The Original Great American Chocolate Chip Cookie Company v. River Valley Cookies, Ltd.

In 1985, The Original Great American Chocolate Chip Cookie Co. (Cookie Co.) (plaintiff) entered into a franchise agreement with the Sigels (defendant) for the operation of a Cookie Co. store in a shopping mall in Illinois. Between 1987 and 1991, the Sigels committed a number of material breaches to the franchise agreement. The Sigels failed to furnish insurance certificates indicating that the Cookie Co. was an additional insured on their insurance. The Sigels paid nine invoices late, and on seven occasions sent the Cookie Co. checks that bounced. The Sigels failed the Cookie Co.’s in-store inspections, and an independent auditor found that the Sigels had underreported their gross sales to the effect of dispossessing the Cookie Co. of almost $3,000 in royalties. As a result, the Cookie Co. terminated the franchise agreement, which was permitted in the event of three or more violations within a 12-month period, without the requirement of notice or opportunity to cure. The Sigels nevertheless continued to operate their store and sold cookies using batter not supplied from the Cookie Co. The Cookie Co. sued to enjoin the Sigels’ violation of its trademarks and moved for a preliminary injunction. The Sigels counterclaimed, arguing that the franchise agreement had been terminated in violation of both the franchise agreement and the Illinois Franchise Disclosure Act and moved for a preliminary injunction directing the Cookie Co. to restore their franchise. The district court granted the Sigels’ motion and denied that of the Cookie Co. The Cookie Co. appealed.