannot be undone, such as by an
award of compensatory damages or otherwise.” Salt Lake Tribune Publ’g Co. v. AT&T
Corp., 320 F.3d 1081, 1105 (10th Cir. 2003). In other words, one only gets a preliminary
injunction when an award of money after the fact cannot cure the injury.
Here, it should not be overlooked that this legal fight arose because of a dispute
over money. Freeman was upset that Winslow had not paid for the inventory and
furnishings that she had acquired when she began running the store. Winslow also
refused to sign (or failed to sign) a promissory note that would assure she would start
making payments on that debt. There is a dispute about the value of those furnishings,
Case No. 1:24-cv-00371-NRN Document 67 filed 09/24/24 USDC Colorado pg 12
of 18

13
whether it was in the range of $20,000 or closer to $40,000.1 But Winslow does not
dispute that she owes something for that inventory. However, there is also no dispute
that there was no written agreement or schedule pursuant to which that money should
be paid back. The matter came to a head when the frustrated Freeman withdrew from
Winslow’s account $1,500 in funds using the ACH process. This withdrawal was not
authorized. Winslow then cancelled the ACH authorization . Freeman refused to return
the $1,500, instead deciding to attribute that to the unpaid royalties that she could not
get via the ACH process. Ultimately, it appears that Freeman terminated the franchise
because of a dispute over $759.24 in unpaid royalties.
It is not clear that Winslow’s failure to pay for the inventory would, of itself, have
been a basis for terminating the franchise, as opposed to simply a basis for a breach of
contract suit or an unjust enrichment claim. The Court finds unconvincing the other
articulated bases for terminating the franchise (found in a letter from counsel dated
November 20, 2023, Ex. 24), such as default of the inventory deposit of $20,000 (which
appeared to have been waived for Winslow), the default of payment due for inven tory
(discussed above), the default of advertising requirement, or the default of reporting.
In any event, what Freeman has lost to date is either the ongoing royalty
payments that she would have received had Ms. Winslow had continued as a
franchisee, or, with the franchise terminated, the loss the royalties Freeman would have
gotten had she found a replacement franchisee and had Winslow, abiding by the non-
compete agreement, stopped selling spice and tea. Presumably, Winslow’s profits
1 Freeman submitted an inventory valuation dated January 6, 2022 which she
says she compiled at the time the Store was transferred to Winslow, which shows
$39,144.94 in product and furnishings. See Ex. 9
Case No. 1:24-cv-00371-NRN Document 67 filed 09/24/24 USDC Colorado pg 13
of 18

14
during the time she was purportedly in violation of the non-compete can be calculated
and would be at least one of the measures of Freeman’s damages. Freeman has also
lost, and is presumably entitled to recover, the value of the inventory and furnishings.
But these amounts can be calculated.
In protesting Ellis’s termination of the headlease, Freeman wrote that she found it
“staggering” that he had terminated the lease and effectively turned the Store over to
Winslow, without regard to the investment Freeman had made in the Store (including
furnishings) and 14 years of “hard work.” Freeman stated to Ellis, “this loss represents
nearly $100,000 to me.” Thus, Freeman could at least put some dollar amount on the
loss caused by Ellis’s allegedly unlawful termination of the headlease.
There is also the issue of the lost goodwill of the Spice & Tea Merchants brand
that had been built up over the years at the Breckenridge store. But there was little
evidence presented of any goodwill associated with the Store itself. The Court does not
find that Winslow is inappropriately capitalizing on the “Spice & Tea Merchants”
trademark. She has changed the signage and covered up with stickers the old Spice &
Tea Merchants labels that were found on her existing inventory, which arguably
minimizes any damage to the Spice & Tea Merchant brand. The Court finds
unpersuasive the claim that Winslow is somehow infringing on Spice & Tea Merchant’s
trade dress.
In sum, the Court is not convinced that the damages suffered by Freeman and
her companies are so incalculable as to justify the imposition of an injunction. The Court
comes to this conclusion without making any determination or finding whether Ellis’s
termination of the headlease was valid or not. After all, Ellis himself terminated the
Case No. 1:24-cv-00371-NRN Document 67 filed 09/24/24 USDC Colorado pg 14
of 18

15
headlease without giving any right to cure or speaking to Freeman , and one of the basis
given for termination—that there was no valid sublease with Winslow--is suspect, since
Ellis turned around and signed his own lease with Winslow. Obviously, Ellis had no
problem with Winslow as a tenant.
c. The balancing of the equities does not favor an injunction.
Plaintiffs argue that the “only harm to Pretty [Colorado] and Winslow is that they
must relocate their competing store outside the non -competition zone.” ECF No. 8 at 10.
Of course, the non-competition zone is 15-miles from Breckridge—essentially Summit
County—and Winslow would have to move her store to Vail or Steamboat Springs or
Fairplay to not be in violation. Plaintiffs also argue that every day that Pretty Colorado
and Winslow are allowed to operate as an independent store, the goodwill built up by
the Spice Merchants franchise system in Breckenridge since 2009 is dissipating. Id.
The Court is unconvinced that the damage to goodwill is incalculable, and there
was scant evidence presented of “goodwill” that was being dissipated by the continued
operation of Winslow’s shop. Plaintiffs also argue that there is the possibility that “left
unchecked,” other Spice Merchants franchisees will do the same thing that Winslow has
done—learn the “Spice system,” amass goodwill under Spice Merchant’s system, and
then stop paying royalties and “convert to an independent retailer once their franchise
rights terminate.” Id. The Court finds this potential harm to be speculative. This was a
unique situation.
The Court recognizes that there is caselaw expressing the view that where there
is a non-competition agreement, breach is the “controlling factor” and injunctive relief
follows “almost as a matter of course.” I Can’t Believe IT’s Yogurt v. Gunn, No. 94-OK-
Case No. 1:24-cv-00371-NRN Document 67 filed 09/24/24 USDC Colorado pg 15
of 18

16
2109-TL, 1997 WL 599391, at *20 (D. Colo. April 15, 1997) (quoting Miller v. Kendall,
541 P.2d 126, 127 (Colo. App. 1975), for proposition that “[w]here there is a
noncompetition agreement, breach is the controlling factor and injunctive relief follows
almost as a matter of course. Damage is presumed to be irreparable and the remedy at
law is considered inadequate”). But here, the issue of the breach, at least on the
question of the royalty payment, is unclear. Freeman arguably first violated the terms of
the agreement by making an unauthorized ACH transfer and then terminated the
franchise before the time to cure had passed. The Court concludes that, based on the
preliminary injunction evidence, Freeman is not without fault. Communication was still
going-on between the lawyers. The relatively small overdue royalty payment could have
been paid quickly. Freeman’s appearance at the store, her confronting and blocking-in
of Winslow, and her having the Sheriff prematurely post notices to quit on the store
unnecessarily escalated the situation. Thus, a multi-year relationship apparently
collapsed over little less than an $800 royalty payment.
The Court’s conclusion that Freeman unnecessarily escalated and accelerated
the collapse of the business relationship is supported by an exhibit submitted by
Defendants (Ex. OO) which contains intemperate language by Freeman directed at
another former friend and business partner whom Freeman also was accusing of having
stolen her ideas, recipes, and business plan.
The damage to Winslow of enforcing the non -compete pending a full trial on the
merits would be substantial. By all accounts, this business is not raking in substantial
profits. It would not be easy for Winslow to pull up stakes and move to a new location 15
miles from Breckridge. There may be some damage to the goodwill of the Spice & Tea
Case No. 1:24-cv-00371-NRN Document 67 filed 09/24/24 USDC Colorado pg 16
of 18

17
Merchants franchise if Winslow is permitted to continue to operate a spice shop in
Breckenridge during the pendency of this case. But there was little evidence about the
real degree of that damage. In sum, the Court does not find that the balancing of the
equities justifies the issuance of a preliminary injunction here.
d. Winslow should return any manuals, guides, and recipes.
The Court does find that Freeman has sufficiently proven her case for the return
of any operations manual, instruction guides, or recipes that Winslow received from
Freeman when Winslow became a franchisee. Winslow testified that she is still in
possession of that documentation, although she claims not to use it. The franchise
agreement has been terminated and there is no basis for Winslow to retain possession
of arguably proprietary materials that she received from Freeman or Spice & Tea
Merchants. Therefore, Winslow shall return any such documentation to Ms. Freeman
within five (5) days from the date of this Order.
V. CONCLUSION
For the reasons outlined above, it is hereby ORDERED that Plaintiffs’ Motion for
Preliminary Injunction, ECF No. 8, is GRANTED IN PART and DENIED IN PART as
follows.
Winslow and Pretty Colorado are ORDERED to return any Spice & Tea
Merchants documents, manuals, operating guides, or recipes that Winslow received (or
retained possession of) when she became a franchisee of Freeman or Spice Merchants
Entities within five (5) business days from the date of this Order. The Motion is DENIED
in all other respects.
Case No. 1:24-cv-00371-NRN Document 67 filed 09/24/24 USDC Colorado pg 17
of 18

18
It is further ORDERED that the Parties are to contact the Court’s chambers (303-
335-2403) within three (3) days to schedule a telephonic scheduling conference so as to
obtain a scheduling order, and get trial dates.
SO ORDERED
Dated: September 24, 2024
Denver, Colorado N. Reid. Neureiter
United States Magistrate Judge
Case No. 1:24-cv-00371-NRN Document 67 filed 09/24/24 USDC Colorado pg 18
of 18