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JAY BHARAT DEVELOPERS, INC., et al., Plaintiffs and Appellants, v. JIM MINIDIS et al., Defendants and Respondents.

B199294

COURT OF APPEAL OF CALIFORNIA, SECOND APPELLATE DISTRICT, DIVISION TWO

167 Cal. App. 4th 437; 84 Cal. Rptr. 3d 267; 2008 Cal. App. LEXIS 1572

September 11, 2008, Filed

SUBSEQUENT HISTORY: [***1] injunctive relief was sought. In the motion for a The Publication Status of this Document has been preliminary injunction, the franchisors asserted that the Changed by the Court from Unpublished to Published franchise relationship was properly terminated and that October 8, 2008. the injunction was warranted to prevent further economic Review denied by Jay Bharat Developers, Inc. v. Minidis harm. The court held that the trial court properly granted (Jim), 2008 Cal. LEXIS 15053 (Cal., Dec. 23, 2008) the injunction. The franchisors established the likelihood of prevailing on the merits by presenting evidence that PRIOR HISTORY: APPEAL from an order of the the franchisees had failed to make royalty payments and Superior Court of Los Angeles County, No. BC336287, to pay advertising fees. The trial court could presume Joseph R. Kalin, Judge. irreparable injury under the circumstances, and after weighing the balance of harms, an injunction prohibiting DISPOSITION: Affirmed. use of the franchisors' trademark was appropriate. The unclean hands doctrine did not preclude injunctive relief CASE SUMMARY: because the alleged misconduct did not affect the equitable relations between the parties. Interim injunctive relief under Code Civ. Proc., § 1281.8, was an PROCEDURAL POSTURE: Appellant franchisees appropriate provisional remedy in connection with sought review of an order from the Superior Court of Los arbitration. Angeles County (California), which, in a dispute concerning the termination of the parties' franchise OUTCOME: The court affirmed the trial court's order. agreement, granted respondent franchisors' motion for a preliminary injunction to prohibit the franchisees from LexisNexis(R) Headnotes continuing to represent themselves as franchisees and from using franchise trademarks.

OVERVIEW: The franchisees alleged that they were fraudulently induced to enter into the agreement. The Civil Procedure > Remedies > Injunctions > franchisors contended that the franchisees breached the Preliminary & Temporary Injunctions agreement. The franchise agreement contained an [HN1] The ultimate goal of any test to be used in arbitration provision that excluded disputes in which deciding whether a preliminary injunction should issue is Page 2 167 Cal. App. 4th 437, *; 84 Cal. Rptr. 3d 267, **; 2008 Cal. App. LEXIS 1572, ***1 to minimize the harm which an erroneous interim with unclean hands to recover in an action creates doubts decision may cause. As a general matter, the question as to the justice provided by the judicial system. Thus, whether a preliminary injunction should be granted precluding recovery to the unclean plaintiff protects the involves two interrelated factors: (1) the likelihood that court's, rather than the opposing party's, interests. The the plaintiff will prevail on the merits, and (2) the relative doctrine promotes justice by making a plaintiff answer balance of harms that is likely to result from the granting for his own misconduct in the action. It prevents a or denial of interim injunctive relief. wrongdoer from enjoying the fruits of his transgression. The misconduct that brings the unclean hands doctrine into play must relate directly to the cause at issue. The Civil Procedure > Remedies > Injunctions > misconduct must prejudicially affect the rights of the Preliminary & Temporary Injunctions person against whom the relief is sought so that it would Civil Procedure > Appeals > Standards of Review > be inequitable to grant such relief. Abuse of Discretion [HN2] A party challenging an order granting or denying a preliminary injunction has the burden of making a clear Civil Procedure > Equity > Maxims > Clean Hands showing of an abuse of discretion. An abuse of discretion Principle will be found only where the trial court's decision [HN5] Courts have gleaned a three-pronged test to exceeds the bounds of reason or contravenes the determine the effect to be given to a plaintiff's unclean uncontradicted evidence. Where the evidence with hands conduct. Whether the particular misconduct is a respect to the right to a preliminary injunction is bar to the alleged claim for relief depends on (1) conflicting, the reviewing court must interpret the facts in analogous case law, (2) the nature of the misconduct, and the light most favorable to the prevailing party and (3) the relationship of the misconduct to the claimed indulge in all reasonable inferences in support of the trial injuries. court's order. When the matter raised on appeal is solely a question of law, the standard of review is not abuse of discretion but whether statutory or constitutional law was Business & Corporate Law > Distributorships & correctly interpreted and applied by the trial court. Franchises > Remedies > Injunctive Relief Trademark Law > Infringement Actions > Remedies > Equitable Relief > Preliminary Injunctions Contracts Law > Breach > General Overview [HN6] Injunctive relief is appropriate where a terminated [HN3] Under basic contract principles, when one party to franchisee continues to use a franchisor's trademark. a contract feels that the other contracting party has breached its agreement, the non-breaching party may either stop performance and assume the contract is Civil Procedure > Alternative Dispute Resolution > avoided or continue its performance and sue for damages. Arbitrations > General Overview Under no circumstances may the non-breaching party Civil Procedure > Remedies > Injunctions > stop performance and continue to take advantage of the Preliminary & Temporary Injunctions contract's benefits. [HN7] See Code Civ. Proc., § 1281.8, subd. (b).

Civil Procedure > Equity > Maxims > Clean Hands Civil Procedure > Alternative Dispute Resolution > Principle Arbitrations > General Overview [HN4] The venerable doctrine of unclean hands arises Civil Procedure > Remedies > Injunctions > from the maxim that one who comes to court seeking Preliminary & Temporary Injunctions equity must come with clean hands. The doctrine [HN8] In deciding whether to issue an injunction demands that a plaintiff act fairly in the matter for which pursuant to Code Civ. Proc., § 1281.8, a trial court must he seeks a remedy. He must come into court with clean weigh the same factors it considers in proceeding under hands, and keep them clean, or he will be denied relief, Code Civ. Proc., § 526: (1) likelihood of success on the regardless of the merits of his claim. The unclean hands merits, and (2) whether the moving party will suffer doctrine protects judicial integrity and promotes justice. It irreparable harm in the interim if the injunction is not protects judicial integrity because allowing a plaintiff issued. Interim injunctive relief under § 1281.8, therefore, Page 3 167 Cal. App. 4th 437, *; 84 Cal. Rptr. 3d 267, **; 2008 Cal. App. LEXIS 1572, ***1 is appropriate only if the applicant has no adequate (1) Injunctions § 15--Preliminary Injunctions--When alternative remedy, and will suffer irreparable harm if the Appropriate.--The ultimate goal of any test to be used in injunction is denied. deciding whether a [*438] preliminary injunction should issue is to minimize the harm which an erroneous interim SUMMARY: decision may cause. As a general matter, the question whether a preliminary injunction should be granted CALIFORNIA OFFICIAL REPORTS SUMMARY involves two interrelated factors: (1) the likelihood that the plaintiff will prevail on the merits, and (2) the relative In a dispute concerning the termination of a franchise balance of harms that is likely to result from the granting agreement, the trial court granted the franchisors' motion or denial of interim injunctive relief. for a preliminary injunction to prohibit the franchisees from continuing to represent themselves as franchisees (2) Contracts § 44--Performance--Breach--Options of and from using franchise trademarks. The franchisees Nonbreaching Party.--Under basic contract principles, alleged that they were fraudulently induced to enter into when one party to a contract feels that the other the agreement. The franchisors contended that the contracting party has breached its agreement, the franchisees breached the agreement. The franchise nonbreaching party may either stop performance and agreement contained an arbitration provision that assume the contract is avoided, or continue its excluded disputes in which injunctive relief was sought. performance and sue for damages. Under no In the motion for a preliminary injunction, the franchisors circumstances may the nonbreaching party stop asserted that the franchise relationship was properly performance and continue to take advantage of the terminated and that the injunction was warranted to contract's benefits. prevent further economic harm. (Superior Court of Los Angeles County, No. BC336287, Joseph R. Kalin, (3) Equity § 6.2--Principles and Maxims--Clean and Judge.*) Unclean Hands--Prejudicial Misconduct.--The venerable doctrine of unclean hands arises from the * Retired judge of the Los Angeles Superior maxim that one who comes to court seeking equity must Court, assigned by the Chief Justice pursuant to come with clean hands. The doctrine demands that a article VI, section 6 of the California plaintiff act fairly in the matter for which he or she seeks Constitution. a remedy. The plaintiff must come into court with clean hands, and keep them clean, or he or she will be denied The Court of Appeal affirmed the trial court's grant relief, regardless of the merits of his or her claim. The of the injunction, concluding that the franchisors unclean hands doctrine protects judicial integrity and established the likelihood of prevailing on the merits by promotes justice. It protects judicial integrity because presenting evidence that the franchisees had failed to allowing a plaintiff with unclean hands to recover in an make royalty payments and to pay advertising fees. The action creates doubts as to the justice provided by the trial court could presume irreparable injury under the judicial system. Thus, precluding recovery to the unclean circumstances, and after weighing the balance of harms, plaintiff protects the court's, rather than the opposing an injunction prohibiting use of the franchisors' party's, interests. The doctrine promotes justice by trademark was appropriate. The unclean hands doctrine making a plaintiff answer for his or her own misconduct did not preclude injunctive relief because the alleged in the action. It prevents a wrongdoer from enjoying the misconduct did not affect the equitable relations between fruits of his or her transgression. The misconduct that the parties. Interim injunctive relief under Code Civ. brings the unclean hands doctrine into play must relate Proc., § 1281.8, was an appropriate provisional remedy directly to the cause at issue. The misconduct must in connection with the parties' arbitration. (Opinion by prejudicially affect the rights of the person against whom Ashmann-Gerst, J., with Boren, P. J., and Chavez, J., the relief is sought so that it would be inequitable to grant concurring.) such relief.

HEADNOTES (4) Equity § 6.2--Principles and Maxims--Clean and Unclean Hands--Prejudicial Misconduct.--Courts have CALIFORNIA OFFICIAL REPORTS HEADNOTES gleaned a three-pronged test to determine the effect to be Page 4 167 Cal. App. 4th 437, *438; 84 Cal. Rptr. 3d 267, **; 2008 Cal. App. LEXIS 1572, ***1 given to a plaintiff's unclean hands conduct. Whether the [**269] ASHMANN-GERST, J.--This appeal particular misconduct is a bar to the alleged claim for arises out of the termination of a franchise agreement. relief depends on (1) analogous case law, (2) the nature Appellants Jay Bharat Developers, Inc. (Jay Bharat), Jay of the misconduct, and (3) the relationship of the Bharat Resorts, Inc., Bipin Morari (Morari), and misconduct to the claimed injuries. Chandrakant Patel (Patel), the franchisees, challenge a trial court order granting the motion for a preliminary (5) Franchise, Distribution, and Dealership Contracts injunction of respondents Jim Minidis (Jim), Lynn § 7--Actions--Remedies--Injunctive Relief.--Injunctive Minidis (Lynn), 1 RedBrick Pizza Worldwide, Inc. relief is appropriate where a terminated franchisee (RedBrick Pizza), and RedBrick Pizza, Inc., the continues to use a franchisor's trademark. [*439] franchisors. They essentially assign three errors to the trial [*440] court's order. First, appellants contend that (6) Arbitration and Award § 14--Proceedings--Interim the trial court erroneously followed Burger King Corp. v. Injunctive Relief.--In deciding whether to issue an Hall (S.D.Fla. 1991) 770 F.Supp. 633 (Burger King) and injunction pursuant to Code Civ. Proc., § 1281.8, a trial refused to consider [***2] appellants' alleged evidence court must weigh the same factors it considers in of fraud in evaluating the merits of respondents' request proceedings under Code Civ. Proc., § 526: (1) likelihood for an injunction. They claim that the trial court should of success on the merits, and (2) whether the moving have found that respondents' termination of the franchise party will suffer irreparable harm in the interim if the agreement was proper before granting their request for a injunction is not issued. Interim injunctive relief under § preliminary injunction. Second, appellants argue that 1281.8, therefore, is appropriate only if the applicant has respondents' unclean hands precluded the issuance of a no adequate alternative remedy and will suffer irreparable preliminary injunction. Third, citing Code of Civil harm if the injunction is denied. Procedure section 1281.8, 2 appellants assert that the trial (7) Arbitration and Award § 14--Proceedings--Interim court should never have entertained respondents' motion, Injunctive Relief.--Franchisors established that interim given that the litigation had been ordered into arbitration injunctive relief under Code Civ. Proc., § 1281.8, was before respondents sought injunctive relief. appropriate to prevent terminated franchisees from 1 We refer to the Minidises by their first names, continuing to use their trademark. The franchisors proved not out of familiarity or disrespect, but for ease of a likelihood of success on the merits. They also reference. (Kuehn v. Kuehn (2000) 85 Cal.App.4th established irreparable harm, namely by the lack of 824, 828, fn. 2 [102 Cal. Rptr. 2d 743]; In re control over their mark. Because the franchisors proved Marriage of Smith (1990) 225 Cal.App.3d 469, that the interim harm they would suffer was more than 475, fn. 1 [274 Cal. Rptr. 911].) monetary, injunctive relief was appropriate. 2 All further statutory references are to the Code [Cal. Forms of Pleading and Practice (2008) ch. 32, of Civil Procedure unless otherwise indicated. Contractual Arbitration: Agreements and Compelling We are not convinced by appellants' arguments. Arbitration, § 32.42.] Accordingly, we affirm.

COUNSEL: James W. Denison for Plaintiffs and FACTUAL AND PROCEDURAL BACKGROUND Appellants. The Parties to the Master Franchise Agreement (MFA) Lewis Brisbois Bisgaard & Smith, Roy G. Weatherup, David M. Makous, Leo A. Bautista and Allison A. RedBrick Pizza is the franchisor of the RedBrick Arabian for Defendants and Respondents. Pizza Franchise System. Jim [***3] and Lynn are cofounders of the franchise. JUDGES: Opinion by Ashmann-Gerst, J., with Boren, P. J., and Chavez, J., concurring. [**270] Jay Bharat is a California corporation owned and operated by Morari and Patel. In 2002, OPINION BY: Ashmann-Gerst pursuant to the MFA, Jay Bharat became a master franchisee of RedBrick Pizza in Southern California. The OPINION MFA permitted Jay Bharat to sell franchises within a Page 5 167 Cal. App. 4th 437, *440; 84 Cal. Rptr. 3d 267, **270; 2008 Cal. App. LEXIS 1572, ***3 certain territory. Morari and Patel executed the MFA on and advertising fees. Jay Bharat [***5] then permitted its behalf of Jay Bharat. registration as a franchisor with the State of California to lapse, operated franchises outside of its territory, failed to The MFA explains the terms of the parties' business report income, and committed other contract violations. relationship. As is relevant to this appeal, the MFA RedBrick Pizza provided Jay Bharat numerous contains a royalty payment schedule, which sets forth Jay opportunities to cure the defaults, but terminated the Bharat's royalty payment obligations to RedBrick Pizza. contract when no cure was forthcoming. The notice of termination demanded that Jay Bharat comply with all The MFA also sets forth the circumstances under posttermination obligations under the MFA. which RedBrick Pizza can terminate the MFA. In addition to other grounds, "[i]f [Jay Bharat] fails to RedBrick Pizza's Cross-complaint perform any obligation imposed upon [it] by this [MFA] ... and such default is not totally cured within 30 days On or about February 13, 2007, RedBrick Pizza filed after ... written notice of such default to [Jay Bharat] ... , a cross-complaint against Jay Bharat, Morari, and Patel. then [RedBrick Pizza] may terminate this [MFA] at any RedBrick Pizza alleged, inter alia, that Jay Bharat refused time thereafter." to honor the termination of the MFA and continued to receive royalties from its former franchisees and withhold And, the MFA contains an arbitration provision. them from RedBrick Pizza. Excluded from the parties' arbitration agreement are disputes in which injunctive relief is sought. [*441] RedBrick Pizza's Motion for Preliminary Injunction

As a condition of their agreement, Morari and Patel The cross-complaint was accompanied by a motion agreed to own [***4] and operate a RedBrick Pizza for a preliminary injunction. [**271] RedBrick Pizza restaurant within the territory of Cerritos, California, argued that Jay Bharat, Morari, and Patel should [*442] pursuant to a unit franchise agreement, which contains be enjoined from continuing to represent themselves as a substantially similar terms to the MFA. RedBrick Pizza master franchisee and from using franchise trademarks. RedBrick Pizza further asserted The Complaint that the franchise relationship was properly terminated [***6] and that the injunction was warranted to prevent On July 8, 2005, appellants initiated a lawsuit against further economic harm. respondents, alleging 11 causes of action. In particular, appellants averred that respondents fraudulently induced In support of the motion, RedBrick Pizza offered them to enter into the MFA by failing to disclose pending Lynn's declaration. Lynn, the vice-president and chief litigation in the franchise-offering circular and by financial officer of RedBrick Pizza, testified that in misrepresenting that they could adequately train and August 2002, Morari and Patel executed the MFA with support franchisees, had sufficient vendor contacts, and RedBrick Pizza on behalf of Jay Bharat. Under the terms owned the trademark rights pertaining to the RedBrick of the MFA, Jay Bharat became a master developer for a Pizza brand. Appellants later filed a first amended protected territory that included Los Angeles, Ventura, complaint, with largely similar allegations and claims. and Mono Counties. However, the Antelope and Santa Clarita Valleys were specifically excluded from the The Parties Are Ordered to Arbitration territory. Jay Bharat paid an initial fee of $ 600,000 for Respondents moved to compel arbitration pursuant the right to act as a subfranchisor in the protected to the MFA. Over appellants' opposition, on November territory using the franchise system and its proprietary 21, 2005, the trial court granted the motion and ordered marks. As a master developer, Jay Bharat was responsible the case to arbitration. for selling a certain number of third party franchises in the territory as well as operating its own RedBrick Pizza RedBrick Pizza Terminates the MFA restaurant in Cerritos.

On August 25, 2006, RedBrick Pizza terminated Jay Lynn further attested that the franchise relationship Bharat's MFA. According to RedBrick Pizza, Jay Bharat began to deteriorate before Jay Bharat commenced had been in breach of the MFA by failing to pay royalties litigation. For example, Jay Bharat sold a franchise Page 6 167 Cal. App. 4th 437, *442; 84 Cal. Rptr. 3d 267, **271; 2008 Cal. App. LEXIS 1572, ***6 outside of its territory, in Santa Clarita Valley. Jay Bharat 554 [133 Cal. Rptr. 2d 648, 68 P.3d 74].) ignored Lynn's request for $ 21,000 to add this new territory [***7] to the MFA. [HN2] "The party challenging an order granting or denying a preliminary injunction has the burden of Moreover, Jim was attempting to address various making a clear showing of an abuse of discretion. issues that were impacting the franchise relationship, [Citation.] An abuse of discretion will be found only including Jay Bharat's operation of its own restaurant in where the trial court's decision exceeds the bounds of Cerritos, its failure to use approved vendors, its default reason or contravenes the uncontradicted evidence. on royalty payments, its failure to properly close down [Citation.]" (Tahoe Keys Property Owners' Assn. v. State one of the franchises within its territory, and Water Resources Control Bd. (1994) 23 Cal.App.4th unprofessional behavior. Thus, RedBrick Pizza gave Jay 1459, 1470 [28 Cal.Rptr.2d 734].) "Where the evidence Bharat notice that it was in material breach of the MFA. with [***9] respect to the right to a preliminary RedBrick Pizza demanded that the defaults be cured injunction is conflicting, the reviewing court must within 30 days. 'interpret the facts in the light most favorable to the prevailing party and indulge in all reasonable inferences Ultimately, the breaches were not cured and, on in support of the trial court's order.' " (Gleaves v. Waters August 25, 2006, RedBrick Pizza terminated the MFA. (1985) 175 Cal.App.3d 413, 416-417 [220 Cal. Rptr. Although RedBrick Pizza demanded that Jay Bharat 621].) When the matter raised on appeal is solely a comply with its posttermination obligations, it failed to question of law, the standard of review is not abuse of do so, proceeding as if the termination were ineffective. discretion " 'but whether statutory or constitutional law was correctly interpreted and applied by the trial court.' " Appellants opposed the motion for preliminary (Bullock v. City and County of San Francisco (1990) 221 injunction on several grounds. In particular, they asserted Cal.App.3d 1072, 1094 [271 Cal. Rptr. 44].) that section 1281.8 prohibited the issuance of a preliminary injunction, and that respondents could not II. The trial court properly issued a preliminary establish a likelihood of success on the merits, in part injunction because of respondents' alleged unclean hands. (2) Applying the foregoing principles, we conclude After entertaining oral argument, the trial court that the trial court properly granted respondents' motion granted respondents' motion. Appellants' motion for for a preliminary injunction. First, respondents reconsideration [***8] was denied. [*443] established the likelihood of prevailing on the merits. (White v. Davis, supra, 30 Cal.4th at p. 554.) [HN3] This timely appeal ensued. "Under basic contract principles, when one party to a DISCUSSION contract feels that the other contracting party has breached its agreement, the non-breaching party may I. Standard of review either stop performance and assume the contract is avoided, or continue its performance and sue for (1) The issue in this appeal is whether the trial court damages. Under no circumstances [***10] may the erred in issuing the preliminary injunction. [HN1] "The non-breaching party stop performance and continue to ultimate goal of any test to be used in deciding whether a take advantage of the contract's benefits." (S & R Corp. v. preliminary injunction should issue is to minimize the Jiffy [*444] Lube Intern., Inc. (3d Cir. 1992) 968 F.2d harm which an erroneous interim decision may cause." 371, 376.) Yet that is exactly what appellants tried to do. (IT Corp. v. County of Imperial (1983) 35 Cal.3d 63, 73 According to the evidence presented to the trial court, [196 Cal. Rptr. 715, 672 P.2d 121].) "[A]s a general appellants breached the MFA by failing to make royalty matter, the question whether a preliminary injunction payments and failing to pay advertising fees. Despite should be granted involves two interrelated factors: (1) their breaches, appellants still wanted to use the RedBrick the likelihood that the plaintiff will prevail on the merits, Pizza franchise and trademarks. They cannot do so. Once and (2) the relative balance of harms that is likely to appellants breached the MFA, respondents could result from the granting or denial of interim injunctive terminate that franchise agreement and prevent appellants [**272] relief." (White v. Davis (2003) 30 Cal.4th 528, from utilizing the RedBrick Pizza franchise. Page 7 167 Cal. App. 4th 437, *444; 84 Cal. Rptr. 3d 267, **272; 2008 Cal. App. LEXIS 1572, ***10

Based upon respondents' showing of likelihood of [*445] success on its claims, we conclude that the trial court could presume irreparable injury. (See, e.g., GoTo.com, This dialogue compels us to conclude that, Inc. v. Walt Disney Co. (9th Cir. 2000) 202 F.3d 1199, appellants' arguments on appeal notwithstanding, the trial 1209; Charles Schwab & Co., Inc. v. Hibernia Bank court did not follow Burger King, supra, 770 F.Supp. (N.D.Cal. 1987) 665 F.Supp. 800, 812.) In any event, 633, and ignore appellants' allegations of fraud. Rather, it after weighing the balance of harms, an injunction considered the evidence and determined that appellants prohibiting appellants, as terminated franchisees, from had breached the MFA, which provided grounds for its continuing to use respondents' trademark is certainly termination. This analysis was proper and supported by appropriate. (S & R Corp. v. Jiffy Lube Intern., Inc., the evidence. (See, e.g., S & R Corp. v. Jiffy Lube Intern., supra, 968 F.2d at p. 378.) Inc., supra, 968 F.2d at p. 377.)

In [***11] urging us to reverse the trial court's Moreover, in so ruling, the trial court was mindful of order, appellants raise several arguments. First, they appellants' allegations of fraud. However, the trial court contend that the trial court erroneously relied upon correctly determined [***13] that those allegations were Burger King, supra, 770 F.Supp. 633, in granting relevant to appellants' damages claim, not to the question respondents' motion. They claim that the trial court of whether an injunction was an appropriate remedy. should have (1) found that respondents' termination was not wrongful before granting a preliminary injunction, In a similar vein, appellants assert that the doctrine and (2) considered appellants' allegations of fraud. of unclean hands precludes the imposition of a Appellants' argument is flawed. As evidenced by the preliminary injunction. In other words, appellants claim reporter's transcript, the trial court did find that that their allegations of fraud, based upon respondents' respondents' termination of the MFA was not wrongful; alleged nondisclosure of pending litigation at the time the in [**273] fact, the trial court determined that parties entered into the MFA, preclude them from respondents terminated the MFA because of appellants' obtaining the equitable remedy of an injunction. several contractual breaches. (3) We disagree. [HN4] The venerable doctrine of At the hearing on respondents' motion, the trial court unclean hands arises from the maxim that one who comes commenced oral argument by commenting on the to court seeking equity must come with clean hands. "substantial and serious disputes between the parties with (Blain v. Doctor's Co. (1990) 222 Cal.App.3d 1048, 1059 regard to this franchise." The trial court then noted that [272 Cal. Rptr. 250].) "The doctrine demands that a appellants had not "been living up to the franchise plaintiff act fairly in the matter for which he seeks a agreement with regard to royalty payments [and] remedy. He must come into court with clean hands, and advertising fees due," 3 prompting it to query why an keep them clean, or he will be denied relief, regardless of injunction should not issue "where in fact we have all of the merits of his claim." (Kendall-Jackson Winery, Ltd. v. the breaches of the franchise agreement." Appellants Superior Court (1999) 76 Cal.App.4th 970, 978 [90 Cal. responded by disputing [***12] whether they had Rptr. 2d 743] (Kendall-Jackson).) breached the MFA and by asserting that the trial court "The unclean hands doctrine protects judicial should not ignore their allegations of fraud. But, the trial integrity and promotes justice. It protects judicial court was not persuaded, concluding that even if integrity because allowing a plaintiff with unclean hands appellants ultimately proved their fraud claim, "there to recover [***14] in an action creates doubts as to the [would] still [be] no way that [they could] continue justice provided by the judicial system. Thus, precluding operating under the franchise. All they [could] get is a recovery to the unclean plaintiff protects the court's, judgment, money judgment, for huge amounts of rather than the opposing party's, interests. [Citations.] money." The doctrine promotes justice by making a plaintiff 3 Later, in its discussion with counsel, the trial answer for his own misconduct in the action. It prevents court reiterated that appellants had not "paid any 'a wrongdoer from enjoying the fruits of his fees or any of the monies due under the [MFA] transgression.' [Citations.]" (Kendall-Jackson, supra, 76 for ... almost a year and three or four months." Cal.App.4th at pp. 978-979.) Page 8 167 Cal. App. 4th 437, *445; 84 Cal. Rptr. 3d 267, **273; 2008 Cal. App. LEXIS 1572, ***14

[**274] "The misconduct that brings the unclean hands proceeding is pending, or if an arbitration proceeding has doctrine into play must relate directly to the cause at issue not commenced, in any proper court, an application for a ... . The misconduct must ' " 'prejudicially affect ... the provisional remedy in connection with an arbitrable rights of the person against whom the relief is sought so controversy, but only upon the ground that the award to that it would be inequitable to grant such relief.' " ' which the applicant may be entitled may be rendered [Citation.]" (Kendall-Jackson, supra, 76 Cal.App.4th at ineffectual without provisional relief." p. 979.) [HN8] (6) In deciding whether to issue an injunction [HN5] (4) Courts have "gleaned a three-pronged test pursuant to section 1281.8, the trial court must weigh the to determine the effect to be given to the plaintiff's same factors it considers in proceedings under section unclean hands conduct. Whether the particular [*446] 526: (1) likelihood of success on the merits, and (2) misconduct is a bar to the alleged claim for relief depends whether the moving party will suffer irreparable harm in on (1) analogous case law, (2) the nature of the the interim if the injunction is not issued. (Dodge, misconduct, and (3) the relationship of the misconduct to Warren & Peters Ins. Services, Inc. v. Riley (2003) 105 the claimed injuries. [Citations.]" (Kendall-Jackson, Cal.App.4th 1414, 1420-1421 [130 Cal. Rptr. 2d 385].) supra, 76 Cal.App.4th at p. 979.) Interim injunctive relief under section 1281.8, therefore, is appropriate only if the applicant "has no adequate (5) Against this [***15] backdrop, the doctrine of alternative remedy, and will suffer irreparable harm if the unclean hands does not preclude respondents from injunction is denied." (Davenport v. Blue Cross of obtaining injunctive relief. As for analogous case law, California (1997) 52 Cal.App.4th 435, 450 [60 Cal. Rptr. courts have concluded that [HN6] injunctive relief is 2d 641].) [*447] appropriate where a terminated franchisee continues to use a franchisor's trademark. (See, e.g., S & R Corp. v. (7) That [***17] is exactly what RedBrick Pizza Jiffy Lube Intern., Inc., supra, 968 F.2d at pp. 376-377; established. As set forth above, respondents proved a McDonald's Corp. v. Robertson (11th Cir. 1998) 147 likelihood of success on the merits. They also established F.3d 1301, 1308-1310.) Moreover, the nature of the irreparable harm, namely by the lack of control over their alleged misconduct--respondents' alleged failure to RedBrick Pizza mark. (S & R Corp. v. Jiffy Lube Intern., disclose pending litigation in the franchise-offering supra, 968 F.2d at p. 378.) Because RedBrick Pizza circular--does not "infect the cause of action involved and proved [**275] that the interim harm it would suffer affect the equitable relations between the litigants." was more than monetary, injunctive relief was (Kendall-Jackson, supra, 76 Cal.App.4th at p. 984.) appropriate. (Thayer Plymouth Center, Inc. v. Chrysler Rather, as the trial court pointed out, if appellants prevail Motors Corp. (1967) 255 Cal.App.2d 300, 306 [63 Cal. on their fraud claim, they will obtain a substantial money Rptr. 148] ["Generally, where damages afford an judgment. Nothing in that respect is changed by the adequate remedy by way of compensation for breach of injunction. Accordingly, the trial court did not abuse its contract, equitable relief will be denied."].) discretion in refusing to deny respondents a preliminary injunction based upon the unclean hands doctrine. DISPOSITION (O'Flaherty v. Belgum (2004) 115 Cal.App.4th 1044, 1100 [9 Cal. Rptr. 3d 286].) The order is affirmed. Respondents are entitled to costs on appeal. Finally, Jay Bharat argues that section 1281.8 prohibited the trial court from issuing [***16] the Boren, P. J., and Chavez, J., concurred. preliminary injunction. We are not convinced. A petition for a rehearing was denied October 22, Section 1281.8, subdivision (b), provides, in relevant 2008, and appellants' petition for review by the Supreme part: [HN7] "A party to an arbitration agreement may file Court was denied December 23, 2008, S168411. in the court in the county in which an arbitration Werdegar, J., did not participate therein.